SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
Form 10-Q
(Mark One)
[ X ] Quarterly report purusant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934 for the quarterly period ended
February 28, 1997
[ ] Transaction report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the transition period from ______________ to __________________
Commission File Number: 0-15838
New Jersey Steel Corporation
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(Exact name of registrant as specified in its charter)
Delaware 22-2137967
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
North Crossman Road, Sayreville, New Jersey 08872
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(Address of pricipal executive offices) (Zip code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
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 and 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 filing requirements for the past 90 days.
x YES NO
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY DURING THE PRECEDING
FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
YES NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of February 28, 1997.
$.01 Par Value Common Stock 5,920,500
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(Title of Class) (Number of Shares Outstanding)
NEW JERSEY STEEL CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Operations
Three-Month Periods Ended February 28, 1997 and February 29, 1996
(In thousands, except per share data)
<TABLE>
1997 1996
----------------------------------
(Unaudited)
<S> <C> <C>
Net sales $31,009 $24,583
Net sales - affiliates 2,277 2,072
Cost of sales 32,606 30,989
----------------------------------
Gross profit (loss) 680 (4,334)
Selling, general and
administrative expenses 2,546 2,079
Operating (loss) income (1,866) (6,413)
Other income (expense):
Interest (expense) (1,123) (177)
Rental income 35 55
Other income (expense) -- 4
----------------------------------
(Loss) earnings before provision
for income taxes and equity in
operations of investee (2,954) (6,531)
Provision for income taxes -- --
----------------------------------
(Loss) earnings before equity in
operations of investee (2,954) (6,531)
Equity in operations of investee (45) (90)
----------------------------------
Net (loss) earnings (2,999) (6,621)
Net (loss) earnings per common share ($.51) ($1.12)
Weighted average number of shares 5,921 5,921
outstanding
</TABLE>
See accompanying notes to condensed consolidated financial statements.
NEW JERSEY STEEL CORPORATION AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share data)
<TABLE>
Feb 28 Nov 30
1997 1996
----------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13 $ 13
Receivables:
Trade, net 17,881 21,273
Trade - affiliates 2,966 2,458
Other 495 542
----------------------------------
Net receivables 21,342 24,273
----------------------------------
Inventories 20,579 15,990
Prepaid expenses and other
current assets 353 412
Deferred income taxes 270 270
----------------------------------
Total current assets 42,557 40,958
Property, plant and equipment, net 91,748 91,607
Other assets 1,259 1,422
Deferred income taxes 4,630 4,630
Real estate, net 12,753 12,753
----------------------------------
$ 152,947 $ 151,370
==================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long
-term debt $ 1,500 $ 1,500
Accounts payable - trade 30,169 32,020
Due to parent 2,343 2,035
Accrued expenses 4,639 4,152
----------------------------------
Total current liabilities 38,651 39,707
----------------------------------
Note payable - bank 17,271 13,264
Long-term debt, less current
installments 5,625 6,000
Note payable - Parent 19,000 17,000
Stockholders' equity:
Preferred stock, $.01 par value.
Authorized 5,000,000 shares;
none issued. -- --
Common stock, $.01 par value.
Authorized 15,000,000 shares;
issued and outstanding
5,920,500 shares in 1996 and
1995 59 59
Additional paid-in capital 134,070 134,070
Accumulated deficit (61,729) (58,730)
----------------------------------
Total stockholders' equity 72,400 75,399
----------------------------------
Commitments and contingencies
----------------------------------
$ 152,947 $ 151,370
==================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
NEW JERSEY STEEL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Three-Month Periods Ended February 28, 1997
and February 29, 1996
<TABLE>
1997 1996
----------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) earnings $ (2,999) $ (6,621)
Adjustments to reconcile net
(loss) earnings to net cash used
in operating activities:
Depreciation 2,264 1,971
Provision for losses on trade
receivables 46 70
Equity in operations of
investee 45 90
Changes in assets and liabilities:
Decrease in net receivables 2,885 6,256
Increase in inventories (4,589) (1,443)
Decrease in prepaid expenses
and other current assets 59 112
Decrease in other assets 118 3,884
(Decrease) Increase in accounts
payable - trade (1,851) 3,371
Increase (decrease) in due to
parent and accrued expenses 795 (5,202)
----------------------------------
Net cash (used in)
generated by
operating activities (3,227) 2,488
----------------------------------
Cash flows from investing activities:
Capital expenditures (2,405) (4,996)
----------------------------------
Cash flows from financing activities:
Repayment of long-term debt (375) --
Bank borrowings - net 4,007 2,475
Borrowings from parent - net 2,000 --
----------------------------------
Net cash provided by
financing activities 5,632 2,475
----------------------------------
Net decrease in cash and
cash equivalents -- (33)
----------------------------------
Cash and cash equivalents at beginning
of period 13 61
----------------------------------
Cash and cash equivalents at end of
period $ 13 $ 28
==================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
New Jersey Steel Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 1997 and November 30, 1996
(Dollars in thousands, except per share amounts)
(Unaudited)
(1) Basis of Presentation
The unaudited condensed consolidated financial statements of New Jersey Steel
Corporation and subsidiary (the Company), in the opinion of management,
include all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation of the results of such periods. The results of
operations for the three-month periods ended February 28, 1997 and
February 29, 1996 are not necessarily indicative of the results to be
expected for the entire year. The accompanying interim financial statements
should be read in conjuntion with the Company's audited 1996 consolidated
financial statements.
