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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JULY 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-20490
THE CARBIDE/GRAPHITE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 25-1575609
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Code)
One Gateway Center, 19th Floor
Pittsburgh, PA
15222
(Address of principal executive offices)
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Registrant's telephone number, including area code: (412) 562-3700
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
-----------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K 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]
The aggregate market value of voting stock held by non-affiliates of
the Registrant as of the close of business on September 24, 1999 was
$48,114,056.
As of the close of business on September 24, 1999 there were 8,337,842
shares of the Registrant's $0.01 par value Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
The information required under Part III is incorporated by reference to
the Registrant's Proxy Statement and Notice of the Annual Meeting of
Stockholders for 1999, which is to be filed within 120 days after July 31, 1999.
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PART I
ITEM 1 BUSINESS
OVERVIEW
The Carbide/Graphite Group, Inc. (the Company or Registrant) is a major U.S.
manufacturer of graphite electrode products and calcium carbide products.
Graphite electrodes are used as conductors of electricity, and are consumed, in
the electric arc furnace steel-making process common to all mini-mill steel
producers. Calcium carbide and derivative products, primarily acetylene, are
used in the manufacture of specialty chemicals, as a fuel in metal cutting and
welding and for metallurgical applications such as iron and steel
desulfurization. The Company is the only manufacturer of graphite electrodes
that produces its own requirements of needle coke, the principal raw material
used in the manufacture of graphite electrodes, and the Company sells needle
coke to its competitors in the graphite electrode business. Net sales for the
Company's graphite electrode products segment and calcium carbide products
segment represented 76.5% and 23.5%, respectively, of consolidated net sales for
fiscal 1999. Refer to Note 10 to the Company's consolidated financial statements
for its fiscal year ended July 31, 1999 (incorporated by reference under Item 8
of this Form 10-K) for information regarding sales (including export sales),
operating income and identifiable assets by reportable business segment.
Weakness in certain regions of the global economy and its effect on the
global demand for steel negatively impacted demand for many of the Company's
products in fiscal 1999. Also, the relative strength of the U.S. economy and
U.S. dollar resulted in an increased level of steel imports into the U.S., as
foreign steel producers looked for markets to absorb excess production. This
situation resulted in the further curtailment of steel production in the U.S.,
which is the most significant market for the Company's graphite electrodes and
calcium carbide for metallurgical applications. As steel production declined in
late 1998 and early 1999, demand for graphite electrodes, needle coke and
calcium carbide for metallurgical applications was reduced significantly.
In response to weak demand for many of its products, the Company initiated
a comprehensive cost savings program during fiscal 1999. A component of this
program is the closure of two high-cost graphite production units at the
Company's St. Marys, Pennsylvania plant. This cost savings program, coupled with
the commissioning of two major capital projects in the Company's graphite
business in February 1999, reduced staffing levels by about 300 employees
Company wide, representing a reduction in staffing of approximately 24%. The
Company also achieved cost reductions in the areas of raw materials, utilities,
transportation and professional services during fiscal 1999 in an effort to help
offset the negative effect of lower sales. The Company will attempt to achieve
further cost reductions in fiscal 2000.
In May 1997, the Company was served with a subpoena issued by a Grand Jury
empanelled by the United States District Court for the Eastern District of
Pennsylvania. The Company was advised by attorneys for the Department of Justice
(DOJ) that the Grand Jury is investigating price fixing by producers of graphite
products in the United States and abroad during the past five years. The Company
is cooperating with the DOJ in the investigation. The DOJ has granted the
Company and certain former and present senior executives the opportunity to
participate in its Corporate Leniency Program and the Company has entered into
an agreement with the DOJ under which the Company and such executives who
cooperate will not be subject to criminal prosecution with respect to the
investigation if charges are issued by the Grand Jury. Under the agreement, the
Company has agreed to use its best efforts to provide for restitution to its
domestic customers for actual damages if any conduct of the Company which
violated the Federal Antitrust Laws in the manufacture and sale of such graphite
products caused damage to such customers.
Subsequent to the initiation of the DOJ investigation, four civil cases
were filed in the United States District Court for the Eastern District of
Pennsylvania in Philadelphia asserting claims on behalf of a class of purchasers
for violations of the Sherman Act. These cases, which have been consolidated,
name the Company, UCAR International, Inc. (UCAR), SGL Carbon Corporation (SGL
Corp.) and SGL Carbon AG (SGL) as defendants (together, the Named Defendants)
and seek treble damages. On March 30, 1998, a number of purchasers who were
previously included in the purported class of plaintiffs covered by the
consolidated case initiated a separate action in the same District Court which
asserts substantially the same claims and seeks the same relief as the
consolidated case and names the Named Defendants,
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as well as Showa Denko Carbon, Inc. (Showa Denko). Thereafter, seven additional
groups of purchasers who were previously included in the purported class of
plaintiffs covered by the consolidated case instituted their own actions against
the Named Defendants, Showa Denko and, in several cases, certain present or
former related parties of UCAR and Showa Denko, asserting substantially the same
claims and seeking the same relief as in the consolidated case. Four such
actions were filed in the United States District Court for the Eastern District
of Pennsylvania on April 3, 1998, May 14, 1998, May 28, 1998 and March 31, 1999,
respectively. One action was filed in the United States District Court for the
Northern District of Ohio on April 17, 1998 but has been transferred to the
Eastern District of Pennsylvania for pre-trial proceedings. Another action was
filed in the United States District Court for the Western District of
Pennsylvania on June 17, 1998 but has also been transferred to the Eastern
District of Pennsylvania for pre-trial proceedings. The complaints or amended
complaints in some of the cases have also named as defendants other companies
including Mitsubishi Corporation, Tokai Carbon U.S.A., Inc. and related
companies. On December 7, 1998, the Company was served with a complaint filed by
Chaparral Steel Company against the Named Defendants, Showa Denko and parties
related to Showa Denko and UCAR in state court in Ellis County, Texas alleging
violations of various Texas state antitrust laws and seeking treble damages.
Chaparral Steel Company has filed an amended complaint adding two additional
related plaintiffs.
The Company has reached settlement agreements representing approximately
60% of domestic antitrust claims with the plaintiffs that filed lawsuits on
March 30, 1998, May 14, 1998, May 28, 1998 and March 31, 1999 and other
purchasers who had yet to file lawsuits. The Company has also reached agreements
in principle representing an additional 36% of domestic antitrust claims with
the class plaintiffs and the plaintiffs who filed the lawsuits on April 3, 1998,
April 17, 1998, and June 17, 1998, subject to the negotiation of certain
conditions and, with respect to the class plaintiffs, court approval. The
settlement in principle with the class plaintiffs, which contemplates possible
payments to certain foreign purchasers, would allow the Company to terminate any
definitive settlement agreement if the claims of foreign purchasers who opt out
of the class settlement exceed certain levels and would allow the class
plaintiffs to terminate such settlement agreement if the Company's sales to
certain foreign purchasers, as defined in the settlement agreement, exceed
certain levels. Although various of the settlements are unique, in the aggregate
they consist generally of current and deferred cash payments and, in a number of
cases, provisions which provide for additional payments under certain
circumstances ("most favored nations" provisions). In addition to the
settlements discussed above, the Company may also settle with various additional
purchasers.
On February 10, 1999, a U.S. corporation which allegedly made purchases on
behalf of two foreign entities and a group of 22 foreign purchasers which are
based in several foreign countries filed a complaint against the Company, UCAR,
SGL, Tokai Carbon Co., Ltd., Tokai Carbon U.S.A., Inc., Nippon Carbon Co., Ltd.,
SEC Corporation and certain present and former related parties of UCAR in United
States District Court for the Eastern District of Pennsylvania. This complaint
has been amended to add four additional defendants. On September 24, 1999, three
Australian companies and one New Zealand company filed a complaint against the
same parties as are named in the lawsuit filed on February 10, 1999. These cases
assert substantially the same claims and seek the same relief as the
consolidated case. Other foreign purchasers have also made similar claims
against the Company but have not filed lawsuits.
The Company understands that defendants UCAR and Showa Denko have reached
settlement agreements with the class action plaintiffs, which have been approved
by the court, and have also settled claims brought by various individual
purchasers. The Company further understands that UCAR, Robert P. Krass, Robert
J. Hart, SGL, Robert J. Koehler, Showa Denko and Tokai have agreed to plead or
have pleaded guilty to antitrust conspiracy charges filed by the DOJ and have
agreed to or been ordered to pay fines and, in the case of Messrs. Krass and
Hart, have agreed to serve prison sentences in connection with those guilty
pleas or agreements to plead guilty.
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The Company has also advised the Commission of the European Communities
(the European Commission) that it wishes to invoke its Leniency Notice.
Generally under these guidelines, the European Commission may reduce fines and
other penalties if a company sufficiently cooperates with the European
Commission. The Company understands that the European Commission will determine
fines, if any, at the completion of its proceedings.
On June 18, 1998, a group of Canadian purchasers filed a lawsuit in the
Ontario Court (General Division) claiming a conspiracy and violations of the
Canadian Competition Act. The Canadian lawsuit names the Named Defendants and
Showa Denko, as well as several present or former parents, subsidiaries and/or
affiliates of UCAR, SGL and Showa Denko. The Canadian Competition and Consumer
Law Division (Canadian Division) has initiated an inquiry and the Company is
cooperating fully with the authorities conducting that inquiry pursuant to an
agreement with the Director of Research and Investigation of the Canadian
Division under which the Company and its present and former officers, directors
and employees will not be subject to criminal prosecution.
During fiscal 1998, the Company recorded a $38 million pre-tax charge ($25
million after expected tax benefits) for potential liabilities resulting from
civil lawsuits, claims, legal costs and other expenses associated with the
pending antitrust matters (the Initial Antitrust Charge). During fiscal 1999,
the Company recorded an additional $7.0 million charge ($4.5 million after
expected tax benefits) for such potential liabilities (the Supplemental
Antitrust Charge). The combined $45.0 million charge (the Antitrust Charge)
represents the Company's estimate, based on current facts and circumstances, of
the expected cost to resolve pending antitrust claims. The Company understands
that defendants UCAR and Showa Denko have reached settlements with the class
action plaintiffs and various individual purchasers at amounts substantially
higher than the levels contemplated in the Antitrust Charge. In light of these
and other developments including: (a) possible future settlements with other
purchasers and the effect of the possible additional payments ("most favored
nations") noted above, (b) the outcome of the European Commission antitrust
investigation, (c) potential additional lawsuits by foreign purchasers, (d) the
failure of agreements in principle to result in definitive settlement
agreements, (e) the failure to satisfy the conditions to the class action
settlement, and (f) adverse rulings or judgments in pending litigation, the
antitrust matters could result in aggregate liabilities and costs which could
differ materially and adversely from the Antitrust Charge and could affect the
Company's financial condition and its ability to service its currently planned
liquidity needs. As of July 31, 1999, $23.6 million in antitrust settlements and
costs had been paid. See "Liquidity and Capital Resources" under Item 7 of this
Form 10-K.
GRAPHITE ELECTRODE PRODUCTS BUSINESS
Products and Markets
The Company's graphite electrode products business segment includes graphite
electrodes, needle coke, bulk graphite, granular graphite (primarily from
machine turnings) and other related miscellaneous sales. The following table
presents the Company's net sales and percentage of segment sales within its
graphite electrode products segment for fiscal 1999, by principal product
category:
<TABLE>
<CAPTION>
FISCAL 1999
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Product Category Net Sales % of Total
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(dollars in thousands)
<S> <C> <C>
Graphite electrodes $130,182 70.9%
Needle coke (third party sales) 31,833 17.3
Bulk graphite 12,750 6.9
Granular graphite 7,155 3.9
Other 1,698 1.0
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Total graphite electrode product net sales $183,618 100.0%
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</TABLE>
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Domestic sales of graphite electrode products are made primarily by the
Company's direct sales force, consisting of seven salesmen for graphite
electrodes and one salesman for other graphite products. This sales force is
supported by five technical service personnel. International sales of electrodes
are made through longstanding relationships with over twenty independent agents.
Exports of graphite electrodes account for 40% to 50% of the Company's annual
shipments of graphite electrodes and subject the Company to risks associated
with fluctuations in foreign currency exchange rates. Most foreign currencies
were weaker in relationship to the U.S. dollar during fiscal 1999 which
negatively impacted foreign price realizations and operating results. The
Company regularly enters into forward foreign currency contracts to help
mitigate foreign currency exchange rate exposure. In addition, the Company is
attempting to shift sales to markets in which transactions are completed in U.S.
dollars and to markets with foreign currencies that are not as weak. There can
be no assurance that the Company's attempts to mitigate its exposure to foreign
currency valuations will fully offset the negative effects of the strengthened
U.S. dollar.
During fiscal 1999, one of the Company's graphite customers, Dow Chemical
Company, Inc. (Dow), announced its intention to permanently close its magnesium
production facility in Freeport, Texas. The Company previously supplied Dow with
all of its graphite anode needs under a long-term supply agreement. The
cancellation of the supply agreement accounts for approximately 8 million pounds
of graphite production capacity. In connection with the Company's cost savings
program, the Company has eliminated a significant amount of the costs associated
with producing the graphite anodes previously supplied to Dow. With the
continued weak demand for graphite electrodes, the Company does not believe that
the graphite anodes previously supplied to Dow will be replaced with sales of
electrodes or other graphite products for at least the next several quarters.
The cancellation of this contract contributed to the decline in shipments of
graphite electrodes for fiscal 1999.
The Company's needle coke affiliate, Seadrift Coke, L.P. (Seadrift) sold
approximately 50% of its needle coke production to six other graphite electrode
producers. As a result of a capacity expansion project at Seadrift, the
Company's sales of needle coke to its competitors in the graphite electrode
industry is expected to become a more significant
component of the graphite electrode products segment in the future.
In connection with the fiscal 1995 sale (the Specialty Products Sale) of
the Company's graphite specialty products business (Specialty Products) to SGL
Corp., the Company agreed to continue to produce graphite rods and plates (also
known as bulk graphite), the majority of which were sold to SGL Corp. at prices
approximating the Company's manufacturing cost under a supply agreement that
expired in January 1998 (the SGL Supply Agreement). Sales to SGL Corp. under
this contract in fiscal 1998 were $3.9 million versus $16.7 million in fiscal
1997. The Company also sells these bulk graphite rods and plates, and certain
other graphite products, to other graphite specialty customers. The Company
continues to pursue a strategy to increase its customer base for bulk graphite.
While the Company believes that it will continue to sell bulk graphite to SGL
Corp. and other bulk graphite customers, there can be no assurance that the
Company will be able to sell quantities of bulk graphite equal to those sold
while the SGL Supply Agreement was in effect. Bulk graphite sales to SGL Corp.
and other graphite customers totaled $3.3 million and $9.4 million,
respectively, in fiscal 1999. Granular graphite is primarily turnings from the
machining of graphite electrodes and is used in a variety of industrial
applications, including brake shoe materials and carbon additives for steel
chemistry. In addition, the Company provides processing services, which include
graphitizing baked rods.
The steel industry, which constitutes the principal market for the
Company's graphite electrodes and a major market for its calcium carbide for
metallurgical applications, is highly cyclical. As a result, the Company's steel
industry-related products will face periods of reduced demand, which, because of
the generally high fixed costs of the Company's business, could result in
substantial downward pressure on profitability. Weakness in certain regions of
the global economy had a negative impact on demand for graphite electrodes,
premium needle coke and calcium carbide for metallurgical applications in fiscal
1999 and has resulted in and is expected to continue to result in decreased
shipments and/or average prices of graphite electrodes, needle coke and calcium
carbide for metallurgical applications for the first half of fiscal 2000 and
potentially beyond. Demand for and sales of graphite electrodes, needle coke and
calcium carbide can also fluctuate from quarter to quarter due to such factors
as scheduled plant shutdowns by customers, changes in customer production
schedules in response to seasonal changes in energy costs, weather conditions,
strikes and work stoppages at customer plants and changes in customer order
patterns in response to the announcement of price increases or decreases.
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Manufacturing and Modernization
The Company's electrodes and other graphite products are manufactured at its
facilities in Niagara Falls, New York and St. Marys, Pennsylvania. Both plants
are equipped with facilities for milling, mixing, homogenizing and extruding;
baking and rebaking; pitch impregnating; graphitizing; and machine finishing.
The Company currently has the effective capacity to manufacture approximately
110 million pounds of electrodes and approximately 20 million pounds of bulk
graphite annually.
The Company manufactures all of its needle coke (the primary raw material
for graphite electrodes) at its affiliate, Seadrift. The Company currently has
the capacity to manufacture approximately 200,000 tons of needle coke annually,
a 48% increase over previous levels as a result of a $22 million capital
expansion and process modification project completed in fiscal 1998.
Approximately 40% of Seadrift's capacity is used internally for the production
of graphite electrodes. Needle coke is shipped from Seadrift largely by rail to
the Company's St. Marys facilities and by rail, barge and overseas vessel to its
third-party customers.
The Company has completed a program to modernize certain components of its
electrode manufacturing process (the Modernization Program). The primary
objectives of the Modernization Program, which had a total cost of approximately
$40 million, are the automation of labor intensive processes and the replacement
of older equipment with new, state-of-the-art technology in order to reduce
costs while improving electrode quality and consistency. A major aspect of the
Modernization Program focused on the electrode forming processes, including the
addition of equipment to automate the Company's sizing and weighing systems, and
to enhance production capabilities by adding new needle coke preheaters, needle
coke and pitch mixers as well as mix cooling/homogenization equipment. These
improvements, with a total cost of approximately $32 million, are designed to
reduce total labor requirements and minimize variations in the critical initial
forming of the electrodes, resulting in better and more consistent electrode
quality. This project also allows the Company to produce 28-inch electrodes. In
addition, the Company has added three new computer-controlled machine tools used
for electrode finishing in its Niagara Falls facility. At a cost of
approximately $8 million, the machine tool system meets the highest electrode
machining standard. The majority of the cost for the machine tool system is
being financed under a long-term operating lease. Startup costs associated with
the Modernization Program did not have a material impact on the Company's
financial results for fiscal 1999.
CALCIUM CARBIDE PRODUCTS BUSINESS
Products and Markets
The Company's primary products in this segment are acetylene and calcium carbide
for metallurgical applications such as iron and steel desulfurization and
deoxidation. The following table presents the Company's net sales and percentage
of segment sales within its calcium carbide products segment for fiscal 1999, by
principal product category:
<TABLE>
<CAPTION>
FISCAL 1999
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Product Category Net Sales % of Total
- -------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C>
Acetylene:
Pipeline acetylene $17,085 30.2%
Fuel gas applications 14,056 24.9
Metallurgical applications 19,679 34.8
Other 5,692 10.1
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Total calcium carbide product net sales $56,512 100.0%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company produces acetylene at its Louisville and Calvert City, Kentucky
plants for pipeline delivery to three customers, International Specialty
Products (ISP), Air Products and Chemicals, Inc. (Air Products) and E.I. duPont
de Nemours & Company (DuPont), for use as a feedstock in the manufacture of
specialty chemicals. Each of these customers has been supplied by the Company
for over thirty years. Although relationships with these pipeline customers are
long-standing,
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there can be no assurance that any of these customers will continue to operate
their adjacent facility or require the Company's acetylene product. ISP, the
Company's largest pipeline acetylene customer, in response to lower global
demand and lower prices for some of its acetylene-based products, reduced their
demand for the Company's acetylene during fiscal 1999 by as much as 75% of its
historical levels. This reduction in demand may be permanent. Partially
offsetting the sales effect of the lower deliveries to pipeline acetylene
customers is an increase in average pipeline acetylene prices resulting from the
volume/price structure of the Company's acetylene supply contracts.
Calcium carbide is sold to industrial gas generators as a raw material for
the production of cylinder acetylene, a fuel gas which is primarily used in the
metal fabrication and construction industries. The acetylene distribution market
is comprised of several large, national distributors of industrial gases with
numerous generating locations, and a large number of small companies that serve
their regional markets. The Company sells to both types of customers. The
Company expects sales in this product line to remain flat in fiscal 2000.
The Company sells calcium carbide for metallurgical applications, such as
blast furnace hot metal desulfurization, foundry iron desulfurization and
electric furnace slag conditioning and deoxidation. Most calcium carbide
desulfurization products are finely ground and, together with several additives,
are injected into baths of molten iron to reduce the sulfur content of the
material. The Company continues to face increased competition in this product
line, as well as weakness in the steel industry. The Company has formed new
alliances which are expected to increase shipments. However, net sales are
expected to be flat in fiscal 2000 and, potentially, beyond unless market
conditions improve. The Company sells calcium carbide to major distributors
which in turn supply carbide mixtures and a variety of ancillary services to
steel mills for metallurgical applications.
The Company markets calcium carbide products to all of its end customers
through a sales force of three and through distributors, with technical service
support from a staff of two. Sales to customers other than pipeline customers
are made through purchase orders.
Manufacturing
The Company manufactures its calcium carbide products at plants in Louisville
and Calvert City, Kentucky with a combined production capacity of approximately
200,000 tons. Both plants operate submerged arc electric furnaces for the
production of calcium carbide, as well as crushing, screening and packing
equipment; acetylene generators; and grinding facilities. The Louisville plant
supplies pipeline acetylene to DuPont; the Calvert City plant supplies pipeline
acetylene to ISP and Air Products. The Calvert City plant is operated in
block-run fashion on an as needed basis.
COMPETITION
Graphite Electrode Products
The Company's competition in graphite electrodes includes two major producers,
UCAR and SGL, as well as a group of smaller, foreign producers, including Showa
Denko, Tokai Carbon Co., Ltd. (of Japan), Nippon Carbon Co. Ltd. (of Japan) and
ERFTcarbon AG (of Germany). Participants in the graphite electrode industry
compete on the basis of service and product quality, reliability, efficiency and
price.
UCAR and SGL are market and price leaders, each having worldwide market
shares ranging between 25% and 35%. Both maintain operations in various
international markets. The Company is one of a small group of graphite electrode
producers each having a worldwide market share of 5% to 7%. While the Company
markets its graphite electrodes worldwide, it has no production facility outside
of the United States and, accordingly, has significant transportation, duty cost
and, at times, foreign currency exchange rate disadvantages relative to some of
its competitors who have production facilities located in foreign markets.
From time to time, graphite electrode manufacturers, including the Company,
experience temporary declines in the quality of their graphite electrodes,
sometimes resulting in customer credits and reimbursements. The Company
continually evaluates and implements procedures to improve electrode quality and
believes that its electrode performance meets the quality requirements of its
customers. Moreover, the Modernization Program is intended to further enhance
the Company's ability to consistently manufacture electrodes of acceptable
quality. There can be no assurance, however, that temporary declines in
electrode quality will not recur.
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Outside of Japan, there are currently only three needle coke producers:
Conoco, Inc. (Conoco), UNO-VEN Company (Uno-Ven) and Seadrift. Conoco is the
largest needle coke producer and is the market leader, with annual capacity
currently estimated by the Company to be 400,000 tons. Uno-Ven has a production
capacity of approximately 100,000 tons per year and Seadrift's production
capacity is currently approximately 200,000 tons per year. In Japan, there are
four small producers, one of which is a Conoco affiliate, and two of which make
a different type of coke from coal tar pitch. The Company believes the three
Japanese producers (other than the Conoco affiliate) produce an aggregate of
approximately 200,000 tons per year. Participants in the needle coke industry
compete primarily on price and quality.
The Company has numerous competitors in the sale of granular graphite,
including granular graphite marketed by other electrode manufacturers and a
variety of graphite scrap dealers and granular graphite substitutes. Graphite
blocks and rods (also known as bulk graphite) are produced by a number of
companies throughout the world, including UCAR and SGL. These materials are
marketed on a worldwide basis by the Company.
Calcium Carbide Products
The Company's primary competitor in the manufacture and marketing of calcium
carbide in the United States and Canada is Elkem. Participants in the calcium
carbide market compete on the basis of service and product quality, reliability,
efficiency and price.
The Company sells all of its acetylene to the adjacent specialty chemical
plants of its pipeline customers. These plants are not supplied with acetylene
by any source other than the Company, although certain pipeline acetylene
customers have alternative production facilities producing the same end products
for which they purchase acetylene from the Company. See "Calcium Carbide
Products Business--Products and Markets." For many years, other, less expensive
materials have competed with cylinder acetylene for use in the metal fabrication
and construction industries. Acetylene has maintained its market position
through its versatility and ease of use. Acetylene provides the hottest cutting
flame of all the fuel gases and thus allows for faster, cleaner cutting
operations.
Calcium carbide for metallurgical applications competes with magnesium- and
lime-based desulfurization products and lime spar. The commodity price of
magnesium and the resultant price of magnesium-based desulfurizers affects the
demand for calcium carbide-based desulfurization products. As previously
mentioned, the Company is experiencing increased competition from substitute
products which is expected to have a negative impact on sales and results in
fiscal 2000 and, potentially, beyond.
RAW MATERIALS AND COSTS
Graphite Electrode Products
The significant raw material costs of production for all graphite electrode
manufacturers are needle coke, coal tar pitch, natural gas for the heating of
kilns and electricity for graphitizing. The Company's graphite electrode
business purchases all of its needle coke requirements from Seadrift, an
affiliate of the Company.
Seadrift uses low sulfur decant oil, a by-product of fluid catalytic
cracking units in integrated oil refineries, in the manufacture of needle coke.
Most of this feedstock is purchased from refineries along the U.S. Gulf Coast. A
limited number of refineries on the U.S. Gulf Coast produce decant oil suitable
for use by Seadrift. Due to restraints on local availability, Seadrift also
purchases decant oil on the West and East Coasts at a higher cost (due primarily
to transportation costs) than if obtained from a local refinery. Conoco and
Uno-Ven, Seadrift's two largest needle coke competitors, operate large,
integrated refineries that have the ability to desulfurize decant oil.
The cost of refinery decant oil is pegged to the U.S. Gulf Coast spot cargo
barge prices for heavy fuel oil and, in certain cases, West Texas Intermediate
crude oil. The Company regularly hedges oil costs by trading in futures
contracts for crude oil and swap agreements for low sulfur fuel oil. The Company
utilizes several suppliers of low sulfur decant oil in an effort to disperse the
risk of availability to some degree. Prices and availability of low sulfur
decant oil may be impacted by many factors, including world crude oil production
and output, global demand for oil products and the production parameters of
Seadrift's decant oil suppliers. While the Company believes that a sufficient
amount of decant oil of an acceptable quality is currently readily available,
there can be no assurance that Seadrift will be able to obtain an adequate
quantity of suitable feedstocks at all times in the future or at acceptable
prices.
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Electricity for graphitizing electrodes represents a major cost factor due
to the large quantities of electricity needed to graphitize electrodes. At the
Company's plant in Niagara Falls, electricity is supplied by the Power Authority
of the State of New York at favorable, pre-determined prices under a contract
that expires in 2006. The St. Marys plant is supplied electricity under a
conventional power contract. Through an electricity co-generation process,
Seadrift is a net power producer, resulting in only nominal electrical power
costs for that facility. The Company purchases natural gas for heating kilns
from either interstate natural gas carriers or from local gas well operators.
Calcium Carbide Products
Raw materials required for calcium carbide manufacture are lime, coke and large
amounts of electricity for submerged arc electric furnaces. The Company believes
that its raw materials are widely available at satisfactory prices. Both the
Louisville and Calvert City plants are supplied electricity under conventional
power contracts.
EMPLOYEES
The Company employed 965 people as of July 31, 1999. At July 31, 1999, the
Company employed 704 people in its graphite electrode products segment; of which
39% were salaried and 61% were paid hourly. Seadrift is staffed entirely with
salaried personnel. At July 31, 1999, there were 244 people in the calcium
carbide segment; of which 19% were salaried and 81% were paid hourly. At July
31, 1999, the Company employed 17 people in its corporate function, all of whom
were salaried employees.
