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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-9944
CHAPARRAL STEEL COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE 75-1424624
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 WARD ROAD, MIDLOTHIAN, TEXAS 76065
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: A/C 214 775-8241
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ----------------
COMMON STOCK, PAR VALUE $.10 NEW YORK STOCK EXCHANGE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 periods 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. (X).
Aggregate market value of the voting stock (which consists solely of
shares of Common Stock) held by non-affiliates of the registrant as of August
5, 1994, computed by reference to the closing sale price of the registrant's
Common Stock on the New York Stock Exchange on such date: $53,249,063.
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock, as of the latest practicable date.
COMMON STOCK - $.10 PAR VALUE
29,679,900 SHARES AS OF AUGUST 5, 1994
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR
ENDED MAY 31, 1994 INCLUDED AS EXHIBIT 13 TO THIS ANNUAL REPORT ARE
INCORPORATED BY REFERENCE INTO PART II.
PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD OCTOBER 19, 1994 (S.E.C. FILE NUMBER:
1.001-09944), ARE INCORPORATED BY REFERENCE INTO PART III.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business............................................ 1
Item 2. Properties.......................................... 5
Item 3. Legal Proceedings................................... 5
Item 4. Submission of Matters to a Vote of
Security Holders............................... 5
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters..................... 5
Item 6. Selected Financial Data.............................. 5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 6
Item 8. Financial Statements and Supplementary Data.......... 6
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............. 6
PART III
Item 10. Directors and Executive Officers of the Registrant..... 7
Item 11. Executive Compensation................................. 9
Item 12. Security Ownership of Certain Beneficial Owners
and Management.................................... 9
Item 13. Certain Relationships and Related Transactions......... 9
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K................................ 10
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PART I
ITEM 1. BUSINESS
(a) General development of business
Chaparral Steel Company (the "Company") was organized as a Delaware
corporation in July 1973 by Texas Industries, Inc. ("TXI") and Co-Steel
Inc.("Co-Steel"), a Canadian corporation, which owns steel mills in New Jersey,
Canada and the United Kingdom. TXI is a New York Stock Exchange listed company
which produces cement and concrete. At the time of the Company's organization,
TXI and Co-Steel each owned a 50% interest in the Company. TXI owned 100% of
the Company from November 1985 when it acquired the remaining 50% of the
outstanding securities of the Company from Co-Steel, until July 1988 when
approximately 19.8% of the outstanding securities were sold in an initial
public offering of common stock by the Company. The consolidated financial
statements include the operations of Chaparral Steel Company, America Steel
Transport and Chaparral's inactive wholly-owned subsidiaries.
(b) Financial information about industry segments
The Company operates in the steel industry only; therefore, no industry
segment information is presented.
(c) Narrative description of business
The Company's original steel mill facility was completed in 1975 and
consisted of an electric arc furnace and a rolling mill, which produced rebar
used in concrete construction, and small size angles, channels, rounds and
flats. The mill achieved a production rate of approximately 500,000 tons per
year, which was substantially above its original design capacity.
In 1982, a major expansion of the steel mill, at a cost of
approximately $180 million, added an additional electric arc furnace and
rolling mill to produce medium-sized structural products. The expansion enabled
the Company to produce beams up to 8" wide. Additional modifications to the
medium section mill now enable the Company to produce beams up to 14" wide, in
addition to large channels and angles.
During fiscal 1992, commissioning was completed on a large beam mill
which has expanded the existing product range up to include 24" wide flange
beams. The expansion was financed with long-term senior unsecured notes of $80
million.
PRODUCTS
The Company's products are sold generally to steel service centers and
steel fabricators for use in the construction industry, as well as to cold
finishers, forgers and original equipment manufacturers for use in the
railroad, defense, automotive, mobile home and energy industries.
The Company designed its bar and structural mills to efficiently
produce bar mill products (31% of 1994 sales on a tonnage basis), structural
mill products (52% of 1994 sales on a tonnage basis) and large beam mill
products (17% of 1994 sales on a tonnage basis). The bar and structural mills
can be modified, without substantial cost or delay, to change current product
mix in order to comply with customer needs or changes in market conditions.
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After inspection, bundling and strapping, finished products are
delivered by common carrier, customer-owned truck, rail or barge. The Company
maintains an inventory of finished products based on anticipated short-term
usage to provide prompt shipments to customers when possible.
The following is a general description of the Company's products:
REINFORCING BAR
The Company produces all commercial sizes of rebar from 3/8" diameter
to 1-3/8" diameter for use in construction applications ranging from highway
and public works projects to residential and high-rise construction.
MERCHANT QUALITY ROUNDS
Merchant quality rounds are cylindrical steel bars used in
construction and fabrication operations. Common uses include roof joists,
anchor bolts and truss supports.
SPECIAL BAR QUALITY ROUNDS
Special Bar Quality ("SBQ") rounds are produced in a large variety of
carbon and alloy grades primarily for use in the forging, machining and cold
drawing industries for production of automotive gears and hand tools. SBQ
rounds are also used as sucker rod material in the oil industry.
BEAMS
Beams are used for building construction and the non-building
fabrication industries. Sales of beams currently constitute approximately 64%
of the Company's sales on a tonnage basis. Beams produced by the Company's
medium section mill include wide-flange beams (ranging in size from 4" x 4" to
14" x 6-3/4"), certain sizes of standard "I" beams and Bantam(TM) beams. Those
beams are used in low-rise construction (up to five stories) and in various
fabrication operations for industrial machinery and mobile home frames. The
large beam mill has enabled the Company to produce wide-flange beams from 8" to
24" in diameter that are used in multi-story buildings, short-span bridges and
other heavy industrial applications.
STRUCTURAL MERCHANT SHAPES AND OTHER PRODUCTS
These products consist of structural channels, flat bars and squares
used in the equipment manufacturing and construction industries, particularly
in low-rise structures.
The Company's products are predominately marketed in North America
exclusively by Company salespersons. Approximately 47% of the Company's
products are sold in Texas, Oklahoma, Louisiana and Arkansas. Other regional
sales of the Company's products are approximately 17% in the midwest United
States and approximately 11% in the southeastern United States. Rebar, merchant
shapes and other products are sold principally to customers located in the
southwestern United States. The Free Trade Agreements between the United
States, Canada and Mexico may continue to favorably affect the Company's
position as a supplier of certain steel products in the Canadian and Mexican
markets. Export sales accounted for 7% of 1994 shipments.
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EXPANDING CAPACITY
Historically, the Company's philosophy was to operate its mill at full
production capacity. Recently, the Company refocused on serving customer
requirements and specific markets while striving to achieve the lowest possible
unit cost of production. The Company's strategy is to continually increase its
melting capacity through productivity improvements, the utilization of new
technology and capital expenditures. Continuing increases in melting capacity
have dictated further capital spending for increases in rolling capacity to
allow maximum use of the Company's facilities to take advantage of marketplace
opportunities.
RAW MATERIALS AND ENERGY
The Company's primary raw material is scrap steel, which includes
shredded steel. The Company produces a major portion of its shredded steel
requirements from its own shredder operation at the site of the steel mill.
Shredded material, which constitutes approximately 28% of the Company's raw
material mix, is produced by the Company at its facility and is primarily
composed of crushed auto bodies purchased on the open market. Another grade of
scrap steel is #1 Heavy, which constitutes approximately 29% of the Company's
scrap steel requirements and is also purchased on the open market.
Historically, the Company has had an adequate supply of scrap steel for its
operations, and the Company believes that the supply of scrap steel will be
adequate to meet future requirements. The purchase price of scrap steel is
subject to market forces largely beyond the control of the Company. The Company
has historically maintained a scrap inventory commensurate with market
conditions.
The Company's steel mill consumes large amounts of electricity and
natural gas. Electricity is obtained from a local electric utility under an
interruptible supply contract with price adjustments which reflect increases or
decreases in the utility's fuel costs. The Company believes that the savings in
the cost of electricity resulting from the interruption provisions of the
contract offsets any loss which might result from interruptions. Natural gas is
purchased in the open market generally under a one year supply contract. The
Company believes that adequate supplies of both electricity and natural gas are
readily available.
SEASONALITY
While there is generally no seasonality in demand for the Company's
products, production at the mill is normally shut down for up to two weeks each
summer and up to one week in December, in order to conduct comprehensive
maintenance (in addition to normal maintenance performed throughout the year)
and to install capital improvements. During these periods, much of the
equipment in the plant is dismantled, inspected and overhauled. The resulting
lower production during the three month periods ending August and February
affect the Company's financial results for those periods.