The Company's business is seasonal and is normally slower in the winter
months with inventory build-up during this period.
(2) Capital Stock
During the three-month period ended February 29, 1996, no stock options were
granted or exercised.
During the three-month period ended February 28, 1997, in connection with
an officer assuming the position of President and Chief Executive Officer of
the Company, outstanding options held by such officer to purchase 65,000
shares of the Company's Common Stock at exercise price ranging from $8.00
to $14.00 per share were surrendered and exchanged for options to purchase
65,000 shares of the Common Stock at an exercise price of $5.00 per share,
the fair market value on the date of grant. Of such options, options
covering 15,000 shares vested immediately and the remaining options covering
50,000 shares vest in 20% increments on April 12th of each year beginning
April 12, 1997 and continuing through April 12, 2001. Also in connection
with his becoming President and Chief Executive Officer, such officer was
granted additional options to purchase 50,000 shares of Common Stock at an
exercise price of $5.00, the fair market value on the date of grant. Such
options vest in 20% increments on February 24th of each year beginning
February 24, 1998 and continuing through February 24, 2002. No stock options
were exercised during the three-month period ended February 28, 1997.
(3) Inventories
Inventories consist of the following:
<TABLE>
Feb 28 Nov 30
1997 1996
---------------------------
(Unaudited)
<S> <C> <C>
Finished goods $ 6,962 5,070
Work-in-process 2,654 1,933
Raw materials, spare
parts and supplies 10,963 8,987
---------------------------
$ 20,579 15,990
===========================
</TABLE>
(4) Per Common Share Amounts
Per common share amounts are based on the weighted average number of shares of
shares of common stock outstanding during each period. The effect of stock
options for the three-month periods ended February 28, 1997 and February 29,
1996 were not material.
(5) Bank Borrowings
In June 1996, the Company entered into an Amended and Restated Loan and
Security Agreement (the "loan agreement") with its bank to increase the
maximum amount available under its revolving credit facility from
$17,500 to $20,000 and to extend the maturity date from April 30,
1997 to May 1, 1998. The maturity dated on the Company's $7,500 term loan
was also extended from December 31, 2000 to May 1, 2001. The loan agreement
also amended certain financial convenants. Borrowings under the revolving
credit facility and term loan are secured by substantially all of the
Company's assets. Principal repayments under the term loan are due in
monthly installments of $125 beginning December 1, 1996 with a final
payment of $875 due at maturity. Interest on the term loan and
outstanding amounts under the revolving credit facility are payable at the
prime rate plus one percent (9.25% at February 28, 1997). On February 27,
1997, the bank amended the loan agreement with respect to the financial
statement covenants. Covenants amended include tangible net worth, working
capital, capital expenditures and the cash coverage ratio, as defined.
Concurrently with the execution and delivery of the loan agreement, the
Company entered into a Credit Agreement (the "credit agreement") with Von
Roll Holding Ltd., its majority stockholder. The credit agreement provided a
$15,000 revolving credit facility to the Company which matures May 1, 1998.
The credit agreement was amended in September 1996 increasing the amount
available under the revolving credit facility to $17,000. Repayment of
borrowings under this revolving credit facility is subordinated to the bank
borrowing referred to above and is secured by subordinate liens on
substantially all of the Company's assets. Interest on outstanding amounts
under the credit agreement is payable monthly at the prime rate plus one
percent. In December 1996, the Board of Directors of the Company authorized
an amendment to the credit agreement with Von Roll increasing the maximum
amount available under the revolving credit facility to $19,000 and
subsequently the Company increased its borrowings by $2,000.
On February 27, 1997, the bank agreed to a temporary increase in the maximum
amount available under its credit facility from $20,000 to $23,500.
The increase in availability is only in effect through May 31, 1997. In
addition, the Company anticipates that with the continued support from its
majority stockholder, it will be able to secure additional borrowings to
meet its anticipated liquidity requirements.
