<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended April 30, 1997
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to ___________
Commission file number 0-21556
NORTHWESTERN STEEL AND WIRE COMPANY
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-1562920
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121 Wallace Street, Sterling, Illinois 61081
- -------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 815/625-2500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Number of shares of common stock outstanding as of June 10, 1997:
Common Stock 24,937,384 shares
(includes 420,144 treasury shares)
Page 1 of 11
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
------------------------------- ---------------------------------
1997 1996 1997 1996
(Unaudited)
(in thousands of dollars except per share data and tonnage data)
<S> <C> <C> <C> <C>
Net sales $ 171,652 $ 173,183 $ 460,576 $ 483,270
----------- ----------- ------------ ------------
Cost and operating expenses:
Cost of goods sold (excluding depreciation) 157,149 154,150 424,814 427,555
Depreciation 6,582 6,094 19,573 18,084
Selling and administrative 3,869 3,105 9,234 8,497
----------- ----------- ------------ ------------
Total cost and operating expenses 167,600 163,349 453,621 454,136
----------- ----------- ------------ ------------
Operating profit 4,052 9,834 6,955 29,134
----------- ----------- ------------ ------------
Other income and expenses:
Interest expense 5,075 4,760 15,053 13,843
Interest and other income (61) (12) (106) (57)
----------- ----------- ------------ ------------
Total other income and expenses 5,014 4,748 14,947 13,786
----------- ----------- ------------ ------------
(Loss) income before income taxes (962) 5,086 (7,992) 15,348
(Benefit) provision for income taxes (389) 1,528 (3,229) 4,604
----------- ----------- ------------ ------------
Net (loss) income $ (573) $ 3,558 $ (4,763) $ 10,744
=========== =========== ============ ============
Net (loss) income per share $ (0.02) $ 0.14 $ (0.19) $ 0.43
=========== =========== =========== ============
Net tons shipped 448,611 438,621 1,199,272 1,213,351
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part
of the unaudited consolidated financial statements
-2-
<PAGE> 3
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars except share data)
<TABLE>
<CAPTION>
April 30, July 31,
1997 1996
ASSETS -------------- -------------
<S> <C> <C>
CURRENT ASSETS (Unaudited)
Cash and cash equivalents $ 3,906 $ 5,558
Receivables, less allowance of $825 67,986 68,004
Deferred income taxes 11,517 11,517
Other assets 4,807 6,799
-------------- -------------
88,216 91,878
-------------- -------------
Inventories, at lower of cost or market:
Finished products 49,041 38,823
Semi-finished products 42,241 36,832
Raw materials and supplies 24,991 22,746
-------------- -------------
116,273 98,401
-------------- -------------
Total current assets 204,489 190,279
-------------- -------------
PLANT AND EQUIPMENT, at cost 422,487 407,395
Accumulated depreciation 185,779 166,206
-------------- -------------
Net plant and equipment 236,708 241,189
-------------- -------------
DEFERRED INCOME TAXES 6,616 6,616
DEFERRED FINANCING COST 3,832 4,434
OTHER ASSETS 13,456 -
-------------- -------------
Total assets $ 465,101 $ 442,518
============== =============
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 45,032 $ 75,470
Accrued expenses 26,472 22,768
Current portion of long term debt 7,797 7,504
-------------- -------------
Total current liabilities 79,301 105,742
LONG TERM DEBT 191,431 153,646
OTHER LONG TERM LIABILITIES 97,592 77,114
-------------- -------------
Total liabilities 368,324 336,502
-------------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, par value $1 per share:
- Authorized - 1,000,000 shares
- Issued - none - -
Common stock, par value $.01 per share:
- Authorized - 75,000,000 shares
- Issued - 24,872,924 and 24,858,842 shares, respectively 123,966 123,786
Retained (deficit) earnings (9,814) (5,051)
Minimum pension liability (12,051) (7,395)
Treasury shares, at cost; 420,144 shares of common stock (5,324) (5,324)
-------------- -------------
Total shareholders' equity 96,777 106,016
-------------- -------------
Total liabilities and shareholders' equity $ 465,101 $ 442,518
============== =============
</TABLE>
The accompanying notes are an integral part
of the unaudited consolidated financial statements
-3-
<PAGE> 4
<TABLE>
<CAPTION>
NORTHWESTERN STEEL AND WIRE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
April 30,
-------------------------------------
1997 1996
-------------------------------------
(Unaudited)
(In thousands of dollars)
<S> <C> <C>
Cash Flow From Operations:
Net (loss) income $ (4,763) $ 10,744
