<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 27, 1994 or
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
___________________________
Commission file number 0-14727
ACME METALS INCORPORATED
(formerly Acme Steel Company)
(Exact name of registrant as specified in its charter)
Delaware 36-3802419
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13500 South Perry Ave., Riverdale, Illinois 60627-1182
(Address of principal executive offices) (Zip Code)
(708) 849-2500
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
----- -----
Number of shares of Common Stock outstanding as of April 24, 1994, 5,555,842.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACME METALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 27, December 26,
1994 1993
----------- ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 60,937 $ 50,444
Receivables, less allowances of $1,176 in 1994 and $1,155 in 1993 59,088 58,479
Inventories 44,541 47,867
Deferred income taxes 12,337 12,337
Other current assets 1,409 1,267
----------- -----------
Total current assets 178,312 170,394
----------- -----------
INVESTMENTS AND OTHER ASSETS:
Investments in associated companies 14,701 14,701
Other assets 13,216 13,389
Deferred income taxes 19,846 19,846
----------- -----------
Total investments and other assets 47,763 47,936
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost 410,046 408,556
Accumulated depreciation (296,715) (293,017)
----------- -----------
Total property, plant and equipment 113,331 115,539
----------- -----------
$ 339,406 $ 333,869
----------- -----------
----------- -----------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 29,271 $ 32,800
Accrued expenses 35,982 34,089
Income taxes payable 4,014 3,641
Current maturities of long-term debt 6,667 6,667
----------- -----------
Total current liabilities 75,934 77,197
----------- -----------
LONG-TERM LIABILITIES
Long-term debt 49,333 49,333
Other long-term liabilities 10,616 10,543
Postretirement benefits other than pensions 83,297 82,630
Retirement benefit plans 30,963 30,963
----------- -----------
Total long-term liabilities 174,209 173,469
----------- -----------
Commitments and contingencies (see note titled COMMITMENTS AND
CONTINGENCIES)
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, 2,000,000 shares authorized, no shares issued
Common stock, $1 par value, 20,000,000 shares authorized, 5,553,682
and 5,406,387 shares issued in 1994 and 1993, respectively 5,554 5,406
Additional paid-in capital 50,658 48,344
Retained earnings 54,346 50,748
Minimum pension liability adjustment (21,295) (21,295)
----------- -----------
Total shareholders' equity 89,263 83,203
----------- -----------
$ 339,406 $ 333,869
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
2
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ACME METALS INCORPORATED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For The Three Months Ended
--------------------------
March 27, March 28,
1994 1993
---------- -----------
<S> <C> <C>
NET SALES $ 123,560 $ 107,863
COSTS AND EXPENSES:
Cost of products sold 106,258 96,619
Depreciation expense 3,783 3,726
---------- ----------
Gross profit 13,519 7,518
Selling and administrative expense 7,363 6,729
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Operating income 6,156 789
NON-OPERATING INCOME (EXPENSE):
Interest expense (1,334) (1,384)
Interest income 394 368
Other - net 781 417
---------- ----------
Income before income taxes 5,997 190
Income tax provision 2,399 76
---------- ----------
Net income $ 3,598 $ 114
---------- ----------
---------- ----------
PER COMMON SHARE:
Net Income $ 0.64 $ 0.02
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
3
<PAGE>
ACME METALS INCORPORATED
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For The Three Months Ended
--------------------------
March 27, March 28,
1994 1993
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,598 $ 114
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 3,930 3,849
CHANGE IN CURRENT ASSETS AND LIABILITIES:
Receivables (609) (6,797)
Inventories 3,326 833
Accounts payable (3,529) (101)
Other current accounts 2,124 1,083
Other, net 1,331 950
---------- ----------
Net cash provided by (used for) operating activities 10,171 (69)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,842) (1,755)
---------- ----------
Net cash used for investing activities (1,842) (1,755)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Other (94) (32)
Proceeds from the exercise of stock options 2,258
---------- ----------
Net cash provided by (used for) financing activities 2,164 (32)
---------- ----------
Net increase (decrease) in cash and cash equivalents 10,493 (1,856)
Cash and cash equivalents at beginning of period 50,444 49,224
---------- ----------
Cash and cash equivalents at end of period $ 60,937 $ 47,368
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
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ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION:
The accompanying financial statements for the periods ended March 27, 1994 and
March 28, 1993 are unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of such financial statements have been
included. The financial statements have been subjected to a limited review by
Price Waterhouse, the Company's independent accountants, whose report appears on
page 9 of this filing. Such report is not a "report" or "part of the
Registration Statement" within the meaning of Sections 7 and 11 of the
Securities Act of 1933 and the liability provisions of Section 11 of such Act do
not apply.