The Company has various labor agreements with unions representing its
hourly work force. Within the graphite electrode products business, the St.
Marys labor agreement was renegotiated and became effective in June 1999. The
new agreement will expire in June 2001. This agreement was negotiated to terms
deemed satisfactory to the Company. The Niagara Falls labor agreement expires in
January 2004. Within the calcium carbide products business, the Louisville and
Calvert City agreements will expire in July 2001 and February 2001,
respectively. The Company believes that its relationships with the unions are
stable. However, there can be no assurance that new agreements will be reached
when the current agreements expire without union action or will be on terms
satisfactory to the Company.
PATENTS AND TRADEMARKS
The Company does not believe that any of its patents, patent applications or
trademarks are material to its business or operations.
ENVIRONMENTAL COMPLIANCE
In connection with the agreement under which the Company acquired its operating
assets from The BOC Group, plc (BOC) (the Asset Acquisition), BOC agreed to
indemnify the Company, its successors and assigns, against certain liabilities,
to the extent not disclosed and expressly excluded from the indemnity, arising
from (i) pre-closing operations of its former divisions (regardless of whether
such liabilities arose during or before BOC's ownership thereof); (ii) assets
transferred to the Company pursuant to the Asset Acquisition; and (iii)
pre-closing activities conducted at the real property and leased premises
transferred to the Company pursuant to the Asset Acquisition (the BOC
Environmental Indemnity Agreement). Such indemnification includes certain
liabilities arising out of the use, generation, transportation, storage,
treatment, release or disposal of hazardous materials; the violation of any
environmental regulations; or any claim or cause of action to the effect that
the Company is responsible or liable for acts or omissions of BOC concerning
hazardous materials. Under the indemnity, the Company is required to pay 20% of
the first $2.5 million of costs relating to such environmental claims or
liabilities. Thereafter, BOC is responsible for all of such liabilities. The BOC
indemnity survives for all covered claims brought within 15 years after closing
of the Asset Acquisition, which occurred in July 1988. A number of identifiable
costs at the time of the Asset Acquisition, such as the need for certain
pollution control equipment, receipt of certain discharge permits and the need
for continued operation and maintenance of a landfill used exclusively by
8
<PAGE> 10
the Company at its St. Marys facility, were disclosed by BOC and were excluded
from the indemnification. The Company has installed much of the pollution
control equipment and received the discharge permits excluded from the BOC
indemnity. If any of the pollution control equipment excluded from the BOC
indemnity is required in the future for reactivation of production equipment or
increases in capacity, the costs related thereto are not believed by the Company
to be material.
In connection with the Specialty Products Sale, the Company agreed to
indemnify SGL Corp. for 80% of all environment costs in excess of an aggregate
$100,000 threshold up to a maximum exposure of $6.0 million for a five-year
period. In addition, with respect to the Company's former subsidiary, Speer
Canada, Inc., sold pursuant to the Specialty Products Sale, the Company agreed
to indemnify SGL Corp. for 80% of all environmental costs, in excess of a
$100,000 threshold, relating to such former subsidiary's operations prior to the
consummation of the Specialty Products Sale, up to a maximum exposure of $1.5
million. As of July 31, 1999, no environmental claims have been submitted for
indemnification by SGL Corp.
During fiscal 1999, the Company completed an environmental compliance audit
(ECA) of all five of its operating facilities. Such ECA was completed by an
independent, experienced environmental consulting firm to assess the compliance
status of each facility. In addition to the compliance objectives, the ECA
evaluated the effectiveness of the existing management systems as well as the
risks associated with management practices related to the use, storage, and
disposal of regulated and non-regulated materials. All areas of non-compliance
identified by the ECA have been corrected and the Company is in the process of
implementing suggestions to achieve best management practices in an effort to
maintain and improve environmental performance. None of the areas of
non-compliance identified by the ECA were deemed to be material.
The Clean Air Act was amended in 1990 (including Title V). The Clean Air
Act has resulted and will continue to result in revisions to state
implementation plans which may necessitate the installation of additional
controls for certain of the Company's emission sources. The Company's Title V
applications for its five production facilities are in various
stages of completion.
In the process of developing permit applications for facility upgrades at
the Company's Niagara Falls, NY and St. Marys, PA graphite plants, the Company
determined that certain parameters in its air permits do not reflect current
operations. The Company is working to resolve this issue and has advised the
appropriate state environmental authorities. The Company's plan to resolve this
issue at its Niagara Falls, NY plant was approved by the State of New York
environmental authority. This plan required the Company to spend approximately
$0.3 million in capital improvements to achieve resolution. With respect to the
St. Marys, PA plant, the Company is in the process of preparing a proposed plan
of action to achieve resolution of this issue. Such plan of action will include
the installation and ongoing operation of an air emissions scrubbing unit. A
preliminary cost estimate for this unit is approximately $3 million installed,
plus $0.5 million per year in ongoing cash operating costs. The Company believes
that certain costs are subject to reimbursement under the BOC Environmental
Indemnity Agreement. It is unclear whether or not the state will levy a fine in
connection with this issue.
During fiscal 1999, the Company spent approximately $1.3 million on capital
expenditures in order to comply with environmental laws and regulations (which
expenditures are included in the consolidated financial statements, including
the notes thereto, appearing elsewhere in this Form 10-K as additions to
property, plant and equipment). During fiscal 2000, the Company expects to spend
approximately $2.4 million for such projects.
ITEM 2 PROPERTIES
The Company maintains its corporate headquarters at One Gateway Center,
Pittsburgh, Pennsylvania under a lease with an initial term expiring on December
31, 1999. A new lease has been entered into by the Company for the same property
that begins on January 1, 2000 and has an expiration of June 30, 2003.
9
<PAGE> 11
The Company has the following additional properties, which are owned or
leased, as indicated:
<TABLE>
<CAPTION>
Area
(approximate Owned
Location Use square feet) or Leased
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Graphite electrode products facilities:
Niagara Falls, New York Electrodes 1,000,000 Owned
St. Marys, Pennsylvania Electrodes 742,000 Owned
Seadrift, Texas Needle coke 743,000 Owned
Calcium carbide products facilities:
Calvert City, Kentucky Carbide products 150,000 Owned
Louisville, Kentucky Carbide products 200,000 Owned
Louisville, Kentucky Carbide sales, technical and finance offices 6,000 Leased
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pursuant to the Specialty Products Sale, SGL Corp. acquired a discrete
portion of the Company's St. Marys facility. The Company and SGL Corp. share
common steam services in St. Marys. In addition, the Company leases to SGL Corp.
a portion of a building and certain parking lot space at its facility in Niagara
Falls pursuant to a lease expiring in January 2000.
The Company owns all of its major manufacturing facilities. The Company
believes that its plants and facilities, which are of varying ages and types of
construction, are generally in satisfactory condition.
Many of the Company's operations are conducted at extremely high
temperatures, exceeding 5,000 degrees Fahrenheit in the case of electrode
graphitizing. In some facilities, a maintenance "turnaround" is conducted
annually; in other facilities, major maintenance is conducted on an ongoing
basis. Maintenance expenditures, which are expensed as incurred, amounted to
approximately $29.3 million, $37.7 million and $37.5 million for the fiscal
years ended July 31, 1999, 1998 and 1997, respectively.
ITEM 3 LEGAL PROCEEDINGS
GENERAL
In May 1997, the Company was served with a subpoena issued by a Grand Jury
empanelled by the United States District Court for the Eastern District of
Pennsylvania. The Company was advised by attorneys for the Department of Justice
that the Grand Jury is investigating price fixing by producers of graphite
products in the United States and abroad during the past five years. The Company
is cooperating with the DOJ in the investigation. The DOJ has granted the
Company and certain former and present senior executives the opportunity to
participate in its Corporate Leniency Program and the Company has entered into
an agreement with the DOJ under which the Company and such executives who
cooperate will not be subject to criminal prosecution with respect to the
investigation if charges are issued by the Grand Jury. Under the agreement, the
Company has agreed to use its best efforts to provide for restitution to its
domestic customers for actual damages if any conduct of the Company which
violated the Federal Antitrust Laws in the manufacture and sale of such graphite
products caused damage to such customers.
Subsequent to the initiation of the DOJ investigation, four civil cases
were filed in the United States District Court for the Eastern District of
Pennsylvania in Philadelphia asserting claims on behalf of a class of purchasers
for violations of the Sherman Act. These cases, which have been consolidated,
name the Company, UCAR, SGL Corp. and SGL as the Named Defendants and seek
treble damages. On March 30, 1998, a number of purchasers who were previously
included in the purported class of plaintiffs covered by the consolidated case
initiated a separate action in the same District Court which asserts
substantially the same claims and seeks the same relief as the consolidated case
and names the Named Defendants, as well as Showa Denko. Thereafter, seven
additional groups of purchasers who were previously included in the purported
class of plaintiffs covered by the consolidated case instituted their own
actions against the Named Defendants, Showa Denko and, in several cases, certain
present or former related parties of UCAR and Showa Denko,
10
<PAGE> 12
asserting substantially the same claims and seeking the same relief as in the
consolidated case. Four such actions were filed in the United States District
Court for the Eastern District of Pennsylvania on April 3, 1998, May 14, 1998,
May 28, 1998 and March 31, 1999, respectively. One action was filed in the
United States District Court for the Northern District of Ohio on April 17, 1998
but has been transferred to the Eastern District of Pennsylvania for pre-trial
proceedings. Another action was filed in the United States District Court for
the Western District of Pennsylvania on June 17, 1998 but has also been
transferred to the Eastern District of Pennsylvania for pre-trial proceedings.
The complaints or amended complaints in some of the cases have also named as
defendants other companies including Mitsubishi Corporation, Tokai Carbon
U.S.A., Inc. and related companies. On December 7, 1998, the Company was served
with a complaint filed by Chaparral Steel Company against the Named Defendants,
Showa Denko and parties related to Showa Denko and UCAR in state court in Ellis
County, Texas alleging violations of various Texas state antitrust laws and
seeking treble damages. Chaparral Steel Company has filed an amended complaint
adding two additional related plaintiffs.
The Company has reached settlement agreements representing approximately
60% of domestic antitrust claims with the plaintiffs that filed lawsuits on
March 30, 1998, May 14, 1998, May 28, 1998 and March 31, 1999 and other
purchasers who had yet to file lawsuits. The Company has also reached agreements
in principle representing an additional 36% of domestic antitrust claims with
the class plaintiffs and the plaintiffs who filed the lawsuits on April 3, 1998,
April 17, 1998, and June 17, 1998, subject to the negotiation of certain
conditions and, with respect to the class plaintiffs, court approval. The
settlement in principle with the class plaintiffs, which contemplates possible
payments to certain foreign purchasers, would allow the Company to terminate any
definitive settlement agreement if the claims of foreign purchasers who opt out
of the class settlement exceed certain levels and would allow the class
plaintiffs to terminate such settlement agreement if the Company's sales to
certain foreign purchasers, as defined in the settlement agreement, exceed
certain levels. Although various of the settlements are unique, in the aggregate
they consist generally of current and deferred cash payments and, in a number of
cases, provisions which provide for additional payments under certain
circumstances ("most favored nations" provisions). In addition to the
settlements discussed above, the Company may also settle with various additional
purchasers.
On February 10, 1999, a U.S. corporation which allegedly made purchases on
behalf of two foreign entities and a group of 22 foreign purchasers which are
based in several foreign countries filed a complaint against the Company, UCAR,
SGL, Tokai Carbon Co., Ltd., Tokai Carbon U.S.A., Inc., Nippon Carbon Co., Ltd.,
SEC Corporation and certain present and former related parties of UCAR in United
States District Court for the Eastern District of Pennsylvania. This complaint
has been amended to add four additional defendants. On September 24, 1999, three
Australian companies and one New Zealand company filed a complaint against the
same parties as are named in the lawsuit filed on February 10, 1999. These cases
assert substantially the same claims and seek the same relief as the
consolidated case. Other foreign purchasers have also made similar claims
against the Company but have not filed lawsuits.
The Company understands that defendants UCAR and Showa Denko have reached
settlement agreements with the class action plaintiffs, which have been approved
by the court, and have also settled claims brought by various individual
purchasers. The Company further understands that UCAR, Robert P. Krass, Robert
J. Hart, SGL, Robert J. Koehler, Showa Denko and Tokai have agreed to plead or
have pleaded guilty to antitrust conspiracy charges filed by the DOJ and have
agreed to or been ordered to pay fines and, in the case of Messrs. Krass and
Hart, serve prison sentences, in connection with those guilty pleas or
agreements to plead guilty.
The Company has also advised the European Commission that it wishes to
invoke its Leniency Notice. Generally under these guidelines, the European
Commission may reduce fines and other penalties if a company sufficiently
cooperates with the European Commission. The Company understands that the
European Commission will determine fines, if any, at the completion of its
proceedings.
11
<PAGE> 13
On June 18, 1998, a group of Canadian purchasers filed a lawsuit in the
Ontario Court (General Division) claiming a conspiracy and violations of the
Canadian Competition Act. The Canadian lawsuit names the Named Defendants and
Showa Denko, as well as several present or former parents, subsidiaries and/or
affiliates of UCAR, SGL and Showa Denko. The Canadian Competition and Consumer
Law Division (Canadian Division) has initiated an inquiry and the Company is
cooperating fully with the authorities conducting that inquiry pursuant to an
agreement with the Director of Research and Investigation of the Canadian
Division under which the Company and its present and former officers, directors
and employees will not be subject to criminal prosecution.
During fiscal 1998, the Company recorded the Initial Antitrust Charge, a
$38 million pre-tax charge ($25 million after expected tax benefits) for
potential liabilities resulting from civil lawsuits, claims, legal costs and
other expenses associated with the pending antitrust matters. During fiscal
1999, the Company recorded the Supplemental Antitrust Charge, an additional $7.0
million charge ($4.5 million after expected tax benefits) for such potential
liabilities. The combined $45.0 million Antitrust Charge represents the
Company's estimate, based on current facts and circumstances, of the expected
cost to resolve pending antitrust claims. The Company understands that
defendants UCAR and Showa Denko have reached settlements with the class action
plaintiffs and various individual purchasers at amounts substantially higher
than the levels contemplated in the Antitrust Charge. In light of these and
other developments including: (a) possible future settlements with other
purchasers and the effect of the possible additional payments ("most favored
nations") noted above, (b) the outcome of the European Commission antitrust
investigation, (c) potential additional lawsuits by foreign purchasers, (d) the
failure of agreements in principle to result in definitive settlement
agreements, (e) the failure to satisfy the conditions to the class action
settlement, and (f) adverse rulings or judgments in pending litigation, the
antitrust matters could result in aggregate liabilities and costs which could
differ materially and adversely from the Antitrust Charge and could affect the
Company's financial condition and its ability to service its currently planned
liquidity needs. As of July 31, 1999, $23.6 million in antitrust settlements and
costs had been paid. See "Liquidity and Capital Resources" under Item 7 of this
Form 10-K.
The Company is also involved in various legal proceedings considered
incidental to the conduct of its business, the ultimate disposition of which, in
the opinion of the Company's management, will not have a material adverse effect
on the financial position, fiscal year operating results or business of the
Company. Claims (other than environmental and contract claims and claims for
punitive damages) against the Company are generally covered by insurance which
includes a $250,000 per occurrence self-insured retention. As of July 31, 1999,
a $0.2 million reserve has been recorded to provide for estimated exposure on
claims for which a loss is deemed probable.
ITEM 4 SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS
This item is not applicable to the Registrant for this Annual Report on Form
10-K.
12
<PAGE> 14
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ National Market System. The
following tables provide information regarding the high and low prices at which
the Company's Common Stock traded for each of the quarterly periods in the
fiscal years ended July 31, 1999 and 1998.
QUARTERLY STOCK INFORMATION
<TABLE>
<CAPTION>
Year Ended July 31, 1999 High Low
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First $21 5/8 $ 7 3/4
Second 17 1/8 10 3/4
Third 13 11/16 9 3/8
Fourth 15 11
- -------------------------------------------------------------------------------------------------------------------
Fiscal Year $21 5/8 $ 7 3/4
===================================================================================================================
<CAPTION>
Year Ended July 31, 1998 High Low
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First $39 15/16 $28 1/2
Second 39 1/8 33
Third 37 28 1/2
Fourth 34 1/8 20
- -------------------------------------------------------------------------------------------------------------------
Fiscal Year $39 15/16 $20
===================================================================================================================
</TABLE>
No cash Common Stock dividends were declared during fiscal 1999 or fiscal
1998. The Company estimates that as of September 24, 1999, there were 83 record
holders and approximately 1,800 beneficial holders of its Common Stock.
DIVIDEND OF PREFERRED SHARE PURCHASE RIGHTS
In fiscal 1999, the Company's Board of Directors declared a dividend
distribution of one Preferred Share Purchase Right on each outstanding share of
Common Stock. The dividend distribution was made on June 1, 1999 payable to
stockholders of record on that date. The Preferred Share Purchase Rights are
designed to ensure that all of the Company's stockholders receive fair and equal
treatment in the event of certain takeovers of the Company. The Rights are not
intended to prevent a takeover, but should encourage anyone seeking to acquire
the Company to negotiate with the Company's Board of Directors prior to
attempting a takeover.
13
<PAGE> 15
ITEM 6 SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended July 31, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts,
percentages and pricing information)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA(1)(2):
Net sales $240,130 $293,751 $289,586 $259,394 $241,456
Cost of goods sold 202,888 242,535 235,401 214,396 198,160
Selling, general and administrative 14,925 14,884 16,031 14,609 16,247
Early retirement/severance charge(3) -- -- 1,100 -- --
Other expense (income)(4) 15,043 38,000 -- (308) (3,358)
- -------------------------------------------------------------------------------------------------------------------
Operating income (loss) 7,274 (1,668) 37,054 30,697 30,407
Interest expense, net 6,617 5,130 7,894 9,073 10,518
Special financing expenses -- -- -- 889 357
Provision (benefit) for income taxes 259 (1,729) 10,732 6,416 7,206
- -------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
and before extraordinary loss $ 398 $ (5,069) $ 18,428 $ 14,319 $ 12,326
- -------------------------------------------------------------------------------------------------------------------
Per share income (loss) from
operations and before extraordinary loss
applicable to common stock:
Basic $ 0.05 $ (0.58) $ 2.16 $ 1.90 $ 2.00
Diluted 0.05 (0.58) 2.09 1.67 1.59
BALANCE SHEET DATA (AT PERIOD END):
Working capital $ 75,604 $ 70,129 $100,825 $104,825 $106,449
Property, plant and equipment, net 130,342 137,603 87,653 65,177 58,370
Total assets 274,416 289,099 235,860 212,870 214,409
Long-term debt 110,500 110,232 80,035 81,763 110,000
Stockholders' equity 81,317 84,814 96,209 74,808 43,012
OTHER OPERATING DATA(2):
Gross profit margin percentage 15.5% 17.4% 18.7% 17.3% 17.9%
Operating income (loss) margin percentage 3.0 (0.6) 12.8 11.8 12.6
EBITDA(5) $ 40,420 $ 50,708 $ 49,354 $ 39,560 $ 35,371
Depreciation and amortization(5) 18,103 14,376 11,200 9,171 8,322
Capital expenditures(6) 15,532 64,306 33,765 15,670 10,526
Quantity of graphite electrodes sold
(in thousands of pounds) 104,035 119,307 110,293 105,279 100,775
Graphite electrode average
net price per pound $ 1.25 $ 1.34 $ 1.34 $ 1.28 $ 1.19
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes the historical operating results of Specialty Products.
(2) Certain amounts reported in previous years have been reclassified to
conform with current year presentation.
(3) Represents costs associated with the retirement of two executives in fiscal
1997.
(4) Represents expense related to facility closure activities in fiscal 1999,
expenses related to the Antitrust Reserve in fiscal 1999 and 1998 and
income related to a long-term contract for the construction of a graphite
electrode plant in the People's Republic of China (the China Contract) in
fiscal years 1996 and 1995.
(5) EBITDA is defined as operating income before depreciation and amortization,
early retirement/severance charges and other expense and income. EBITDA is
not presented as a measure of operating results under generally accepted
accounting principles. However, management believes that EBITDA is an
appropriate measure of the Company's ability to service its cash
requirements. Depreciation and amortization included in the computation of
EBITDA includes amortization of certain intangibles and does not include
depreciation and amortization related to Specialty Products.
(6) Prior to fiscal 1996, includes capital expenditures related to Specialty
Products.
No cash Common Stock dividends were declared or paid during the five-year period
ended July 31, 1999.
14
<PAGE> 16
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OVERVIEW OF RESULTS
The Company's earnings from operations for the fiscal year ended July 31, 1999
were $0.4 million, or $0.05 per share, versus a loss of $5.1 million, or $0.58
per share, for the fiscal year ended July 31, 1998 and earnings of $18.4
million, or $2.09 per share, for the fiscal year ended July 31, 1997. During
fiscal 1999 and fiscal 1998, the Company recorded net charges of $4.5 million
and $25.0 million, respectively, representing the Antitrust Charge. Also during
fiscal 1999, the Company recorded an $8.0 million pre-tax charge ($5.2 million
net of tax benefits) to provide for the closure of certain graphite production
facilities (the Closure Charge). Excluding the effects of these charges,
earnings from operations for fiscal 1999 and 1998 were $10.2 million, or $1.21
per share, and $19.9 million, or $2.24 per share, respectively.
Extraordinary losses resulting from the early retirement of the Senior
Notes (as herein defined) during the fiscal years presented reduced the
Company's net results to an $11.5 million loss, or $1.32 per share, for fiscal
1998 and net income of $18.3 million, or $2.07 per diluted share, for fiscal
1997.
The Company's reportable business segments include graphite electrode
products, which includes graphite electrodes, needle coke and other graphite
specialty products, and calcium carbide products, which includes pipeline
acetylene, calcium carbide for metallurgical applications and calcium carbide
for fuel gas applications. The following table sets forth certain financial
information for the periods discussed below and should be read in conjunction
with the consolidated financial statements, including the notes thereto,
appearing elsewhere in this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
Year Ended July 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
(dollar amounts in thousands)
<S> <C> <C> <C>
Net sales:
Graphite electrode products $183,618 $215,767 $210,045
Calcium carbide products 56,512 77,984 79,541
- -------------------------------------------------------------------------------------------------------------------
Total net sales $240,130 $293,751 $289,586
===================================================================================================================
Percentage of net sales:
Graphite electrode products 76.5% 73.5% 72.5%
Calcium carbide products 23.5 26.5 27.5
- -------------------------------------------------------------------------------------------------------------------
Total percentage of net sales 100.0% 100.0% 100.0%
===================================================================================================================
Gross profit as a percentage of segment net sales:
Graphite electrode products 16.4% 18.0% 19.9%
Calcium carbide products 12.6 15.9 15.6
Percentage of total net sales:
Total gross profit 15.5% 17.4% 18.7%
Selling, general and administrative 6.2 5.0 5.5
Operating income (loss) 3.0 (0.6) 12.8
Income (loss) from operations 0.2 (1.7) 6.4
Net income (loss) 0.2 (3.9) 6.3
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
FISCAL 1999 VERSUS FISCAL 1998
Net sales for fiscal 1999 were $240.1 million versus $293.8 million in fiscal
1998, an 18.3% decrease. Graphite electrode product net sales declined 14.9% to
$183.6 million, while calcium carbide product net sales declined 27.5% to $56.5
million.
Within the graphite electrode products segment, graphite electrode net
sales were $130.2 million, representing an 18.6% decrease resulting from a 12.8%
decrease in electrode shipments and a 6.7% decrease in average electrode prices.
Graphite electrode shipments for fiscal 1999 totaled 104.0 million pounds versus
119.3 million pounds in fiscal 1998. Weakness in certain regions of the global
economy had a negative impact on demand for electric arc furnace steel and, as a
result, lower graphite electrode shipments and prices during fiscal 1999. Lower
demand for electric arc furnace steel and, as a result, graphite electrode
demand may continue for the next several quarters. Domestic and foreign
15
<PAGE> 17
electrode shipments as a percentage of total electrode shipments for fiscal
1999 were 57.7% and 42.3%, respectively, versus 55.7% and 44.3%, respectively,
in fiscal 1998. Average domestic electrode prices during fiscal 1999 were down
9.6% from fiscal 1998 due to lower electric arc furnace steel production in the
U.S. market. Average foreign net prices were down 3.4% due to lower
transactional prices overseas and as a result of an unfavorable U.S. dollar
exchange rate. The strong U.S. dollar versus most European currencies is
expected to continue to have a negative impact on foreign price realizations for
the foreseeable future. Needle coke sales during fiscal 1999 decreased 6.1% to
$31.8 million. A 15.9% increase in needle coke shipments was more than offset by
a 19.0% decrease in needle coke prices. The decrease in needle coke prices was
due primarily to the lower demand for graphite electrodes described above, which
in turn has resulted in weakening demand for needle coke industry-wide. Graphite
specialty product sales during fiscal 1999 were essentially flat at $21.6
million, although a 37.5% increase in higher-margin bulk graphite sales
essentially offset a 25.9% reduction in lower-margin granular graphite sales.
During fiscal 1999, one of the Company's graphite customers, Dow, announced
its intention to permanently close its magnesium production facility in
Freeport, Texas. The Company previously supplied Dow with all of its graphite
anode needs under a long-term supply agreement. The cancellation of the supply
agreement accounts for approximately 8 million pounds of graphite production
capacity. In connection with the Company's cost savings program (discussed
below), the Company has eliminated a significant amount of the costs associated
with producing the graphite anodes previously supplied to Dow. With the
continued weak demand for graphite electrodes, the Company does not believe that
the graphite anodes previously supplied to Dow will be replaced with sales of
electrodes or other graphite products for at least the next several quarters.
The cancellation of this contract contributed to the reported decline in
shipments of graphite electrodes for fiscal 1999.
Within the calcium carbide product segment, pipeline acetylene sales for
fiscal 1999 declined 40.8% to $17.1 million. The decrease was the result of a
significant decrease in shipments to pipeline acetylene customers. ISP, the
Company's largest pipeline acetylene customer, in response to lower global
demand and lower prices for some of its acetylene-based products, reduced their
demand for the Company's acetylene during fiscal 1999 by as much as 75% of its
historical levels. This reduction in demand may be permanent. Partially
offsetting the sales effect of the deliveries to pipeline acetylene customers
was an increase in average pipeline acetylene prices resulting from the
price/volume structure of the Company's acetylene supply contracts. Sales of
calcium carbide for metallurgical applications of $19.7 million represented a
17.0% decrease from fiscal 1998, primarily due to lower shipments. Weakness in
domestic steel production by integrated steel producers, coupled with lower
prices for magnesium (a substitute product) and selective promotion of magnesium
over calcium carbide by a major distributor, resulted in the lower sales levels.
Calcium carbide for fuel gas applications totaled $14.1 million for fiscal 1999,
a 29.8% decrease from fiscal 1998 resulting primarily from lower shipments. Net
sales of calcium carbide products are expected to remain at these levels
throughout fiscal 2000 and, potentially, beyond as a result of weak demand and
lower prices. All other calcium carbide product sales for fiscal 1999 increased
slightly to $5.7 million as a result of increased shipments of electrode paste.
Gross profit as a percentage of graphite electrode product sales for fiscal
1999 was 16.4% versus 18.0% in fiscal 1998. The decrease in the gross margin was
the result of lower prices of graphite electrodes and needle coke and the
decrease in shipments of graphite electrodes. In addition, depreciation and
amortization increased approximately $4.0 million in fiscal 1999, which alone
negatively impacted the gross margin by 2.2%. Partially offsetting the effect of
the above was a decline in net decant oil costs, which were 12.4% lower during
fiscal 1999. An increase in decant oil costs experienced in early fiscal 2000
may have a negative impact on the Company's gross margin if the higher oil costs
continue for an extended period of time or if the Company is unable to realize
needle coke price increases in fiscal 2000. The Company's commodity hedging
program will mitigate the increase in oil costs to some degree in fiscal 2000.