MARKETING AND BACKLOG
At present, the Company has approximately 1,100 customers, no one of
which accounted for more than 10% of the Company's products sold in 1994. The
commodity nature of certain of the Company's products is generally not
characteristic of a long lead time order cycle. The Company does not believe
that backlog is a significant factor in its business. While the Company has a
small number of long-term customer contracts, most contracts are for quarterly
customer requirements or for immediate shipment. Orders are generally filled
within 45 days and are cancelable.
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COMPETITION AND OTHER MARKET FACTORS
The Company competes with steel producers, including foreign
producers, on the basis of price, quality and service. Intense sales
competition exists for substantially all of the Company's products. A
substantial portion of the Company's products is sold to the construction
industry.
Both the domestic and foreign steel industries are characterized by
excess mill capacity. Steel producers in the United States have faced strong
competition from producers around the world. The Company believes that its
success in increasing productivity, reducing production costs and shifting into
higher margin product lines should continue to enable it to compete effectively
with both foreign and domestic producers.
ENVIRONMENTAL MATTERS
The operations of the Company and its subsidiaries are subject to
various federal and state environmental laws and regulations. Under these laws
the U.S. Environmental Protection Agency ("EPA") and agencies of state
government have the authority to promulgate regulations which could result in
substantial expenditures for pollution control and solid waste treatment. Three
major areas regulated by these authorities are air quality, water quality and
hazardous waste management. Pursuant to these laws and regulations emission
sources at the Company's facilities are regulated by a combination of permit
limitations and emission standards of statewide application, and the Company
believes that it is in substantial compliance with its permit limitations and
applicable laws and regulations.
The Company's steel mill generates, in the same manner as other
similar steel mills in the industry, electric arc furnace ("EAF") dust that
contains lead, chromium and cadmium. The EPA has listed this EAF dust, which is
collected in baghouses, as a hazardous waste. The Company has contracts with
reclamation facilities in the United States and Mexico pursuant to which such
facilities receive the EAF dust generated by the Company and recover the metals
from the dust for reuse, thus rendering the dust non-hazardous. In addition,
the Company is continually investigating alternative reclamation technologies
and has implemented processes for diminishing the amount of EAF dust generated.
In March 1991, the EPA issued an Administrative Order for Removal
Action requiring the Company, along with several other companies, to undertake
final removal activities (the "Final Activities") at a site to which it had
shipped EAF dust. The Company had participated earlier in preliminary remedial
activities at the site under an Administrative Order on Consent entered into in
January 1986 among the EPA, Chaparral and the other companies. Chaparral's
share of the costs associated with the Final Activities did not have a material
adverse effect on its competitive position, operations or financial condition.
The Company intends to comply with all legal requirements regarding
the environment but since many of them are not fixed, presently determinable,
or are likely to be affected by future legislation or rule making by government
agencies, it is not possible to accurately predict the aggregate future costs
of compliance and their effect on the Company's operations, future net income
or financial condition.
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EMPLOYEES
At May 31, 1994, the Company had 943 employees.
ITEM 2. PROPERTIES
The Company's original steel mill facility in Midlothian, Texas, was
completed in 1975. In 1982, a major expansion of the steel mill, added an
additional electric arc furnace and rolling mill. In 1992, a large beam mill
was commissioned that results in excess rolling capacity over the production
capacity of the melting operation. The Company's real property, plant and
equipment are subject to liens securing its long-term debt.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to
claims arising in the ordinary course of business operations. No material
litigation is pending against or currently affects the Company.
The Company maintains insurance with financially sound insurance
companies against certain risks, which insurance the Company believes to be
adequate in relation to the Company's business. The Company also maintains a
hazardous waste liability policy against certain third party claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Common stock market prices, dividends and certain other items as shown
in the "Quarterly Stock Prices and Dividends" information located on page 15 of
the Registrant's Annual Report to Stockholders for the year ended May 31, 1994,
are incorporated herein by reference. The restriction on the payment of
dividends described in Note E to the Consolidated Financial Statements entitled
"Long-Term Debt" on page 12 of the Registrant's Annual Report to Stockholders
for the year ended May 31, 1994, is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The "Selected Financial Data" on page five of the Registrant's Annual
Report to Stockholders for the year ended May 31, 1994, is incorporated herein
by reference.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages three and four of the Registrant's Annual
Report to Stockholders for the year ended May 31, 1994, are incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements and Supplementary Data
of the Registrant and its subsidiaries, included in the Registrant's Annual
Report to Stockholders for the year ended May 31, 1994, are incorporated herein
by reference:
Consolidated Balance Sheets - May 31, 1994 and 1993
Consolidated Statements of Income - Years ended May 31, 1994,
1993 and 1992
Consolidated Statements of Cash Flows - Years ended May 31, 1994,
1993 and 1992
Consolidated Statements of Stockholders' Equity - Years ended
May 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements - May 31, 1994
Quarterly Financial Information
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to "Election of Directors" on page two of the
Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held
October 19, 1994. Information on the directors and executive officers of the
Registrant is presented below:
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POSITIONS WITH REGISTRANT, OTHER
--------------------------------
NAME AGE EMPLOYMENT DURING LAST FIVE YEARS
---- --- ---------------------------------
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Robert D. Rogers........ 58 Chairman of the Board of the Company; President, Chief Executive Officer and
Director of TXI; Director of Consolidated Freightways, Inc. (2)(3)
Gordon E. Forward....... 58 President, Chief Executive Officer and Director; 1988 to 1991, Cement/ Concrete
Division President of TXI; Director of TXI (2)
Kenneth R. Allen........ 37 1990 to present, Director of Investor Relations of Chaparral Steel and TXI;
1991 to present, Treasurer of TXI; 1988 to 1990, Corporate Financial Manager of
TXI
Dennis E. Beach......... 55 Vice President - Administration
Larry L. Clark.......... 50 October 1993 to present, Vice President - Controller and Assistant Treasurer;
1976 to September 1993, Controller and Assistant Treasurer
David A. Fournie........ 46 1992 to present, Vice President of Operations; 1990 to 1991, General Manager -
Medium Section Mill; 1987 to 1989, Superintendent-Medium Section Mill
Richard M. Fowler....... 51 1990 to present, Senior Vice President - Finance; 1986 to 1990, Vice President
- Finance; Vice President - Finance of TXI
Richard T. Jaffre....... 51 Vice President - Raw Materials
Robert C. Moore......... 60 1990 to present, Vice President - General Counsel and Secretary; 1985 to 1990,
Secretary; Vice President - General Counsel and Secretary of TXI
Libor F. Rostik......... 60 1992 to present, Senior Vice President - Engineering; 1985 to 1991, Vice
President - Engineering
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Jeffry A. Werner........ 51 Senior Vice President - Commercial
Peter H. Wright......... 52 1991 to present, Vice President Quality Control and SBQ Sales; 1986 to 1991,
Vice President - Quality Control
Robert Alpert........... 62 1989 to present, Director; Director of TXI and Consolidated Freightways, Inc.;
Chairman of the Board of Alpert Investment Corporation (3)
John M. Belk............ 74 Director; Chairman of the Board of Belk Stores Services, Inc.; Director of
Lowe's Companies, Inc. and Coca-Cola Bottling Co. Consolidated (3)
Gerald R. Heffernan..... 75 Director; 1990 to present, President - G. R. Heffernan & Associates, Ltd.; 1987
to 1990, Chairman of the Board of Co-Steel Inc.; Director of TXI (1) (2)
Gerhard Liener.......... 62 Director; Chief Financial Officer of Daimler-Benz AG; Director of Consolidated
Freightways, Inc. (1)
Eugenio Clariond Reyes.. 51 October 1993 to present, Director; Director General and Chief Executive
Officer, Grupo IMSA. S. A.; President, Mexico - U.S. Chamber of Commerce;
Director, Instituto Tecnologico y de Estudias Superiores de Monterrey, A.C.(1)
</TABLE>
(1) Member of the Audit Committee.
(2) Member of the Executive Committee.
(3) Member of the Compensation Committee.
Directors who are not employees of the Company currently receive
$15,000 per year plus $1,000 for each day that a Board and/or a Committee
Meeting is attended. All references to years in the above biographies are
references to calendar years.