The Company's fiscal year ends on the last Sunday in December. First quarter
results for 1994 and 1993 cover 13-week periods.
SEGMENT INFORMATION:
Beginning in 1993, the Company elected to present its operations in two
segments, Steel Making and Steel Fabricating. Prior year amounts have been
reclassified for comparison purposes.
Steel Making operations include the manufacture of sheet, strip and semifinished
steel in low-, mid-, and high-carbon alloy and special grades. Principal
markets include agricultural, automotive, industrial equipment, industrial
fasteners, welded steel tubing, processor and tool manufacturing industries.
The Steel Fabricating Segment processes and distributes steel strapping,
strapping tools and industrial packaging (Acme Packaging Corporation), welded
steel tube (Alpha Tube Corporation) and auto and light truck jacks (Universal
Tool & Stamping). The Steel Fabricating Segment sells to a number of markets.
All sales between Segments are recorded at current market prices. Income from
operations consists of total sales less operating expenses. Operating expenses
include an allocation of expenses incurred at the Corporate Office that are
considered by the Company to be operating expenses of the Segments rather than
general corporate expenses. Income (loss) from operations does not include
other non-operating income or expense, interest income or expense, or income
taxes.
The products and services of the Steel Making and Steel Fabricating Segments are
distributed through their own respective sales organizations which have sales
offices at various locations in the United States. Export sales are
insignificant.
5
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ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
March 27, March 28,
1994 1993
--------- ---------
(in thousands)
<S> <C> <C>
Net Sales
Steel Making:
Sales to unaffiliated customers $ 53,765 $ 43,974
Intersegment sales 30,503 31,159
-------- --------
84,268 75,133
Steel Fabricating:
Sales to unaffiliated customers 69,795 63,889
Intersegment sales 497 415
-------- --------
70,292 64,304
Eliminations: (31,000) (31,574)
-------- --------
Total $123,560 $107,863
-------- --------
-------- --------
Income (Loss) from Operations
Steel Making $ 2,664 $ (1,277)
Steel Fabricating 3,843 2,318
Eliminations and adjustments (351) (252)
-------- --------
Total $ 6,156 $ 789
-------- --------
-------- --------
</TABLE>
PER SHARE DATA:
Per share amounts for 1994 and 1993 are based on the weighted average number of
common and dilutive common equivalent shares outstanding during the three-month
period (5,662,670 in 1994 and 5,404,013 in 1993). As discussed under FINANCING
ALTERNATIVES FOR THE CASTER PROJECT on page 12, the Company has sold warrants on
a private placement basis in Canada exchangeable into 5.6 million common shares.
If approval is received by the Company's Board of Directors to proceed with the
construction of a continuous thin slab caster/hot strip mill complex, the
Company will record the issuance of the warrants and reflect the warrants in
earnings per share retroactive to the closing of the transaction (March 28,
1994).
6
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
INVENTORIES:
Inventories are summarized as follows:
<TABLE>
<CAPTION>
March 27, December 26,
1994 1993
--------- ------------
(in thousands)
<S> <C> <C>
Raw materials $ 4,270 $ 6,201
Semi-finished and finished products 31,180 32,364
Supplies 9,091 9,302
-------- --------
$ 44,541 $ 47,867
-------- --------
-------- --------
</TABLE>
CASH FLOWS:
Cash flows from operating activities were reduced by $2,026,000 and $414,000
related to cash payments for income taxes in the first quarters of 1994 and
1993, respectively. Cash payments for interest expense were $64,000 in the
first quarters of both quarters presented.