Depreciation 19,573 18,084
Amortization of deferred financing costs and debt discount 676 1,700
Decrease (increase) in receivables 18 (6,516)
Increase in inventories (17,872) (12,487)
Decrease in other current assets 1,992 1,818
Increase in other assets (13,456) -
Decrease in accounts payable and accrued expenses (26,734) (7,050)
Increase in other long term liabilities 15,821 1,348
------------ ------------
Net cash (used in) provided by operations (24,745) 7,641
------------ ------------
Cash Flows From Investing Activities:
Capital expenditures (15,092) (31,324)
------------ ------------
Net cash used in investing activities (15,092) (31,324)
------------ ------------
Cash Flows From Financing Activities:
Payments of long term debt (291,395) (172,410)
Proceeds from issuance of long term debt and revolver loans 329,400 183,400
Exercise of stock options 180 180
------------ ------------
Net cash provided by financing activities 38,185 11,170
------------ ------------
Decrease in cash and cash equivalents (1,652) (12,513)
Cash and Cash Equivalents:
Beginning of period 5,558 14,275
------------ ------------
End of period $ 3,906 $ 1,762
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period For:
Interest $ 11,407 $ 10,524
Income taxes 120 3,289
</TABLE>
The accompanying notes are an integral part
of the unaudited consolidated financial statements
-4-
<PAGE> 5
NORTHWESTERN STEEL AND WIRE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Dollar amounts are in thousands except share data)
1. These consolidated financial statements included herein should be read
together with the fiscal 1996 audited financial statements and notes included
in the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
2. The Consolidated Financial Statements for the three month and nine month
periods ended April 30, 1997 and 1996 have not been audited. However, the
Company believes the information reflects all adjustments which, in the opinion
of management, are necessary to present fairly the results shown for the
periods indicated. Management believes all adjustments were of a normal
recurring nature.
3. Net (loss) income per share amounts, as presented on the Consolidated
Statements of Operations, are based on the average shares outstanding of
24,862,496 for the three months and nine months ended April 30, 1997 and
25,160,048 for the comparable prior year periods. Options issued pursuant to
the various Company stock option plans were not material.
4. An income tax benefit or provision is recorded by estimating the annual
effective income tax rate and applying that rate to pretax loss or income. The
effective income tax rate for the first nine months of fiscal 1997 was 40.4%,
which approximates the combined Federal and State statutory rate. The
effective income tax rate for the nine months ended April 30, 1996 of 30%
varied from the statutory rates due to the estimated realization of net
operating loss carryforwards.
5. On June 5, 1997 the Company announced that it would most likely close its
Houston structural mill permanently in the fourth quarter ending July 31, 1997.
As a result of this conditional decision, a primarily non-cash charge
against operations will be recorded in the fourth quarter. At the time the
exit charge is recorded, the Company will be in violation of the fixed charge
coverage and leverage ratio covenants in its bank credit agreement. The Company
was not in default of any of the covenants contained in the bank credit
agreement as of April 30, 1997. Additionally, the Company is currently
negotiating with its banks, and expects to amend the existing covenants to more
appropriately reflect the business operations on a going forward basis. This
conditional decision is more fully described in Item 2 of this Form 10-Q,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
6. As a result of amendments to a defined benefit retirement plan, the
accumulated benefit obligation for that plan increased by $17,250; the
unfunded prior service cost increased by $12,594 and is reflected in Other
Assets; and the minimum pension liability recorded in Shareholders' Equity
increased by $4,656. Annual pension expense did not change significantly due
to reductions in benefit levels in a defined contribution plan.
7. The Company is subject to a broad range of federal, state and local
environmental requirements, including those governing discharges to the air and
water, the handling and disposal of solid and/or hazardous wastes and the
remediation of contamination associated with releases of hazardous substances.
Primarily because the scrap melting process produces dust that contains lead
and cadmium, the Company is classified, in the same manner as other similar
steel mills in its industry, as a generator of hazardous waste.