Gross profit as a percentage of calcium carbide product sales for fiscal 1999
was 12.6% versus 15.9% in fiscal 1998. The decrease in the gross margin was the
result of lower sales in the carbide business.
In response to weak demand for many of the Company's products, the Company
initiated a comprehensive cost savings program. A component of this program is
the closure of two high-cost graphite production facilities at the Company's St.
Marys, PA plant. This cost savings program, coupled with the commissioning of
two major capital projects in the Company's graphite business in February 1999,
reduced staffing levels by approximately 300 employees
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<PAGE> 18
Company wide, representing a reduction in staffing of approximately 24%. The
Company also achieved cost reductions in the areas of raw materials, utilities,
transportation and professional services during fiscal 1999 in an effort to help
offset the negative effect of lower sales. The Company expects to achieve
further cost reductions in fiscal 2000.
Selling, general and administrative expenditures for fiscal 1999 were $14.9
million, unchanged as compared to fiscal 1998. An increase in expenses
associated with the Company's variable incentive compensation plans was
essentially offset by a reduction in general operating expenses, which was the
result of the Company's cost savings program.
During fiscal 1999 and in connection with the Company's cost savings
program discussed above, the Company announced plans to close certain baking and
graphitizing operations at its St. Marys, PA plant resulting in a 12% reduction
in the Company's graphite electrode production capacity. The Company estimates
that it is capable of producing 110 million pounds of graphite electrodes per
year after the facility closure. Other expense in fiscal 1999 includes the
Closure Charge. Included in this charge is $5.7 million for the net write-off of
impaired fixed assets and spare parts inventory, $1.4 million for hourly and
salary workforce severance costs and $0.9 million in other closure-related
costs. Essentially all of these costs were funded in fiscal 1999. Other expense
for fiscal 1999 also includes the $7.0 million Supplemental Antitrust Charge.
Net interest expense for fiscal 1999 was $6.6 million, including $7.4
million of interest expense associated with the Company's revolving credit
facility and $0.3 million in bank fees, less $1.1 million in capitalized
interest associated with the Modernization Program. Net interest expense for
fiscal 1998 was $5.1 million, including $5.2 million of interest expense
associated with the revolving credit facility, $1.5 million of interest expense
associated with the 11.5% Senior Notes due 2003 (the Senior Notes) previously
outstanding and $0.4 million in bank fees, less capitalized interest of $1.7
million and interest income of $0.3 million.
The effective tax rate for fiscal 1999 was 39.4%. The effective rate
differs from the federal statutory rate due primarily to state taxes and
non-deductible expenses, offset by benefits derived from the Company's foreign
sales corporation.
As a result of a tender of the Company's Senior Notes in fiscal 1998 (the
Tender) and a related revolving credit facility refinancing, the Company
recorded a $6.4 million net extraordinary loss on the early extinguishment of
debt during fiscal 1998. This extraordinary charge represents the premium paid
to Senior Note holders in connection with the Tender and the write-off of
unamortized deferred financing fees associated with the Senior Notes tendered
and a revolving credit facility replaced in connection with the Tender.
FISCAL 1998 VERSUS FISCAL 1997
Net sales for fiscal 1998 were $293.8 million versus $289.6 million in fiscal
1997, representing a 1.4% increase. Graphite electrode product sales increased
2.7% to $215.8 million, while calcium carbide product sales decreased 2.0% to
$78.0 million.
Within the graphite electrode products segment, graphite electrode net
sales for fiscal 1998 were $160.0 million, representing an 8.7% increase over
fiscal 1997 as a result of an 8.2% increase in shipments. Graphite electrode
shipments in fiscal 1998 totaled 119.3 million pounds. Domestic and foreign
electrode shipments as a percentage of total electrode shipments for fiscal 1998
were 55.7% and 44.3%, respectively, versus 53.2% and 46.8%, respectively, in
fiscal 1997. The average net price for graphite electrodes for fiscal 1998 was
$1.34 per pound, unchanged as compared to fiscal 1997. A 4.8% decrease in the
foreign net price of graphite electrodes, which resulted primarily from the
continued strengthening of the U.S. dollar against foreign currencies, was
offset by a 3.5% increase in the domestic net price and the improved
domestic/foreign sales mix. Needle coke sales for fiscal 1998 were $33.9 million
versus $28.6 million in fiscal 1997, with the increase resulting from a 13.8%
increase in shipments and a 4.1% increase in the average selling price of needle
coke. Needle coke shipments were up substantially over fiscal 1997 due to
increased production capacity at the Company's affiliate, Seadrift. Graphite
specialty product sales during fiscal 1998 totaled $21.9 million versus $34.2
million in fiscal 1997. The decrease in sales was principally the result of the
expiration of the SGL Supply Agreement. The contract expired in January 1998.
Within the calcium carbide products segment, pipeline acetylene sales were
$28.9 million in fiscal 1998, a 4.7% increase over fiscal 1997 resulting from a
5.4% increase in pipeline acetylene deliveries. Sales of calcium carbide for
metallurgical applications were $23.7 million, a 3.8% decrease from fiscal 1997
resulting from a 1.9% decline in shipments
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<PAGE> 19
and a 1.9% decrease in prices. Sales of calcium carbide for fuel gas
applications totaled $20.0 million, a 5.6% decrease resulting from a 4.2%
decrease in shipments and a 1.4% decrease in prices. All other calcium carbide
products net sales totaled $5.4 million for fiscal 1998, a decrease of 11.8%
resulting primarily from lower shipments of electrically calcined anthracite
coal.
Gross profit as a percentage of graphite electrode product sales for fiscal
1998 was 18.0% versus 19.9% in fiscal 1997. The decrease in the gross margin
resulted primarily from the disruption in production of needle coke which
resulted from the extended plant shutdown to install and start-up new equipment
at the Company's affiliate, Seadrift. In addition, depreciation and amortization
increased 32.6% during fiscal 1998 to $12.4 million as a result of the Company's
capital expenditures during fiscal years 1998 and 1997. The negative impact from
the extended shutdown and higher depreciation charge more than offset the
benefits of increased needle coke and graphite electrode sales volumes and
improved needle coke prices during fiscal 1998. In addition, the cost of decant
oil, the primary raw material in the production of needle coke, during the
fiscal year ended July 31, 1998 was approximately 11% lower as compared to
fiscal 1997, which contributed positively to the gross margin. Gross profit as a
percentage of calcium carbide product sales for fiscal 1998 was 15.9% versus
15.6% in fiscal 1997. The increase was primarily the result of lower operating
costs during fiscal 1998.
Selling, general and administrative expenditures for fiscal 1998 were $14.9
million versus $16.0 million in fiscal 1997. The decrease was primarily the
result of a $1.8 million decrease in incentive compensation expenses for
salaried employees in fiscal 1998.
During the fiscal year ended July 31, 1997, the Company recorded a $1.1
million non-recurring charge to provide for benefits associated with the early
retirement of two executives of the Company.
During fiscal 1998, the Company recorded the Initial Antitrust Charge, a
$38 million pre-tax charge ($25 million after expected tax benefits), classified
as "other expense" in the consolidated statement of operations for the fiscal
year ended July 31, 1998, for potential liabilities resulting from civil
lawsuits, claims, legal costs and other expenses associated with pending
antitrust matters.
Net interest expense for fiscal 1998 was $5.1 million, including $5.2
million of interest expense associated with the Company's revolving credit
facility, $1.5 million in interest expense associated with the Senior Notes and
$0.4 million in amortization and bank fees. These interest expense items were
reduced by $1.7 million in capitalized interest associated with the Company's
Modernization Program projects and $0.3 million in interest income. Net interest
expense for fiscal 1997 was $7.9 million, including $9.4 million in interest
expense associated with the Senior Notes and $0.3 million in amortization. These
interest expense items were reduced by $0.5 million in capitalized interest and
$1.5 million in interest income in fiscal 1997.
The Company's effective income tax rate for fiscal 1998 was a benefit of
25.4% versus a provision of 36.8% for fiscal 1997. The benefit for fiscal 1998
was unusually low relative to the federal statutory rate of 35% due to state
income tax expenses, the write-off of certain state net operating loss tax
benefits, the effect of non-deductible expenses incurred throughout fiscal 1998
and the impact of adjustments to the Company's prior year tax estimates.
As a result of the Tender and revolving credit facility refinancing, the
Company recorded a $6.4 million net extraordinary loss on the early retirement
of debt during fiscal 1998.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards (SFAS) #131,
"Disclosures about Segments of an Enterprise and Related Information" and SFAS
#132, "Employers' Disclosure about Pensions and Other Postretirement Benefits"
for its fiscal year ended July 31, 1999. The Company is required to adopt SFAS
#133, "Accounting for Derivative Instruments and Hedging Activities" for its
fiscal year ending July 31, 2001. SFAS #133 establishes accounting and reporting
standards for derivatives and hedging activities. The Company has not yet
completed its evaluation of the financial accounting and reporting impact of
SFAS #133.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs are primarily for capital expenditures, working
capital (including antitrust settlements) and debt service on its revolving
credit facility. The weakness in certain regions of the global economy and its
impact on demand for the Company's products has resulted in the deferment of
certain discretionary capital projects. The Company
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<PAGE> 20
estimates that it will spend approximately $15 million in capital improvements
during fiscal 2000. Such spending may include non-discretionary capital for
environmental upgrades. Also, the Company presently believes that it will fund
approximately $20 million in antitrust settlements during fiscal 2000.
The Company believes that its cash flows from operations and availability
under its revolving credit facility should be sufficient to fund all of its
currently planned liquidity needs through at least the expiration of its
revolving credit facility in December 2003. However, the terms and conditions of
any settlements of pending antitrust claims may adversely impact such liquidity
needs. In addition, the Company's expected cash flows from operations could be
negatively impacted if weak demand for the Company's products experienced in
fiscal 1999 or increased oil costs experienced in early fiscal 2000 continues
for an extended period of time. In the event these resources are not sufficient
to fund the Company's planned capital expenditures, service its indebtedness and
pay any other obligation including those that may arise from pending legal
proceedings and the resolution of current antitrust matters, the Company may be
required to refinance or renegotiate its revolving credit facility, obtain
additional funding or further delay discretionary capital projects. If the
Company were required to refinance or renegotiate its revolving credit facility
or obtain additional funding to satisfy its liquidity needs, there can be no
assurance that sources of funds would be available in amounts sufficient for the
Company to meet its obligations or on terms favorable to the Company.
In connection with the Tender, the Company entered into an agreement with a
consortium of banks led by PNC Bank for a $150 million revolving credit facility
with a $15 million sublimit for letters of credit which will expire in December
2003 (as amended, the 1997 Revolving Credit Facility). The 1997 Revolving Credit
Facility was amended during fiscal 1998 and fiscal 1999. Interest under the 1997
Revolving Credit Facility is based on, at the option of the Company, either PNC
Bank's prime rate or a floating LIBOR rate plus a spread (currently 1.125%)
based on a leverage calculation (specifically, the Consolidated Total
Indebtedness to EBITDA Ratio, as defined in the agreement). As of July 31, 1999,
the interest rate on borrowings outstanding under the 1997 Revolving Credit
Facility, including the effect of interest rate swap agreements currently
outstanding, was 6.8%. Repayment of funds borrowed under the facility is not
required until the expiration of the facility. The most restrictive covenants
under the 1997 Revolving Credit Facility include a maximum Consolidated Total
Indebtedness to EBITDA Ratio of 3.75 to 1.0, minimum Interest Coverage Ratio of
3.5 to 1.0 and a minimum Consolidated Tangible Net Worth, all as defined in the
1997 Revolving Credit Facility agreement. The 1997 Revolving Credit Agreement,
as amended, excludes the Antitrust Charge from EBITDA for both pricing and
covenant calculation purposes. The 1997 Revolving Credit Facility is
collateralized with receivables, inventory and substantially all of the
Company's property, plant and equipment.
As of July 31, 1999, the Company had $32.1 million of availability under
the 1997 Revolving Credit Facility. As of July 31, 1999, borrowings under the
1997 Revolving Credit Facility totaled $110.5 million and letters of credit
outstanding totaled approximately $7.4 million.
During fiscal 1998, the Company's Board of Directors authorized the
expenditure of up to $10 million to repurchase the Company's Common Stock.
Subject to price and market considerations and applicable securities laws, such
purchases may be made from time to time in open market, privately negotiated or
other transactions. No time limit was placed on the duration of the repurchase
program. The extent and timing of any repurchases will depend on market
conditions and other corporate considerations. During fiscal 1999, the Company
repurchased 414,200 shares of its Common Stock for $4.2 million under its share
repurchase program. Since fiscal 1998, the Company has repurchased an aggregate
467,200 shares of its Common Stock under its share repurchase program at a total
cost of $5.7 million.
During fiscal 1999, total assets decreased $14.7 million to $274.4 million.
A $12.5 million reduction in outstanding customer accounts receivable and a
$22.8 million reduction in property, plant and equipment due to non-cash
depreciation and impaired asset write-offs were partially offset by a $4.8
million increase in inventories and $15.5 million in capital expenditures. Total
liabilities decreased $11.2 million to $193.1 million, with most of the decrease
attributable to funding antitrust settlements and costs during fiscal 1999.
Stockholders' equity declined $3.5 million to $81.3 million, with the decline
attributable to funding $4.2 million in Common Stock repurchases during fiscal
1999.
Cash flow provided by operations for fiscal 1999 was $17.7 million. Cash
inflows from net income plus non-cash items of $32.2 million, which includes the
$5.2 million net Closure Charge, were reduced by $14.5 million in net cash
outflows from changes in working capital items. Major working capital outflows
during fiscal 1999 included a $5.8 million increase in inventory, coupled with
$22.1 million in funding of antitrust settlements and costs. In addition, the
Company funded $1.4 million in severance and other related costs associated with
the St. Marys, PA graphite production facility
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<PAGE> 21
closure and $7.6 million in net interest payments. These outflows were
partially offset by a $12.4 million cash inflow from reduced accounts
receivable.
The Company's investing activities have historically included short-term
investments and capital expenditures ranging from $15.5 million in fiscal 1999
to $64.3 million in fiscal 1998. The substantial increase in capital
expenditures during fiscal 1997 and fiscal 1998 is due primarily to the
Modernization Program and other significant capital projects initiated in fiscal
1997. The Company believes that most of its future investing activity cash flow
requirements will be for capital expenditures.
The Company's financing activities have principally represented short-term
draw downs and repayments on its revolving credit facilities, as well as
periodic repurchases of Senior Notes in open market transactions and cash
inflows from exercises of stock options. The Company also repurchased treasury
shares in fiscal 1999 and 1998 at a cost of $4.2 million and $1.9 million,
respectively. Other financing activities during fiscal 1998 also included the
effects of the Tender.
WORKING CAPITAL REDUCTION PROGRAM
The Company intends to implement a working capital reduction program during
fiscal 2000. In connection with this program, the Company intends to temporarily
reduce graphite electrode and needle coke production in order to reduce
inventory levels and further improve the Company's cost structure. This program
is expected to have a positive effect on operating cash flows as cash outflows
for raw materials, labor and utilities will be reduced during the period of
lower production. However, the program is expected to have a negative impact on
the Company's operating results during the period of reduced production, as the
Company will not realize operating efficiencies typical of higher levels of
production. This situation may result in the Company reporting a net loss from
operations for the fiscal year ending July 31, 2000. The program, which is
expected to be effective for the quarter ending January 31, 2000 and part of the
quarter ending April 30, 2000, is expected to result in the temporary layoff of
approximately 180 employees.
ITEM 7A QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
The Company is exposed to financial, market and economic risks in many areas of
its business. The Company utilizes several financial instruments and risk
management programs in an effort to mitigate much of this exposure. The
following is a summarization of the programs utilized by the Company in an
attempt to mitigate these risks.
FOREIGN CURRENCY RISKS
Approximately 30% of the Company's net sales during each of the fiscal years
ended July 31, 1999, 1998 and 1997 were to customers located in foreign
countries. The majority of these foreign sales were denominated in local
currencies, subjecting the Company to foreign currency exchange rate risk. The
Company regularly enters into forward foreign currency contracts to help
mitigate foreign currency exchange rate exposure on customer accounts receivable
and sales commitments denominated in foreign currencies. These contracts require
the Company to deliver foreign currencies in the future in order to receive U.S.
dollars owed to it under the contracts at settlement. In the past, the Company
has been generally successful in fulfilling its obligations to deliver the
foreign currencies due under its forward foreign currency contracts. These
contracts generally mature within 12 months and are principally unsecured
contracts with commercial banks. Gains and losses related to forward foreign
currency contracts are deferred and recognized in income at the time of the sale
of the product.
As of July 31, 1999 and 1998, the Company had $26.4 million and $39.4
million, respectively, in forward foreign currency contracts outstanding. A
hypothetical 10% change in forward rates would result in a gain or loss of
approximately $2.6 million related to the contracts outstanding as of July 31,
1999, although any gain or loss would be substantially offset by an inverse
change in the value of future collections on foreign accounts receivable or
sales commitments. For purposes of this sensitivity analysis, October 1999
forward rates as of July 31, 1999 were adjusted by the 10% hypothetical change
and applied to the notional value of the contracts outstanding. The average
maturity of the Company's forward foreign currency contracts is October 1999.
The cash flows from these contracts are classified in a manner consistent
with the underlying nature of the transactions. See Note 2 to the consolidated
financial statements for a detailed description of the Company's foreign
currency exposure, including customer accounts receivable denominated in foreign
currencies and forward foreign currency contracts outstanding.
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<PAGE> 22
COMMODITY PRICE RISKS
The Company's affiliate, Seadrift, purchases approximately 2.5 million barrels
of low sulfur decant oil each year to produce needle coke, the key raw material
in the production of graphite electrodes. The cost of refinery decant oil is
pegged to the U.S. Gulf Coast spot cargo barge prices and, in some cases, West
Texas Intermediate crude oil. The Company regularly enters into crude oil and
low sulfur fuel oil futures and swap agreements in order to help mitigate
exposure to fluctuations in the cost of decant oil. These futures and swap
contracts are financial hedges; the Company never actually takes delivery of the
oil product that is the subject of the contracts.
In the case of futures contracts, the Company agrees to purchase crude oil
in the future at a set price, then liquidates the contract prior to settlement.
The difference between the price of crude oil on the date the Company enters
into the contract and the price on the settlement date represents the financial
gain or loss on that contract. In the case of swap contracts, the Company agrees
to pay a fixed price for low sulfur fuel oil and a counter party agrees to pay
the variable market price for a particular month. The difference between the
fixed price and the average market price for the applicable month represents the
financial gain or loss on the contract. Gains and losses associated with these
contracts, when settled, are deferred as an adjustment to Seadrift's oil
inventory values and, ultimately, the carrying cost of needle coke.
As of July 31, 1999, the Company had $6.0 million in low sulfur fuel oil
swap contracts. A 10% change in the futures rates for low sulfur fuel oil would
result in a $0.8 million gain or loss related to these contracts, although any
gain or loss would be substantially offset by an inverse change in the purchase
price of low sulfur decant oil expected to be purchased in the future. This
hypothetical computation assumes a parallel shift in the applicable commodity
futures prices. For purposes of this sensitivity analysis, forward low sulfur
fuel oil prices for the months of August 1999 through December 1999 were
adjusted by the 10% hypothetical change and applied to the notional number of
barrels being hedged per the contracts outstanding. An increase in decant oil
costs experienced in early fiscal 2000 may have a negative impact on the
Company's gross margin if the higher oil costs continue for an extended period
of time or if the Company is unable to realize needle coke price increases in
fiscal 2000. The Company's commodity hedging program will mitigate the increase
in oil costs to some degree in fiscal 2000.
An additional market risk associated with the commodity product Seadrift
purchases is availability of low sulfur decant oil of an acceptable quality. The
Company utilizes several suppliers of low sulfur decant oil in an effort to
disperse the risk of availability to some degree. Prices and availability of low
sulfur decant oil may be impacted by many factors, including world crude oil
production and output, global demand for oil products and the production
parameters of Seadrift's decant oil suppliers. While the Company believes that a
sufficient amount of decant oil of an acceptable quality is currently readily
available, there can be no assurance that Seadrift will be able to obtain an
adequate quantity of suitable feedstocks at all times in the future or at
acceptable prices.
See Note 2 to the consolidated financial statements for a detailed
description of the consolidated financial statement impact of the Company's oil
hedging activities during the fiscal years presented therein.
INTEREST RATE RISKS
The Company's indebtedness as of July 31, 1999 is comprised of approximately
$110 million in borrowings outstanding under the 1997 Revolving Credit Facility.
Interest cost under the 1997 Revolving Credit Facility is based on either PNC
Bank's prime rate or a floating LIBOR rate plus a spread (currently 1.125%)
based on a leverage calculation. The Company uses interest rate swap and cap
agreements to hedge a portion of its debt cost in an attempt to strike a
favorable balance between fixed and variable rate debt and keep financing costs
as low as possible. The Company has entered into several interest rate swap and
cap agreements. The interest rate swap agreements effectively fix the Company's
LIBOR rate at approximately 5.7% for a decreasing level of borrowings
outstanding ranging from $70.0 million in fiscal 2000 to $15.0 million in fiscal
2003. The interest rate swap agreements did not have a material impact on the
Company's consolidated financial statements during the fiscal year ended July
31, 1999. The interest rate cap agreements effectively cap the Company's base
LIBOR rate at 7.5% on borrowings ranging from $30.0 million in fiscal 2000 to
$26.0 million in fiscal 2003. The interest rate cap agreements did not have a
material impact on the Company's consolidated financial statements for the
fiscal year ended July 31, 1999.
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<PAGE> 23
The Company's effective interest rate, which includes actual interest costs
as well as bank fees and amortization of debt transaction costs, for its fiscal
year ended July 31, 1999 was 7.0%. The Company's blended effective interest rate
on borrowings outstanding as of July 31, 1999 was 7.0%. A hypothetical 10%
change in the blended effective interest rate assuming debt levels as of July
31, 1999 would result in a $0.8 million increase or decrease in interest costs.
YEAR 2000
The Company has modified, upgraded and replaced certain components of its
computer software, operating systems and manufacturing process control systems
to accommodate the Year 2000 changes required for correct recording of dates in
the year 2000 and beyond. The Company has adopted a comprehensive Year 2000
compliance action plan that includes (i) inventorying all of its information
technology (IT) systems, manufacturing process control systems and non-IT
systems, (ii) assessing these systems and resources for Year 2000 compliance,
(iii) remedying and replacing non-compliant systems, (iv) testing upgraded
systems for compliance, and (v) developing contingency plans. The Company has
substantially completed its Year 2000 compliance program, and, while the Company
continues to test and refine its contingency plans, the Company's significant IT
and non-IT systems are Year 2000 compliant. The Company does not expect to
experience significant operational problems associated with Year 2000
compliance.
The Company continues to evaluate the Year 2000 compliance programs of its
critical customers, suppliers and service providers in an attempt to determine
the adequacy of their programs in addressing the Year 2000 issue. This
evaluation includes the distribution of questionnaires to such parties and the
development of contingency plans that assume the failure of a third party
critical to the Company's business. The Company believes that the most
reasonably likely worst-case scenario for the Company with respect to the Year
2000 issue is the failure of a critical vendor, including but not limited to a
utility supplier, or the failure of a critical customer, including electric arc
furnace steel producers who use a substantial amount of power in their
production process. A failure by a critical supplier or group of critical
customers could negatively impact sales, profits and cash flows. The Company
believes that the formulation of contingency plans will help mitigate exposure
and losses should such a failure occur. However, because the Company's overall
Year 2000 compliance is contingent upon the readiness of its critical vendors
and customers, there can be no assurance that the Company's Year 2000 compliance
programs will adequately address Year 2000 issues not under its direct control.
FORWARD-LOOKING STATEMENTS
This report may contain forward-looking statements that are based on current
expectations, estimates and projections about the industries in which the
Company operates, management's beliefs and assumptions made by management. Words
such as "expects," "anticipates," "intends," "plans," "believes," "estimates"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. These statements constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, and
are subject to the safe harbor created thereby. These statements are based on a
number of assumptions that could ultimately prove inaccurate and, therefore,
there can be no assurance that such statements will prove to be accurate.
Factors that could affect actual future results include the developments
relating to the antitrust investigations by the Department of Justice, the
antitrust enforcement authorities of the European Union or related civil
lawsuits as well as the assertion of other claims relating to such
investigations or lawsuits or the subject matter thereof. While the Company
believes that its Antitrust Reserve is adequate, there can be no assurance that
agreements in principle will be finalized or that future developments or other
factors might not adversely affect current estimates. Such factors also include
the possibility that forecasted demand or prices for the Company's products may
not occur or continue, changing economic and competitive conditions (including
currency exchange rate and commodity pricing fluctuations), technological risks
and other risks, costs and delays associated with the start-up and operation of
major capital projects (including the Company's modernization program), changing
governmental regulations (including environmental rules and regulations) and
other risks and uncertainties, including those detailed in the Company's filings
with the Securities and Exchange Commission. The Company does not undertake to
publicly update any forward-looking statement, whether as a result of new
information, future events or otherwise.
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ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Carbide/Graphite Group, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of The
Carbide/Graphite Group, Inc. and Subsidiaries (the Company) at July 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended July 31, 1999, in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
Pittsburgh, Pennsylvania 15219
September 8, 1999
<PAGE> 25
CONSOLIDATED STATEMENTS OF OPERATIONS
THE CARBIDE/GRAPHITE GROUP, INC.
<TABLE>
<CAPTION>
Year Ended July 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share information)
<S> <C> <C> <C>
Net sales $240,130 $293,751 $289,586
Operating costs and expenses:
Cost of goods sold 202,888 242,535 235,401
Selling, general and administrative 14,925 14,884 16,031
Early retirement/severance charge (Note 12) -- -- 1,100
Other expense (Note 12) 15,043 38,000 --
- ---------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 7,274 (1,668) 37,054
Other costs and expenses:
Interest expense, net (Note 6) 6,617 5,130 7,894
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes
and extraordinary loss 657 (6,798) 29,160
Provision (benefit) for taxes on income from operations (Note 4) 259 (1,729) 10,732
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary loss 398 (5,069) 18,428
Extraordinary loss on early extinguishment of debt, net of
tax benefit of $3,769 in 1998 and $84 in 1997 (Note 6) -- (6,417) (126)
- ---------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 398 $(11,486) $ 18,302
===========================================================================================================================
EARNINGS PER SHARE INFORMATION (Note 1)
Income (loss) before extraordinary loss:
Basic $ 0.05 $ (0.58) $ 2.16
Diluted $ 0.05 $ (0.58) $ 2.09
- ---------------------------------------------------------------------------------------------------------------------------
Extraordinary loss on early extinguishment of debt, net:
Basic -- (0.74) (0.01)
Diluted -- (0.74) (0.02)
- ---------------------------------------------------------------------------------------------------------------------------
Net income (loss):
Basic $ 0.05 $ (1.32) $ 2.15
Diluted $ 0.05 $ (1.32) $ 2.07
- ---------------------------------------------------------------------------------------------------------------------------
Common and common equivalent shares:
Basic 8,391,192 8,699,304 8,517,022
Diluted 8,415,437 8,699,304 8,822,706
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE> 26
CONSOLIDATED BALANCE SHEETS
THE CARBIDE/GRAPHITE GROUP, INC.