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ITEM 11. EXECUTIVE COMPENSATION
The "Executive Compensation" and "Report of the Compensation Committee
on Executive Compensation" on pages five through eight of the Registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held October 19,
1994, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The "Security Ownership of Certain Beneficial Owners" on page two and
the "Security Ownership of Management" on page four of the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held October 19, 1994,
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No reportable transactions occurred between the Company and any
director, nominee for director, officer or any affiliate of, or person related
to, any of the foregoing since the beginning of the Company's last fiscal year
(June 1, 1993).
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a)(1) and (2) The response to this portion of Item 14 is submitted as
a separate section of this report.
(a)(3) Listing of Exhibits
3. Articles of Incorporation. (incorporated by reference from
Chaparral Steel Company's Form S-1 Registration No. 33-22103
as filed June 29, 1988)
4. Instruments defining rights of security holders. (incorporated
by reference from Chaparral Steel Company's Form S-1
Registration No. 33-22103 as filed June 29, 1988)
10. Material contracts. (incorporated by reference from Chaparral
Steel Company's Form S-1 Registration No. 33-22103 as filed
June 29, 1988)
11. Statement re: computation of per share earnings.
13. Annual report to security holders--Registrant's annual report
to security holders for its last fiscal year, except for those
portions thereof which are expressly incorporated by reference
in this filing, is furnished for the information of the
Commission and is not to be deemed "filed" as part of this
filing. Since the financial statements in the report have been
incorporated by reference in this filing, the accountant's
certificate is manually signed in the signed copy of this
filing.
21. Subsidiaries of the Registrant.
23. Consents of experts and counsel.
24. Power of Attorney for certain members of the Board of
Directors.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended May
31, 1994.
(c) Exhibits -- The response to this portion of Item 14 is
submitted as a separate section of this report.
(d) Financial Statement Schedules -- The response to this portion
of Item 14 is submitted as a separate section of this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the issuer has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on the 25th day of August, 1994.
CHAPARRAL STEEL COMPANY
By: /s/GORDON E. FORWARD
(Gordon E. Forward)
President, Chief
Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
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Signatures Title Date
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/s/ROBERT D. ROGERS* Chairman of the Board August 25, 1994
--------------------
(Robert D. Rogers)
/s/GORDON E. FORWARD President, August 25, 1994
-------------------- Chief Executive Officer
(Gordon E. Forward) and Director
/s/RICHARD M. FOWLER Senior Vice President - August 25, 1994
-------------------- Finance
(Richard M. Fowler) Chief Financial and
Accounting Officer
Director August 25, 1994
---------------
(Robert Alpert)
/s/JOHN M. BELK* Director August 25, 1994
----------------
(John M. Belk)
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/s/GERALD R. HEFFERNAN* Director August 25, 1994
-----------------------
(Gerald R. Heffernan)
/s/GERHARD LIENER* Director August 25, 1994
------------------
(Gerhard Liener)
/s/EUGENIO CLARIOND REYES* Director August 25, 1994
--------------------------
(Eugenio Clariond Reyes)
</TABLE>
*By /s/RICHARD M. FOWLER
(Richard M. Fowler)
Attorney-in-Fact
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ANNUAL REPORT ON FORM 10-K
ITEM 14 (A)(1) AND (2), (C) AND (D)
LIST OF FINANCIAL STATEMENTS AND SCHEDULES
FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED MAY 31, 1994
CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
MIDLOTHIAN, TEXAS
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FORM 10-K
ITEM 14 (a)(1) and (2) and ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND SCHEDULES
The following consolidated financial statements of Chaparral Steel
Company included in the annual report of the Company to its stockholders for
the year ended May 31, 1994, are incorporated by reference in Item 8:
CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets - May 31, 1994 and 1993
Consolidated Statements of Income - Years ended May 31, 1994, 1993 and
1992
Consolidated Statements of Cash Flows - Years ended May 31, 1994, 1993
and 1992
Consolidated Statements of Stockholders' Equity - Years ended May 31,
1994, 1993 and 1992
Notes to Consolidated Financial Statements - May 31, 1994
The following consolidated financial statement schedules for the years
ended May 31, 1994, 1993 and 1992 are submitted herewith:
Schedule V - Property, plant and equipment
Schedule VI - Accumulated depreciation, depletion and
amortization of property, plant and
equipment
Schedule VIII - Valuation and qualifying accounts
Schedule IX - Short-term borrowings
Schedule X - Supplementary income statement information
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, or are inapplicable and therefore,
have been omitted.
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CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
For the Years Ended May 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
------ ------ ------ ------ ------ ------
Other
Changes--
Balance at Add Balance at
Beginning of Additions (Deduct)-- End of
Classification Period at Cost Retirements Describe Period
-------------- ------------ ---------- ------- -------- -----------
<S> <C> <C> <C> <C> <C>
Year ended May 31, 1994:
Buildings and improvements.. $ 46,634 $ 583 $ - $ 47,217
Machinery and equipment..... 430,614 7,222 (3,795) 434,041
Land........................ 1,288 - - 1,288
-------- ------- ------- --------
$478,536 $ 7,805 $(3,795) $482,546
======== ======= ======= ========
Year ended May 31, 1993:
Buildings and improvements.. $ 46,546 $ 88 $ - $ 46,634
Machinery and equipment..... 423,362 7,336 (84) 430,614
Land........................ 1,288 - - 1,288
-------- ------- ------- --------
$471,196 $ 7,424 $ (84) $478,536
======== ======= ======= ========
Year ended May 31, 1992:
Buildings and improvements.. $ 46,149 $ 397 $ - $ 46,546
Machinery and equipment..... 411,283 12,219 (140) 423,362
Land........................ 1,288 - - 1,288
-------- ------- ------- --------
$458,720 $12,616 $ (140) $471,196
======== ======= ======= ========
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CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
For the Years Ended May 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
------ ------ ------ ------ ------ ------
(2) (1)
Other
Changes--
Balance at Add Balance at
Beginning of Additions (Deduct)-- End of
Classification Period at Cost Retirements Describe Period
-------------- ------------ ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended May 31, 1994:
Buildings and improvements.. $ 17,304 $ 2,327 $ - $ - $ 19,631
Machinery and equipment..... 205,670 26,095 (3,736) - 228,029
------------ ----------- --------- ---------- -----------
$ 222,974 $ 28,422 $ (3,736) $ - $ 247,660
============ =========== ========= ========== ===========
Year ended May 31, 1993:
Buildings and improvements.. $ 15,345 $ 1,959 $ - $ - $ 17,304
Machinery and equipment..... 179,234 26,520 (84) - 205,670
------------ ----------- --------- ---------- -----------
$ 194,579 $ 28,479 $ (84) $ - $ 222,974
============ =========== ========= ========== ===========
Year ended May 31, 1992:
Buildings and improvements.. $ 13,073 $ 2,164 $ - $ 108 $ 15,345
Machinery and equipment..... 153,318 23,991 (121) 2,046 179,234
------------ ----------- --------- ---------- -----------
$ 166,391 $ 26,155 $ (121) $ 2,154 $ 194,579
============ =========== ========= ========== ===========
</TABLE>
(1) Charges capitalized for the large beam mill.
(2) The annual provisions for depreciation have been computed principally
in accordance with the following ranges of rates:
Buildings and improvements 2% to 5%
Machinery and equipment 5% to 20%
16
<PAGE> 19
CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended May 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
------ ------ ------ ------ ------
Additions
Balance at Charged to Balance at
Beginning Costs and End of
Description of Period Expenses Deductions Period
----------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C>
1994:
Allowance for doubtful accounts........ $3,425 $ 800 $ 377(1) $3,848
1993:
Allowance for doubtful accounts........ $3,425 $ 150 $ 150(1) $3,425
1992:
Allowance for doubtful accounts........ $3,735 $ 450 $ 760(1) $3,425
</TABLE>
(1) Uncollectible receivables written off.
17
<PAGE> 20
CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
For the Years Ended May 31, 1994, 1993 and 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
------ ------ ------ ------ ------ ------
Average Weighted
Maximum Amount Average
Weighted Amount Outstanding Interest Rate
Balance at Average Outstanding During During
End of Interest During the Period the Period
Classification Period Rate the Period (1) (2)
-------------- ----------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Borrowings from banks:
Year ended May 31, 1994 $ 15,000 4.34% $20,000 $7,250 4.36%
Year ended May 31, 1993 $ - 6.21% $ 4,000 $ - (3) - (3)
Year ended May 31, 1992 $ - 6.51% $13,000 $4,500 7.12%
</TABLE>
(1) Computed on total of each month's ending balance divided by twelve.
(2) Computed by dividing interest expense for the period by the Average
Amount Outstanding During the Period.