Borrowings under the credit facility and term loan are secured by
virtually all of the Company's assets. Total bank interest paid for the
quarter ended February 28, 1997 was $575, total interest expense
was $1,122.
(6) Commitments and Contingencies
In September 1994, the New Jersey Department of Environmental Protection
(NJDEP) issued a "Permit to Construct, Install or Alter Control Apparatus or
Equipment" a "Temporary Certificate to Operate" and a "Prevention of
Significant Deterioration Permit" (the NJDEP Permit). The NJDEP Permit
authorized the Company to install the Consteel Process at the Sayreville Mill,
including a Continuous Emissions Monitoring System (CEMS) equipment and
directed that there be a stack test. The CEMS equipment was started in
April 1995 and the stack test was conducted in February 1996 with the results
submitted to the NJDEP in March 1996. The CEMS data and stack test results
indicated that certain emissions exceed the levels contained in the permit.
In conjunction with the submission of these results, the Company applied
for a modification of its permit to reflect actual operations. Until such
time as a new permit is issued, there is a question as to whether the Company
is in violation of the NJDEP permit and, as a consequence, subject to fines
and penalties, the amounts of which are subject to the discretion of the
NJDEP. Discussions with the NJDEP regarding how to proceed in this matter
and the application process for a permit with revised limits are continuing.
The Company believes that the ultimate outcome of this matter will not have a
material adverse effect on the Company's financial position or results of
operations.
In March 1996, the Natural Resources Defense Council (NRDC) and the Public
Interest Research Group of New Jersey, Inc. (PIRG) commenced a lawsuit against
the Company in the United States District Court of New Jersey. The lawsuit is
based on the Company's CEMS reports submitted to the NJDEP and claims that
the exceedances since April 1995 constitute violations of the Clean Air Act
which are not being pursued by the NJDEP. The complaint seeks unspecified
fines and penalities for the alleged violations and for an injunction
mandating operation of the Sayreville Mill in accordance with its permit.
The Company filed an answer with the United States District Court on April
10, 1996. Since that time, the State of New Jersey has intervened in the
litigation. The Company believes that the ultimate outcome of this matter
will not have a material adverse effect on the Company's financial position
or results of operations.
The Company and Von Roll are defendants in an action entitled GARY LUTIN v.
NEW JERSEY STEEL CORPORATION, VON ROLL LTD. a/k/a VON ROLL AG, and et al.
The action was originally commenced in a West Virginia state court in 1991.
The plaintiff has alleged that the defendants conspired to destroy the
business of Advanced Mining Systems, Inc., a company which manufactured roof
support systems for underground coal mines. In 1995, the same plaintiff
filed a second action in the same court against the same parties under the
Federal RICO statutes. The plaintiff seeks unspecified damages in both
actions which he claims to be in excess of $50,000.
In October 1996, the court rendered a decision dismissing the complaints in
the two actions. The RICO claims were dismissed with prejudice. The claims
for tortious conspiracy were dismissed without prejudice to the plaintiff's
right to replead. Plaintiff has filed an appeal from the decision dismissing
his RICO claim and filed an amended complaint in the first action. The
Company has moved to dismiss that amended complaint.
A related action entitled NEW JERSEY STEEL CORPORATION AND VON ROLL HOLDING
AG v. GARY LUTIN pending in the Supreme Court of the State of New York,
involves a claim by the Company and Von Roll against Mr. Lutin for libel in
connection with a letter written by Mr. Lutin. In July 1996, Mr. Lutin
filed his answer with counterclaims asserting essentially the same claims as
were made in the two federal actions. The court dismissed the counterclaims
on the grounds that there was another action pending for essentially the
same claims in federal court. Mr. Lutin has filed an appeal from the court's
decision.
The Company has been advised by its counsel that, based on the information
available to it, the claims of Mr. Lutin in these matters are without merit.
In 1995, Egyptian Metals Company ("EMC") commenced a lawsuit againt the
Company in the United States District Court for the District of New Jersey
(Case No. CIV. 95 823 (DRD)) seeking damages in the amount of $5,050 for
steel purchased through certain steel brokers which EMC asserts was of
inferior quality. Trial was conducted and concluded in March 1997 and the
Company is awaiting the outcome. The Company believes it will prevail in
it's defense of this action.