<TABLE>
<CAPTION>
July 31, 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share information)
<S> <C> <C>
ASSETS
Current assets:
Accounts receivable--trade, net of allowance for doubtful
accounts: $819 in 1999 and $2,025 in 1998 (Note 2) $ 37,997 $ 50,469
Inventories (Note 3) 73,621 68,839
Income taxes receivable (Note 4) 6,592 --
Deferred income taxes (Note 4) 12,093 18,189
Other current assets 5,989 6,884
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 136,292 144,381
Property, plant and equipment, net (Note 5) 130,342 137,603
Other assets 7,782 7,115
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $ 274,416 $ 289,099
===========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Overdrafts $ 4,079 $ 2,457
Accounts payable, trade 16,937 15,525
Income taxes payable (Note 4) -- 1,002
Accrued expenses:
Antitrust claims reserve (Note 7) 21,404 36,538
Vacation 3,242 3,826
Workers' compensation 5,597 5,782
Other 9,429 9,122
- ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 60,688 74,252
Long-term debt (Notes 2 and 6) 110,500 110,232
Deferred income taxes (Note 4) 8,107 6,561
Retirement benefit plans and other (Note 8) 11,424 10,725
Deferred revenue (Note 1) 2,380 2,515
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 193,099 204,285
===========================================================================================================================
Commitments and contingencies (Note 7)
- ---------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred Stock, $0.01 par value; 2,000,000 shares authorized; none issued -- --
Common Stock, $0.01 par value; 18,000,000 shares authorized;
shares issued: 9,937,042 in 1999 and 9,884,542 in 1998 99 99
Additional paid-in capital, net of equity issue costs of $1,398 36,616 36,243
Retained earnings 55,595 55,197
Common Stock to be issued under options (Note 9) 39 100
- ---------------------------------------------------------------------------------------------------------------------------
92,349 91,639
Common Stock held in treasury at cost (Note 14):
1,599,200 shares in 1999 and 1,185,000 shares in 1998 (11,032) (6,825)
- ---------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 81,317 84,814
===========================================================================================================================
Total liabilities and stockholders' equity $ 274,416 $ 289,099
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE> 27
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE CARBIDE/GRAPHITE GROUP, INC.
<TABLE>
<CAPTION>
Year Ended July 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Net income (loss) $ 398 $(11,486) $18,302
Adjustments to reconcile net income (loss)
to cash provided by operations:
Depreciation and amortization 18,022 14,012 10,882
Amortization of debt issuance costs 160 190 341
Amortization of intangible assets 81 364 318
Adjustments to deferred taxes 7,642 (14,102) (1,656)
Provision for loss--accounts receivable 120 -- 120
Extraordinary loss on early extinguishment of debt -- 10,186 210
Loss on the impairment of assets 5,742 -- --
Increase (decrease) in cash from changes in:
Accounts receivable 12,352 (1,381) (3,816)
Inventories (5,782) (9,394) (4,666)
Income taxes (7,438) 1,796 6,755
Other current assets 871 (936) (926)
Accounts payable and accrued expenses (14,160) 28,892 6,467
Net change in other non-current assets and liabilities (311) 50 (125)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operations 17,697 18,191 32,206
- ---------------------------------------------------------------------------------------------------------------------------
Investing activities:
Capital expenditures (15,532) (64,306) (33,765)
Proceeds from (purchases of) short-term investments -- 15,750 (5,550)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (15,532) (48,556) (39,315)
- ---------------------------------------------------------------------------------------------------------------------------
Financing activities:
Payments on revolving credit facilities (68,670) (75,400) --
Proceeds from revolving credit facilities 69,020 185,550 --
Repurchase or redemption of Senior Notes, including premiums
of $8,077 in 1998 and $168 in 1997 -- (88,030) (1,896)
Net change in cash overdraft 1,622 2,457 --
Proceeds from exercise of stock options under benefit plans 157 619 354
Purchase of treasury stock (4,207) (1,930) --
Other (87) (836) --
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (2,165) 22,430 (1,542)
- ---------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents -- (7,935) (8,651)
Cash and cash equivalents, beginning of period -- 7,935 16,586
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period -- -- $ 7,935
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
26
<PAGE> 28
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THE CARBIDE/GRAPHITE GROUP, INC.
<TABLE>
<CAPTION>
Common
Stock to
Common Stock Additional be Issued Unfunded
Comprehensive ------------ Paid-In Retained Under Pension Treasury
Income (Loss) Shares Amount Capital Earnings Options Obligation Stock
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands, except
share information)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1996 9,397,670 $94 $30,153 $48,381 $1,151 $(76) $ (4,895)
Net income $ 18,302 18,302
Decrease in unfunded
pension obligation 76 76
- -----------------------------------------------
Comprehensive income $ 18,378
===============================================
Stock option compensation 47
Exercise of stock options 354,602 3 2,093 (1,037)
Tax benefit on exercise
of stock options 1,917
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1997 9,752,272 97 34,163 66,683 161 -- (4,895)
Net loss $(11,486) (11,486)
===============================================
Exercise of stock options 132,270 2 678 (61)
Tax benefit on exercise
of stock options 1,402
Purchase of treasury stock (1,930)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1998 9,884,542 99 36,243 55,197 100 -- (6,825)
Net income $ 398 398
===============================================
Exercise of stock options 52,500 -- 218 (61)
Tax benefit on exercise
of stock options 155
Purchase of treasury stock (4,207)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JULY 31, 1999 9,937,042 $99 $36,616 $55,595 $ 39 -- $(11,032)
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE> 29
FINANCIAL NOTES
THE CARBIDE/GRAPHITE GROUP, INC.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of The
Carbide/Graphite Group, Inc. and its wholly owned subsidiaries and affiliates.
Intercompany accounts and transactions have been eliminated.
The preparation of the consolidated financial statements in accordance with
generally accepted accounting principles requires management to make certain
estimates and assumptions. These may affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as of the
date of the consolidated financial statements. They may also affect the reported
amounts of revenues and expenses during the reporting period. Actual amounts
could differ from those estimates upon resolution of certain matters.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS #131, "Disclosures about Segments of an Enterprise and
Related Information" and SFAS #132, "Employers' Disclosure about Pensions and
Other Postretirement Benefits" for its fiscal year ended July 31, 1999. The
Company is required to adopt SFAS #133, "Accounting for Derivative Instruments
and Hedging Activities" for its fiscal year ending July 31, 2001. SFAS #133
establishes accounting and reporting standards for derivatives and hedging
activities. The Company has not yet completed its evaluation of the financial
accounting and reporting impact of SFAS #133.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost determined
under both the actual cost and the last-in, first-out (LIFO) method. The
supplies inventories are valued at the lower of average cost or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and depreciated on a
straight-line basis over the estimated useful service lives of the related
assets. Interest costs associated with the construction of major capital
additions are capitalized as part of the cost of the related assets. Gains or
losses from the sale or retirement of assets are included in income. Repairs and
maintenance are expensed as incurred.
REVENUE RECOGNITION
Net sales to customers are recognized when products are shipped.
DEFERRED REVENUE
The Company has entered into a long-term supply contract to deliver carbide lime
to a customer for which it has received the contract amount in advance. The
Company is recognizing revenue associated with the agreement over the life of
the contract utilizing the straight-line method.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
ENVIRONMENTAL EXPENDITURES
The Company expenses or capitalizes environmental expenditures that relate to
current operations, as adjusted for indemnity claims against BOC, as
appropriate. Expenditures which do not contribute to future revenues and that
relate to existing conditions caused by past operations are expensed.
Liabilities are recorded when remedial efforts are probable and the costs can be
reasonably estimated.
28
<PAGE> 30
EARNINGS PER SHARE
The following table provides a reconciliation of the income (loss) and share
amounts for the basic and diluted earnings per share computations for income
(loss) from operations for the fiscal years ended July 31, 1999, 1998 and 1997
(dollar amounts in thousands):
<TABLE>
<CAPTION>
Per Share
Income (Loss) Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1999
Basic earnings per share $ 398 8,391,192 $ 0.05
===========================================================================================================================
Effect of dilutive securities:
Options for common stock -- 24,245
- ---------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 398 8,415,437 $ 0.05
===========================================================================================================================
1998
Basic earnings per share $ (5,069) 8,699,304 $(0.58)
===========================================================================================================================
Effect of dilutive securities:
Options for common stock -- --
- ---------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ (5,069) 8,699,304 $(0.58)
===========================================================================================================================
1997
Basic earnings per share $18,428 8,517,022 $ 2.16
===========================================================================================================================
Effect of dilutive securities:
Options for common stock -- 305,684
- ---------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $18,428 8,822,706 $ 2.09
===========================================================================================================================
</TABLE>
Since the Company's results were a net loss from operations for the fiscal
year ended July 31, 1998, common equivalent shares were excluded from the
diluted earnings per share computation as their effect would have been
anti-dilutive.
INTANGIBLES AND DEFERRED CHARGES
Deferred charges and intangibles are recorded at historical cost and amortized
on a straight-line basis over the estimated economic life of the agreement or
contract underlying the assets.
RECLASSIFICATION
Certain amounts previously reported have been reclassified to conform with the
current year presentation.
29
<PAGE> 31
2. FINANCIAL INSTRUMENTS
The Company's financial instruments as of July 31, 1999 and 1998 included its
revolving credit facility, with a carrying and estimated fair value of $110.5
million as of July 31, 1999. In addition, the Company purchases and currently
holds certain derivative financial instruments as hedging vehicles, as more
fully described below.
The Company regularly enters into forward foreign currency contracts to
help mitigate foreign currency exchange rate exposure on customer accounts
receivable and sales commitments denominated in foreign currencies. The
Company's accounts receivable as of July 31, 1999 and 1998 included the
following foreign currency balances (in thousands):
<TABLE>
<CAPTION>
July 31, 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
German Marks $4,057 $ 4,230
Japanese Yen 2,234 3,761
French Francs 1,468 2,053
Spanish Pesata 592 1,946
Italian Lira 586 745
Euros 412 --
British Sterling 57 2,292
Belgian Francs -- 836
- ---------------------------------------------------------------------------------------------------------------------------
Total foreign currency accounts receivable $9,406 $ 15,863
===========================================================================================================================
</TABLE>
As of July 31, 1999 and 1998, the Company held forward foreign currency
contracts in the following foreign denominations (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------------------- --------------------
MARKET Market
CONTRACT VALUE Contract Value
July 31, VALUE GAIN (LOSS) Value Gain (Loss)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Euros $12,549 $(213) -- --
German Marks 5,183 100 $14,805 $ 193
Japanese Yen 3,636 (47) 6,168 880
French Francs 1,694 63 7,155 48
British Sterling 1,907 (24) 1,603 (13)
Spanish Pesata 633 30 3,806 (19)
Italian Lira 621 68 3,910 (6)
Belgian Francs 213 4 2,003 35
- ---------------------------------------------------------------------------------------------------------------------------
Total forward foreign currency contracts $26,436 $ (19) $39,450 $ 1,118
===========================================================================================================================
</TABLE>
These contracts generally mature within 12 months and are principally
unsecured exchange contracts with commercial banks. Gains and losses related to
forward foreign currency contracts are deferred and recognized in income at the
same time as the sale of the product. Gains and losses deferred as of July 31,
1999 and 1998 were not material. The cash flows from these contracts are
classified in a manner consistent with the underlying nature of the
transactions.
30
<PAGE> 32
The Company regularly enters into crude and low sulfur fuel oil futures
contracts and swap agreements. Such contracts and agreements are accounted for
as hedges of decant oil purchases, the primary raw material in the production of
needle coke. As of July 31, 1999 and 1998, the Company held the following oil
futures and swap contracts (in thousands):
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
MARKET Market
CONTRACT VALUE Contract Value
July 31, VALUE GAIN (LOSS) Value Gain (Loss)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
West texas intermediate futures contracts -- -- $ 4,765 $ (973)
Low sulfur fuel oil swap contracts $5,972 $1,759 1,829 (498)
- ---------------------------------------------------------------------------------------------------------------------------
Total commodity hedging contracts $5,972 $1,759 $ 6,594 $ (1,471)
===========================================================================================================================
</TABLE>
As of July 31, 1999 and 1998, deferred gains and losses associated with the
Company's oil hedging activities, including losses not yet recorded in the
consolidated financial statements and gains and losses deferred as an adjustment
to the Company's inventory value totaled a gain of $2.2 million and a loss of
$2.4 million, respectively. Losses associated with oil hedging activities
recognized as an increase to cost of goods sold in the consolidated statements
of operations were $3.4 million, $1.0 million and $0.3 million for the fiscal
years ended July 31, 1999, 1998 and 1997, respectively.
In conjunction with the revolving credit facility refinancing completed in
fiscal 1998 (see Note 6), the Company entered into several interest rate swap
and cap agreements. The interest rate swap agreements effectively fix the
Company's average LIBOR borrowing rate at approximately 5.7% for a decreasing
level of borrowings outstanding ranging from $70.0 million in fiscal 2000 to
$15.0 million in fiscal 2003. The interest rate swap agreements did not have a
material impact on the Company's consolidated financial statements during the
fiscal year ended July 31, 1999 and 1998. The interest rate cap agreements
effectively cap the Company's base LIBOR rate at 7.5% on borrowings ranging from
$30.0 million in fiscal 2000 to $26.0 million in fiscal 2003. The interest rate
cap agreements did not have a material impact on the Company's consolidated
financial statements for the fiscal years ended July 31, 1999 and 1998.
3. INVENTORIES
Inventories were as follows (in thousands):
<TABLE>
<CAPTION>
July 31, 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $22,386 $15,061
Work in process 43,723 36,672
Raw materials 13,429 18,545
- ---------------------------------------------------------------------------------------------------------------------------
79,538 70,278
LIFO reserve (16,487) (12,545)
- ---------------------------------------------------------------------------------------------------------------------------
63,051 57,733
Supplies 10,570 11,106
- ---------------------------------------------------------------------------------------------------------------------------
Total inventories $73,621 $68,839
===========================================================================================================================
</TABLE>
As of July 31, 1999 and 1998, approximately 72.2% and 66.0%, respectively,
of the Company's inventory was valued on a LIFO basis. If valued on a current
cost basis, total inventories would be $16.5 million and $12.5 million higher as
of July 31, 1999 and 1998, respectively.
During fiscal 1999, the Company recorded a $1.0 million pre-tax charge to
write-off supplies inventories that became obsolete upon the closure of certain
graphite production facilities. See Note 12.
31
<PAGE> 33
4. INCOME TAXES
The components of the provision (benefit) for income taxes related to operations
included the following (in thousands):
<TABLE>
<CAPTION>
Year Ended July 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $(7,827) $ 11,523 $11,581
State 444 850 807
- ---------------------------------------------------------------------------------------------------------------------------
(7,383) 12,373 12,388
Deferred 7,642 (14,102) (1,656)
- ---------------------------------------------------------------------------------------------------------------------------
Provision (benefit) for income taxes $ 259 $ (1,729) $10,732
===========================================================================================================================
</TABLE>
A reconciliation of federal statutory income taxes to effective taxes
follows:
<TABLE>
<CAPTION>
Year Ended July 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory taxes $ 230 $ (2,379) $10,206
Tax effect of:
State income taxes, net of federal benefit 225 415 437
Foreign sales corporation benefit (232) (394) (700)
Prior year return and audit adjustments (92) 442 379
Non-deductible expenses 69 88 117
Other 59 99 293
- ---------------------------------------------------------------------------------------------------------------------------
Total effective taxes $ 259 $ (1,729) $10,732
===========================================================================================================================
</TABLE>
The components of deferred tax assets and liabilities follow (in
thousands):
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
DEFERRED TAX DEFERRED TAX Deferred Tax Deferred Tax
July 31, ASSETS LIABILITIES Assets Liabilities
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation -- $11,180 -- $9,550
Antitrust claims reserve $ 7,491 -- $12,788 --
Employee retirement benefits 1,784 -- 1,591 --
Inventory adjustments 790 -- 1,115 --
Workers' compensation 2,213 -- 2,284 --
Allowance for doubtful accounts 593 -- 731 --
Vacation reserve 792 -- 1,015 --
Other 1,503 -- 1,654 --
- ---------------------------------------------------------------------------------------------------------------------------
Total deferred taxes $15,166 $11,180 $21,178 $9,550
===========================================================================================================================
</TABLE>
Management believes that the net deferred tax asset as of July 31, 1999
will be realized through carryback provisions and reductions to future taxable
income. All federal tax returns prior to fiscal 1997 have been settled with the
Internal Revenue Service. Management does not believe that the settlement of its
open tax years will have a material adverse effect on the Company's future
operating results.
32
<PAGE> 34
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
July 31, 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Buildings and improvements $ 51,647 $ 30,691
Machinery and equipment 272,469 250,142
- ---------------------------------------------------------------------------------------------------------------------------
324,116 280,833
Accumulated depreciation (207,506) (194,247)
- ---------------------------------------------------------------------------------------------------------------------------
116,610 86,586
Land 7,711 7,711
Construction in progress 6,021 43,306
- ---------------------------------------------------------------------------------------------------------------------------
Total property, plant and equipment $ 130,342 $ 137,603
===========================================================================================================================
</TABLE>
6. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
July 31, 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
11.5% Senior Notes Due 2003 (a) -- $ 82
The 1997 Revolving Credit Facility (b) $110,500 110,150
- ---------------------------------------------------------------------------------------------------------------------------
Total long-term debt $110,500 $ 110,232
===========================================================================================================================
</TABLE>
(a) In fiscal 1998, the Company completed the Tender, a transaction in which
the Company repurchased essentially all ($79.9 million of the $80.0 million
then outstanding) of its Senior Notes originally issued in fiscal 1994.
After the Tender, $0.1 million in Senior Notes were outstanding. During
fiscal 1999, the Company notified the trustee of the Senior Notes that it
intended to exercise an option to redeem early the remaining Senior Notes
at a price of $1,057.50 for each $1,000 in Senior Note principal, plus
accrued and unpaid interest. The early redemption of the remaining Senior
Notes outstanding was completed during fiscal 1999 and did not have a
material impact on the Company's consolidated financial statements.
(b) In connection with the Tender, the Company entered into an agreement with a
consortium of banks led by PNC Bank for the 1997 Revolving Credit Facility,
a $150 million revolving credit facility with a $15 million sublimit for
letters of credit which will expire in December 2003. The 1997 Revolving
Credit Facility was amended during fiscal 1998 and 1999. Interest under the
1997 Revolving Credit Facility is based on, at the option of the Company,
either PNC Bank's prime rate or a floating LIBOR rate plus a spread
(currently 1.125%) based on a leverage calculation (specifically, the
Consolidated Total Indebtedness to EBITDA Ratio, as defined in the
agreement). As of July 31, 1999, the interest rate on borrowings
outstanding under the 1997 Revolving Credit Facility, including the effect
of interest rate swap agreements currently outstanding, was 6.8%. Repayment
of funds borrowed under the facility is not required until the expiration
of the facility. The most restrictive covenants under the 1997 Revolving
Credit Facility include a maximum Consolidated Total Indebtedness to EBITDA
Ratio of 3.75 to 1.0, minimum Interest Coverage Ratio of 3.5 to 1.0 and a
minimum Consolidated Tangible Net Worth, all as defined in the 1997
Revolving Credit Facility agreement. The 1997 Revolving Credit Agreement,
as amended, excludes the Antitrust Charge from EBITDA for both pricing and
covenant calculation purposes. The 1997 Revolving Credit Facility is
collateralized with receivables, inventory and substantially all of the
Company's property, plant and equipment.
As a result of the Tender and revolving credit facility refinancing, the
Company recorded a $6.4 million net extraordinary loss on the early retirement
of debt for the fiscal year ended July 31, 1998. This extraordinary charge
represents the premium paid to Senior Note holders in connection with the Tender
and the write-off of unamortized deferred financing fees.
33
<PAGE> 35
Interest expense for the fiscal years ended July 31, 1998 and 1997 was
reduced by $0.3 million and $1.5 million respectively, of interest income earned
on cash, cash equivalents and short-term investments. Also, during fiscal 1999,
1998 and 1997 the Company capitalized $1.1 million, $1.7 million and $0.5
million, respectively, in interest costs associated with capital expenditures.
The Company's effective interest rate on outstanding indebtedness for fiscal
1999 was 7.0%.
7. COMMITMENTS AND CONTINGENCIES
The Company leases various types of machinery, equipment and real estate, which
are accounted for as operating leases. Future minimum rental payments under
non-cancellable operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending July 31,
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
2000 $2,239
2001 1,675
2002 1,621
2003 1,506
Thereafter 1,663
===========================================================================================================================
</TABLE>
Consolidated rent expense for the years ended July 31, 1999, 1998 and 1997
amounted to approximately $3.3 million, $2.9 million and $2.3 million,
respectively.
The Company purchases electricity from various local producers under
long-term contracts which expire at various dates through 2007. These contracts
require the Company to make future minimum payments aggregating approximately
$4.0 million through the end of the contracts, whether or not the Company takes
power in the future.
In May 1997, the Company was served with a subpoena issued by a Grand Jury
empanelled by the United States District Court for the Eastern District of
Pennsylvania. The Company was advised by attorneys for the Department of Justice
(DOJ) that the Grand Jury is investigating price fixing by producers of graphite
products in the United States and abroad during the past five years. The Company
is cooperating with the DOJ in the investigation. The DOJ has granted the
Company and certain former and present senior executives the opportunity to
participate in its Corporate Leniency Program and the Company has entered into
an agreement with the DOJ under which the Company and such executives who
cooperate will not be subject to criminal prosecution with respect to the
investigation if charges are issued by the Grand Jury. Under the agreement, the
Company has agreed to use its best efforts to provide for restitution to its
domestic customers for actual damages if any conduct of the Company which
violated the Federal Antitrust Laws in the manufacture and sale of such graphite
products caused damage to such customers.
Subsequent to the initiation of the DOJ investigation, four civil cases
were filed in the United States District Court for the Eastern District of
Pennsylvania in Philadelphia asserting claims on behalf of a class of purchasers
for violations of the Sherman Act. These cases, which have been consolidated,
name the Company, UCAR International, Inc. (UCAR), SGL Carbon Corporation (SGL
Corp.) and SGL Carbon AG (SGL) as defendants (together, the Named Defendants)
and seek treble damages. On March 30, 1998, a number of purchasers who were
previously included in the purported class of plaintiffs covered by the
consolidated case initiated a separate action in the same District Court which
asserts substantially the same claims and seeks the same relief as the
consolidated case and names the Named Defendants, as well as Showa Denko Carbon,
Inc. (Showa Denko). Thereafter, seven additional groups of purchasers who were
previously included in the purported class of plaintiffs covered by the
consolidated case instituted their own actions against the Named Defendants,
Showa Denko and, in several cases, certain present or former related parties of
UCAR and Showa Denko, asserting substantially the same claims and seeking the
same relief as in the consolidated case. Four such actions were filed in the
United States District Court for the Eastern District of Pennsylvania on April
3, 1998, May 14, 1998, May 28, 1998 and March 31, 1999, respectively. One action
was filed in the United States District Court for the Northern District of Ohio
on April 17, 1998 but has been transferred to the Eastern District of
Pennsylvania for pre-trial proceedings. Another action was filed in the United
States District Court for the Western District of Pennsylvania on June 17, 1998
34
<PAGE> 36
but has also been transferred to the Eastern District of Pennsylvania for
pre-trial proceedings. The complaints or amended complaints in some of the cases
have also named as defendants other companies including Mitsubishi Corporation,
Tokai Carbon U.S.A., Inc. and related companies. On December 7, 1998, the
Company was served with a complaint filed by Chaparral Steel Company against the
Named Defendants, Showa Denko and parties related to Showa Denko and UCAR in
state court in Ellis County, Texas alleging violations of various Texas state
antitrust laws and seeking treble damages. Chaparral Steel Company has filed an
amended complaint adding two additional related plaintiffs.
The Company has reached settlement agreements representing approximately
60% of domestic antitrust claims with the plaintiffs that filed lawsuits on
March 30, 1998, May 14, 1998, May 28, 1998 and March 31, 1999 and other
purchasers who had yet to file lawsuits. The Company has also reached agreements
in principle representing an additional 36% of domestic antitrust claims with
the class plaintiffs and the plaintiffs who filed the lawsuits on April 3, 1998,
April 17, 1998, and June 17, 1998, subject to the negotiation of certain
conditions and, with respect to the class plaintiffs, court approval. The
settlement in principle with the class plaintiffs, which contemplates possible
payments to certain foreign purchasers, would allow the Company to terminate any
definitive settlement agreement if the claims of foreign purchasers who opt out
of the class settlement exceed certain levels and would allow the class
plaintiffs to terminate such settlement agreement if the Company's sale to
certain foreign purchasers, as defined in the settlement agreement, exceed
certain levels. Although various of the settlements are unique, in the aggregate
they consist generally of current and deferred cash payments and, in a number of
cases, provisions which provide for additional payments under certain
circumstances ("most favored nations" provisions). In addition to the
settlements discussed above, the Company may also settle with various additional
purchasers.
On February 10, 1999, a U.S. corporation which allegedly made purchases on
behalf of two foreign entities and a group of 22 foreign purchasers which are
based in several foreign countries filed a complaint against the Company, UCAR,
SGL, Tokai Carbon Co., Ltd., Tokai Carbon U.S.A., Inc., Nippon Carbon Co., Ltd.,
SEC Corporation and certain present and former related parties of UCAR in United
States District Court for the Eastern District of Pennsylvania. This complaint
has been amended to add four additional defendants. On September 24, 1999, three
Australian companies and one New Zealand company filed a complaint against the
same parties as are named in the lawsuit filed on February 10, 1999. These cases
assert substantially the same claims and seek the same relief as the
consolidated case. Other foreign purchasers have also made similar claims
against the Company but have not filed lawsuits.
The Company understands that defendants UCAR and Showa Denko have reached
settlement agreements with the class action plaintiffs, which have been approved
by the court, and have also settled claims brought by various individual
purchasers. The Company further understands that UCAR, Robert P. Krass, Robert
J. Hart, SGL, Robert J. Koehler, Showa Denko and Tokai have agreed to plead or
have pleaded guilty to antitrust conspiracy charges filed by the DOJ and have
agreed to or been ordered to pay fines and, in the case of Messrs. Krass and
Hart, have agreed to serve prison sentences, in connection with those guilty
pleas or agreements to plead guilty.
The Company has also advised the Commission of the European Communities
(the European Commission) that it wishes to invoke its Leniency Notice.
Generally under these guidelines, the European Commission may reduce fines and
other penalties if a company sufficiently cooperates with the European
Commission. The Company understands that the European Commission will determine
fines, if any, at the completion of its proceedings.
On June 18, 1998, a group of Canadian purchasers filed a lawsuit in the
Ontario Court (General Division) claiming a conspiracy and violations of the
Canadian Competition Act. The Canadian lawsuit names the Named Defendants and
Showa Denko, as well as several present or former parents, subsidiaries and/or
affiliates of UCAR, SGL and Showa Denko. The Canadian Competition and Consumer
Law Division (Canadian Division) has initiated an inquiry and the Company is
cooperating fully with the authorities conducting that inquiry pursuant to an
agreement with the Director of Research and Investigation of the Canadian
Division under which the Company and its present and former officers, directors
and employees will not be subject to criminal prosecution.
During fiscal 1998, the Company recorded a $38 million pre-tax charge ($25
million after expected tax benefits) for potential liabilities resulting from
civil lawsuits, claims, legal costs and other expenses associated with the
pending antitrust matters (the Initial Antitrust Charge). During fiscal 1999,
the Company recorded an additional $7.0 million
35
<PAGE> 37
charge ($4.5 million after expected tax benefits) for such potential
liabilities (the Supplemental Antitrust Charge). The combined $45.0 million
charge (the Antitrust Charge) represents the Company's estimate, based on
current facts and circumstances, of the expected cost to resolve pending
antitrust claims. The Company understands that defendants UCAR and Showa Denko
have reached settlements with the class action plaintiffs and various individual
purchasers at amounts substantially higher than the levels contemplated in the
Antitrust Charge. In light of these and other developments including: (a)
possible future settlements with other purchasers and the effect of the possible
additional payments ("most favored nations") noted above, (b) the outcome of the
European Commission antitrust investigation, (c) potential additional lawsuits
by foreign purchasers, (d) the failure of agreements in principle to result in
definitive settlement agreements, (e) the failure to satisfy the conditions to
the class action settlement, and (f) adverse rulings or judgments in pending
litigation, the antitrust matters could result in aggregate liabilities and
costs which could differ materially and adversely from the Antitrust Charge and
could affect the Company's financial condition and its ability to service its
currently planned liquidity needs. As of July 31, 1999, $23.6 million in
antitrust settlements and costs had been paid.