(3) The Company had no borrowings outstanding at the month-ends during
fiscal 1993.
18
<PAGE> 21
CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the Years Ended May 31, 1994, 1993 and 1992
(In thousands)
<TABLE>
<CAPTION>
Col. A Col. B
------ ------
Charge to
Item Costs and Expenses
---- ------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs........................... $52,215 $55,130 $53,930
======= ======= =======
(1) (1)
Depreciation and amortization of intangible
assets, preoperating costs and
similar deferrals................. $ 5,334 $ 5,334 $ 3,322
======= ======= =======
Taxes, other than payroll and income taxes:
Real estate................................... $ 5,164 $ 5,067 $ 3,889
Other......................................... 279 357 511
</TABLE>
Royalties and advertising costs did not exceed 1% of total revenues and
therefore are not presented.
(1) Certain items in prior year amounts were reclassified to conform to
current year presentation
19
<PAGE> 22
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
- - ------- -----------
3. Articles of Incorporation. (incorporated by reference from
Chaparral Steel Company's Form S-1 Registration No. 33-22103
as filed June 29, 1988)
4. Instruments defining rights of security holders. (incorporated
by reference from Chaparral Steel Company's Form S-1
Registration No. 33-22103 as filed June 29, 1988)
10. Material contracts. (incorporated by reference from Chaparral
Steel Company's Form S-1 Registration No. 33-22103 as filed
June 29, 1988)
11. Statement re: computation of per share earnings.
13. Annual report to security holders--Registrant's annual report
to security holders for its last fiscal year, except for those
portions thereof which are expressly incorporated by reference
in this filing, is furnished for the information of the
Commission and is not to be deemed "filed" as part of this
filing. Since the financial statements in the report have been
incorporated by reference in this filing, the accountant's
certificate is manually signed in the signed copy of this
filing.
21. Subsidiaries of the Registrant.
23. Consents of experts and counsel.
24. Power of Attorney for certain members of the Board of
Directors.
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
CHAPARRAL STEEL COMPANY
<TABLE>
<CAPTION>
Year Ended May 31,
---------------------------------
1994 1993 1992
---- ---- ----
(In thousands except per share)
<S> <C> <C> <C>
AVERAGE SHARES OUTSTANDING:
For 1994, 1993 and 1992, weighted average shares
outstanding.................................. 29,680 29,675 29,675
======= ======= ======
Primary:
Average shares outstanding...................... 29,680 29,675 29,675
Stock options and other equivalents
treasury stock method........................ 41 - 47
------- ------- ------
TOTALS 29,721 29,675 29,722
======= ======= ======
Fully diluted:
Average shares outstanding...................... 29,680 29,675 29,675
Stock options and other equivalents
treasury stock method........................ 49 - 59
------- ------- ------
TOTALS 29,729 29,675 29,734
======= ======= ======
INCOME APPLICABLE TO COMMON STOCK
Primary and fully diluted:
NET INCOME (LOSS)............................ $11,919 $(2,051) $7,090
Add:
Pre-September 1990 contingent
amortization......................... 233 233 233
------- ------- ------
NET INCOME (LOSS) AVAILABLE TO COMMON STOCK........ $12,152 $(1,818) $7,323
======= ======= ======
PRIMARY AND FULLY DILUTED:
NET INCOME (LOSS) PER COMMON SHARE................. $ .41 $ (.06) $ .25
======= ======= ======
</TABLE>
<PAGE> 1
EXHIBIT 13
CHAPARRAL -- STEEL
1994 ANNUAL REPORT
<PAGE> 2
CORPORATE PROFILE
Chaparral Steel Company, located in Midlothian, Texas, owns and
operates a technologically advanced steel mill which produces bar and
structural steel products by recycling scrap steel. The plant commenced
operations in 1975 and more than doubled in capacity in 1982. In 1992, a large
beam mill was completed which further expanded Chaparral's capacity and product
range. The Company now has two electric arc furnaces with continuous casters, a
bar mill, structural mill and a large beam mill which enable it to produce a
broader array of steel products than traditional mini mills.
Chaparral follows a market mill concept which entails the production
of a wide variety of products ranging from reinforcing bar and specialty
products to large-sized structural beams at low cost and is able to change its
product mix to recognize changing market conditions or customer requirements.
The Company's steel products include beams, reinforcing bars, special
bar quality rounds, channels and merchant quality rounds. These products are
sold principally to the construction industry and to the railroad, defense,
automotive, mobile home and energy industries. Chaparral's principal customers
are steel service centers, steel fabricators, cold finishers, forgers and
original equipment manufacturers.
The Company distributes its products primarily to markets in North
America, and under certain market conditions, to Europe and Asia. Chaparral is
listed on the New York Stock Exchange, and is 81 percent-owned by Texas
Industries, Inc.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1994 1993 1992
(In thousands except per share)
<S> <C> <C> <C>
- - -----------------------------------------------------------------------
RESULTS OF OPERATIONS
Tons shipped:
Bar mill 424 422 484
Structural mills 938 962 914
- - -----------------------------------------------------------------------
TOTAL 1,362 1,384 1,398
Net sales:
Bar mill $138,353 $126,830 $141,538
Structural mills 320,210 289,862 272,474
Transportation service 3,712 3,518 2,598
- - -----------------------------------------------------------------------
TOTAL 462,275 420,210 416,610
Net income (loss) 11,919 (2,051) 7,090
- - -----------------------------------------------------------------------
PER SHARE INFORMATION
Net income (loss) .41 (.06) .25
Dividends .20 .20 .20
- - -----------------------------------------------------------------------
FOR THE YEAR
Net cash provided by
operating activities 10,603 25,087 28,841
Capital expenditures 7,805 7,424 12,616
- - -----------------------------------------------------------------------
YEAR END POSITION
Total assets 488,307 480,811 504,905
Net working capital 95,225 80,901 75,252
Stockholders' equity 265,623 259,598 267,584
</TABLE>
1
<PAGE> 3
TO OUR STOCKHOLDERS:
Several changes that were expected to improve the financial
performance of the Company were implemented at the beginning of this year. The
results of these changes have been satisfying-selling prices improved as
Chaparral began marketing its products closer to home and cost-reduction
programs were successful. These actions, carried out by our employees, have
contributed to a return to profitability.
The year ended with net income of $11.9 million compared to a net loss
of $2.1 million for the previous year. Average selling prices were up 12% over
last year while shipments of 1,362,000 tons were 2% lower than the previous
year.
At the same time Chaparral was implementing the steps to positively
impact its financial results, the scrap market was experiencing unprecedented
demand pull that increased scrap pricing. In spite of record prices for the raw
material used to manufacture Chaparral's products, gross profit per ton
improved by more than 40% this year. Higher scrap costs were a universal
problem for the entire steel industry. Chaparral believes that because of its
operational efficiency, it has an advantage over many of its competitors during
periods of rapidly escalating scrap prices.
A look at the two major markets served by Chaparral's products found
them moving in different directions in 1994. The markets for special bar
quality products were very strong as domestic manufacturing continued to
sustain its performance begun during the prior year. The construction industry
and corresponding consumption of structural beams continued to perform below
historic average levels. Chaparral continues to work on new applications for
lightweight, wide flange beams; but as with many new product development
applications, it takes time to accomplish meaningful change.
During the upcoming year Chaparral will continue to fine tune its
operations with improvements being made this summer to the melting operations.
The marketplace and the Company's role with its major customers are important
areas of management focus. Near-term market conditions for Chaparral's largest
product, wide flange beams, are not expected to improve quickly, but the
Company continues to pursue those products in which it has significant
competitive advantage.
/s/ GORDON E. FORWARD
Gordon E. Forward, Ph.D.
President and Chief Executive Officer
July 14, 1994
2
<PAGE> 4
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
GENERAL
The Company's steel plant is a market mill with the flexibility to
produce a wide range of steel products. The ability to produce a variety of
products at low cost has enabled the Company to penetrate markets throughout
the United States and overseas. The principal components of the Company's cost
of sales are raw material and conversion costs. Scrap steel, the cost of which
fluctuates with market conditions, is the Company's primary raw material.
Conversion costs are comprised principally of energy, maintenance and labor.