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. Such claims
against the Company are generally covered by insurance. There can be no
assurance that insurance, including product liability insurance, will be
available in the future at reasonable rates.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three-Month Periods Ended February 28, 1997 and February 29, 1996
A summary of the period-to-period changes in the "Condensed Consolidated
Statements of Operations" for the three-month periods ended February 28,
1997 and February 29, 1996 is shown below (dollars in thousands):
<TABLE>
Percent of Net Sales
------------------------------- --------------------
1997 1996 Inc. (Dec) 1997 1996
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 33,286 26,655 6,631 100.0 100.0
Gross profit (loss) 680 (4,334) 5,014 2.0 (16.3)
Selling, general
and administrative
expenses 2,546 2,079 467 7.6 7.8
Other (expense) (1,088) (118) 970 (3.3) (0.4)
(Loss) earnings
before provision
for income taxes
and equity in
operations of
investee (2,954) (6,531) (3,577) (8.9) (24.5)
Provision for
income taxes -- -- -- -- --
(Loss) earnings
before equity
in operations
of investee (2,954) (6,531) (3,577) (8.9) (24.5)
Equity in
operations of
investee (45) (90) (45) (0.1) (0.3)
------------------------------- --------------------
Net (loss)
earnings $ (2,999) (6,621) 3,622 (9.0) (24.8)
=============================== ====================
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Three Months Ended February 28, 1997 compared to the three months ended
February 29, 1996
Net sales for the first quarter of 1997 increased 25% to $33,286,000 as
compared to the first quarter of 1996 primarily on the strength of increased
shipping volume and higher average finished goods selling prices. Mild
winter weather allowed the Company to increase its shipment of products to
its Northeast home market during the first quarter of 1997 to 117,000 tons,
as compared to 99,000 tons in 1996. This return to normal distribution
patterns allowed average finished goods selling prices to increase to $301
per ton in the first quarter of fiscal 1997 as compared to $272 per ton
for the first quarter of 1996.
The combination of higher rebar selling prices and increased shipments had a
positive impact on gross profit margins for the first quarter of 1997 as
compared to 1996. Gross profit increased $5,014,000 to $680,000 for the quarter
ended February 28, 1997 from a loss of $4,334,000 in the first quarter of
1996. Conversion cost increased slightly during the first quarter of 1997,
primarily related to a scheduled three-week maintenance outage in both the
melt shop and rolling mill as compared to the first quarter of 1996 when
adverse winter weather conditions in the Northeast had a negative impact on
production. Offsetting increased conversion costs were scrap prices which
declined to $100 per ton in the first quarter 1997 from $113 per ton in 1996.
Other material costs decreased in the first quarter of 1997 over the
first quarter 1996 levels primarily due to lower alloy pricing.
Selling, general and administrative expenses for first quarter of 1997
increased $467,000 to $2,546,000 from $2,079,000 for the comparable 1996
period primarily as a result of severance obligations. For the first quarter
of 1997 other expense increased $970,000 to $1,088,000 from $118,000 for the
comparable 1996 period, primarily due to an increase in net interest expense.
New Jersey Steel's share of equity in the operations of an investee
contributed a $45,000 loss to the Company for the quarter ended February 28,
1997 as compared to a $90,000 loss for the quarter ended February 29, 1996.
Liquidity and Capital Resources
In June 1996, the Company entered into an Amended and Restated Loan and
Security Agreement (the "loan agreement") with its bank to increase the
maximum amount available under its revolving credit facility from
$17,500,000 to $20,000,000 and to extend the maturity date from April 30,
1997 to May 1, 1998. The maturity dated on the Company's $7,500,000 term loan
was also extended from December 31, 2000 to May 1, 2001. The loan agreement
also amended certain financial convenants. Borrowings under the revolving
credit facility and term loan are secured by substantially all of the
Company's assets. Principal repayments under the term loan are due in
monthly installments of $125,000 beginning December 1, 1996 with a final
payment of $875,000 due at maturity. Interest on the term loan and
outstanding amounts under the revolving credit facility are payable at the
prime rate plus one percent. On February 27, 1997, the bank amended the
loan agreement with respect to the financial statement covenants. Covenants
amended include tangible net worth, working capital, capital expenditures
and the cash coverage ratio, as defined.
Concurrently with the execution and delivery of the loan agreement, the
Company entered into a Credit Agreement (the "credit agreement") with Von
Roll, its majority stockholder. The credit agreement provided a $15,000,000
revolving credit facility to the Company which matures May 1, 1998. The
credit agreement was amended in September 1996 increasing the amount
available under the revolving credit facility to $17,000,000. Repayment of
borrowings under this revolving credit facility is subordinated to the bank
borrowing referred to above and is secured by subordinate liens on
substantially all of the Company's assets. Interest on outstanding amounts
under the credit agreement is payable monthly at the prime rate plus one
percent. In December 1996, the Board of Directors of the Company authorized
an amendment to the credit agreement with Von Roll increasing the maximum
amount available under the revolving credit facility to $19,000,000 and
subsequently the Company increased its borrowings by $2,000,000.