The Company is also party to various legal proceedings considered
incidental to the conduct of its business or otherwise not material in the
judgment of management. Management does not believe that its loss exposure
related to these cases is materially greater than amounts provided in the
consolidated balance sheet as of July 31, 1999. As of July 31, 1999, a $0.2
million reserve has been recorded to provide for estimated exposure on claims
for which a loss is deemed probable.
8. EMPLOYEE RETIREMENT BENEFIT PLANS
The Company maintains defined benefit pension, postretirement health care and
life insurance benefit plans covering substantially all of its hourly employees.
The benefits under the pension plans are based primarily on years of service and
benefit rates established by union contracts. For the pension plans, the
Company's funding policy is to contribute annually the amount recommended by its
consulting actuary, subject to statutory provisions. The postretirement
healthcare and life insurance plans (the OPEB Plans) are currently unfunded and
require the employee to pay a portion of the benefit cost.
The following is a reconciliation of the beginning and ending benefit
obligations for the Company's pension plans and OPEB Plans (in thousands):
<TABLE>
<CAPTION>
Pension Plans OPEB Plans
----------------------- -----------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefit obligation as of the beginning of the year $23,944 $18,754 $ 3,652 $ 3,293
Service cost 960 829 95 107
Interest cost 1,684 1,407 246 239
Actuarial loss (gain) 227 1,751 390 217
Plan amendments 281 1,839 -- --
Plan curtailments 133 -- (48) --
Benefits paid to retirees (742) (636) (262) (204)
- ------------------------------------------------------------------------------------------------------------------------
Benefit obligation as of the end of the year $26,487 $23,944 $ 4,073 $ 3,652
========================================================================================================================
</TABLE>
The following is a reconciliation of the beginning and ending fair values
of plan assets for the Company's pension plans (in thousands):
<TABLE>
<CAPTION>
Pension Plans
----------------------------
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fair value of plan assets as of the beginning of the year $17,613 $15,971
Actual return on plan assets 1,821 859
Employer contributions 1,077 1,419
Benefits paid to retirees (742) (636)
- -----------------------------------------------------------------------------------------------------------------------
Fair value of plan assets as of the end of the year $19,769 $17,613
=======================================================================================================================
</TABLE>
Components of each of the plan's assets included primarily U.S. government
obligations and common stocks.
36
<PAGE> 38
The following is a reconciliation of the funded status of the Company's
pension plans and OPEB Plans as of July 31, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
Pension Plans OPEB Plans
----------------------- ----------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefit obligations $26,487 $23,944 $ 4,073 $ 3,652
Fair value of plan assets 19,769 17,613 -- --
- -----------------------------------------------------------------------------------------------------------------------
Unfunded status (6,718) (6,331) (4,073) (3,652)
Unrecognized transition obligation 412 599 -- --
Unrecognized prior service cost 5,234 5,972 (31) (35)
Unrecognized net actuarial loss (gain) 741 841 273 (116)
- -----------------------------------------------------------------------------------------------------------------------
Net funded (unfunded) status recognized $ (331) $ 1,081 $(3,831) $(3,803)
=======================================================================================================================
Accrued benefit liability $ (5,803) $ (4,098) $(3,831) $(3,803)
Intangible asset 5,472 5,179 -- --
- -----------------------------------------------------------------------------------------------------------------------
Net funded (unfunded) status recognized $ (331) $ 1,081 $(3,831) $(3,803)
=======================================================================================================================
</TABLE>
The following is a summary of the amount of net periodic benefit cost
recognized in the consolidated statement of operations for the years ended July
31, 1999, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
Pension Plans OPEB Plans
----------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 960 $ 829 $ 831 $ 95 $107 $105
Interest cost 1,684 1,407 1,273 246 239 215
Expected return on plan assets (1,433) (1,296) (875) -- -- --
Plan curtailments 680 -- -- (48) -- --
Recognized net actuarial loss (gain) -- (10) -- -- (8) (17)
Net amortization 598 486 375 (4) (4) (4)
- -----------------------------------------------------------------------------------------------------------------------
Total net periodic benefit cost $ 2,489 $ 1,416 $ 1,604 $ 289 $334 $299
=======================================================================================================================
</TABLE>
The net gain and loss associated with plan curtailments during fiscal 1999
were the result of the curtailment of the St. Marys, Pennsylvania hourly
workforce pension plan and OPEB Plans. The curtailment was the result of the
severance of hourly employees at the St. Marys plant in connection with closure
of certain graphite production facilities (see Note 12).
The following assumptions were used in the accounting for the Company's
pension plans and OPEB Plans:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate:
Net periodic benefit cost 7.00% 7.50% 7.50%
Benefit obligation 7.00 7.00 7.50
Expected return on plan assets 8.00 8.00 8.00
=======================================================================================================================
</TABLE>
For estimated OPEB Plan expense and liability measurement purposes, the
health care cost trend rate was assumed to increase 7.0% in fiscal 2000, with
the rate of increase declining evenly each year to 5% in fiscal 2005 and
thereafter. If the assumed health care cost trend rate was increased by one
percent, the fiscal 1999 OPEB Plan benefit cost would have increased 2.2% while
the OPEB Plan benefit obligation as of July 31, 1999 would have increased
approximately 3.1%.
37
<PAGE> 39
SAVINGS INVESTMENT PLAN
The Company has a defined contribution savings investment plan for substantially
all salaried employees. Employee contributions up to a maximum of 6% of employee
compensation are matched 50% by the Company. Additional employer contributions
may be made at the discretion of the Board of Directors based on the Company's
current year performance. The cost of these Company contributions was $1.8
million, $1.5 million and $2.0 million for the fiscal years ended July 31, 1999,
1998 and 1997, respectively.
9. OTHER COMPENSATION
MANAGEMENT STOCK OPTION PLANS
The Company has adopted several incentive or non-qualified, compensatory stock
option plans or agreements, participation in which is limited to officers,
directors and/or key employees of the Company (collectively, the MSOP). Options
granted under the MSOP generally vest over three years and expire ten years from
the date of grant. The table below summarizes option activity for the periods
indicated.
<TABLE>
<CAPTION>
Year Ended July 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding, beginning of year:
Number 479,000 446,250 617,500
Weighted-average exercise price $ 18.79 $ 13.67 $ 4.52
Granted:
Number 269,800 177,000 176,500
Weighted-average exercise price $ 13.94 $21.69 $ 24.16
Weighted-average fair value* $ 5.78 $ 9.08 $ 8.58
Exercised:
Number (52,500) (132,250) (311,750)
Weighted-average exercise price $ 3.00 $ 4.68 $ 1.23
Forfeited or expired:
Number (4,000) (12,000) (36,000)
Weighted-average exercise price $ 22.31 $ 22.31 $ 15.75
- ---------------------------------------------------------------------------------------------------------------------------
Options outstanding, end of year
Number 692,300 479,000 446,250
Weighted-average exercise price $ 18.08 $ 18.79 $ 13.67
===========================================================================================================================
</TABLE>
* The weighted-average fair value disclosed was computed utilizing the
measurement alternatives suggested in SFAS #123. Such alternatives were not
adopted by the Company for compensation measurement purposes.
The following is a summary of the characteristics of the options
outstanding as of July 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Range 1 Range 2 Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Number 373,300 319,000 692,300
Weighted-average exercise price $13.85 $23.03 $18.08
Range of exercise prices $2.00-$18.25 $22.375-$34.6875 $2.00-$34.6875
Remaining weighted-average contractual life (in months) 107 101 104
Number of options currently exercisable 103,500 179,000 282,500
Weighted-average exercise price of options exercisable $13.61 $23.54 $19.90
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
As of July 31, 1999, 872,500 shares were reserved for issuance under the
MSOP. Options granted under the MSOP for the fiscal years presented were granted
at the fair market value of the Company's Common Stock as quoted on the NASDAQ
National Market System on the date of grant.
38
<PAGE> 40
The Company adopted the disclosure requirements of SFAS #123, "Accounting
for Stock-Based Compensation." The measurement alternatives of SFAS #123 were
not adopted. SFAS #123 requires the disclosure of pro forma net income (loss)
and earnings per share amounts calculated as if the measurement alternatives
suggested by SFAS #123 had been adopted. The following table summarizes the
required pro forma disclosures for the fiscal years ended July 31, 1999, 1998
and 1997 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
ACTUAL PRO FORMA Actual Pro Forma Actual Pro Forma
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $ 398 $ (326) $(11,486) $(11,848) $18,302 $18,023
Earnings (loss) per share $ 0.05 $(0.04) $ (1.32) $ (1.36) $ 2.07 $ 2.04
===========================================================================================================================
</TABLE>
Significant assumptions used in determining fair value and compensation
cost for stock options in accordance with SFAS #123 included the following:
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free rate of return 5.5% 5.3% 6.3%
Expected volatility 53.6% 44.8% 31.1%
Expected dividend yield 0.0% 0.0% 0.0%
Expected life of option 3 to 4 years 4 to 5 years 4 to 5 years
===========================================================================================================================
</TABLE>
BONUS PLANS
In addition to the compensation expense recorded for the MSOP, the Company also
recorded $1.3 million, $0.2 million and $1.4 million in compensation expense for
the fiscal years ended July 31, 1999, 1998 and 1997, respectively, associated
with bonuses for executives and certain key employees of the Company. The bonus
amounts were determined by the Company's Board of Directors.
10. SEGMENT INFORMATION
The Company has three operating segments organized around its major product
groups: Graphite products, the Company's affiliate, Seadrift Coke, L.P. and
calcium carbide products. Two of these operating segments, graphite products and
Seadrift Coke, L.P., have been combined into one reportable segment: graphite
electrode products. The other reportable segment is calcium carbide products.
Such aggregation and presentation of reportable segments is consistent with the
approach utilized by the Company in previous fiscal years.
The graphite electrode products segment manufactures and markets graphite
electrodes, primarily to electric arc furnace steel producers. In addition, this
segment manufactures and markets needle coke, the principal raw material used in
the manufacture of graphite electrodes, as well as certain other graphite
specialty products. The calcium carbide products segment manufactures and
markets calcium carbide and its direct derivatives, primarily acetylene gas,
that are used in the further manufacturing of specialty chemicals, in fuel gas
applications, and in metallurgical applications such as ductile iron and steel
desulfurization.
Net sales to the Company's top ten customers as a percentage of total sales
were approximately 30% in each of the fiscal years ended July 31, 1999, 1998 and
1997. Sales of graphite electrodes and calcium carbide for metallurgical
applications to customers in the steel and ductile iron industries accounted for
approximately 60% of net sales in each of the fiscal years presented. Amounts
due from customers in the steel industry at July 31, 1999 and 1998 were $28.7
million and $36.4 million, respectively.
As a result of increased needle coke production capabilities achieved
throughout fiscal 1998 and 1997, the Company is currently selling a greater
amount of needle coke to its competitors in the graphite electrode industry.
Third party needle coke sales as a percentage of total net sales were 13.3%,
11.5% and 9.9% for the fiscal years ended July 31, 1999, 1998 and 1997,
respectively.
39
<PAGE> 41
Segment information is as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended July 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES TO CUSTOMERS BY PRODUCT LINE:
Graphite electrodes $130,182 $159,997 $147,206
Needle coke 31,833 33,907 28,615
Bulk graphite 12,750 9,273 19,712
Granular graphite 7,155 9,627 10,223
Other 1,698 2,963 4,289
- ---------------------------------------------------------------------------------------------------------------------------
Total graphite electrode product net sales 183,618 215,767 210,045
- ---------------------------------------------------------------------------------------------------------------------------
Acetylene:
Pipeline acetylene 17,085 28,863 27,577
Fuel gas applications 14,056 20,009 21,187
Metallurgical applications 19,679 23,712 24,652
Other 5,692 5,400 6,125
- ---------------------------------------------------------------------------------------------------------------------------
Total calcium carbide product net sales 56,512 77,984 79,541
- ---------------------------------------------------------------------------------------------------------------------------
Total net sales to customers 240,130 293,751 289,586
- ---------------------------------------------------------------------------------------------------------------------------
Intersegment sales, at prevailing market prices:
Graphite electrode products 152 338 248
Eliminations (152) (338) (248)
- ---------------------------------------------------------------------------------------------------------------------------
Total net sales $240,130 $293,751 $289,586
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NET SALES TO GEOGRAPHIC AREAS:
United States $157,118 $202,557 $199,895
Europe 51,157 45,237 40,465
Other Americas 22,853 32,585 23,943
Asia/Far East 9,002 13,372 25,283
- ---------------------------------------------------------------------------------------------------------------------------
Total net sales $240,130 $293,751 $289,586
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS):
Graphite electrode products* $ 24,710 $ 32,813 $ 36,346
Calcium carbide products 5,079 10,470 10,616
Unallocated corporate expenses (22,515) (44,951) (9,908)
- ---------------------------------------------------------------------------------------------------------------------------
Total operating income (loss) $ 7,274 $ (1,668) $ 37,054
- ---------------------------------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION:
Graphite electrode products $ 16,371 $ 12,365 $ 9,325
Calcium carbide products 1,545 1,553 1,505
Unallocated corporate 187 458 370
- ---------------------------------------------------------------------------------------------------------------------------
Total depreciation and amortization $ 18,103 $ 14,376 $ 11,200
- ---------------------------------------------------------------------------------------------------------------------------
EBITDA**
Graphite electrode products $ 41,081 $ 45,178 $ 45,671
Calcium carbide products 6,624 12,023 12,121
Unallocated corporate expenses (7,285) (6,493) (8,438)
- ---------------------------------------------------------------------------------------------------------------------------
Total EBITDA $ 40,420 $ 50,708 $ 49,354
- ---------------------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS:
Graphite electrode products $224,773 $238,399 $171,643
Calcium carbide products 27,888 29,332 27,695
Corporate assets 21,755 21,368 36,522
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $274,416 $289,099 $235,860
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES:
Graphite electrode products $ 13,718 $ 62,698 $ 31,701
Calcium carbide products 1,814 1,608 2,064
- ---------------------------------------------------------------------------------------------------------------------------
Total capital expenditures $ 15,532 $ 64,306 $ 33,765
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Excludes other expense in fiscal 1999 and 1998, which are included in
"Unallocated Corporate Expenses" (see Note 12).
**EBITDA is defined as operating income before depreciation and amortization,
early retirement/severance charges and other expense. EBITDA is not presented
as a measure of operating results under generally accepted accounting
principles. However, management believes that EBITDA is an appropriate measure
of the Company's ability to service its cash requirements. EBITDA is an
important measure in assessing the performance of the Company's business
segments.
40
<PAGE> 42
11. CASH FLOW INFORMATION
Net cash payments for interest and income taxes were as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended July 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $7,572 $10,196 $8,913
Income taxes 106 6,627 5,926
===========================================================================================================================
</TABLE>
12. OTHER ITEMS
EARLY RETIREMENT/SEVERANCE CHARGE
Early retirement/severance charges for the year ended July 31, 1997 represent
costs associated with the retirement of two executives of the Company.
OTHER EXPENSE
During fiscal 1999, the Company announced plans to close certain baking and
graphitizing operations at its St. Marys, Pennsylvania plant. Other expense for
fiscal 1999 includes the Closure Charge, an $8.0 million pre-tax charge to
provide for the estimated cost of the facility closure activities. Included in
this charge is $5.7 million for the net write-off of impaired fixed assets and
spare parts inventory, $1.4 million for hourly and salary workforce severance
costs and $0.9 million in other closure-related costs. Essentially all of these
costs were funded in fiscal 1999. Other expense for fiscal 1999 and 1998 also
includes charges of $7.0 million and $38.0 million, respectively, representing,
in total, the Antitrust Charge (see Note 7).
41
<PAGE> 43
13. QUARTERLY RESULTS (UNAUDITED)
The following table sets forth certain unaudited consolidated quarterly
operating information of the Company (in millions, except per share
information):
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1999: 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER FISCAL YEAR
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $69.3 $58.2 $58.3 $54.3 $240.1
Gross profit 10.0 8.7 8.7 9.8 37.2
Operating income (loss) (1.6)*** 5.3 4.5 (0.9)* 7.3
Net income (loss) (2.0) 2.5 1.8 (1.9) 0.4
Per diluted share:
Net income (loss) (0.23) 0.30 0.22 (0.23) 0.05
===========================================================================================================================
Year Ended July 31, 1998:
- ---------------------------------------------------------------------------------------------------------------------------
Net sales $73.4 $74.8 $72.8 $72.8 $293.8
Gross profit 14.1 14.5 10.7 11.9 51.2
Operating income (loss) 10.3 10.1 (31.1)* 9.0 (1.7)
Income (loss) before extraordinary loss 5.7 5.8 (21.3) 4.7 (5.1)
Extraordinary loss (6.4)** -- -- -- (6.4)
Net income (loss) (0.7) 5.8 (21.3) 4.7 (11.5)
Per diluted share:
Income (loss) before extraordinary loss 0.64 0.66 (2.44) 0.54 (0.58)
Net (loss) income (0.09) 0.66 (2.44) 0.54 (1.32)
===========================================================================================================================
</TABLE>
* Includes a $7.0 million pre-tax charge in fiscal 1999 and a $38.0 million
pre-tax charge in fiscal 1998 for potential antitrust liabilities (see
Note 7).
** Represents net charges associated with the early retirement of Senior Notes
(see Note 6).
*** Includes an $8.0 million pre-tax charge for facility closure activities (see
Note 12).
14. SHARE REPURCHASE PROGRAM
During fiscal 1998, the Company's Board of Directors authorized the expenditure
of up to $10 million to repurchase the Company's Common Stock. Subject to price
and market considerations and applicable securities laws, such purchases may be
made from time to time in open market, privately negotiated or other
transactions. No time limit was placed on the duration of the repurchase
program. The extent and timing of any repurchases will depend on market
conditions and other corporate considerations. During fiscal 1999, the Company
repurchased 414,200 shares of its Common Stock for $4.2 million under its share
repurchase program. Since fiscal 1998, the Company has repurchased an aggregate
467,200 shares of its Common Stock under its share repurchase program at a total
cost of $5.7 million.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
This item is not applicable to the Registrant for this Annual Report on Form
10-K.
42
<PAGE> 44
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item will be furnished in the Company's Proxy
Statement dated October 22, 1999 and to be filed within 120 days of July 31,
1999 and is incorporated herein by reference.
ITEM 11 EXECUTIVE COMPENSATION
Information required by this item will be furnished in the Company's Proxy
Statement dated October 22, 1999 and to be filed within 120 days of July 31,
1999 and is incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item will be furnished in the Company's Proxy
Statement dated October 22, 1999 and to be filed within 120 days of July 31,
1999 and is incorporated herein by reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item will be furnished in the Company's Proxy
Statement dated October 22, 1999 and to be filed within 120 days of July 31,
1999 and is incorporated herein by reference.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) List of Financial Statements
The following consolidated financial statements, including the notes
thereto, of the Company and the Report of Independent Accountants set forth on
pages 24 through 42 and page 23, respectively, of this Annual Report on Form
10-K, are incorporated by reference into this Item 14 of Form 10-K by Item 8
hereof:
* Consolidated Balance Sheets as of July 31, 1999 and 1998.
* Consolidated Statements of Operations for the Years Ended July 31, 1999,
1998 and 1997.
* Consolidated Statements of Stockholders' Equity for the Years Ended
July 31, 1999, 1998 and 1997.
* Consolidated Statements of Cash Flows for the Years Ended July 31, 1999,
1998 and 1997.
* Report of Independent Accountants dated September 8, 1999.
(a)(2) List of Financial Statement Schedules
The following financial statement schedule of the Company and the Report of
Independent Accountants are included on pages 49 and 48, respectively, of this
Annual Report on Form 10-K and are incorporated by reference into this Item 14
on Form 10-K:
* Report of Independent Accountants dated September 8, 1999.
* Schedule II--Valuation and Qualifying Accounts for the Years Ended July 31,
1999, 1998 and 1997.
All other financial statement schedules are not required, are not
applicable or the information called for therein is included elsewhere in the
consolidated financial statements or related notes thereto.
43
<PAGE> 45
(a)(3) List of Exhibits
Exhibit No. Description
- --------------------------------------------------------------------------------
3.1* Restated Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1, Registration No. 33-91002)
3.2* Amended and Restated By-Laws of the Company (incorporated herein
by reference to Exhibit 3.2 to the Company's Registration
Statement on Form S-1, Registration No. 33-91002)
3.3* Restated Stockholders' Agreement dated as of September 19, 1995
among the Company and the Management Stockholders (incorporated
herein by reference to Exhibit 3.3 to the Company's Registration
Statement on Form S-1, Registration No. 33-31408)
3.4* Rights Agreement, including the associated Form of Rights
Certificate and Form of Certificate of Designation for Series A
Junior Participating Preferred Stock, dated as of May 21, 1999,
between The Carbide/Graphite Group, Inc. and State Street Bank
(incorporated herein by reference to Exhibit 1 of the Company's
Current Report on Form 8-K dated May 21, 1999 and filed on June 1,
1999)
4.1* Specimen Certificate for Common Stock of the Company (incorporated
herein by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-1, Registration No. 33-91102)
4.2* Indenture dated August 26, 1993 between the Company and State
Street Bank and Trust Company, as trustee, relating to 11 1/2%
Senior Notes Due 2003, including the form of Senior Note included
therein (incorporated herein by reference to Exhibit 4.2 to the
Company's Registration Statement on Form S-1, Registration No.
33-91102)
4.3* Supplemental Indenture No. 2 dated as of September 15, 1997
between the Company and State Street Bank and Trust Company, as
trustee, related to the elimination of substantially all of the
restrictive covenants and certain default provisions in the Senior
Note Indenture (incorporated herein by reference to Exhibit 4.3 to
the Company's Annual Report on Form 10-K for its fiscal year ended
July 31, 1997, Commission File No. 0-20490)
10.1* Securities Purchase Agreement dated as of September 25, 1991
between the Company and BOC (incorporated herein by reference to
Exhibit 10.1 to the Company's Registration Statement on Form S-1,
Registration No. 33-65150)
10.2* Asset Transfer Agreement dated as of July 9, 1988 among the
Company, BOC and Centre Capital Investors, L.P. (incorporated
herein by reference to Exhibit 10.2 to the Company's Registration
Statement on Form S-1, Registration No. 33-65150)
10.3* Asset Purchase Agreement dated as of January 17, 1995 among the
Company, The C/G Specialty Products Business Trust, Materials
Technology Corporation and SGL Carbon Corporation (incorporated
herein by reference to Exhibit 2.1 to the Company's Current Report
on Form 8-K dated January 17, 1995)
10.4* Share Purchase Agreement dated as of January 17, 1995 between the
Company and 9012-9677 Quebec Inc. (incorporated herein by
reference to Exhibit 2.2 to the Company's Current Report on Form
8-K dated January 17, 1995)
10.5* Revolving Credit Agreement and Letter of Credit Issuance dated
September 25, 1997 by and among the Company, PNC Bank, N.A. and
the Financial Institutions party thereto (incorporated herein by
reference to Exhibit 10.5 to the Company's Annual Report on Form
10-K for its fiscal year ended July 31, 1997, Commission File No.
0-20490)
10.6* Second Amendment to Revolving Credit and Letter of Credit Issuance
Agreement and Waiver between the Company and PNC Bank, N.A. dated
April 30, 1998 (incorporated herein by reference to Exhibit 10.49
to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended April 30, 1998, Commission File No. 0-20490)
44
<PAGE> 46
Exhibit No. Description
- --------------------------------------------------------------------------------
10.7* Third Amendment to the Revolving Credit and Letter of Credit
Issuance Agreement and Amendment to Revolving Credit Notes Among
The Carbide/Graphite Group, Inc., the Lenders which are Parties
thereto, and PNC Bank, N.A., as the Issuing Bank and as the Agent
for the Lenders dated April 30, 1999 (incorporated herein by
reference to Exhibit 10.33 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended April 30, 1999)
10.8 Fourth Amendment to the Revolving Credit and Letter of Credit
Issuance Agreement Among The Carbide/Graphite Group, Inc., the
Lenders which are Parties thereto, and PNC Bank, N.A., as the
Issuing Bank and as the Agent for the Lenders dated September 8,
1999
10.9* Office Lease dated August 30, 1991 between the Company and The
Equitable Life Assurance Society of the United States
(incorporated herein by reference to Exhibit 10.10 to the
Company's Registration Statement on Form S-1, Registration No.
33-65150) (incorporated herein by reference to Exhibit 10.18 to
the Company's Annual Report on Form 10-K for its fiscal year ended
July 31, 1997, Commission File No. 0-20490)
10.10 Employment Agreement dated September 1, 1999 between the Company
and Walter B. Fowler
10.11* Employment Agreement dated February 1, 1998 between the Company
and Stephen D. Weaver (incorporated herein by reference to Exhibit
10.10 to the Company's Annual Report on Form 10-K for its fiscal
year ended July 31, 1998, Commission File No. 0-20490)
10.12* Separation Agreement dated April 25, 1997 between the Company and
Walter E. Damian (incorporated herein by reference to Exhibit
10.21 to the Company's Annual Report on Form 10-K for its fiscal
year ended July 31, 1997, Commission File No. 0-20490)
10.13* Separation Agreement dated April 25, 1997 between the Company and
Jim J. Trigg (incorporated herein by reference to Exhibit 10.22 to
the Company's Annual Report on Form 10-K for its fiscal year ended
July 31, 1997, Commission File No. 0-20490)
10.14 Separation Agreement dated August 11, 1999 between the Company and
Ararat Hacetoglu
10.15 Separation Agreement dated October 6, 1999 between the Company and
Michael F. Supon
10.16* 1995 Stock-Based Incentive Compensation Plan of the Company
(incorporated herein by reference to Exhibit 10.24 to the
Company's Registration Statement on Form S-1, Registration No.
33-31408)
10.17* Amendment to 1995 Stock-Based Incentive Compensation Plan of the
Company dated August 26, 1996 (incorporated herein by reference to
Exhibit 10.25 to the Company's Annual Report on Form 10-K for its
fiscal year ended July 31, 1996, Commission File No. 0-20490)
10.18* Agreement under the 1995 Stock-Based Incentive Plan (incorporated
herein by reference to Exhibit 10.22 to the Company's Registration
Statement on Form S-1, Registration No. 33-91102)
10.19* Non-Employee Director Stock-Based Incentive Compensation Plan of
the Company dated August 26, 1996 (incorporated herein by
reference to Exhibit 10.27 to the Company's Annual Report on Form
10-K for its fiscal year ended July 31, 1996, Commission File No.
0-20490)
10.20* Incentive Bonus Plan of the Company (incorporated herein by
reference to Exhibit 10.33 to the Company's Annual Report on Form
10-K for its fiscal year ended July 31, 1997, Commission File No.
0-20490)
10.21* Supplemental Executive Savings Plan of the Company (incorporated
herein by reference to Exhibit 10.31 to the Company's Annual
Report on Form 10-K for its fiscal year ended July 31, 1996,
Commission File No. 0-20490)
10.22* The 1998 Stock-Based Incentive Compensation Plan (incorporated
herein by reference from Exhibit 10.32 of the Company's Quarterly
Report on Form 10-Q for the quarterly period ended January 31,
1999)
45
<PAGE> 47
Exhibit No. Description
- --------------------------------------------------------------------------------
10.23* Replacement Power Agreement between the Power Authority of the
State of New York and the Company dated October 17, 1994
(incorporated herein by reference to Exhibit 10.31 to the
Company's Registration Statement on Form S-1, Registration No.