RESULTS OF OPERATIONS
NET SALES
In 1994, net sales increased $42.1 million from the previous year as a
12% increase in average selling price was offset by a 22,000 ton decrease in
shipments. The change in pricing strategy for certain structural products
announced in the May 1993 quarter and general price increases in the current
fiscal year, intended to offset the continued escalation in scrap prices, have
combined to produce the improvement in selling price. Excess industry capacity
will continue to affect the structural beam market and the Company anticipates
average steel prices for these products to decrease slightly in fiscal 1995
unless current levels of demand change. Chaparral will continue to optimize its
product mix to remain competitive and maintain market share. Export sales were
7% of total shipments in 1994.
Net sales in 1993 increased $3.6 million from the prior year as a 2%
increase in average selling price offset a 14,000 ton decrease in shipments.
The Company's average net selling price increased despite numerous rebate and
free steel programs offered by competitors that Chaparral effectively matched
to stay competitive. Export sales were 6% of total shipments in 1993.
COST OF SALES
Higher scrap costs in 1994 accounted for a significant portion of the
7% increase in average cost per ton. All areas of melt shop conversion costs
were slightly lower than the previous year. Combined rolling conversion costs
were unchanged from 1993.
In 1993, cost of sales increased $11.7 million due primarily to a 4%
increase in average cost per ton. An increase in shipments of larger and higher
quality products contributed to the increase in cost of sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expenses generally fluctuated with
the provisions for employee incentive programs that are based on profitability
which amounted to $(.1) million, $(2.4) million and $.6 million for 1994, 1993
and 1992, respectively. In an effort to stay competitive and reduce costs, the
Company decreased its number of employees in the first quarter of fiscal 1994.
As a result, a non-recurring charge of $1.6 million for severance pay is
included in selling, general and administrative in 1994.
INTEREST EXPENSE
Payment of scheduled maturities of long-term debt during the three
years ended May 31, 1994 served to reduce the amount of interest expense. In
addition, interest deferred in connection with the large beam mill was $3.4
million in 1992.
PROVISION FOR INCOME TAXES
The provisions for income taxes fluctuated with income (loss) before
income taxes. The income tax rate differs from the statutory rate principally
due to non-deductible goodwill amortization. In August 1993, the Omnibus Budget
Reconciliation Act of 1993 was signed into law that contained a provision
raising the top effective rate for corporations to 35%. The rate increase, when
applied to the Company's temporary differences, resulted in a charge of $1.4
million which is included in the income tax provision in 1994.
NET INCOME (LOSS)
Net income (loss) improved $14 million in 1994 due primarily to a $36
increase in average selling price due to the change in pricing strategy and the
market reaction to higher raw material prices. Depreciation costs were
unchanged as the Company did not incur any major capital improvements during
1994. Amortization of
3
<PAGE> 5
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
commissioning costs, that are being expensed over a five year period, totaled
$3 million in 1994. Amortization of goodwill totaled $2.3 million in the
current period.
Net income (loss) decreased $9.1 million to a loss of $2.1 million in
1993 caused principally by a 4% increase in cost of sales per ton due in part
to a shift in mix to higher cost products. Depreciation costs increased as a
complete year of large beam mill expense was recognized. Amortization of
commissioning costs, that are being expensed over a five year period, totaled
$3 million in 1993. Amortization of goodwill totaled $2.3 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased $14.3 million to $95.2 million at May 31,
1994. Cash provided by operations decreased by $14.5 million as the increase in
net income of $14 million was offset by increases in inventory of $24.9 million
and accounts receivable of $7.5 million. At May 31, 1994, the Company had net
borrowings of $15 million from its short-term credit facilities. As a result,
cash and cash equivalents decreased $.6 million after the Company acquired $7.8
million of capital additions, repaid $12.8 million of long-term debt and paid
cash dividends of $5.9 million.
Capital expenditures for fiscal 1995 are currently estimated to be
approximately $17 million; which represents normal replacement and
technological upgrades of existing equipment. The Company currently does not
plan any major capital expenditures requiring significant capital resources
within the next two years.
The Company's capitalization of $361.8 million at May 31, 1994,
consisted of $96.2 million in long-term debt and $265.6 million of
stockholders' equity. The Company's stockholders' equity includes additional
paid-in-capital which resulted from the excess of cost over fair value of net
assets acquired, net of amortization. The long-term debt-to-capitalization
ratio was 27% at May 31, 1994 versus 31% at May 31, 1993. The decrease was
caused by the repayment of $12.8 million of long-term debt and the increase in
stockholders' equity which was due to the net income of $11.9 million minus the
payment of cash dividends of $5.9 million.
The Company's earnings improved in 1994 due primarily to the dramatic
increase in average selling price. Based on the current outlook for steel
consumption levels and its impact on prices, in 1995, the Company expects its
average selling price and cost per ton levels to remain virtually unchanged
from 1994. The Company plans to lower finished goods inventory to return to
previous years' levels. Significant changes in average selling price without a
corresponding change in the scrap raw material costs could have a substantial
effect on the Company's operating results and liquidity.
The Company has short-term credit facilities with two banks totaling
$20 million which will expire in January 1995, if not renewed by the banks or
the Company. The Company had maximum borrowings of $20 million at any one time
under these arrangements during fiscal 1994. At May 31, 1994, the Company had
$15 million of outstanding borrowings under these facilities. The Company
believes that it will be able to renew these credit facilities or negotiate
similar arrangements with other financial institutions if they are deemed
necessary. The Company expects the current financial resources, anticipated
cash provided from operations and reductions in certain working capital
components in fiscal 1995 will be sufficient to provide funds for capital
expenditures, meet scheduled debt payments and satisfy other known working
capital needs for fiscal 1995. If additional funds are required to accomplish
long-term expansion of its productive capabilities, the Company believes that
funding can be obtained to meet such requirements.
INFLATION
Energy, scrap and labor, which are the principal components of the
Company's manufacturing costs, are generally susceptible to inflationary
pressures, while finished product prices are more readily influenced by
competition within the steel industry. Since May 31, 1991, inflation has not
materially affected the Company's results of operations or financial condition.
4
<PAGE> 6
SELECTED FINANCIAL DATA
Chaparral Steel Company and Subsidiaries
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
(In thousands except per share)
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales $462,275 $420,210 $416,610 $418,311 $404,155
Gross profit 81,777 58,624 66,678 81,478 80,188
Employee profit sharing 1,896 - 1,199 2,699 3,210
Interest expense 13,439 14,650 12,541 10,513 12,556
Net income (loss) 11,919 (2,051) 7,090 19,125 24,046
- - -------------------------------------------------------------------------------------------------------------
PER SHARE INFORMATION
Net income (loss) $ .41 $ (.06) $ .25 $ .63 $ .74
Dividends .20 .20 .20 .20 .13
- - -------------------------------------------------------------------------------------------------------------
FOR THE YEAR
Net cash provided by operating activities $ 10,603 $ 25,087 $ 28,841 $ 45,827 $ 31,192
Capital expenditures 7,805 7,424 12,616 94,099 36,711
- - -------------------------------------------------------------------------------------------------------------
YEAR END POSITION
Total assets $488,307 $480,811 $504,905 $499,654 $382,621
Net working capital 95,225 80,901 75,252 55,459 87,509
Long-term debt 96,219 113,997 126,714 119,214 94,012
Stockholders' equity 265,623 259,598 267,584 266,429 181,021
</TABLE>
5
<PAGE> 7
CONSOLIDATED BALANCE SHEETS
Chaparral Steel Company and Subsidiaries
May 31
<TABLE>
<CAPTION>
1994 1993
(In thousands)
- - -------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,203 $ 3,763
Trade accounts receivable, net
of allowance of $3.8 million
and $3.4 million, respectively 41,734 34,187
Inventories 117,583 92,672
Prepaid expenses 8,914 8,147
- - -------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 171,434 138,769
PROPERTY, PLANT AND EQUIPMENT
Buildings and improvements 47,217 46,634
Machinery and equipment 434,041 430,614
Land 1,288 1,288
- - -------------------------------------------------------------------------------------
482,546 478,536
Less allowance for depreciation 247,660 222,974
- - -------------------------------------------------------------------------------------
234,886 255,562
OTHER ASSETS
Goodwill, commissioning costs and other
assets, net of accumulated amortization
of $16.9 million and $11.6 million,
respectively 81,987 86,480
- - -------------------------------------------------------------------------------------
$488,307 $480,811
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
1994 1993
(In thousands)
- - -------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 15,000 $ -
Trade accounts payable 28,667 27,202
Accrued interest payable 2,435 3,044
Other accrued expenses 12,124 14,902
Current portion of long-term debt 17,983 12,720
- - -------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 76,209 57,868
LONG-TERM DEBT 96,219 113,997
DEFERRED INCOME TAXES
AND OTHER CREDITS 50,256 49,348
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value,
500,000 authorized, none outstanding - -
Common stock, $.10 par value,
50,000,000 authorized, 29,679,900 and
29,675,400 outstanding 2,994 2,994
Paid-in capital 188,037 188,050
Retained earnings 77,096 71,113
Cost of common shares in treasury (2,504) (2,559)
- - -------------------------------------------------------------------------------------
265,623 259,598
- - -------------------------------------------------------------------------------------
$ 488,307 $ 480,811
=====================================================================================
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 8
CONSOLIDATED STATEMENTS OF INCOME
Chaparral Steel Company and Subsidiaries
Year Ended May 31
<TABLE>
<CAPTION>
1994 1993 1992
(In thousands except per share)
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 462,275 $ 420,210 $ 416,610
Costs and expenses:
Cost of sales 380,498 361,586 349,932
Selling, general and administrative 15,937 13,992 17,437
Depreciation and amortization 33,756 33,814 29,477
Interest 13,439 14,650 12,541
Other income (3,372) (2,072) (5,217)
- - -------------------------------------------------------------------------------------------------
440,258 421,970 404,170
- - -------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 22,017 (1,760) 12,440
Provision for income taxes 10,098 291 5,350
- - -------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 11,919 $ (2,051) $ 7,090
=================================================================================================
NET INCOME (LOSS) PER COMMON SHARE $ .41 $ (.06) $ .25
=================================================================================================
</TABLE>
See notes to consolidated financial statements.