5
<PAGE> 6
Based on continuing review of applicable regulatory requirements by the
Company's internal environmental compliance manager and advice from independent
consultants, the Company believes that it is currently in substantial
compliance with applicable environmental requirements, except as noted in the
Company's fiscal 1996 Annual Report on Form 10-K for Commitments and
Contingencies.
8. In accordance with Statement of Financial Accounting Standard No. 128
"Earnings Per Share" (SFAS 128), the Company will implement the requirements of
SFAS 128 at the end of the second quarter of fiscal 1998. The Company has
calculated earnings per share using both the basic and diluted methods, which
amounts will not differ materially from earnings per share as currently
reported.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
The following discussion should be read in conjunction with the
Management's Discussion and Analysis of Financial Condition and Results of
Operations included as Item 7 of Part II of the Company's Annual Report on Form
10-K for the year ended July 31, 1996.
FORWARD LOOKING INFORMATION
- ---------------------------
Except for historical information, matters discussed in this Item 2
contain forward looking information and describe the Company's belief
concerning future business conditions and the outlook for the Company based on
currently available information. The Company has identified these "forward
looking" statements by words such as "should", lead to", "expects",
"anticipates" and similar expressions. Risks and uncertainties which could
cause the Company's actual results or performance to differ materially from
those expressed in these statements include the following: volumes of
production and product shipments; changes in product mix and pricing; costs of
scrap steel and other raw material inputs; changes in domestic manufacturing
capacity; the level of non-residential construction and overall economic
growth in the United States; changes in legislative, regulatory or industrial
requirements; and the level of imported products in the Company's markets.
RESULTS OF OPERATIONS
- ---------------------
Net sales for the Company were $171.7 million on shipments of 448,611 net
tons for the three months ended April 30, 1997, compared to $173.2 million on
shipments of 438,621 net tons for the three months ended April 30, 1996. The
net loss for the three months ended April 30, 1997 was $0.5 million resulting
in a loss of $0.02 per share. The third quarter would have been slightly
profitable, excluding losses from the Houston mill discussed below. Earnings
were $3.6 million or $0.14 per share in the prior year third quarter.
Tons shipped in the quarter increased approximately 2% compared to the
prior year period. However, the mix of products sold contributed to lower
revenues in the third quarter. Principal among
6
<PAGE> 7
those factors was a decline of almost 15% from the prior year in shipments
of medium and large structural products, which generally account for
approximately fifty percent of the Company's business, at slightly lower
selling prices. This decline resulted, in part, to weaker market conditions
for medium and large structural products. The Company experienced good volume
gains in its wire, rod, small structural and semi-finished businesses.
However, except for rods, average selling prices for these product groups were
all below prior year third quarter levels.
The volumes in the medium and heavy structurals business mirrored a
general downturn in industry shipments. Price decreases were announced near the
end of the quarter for these beam products. However, in the Company's stronger
markets, rod, wire and small structurals, recent price increases have been
announced which will take effect during the fourth quarter.
For the nine-month period ended April 30, 1997, net sales were $460.6
million. This represents a decrease of $22.7 million or almost 5% compared to
the same period in the prior year. Tons shipped decreased from 1,213,351 net
tons for the nine months ended April 30, 1996 to 1,199,272 for the comparable
nine months in the current year. Most of the decrease in revenues and volume
occurred in the first quarter, due to reduced order levels related to
uncertainties surrounding the Company's labor negotiations, which were
successfully concluded on July 31, 1996. In addition, structural markets have
been weaker, as noted above.
Cost of goods sold, excluding depreciation, as a percentage of net sales
for the three-month period ended April 30, 1997 increased to almost 91.6%
compared to the prior year at 89.0%. The increase resulted primarily from
decreased production levels for medium and large structural products, lower
pricing levels for the products noted above and higher operating costs in the
quarter. Operating costs were negatively impacted by the decreased production
levels required for market conditions on the medium and large structural
products.
Cost of goods sold, excluding depreciation, as a percentage of net sales
for the nine months ended April 30, 1997 was 92.2% compared to the prior year
at 88.5%. The increase resulted primarily as noted above.
For the quarter and nine months ended April 30, 1997, selling and
administrative expense was $3.9 million and $9.2 million, respectively. This
compared to $3.1 million and $8.5 million for the same periods, respectively,
in the prior fiscal year
Interest expense was $5.1 million and $15.1 million for the quarter and
nine months ended April 30, 1997, respectively. This compared to $4.8 million
and $13.8 million for the same periods, respectively, in the prior fiscal year.