33-91102)
10.24* Acetylene Purchase Agreement dated as of January 1, 1985 between
BOC (as predecessor to the Company) and GAF Corporation
(incorporated herein by reference to Exhibit 10.32 to the
Company's Registration Statement on Form S-1, Registration No.
33-91102)
10.25* Amendment to the Acetylene Supply Agreement between Air Products &
Chemicals and the Company dated as of October 21, 1994
(incorporated herein by reference to Exhibit 10.33 to the
Company's Registration Statement on Form S-1, Registration No.
33-91102)
10.26* Acetylene Agreement dated January 1, 1975, as amended June 12,
1978 and February 10, 1982, between Airco, Inc. and DuPont
(incorporated herein by reference to Exhibit 10.34 to the
Company's Registration Statement on Form S-1, Registration No.
33-91102)
10.27* Agreement between the Company (Carbide Unit), Calvert City,
Kentucky, and the Oil, Chemical and Atomic Workers, International
Union, AFL-CIO Local 3-556, dated February 1, 1996 (incorporated
herein by reference to Exhibit 10.38 to the Company's Annual
Report on Form 10-K for its fiscal year ended July 31, 1996,
Commission File No. 0-20490)
10.28 Agreement between the Company (Electrode Unit) and International
Union of Electrical, Technical Salaried Machine and Furniture
Workers, AFL-CIO Local Union 502, dated June 7, 1999
10.29* Agreement by and between the Company (Carbide Division),
Louisville, Kentucky Plant, and International Brotherhood of
Firemen and Oilers Local No. 320, Affiliated with the AFL-CIO,
dated July 1, 1996 (incorporated herein by reference to Exhibit
10.40 to the Company's Annual Report on Form 10-K for its fiscal
year ended July 31, 1996, Commission File No. 0-20490)
10.30* Agreement between the Company (Electrode Unit) and Oil, Chemical
and Atomic Workers International Union and Local Union Number
8-23516, dated January 25, 1999 (incorporated herein by reference
to Exhibit 10.29 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended January 31, 1999)
10.31* Master Lease between the Company and PNC Leasing Corp. dated
January 27, 1997 (incorporated herein by reference to Exhibit
10.43 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended April 30, 1997, Commission File No.
0-20490)
21.1* Subsidiaries and Affiliates of the Company (incorporated herein by
reference to Exhibit 21.1 to the Company's Annual Report on Form
10-K for its fiscal year ended July 31, 1997, Commission File No.
0-20490)
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
* Exhibit has previously been filed with the Commission and is herein
incorporated by reference.
(b) Reports on Form 8-K
On June 1, 1999, the Company filed a Report on Form 8-K dated May 21, 1999
announcing that its Board of Directors had approved a shareholders rights plan.
On June 2, 1999, the Company filed a Report on Form 8-K dated June 2, 1999
announcing that it was in active negotiations with the union representing its
hourly workforce at its St. Marys, PA plant. On June 7, 1999, the Company filed
a Report on Form 8-K dated June 7, 1999 announcing that it had reached a labor
agreement with the union representing its hourly workforce at its St. Marys, PA
plant.
46
<PAGE> 48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on October 25,
1999.
THE CARBIDE/GRAPHITE GROUP, INC.
By: /s/ Walter B. Fowler
- -------------------------------------------------
(WALTER B. FOWLER)
President and Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated on
October 25, 1999.
<TABLE>
<CAPTION>
Signature Title
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
/s/ Walter B. Fowler Chairman of the Board, President, Chief Executive Officer and
- ------------------------------------------ Director (Principal Executive Officer)
(WALTER B. FOWLER)
/s/ Stephen D. Weaver Vice President-Finance and Chief Financial Officer
- ------------------------------------------ (Principal Financial Officer)
(STEPHEN D. WEAVER)
/s/ Jeffrey T. Jones Controller-Corporate Finance (Principal Accounting Officer)
- ------------------------------------------
(JEFFREY T. JONES)
/s/ Ararat Hacetoglu Vice President and General Manager, Carbide Products
- ------------------------------------------
(ARARAT HACETOGLU)
/s/ Michael F. Supon Vice President and General Manager, Electrodes and
- ------------------------------------------ Graphite Specialty Products
(MICHAEL F. SUPON)
/s/ Jim J. Trigg Vice President and General Manager, Seadrift Coke, L.P.
- ------------------------------------------
(JIM J. TRIGG)
/s/ James R. Ball Director
- ------------------------------------------
(JAMES R. BALL)
/s/ Paul F. Balser Director
- ------------------------------------------
(PAUL F. BALSER)
/s/ Robert M. Howe Director
- ------------------------------------------
(ROBERT M. HOWE)
/s/ Ronald B. Kalich Director
- ------------------------------------------
(RONALD B. KALICH)
/s/ Nicholas T. Kaiser Director
- ------------------------------------------
(NICHOLAS T. KAISER)
/s/ Charles E. Slater Director
- ------------------------------------------
(CHARLES E. SLATER)
</TABLE>
47
<PAGE> 49
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Carbide/Graphite Group, Inc.:
In connection with our audits of the consolidated financial statements of The
Carbide/Graphite Group, Inc. and Subsidiaries (the Company) as of July 31, 1999
and 1998 and for each of the three years in the period ended July 31, 1999,
which financial statements are included in this Form 10-K, we have also audited
the financial statement schedule listed in Item 14 herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ PricewaterhouseCoopers LLP
- ----------------------------------
Pittsburgh, Pennsylvania
September 8, 1999
48
<PAGE> 50
SCHEDULE II
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended July 31, 1999, 1998 and 1997 (in thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
- ---------------------------------------------------------------------------------------------------------------------------
Additions
Balance at --------------------------
Beginning Charged Charged to Balance at
of Period to Expense Other Accounts Deductions* End of Period
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Year Ended July 31, 1999 $2,025 $120 -- $1,326 $ 819
Year Ended July 31, 1998 2,029 -- -- (4) 2,025
Year Ended July 31, 1997 1,896 120 $13 -- 2,029
===========================================================================================================================
</TABLE>
* Represents uncollectible accounts written off and recoveries of customer
accounts previously reserved for.
49
<PAGE> 1
Exhibit 10.8
FOURTH AMENDMENT TO REVOLVING CREDIT
AND LETTER OF CREDIT ISSUANCE AGREEMENT
This FOURTH AMENDMENT TO REVOLVING CREDIT AND LETTER OF CREDIT
ISSUANCE AGREEMENT is made as of this 8th day of September, 1999 (this "FOURTH
AMENDMENT") and entered into by and among THE CARBIDE/GRAPHITE GROUP, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"BORROWER"), the financial institutions party thereto as lenders (collectively
referred to herein as the "LENDERS"), PNC BANK, NATIONAL ASSOCIATION, in its
capacity as the issuer of letters of credit (in such capacity, the "L/C ISSUER")
and PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Lenders and
the L/C Issuer (in such capacity, the "AGENT") and further amends that certain
Revolving Credit and Letter of Credit Issuance Agreement dated as of September
25, 1997, as previously amended by that certain First Amendment to Revolving
Credit and Letter of Credit Issuance Agreement dated as of October 28, 1997 (the
"FIRST AMENDMENT"), the Second Amendment to Revolving Credit Agreement and
Waiver dated as of April 30, 1998 (the "SECOND AMENDMENT") and the Third
Amendment to Revolving Credit and Letter of Credit Issuance Agreement and
Amendment to Revolving Credit Notes dated as of April 30, 1999 (the "THIRD
AMENDMENT") (the Revolving Credit and Letter of Credit Issuance Agreement, as
amended by the First Amendment, the Second Amendment and the Third Amendment, is
hereinafter referred to as the "ORIGINAL CREDIT AGREEMENT").
WITNESSETH
WHEREAS, as a result of the Investigation the Borrower has
recorded, without admitting or denying either culpability or liability, a charge
of Thirty Eight Million Dollars ($38,000,000) for its Fiscal Quarter ending
April 30, 1998 for liabilities which may be incurred as a result of the
Investigation and will record, without admitting or denying either culpability
or liability, a charge of Seven Million Dollars ($7,000,000) for its Fiscal
Quarter ending July 31, 1999; and
WHEREAS, the Borrower has requested certain amendments to the
terms of the Original Credit Agreement to accommodate the Investigation and the
Special Reserve (as defined below); and
WHEREAS, the Agent, the Lenders and the L/C Issuer have agreed
to make such amendments upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing premises, the
mutual covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
with the intent to be legally bound hereby, the parties hereto agree as follows:
<PAGE> 2
ARTICLE I
AMENDMENTS TO ORIGINAL CREDIT AGREEMENT
SECTION 1.01 AMENDMENTS TO SECTION 1.01 OF THE ORIGINAL CREDIT
AGREEMENT. The following defined terms and the definitions therefor are hereby
added to Section 1.01 of the Original Credit Agreement and inserted in correct
alphabetical order:
Fourth Amendment shall mean the Fourth Amendment to Revolving
Credit and Letter of Credit Issuance Agreement dated as of the Fourth
Amendment Effective Date.
Fourth Amendment Effective Date shall mean September 8, 1999.
Fourth Amendment Fee shall mean a fee equal to five (5) basis
points of each Lender's Revolving Credit Commitment which shall be
payable by the Borrower to each Lender who approves the Fourth
Amendment on or before the Fourth Amendment Effective Date.
Initial Special Reserve shall mean the charge of Thirty-Eight
Million Dollars ($38,000,000) recorded by the Borrower for its Fiscal
Quarter ending April 30, 1998 for potential liabilities which may be
incurred as a result of the Investigation.
Supplemental Special Reserve shall mean the charge of Seven
Million Dollars ($7,000,000) recorded by the Borrower for its Fiscal
Quarter ending July 31, 1999 for potential liabilities which may be
incurred as a result of the Investigation.
SECTION 1.02 MODIFICATION OF EXISTING DEFINED TERM. The following
defined terms in Section 1.01 of the Original Credit Agreement are amended and
restated to read as follows:
EBITDA shall mean, for any period, the consolidated net income
(or net loss) of the Borrower for such period as determined in
accordance with GAAP, plus (a) the sum of (i) depreciation expense,
(ii) amortization expense, (iii) Interest Expense, (iv) total income
tax expense, (v) extraordinary or unusual losses (including (a) the
Initial Special Reserve and the Supplemental Special Reserve and (b)
after tax losses on sales of assets outside of the ordinary course of
business and not otherwise included in GAAP extraordinary or unusual
losses), (vi) other non-cash charges, and (vii) the net loss of any
Person that is accounted for by the equity method of accounting, except
to the extent of the amount of dividends or distributions paid to the
Borrower, less (b) the sum of (i) extraordinary or unusual gains
(including after tax gains on sales of assets outside of the ordinary
course of business and not otherwise included in GAAP extraordinary or
unusual gains), (ii) other non-cash credits, and (iii) the net income
of any Person that is accounted for by the equity method of accounting,
-2-
<PAGE> 3
except to the extent of the amount of dividends or distributions paid
to the Borrower.
Special Reserve shall mean for all periods prior to April 30,
1999 the Initial Special Reserve and for all periods after May 1, 1999
collectively the Initial Special Reserve and the Supplemental Special
Reserve.
SECTION 1.03 NO OTHER AMENDMENTS. Except as specifically set forth
therein, the amendments to the Original Credit Agreement set forth in Sections
1.01 through 1.02 above do not either implicitly or explicitly alter, waive or
amend, the provisions of the Original Credit Agreement. The amendments set forth
in Sections 1.01 through 1.02 hereof do not waive, now or in the future,
compliance with any other covenant, term or condition to be performed or
complied with nor do they impair any rights or remedies of the Lenders and the
Agents under the Original Credit Agreement with respect to any such violation.
ARTICLE II
BORROWER'S SUPPLEMENTAL REPRESENTATIONS
SECTION 2.01. INCORPORATION BY REFERENCE. As an inducement to the
Agent, the Lenders, and the L/C Issuer to enter into this Fourth Amendment, the
Borrower hereby repeats herein for the benefit of the Agent, the Lenders, and
the L/C Issuer the representations and warranties made by the Borrower in
Article IV of the Original Credit Agreement, as amended hereby, except that for
purposes hereof such representations and warranties shall be deemed to extend to
and cover this Fourth Amendment.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01 CONDITIONS PRECEDENT. Each of the following shall be a
condition precedent to the effectiveness of this Fourth Amendment:
(i) The Agent shall have received, on or before the Fourth
Amendment Effective Date, the following items, each, unless otherwise indicated,
dated on or before the Fourth Amendment Effective Date and in form and substance
satisfactory to the Agent and its special counsel, Tucker Arensberg, P.C.:
(A) A duly executed counterpart original of this
Fourth Amendment executed by the Required
Lenders, the Agent and the Borrower;
(B) A certificate from the Secretary of the Borrower
certifying that the Articles of Incorporation and Bylaws of the Borrower
previously delivered to the Agent are true, complete, and correct.
-3-
<PAGE> 4
(C) Payment of the Fourth Amendment Fee to the Agent
for the benefit of the Lenders;
(D) Such other instruments, documents and opinions of
counsel as the Agent shall reasonably require, all of which shall be
satisfactory in form and content to the Agent and its special counsel, Tucker
Arensberg, P.C.
(ii) The following statements shall be true and correct on the
Fourth Amendment Effective Date and the Agent shall have received a certificate
signed by an Authorized Officer of the Borrower, dated the Fourth Amendment
Effective Date, stating that:
(A) the representations and warranties made pursuant
to Section 2.01 of this Fourth Amendment and in the other Loan Documents, as
amended hereby, are true and correct on and as of the Fourth Amendment Effective
Date as though made on and as of such date;
(B) no petition by or against the Borrower has at any
time been filed under the United States Bankruptcy Code or under any similar
act;
(C) Taking into account the amendments set forth in
this Fourth Amendment, no Event of Default or event which with the giving of
notice, the passage of time or both would become an Event of Default has
occurred and is continuing, or would result from the execution of or performance
under this Fourth Amendment;
(D) Taking into account the amendments set forth in
this Fourth Amendment, no Material Adverse Change has occurred which has not
been disclosed to the Agent and the Lenders; and
(E) Taking into account the amendments set forth in
this Fourth Amendment, the Borrower has in all material respects performed all
agreements, covenants and conditions required to be performed on or prior to the
date hereof under the Original Credit Agreement and the other Loan Documents.
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.01 RATIFICATION OF TERMS. Except as expressly amended by this
Fourth Amendment, the Original Credit Agreement and each and every
representation, warranty, covenant, term and condition contained therein is
specifically ratified and confirmed. The Borrower hereby confirms that any
collateral for the Lender Obligations, including but not limited to
encumbrances, Liens, security interests, mortgages and pledges granted by the
Borrower or third parties, shall continue unimpaired and in full force and
effect. THE BORROWER EXPRESSLY RATIFIES AND CONFIRMS THE WAIVER OF JURY TRIAL
PROVISION CONTAINED IN THE ORIGINAL CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
-4-
<PAGE> 5
SECTION 4.02 REFERENCES. All notices, communications, agreements,
certificates, documents or other instruments executed and delivered after the
execution and delivery of this Fourth Amendment in connection with the Original
Credit Agreement, any of the other Loan Documents or the transactions
contemplated thereby may refer to the Original Credit Agreement without making
specific reference to this Fourth Amendment, but nevertheless all such
references shall include this Fourth Amendment unless the context requires
otherwise. From and after the Amendment Effective Date, all references in the
Original Credit Agreement and each of the other Loan Documents to the
"Agreement" shall be deemed to be references to the Original Credit Agreement as
amended hereby.
SECTION 4.03 INCORPORATION INTO ORIGINAL CREDIT AGREEMENT. This Fourth
Amendment is deemed incorporated into the Original Credit Agreement. To the
extent that any term or provision of this Fourth Amendment is or may be deemed
expressly inconsistent with any term or provision of the Original Credit
Agreement, the terms and provisions hereof shall control.
SECTION 4.04 COUNTERPARTS. This Fourth Amendment may be executed in
different counterparts, each of which when executed by the Borrower and the
Agent, the Lenders, and the L/C Issuer shall be regarded as an original, and all
such counterparts shall constitute one Fourth Amendment.
SECTION 4.05 CAPITALIZED TERMS. Except for proper nouns and as
otherwise defined herein, capitalized terms used herein as defined terms shall
have the same meanings herein as are ascribed to them in the Original Credit
Agreement, as amended hereby.
SECTION 4.06 TAXES. The Borrower shall pay any and all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of this Fourth Amendment and such
other documents and instruments as are delivered in connection herewith and
agrees to save the Agent, the Lenders, and the L/C Issuer harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
SECTION 4.04 COSTS AND EXPENSES. The Borrower will pay all costs and
expenses of the Agent (including, without limitation, the reasonable fees and
the disbursements of the Agent's special counsel, Tucker Arensberg, P.C.) in
connection with the preparation, execution and delivery of this Fourth Amendment
and the other documents, instruments and certificates delivered in connection
herewith.
SECTION 4.08 GOVERNING LAW. THIS FOURTH AMENDMENT AND THE RIGHTS AND
OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO THE PROVISIONS
THEREOF REGARDING CONFLICTS OF LAW.
SECTION 4.09 HEADINGS. The headings of the sections in this Fourth
Amendment are for purposes of reference only and shall not be deemed to be a
part hereof.
-5-
<PAGE> 6
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto, with the intent to be
legally bound hereby, have caused this Fourth Amendment to Revolving Credit and
Letter of Credit Issuance Agreement to be duly executed by their respective
proper and duly authorized officers as a document under seal, as of the day and
year first above written.
ATTEST: BORROWER:
THE CARBIDE/GRAPHITE GROUP,
INC., a Delaware corporation
_________________________ By__________________________(SEAL)
Name: Name:
Title: Title:
AGENT AND L/C ISSUER:
PNC BANK, NATIONAL ASSOCIATION
By__________________________(SEAL)
Name:
Title:
LENDERS:
REVOLVING CREDIT PNC BANK, NATIONAL ASSOCIATION
COMMITMENT: $26,000,000.00
RATABLE SHARE: 17.33% By__________________________(SEAL)
Name:
Title:
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
-7-
<PAGE> 8
REVOLVING CREDIT NATIONAL CITY BANK OF
COMMITMENT: $18,000,000.00 PENNSYLVANIA
RATABLE SHARE: 12% By__________________________(SEAL)
Name:
Title:
REVOLVING CREDIT THE FIRST NATIONAL BANK OF
COMMITMENT: $13,000,000.00 CHICAGO
RATABLE SHARE: 8.66% By__________________________(SEAL)
Name:
Title:
REVOLVING CREDIT FIRST UNION NATIONAL BANK
COMMITMENT: $18,000,000.00
RATABLE SHARE: 12% By__________________________(SEAL)
Name:
Title:
REVOLVING CREDIT KEYBANK, NATIONAL ASSOCIATION
COMMITMENT: $13,000,000.00
RATABLE SHARE: 8.66% By__________________________(SEAL)
Name:
Title:
REVOLVING CREDIT STANDARD CHARTERED BANK
COMMITMENT: $13,000,000.00
RATABLE SHARE: 8.66% By__________________________(SEAL)
Name:
Title:
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
-8-
<PAGE> 9
REVOLVING CREDIT MELLON BANK, N.A.
COMMITMENT: $13,000,000.00
RATABLE SHARE: 8.66% By__________________________(SEAL)
Name:
Title:
REVOLVING CREDIT BANK OF AMERICA, N.A.
COMMITMENT: $18,000,000.00
RATABLE SHARE: 12% By__________________________(SEAL)
Name:
Title:
REVOLVING CREDIT THE CHASE MANHATTAN BANK
COMMITMENT: $18,000,000.00
RATABLE SHARE: 12% By__________________________(SEAL)
Name:
Title:
-9-
<PAGE> 1
Exhibit 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT between The Carbide/Graphite Group, Inc.,
a Delaware corporation (the "Corporation") and Walter B. Fowler (the
"Executive") dated as of September 1, 1999 (the "Agreement").
WHEREAS, the Corporation and the Executive have entered into
an employment agreement dated April 1, 1997 which is superseded by this
Agreement; and
WHEREAS, the Corporation wishes to employ the Executive as
Chairman, President and Chief Executive Officer of the Corporation on the terms
set forth herein and the Executive wishes to be employed by the Corporation on
such terms;
IT IS, THEREFORE AGREED:
1. Employment. The Corporation hereby agrees to employ the
Executive, and the Executive hereby agrees to be employed by the Corporation,
for the period commencing as of the date hereof and ending on August 31, 2001 as
its Chairman, President and Chief Executive Officer (the "Employment Period").
2. Duties. During the Employment Period, the Executive agrees
to devote his attention full time and during normal business hours to the
business and affairs of the Corporation and to use his best efforts to perform
faithfully and efficiently such responsibilities. The Executive shall, subject
to the supervision and control of the Board of Directors of the Corporation,
perform such duties and exercise such supervision and powers over and with
regard to the business of the Corporation as are contemplated to be performed by
the Chairman, President and Chief Executive Officer pursuant to the By-laws of
the Corporation, and such additional duties as may from time to time be
prescribed by the Board of Directors. Subject to the provisions of the
Corporation's Charter and By-laws and applicable law, it is the expectation
<PAGE> 2
of the Corporation that the Executive will continue to serve as a member of the
Board of Directors of the Corporation during the Employment Period.
3. Base Compensation. During the Employment Period, the
Executive shall receive a base salary at an annual rate of at least $350,000
with any increase thereto to be determined by the Compensation Committee of the
Board of Directors from time to time.
4. Stock Options. During the Employment Period, the Executive
shall receive stock option grants as determined by the Stock Option Plan
Committee on terms and conditions consistent with other participants in the
Stock Option Plan.
5. Annual Incentive Awards. Subject to the terms of the
Corporation's Annual Incentive Bonus Plan, the Executive's participation in the
Plan for the fiscal years ending July 31, 2000 and July 31, 2001 shall be at a
target award level equal to a rate of 50% of base pay, a "near-miss" award level
of 25% of base pay and a maximum award level of 100% of base pay.
6. Termination. (a) Death or Disability. This Agreement shall
terminate automatically upon the Executive's death. The Corporation may
terminate this Agreement during the Employment Period after having established
the Executive's "Disability" (as defined below), by giving the Executive written
notice of its intention to terminate the Executive's employment. For purposes of
this Agreement, "Disability" means the Executive's inability to substantially
perform his duties and responsibilities to the Corporation by reason of a
physical or mental disability or infirmity (i) for a continuous period of six
months or (ii) at such earlier time as the Executive submits medical evidence
satisfactory to the Corporation that the Executive has a physical or mental
disability or infirmity that will likely prevent the Executive from
substantially performing his duties and responsibilities for six months or
longer. The date of
2
<PAGE> 3
Disability shall be the day on which the Executive receives notice from the
Corporation pursuant to this Section 6(a).
(b) Cause. The Corporation shall have the right to
terminate the Executive's employment for "Cause" during the Employment Period.
For purposes of this Agreement, "Cause" shall mean (i) the willful and continued
failure by the Executive to perform substantially his duties to the Corporation
or its subsidiaries (other than any such failure resulting from his Disability)
within a reasonable period of time after a written demand for substantial
performance is delivered to the Executive by the Board of Directors, which
demand specifically identities the manner in which the Board of Directors
believes that the Executive has not substantially performed his duties, (ii)
embezzlement or theft from the Corporation or any subsidiary or affiliate by the
Executive or the commission or perpetration by the Executive of any act
involving moral turpitude, or (iii) any material and willful violation by the
Executive of his obligations under Section 8 hereof.
(c) Change of Control. The Executive shall have the
right to terminate this Agreement during the Employment Period upon thirty (30)
days prior written notice to the Corporation or a successor of the Corporation,
as the case may be, for "Good Reason" on or subsequent to the consummation of a
"Change of Control". For purposes of this Agreement, (A) "Good Reason" shall
mean (1) a change in the Executive's duties and responsibilities without his
consent such that his duties and responsibilities are materially reduced or
altered in a manner unfavorable to him or a decrease in the Executive's salary
or bonus award potential, or a material decrease in his benefits or (2) a change
in the location at which the Executive's duties are principally carried out of
more than 20 miles from the Corporation's principal executive offices in
Pittsburgh, Pennsylvania or (3) the Corporation or its successor is unwilling to
extend the
3
<PAGE> 4
Executive's employment upon terms at least as favorable to the Executive as the
terms set forth in this agreement; and (B) "Change of Control" shall mean (i) a
change in control of the Board of Directors of the Corporation pursuant to which
any single Person or two or more Persons acting in concert acquires control of
such Board of Directors or (ii) the Transfer of a least 51% or more of the
voting equity interests in the Corporation (or any parent of the Corporation),
whether by sale, merger, consolidation or otherwise, to any single Person or two
or more Persons acting in concert; provided that two or more Persons shall be
considered to be acting in concert for purposes of clauses (i) and (ii) hereof
only if such Persons would have been considered to be acting in concert as a
"group" for purposes of Section 13(d) of the Securities Exchange Act of 1934,
for such purposes treating voting equity interests of the Corporation held or
acquired by such Persons as if such voting equity interests were equity
securities in respect of which a Schedule 13D would be required to be filed with
the Securities and Exchange Commission and as if the requisite percentage and
other threshold conditions to such filing were satisfied. "Person" means any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or governmental body. "Transfer"
means, sell, transfer, convey, lease and/or deliver (other tenses of the term
have similar meaning) or sale, transfer, assignment, conveyance, lease and/or
delivery, as indicated by the context.
7. Effect of Termination. (a) Upon termination of the
Executive's employment during the Employment Period, because of death or
Disability as provided in subsection 6(a), following termination of the
Executive's employment the Corporation shall continue to pay the Executive or
his estate or other personal representative as severance (x) the amount of the
Executive's salary as provided in Section 3 at the rate in effect immediately
prior to termination of his employment for a period of twenty-four months less
the amount of any
4
<PAGE> 5
disability payments made by the Corporation or any Corporation plan and (y) in
the case of a Disability termination will afford to the Executive at the
Corporation's expense, health insurance benefits (including medical and dental)
and life insurance equivalent to the benefits enjoyed by the Executive at the
date of termination (the "Insurance Benefits') for a period of twenty-four
months from the date of such termination.
(b) If the Executive's employment is terminated by
the Corporation during the Employment Period (other than for death, Disability
or Cause or other than by virtue of a Change of Control pursuant to subsection
6(c)), or in the event the provisions of subsection 6(c)(A)(3) are not
applicable and the Corporation is unwilling to extend the Executive's employment
at the expiration of this Agreement upon terms at least as favorable to the
Executive as the terms set forth herein, the Corporation shall pay to the
Executive a cash amount as severance in a lump sum equal to two times the
Executive's annual base salary then in effect pursuant to Section 3 plus two
times the average of the previous two years of bonus plan payouts for the
Executive and shall continue to maintain the Insurance Benefits for a period of
24 months from the date of such termination or expiration. The lump sum payment
shall be paid to the Executive within 45 days after the date of such termination
or expiration.
(c) If the Executive's employment is terminated by
the Executive during the Employment Period pursuant to subsection 6(c)
(including a termination arising from the circumstances set forth in subsection
6(c)(A)(3)), the Corporation shall pay to the Executive a cash amount as
severance in a lump sum equal to 2.99 times the Executive's base salary then in
effect pursuant to Section 3 plus 2.99 times the average of the previous two
years of bonus plan payouts for the Executive; provided that such payment under
this subsection 7(c) shall be limited to an amount which would not constitute an
"excess parachute payment" under Section 280G of
5
<PAGE> 6
the federal Internal Revenue Code. Such lump sum payment shall be paid within 45
days after the date of termination provided for in subsection 6(c). The
Corporation shall continue to maintain the Insurance Benefits for a period of 36
months from the date of the termination provided for in subsection 6(c).