7
<PAGE> 9
CONSOLIDATED STATEMENTS OF CASH FLOWS
Chaparral Steel Company and Subsidiaries
Year Ended May 31
<TABLE>
<CAPTION>
1994 1993 1992
(In thousands)
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $11,919 $(2,051) $ 7,090
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 33,756 33,814 29,477
Provision for deferred income taxes 3,101 3,005 4,105
Other deferred credits (2,193) (3,044) (1,481)
Changes in operating assets and liabilities:
Trade accounts receivable, net (8,380) 2,362 (5,779)
Inventories (24,911) (2,177) (7,765)
Prepaid expenses (767) (3,472) (2,346)
Trade accounts payable 1,465 (6,102) 8,128
Accrued interest payable (609) (627) (550)
Other accrued expenses (2,778) 3,379 (2,038)
- - -------------------------------------------------------------------------------------------------
Net cash provided by operating activities 10,603 25,087 28,841
INVESTING ACTIVITIES
Capital expenditures (7,805) (7,424) (12,616)
Commissioning costs and other 93 - (8,347)
- - -------------------------------------------------------------------------------------------------
Net cash used in investing activities (7,712) (7,424) (20,963)
FINANCING ACTIVITIES
Short-term borrowings 30,000 7,000 18,000
Repayments on short-term debt (15,000) (7,000) (28,000)
Long-term borrowings 260 - 20,237
Repayments on long-term debt (12,775) (12,718) (14,305)
Dividends paid (5,936) (5,935) (5,935)
- - -------------------------------------------------------------------------------------------------
Net cash used in financing activities (3,451) (18,653) (10,003)
- - -------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (560) (990) (2,125)
Cash and cash equivalents at beginning of year 3,763 4,753 6,878
- - -------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 3,203 $ 3,763 $ 4,753
=================================================================================================
</TABLE>
See notes to consolidated financial statements.
8
<PAGE> 10
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Chaparral Steel Company and Subsidiaries
<TABLE>
<CAPTION>
Preferred Common Stock Paid-in Retained Treasury Stock
Stock Shares Amount Capital Earnings Shares Amount
(In thousands)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1991 $ - 29,940 $ 2,994 $ 188,050 $ 77,944 (265) $ (2,559)
Net income for the year
ended May 31, 1992 - - - - 7,090 - -
Dividends paid to
stockholders ($.20 per share) - - - - (5,935) - -
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1992 - 29,940 2,994 188,050 79,099 (265) (2,559)
Net loss for the year
ended May 31, 1993 - - - - (2,051) - -
Dividends paid to
stockholders ($.20 per share) - - - - (5,935) - -
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1993 - 29,940 2,994 188,050 71,113 (265) (2,559)
Net income for the year
ended May 31, 1994 - - - - 11,919 - -
Dividends paid to
stockholders ($.20 per share) - - - - (5,936) - -
Treasury stock issued for
options - 4,500 shares - - - (13) - 5 55
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1994 $ - 29,940 $ 2,994 $ 188,037 $ 77,096 (260) $ (2,504)
===================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
9
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Chaparral Steel Company and Subsidiaries
May 31, 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND RELATED MATTERS:
The consolidated financial statements include the operations of
Chaparral Steel Company (the "Company"), America Steel Transport and inactive
wholly-owned subsidiaries. The Company is 81% owned by Texas Industries, Inc.
("TXI").
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS:
The Company operates in the steel industry only; therefore, no
industry segment information is presented.
CASH EQUIVALENTS:
Cash equivalents consist of highly liquid investments with original
maturities of three months or less.
CREDIT RISK:
The Company extends credit to various companies in steel distribution,
fabrication and related industries. Such credit risk is considered by
management to be limited due to the Company's sizable customer base and the
geographical dispersion of the customer base. The Company performs ongoing
credit evaluations of its customers and generally does not require collateral.
INVENTORIES:
Inventories are stated at the lower of cost (last-in, first-out) or
market, except rolls which are stated at cost (specific identification) and
supplies which are stated at average cost.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are recorded at cost. Depreciation of
property, plant and equipment is computed using the straight-line method over
the estimated useful lives of the property.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED:
The amount of goodwill net of amortization, arising from the purchase
of 50% of the outstanding securities of the Company by TXI, was recorded using
the purchase method of accounting and totaled $73 million and $75.3 million at
May 31, 1994 and 1993, respectively. This goodwill is being amortized over 40
years using the straight-line method and reduced earnings by $2.3 million in
1994, 1993 and 1992.
COMMISSIONING COSTS:
The Company's policy for new facilities is to capitalize certain costs
until the facility is substantially complete and ready for its intended use.
INCOME TAXES:
The Company, its subsidiaries and TXI have tax sharing agreements (the
"Agreements") whereby the Company and its subsidiaries are included in the
consolidated income tax return of TXI. The Agreements provide that the Company
will account for income taxes on a stand-alone basis. Accordingly, the Company
and its subsidiaries make payments to or receive payments from TXI in amounts
equal to the income taxes they would have otherwise paid or received.
The Company adopted the provisions of Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes," (SFAS 109) effective
June 1, 1992. As permitted under SFAS 109, prior years' financial statements
have not been restated and no cumulative effect resulted from this change.
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per common share is calculated based upon a weighted
average of 29,721,000, 29,675,000 and 29,722,000 shares outstanding (including
common stock equivalents that are not antidilutive) during 1994, 1993 and 1992,
respectively.
The calculations of net income (loss) per common share for periods
after August 31, 1990, contain an adjustment for the previous amortization of
an estimated amount of goodwill.
10
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
May 31 1994 1993
(In thousands)
- - ----------------------------------------------------
<S> <C> <C>
Finished goods $ 72,946 $ 49,596
Work in process 14,477 7,817
Raw materials:
Scrap 10,407 10,843
Crushed cars - 171
Rolls 15,602 14,579
Supplies 14,878 14,684
LIFO adjustment (10,727) (5,018)
- - ----------------------------------------------------
$ 117,583 $ 92,672
====================================================
</TABLE>
NOTE C - COMMISSIONING COSTS
In fiscal 1990, the Company began construction of the large beam mill
and commissioning commenced in February 1991.
The Company's policy for new facilities is to capitalize certain costs
until the facility is substantially complete and ready for its intended use.
The mill was substantially complete and ready for its intended use in the third
quarter of fiscal 1992 with a total of $15.1 million of costs deferred. The
amounts of amortization charged to income were $3 million, $3 million and $1
million in 1994, 1993 and 1992, respectively, based on a five year period.
NOTE D - CONTINGENCIES
The Company and subsidiaries are defendants in lawsuits which arose in
the normal course of business. In management's judgement (based on the opinion
of counsel) the ultimate liability, if any, from such legal proceedings will
not have a material effect on the Company's financial position.
The Company has no post-retirement health benefits and, therefore,
realizes no effect from accounting requirements under Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Post-retirement
Benefits Other Than Pensions" (SFAS 106).