On February 27, 1997, the bank agreed to a temporary increase in the maximum
amount available under its credit facility from $20,000,000 to $23,500,000.
The increase in availability is only in effect through May 31, 1997. In
addition, the Company anticipates that with the continued support from its
majority stockholder, it will be able to secure additional borrowings to
meet its anticipated liquidity requirements.
Von Roll has also guaranteed the Company's payment obligations under the
Company's scrap brokerage and service agreements. The guaranty is for a
maximum of $5,000,000 and will expire 30 days after the termination of the
scrap brokerage and service agreements.
The quarter ended February 28, 1997 reflects an increase in working capital
as compared to November 30, 1996. This is primarily the result of an
increase of $1.7 million in net receivables and inventory.
Net cash used in operating activities was $3,227,000 for the quarter ended
February 28, 1997 as compared to $2,488,000 of cash generated during the
comparable quarter of 1996. Increases in inventory of $4,589,000 and a
decrease in trade payables fo $1,851,000 were the primary contributors to
this change. Net bank borrowings for the first quarter of 1997 were
$4,007,000 as compared to $2,475,000 in the first quarter of 1996.
Borrowing for the Company's parent was $2,000,000 for the first quarter of
1997. Capital expenditures decreased to $2,405,000 for the first quarter of
1997 as compared to $4,996,000 for the 1996 first quarter, primarily as a
result of reduced capital expenditure activity by the Company due to near
completion of its modernization program. The Company anticipates to incur
capital expenditures of $6.8 million in fiscal 1997 primarily for cost
reduction projects identified during the course of an ongoing review of melt
shop operations by technical consultants. The Company believes cash flows
generated by future operations and its credit facility will be adequate to
fund day-to-day operations and anticipated capital expenditures for the
balance of the fiscal year.
Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 128, "Earnings Per Share" (SFAS 128). SFAS 128
establishes standards for computing and presenting earnings per share. In
accordance with the effective date of SFAS 128, the Company will adopt SFAS
128 as of February 28, 1998. This statement is not expected to have a
material impact upon the Company's financial statements.
PART II. Other Information
Item 1. Legal Proceeedings
See "Note (6) - Commitments and Contingencies of the Notes to Condensed
Consolidated Financial Statements" for a description of legal proceedings
involving the Company and for new developments in the Egyptian Metals
Company litigation.
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. Such claims
against the Company are generally covered by insurance. There can be no
assurance that insurance, including product liability insurance will be
available in the future at reasonable rates.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
3(a) - Restated Certificate of Incorporation as amended - Incorporated
by reference to Exhibit 3(a) of the Company's Registration
Statement on Form S-1 (No. 33-13298).
3(b) - By-laws as amdended - Incorporated by reference to Exhibit 3(b) to
the Company's Annual Report on Form 10-K for the year ended November
30, 1993 (File No. 0-15838).
4(a) - Form of Certificate for shares of Common Stock of the Company -
Incorporated by reference to Exhibit 4(a) of the Company's
Registration Statement on Form S-1 (No. 33-13298).
10(a) - Technical Services and Management Consulting Agreement between the
Company and Von Roll Ltd. dated as of April 1, 1987 - Incorporated
by reference to Exhibit 10(e) of the Company's Registration
Statement on Form S-1 (No. 33-13298).
10(b) - Incentive Stock Option Plan of Company adopted October 2, 1987 with
amendements - Incorporated by reference to Exhibit 10(f) of the
Company's Registration Statement on Form S-1 (No. 33-13298).
10(c) - Form of Stock Option Agreement - Incorporated by reference to
Exhibit 4(b) of the Company's Registration Statement on Form S-8
(No. 33-17435).
10(d) - Indemnity Agreement between the Company and Von Roll Ltd. dated as
of April 1, 1987 - Incorporated by reference to Exhibit 10(g) of
the Company's Registration Statement on Form S-1 (No. 33-13298).
10(e) - New Jersey Steel Corporation Thrift Savings Plan (as amended 1994)
- Incorporated by reference to Exhibit 10(g) of the Company's
Annual Report on Form 10-K for the year ended November 30, 1994
(File No. 0-15838).
10(f) - New Jersey Steel Corporation Thrift Trust Savings Agreement (as
amended 1994) - Incorporated by reference to Exhibit 10(h) of the
Company's Annual Report on Form 10-K for year ended November 30,
1994 (File No. 0-15838).
10(g) - Registration Agreement between the Company and Von Roll Ltd. dated
as of April 1, 1987 - Incorporated by reference to Exhibit 10(h) of
the Company's Registration Statement on Form S-1 (No. 33-13298).