COMMITMENTS AND CONTINGENCIES:
The Company's interest in an iron ore mining joint venture requires payment of
its proportionate share of all fixed operating costs, regardless of the quantity
of ore received, plus the variable operating costs of minimum ore production for
the Company's account. Normally, the Company reimburses the joint venture for
these costs through its purchase of ore at the higher of cost or market prices.
The Company is subject to various federal, state and local environmental
statutes and regulations which provide a comprehensive program for controlling
the release of materials into the environment and require responsible parties to
remediate certain waste disposal sites. In addition, various health and safety
statutes and regulations apply to the work-place environment. Administrative,
civil and criminal penalties may be applicable for failure to comply with these
laws.
These environmental laws and regulations are subject to periodic revision and
modification. The United States Congress, by example, has recently completed a
major overhaul of the federal Clean Air Act which is a major component of the
federal environmental statutes affecting the Company's operations.
From time to time, the Company is also involved in administrative proceedings
involving the issuance, or renewal, of environmental permits relating to the
conduct of its business. The final
7
<PAGE>
ACME METALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
issuance of these permits have been resolved on terms satisfactory to the
Company; and, in the future, the Company expects such permits will similarly be
resolved on satisfactory terms.
Although management believes it will be required to make further substantial
expenditures for pollution abatement facilities in future years, because of the
continuous revision of these regulatory and statutory requirements, the Company
is not able to reasonably estimate the specific pollution abatement
requirements, the amount or timing of such expenditures to maintain compliance
with these environmental laws. While such expenditures in future years may be
substantial, management does not presently expect they will have a material
adverse effect on the Company's future ability to compete within its markets.
In those cases where the Company has been identified as a Potentially
Responsible Party ("PRP") or is otherwise made aware of a possible exposure to
incur costs associated with an environmental matter, management determines (i)
whether, in fact, the Company has been properly named or is otherwiqe obligated,
(ii) the extent to which the Company may be responsible for costs associated
with the site in question, (iii) an assessment as to whether another party may
be responsible under various indemnification agreements the Company is a party
to, and (iv) an estimate, if one can be made, of the costs associated with the
clean-up efforts or settlement costs. It is the Company's policy to make
provisions for environmental clean-up costs at the time that a reasonable
estimate can be made. At March 27, 1994, the Company had recorded reserves of
approximately $0.3 million for environmental clean-up matters. While it is not
possible to predict the ultimate costs of resolving environmental related issues
facing the Company, based upon information currently available, they are
currently not expected to have a material effect on the consolidated financial
condition of the Company.
In connection with the spin-off from Interlake Corporation (Interlake), Acme
Steel Company entered into certain indemnification agreements with Interlake.
As discussed in the Company's 1993 Annual Report and Form 10-K, significant
environmental and tax matters are subject to indemnification by Interlake under
these agreements. The inability of Interlake to fulfill its obligations, for
any reason, under these indemnification agreements could result in increased
future obligations for the Acme Steel Company.
8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Acme Metals Incorporated
We have made a review of the accompanying consolidated balance sheet as of March
27, 1994 and the consolidated statements of operations and cash flows for the
three-month periods ended March 27, 1994 and March 28, 1993 (the "consolidated
financial information") of Acme Metals Incorporated and its subsidiaries, in
accordance with standards established by the American Institute of Certified
Public Accountants.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial information for it to be in
conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 26, 1993, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the year then ended (not presented herein), and in our report dated March 2,
1994 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet information as of December 26, 1993, is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.
PRICE WATERHOUSE
Chicago, Illinois
April 21, 1994
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
FIRST QUARTER 1994 COMPARED WITH FIRST QUARTER 1993
CONSOLIDATED RESULTS
The Company recorded first quarter earnings of $3.6 million, or 64 cents per
share, compared to the net income of $0.1 million, or 2 cents per share, in last
year's first quarter.