The Company is subject to federal, state and local environmental laws
and regulations concerning, among other matters, air emissions, furnace dust
disposal and wastewater discharge. The Company believes it is in substantial
compliance with applicable environmental laws and regulations. Notwithstanding
such compliance, if damage to persons or property or contamination of the
environment has been or is caused by the conduct of the Company's business or
by hazardous substances or wastes used in, generated or disposed of by the
Company, the Company may be held liable for such damages and be required to pay
the cost of investigation and remediation of such contamination. The amount of
such liability could be material. Changes in federal or state laws, regulations
or requirements or discovery of unknown conditions could require additional
expenditures by the Company. At May 31, 1994, the Company had approximately
$1.5 million accrued for environmental matters.
11
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E - LONG-TERM DEBT
Outstanding long-term debt is as follows:
<TABLE>
<CAPTION>
May 31 Interest Rate 1994 1993
(In thousands)
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
First mortgage notes payable:
$61.4 million note, due in
annual installments through
January 2001 14.2% $ 26,595 $ 30,687
$70.9 million note, due in 10.2% - 8,502
semiannual installments 1.5% to
through June 1995 2% over
Libor (1) 7,257 7,257
- - -------------------------------------------------------------------------------
33,852 46,446
$80 million senior unsecured
notes due in annual
installments from April 1995
through 2004 10.2% 80,000 80,000
Other notes payable, due
through 1998 Various 350 271
- - -------------------------------------------------------------------------------
114,202 126,717
Less current portion 17,983 12,720
- - -------------------------------------------------------------------------------
$ 96,219 $113,997
===============================================================================
</TABLE>
(1) London Interbank Offered Rate (Libor) (3.5% at May 31, 1994).
Scheduled maturities of long-term debt at May 31, 1994 for each of the
five succeeding fiscal years are as follows:
(In thousands)
1995 $17,983
1996 13,766
1997 12,128
1998 12,096
1999 12,092
Substantially all of the assets of the Company except accounts
receivable, inventories and certain equipment not forming an integral part of
the mill have been pledged as collateral on the first mortgage notes.
The Company has arrangements for up to $20 million of short-term
borrowings with banks for which it pays quarterly fees at an annual rate of 3/8
of 1% on the unused portion of the commitment. These short-term credit lines
are due to expire in January 1995, if not renewed by the banks or the Company.
The terms of the loan agreements impose certain restrictions on the
Company, the most significant of which require the Company to maintain minimum
amounts of working capital, limit the incurrence of certain indebtedness and
restrict payments of cash dividends and purchases of treasury stock. The
amounts of earnings available for restricted payments were approximately $33
million at May 31, 1994 and 1993.
Interest payments were $14 million, $15.2 million and $16.4 million in
1994, 1993 and 1992, respectively. In addition, interest deferred as
commissioning costs totaled $3.4 million in 1992.
NOTE F - INCOME TAXES
The provisions for income taxes are comprised of:
<TABLE>
<CAPTION>
Year ended May 31 1994 1993 1992
(In thousands)
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current $ 6,982 $ 3,196 $ 470
Deferred 3,116 (2,905) 4,880
- - -------------------------------------------------------------------------------
$10,098 $ 291 $5,350
===============================================================================
</TABLE>
The reasons for the differences between the provisions for income taxes and the
amounts computed by applying the statutory federal income tax rates to income
(loss) before income taxes are:
<TABLE>
<CAPTION>
Year ended May 31 1994 1993 1992
(In thousands)
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate applied
to income (loss) before
income taxes $ 7,706 $(598) $4,230
Increase in taxes resulting from:
Change in statutory federal
tax rate 1,443 - -
Goodwill amortization 811 787 787
State income tax 135 48 234
Other - net 3 54 99
- - -------------------------------------------------------------------------------
$10,098 $ 291 $5,350
===============================================================================
</TABLE>
12
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of deferred income tax expense result from:
<TABLE>
<CAPTION>
Year ended May 31 1992
(In thousands)
- - --------------------------------------------------------------------
<S> <C>
Depreciation $ 3,439
Commissioning costs 3,236
Deferred compensation 498
Environmental costs 128
Recognition of minimum
tax credit carryforwards (2,986)
Expenses not currently
tax deductible 565
- - --------------------------------------------------------------------
$ 4,880
====================================================================
</TABLE>
The components of the net deferred tax liability as of May 31, 1994 and 1993
are summarized below:
<TABLE>
<CAPTION>
Year ended May 31 1994 1993
(In thousands)
- - ------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Deferred compensation $ 290 $ 1,027
Accounts receivable 1,347 1,164
Uniform capitalization expense 1,388 1,262
Net operating loss carryforwards 15 2,068
Alternative minimum tax
credit carryforwards 6,491 6,983
Expenses not currently tax
deductible 1,302 1,626
- - ------------------------------------------------------------------
Total deferred tax assets 10,833 14,130
Deferred tax liabilities:
Accelerated tax depreciation (53,085) (52,506)
Commissioning costs (2,817) (3,762)
Other - net (268) (83)
- - ------------------------------------------------------------------
Total deferred tax liabilities (56,170) (56,351)
- - ------------------------------------------------------------------
Net deferred tax liability (45,337) (42,221)
Current portion 4,038 4,053
- - ------------------------------------------------------------------
Non-current portion of
deferred tax liability $ (49,375) $ (46,274)
==================================================================
</TABLE>
Deferred income taxes and other credits as reflected on the
consolidated balance sheets include deferred income tax liability of $49.4
million and $46.3 million at May 31, 1994 and 1993, respectively. On June 1,
1992, the Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). This standard, which changes the
classification of current versus non-current deferred taxes, did not have a
material effect on the Company's financial position or operating results. In
August 1993, the Omnibus Budget Reconciliation Act of 1993 was signed into law
and contained a provision raising the top effective rate for corporations to
35%. This rate increase, when applied to the Company's temporary differences,
resulted in a charge of $1.4 million which is included in the income tax
provision in the August 1993 quarter. The Company made income tax payments of
$7.2 million, $2.5 million and $4.3 million in 1994, 1993 and 1992,
respectively. The amounts of federal income taxes currently payable were $1
million and $1.3 million at May 31, 1994 and 1993, respectively.
13
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G - RETIREMENT PLAN
There exists a non-contributory defined contribution plan to provide
retirement benefits for substantially all employees. The Company makes a
regular contribution of 1% of annual compensation for each participant and a
variable contribution equal to 1/2 of 1% of pre-tax income, as defined, to this
plan. The amounts of expense charged to income for this plan were $.5 million,
$.4 million and $.4 million in 1994, 1993 and 1992, respectively. It is the
Company's policy to fund the plan to the extent of charges to income.
NOTE H - INCENTIVE PLANS
The Company has a profit-sharing plan which provides that all
personnel employed as of May 31 share currently in the pre-tax income, as
defined, of the Company for the year then ended based on a predetermined
formula. The duration of the plan is one year and is subject to annual renewal
by the Board of Directors. The provisions for this plan were $1.9 million, $-0-
and $1.2 million for 1994, 1993 and 1992, respectively.
In 1987, the Board of Directors approved a deferred compensation plan
for certain executives of the Company. The plan is based on a five-year average
of earnings. Amounts recorded as expense (income) under this plan were ($2)
million, ($2.4) million and ($.6) million for 1994, 1993 and 1992,
respectively. The amount of deferred compensation currently payable was $.2
million and $.6 million at May 31, 1994 and 1993, respectively. The amount of
accrued deferred compensation was $.8 million and $3 million at May 31, 1994
and 1993, respectively.
NOTE I - STOCK OPTION PLAN
In 1989, the stockholders approved a stock option plan whereby options
to purchase Common Stock may be granted to officers and key employees at prices
not less than the market value at the date of grant. Generally, options become
exercisable beginning two years after date of grant, and expire ten years after
the date of grant.
A summary of option transactions for the two years ended May 31, 1994,
follows:
<TABLE>
<CAPTION>
Shares under Option Aggregate
Option Price Option Price
(In thousands except option price)
- - ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at May 31, 1992 1,110 $ 8.88 - 12.13 $ 12,053
Terminated (40) 8.88 - 12.13 (438)
- - ---------------------------------------------------------------------------------
Outstanding at May 31, 1993 1,070 8.88 - 12.13 11,615
Granted 108 10.625 1,162
Terminated (63) 8.88 - 12.13 (691)
Exercised (5) 8.88 (40)
- - ---------------------------------------------------------------------------------
Outstanding at May 31, 1994 1,110 $ 8.88 - 12.13 $ 12,046
=================================================================================
</TABLE>
<TABLE>
<CAPTION>
May 31 1994 1993
(In thousands)
- - ------------------------------------------------------------------
<S> <C> <C>
Shares at end of year:
Exercisable 785 413
Available for future grants 390 430
</TABLE>
The options outstanding at May 31, 1994, expire on various dates to
January 13, 2004.