(d) Nothing herein shall be deemed to restrict or
reduce the Executive's vested benefits under the Corporation's Stock Option
Plans, the compensation deferral plan, the Savings Incentive Plan or the Annual
Incentive Bonus Plan as determined in accordance with the provisions of such
plans.
(e) No continued salary or severance shall be paid if
the Executive's employment terminates for any reason during the Employment
Period other than as set forth above in this Section 7. Upon the termination of
employment with the Corporation for any reason, the Executive shall offer to
resign his position as a director of the Corporation, effective as of the date
of such termination.
8. Confidential Information; Non-Competition. (a) For a three
year period commencing on the date on which the Executive's employment with the
Corporation, or any of its affiliates, terminates for whatever reason (the "Date
of Termination"), (i) the Executive shall hold in a fiduciary capacity for the
benefit of the Corporation all secret or confidential information, knowledge or
data relating to the Corporation or its affiliates, and their respective
businesses which shall not be public knowledge (other than information which
becomes public as a result of acts of the Executive or his representatives in
violation of this Agreement), including without limitation, customer lists, bid,
proposals, contracts, matters subject to litigation, technology or financial
information of the Corporation or its subsidiaries and other know-how, and (ii)
the Executive shall not, without the prior written consent of the Corporation,
6
<PAGE> 7
communicate or divulge any such information, knowledge or data to anyone other
than the Corporation and those designated by it in writing.
(b) For a three year period commencing on the Date of
Termination, the Executive will not, directly or indirectly, (i) own, manage,
operate, control or participate in the ownership, management or control of, or
be connected as an officer, employee, partner, director, or consultant or
otherwise, with, or have any financial interest in (except for (A) ownership as
of the date hereof, (B) any ownership in the common stock of the Corporation, or
(C) any ownership of less than 5% of the outstanding equity interest in any
entity) (I) the manufacture of graphite electrodes, or (II) the refining of
products required for production of, or the production of, needle coke, or the
manufacture or marketing of calcium carbide and its direct derivatives, in each
case, in any market in which the Corporation or its affiliates conducts or
solicits business or (ii) solicit or contact any employee of the Corporation or
its affiliates with a view to inducing or encouraging such employee to leave the
employ of the Corporation or its affiliates for the purpose of being employed by
the Executive, an employer affiliated with the Executive, or any competitor of
the Corporation or any affiliate thereof; provided that the provisions of
subsection (b)(i) shall be limited to a period of two years in the event the
Corporation is unwilling to extend the Executive's employment at the expiration
of this Agreement upon terms at least as favorable to the Executive as set forth
in this Agreement or the termination by the Corporation of the Executive's
employment during the Employment Period other than for Cause or Disability.
(c) The Executive acknowledges that the provisions of
this Section 8 are reasonable and necessary for the protection of the
Corporation and that the Corporation will be irrevocably damaged if such
provisions are not specifically enforced. Accordingly, the
7
<PAGE> 8
Executive agrees that, in addition to any other relief to which the Corporation
may be entitled in the form of actual or punitive damages, the Corporation shall
be entitled to seek and obtain injunctive relief from a court of competent
jurisdiction (without the posting of a bond therefor) for the purposes of
restraining the Executive from any actual or threatened breach of such
provisions.
9. Successors. (a) This Agreement is personal to the Executive
and without the prior written consent of the Corporation shall not be assignable
by the Executive other than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Corporation and its successors.
(c) This Agreement supersedes the employment
agreement dated April 1, 1997 between the Executive and the Corporation which
prior agreement is no longer in force.
10. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Walter B. Fowler
18 Green Brier Drive
Allison Park, PA 15101
8
<PAGE> 9
If to the Corporation:
The Carbide/Graphite Group, Inc.
One Gateway Center, 19th Floor
Pittsburgh, PA 15222
Attention: Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(c) The Corporation may withhold from any amounts
payable under this Agreement such Federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(d) The Corporation's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of such
provision or any other provision hereof. The Executive's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a waiver
of such provision hereof.
(e) This Agreement embodies the entire agreement
between the parties with respect to the Executive's employment, and may not be
changed or terminated orally.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and pursuant to the authorization from its Board of Directors the Corporation
has caused these presents to be executed in its name and on its behalf, all as
of the day and year first above written.
THE CARBIDE/GRAPHITE GROUP,
INC.
By /s/ Roger Mulvihill
-------------------------
Name: Roger Mulvihill
Title: Secretary
/s/ Walter B. Fowler
---------------------------
Walter B. Fowler
9
<PAGE> 1
Exhibit 10.14
[LOGO]
THE CARBIDE/GRAPHITE GROUP, INC.
================================================================================
To: | From:
ARA HACETOGLU | WALTER B. FOWLER
|
================================================================================
DATE August 11, 1999
---------------
SUBJECT: TERMINATION, CONFIDENTIALITY &
NON-COMPETITION AGREEMENT
PERSONAL & CONFIDENTIAL
IT WAS AGREED BY THE C/G BOARD OF DIRECTORS THAT YOU WILL BE
GRANTED ONE YEAR OF SEVERANCE PAY AND ONE YEAR OF MEDICAL
COVERAGE (AS PROVIDED BY THE COMPANY AND CURRENTLY IN EFFECT AT
THE TIME OF TERMINATION) IN THE EVENT YOU ARE TERMINATED FROM THE
COMPANY FOR A REASON OTHER THAN CAUSE AS DEFINED IN THE ATTACHED
SCHEDULE A. PLEASE UNDERSTAND THAT A TRANSFER TO A JOINT VENTURE
OR OTHER SUCCESSOR ORGANIZATION WILL NOT CONSTITUTE A TERMINATION
FOR PURPOSES OF THIS AGREEMENT IF YOU ARE EMPLOYED BY THE
SUCCESSOR ORGANIZATION AND YOUR COMPENSATION PACKAGE WITH THE
SUCCESSOR ORGANIZATION IS EQUAL TO OR GREATER THAN YOUR
COMPENSATION AT C/G.
IN ADDITION, WE REQUEST THAT YOU SIGN THE ATTACHED
"CONFIDENTIALITY, NON-COMPETITION, AND INVENTIONS AGREEMENT"
INCLUDED AS SCHEDULE B. THIS AGREEMENT IS AN IMPORTANT PROTECTION
FOR THE COMPANY AND IS REFERRED TO IN THE DEFINITION OF "CAUSE"
RELATING TO THE TERMINATION AGREEMENT.
IF YOU ARE IN AGREEMENT WITH THE TERMINATION PROVISIONS, PLEASE
SIGN BELOW. ALSO, PLEASE SIGN THE "CONFIDENTIALITY,
NON-COMPETITION, AND INVENTIONS AGREEMENT" SEPARATELY AT THE
BOTTOM OF SCHEDULE B.
/S/ WALTER B. FOWLER
WBF:NLF WALTER B. FOWLER
ATTACHMENTS
/s/ ARA HACETOGLU
------------------
ARA HACETOGLU
DATE: AUGUST 16, 1999
----------------
<PAGE> 2
SCHEDULE A
CAUSE
For purposes of this Agreement, "CAUSE" shall mean (i) the willful and continued
failure by the Executive to perform substantially his duties to the Corporation
or its subsidiaries (other than any such failure resulting from his disability)
within a reasonable period of time after a written demand for substantial
performance is delivered to the Executive by the Chairman, which demand
specifically identifies the manner in which the Chairman believes that the
Executive has not substantially performed his duties, (ii) embezzlement or theft
from the Corporation or any subsidiary or affiliate by the Executive or the
commission or perpetration by the Executive of any act involving moral
turpitude, or (iii) any material and willful violation by the Executive of his
obligations under the "CONFIDENTIALITY, NON-COMPETITION, AND INVENTIONS
AGREEMENT" (Schedule B attached).
- # -
<PAGE> 3
SCHEDULE B
CONFIDENTIALITY, NON-COMPETITION, AND INVENTIONS AGREEMENT
1. For a one-year period commencing on the date on which the
Executive's employment with the Corporation, or any of its affiliates,
terminates for whatever reason (the "Date of Termination"), (i) the Executive
shall hold in a fiduciary capacity for the benefit of the Corporation all secret
or confidential information, knowledge or data relating to the Corporation or
its affiliates, and their respective businesses which shall not be public
knowledge (other than information which becomes public as a result of acts of
the Executive or his representatives in violation of this Agreement), including
without limitation, customer lists, bids, proposals, contracts, matters subject
to litigation, technology or financial information of the Corporation or its
subsidiaries and other know-how, and (ii) the Executive shall not, without the
prior written consent of the Corporation, communicate or divulge any such
information, knowledge or data to anyone other than the Corporation and those
designated by it in writing.
2. For a one-year period commencing on the Date of
Termination, the Executive will not, directly or indirectly, (i) own, manage,
operate, control or participate in the ownership, management or control of, or
be connected as an officer, employee, partner, director, or consultant or
otherwise, with, or have any financial interest in (except for (A) ownership as
of the date hereof, (B) any ownership in the common stock of the Corporation, or
(C) any ownership or less than 5% of the outstanding equity interest in any
entity)
- 1 -
<PAGE> 4
SCHEDULE B
CONFIDENTIALITY, NON-COMPETITION, AND INVENTIONS AGREEMENT
(I) the manufacture or marketing of graphite electrodes, (II) the manufacture or
marketing of specialty extruded carbon and graphite products, (III) the
manufacture or marketing of needle coke, or (IV) the manufacture or marketing of
calcium carbide and its direct derivatives, in each case, in any market in which
the Corporation or its affiliates conducts or solicits business or (ii) solicit
or contact any employee of the Corporation or its affiliates with a view to
inducing or encouraging such employee to leave the employ of the Corporation or
its affiliates for the purpose of being employed by the Executive, an employer
affiliated with the Executive, or any competitor of the Corporation or any
affiliate thereof.
3. The Executive acknowledges that the provisions of this
Schedule B are reasonable and necessary for the protection of the Corporation
and that the Corporation will be irrevocably damaged if such provisions are not
specifically enforced. Accordingly, the Executive agrees that, in addition to
any other relief to which the Corporation may be entitled in the form of actual
or punitive damages, the Corporation shall be entitled to seek and obtain
injunctive relief from a court of competent jurisdiction (without the posting of
a bond therefor) for the purposes of restraining the Executive from any actual
or threatened breach of such provisions.
- 2 -
<PAGE> 5
SCHEDULE B
CONFIDENTIALITY, NON-COMPETITION, AND INVENTIONS AGREEMENT
4. IN CONSIDERATION of my employment by, and/or being retained
in the employ of, The Carbide/Graphite Group, Inc., a Delaware corporation
(hereinafter called the "Company") during such time as shall be mutually
agreeable to the Company and myself, I, for myself, my heirs, executors,
administrators and assigns, do hereby agree as follows:
(a) I shall promptly grant and assign to the Company
for its sole use and benefit, any and all inventions and improvements together
will all letters patent and reissues thereof that may at any time be granted for
or upon any such inventions or improvements which I may make or conceive during
the period of my employment except such inventions or improvements which I may
make or conceive outside of working hours, using no equipment, supplies,
facilities or trade secret information of the company and which neither (i)
relate to the Company's business or research, nor (ii) results from any work
performed by me for the Company.
I agree, however, promptly to disclose to the
Company, in confidence, any and all inventions or improvements made or conceived
by me, whether solely or jointly with others, during the term of my employment,
for the purpose of determining such issues of assignment as may arise concerning
said inventions or improvements.
- 3 -
<PAGE> 6
SCHEDULE B
CONFIDENTIALITY, NON-COMPETITION, AND INVENTIONS AGREEMENT
(b) I shall, without charge but at the expense of the
Company, promptly at all times hereafter, execute and deliver such applications,
assignments, descriptions and other instruments as may be necessary or proper in
the opinion of the Company to vest the title in the Company to any such
inventions, improvements, and patents or reissues thereof, and to enable the
Company to obtain and maintain the entire right and title thereto throughout the
world.
(c) I shall render to the Company at its expense
(including a reasonable payment for the time involved in case I am not then in
its employ) all assistance it may require (i) in the prosecution of applications
for patents or reissues thereof, (ii) in the prosecution or defense of
interferences which may be declared involving any of said applications or
patents, and (iii) in litigation in which the Company may be involved, relating
to any such patents, inventions, or improvements.
5. This Agreement shall supersede any previous
confidentiality, non-competition or inventions agreements.
/s/ Katherine F. Darby /s/ Ara Hacetoglu
---------------------- ----------------------
Witness Ara Hacetoglu
Date: August 17, 1999 Date: August 17, 1999
------------------- -----------------
- 4 -
<PAGE> 1
Exhibit 10.15
[LOGO]
THE CARBIDE/GRAPHITE GROUP, INC.
================================================================================
To: | From:
MICHAEL F. SUPON | WALTER B. FOWLER
|
================================================================================
DATE August 11, 1999
----------------
SUBJECT: TERMINATION, CONFIDENTIALITY &
NON-COMPETITION AGREEMENT
PERSONAL & CONFIDENTIAL
IT WAS AGREED BY THE C/G BOARD OF DIRECTORS THAT YOU WILL BE
GRANTED ONE YEAR OF SEVERANCE PAY AND ONE YEAR OF MEDICAL
COVERAGE (AS PROVIDED BY THE COMPANY AND CURRENTLY IN EFFECT AT
THE TIME OF TERMINATION) IN THE EVENT YOU ARE TERMINATED FROM THE
COMPANY FOR A REASON OTHER THAN CAUSE AS DEFINED IN THE ATTACHED
SCHEDULE A. PLEASE UNDERSTAND THAT A TRANSFER TO A JOINT VENTURE
OR OTHER SUCCESSOR ORGANIZATION WILL NOT CONSTITUTE A TERMINATION
FOR PURPOSES OF THIS AGREEMENT IF YOU ARE EMPLOYED BY THE
SUCCESSOR ORGANIZATION AND YOUR COMPENSATION PACKAGE WITH THE
SUCCESSOR ORGANIZATION IS EQUAL TO OR GREATER THAN YOUR
COMPENSATION AT C/G.
IN ADDITION, WE REQUEST THAT YOU SIGN THE ATTACHED
"CONFIDENTIALITY, NON-COMPETITION, AND INVENTIONS AGREEMENT"
INCLUDED AS SCHEDULE B. THIS AGREEMENT IS AN IMPORTANT PROTECTION
FOR THE COMPANY AND IS REFERRED TO IN THE DEFINITION OF "CAUSE"
RELATING TO THE TERMINATION AGREEMENT.
IF YOU ARE IN AGREEMENT WITH THE TERMINATION PROVISIONS, PLEASE
SIGN BELOW. ALSO, PLEASE SIGN THE "CONFIDENTIALITY,
NON-COMPETITION, AND INVENTIONS AGREEMENT" SEPARATELY AT THE
BOTTOM OF SCHEDULE B.
/s/ WALTER B. FOWLER
WBF:nlf WALTER B. FOWLER
ATTACHMENTS
/s/ MICHAEL F. SUPON
--------------------------
MICHAEL F. SUPON
DATE: 10/6/99
---------------------
<PAGE> 2
SCHEDULE A
CAUSE
For purposes of this Agreement, "CAUSE" shall mean (i) the willful and continued
failure by the Executive to perform substantially his duties to the Corporation
or its subsidiaries (other than any such failure resulting from his disability)
within a reasonable period of time after a written demand for substantial
performance is delivered to the Executive by the Chairman, which demand
specifically identifies the manner in which the Chairman believes that the
Executive has not substantially performed his duties, (ii) embezzlement or theft
from the Corporation or any subsidiary or affiliate by the Executive or the
commission or perpetration by the Executive of any act involving moral
turpitude, or (iii) any material and willful violation by the Executive of his
obligations under the "CONFIDENTIALITY, NON-COMPETITION, AND INVENTIONS
AGREEMENT" (Schedule B attached).
- # -
<PAGE> 3
SCHEDULE B
CONFIDENTIALITY, NON-COMPETITION, AND INVENTIONS AGREEMENT
1. For a one-year period commencing on the date on which the
Executive's employment with the Corporation, or any of its affiliates,
terminates for whatever reason (the "Date of Termination"), (i) the Executive
shall hold in a fiduciary capacity for the benefit of the Corporation all secret
or confidential information, knowledge or data relating to the Corporation or
its affiliates, and their respective businesses which shall not be public
knowledge (other than information which becomes public as a result of acts of
the Executive or his representatives in violation of this Agreement), including
without limitation, customer lists, bids, proposals, contracts, matters subject
to litigation, technology or financial information of the Corporation or its
subsidiaries and other know-how, and (ii) the Executive shall not, without the
prior written consent of the Corporation, communicate or divulge any such
information, knowledge or data to anyone other than the Corporation and those
designated by it in writing.
2. For a one-year period commencing on the Date of
Termination, the Executive will not, directly or indirectly, (i) own, manage,
operate, control or participate in the ownership, management or control of, or
be connected as an officer, employee, partner, director, or consultant or
otherwise, with, or have any financial interest in (except for (A) ownership as
of the date hereof, (B) any ownership in the common stock of the Corporation, or
(C) any ownership or less than 5% of the outstanding equity interest in any
entity)
- 1 -
<PAGE> 4
SCHEDULE B
CONFIDENTIALITY, NON-COMPETITION, AND INVENTIONS AGREEMENT
(I) the manufacture or marketing of graphite electrodes, (II) the manufacture or
marketing of specialty extruded carbon and graphite products, (III) the
manufacture or marketing of needle coke, or (IV) the manufacture or marketing of
calcium carbide and its direct derivatives, in each case, in any market in which
the Corporation or its affiliates conducts or solicits business or (ii) solicit
or contact any employee of the Corporation or its affiliates with a view to
inducing or encouraging such employee to leave the employ of the Corporation or
its affiliates for the purpose of being employed by the Executive, an employer
affiliated with the Executive, or any competitor of the Corporation or any
affiliate thereof.
3. The Executive acknowledges that the provisions of this
Schedule B are reasonable and necessary for the protection of the Corporation
and that the Corporation will be irrevocably damaged if such provisions are not
specifically enforced. Accordingly, the Executive agrees that, in addition to
any other relief to which the Corporation may be entitled in the form of actual
or punitive damages, the Corporation shall be entitled to seek and obtain
injunctive relief from a court of competent jurisdiction (without the posting of
a bond therefor) for the purposes of restraining the Executive from any actual
or threatened breach of such provisions.
- 2 -
<PAGE> 5
SCHEDULE B
CONFIDENTIALITY, NON-COMPETITION, AND INVENTIONS AGREEMENT
4. IN CONSIDERATION of my employment by, and/or being retained
in the employ of, The Carbide/Graphite Group, Inc., a Delaware corporation
(hereinafter called the "Company") during such time as shall be mutually
agreeable to the Company and myself, I, for myself, my heirs, executors,
administrators and assigns, do hereby agree as follows:
(a) I shall promptly grant and assign to the Company
for its sole use and benefit, any and all inventions and improvements together
will all letters patent and reissues thereof that may at any time be granted for
or upon any such inventions or improvements which I may make or conceive during
the period of my employment except such inventions or improvements which I may
make or conceive outside of working hours, using no equipment, supplies,
facilities or trade secret information of the company and which neither (i)
relate to the Company's business or research, nor (ii) results from any work
performed by me for the Company.
I agree, however, promptly to disclose to the
Company, in confidence, any and all inventions or improvements made or conceived
by me, whether solely or jointly with others, during the term of my employment,
for the purpose of determining such issues of assignment as may arise concerning
said inventions or improvements.
- 3 -
<PAGE> 6
SCHEDULE B
CONFIDENTIALITY, NON-COMPETITION, AND INVENTIONS AGREEMENT
(b) I shall, without charge but at the expense of the
Company, promptly at all times hereafter, execute and deliver such applications,
assignments, descriptions and other instruments as may be necessary or proper in
the opinion of the Company to vest the title in the Company to any such
inventions, improvements, and patents or reissues thereof, and to enable the
Company to obtain and maintain the entire right and title thereto throughout the
world.
(c) I shall render to the Company at its expense
(including a reasonable payment for the time involved in case I am not then in
its employ) all assistance it may require (i) in the prosecution of applications
for patents or reissues thereof, (ii) in the prosecution or defense of
interferences which may be declared involving any of said applications or
patents, and (iii) in litigation in which the Company may be involved, relating
to any such patents, inventions, or improvements.
5. This Agreement shall supersede any previous
confidentiality, non-competition or inventions agreements.
/s/ Margaret R. Griech /s/ Michael F. Supon
- ---------------------------- ----------------------------
Witness Michael F. Supon
Date: 10/6/99 Date: 10/6/99
----------------------- -----------------------
- 4 -
<PAGE> 1
Exhibit 10.28
AGREEMENT
BETWEEN
THE CARBIDE/GRAPHITE GROUP, INC.
AND
INTERNATIONAL, UNION OF ELECTRICAL,
TECHNICAL, SALARIED MACHINE AND
FURNITURE WORKERS
AFL-CIO LOCAL UNION 502
JUNE 7, 1999
<PAGE> 2
CONTENTS - ALPHABETICAL
Article Subject Page
19 Arbitration
6 Call-in Pay
24 Change in Method of Payment
35 Company Policy Regarding Supervisory Personnel
42 Conflict of Laws
12 Decrease in Work Force
14 Discharges
34 Employee Ratings
27 Establishing the Standard
43 Expiration and Renewal
36 Family Leave
32 Funeral Leave
18 Grievances
38 Group Insurance
9 Holidays
4 Hours
23 Incentive Pay
11 Job Bidding
13 Job Description and Evaluation
31 Jury Duty
17 Leaves of Absence
26 Making the Time Study
20 Management
29 New Products
33 No Discrimination
3 Notices
8 Overtime and Night Bonus
39 Pensions
1 Recognition
5 Reporting Pay
7 Rest Periods
28 Retiming of Jobs
21 Safety and Health
44 Schedule l - Rate Schedule
45 Schedule 2 - Wage Schedule
46 Schedule 3 - Supplements
41 Scope of Agreement
10 Seniority
37 Stewards
22 Strikes and Lockouts
30 Temporary Time Values
25 Time Studies
16 Transfers
2 Union Security and Checkoff
15 Vacations
40 Wages
1
<PAGE> 3
INDEX
Article Subject Page
1 Recognition
2 Union Security and Checkoff
3 Notices
4 Hours
5 Reporting Pay
6 Call-in Pay
7 Rest Periods
8 Overtime and Night Bonus
9 Holidays
10 Seniority
11 Job Bidding
12 Decrease in Work Force
13 Job Description and Evaluation
14 Discharges
15 Vacations
16 Transfers
17 Leaves of Absence
18 Grievances
19 Arbitration
20 Management
21 Safety and Health
22 Strikes and Lockouts
23 Incentive Pay
24 Change in Method of Payment
25 Time Studies
26 Making the Time Study
27 Establishing the Standard
28 Retiming of Jobs
29 New Products
30 Temporary Time Values
31 Jury Duty
32 Funeral Leave
33 No Discrimination
34 Employee Ratings
35 Company Policy Regarding Supervisory Personnel
36 Family Leave
37 Stewards
38 Group Insurance
39 Pensions
40 Wages
41 Scope of Agreement
42 Conflict of Laws
43 Expiration and Renewal
44 Schedule l - Rate Schedule
45 Schedule 2 - Wage Schedule
46 Schedule 3 - Supplements
2
<PAGE> 4
AGREEMENT
AGREEMENT, made this 7th day of June, 1999, between THE CARBIDE/GRAPHITE GROUP,
INC, (the Company) and the LOCAL UNION 502, affiliated with the International
Union of Electrical, Technical, Salaried, Machine and Furniture Workers, AFL-CIO
(the Union), as agent for and on behalf of all the Company's production and
maintenance employees (the employees) at the St. Marys, Pennsylvania facility.
The purpose of the Agreement is to provide orderly collective bargaining
relations between the Company and the Union, to secure a prompt and equitable
settlement of grievances, and to establish and maintain fair wages, hours and
working conditions for the employees covered by this Agreement.
It is acknowledged by both parties that C/G is an ISO9000 certified producer of
Carbon and Graphite products and will strive to function within the criteria as
set forth to achieve and sustain this certification.
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ARTICLE 1
RECOGNITION
1. The Company recognizes the Local Union 502 affiliated with the
International Union of Electrical, Technical, Salaried, Machine and
Furniture Workers, AFL-CIO, and the sole collective bargaining agent
for all production and maintenance hourly employees, except foremen,
assistant foremen, supervisors, timekeepers, clerks, laboratory
assistants, time study, development and method employees, guards and/or
watchmen, with respect to rates of pay, wages, hours of employment and
all other conditions of employment.
2. It is agreed that no activities pertaining to the Union will be
permitted during working hours, it being understood that this clause
does not include matters under the grievance procedure.
3. (a) The Company and Union agree that it is desirable for C/G
employees to perform maintenance work in the plant where
practical. Management, however, reserves the right to
subcontract for legitimate business reasons.
(b) If the Union desires, an explanation about a maintenance job
subcontracted will be provided by the appropriate department
or maintenance superintendent. This explanation will include
the reasons for subcontracting, such as
(1) Unavailability of properly qualified employees
(2) Unavailability of equipment or facilities
(3) The allowable duration for completion of such work
(4) Cost considerations
(5) Emergencies
(6) Other legitimate business reasons
(c) After receiving the answer in (b) above the Union may request
such answer in writing. If so requested the Company will respond in
writing.
4. The Carbide/Graphite Group, Inc. will create a new Pension Plan
covering hourly employees which will be a mirror image of the language
of the BOC Plan, effective the date The Carbide/Graphite Group, Inc.
takes over.
BOC stipulates that the assets in the BOC Pension Plan covering the
participants at the St. Marys Carbide/Graphite Plant are more than
sufficient to pay all the accrued benefits, both vested and non-vested
under the Plan as of December 31, 1987.
BOC has entered into similar pension arrangements in the following
company locations: Airco Alloys (Niagara Falls, NY), Airco Alloys
(Charleston, SC), Airco Alloys (Mobile, AL) and Airco Welding Products
(Cleveland, OH).
In each of these instances, there has never been a case where a BOC
Plan has failed to meet the agreed upon pension obligations. It is the
Company's intention that they will not fail at St. Marys as they have
not failed at the other locations.
Continuous service with BOC will be added to the continuous service of
The Carbide/Graphite Group, Inc. for purposes of determining vesting
eligibility.
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In the event that The Carbide/Graphite Group, Inc. Pension Plan for the
bargaining unit St. Marys employees is terminated, the BOC Plan for St.
Marys employees will vest all unvested Participants (those hired prior
to the Closing Date of the sale and still in the employ of The
Carbide/Graphite Group, Inc. on the date The Carbide/Graphite Group,
Inc. Plan terminates.)
Example
Assume that the sale of the St. Marys Plant from BOC to The
Carbide/Graphite Group, Inc. closes on July 1, 1988. Assume that the
per month per year of service benefit in the bargaining unit pension
plan is $15 on that date and changes to $16 on July 1, 1990. Assume
that a bargaining unit employee retires on July 1, 1990 at age 65 with
twenty years of credited service.
That employee will receive a total pension benefit of $320 a month. The
BOC Pension Plan's responsibility will be frozen as of the terms of the
pension plan on July 1, 1988, and the employee service as of that date
(18 years x $15 = $270). The Carbide/Graphite Group, Inc.'s Pension
Plan will be responsible for the employee service after July l, 1988
and for any benefit levels negotiated after July 1, 1988 (2 years x $16
+ $18 = $50).
Continuous service with BOC will be added to the continuous service of
The Carbide/Graphite Group, Inc. for purposes of determining vesting
eligibility.