10(h) - Amended and Restated Loan and Security Agreement dated as of June
6, 1996 between Midlantic Bank, National Association and the
Company - Incorporated by reference to Exhibit 10(i) to the
Company's Quarterly Report on Form 10-Q for the quarter ended May
31, 1996 (File No. 0-15838).
10(i) - Credit Agreement dated as of June 6, 1996 between Von Roll Holding
AG and the Company - Incorporated by reference to Exhibit 10(j) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
May 31, 1996 (File No. 0-15838).
10(j) - 1996 Stock Option Plan - Incorporated by reference to Exhibit A of
the Company's Proxy Statement dated May 7, 1996 used in connection
with the meeting of stockholders held June 21, 1996
(File No. 0-15838).
10(k) - Form of Stock Option Agreement used in connection with the Company's
1996 Stock Option Plan - Incorporated by reference to Exhibit 10(l)
of the Company's Quarterly Report on Form 10-Q for the quarter ended
May 31, 1996 (File No. 0-15838).
10(l) - First Amendment of Revolving Loan and Security Agreement dated
February 27, 1997 between the Company and PNC Bank - Incorporated
by reference to Exhibit 10(m) of the Company's Annual Report on
Form 10-K for the period ended November 30, 1996 (File No. 0-15838).
10(m) - Employment Agreement dated as of September 9, 1996 between the
Company and Louis F. Hagan - Incorporated by reference to Exhibit
10(n) of the Company's Annual Report on Form 10-K for the period
ended November 30, 1996 (File No. 0-15838).
10(n) - Form of Employment Agreement entered into between Gary A.
Giovannetti and the Company effective upon a "change in control". -
Incorporated by reference to Exhibit 10(o) of the Company's Annual
Report on Form 10-K for the period ended Novmeber 30, 1996 (File
No. 0-15838).
10(o) - Employment Agreement dated as of February 24, 1997 between Gary
A. Giovannetti and the Company - Filed herewith.
27 - Financial Data Schedule
SIGNATURES
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.
NEW JERSEY STEEL CORPORATION
Registrant
Dated: April 15, 1997 /s/ Gary A. Giovannetti
------------------------------------
Gary A. Giovannetti
President
/s/ Alexander Prelat
------------------------------------
Alexander Prelat
Acting Vice President,
Finance and Treasurer
(Principal Financial and Accounting
Officer)
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 24th day of February, 1997 by and between
NEW JERSEY STEEL CORPORATION (the "Company"), a Delaware corporation with
offices at North Crossman Road, Sayreville, New Jersey 08872 and Gary A.
Giovannetti ("Executive"), an individual residing at 388 Ocean Avenue North,
#3D, Long Branch, New Jersey 07740.
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein
contained, the parties hereby agree as follows:
1. Employment. The Company agrees to employ, and does hereby employ,
Executive, and Executive hereby accepts such employment, for the term,
with the duties and compensation and upon the terms and conditions
contained in this Agreement.
2. Term. The term of Executive's employment hereunder (the "Term")
shall be two (2) years beginning on the date of this Agreement and
ending two years thereafter, i.e., February 23, 1999, unless earlier
terminated as hereinafter provided.
3. Duties and Offices.
(a) Executive shall have the duties of the President provided in the
By-Laws of the Company and the title of President and Chief
Executive Officer. Executive will perform his services subject
only to the direction and control of the Company's Board of
Directors and will report only to the Board of Directors.
Executive shall not be required to perform any duties other than
those consistent with his status as President and Chief Executive
Officer.
(b) During the Term, Executive shall devote his full working time
and energies to the business and affairs of the Company.
Executive agrees during the Term to use his best efforts,
skill and abilities to promote the Company's interests; to
serve as a director of the Company; to serve as a director
and officer of any corporation which is a subsidiary of the
Company if elected by the stockholders or Board of Directors
of such subsidiary corporation; and, subject to the
provisions of paragraph (a) of this Section 3, to perform
such duties as may be assigned to him by the Board of
Directors of the Company.
(c) Unless Executive otherwise agrees in writing, the
headquarters for the performance of his services shall be
the principal executive offices of the Company in Sayreville,
New Jersey subject to such reasonable travel as the
performance of his duties in the business of the Company may
require.
4. Compensation.
(a) For his services during the Term, and except as otherwise
provided in this Agreement, the Company shall pay Executive
an annual salary (the "Salary") plus an incentive bonus (the
"Bonus").
(b) The initial Salary shall be at the rate of Two Hundred Fifty
Thousand Dollars ($250,000) per annum. The Salary shall be
reviewed by the Board of Directors prior to the second year
of the Term hereof. The Board of Directors, in its sole
discretion, may increase such Salary. In no event shall the
Salary be reduced. The Salary shall be payable in equal
installments not less frequently than monthly.