NOTE J - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments". The estimated fair value amounts at May 31, 1994 and
1993 have been determined by the Company using available market information and
the following methodologies:
* Cash and cash equivalents, accounts receivable, accounts payable: The
carrying amounts of these items are a reasonable estimate of their
fair values at May 31, 1994 and 1993.
* Long-term debt: Interest rates that are currently available to the
Company for issuance of the debt with similar terms and remaining
maturities are used to estimate fair value for debt issues using
discounted cash flow analysis.
<TABLE>
<CAPTION>
May 31 1994 1993
(In millions)
- - ------------------------------------------------------------------
<S> <C> <C>
Long-term debt:
Carrying amount $ 114.2 $ 126.7
Estimated fair value 130.0 150.0
</TABLE>
14
<PAGE> 16
QUARTERLY FINANCIAL INFORMATION
The following table is a summary of quarterly financial information
for the two years ended May 31, 1994:
<TABLE>
<CAPTION>
Three months ended May Feb. Nov. Aug.
(In thousands except per share)
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Net sales $ 124,467 $ 118,687 $ 117,225 $ 101,896
Gross profit 20,454 22,403 22,371 16,549
Net income (loss) 3,962 4,408 4,423 (874)
- - -------------------------------------------------------------------------------------------
Net income (loss) per
common share .14 .15 .15 (.03)
1993
Net sales $ 108,688 $ 103,396 $ 106,568 $ 101,558
Gross profit 14,906 15,800 16,630 11,288
Net income (loss) (999)1) 590 667 (2,309)
- - -------------------------------------------------------------------------------------------
Net income (loss) per
common share (.03) .02 .03 (.08)
</TABLE>
1) The Company's fourth quarter results in fiscal 1993 contain an income tax
rate in excess of the effective rate used in the previous quarters due to
lower than expected pre-tax income.
QUARTERLY STOCK PRICES AND DIVIDENDS
The Company's common stock is listed on the New York Stock Exchange
(ticker symbol CSM). The number of record holders of the Company's common stock
at May 31, 1994 was 1,013. High and low stock prices and dividends for the last
two years were:
<TABLE>
<CAPTION>
1994 Stock Prices Dividends
Quarter High Low
- - -----------------------------------------------------------------------------
<S> <C> <C> <C>
First 10 1/8 7 7/8 $ .05
Second 10 1/8 8 3/8 .05
Third 11 1/2 9 1/4 .05
Fourth 12 1/4 8 7/8 .05
</TABLE>
<TABLE>
<CAPTION>
1993 Stock Prices Dividends
Quarter High Low
- - -----------------------------------------------------------------------------
<S> <C> <C> <C>
First 11 5/8 8 5/8 $ .05
Second 10 1/8 8 1/4 .05
Third 12 9 1/4 .05
Fourth 11 7/8 8 7/8 .05
</TABLE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Chaparral Steel Company
Midlothian, Texas
We have audited the accompanying consolidated balance sheets of
Chaparral Steel Company and subsidiaries as of May 31, 1994 and 1993, and the
related consolidated statements of income, cash flows and stockholders' equity
for each of the three years in the period ended May 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Chaparral Steel Company and subsidiaries at May 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended May 31, 1994, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Dallas, Texas
July 14, 1994
15
<PAGE> 17
CHAPARRAL STEEL COMPANY
<TABLE>
<CAPTION>
DIRECTORS OFFICERS
<S> <C>
Robert D. Rogers Gordon E. Forward
Chairman of the Board President and Chief
Executive Officer
Gordon E. Forward
President and Chief Kenneth R. Allen
Executive Officer Director-Investor Relations
Robert Alpert Dennis E. Beach
Chairman of the Board Vice President-
Alpert Companies Administration
Dallas, Texas
Larry L. Clark
John M. Belk Vice President-Controller
Chairman of the Board and Assistant Treasurer
Belk Stores Services, Inc.
Charlotte, North Carolina David A. Fournie
Vice President-Operations
Lic. Eugenio Clariond Reyes
Director General and Chief Richard M. Fowler
Executive Officer Senior Vice President-
Grupo IMSA, S.A. Finance
Monterrey
Richard T. Jaffre
Gerald R. Heffernan Vice President-Raw Materials
President
G.R. Heffernan & Robert C. Moore
Associates, Ltd. Vice President-General
Toronto, Ontario Counsel and Secretary
Dr. Gerhard Liener Libor F. Rostik
Chief Financial Officer Senior Vice President-
Daimler-Benz AG Engineering
Stuttgart
Jeffry A. Werner
Senior Vice President-
Commercial
Peter H. Wright
Vice President-Quality
Control and SBQ Sales
</TABLE>
TRANSFER AGENT AND REGISTRAR OF STOCK
Chemical Bank
Common Stock
Stockholder Inquiries
1-800-635-9270
STOCK EXCHANGE LISTING
New York Stock Exchange
FORM 10-K REQUESTS
Stockholders may obtain, without charge, a copy of the Company's Form
10-K for the year ended May 31, 1994, as filed with the Securities and Exchange
Commission. Written requests should be addressed to the Director-Investor
Relations.
The information contained herein is not given in connection with any
sale or offer of, or solicitation of any offer to buy, any securities.
ANNUAL MEETING
The Annual Meeting of Stockholders of Chaparral Steel Company will be
held Wednesday, October 19, 1994, at 9:30 a.m., CDT, at The Ballpark in
Arlington, 1000 Ballpark Way, Arlington, Texas.
16
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
CHAPARRAL STEEL COMPANY
<TABLE>
<CAPTION>
Jurisdiction
Subsidiary of Incorporation
---------- ----------------
<S> <C>
Wholly-Owned:
Ferrco Dallas, Inc. .......................... Texas
TA Joist, Inc. ............................... Delaware
80% Owned:
America Steel Transport, Inc. ................ Texas
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Chaparral Steel Company of our report dated July 14, 1994, included in the
1994 Annual Report to Stockholders of Chaparral Steel Company.
Our audits also included the financial statement schedules of Chaparral Steel
Company listed in Item 14(a). These schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-39626) pertaining to the Chaparral Steel Company Stock Option
Plan and in the related Prospectus of our report dated July 14, 1994, with
respect to the consolidated financial statements incorporated herein by
reference, and our report included in the preceding paragraph with respect to
the financial statement schedules included in this Annual Report (Form 10-K) of
Chaparral Steel Company.
/s/ Ernst and Young LLP
Dallas, Texas
August 23, 1994
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
Each of the undersigned hereby constitutes and appoints GORDON E.
FORWARD, RICHARD M. FOWLER and JAMES R. McCRAW, and each of them, with full
power of substitution as the undersigned's attorney or attorney-in-fact, to
sign for each of them and in each of their names, as members of the Board of
Directors, an Annual Report on Form 10-K for the year ended May 31, 1994, and
any and all amendments, filed by CHAPARRAL STEEL COMPANY, a Delaware
corporation, with the Securities and Exchange Commission under the provisions
of the Securities Act of 1934, as amended, with full power and authority to do
and perform any and all acts and things necessary or appropriate to be done in
the premises.
DATED: July 14, 1994
ROBERT ALPERT
(Director)
/s/ JOHN M. BELK
JOHN M. BELK
(Director)
/s/ GERALD R. HEFFERNAN
GERALD R. HEFFERNAN
(Director)
/s/ GERHARD LIENER
GERHARD LIENER
(Director)
/s/ EUGENIO CLARIOND REYES
EUGENIO CLARIOND REYES
(Director)
/s/ ROBERT D. ROGERS
ROBERT D. ROGERS
(Director)
STATE OF TEXAS )
)
COUNTY OF DALLAS )
On this 15th day of July, 1994, before me personally came
ROBERT ALPERT, JOHN M. BELK, GERALD R. HEFFERNAN, GERHARD LIENER, EUGENIO
CLARIOND REYES AND ROBERT D. ROGERS, known to me to be the same persons
described in and who executed the foregoing Power of Attorney and each of them
duly acknowledged to me that they each executed the same for the purposes
therein stated.
/s/ GWYNN E. HERRICK
___________________________________________
Notary Public in and for the
State of Texas