The increase in interest expense is primarily due to the effect of having
capitalized interest on major capital projects during the prior year.
Generally higher inventory balances during the third quarter of fiscal 1997
also contributed to increased interest expense.
7
<PAGE> 8
The benefit for income taxes was $0.4 million for the three months ended
April 30, 1997 compared to an expense of $1.5 million for same period in the
prior year due to the net loss in the current year third quarter. For the nine
months ended April 30, 1997, the Company recorded a benefit for income taxes of
$3.2 million compared to an expense of $4.6 million for the prior year period.
ANNOUNCEMENT OF CONDITIONAL PLANT CLOSURE
- -----------------------------------------
On June 5, 1997, the Company announced that is would most likely close
its Houston structural mill permanently in the fourth quarter ending July 31,
1997. The Company has suspended making semi-finished steel for Houston and
notified its Houston employees that the Houston mill will, in all likelihood,
be closed. The Company has concluded that market conditions today -- and for
the foreseeable future -- are such that the Houston plant is not, and is
unlikely to become, a profitable, competitive source for structural steel.
This situation has been intensified by recently announced significant
structural steel capacity additions to the marketplace. Significant losses
were incurred at Houston in the first nine months of fiscal 1997. The Company
does not believe that the operating costs of the Houston plant, nor the future
required investments in this plant, can be recovered.
The Company has shared all relevant information that led to this decision
with the United Steelworkers of America (USWA). The Company has also agreed to
cooperate with the USWA in undertaking additional work and analysis, supported
by outside consultants recommended by the USWA, to determine what, if any,
additional actions might be taken to continue operations in Houston. The work
is to be concluded by the end of June. Should these studies result in an
acceptable plan which would allow Houston to be a long-term, viable and
profitable operation with an acceptable return on investment, the Company would
reconsider its conditional decision.
Should the Company permanently close the Houston plant, the Company would
incur a non-recurring, mostly non-cash, pretax exit charge in the fourth
quarter ending July 31, 1997, currently estimated at between $95 and $105
million. Liquidation of Houston assets, net of closure costs, is expected to
generate a modest amount of cash, which will be used for debt reduction. The
Company has discussed with its banks the effects of the Houston closing on the
covenants within its bank credit agreement, and expects to amend the covenants
to more appropriately reflect business operations on a going forward basis.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
GENERAL. Funds for the Company's operational needs have been provided
from internally generated cash and through utilization of the Company's credit
facility. As of April 30, 1997, total liquidity, comprising cash, cash
equivalents and funds available under the Company's credit facility, totaled
$47.4 million compared to $94.6 million at July 31, 1996. Principal uses of
cash during the first
8
<PAGE> 9
nine months of fiscal 1997 included increases in working capital, capital
expenditures and scheduled debt repayments.
The working capital increase was primarily the result of a reduction in
accounts payable and increased levels of inventory. The change in accounts
payable was primarily the result of the timing of payments for and reduced
purchases of scrap steel during the third quarter of fiscal 1997 compared to
the fourth quarter of fiscal 1996. As reported in the second quarter Form
10-Q, the Company has begun to reduce inventory levels to bring production
levels and shipment levels in better balance. During the third quarter,
inventories decreased approximately $5.3 million but still remain higher than
at July 31, 1996.
Capital expenditures were $15.1 million for the first nine months of
fiscal 1997 compared to $31.3 million in the prior year. As a result of
decreased earnings, the Company reduced capital expenditures. The Company
currently anticipates capital expenditures for fiscal 1997 to be significantly
less than depreciation charges. However, in connection with the conditional
closing of the Houston mill described above, the Company expects to increase
its level of capital expenditures at Sterling during the next two years to
levels which exceed the expected 1997 spending levels. Expenditures are
expected to focus primarily upon the 24" and 14" rolling mills.
As described above, the closure of the Houston mill would result in a
largely non-cash charge against operations in the fourth quarter of 1997. Cash
generated from liquidation of working capital, net of closure costs, will be
used to repay existing indebtedness. As a result of the Houston exit charge,
the Company will be in default of covenants in its credit agreement governing
leverage and fixed charge coverage ratios. The Company believes it will be
able to amend the covenants in its bank credit agreement to more appropriately
reflect the business operations on a going forward basis. In the near term, a
return to profitable operations as well as utilization of the Company's credit
facility will be required to provide the funds needed to upgrade and modernize
the previously described steel operations at the Sterling, Illinois location.