Net sales of $123.6 million in 1994 were $15.7 million, or 15 percent higher
than first quarter 1993 sales. Higher volume represented an $8.9 million
increase in sales as all of the Company's main product categories exceeded last
year's sales volume levels. The volume gains were supplemented by a 6 percent
increase in average selling prices in the quarter. The increased selling prices
had a $6.8 million favorable impact on sales in comparison to the first quarter
of 1993.
The gross profit margin for the first quarter of 1994 of $13.5 million was $6
million higher than the margin recorded during last year's comparable period.
The increase in margin was due to higher average selling prices for the
Company's products and increased sales volume. Operating costs, however, were
higher in 1994's first quarter. Higher raw material costs, increased
expenditures, higher pension and medical expenses ($1.1 million higher than last
year's comparable period) and higher property taxes were the primary reasons for
the increased operating costs. The increased pension and medical costs were the
result of lowering the interest income assumptions related to post-retirement
obligations and continued higher expenses for the Company's active and retired
employees' medical expenses. Property taxes were higher in 1994 as a result of
a $0.3 million refund of local property taxes recorded in the first quarter of
1993. The gross profit, as a percentage of sales, was 10.9 percent in 1994
versus 7 percent a year ago.
Selling and administrative expense totalled $7.4 million (6 percent of sales)
and $6.7 million (6.2 percent of sales) for the first quarters of 1994 and 1993,
respectively.
Interest expense was slightly lower than the prior year due to a reduced balance
on our long-term debt. Interest income for both periods presented in the
unaudited Consolidated Statements of Operations was $0.4 million.
Nonoperating income in the first quarter of 1994 was $0.4 million higher than
last year's comparable period due to a $0.7 million refund of prior year utility
costs from Commonwealth Edison recorded in the current period. Royalty income
from Acme's coal producing properties in the first quarter of 1994, however, was
lower than in 1993.
The income tax expense for 1994's first quarter totaled $2.4 million based on a
40 percent effective tax rate as compared to the $0.1 million expense recorded
in 1993 also based on a 40 percent effective rate.
10
<PAGE>
Acme expects a strong second quarter due to a solid order book and continued
strengthening in prices for commercial steel and welded tubing. A decision on
the construction of a continuous thin slab caster/hot strip mill complex (the
"Project") at the Company's Riverdale, Illinois plant is expected in 1994. If
the Board of Directors approves the construction of the Project, the estimated
capital cost will approximate $300 million to $350 million. It is expected
that the Project will be financed by a combination of existing cash, new equity
and debt. An investment banker has been retained to assist the Company in its
financing activities. If the Project is approved, there will be a charge to
earnings to write down those assets that will be replaced because of the new
technology, and provisions to record estimated costs related to the associated
restructuring of operations. The financial impact of the asset write-down and
restructuring charges would total approximately $13 million, pre-tax.
Additionally, the Company will benefit from using the higher statutory federal
tax rate to value its deferred tax accounts. The effect of this change will be
to lower the Company's effective tax rate from 40 percent to 34 percent during
1994.
A detailed discussion of the caster project can be found in Item 1(e) of the
Company's 1993 Annual Report and Form 10-K.
STEEL MAKING SEGMENT
Total sales for the Steel Making Segment advanced to $84.3 million in the first
quarter of 1994, a $9.1 million, or 12 percent, improvement over last year's
comparable period. Sales to unaffiliated customers increased 22 percent to
$53.8 million while Intersegment sales of $30.5 million were 2 percent lower
than in the first quarter of 1993. The increase in total sales was the result
of a 5 percent increase in average selling prices and a 17,000 ton increase in
shipments.
Operating income for the Steel Making Segment totaled $2.7 million as compared
to the $1.3 million loss recorded in last year's first quarter. The earnings
improvement was driven primarily by the 5 percent increase in average selling
prices and, to a lesser extent, an increase in shipments. Shipments to external
customers increased 17 percent over last year's comparable period while
shipments to the Steel Fabricating Segment were 9,000 tons, or 11 percent, lower
than in 1993. Approximately 62 percent of shipments and gross margins in 1994
were attributable to external customers while the remaining 38 percent of
shipments and margins were generated by sales to the Steel Fabricating Segment.