(c) For the duration of the Term, Executive shall be paid a Bonus
with respect to each fiscal year of the Company in an amount
equal to one percent (1%) of Pre-tax Profits for a Year,
except that the Bonus for the Year during which the Term
ends shall be a pro rata portion of 1% of Pre-tax Profits
for such Year in the ratio that the number of months of the
Term included in such Year bears to 12.
(d) As used herein the following terms shall have the meanings
set forth:
"Pre-tax Profits" for a Year means the consolidated net
income of the Company and its subsidiaries (before
provision or credit for income taxes or utilization of net
operating loss carryforwards, but after provision for
equity in operations of investees) for such Year determined
in accordance with generally accepted accounting principles
consistently applied.
"Year" means the fiscal year of the Company.
5. Expenses, Benefits and Perquisites.
(a) The Company will pay or reimburse Executive for all travel and
other expenses reasonably incurred by Executive during the Term
in connection with the performance of his duties hereunder.
(b) During the Term, Executive shall receive the benefits from all
retirement, group insurance, life insurance, medical and similar
programs, executive thrift, and stock option and other benefit
plans which are currently available to executives of the Company
generally.
(c) Executive shall be entitled to the use of a Company automobile
during the Term of this Agreement. The type and cost of such
automobile shall be subject to the approval of the Board of
Directors, but shall be generally consistent with a $30-$40,000
luxury automobile.
(d) The Company will pay the initiation fee and the annual
membership fee for one country club membership for Executive.
Any bond or other returnable security arrangement shall be
returned to the Company upon termination of such membership and
return of any such amount to Executive.
(e) Executive shall be entitled to four (4) week paid vacation
during each year of this Agreement.
6. Stock Options and Stock Appreciation Bonus. The Board of Directors
is granting executive new options to purchase 50,000 shares of common
stock under the terms of the New Jersey Steel Corporation 1996 Stock
Option Plan and is acting to reprice the existing options held by
Executive, covering 65,000 shares all such options to be at the price
on February 24, 1997, the date the Board of Directors acted on such
grant. In addition, the Board agrees to negotiate in good faith an
incentive arrangement with Executive whereby Executive will receive
an additional cash bonus should the Company's common stock price
achieve certain target levels.
7. Death of Executive. In the event Executive should die during the
Term, this Agreement and all benefits hereunder shall terminate,
except that the Company shall pay Executive's estate the following:
(a) Executive's Salary until the earlier of the last day of the
sixth month next following the month in which Executive's death
occurs or the Second Anniversary and
(b) an amount equal to a fraction of the Bonus which would have been
paid Executive for the Year in which death occurs had Executive
not died, the numerator of which fraction is the number of
months from December 1 of the Year in question to the end of
the month in which Executive died and the denominator of which
is 12. Such termination shall not affect any rights which
Executive may have at the time of his death pursuant to any
insurance or other death benefit, bonus retirement or stock
award plans or arrangements of the Company or any subsidiary,
or any stock option plan or any options granted thereunder,
which rights shall continue to be governed by the provisions of
such plans and arrangements.
8. Discharge for Cause. The Board of Directors of the Company may
discharge Executive for cause at any time. Such discharge shall be
effected by written notice (the "Discharge Notice") to Executive
which shall specify the reasons for Executive's discharge and the
effective date thereof. As used herein, the term "for cause" shall
mean only criminal dishonesty, chronic alcoholism, drug addiction or
willful violation of specific written directions from the Board of
Directors of the Company, which directions are lawful and are
consistent with the provisions of this Agreement; provided, however,
that if
(a) such discharge is effected because of Executive's willful
violation of such specific written directions from the Board of
Directors of the Company, and
(b) within seven (7) days following the date of receipt by the
Executive of the Discharge Notice, Executive shall cease his
refusal and shall use his best efforts to carry out such written
directions, the termination shall not be effective. Upon
termination pursuant to this Section 8, this Agreement and all
benefits hereunder shall terminate, except that such termination
shall not affect any rights which Executive may have at the time
of termination pursuant to any insurance or other death benefit,
bonus, retirement or stock award plans or arrangements of the
Company or any subsidiary, or any stock option plan or any
options granted thereunder, which rights shall continue to be
governed by the provisions of such plans and arrangements.
9. Disability. If Executive is unable to substantially perform his
services by reason of illness or incapacity for a period of more
than three (3) consecutive months, the Salary and Bonus thereafter
payable to him during the continued period of such illness or
incapacity shall be reduced by the amount of any disability benefits
payable to Executive under any disability program provided by the
Company. Executive's full Salary and Bonus shall be reinstated upon
his return to full employment and discharge of his duties.