On a longer term basis, the Company has significant future debt service
obligations. The Company's ability to satisfy these obligations and to secure
adequate capital resources in the future are dependent on its ability to
generate adequate cash flow. This will be dependent on the Company's overall
operating performance and be subject to general business, financial,
competitive and other factors affecting the Company and the domestic steel
industry, certain of which are beyond the control of the Company.
9
<PAGE> 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 11 - Computation of (Loss) Income Per Share
(b) Exhibit 20 - Other Statements to Security Holders
Press Release dated June 5, 1997
(c) Exhibit 27 - Financial Data Schedule
(d) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the quarter ended April 30, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHWESTERN STEEL AND WIRE COMPANY
By /s/ T. J. Bondy
---------------------------------
Timothy J. Bondy
Vice President, and
Chief Financial Officer
(Principal Financial Officer)
June 13, 1997
10
<PAGE> 1
Exhibit 11
NORTHWESTERN STEEL AND WIRE COMPANY
Computation of (Loss) Income Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
--------------------------------- ---------------------------------
1997 1996 1997 1996
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net (loss) income $ (573,000) $ 3,558,000 $ (4,763,000) $ 10,744,000
============= ============= ============== =============
Shares outstanding for net (loss)
income per share calculation 24,862,496 25,160,048 24,862,496 25,160,048
============= ============= ============== =============
Net (loss) income per share $ (0.02) $ 0.14 $ (0.19) $ 0.43
============= ============= ============== =============
</TABLE>
<PAGE> 1
NEWS NORTHWESTERN (TM)
RELEASE STEEL AND WIRE COMPANY
121 WALLACE STREET, STERLING, ILLINOIS 61081
FOR IMMEDIATE RELEASE CONTACT: Timothy J. Bondy
Vice President and CFO
815/625-2500
Ext. 2331
COMPANY ANNOUNCES IMPROVED THIRD QUARTER RESULTS
COMPARED TO MOST RECENT TWO QUARTERS AND STRATEGIC
INITIATIVES TO IMPROVE COMPETITIVE POSITION
Sterling, Illinois - June 5, 1997 -- Northwestern Steel and Wire Company
(Nasdaq:NWSW) announced today improved operating results for the third quarter
ended April 30, 1997, compared with results for the first two quarters of
fiscal 1997. The Company also announced that its Board of Directors approved
new strategic initiatives that will result in the upgrading and modernization
of its Sterling, Illinois operations and, most likely, the permanent closing of
its Houston, Texas structural mill.
Sales were $171.7 million in the third quarter compared to $173.2 million
in the prior year. The Company recorded a net loss for the period of $0.6
million, or $.02 per share, versus net income of $3.6 million, or $.14 per
share, in the year ago period. For the nine months, sales were $460.6 million
compared to $483.3 million in the prior year. The Company incurred a net loss
of $4.8 million, or $.19 per share, in the current year compared to net income
of $10.7 million, or $.43 per share, last year.
In commenting on the third quarter results, Mr. Gildehaus said, "Operating
performance improved from the significantly depressed levels experienced in the
first two quarters of fiscal 1997, when losses of $.08 and $.09 per share,
respectively, were recorded. During the third quarter, pricing began to
improve for small structural products and wire rod. Although overall volume
increased compared to year ago levels, with higher volumes in semi-finished
steel and rod offset by lower beam shipments, average selling prices were lower
for most products."
<PAGE> 2
Mr. Thomas A. Gildehaus, Chairman and Chief Executive Officer, said, "The
Board has authorized the Company to proceed with engineering and marketing
analyses to upgrade and modernize steel operations at the Sterling, Illinois
location. Capital expenditures over the next two years are expected to focus
primarily on our 24" and 14" rolling mills. These expenditures are directed
toward improving the productivity and cost effectiveness of these mills and,
coupled with previous improvements made to our steelmaking capability, should
significantly reduce the costs of products from these mills. Ongoing cost
reduction programs, coupled with our aggressive new partnership program with
the United Steelworkers of America (USWA), should also generate additional
productivity improvements and cost reductions. The Company will concentrate
the bulk of its resources over the next two years on the Sterling operations to
assure its quality and cost competitiveness in the years ahead."