In 1993's first quarter, the Steel Making Segment shipped 55 percent of its
products to external customers which generated 60 percent of margin while
shipments to the Fabricating Segment produced the remaining 40 percent of
margin. In total, the increased selling prices generated $5 million in increased
revenue while the increased shipments contributed $1.6 million over last year's
results. Partially offsetting the Steel Making Segment's sales related gains
were increased material costs and higher insurance and pension costs ($0.9
million higher than last year's comparable period) for the Segment's active and
retired employees.
Looking ahead to the second quarter, sales are expected to increase as price
increases for commercial steel initiated in January will be fully realized in
the quarter. Shipments of commercial steel, while expected to be stronger than
in the first quarter, will be negatively affected by unexpected outages at the
Segment's hot strip mill in the upcoming quarter.
11
<PAGE>
STEEL FABRICATING SEGMENT
Steel Fabricating Segment sales of $70.3 million were $6 million, or 9 percent
higher than the prior year. A 7 percent increase in average selling prices
accounted for approximately 80 percent of the sales improvement while increased
shipments generated the remainder of the increase over last year's first
quarter.
Operating income for the Steel Fabricating Segment of $3.8 million in the first
quarter of 1994 was $1.5 million higher than the results recorded in last year's
comparable period. Packaging's earnings more than doubled as a result of a 5
percent increase in average selling prices for steel strapping. Alpha Tube's
results were significantly higher due entirely to an 18 percent increase in
average selling prices for welded tubing and Universal's operating income also
improved in the quarter as the result of a 4 percent increase in average selling
prices for auto and light truck jacks. The majority of price increases for the
Fabricating Segment in the first quarter of 1994 were the result of the
realization of price hikes initiated in 1993. Partially offsetting the Steel
Fabricating sales related gains were increased raw material costs in the form of
higher flat-rolled prices from the Steel Making Segment and external suppliers.
Results for the Steel Fabricating Segment are expected to continue to improve in
the second quarter. The Packaging Company, despite the rescission of a price
increase that was planned for April, is expected to improve upon its first
quarter sales and earnings results. Results for Alpha are expected to continue
to grow due to higher average selling prices and production efficiencies.
Universal's sales and earnings are expected to decline slightly from first
quarter results as a result of increased competition.
LIQUIDITY AND CAPITAL RESOURCES
At the end of the first quarter, cash balances totalled $60.9 million, up $10.5
million from the December 1993 balance. Operating activities generated $10.2
million of cash in the quarter due to a combination of net income of $3.6
million, the add-back of $3.9 million of non-cash depreciation and $2.7 million
from changes in working capital and non-current accounts. Working capital stood
at $102.4 million at the end of March, up $9.2 million over last December's
ending amount.
Long term debt was 39 percent of total capitalization at March 27,1994. The
Company has a $60 million revolving credit agreement which has not been utilized
in the quarter.
FINANCING ALTERNATIVES FOR THE CASTER PROJECT
In the event the Board of Directors of the Company decides to proceed with the
continuous thin slab caster/hot strip mill, the Company will be committed to a
construction and engineering project that will involve direct costs of
approximately $300 to $350 million over an approximately 30 month period. The
Company will be required to fund these costs almost exclusively from external
financing sources, including access to new credit facilities.
On March 3, 1994, the Company agreed to sell an issue of securities at a price
of $21.00 per security on a private placement basis exclusively in Canada.
Subject to certain conditions, within 150 days of the closing of this
transaction (March 28, 1994), the securities will be exchangeable
12
<PAGE>
on a one-for-one basis, for up to 5,600,000 shares of the Company's common
stock. The conditions for the exchange of the securities for common stock and
the Company's receipt of the proceeds of the sale of the securities include
assurance that not less than 85 percent of the reasonably estimated funds needed
for construction of the Project (inclusive of the Company's cash on hand) will
be available to the Company and approval of such construction by the Company's
Board of Directors. The securities and the underlying common shares have not
been registered under the Securities Act and may not be offered or sold in the
United States or to a U.S. person, as defined in Regulation S under the
Securities Act, absent registration or an applicable exemption from registration
requirements.