Notwithstanding anything to the contrary, the Company may terminate
this Agreement at any time after the Executive is absent or unable
to substantially perform his duties by reason of such illness or
incapacity for six (6) months in any twelve (12) month period. Upon
termination pursuant to this Section 9, this Agreement and all
benefits hereunder shall terminate, except that such termination
shall not affect any rights which Executive may have at the time of
termination pursuant to any insurance or other death benefit, bonus,
retirement or stock award plans or arrangements of the Company or
any subsidiary, or any stock option plan or any options granted
thereunder, which rights shall continue to be governed by the
provisions of such plans and arrangements.
10. Discharge Without Cause.
(a) The Company retains the right to discharge Executive without
cause at any time during the Term by written notice of
termination given to Executive.
(b) If the Company discharges Executive without cause, the Company
shall pay, as severance compensation and liquidated damages,
the Salary and Bonus which Executive would have received, and
the benefits which he would have been entitled to receive under
Section 5(b) hereof, had Executive not been so discharged, and
the following provisions shall apply:
(i) Payment shall be made at the times and in the manner such
Salary and Bonus would have been paid to Executive had he
not been discharged hereunder; and
(ii) In determining the other benefits which Executive would
have received under Section 5(b) during the Term had such
discharge not occurred, it shall be conclusively presumed
that Executive would have received benefits (excluding
stock awards) equal to those which he received with respect
to the last Year prior to the Year in which the discharge
occurs. The term "other benefits" shall not include
incidental management perquisites not provided pursuant to
a benefit plan or program.
11. Indemnification and Legal Fees. The Company shall indemnify
Executive to the fullest extent permitted by law and the Certificate
of Incorporation and By-Laws of the Company from and against any loss,
claim, liability and/or expense incurred for, or by reason of, or
arising out of, acts of Executive as an officer and/or director of
the Company or any subsidiary.
12. Noncompetition and Confidentiality Agreement.
(a) During the Term, Executive will not, without the prior written
consent of the Company, directly or indirectly own, manage,
operate, control or participate in the ownership, management,
operation or control of, or be connected as a stockholder, partner,
joint venturer or otherwise with, or accept employment of any kind
with, any business which, or any business or organization any part
of which, competes with the businesses of the Company or any of
its subsidiaries as such businesses are now conducted, in any
geographical area in which such businesses are conducted.
However, nothing herein contained shall prevent Executive from
investing solely as a passive investor in any securities of a
corporation, partnership, trust, or other entity. For the
purposes of this Agreement, Executive shall be deemed to be a
"passive investor" if he does not control, or does not become
part of any control group of, the issuer of securities acquired
by Executive.
(b) Executive acknowledges that during his employment with the Company
or any of its subsidiaries, he may have had, or may have, access
to secret and confidential information with respect to some or all
of the following:
(i) product and business plans, budgets, sales forecasts, design
plans, research and engineering data, inventions, methods,
systems and processes,
(ii) customers and
(iii) trade secrets (all such information is hereinafter referred
to as "Confidential Information"). Executive agrees that
(except as authorized in writing by the Company or required
pursuant to legal or administrative process) he will not
reveal, divulge or make known to any person, firm or
corporation any Confidential Information. Executive further
agrees that if after the cessation of his employment by the
Company, he discovers any Confidential Information in his
possession, he shall forthwith deliver the same to the
Company. The provisions of this Section 12(b) shall
survive the end of the Term of this Agreement.
13. Fiscal Year. If the Company shall change its fiscal year,
appropriate adjustments shall be made in the provisions of this
Agreement to reflect such change.
14. Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.
15. Miscellaneous.
(a) This Agreement contains the entire understanding between the
parties hereto with respect to the subject matter hereof. This
Agreement may only be amended by an instrument in writing executed
by the party to be bound.
(b) This Agreement and the rights and obligations of the parties
hereto shall bind and inure to the benefit of the successor or
successors of the Company, whether by merger, consolidation or
otherwise.
(c) Any notice to be given pursuant to the terms of this Agreement
shall be in writing and delivered by hand or sent by registered
or certified mail, if to the Company, to the Secretary of the
Company, c/o Jacobs Persinger & Parker, 77 Water Street, New
York, New York 10005, and if to Executive, to his address set
forth above or to such other address or to the attention of such
other person as either party has specified by prior written
notice to the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
NEW JERSEY STEEL CORPORATION
By:
---------------------------------
Chairman of the Board
--------------------------------
Gary A. Giovannetti
<TABLE> <S> <C>
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<LEGEND>
The schedule contains summary financial information extracted from the
registrant's consolidated financial statements for the year ended
November 30, 1997 and is qualified in its entirety by reference to such
financial statements
</LEGEND>
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<S> <C>
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0
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