"Unfortunately, market conditions today -- and for the foreseeable future
- -- are such that the Houston plant is not, and is unlikely to become, a
profitable, competitive source for structural steel. This situation has been
intensified by recently announced significant structural steel capacity
additions to the marketplace. We regret this situation, but must face reality
and take the actions necessary for the long-term benefit of our Company.
Significant losses were incurred at Houston in the first nine months of fiscal
1997. The third quarter would have been slightly profitable, excluding Houston
losses. We do not believe that the operating costs of the Houston plant, nor
the future required investments in this plant, can be recovered."
"We have notified the Houston employees that the Houston mill will, in all
likelihood, be closed. We have suspended making semi-finished steel for
Houston. However, the Company expects to fulfill all customer orders on the
books and will assist customers in locating alternate sources, including
Sterling, for product no longer available from Houston."
"Pursuant to our partnership agreement with the USWA, we have shared all
relevant information that led to this decision. We have also agreed to
cooperate with the USWA in undertaking additional work and analysis to be
jointly conducted over the next 30 days by the Company and the USWA, supported
by outside consultants recommended by the USWA, to determine what, if any,
additional actions might be taken to continue operations in Houston. Should
these studies result in an acceptable plan which would allow Houston to be a
long-term viable and profitable operation with an acceptable return on
investment, the Company would reconsider its conditional decision."
<PAGE> 3
"Should the Company permanently close the Houston plant, the Company would
incur a non-recurring, mostly non-cash, pretax exit charge in the fourth
quarter ending July 31, 1997, currently estimated at between $95 and $105
million. Liquidation of Houston assets, net of closure costs, is expected to
generate a modest amount of cash, which will be used for debt reduction. The
Company has discussed with its banks the effects of the Houston closing on the
covenants within its bank credit agreement, and expects to amend the covenants
to more appropriately reflect business operations on a going forward basis."
Mr. Gildehaus concluded by saying, "As we look ahead, change is evident in
both the near term and longer term. Recent price increases in rod and small
structurals reflect the continued strength of that portion of our business.
However, price decreases were announced near the end of the quarter for beam
products. Our conditional decision to close Houston, further invest in the
Sterling steel operations and the announcements by our competitors of capacity
additions in the structural steel business, all challenge us to improve our
competitive position in the marketplace. We intend to continue our position as
a major source of structural and merchant bar products."
Except for historical information, matters discussed above contain forward
looking information and describe the Company's belief concerning future
business conditions outlook based on currently available information. The
Company has identified these "forward looking" statements by words such as
"should", "expects" and similar expressions. Risks and uncertainties which
could cause actual results or performance to differ materially from those
expressed in these statements include the following: volumes of production and
product shipments; changes in product mix and pricing; costs of scrap steel and
other raw material inputs; changes in domestic manufacturing capacity; the
level of non-residential construction and overall economic growth in the United
States; changes in legislative or regulatory requirements; and the level of
imported products in the Company's markets. The Company assumes no obligation
to update the information contained herein.
Founded in 1879, the Company is a major mini-mill producer of structural
steel components which include wide flange beams, channels, angles and merchant
bar, as well as rod and wire products which include nails, fencing, concrete
reinforcing mesh and other fabricated wire products. Structural products are
used in a wide variety of commercial, industrial and residential construction
applications, while rod and wire products are marketed to the construction and
agricultural industries, retail "do-it-yourself" outlets, distributors and
other wire manufacturers.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> APR-30-1997
<CASH> 3,906
<SECURITIES> 0
<RECEIVABLES> 68,811
<ALLOWANCES> 825
<INVENTORY> 116,273
<CURRENT-ASSETS> 204,489
<PP&E> 422,487
<DEPRECIATION> 185,779
<TOTAL-ASSETS> 465,101
<CURRENT-LIABILITIES> 79,301
<BONDS> 0
0
0
<COMMON> 123,966
<OTHER-SE> (27,189)
<TOTAL-LIABILITY-AND-EQUITY> 465,101
<SALES> 171,652
<TOTAL-REVENUES> 171,713
<CGS> 157,149
<TOTAL-COSTS> 167,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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