In the event the conditions for completion of the privately placed Canadian
financing are satisfied, the Company's outstanding shares of common stock will
double from 5.6 million to 11.2 million, and the Company's total shareholders'
equity will increase by approximately $112 million. The Company anticipates
that substantially all of this additional equity will be used to pay costs
associated with the Project.
In addition to the funds to be raised from the privately placed Canadian
financing, the Company will need to raise approximately $190 million to $240
million from other financing sources, exclusive of a possible prepayment of $50
million of senior notes the Company currently has outstanding as discussed
below. To date, the Company has not received commitments from any such
financing source. The Company is exploring the sale of additional equity
securities, the sale of debt securities, and the opening of new credit
facilities. At present, there can be no assurance that the Company will be able
to obtain any such funds nor are the terms and conditions known on which such
funds may be available.
To the extent the Company decides and is able to raise the additional funds
needed for construction of the Project (exclusive of the funds to be raised
through the privately placed Canadian financing) through debt financing, the
Company's interest expense and debt-to-equity ratio will increase accordingly.
Although neither the availability nor the characteristics of such debt are known
at this time, the Company will not proceed with the Project until it is assured
that adequate sources of liquidity are available to cover foreseeable interest
costs through construction, start-up and operation of the Project.
The Company currently has outstanding Senior notes in the principal amount of
$50 million. The terms of these notes would preclude the Company from
increasing its indebtedness by more than approximately $75 million. To the
extent the Company wishes to increase its debt by more than this amount, these
notes would have to be renegotiated or prepaid. Prepayment of the notes would
trigger a penalty of approximately $4 million. The Company also has an unused
$60 million revolving credit agreement. This agreement would terminate upon the
approval of the Project by the Company's Board of Directors. If the Project is
approved, the Company believes it can secure an adequate working capital credit
facility; however, there can be no assurances the Company would be able to
obtain a new credit facility or that it would be otherwise able to fund its
working capital needs from external sources if these needs cannot be met from
continuing operation of the existing facilities.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 15 - Letter Regarding Unaudited Interim Financial Information
(b) Reports on Form 8-K
On March 3, 1994, Acme Metals Incorporated (the "Company") agreed to
sell an issue of securities on a private placement basis exclusively
in Canada. Within 160 days of the closing of this transaction
(expected on March 28, 1994), the securities will be exchangeable for
5,000,000 common shares of the Company (5,600,000 common shares if an
over-allotment option for the securities is exercised before closing)
subject to the fulfillment of certain conditions. Conditions include
the approval by the Board of Directors of the Company of the
construction of a continuous thin slab caster/hot rolled mill and
confirmation of the availability of debt financing sufficient for such
construction.
The securities and the underlying common shares have not been
registered under the Securities Act of 1933 (the "Securities Act") and
may not be offered or sold in the United States or to a U.S. person,
as defined in Regulation S under the Securities Act, absent
registration or an applicable exemption from registration
requirements.
The report on Form 8-K discussing the above matter was filed on March
7, 1994.
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.
ACME METALS INCORPORATED
Date: May 9, 1994 By: /s/ J. F. Williams
------------------------------
Jerry F. Williams
Vice President - Finance
and Administration
(Principal Financial Officer)
14
<PAGE>
Exhibit 15
May 6, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Dear Sirs:
We are aware that Acme Metals Incorporated has included our report dated April
21, 1994 (issued pursuant to the provisions of Statement on Auditing Standards
No. 71) in the Prospectuses constituting part of its Registration Statements on
Form S-8 (Nos. 33-17235, 33-19437, 33-338747 and 33-30841). We are also aware
of our responsibilities under the Securities Act of 1933.
Very truly yours,