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ARTICLE 2
UNION SECURITY AND CHECKOFF
1 Union Shop - Every employee who is a member of the Union on the date
this Agreement becomes effective shall be required as a condition of
continued employment to remain a member of the Union for the term of
this Agreement. Every employee who is not a member of the Union on such
effective date shall be required, as a condition of continued
employment, to become a member of the Union on the 480 hours worked
after such effective date and to remain a member of the Union in good
standing for the term of this Agreement. (Note: Dues shall be deducted
following 480 hours actually worked.) Every person who is hired on a
job, after this Agreement has become effective, shall be required, as a
condition of continued employment, to become a member of the Union
after 480 hours actually worked from the date of hire and shall remain
a member in good standing for the term of this Agreement.
2. During the life of this Agreement the Company agrees to make monthly
deductions for the dues and for the Union initiation fee for each
employee who signs a deduction authorization. Such deductions will be
paid monthly to the Financial Secretary of the Union. The Union agrees
to furnish the Company written notice of the amount to be deducted for
initiation fees and dues, and of the identity of the Union official
authorized to receipt for such deductions. The Union shall report
monthly to the Company all amounts owing as dues to the Union from
employees for whom no dues were deducted in the preceding month, and
such amounts shall be deducted with the employee's next regular dues
deduction.
LOCAL 502, IUE-AFL-CIO
INDIVIDUAL CHECKOFF AUTHORIZATION
To:______________________ Effective Date:_______________
(Name of Company)
I authorize and direct you to check off from my pay each month the sum
of $_____ as my monthly Union Membership dues (agency equivalent fee),
including initiation fee of $_____(if payable), and promptly to remit
same to Local 502, IUE-AFL-CIO.
This check-off authorization shall continue until revoked and may be
revoked only at the times and in the manner provided below and shall be
irrevocable for a period of one year from ____________19__, or until
the expiration of the Agreement between the Company and the Union
(whichever occurs sooner), and shall be irrevocable for each succeeding
year thereafter, or until the expiration of the said successive
applicable Agreement between the Company and the Union (whichever
occurs sooner), unless it is revoked by me within the seven (7) days
preceding the end of such period of irrevocability.
Revocation shall be effective only if I give you and Local 502 written
notice by individual registered mail, return receipt requested, and it
is received or postmarked during the period specified above.
______________________
(Employee's Signature)
LOCAL 502
IUE-AFL-CIO____________ Dept.____________Clock No.____________
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3. (a) College summer help as a condition of employment, shall, upon
accumulation of 960 hours after the date of hiring, become
members of the Union and remain members in good standing
during the remainder of their temporary employment. Such
employees may be terminated by the Company at any time during
such temporary employment and not guaranteed re-employment.
Neither shall such employees have seniority rights over any
permanent employee. Such temporary employee shall acknowledge
in writing, within 120 hours of their employment, their
understanding of this Article 2 and its applicability to them.
(b) The wage of college summer help will be $9.00 per hour.
4. No college summer help will be hired to perform bargaining unit work
while permanent employees are on layoff.
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ARTICLE 3
NOTICES
The Union shall have the right of free use of Union bulletin boards in the
Company's plants for notices in regard to meetings, social gatherings,
collecting dues, names of candidates and other notices, provided all such
notices are first submitted to and approved by the Human Resources Manager.
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ARTICLE 4
HOURS
1. Forty (40) hours of work per week, consisting of five (5) days: Monday,
Tuesday, Wednesday, Thursday and Friday, not exceeding eight (8) hours
per day, shall constitute a normal week's work, except for employees
engaged in continuous operations.
2. "Continuous operations," as used in this Agreement, shall be jobs that
normally require work seven (7) days a week, such as furnace firemen,
boiler firemen, pitch impregnating and graphitizing crews.
(a) The Company is not opposed to dupont shifts as a matter of
principle. When the Management feels that a situation is
appropriate for dupont shifts, and a majority of a crew
agrees, the Department Superintendent may implement such
shifts.
3. The above provisions are not intended as a guarantee of eight (8) hours
work per day or forty (40) hours of work per week.
4. A maximum of fifteen minutes may be permitted for shower time at the
end of a complete shift, however, this allowance shall not be used to
interrupt the completion of a job or assignment.
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ARTICLE 5
REPORTING PAY
1. Any employee who reports for work as scheduled and has not been given
at least six (6) hours notice not to report shall receive four (4)
hours of available work or pay, and employees working the Dupont shift
will receive six (6) hours of available work or pay, at the discretion
of the Company. This provision shall not apply in the event any of the
following conditions interfere with work being provided; power
failures, machine breakdowns, fires, disasters, etc.
2. Employees who are absent on any day for any reason shall not be
eligible for reporting pay, if upon their return no work is available,
unless the employee was excused in advance.
3. It is the employee's responsibility to insure that his current address
and telephone number are on file with his immediate supervisor.
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ARTICLE 6
CALL-IN PAY
An employee who has completed his regularly scheduled shift and is contacted to
return to work within the next sixteen (16) hours, either voluntarily or as
directed, shall receive at least four (4) hours work or pay at the discretion of
the Company. Employees who are called to work outside of their regular shift or
schedule shall be paid at the rate of double time for such hours worked, and
straight time hourly rate for the balance of the four (4) hours if not worked.
Employees shall receive shower time on call-in if they work at least four (4)
hours. Also, if an employee works at least four (4) hours on the call-in, he
will receive a ten (10) minute rest period and, if he continues an additional
four (4) hours, he will be entitled to an additional ten (10) minute rest
period.
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ARTICLE 7
REST PERIODS
The Company shall grant all employees rest periods totaling twenty (20) minutes
for each eight (8) hour shift; wherever practical during such periods, employees
shall be free to leave their work places. Hourly workers shall be paid for this
time.
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ARTICLE 8
OVERTIME AND NIGHT BONUS
1. All work performed in excess of eight (8) hours in any one workday, or
in excess of forty (40) hours in any regularly scheduled workweek, and
all work performed on Saturday, Sunday and holidays, as listed below,
shall be paid for at the rate of time and one-half.
2. Employees engaged in noncontinuous operations shall be paid at double
time for all work performed on Sunday.
3. Overtime work shall be divided as equally as possible among employees
who regularly perform a similar class of work. In the event all
employees in a job classification on a shift are scheduled to work
overtime and additional employees are necessary, employees from within
the job classification will be scheduled in preference to employees
from other job classifications, except if call-in pay is necessary to
effect a cross-shift assignment the Company may select another employee
from within the shift. In the event a temporary vacancy has been filled
in accordance with the provisions of Article 11, Section 2, 2(a) and
2(b), the temporary replacement will be assigned to work the overtime.
(a) Each foreman will maintain a record of overtime and furnish a
copy of that record to the Department Steward upon reasonable
demand.
(b) Failure to work overtime shall be recorded as having been
worked.
(c) In the event an absence occurs due to accident, injury or
illness, said employee will be charged for overtime as
follows:
(i) If employee is off less than fourteen (14) days there
will be no charge of overtime if the employee was not
asked.
(ii) If employee is off more than fifteen (15) days the
employee will be charged the average overtime worked
during his absence upon his return.
4 A list of qualified people in the groups listed below will be
maintained and, if all bid-in employees have been asked and refused the
overtime, then Miscellaneous employees will be canvassed, and then
qualified employees listed will be canvassed, without the necessity for
call-in pay. If no qualified employees are willing to work the
overtime, the bid-in employee(s) who is low in overtime will be
required to work.
Groups as used in this section are:
1. Plant 3 (Dept. 18, 19, and 49)
2. Bake (Dept. 17, 20, 23, 25, 28, 32, 47, and 56)
3. Electricians
4. Mobile Mechanics
5. Maintenance Mechanics
6. Outside Maintenance
In the event qualified employees are selected to work overtime in place
of bid-in employees, they will be charged for the overtime. Similarly,
employees from the qualified list will be charged overtime if they
refuse.
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5. When an employee completes a full eight (8) hour shift and is obliged
to work overtime for a period of four (4) hours or more, he may take a
half hour lunch period for which he shall be paid. At the end of eight
(8) hours he either gets a half hour lunch period or, if he must work
through twelve (12) hours, he will receive a half hour extra pay. If he
is working with a crew which receives a break, he will also be
permitted the break.
6. It is agreed that overtime pay shall not be pyramided. In all cases
concerning pyramiding, the highest premium rate only shall be paid.
7. Employees, when working overtime, shall be paid the overtime rate on
their earnings during that overtime period.
8. All employees working the second and third shifts shall be paid at the
rate of time and one-tenth. This shall also apply to incentive and
overtime. Third shift employees working overtime hours, consecutive
with their regular shift hours, will be paid at the rate of time and
one-tenth for all overtime hours worked. First shift employees working
twelve (12) or more consecutive hours will be paid at the rate of time
and one-tenth for all overtime hours worked.
9. Wherever possible, except in an emergency, all employees will be
notified seventy-two (72) hours in advance that they will be called on
to perform work on Saturday and Sunday.
10. An employee who is scheduled to work on Saturday and is absent from
work on Friday shall be considered to be unavailable for Saturday
overtime if he does not report off by his or her mid-shift on Friday.
11. All Union employees will be canvassed within the group as defined in
Article 8 - Section 4 before any probationary employees.
12. Maintenance overtime - refer to Supplement 14.
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ARTICLE 9
HOLIDAYS
1. The following holidays shall be designated as "paid" holidays from June
3, 1996 to June 7, 1999:
Independence Day December 24
Labor Day Christmas Day
Veterans Day New Year's Day
Thanksgiving Day Good Friday
Day after Thanksgiving Memorial Day
First day of Buck Hunting Season
2. Whenever possible, the Company will notify the Union three (3) working
days in advance of a designated holiday whether or not work will be
performed on that holiday in the plant or certain departments.
3. Continuous operators shall be paid even though the holiday falls on a
scheduled day off.
(a) Employees working the DuPont schedule who do not work their
scheduled holiday due to plant/department shutdown will be paid 12
hours at the reduced rate.
4. All employees working on a paid holiday shall be paid, in addition to
eight (8) hours straight time pay, time and one-half for all hours
worked.
5. Any employee who is in the first step of the absentee disciplinary
procedure and is absent the day before or the day after an observed
paid holiday, unless excused otherwise by Management, shall not receive
any pay for said holiday.
(a) In order to be eligible to receive pay for a holiday not
worked, an employee will be required to have a punch sometime
in the pay period in which the holiday falls.
(b) "Inactive employees will be ineligible for holiday pay under
the following conditions":
(i) New Hires who start after the holiday.
(ii) Voluntary quits prior to the holiday if they do not
work on their scheduled day immediately preceding the
holiday.
(iii) Employees discharged for cause prior to the holiday
if the discharge is upheld.
6. In the event an employee is injured or is ill during the pay period in
which the holiday falls, said employee will nevertheless be paid for
such holiday, if he works at all during that pay period. The Company
may require medical proof of such injury or illness.
7. Employees who are scheduled to work on a paid holiday and fail to
report for work shall not receive any pay for said holiday, unless said
employee notifies the Company not later than noon of the day before the
holiday and is excused from reporting.
8. It is understood and agreed that Saturdays, Sundays and holidays shall
begin with the morning shift and shall continue for twenty-four (24)
hours thereafter.
9. When a paid holiday falls on a Saturday it will be celebrated on
Friday; when a paid holiday falls on a Sunday it will be celebrated on
Monday.
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10. Any continuous or maintenance employees, who work a paid holiday, may
elect to take another day off without pay within sixty (60) days
following that holiday at the discretion of the Company, with seniority
being the basis for consideration.
11. The First Day of Buck Hunting Season and Christmas holidays will be
considered restricted workdays except for Power Monitors and Kiln
Attendants. The Company will, to the greatest extent practical,
minimize the work requirements on these days. If the Company is unable
to fill all of the requirements deemed necessary on a voluntary basis,
junior qualified employees will be directed to work.
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ARTICLE 10
SENIORITY
1. The Company agrees to recognize the principle of seniority insofar as
it applies to regular employees who have been employed by the Company
for more than the probationary period.
2. Any new employee hired by the Company shall be placed on a probationary
period consisting of 480 hours actually worked. During this time, the
Company will have the sole right to determine whether employment will
be continued. Upon completion of this probationary period, the new
employee shall automatically receive the applicable miscellaneous rate
in Article 40 hereof.
3. Seniority shall not apply during an employee's probationary period, and
any employee may be discharged during such probationary period, but
when an employee has remained in continuous employment and has actually
worked 480 hours or more, said employee's seniority shall be computed
from the date first hired.
4. In all cases of layoffs, recall, transfers and promotions, length of
service and ability shall govern. "Seniority", as used herein, shall
mean length of service, qualifications and ability. Qualifications,
previous experience with the Company or elsewhere, education, skill and
ability, related work, etc., shall be determined by the Company,
subject to the grievance procedure.
(a) The only jobs requiring the passing of an aptitude test will
be those in Group III, Power Monitor, 48" Control Room
Operator, and Kiln Attendant or those that are progression
jobs which lead to a job listed under Group III. Employees who
have bumped or are recalled will be subject to 120 hours
qualifying period, (200 Hours for Group III, Power Monitor,
48" Control Room Operator, and Kiln Attendant).
(b) Employees may request a review of the results of the aptitude
test with a Union representative present at the time the
results are reviewed.
5. An employee's seniority will end and he will be considered terminated
if he:
(a) voluntarily quits, or
(b) is discharged or released for proper cause
(c) has not worked for the Company for thirty-six (36) consecutive
months. NOTE: any employee terminated under this item (c) who
is rehired within twenty-four (24) months of losing seniority
shall have his seniority bridged to his original date of hire,
or
(d) fails to comply with the layoff-recall provisions of Article
12, Sections 3 and 4.
6. Seniority shall be maintained, but shall not accumulate beyond sixty
(60) consecutive months absence due to illness, when supported by a
doctor's certificate. In all cases of absence due to illness, the
Company may require the said employee to be examined by another
physician; and, in the event said employee refuses to submit to such
examination, or after examination is certified as able to perform
available work and said employee declines such work, he shall be
discharged and his seniority shall cease. It is understood that
eligibility for medical coverage will not extend beyond thirty-six (36)
months absence.
7. The Company agrees that it will furnish the Union each month with a
list of all employees hired, laid off, recalled, transferred from one
department to another and/or promoted out of the bargaining unit.
8. An employee who is transferred out of the bargaining unit shall
accumulate seniority following such transfer for an additional period,
not to exceed one year, and have the right in the event of a layoff or
abolishment of his job to return to available work in the bargaining
group in line with his accumulated seniority as described above.
Employees who return to available work in the bargaining unit will not
be permitted to bid for a period of six (6) weeks. Employees
transferred
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prior to the 1969 Agreement shall have accumulated seniority, for
purposes of this Article only, to October 15, 1970.
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(a) An employee transferred out of the bargaining unit after March
9, 1984 shall accumulate seniority following such transfer for
an additional period not to exceed one year. Such transferred
employees must decide at this time whether or not they wish to
return to the bargaining unit. If their choice is to remain
out of the bargaining group they relinquish all rights to
return to that unit. If their choice is to return to the
bargaining unit the conditions set forth in 8. above will
apply.
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ARTICLE 11
JOB BIDDING
1. The following increase in work force procedure will be followed for all
plants:
(a) The Company shall post all bid jobs factory-wide for a period
of seven (7) calendar days, and any employee may apply for
them. Such bid jobs must be posted within fourteen (14)
calendar days after the vacancies exist. In the case of a
retirement, the job will be posted twenty-one (21) calendar
days prior to the effective retirement date.
(b) Preference will be given the employee with the greatest
seniority, provided:
(i) said employee has not requested and received another
job within the preceding eight (8) weeks. The eight
(8) weeks shall be determined by the removal date on
the bid sheet, and
(ii) said employee is competent to perform the work. The
Company shall be the judge of the competency of its
employees, subject to review under the grievance
procedure.
"Competency" shall be considered to mean ability to
do an available job in a workmanlike manner and in
the event any employee because of inability whether
due to lack of experience, physical unfitness or
otherwise is unable to perform available work in a
workmanlike manner, the job will be re-bid.
(iii) A successful bidder is required to complete any
physical testing requirements within six (6) calendar
days of the date the job is removed from bid. If the
successful bidder does not comply, he shall remain on
his job, his vacancy shall be cancelled, and the job
shall be awarded to the next senior qualified bidder.
(iv) Employees on S&A who bid and are awarded the job must
be able to perform the job duties within four (4)
weeks of removal of bid. If not able to perform the
job, the job will be re-bid.
(c) In the event an employee voluntarily requests and is granted a
transfer to another plant, said employee shall comply with
Sections (b) (i) and (ii) above before bidding. All voluntary
straight out transfer requests must be honored before
recalling any junior employee from layoff or new hire to fill
the job. This employee shall be considered as the junior
miscellaneous employee in that department for a period of six
(6) weeks from the date of the transfer, for the purpose of
premium assignments. The Union agrees that this language will
not be used to the extent of hindering the Company's
production requirements in any Department.
(d) The Company agrees that it will transfer the successful bidder
to the bid job within a period no greater than four (4) weeks.
(e) When the Engineering Department turns over new equipment to
the Production Department and the equipment is approved by the
latter for production purposes, then the Company shall post a
bid, if a vacancy exists, within seven (7) calendar days after
the acceptance of the new equipment by the Production
Department.
(f) When a bid job has been posted for a period of seven (7)
calendar days and no bids have been received, then the job
shall be filled at the discretion of the Company with rights
as though bid, except that Section (b) (i) above shall not
apply if he elects to bid another job.
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(g) Applications to fill vacancies must be in writing and shall be
deposited in a sealed box to be provided by the employer and
placed in the various plant offices. The employer and the
Union shall jointly open the sealed box and examine the
applications for the job vacancies.
(h) In the event an employee is a successful bidder and he
declines to accept, he shall be transferred, as soon as
practical but never longer than four (4) weeks later, to
miscellaneous in the plant he is part of at the time of
bidding, and he shall be prohibited from any further bidding
for a period of six (6) months. Furthermore, this employee
shall be considered as the junior miscellaneous employee in
that department for a period of three (3) months from the date
the employee is transferred to miscellaneous for the purpose
of premium assignments.
2. In the event a temporary vacancy occurs due to accident, injury,
illness, contested discharge or suspension, or other absence of a
regular employee, the job will not be posted but filled by an available
employee who shall continue as the temporary replacement for the
remainder of the vacancy, unless a permanent vacancy exists.
(a) The employee will not assume the seniority of the employee he
is replacing.
(b) In the event of a layoff or reduction of work in the job
classification, the temporary employee will first be removed.
(c) If an employee's physical condition is such that it is
medically certified that the employee will never be able to
return to his bid job, the job will be posted for bid.
3. When it becomes necessary to reduce permanent classified jobs (not
miscellaneous jobs) in Plant 3, Mass and Sagger Bake and Inspection,
Graphitizing Department, Pitch Impregnating, Central Cleaning
Department, and Plant 607 due to a long term lack of work, such jobs
shall not be posted for bid, and the employees holding these jobs shall
be returned to their positions without virtue of bid when the jobs are
re-established. If a person is holding job rights under this paragraph,
he is the youngest miscellaneous employee, unless he agrees to give up
job rights, then he falls back in line with seniority.
When a permanent vacancy(s) occurs within a plant complex, the jobs
will be offered out in line with seniority. All miscellaneous employees
in the complex shall be canvassed for the opening(s), with employees
retaining rights to bid jobs being asked last. If all employees refuse
the opening(s), the youngest employee(s) in line with regular seniority
will be assigned to the vacancy(s).
A permanent vacancy is defined as any job normally posted for bid. A
temporary vacancy(s) will be filled according to the miscellaneous
agreement (Article 11, paragraph 2).
4. A bid job shall be considered permanent only after it has continued in
operation for a period of more than three (3) weeks after the bid
notice has been taken down.
(a) In the event that an employee is removed from a bid job within
the three (3) weeks because the job is abolished, he will
return to his old bid job in his original plant. If the
employee's prior job was miscellaneous work, he will return to
his original plant.
5. In an effort to clarify the practice of filling temporary vacancies in
the Plant, it is hereby understood and agreed that the following
procedures shall apply for employees holding "bid rights" within a
department.
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(a) When two or more employees holding "bid rights" are working in
their bid-in-department on a temporary basis, the junior in
seniority will be removed first and returned to the
miscellaneous workforce, irregardless of who was first to fill
a vacancy.
(b) When one employee holds "bid rights" and is working a
temporary vacancy in his bid-in department, and the other
employee is miscellaneous, the miscellaneous employee will be
returned to miscellaneous first.
(c) When two or more miscellaneous employees are filling temporary
vacancies, the miscellaneous employee shall continue as the
temporary replacement for the remainder of the vacancy.
It is understood that in the event of cross-shift assignments in the
case of a. or b. above, it may be necessary to retain the junior "bid
rights" holder or miscellaneous employee for a day in order to
effectively change the shift of the senior employee.
6. Vacancies of one (1) day or less which occur with or without advance
notice will be filled from the miscellaneous workforce in accordance
with normal canvassing procedures. Vacancies of two (2) days or longer
will be filled with the senior bid-in operator holding rights.
Vacancies which occur as a result of absences on a day-to-day basis
without notice, will be filled from the miscellaneous workforce by
following normal canvassing procedures. It is also understood that in
the event of cross-shift assignments it may be necessary to retain the
junior bid-rights holder or miscellaneous employee for a day in order
to effectively change the shift of the senior employee.
(a) A person holding job rights who does not comply to paragraph 6
forfeits his job rights.
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ARTICLE 12
DECREASE IN WORK FORCE
1. In the event of transfers or layoffs due to a reduction in the work
force, seniority will govern. Employees will be permitted to displace
other employees, except those jobs listed in Group III and listed
below, provided those retained are competent to perform the work.
(a) Employees may displace a junior employee in Group III, or
those listed in paragraph l.b. only if they previously held
that classification and when they would be placed on layoff
from the factory.
(b) The Protected Jobs are:
314 48" Control Room Operator
719 Power Monitor
2. The following reduction in force procedure will apply for all plants as
set forth in Section 9 of this Article.
(a) An employee affected under this Section will be placed on
available work within his plant. If there is no available
work, he will displace the least senior employee within the
plant.
(b) An employee removed from his plant under Section (a) or unable
to bump under Section (a) will then be placed on available
work factory-wide. If there is no available work factory-wide,
he will displace the least senior employee factory-wide.
Rather than exercise this bump, the employee may elect to take
a layoff.
(c) The least senior employee factory-wide who is affected by
bumping will then be placed on layoff.
(d) An employee's election not to bump under Section (b) above
shall be construed to mean that the employee is not suited for
the work offered and will not prejudice his right to receive
benefits under the Unemployment Insurance Program in the state
of Pennsylvania.
3. Employees, if able to perform the job, will be recalled from layoff in
line with their seniority and without regard to their former plants.
However, employees exercising the option in Section 2(b) above must
specify at time of layoff to which plants (other than the one for which
a bumping opportunity was refused) he or she would be willing to accept
recall. In the event of a recall opportunity to any of those plants for
which a preference was indicated, the employee must either accept the
recall or be terminated.
4. In the event a laid off employee fails to report for work at the time
said employee is directed to do so and should such employee also fail
to notify the Company of any reason for failing to report as directed,
then, in such event, the Company is under no obligation to offer such
employee an opportunity to return to work, and such employee shall lose
all seniority rights. At least five (5) days notice, by registered
mail, to the employee's last known address shall be sufficient for the
purpose of this Section. A copy of the notice will be sent to the local
Union.
5. If a laid off person is recalled any time within thirty-six (36) months
from his date of layoff, he will receive seniority credit for the
actual time laid off.
6. Except in cases of classifications where in the judgment of the Company
special fitness or skill is required, no new employee will be hired
until all laid off employees with seniority rights who are capable of
efficiently performing the work have been given an opportunity to
return to work.
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7. When an employee is removed from his plant due to a decrease in work
force other than layoff, said employee may request a transfer back to
his original plant from the foreman in his new department. This request
will be filed with the Human Resources Office within fourteen (14) days
of his removal and a copy shall be given to the Union.
(a) When vacancies occur in his former plant, Management, before
hiring any new applicant or recalling a junior employee from
layoff for such vacancy, will honor, by seniority, a written
request for transfer back to such plant from any employee who
was transferred from such plant through no fault of his own,
provided said employee is competent to perform the work.
(b) In the event an employee bids and secures a job in his new
plant, his right to transfer back to his original plant shall
cease.
(c) When an employee takes a voluntary layoff he will be treated
as a decrease in workforce upon his return from the voluntary
layoff.
8. (a) A "temporary layoff" shall be defined as any layoff not
exceeding four (4) days in duration because of lack of work,
power failures, machine breakdowns, fires, disasters, etc. In
such event, employees of the affected job classification on a
shift shall be laid off in seniority order but without bumping
opportunities in the case when the events leading to the
temporary layoff became known after the beginning of the
workday. If such temporary layoff continues into the next
workday, the application of seniority will be within the job
classification without regard to shift. Such shift
reassignments as are required to effect these seniority
provisions shall not result in premium or call-in pay. When
the temporary layoff is concluded, the employees first
recalled will be those who are regularly assigned to the first
full shift scheduled. If other work is available in any plant,
it will be distributed in accordance with seniority, as above
defined. This temporary layoff provision will not be used to
effect work sharing or to avoid a permanent layoff because of
a sustained reduction in the workload.
(b) For DuPont shift workers, a temporary layoff shall continue to
be defined as four (4) days, however:
(i) The first three (3) days shall be exactly as defined
above.
(ii) At the time of layoff, each employee will be
canvassed as to his desire to work on the fourth day.
For those desiring to work, the Company shall provide
available work.
9. For the purpose of decrease in work force or such other purposes as are
expressly provided for in this Agreement, it is agreed that The
Carbide/Graphite Group is divided as follows:
Plant 3 and Miscellaneous;
Carbottom, Mass and Sagger Bake, Pitch Impregnating, Central
Cleaning, Longitudinal Graphitizing, Plant 607 (Departments 32
and 47), Inspection and Miscellaneous;
Mechanical Maintenance;
Electrical Maintenance;
Outside Maintenance;
Mobile Maintenance.
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Each of the above groups shall be interpreted as a plant.
10. If an employee elects to take a voluntary layoff in accordance with
this Article, the employee shall have the opportunity of exercising
bumping privileges into his seniority unit at thirteen (13) week
intervals from the last day worked, or upon expiration of such
employee's Unemployment Compensation benefits provided his seniority so
permits, and the employee provides two (2) weeks notification to the
Company of the Unemployment Compensation benefit expiration and his
intention to return.
In the event the seniority of the employee on voluntary layoff status
would not permit the employee to be working, that status will convert
to involuntary layoff, and all benefits shall revert to those benefits
as provided for with involuntary layoff.
Any employee who elects a voluntary layoff shall have insurance
coverage for medical, surgical, hospitalization, major medical,
prescription drug and life insurance continued for a maximum of
thirty-nine (39) weeks from the last day worked. The employee may
continue such coverage for the thirty-nine (39) week duration by
payment of the contractually specified amount for the same to the
Company.
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ARTICLE 13
JOB DESCRIPTION AND EVALUATION
1. It is agreed and understood that the wage structure for this plant is
based upon job evaluation.
2. The present job evaluation plan shall be used in evaluating the new
jobs and in reevaluating existing jobs when changes in job content
occur. In the event no agreement is reached, it is agreed it shall be
handled under the grievance procedure.
3. Classifications and the establishment of new classifications shall be
subject to negotiation and agreement by and between the employer and
the Union. Disputes shall be subject to the grievance and arbitration
procedure.
4. The Company agrees to notify the Union of new job evaluations and
changes in existing evaluations. The Company will furnish the Union
with copies of job descriptions, and they will be deemed a part of this
Agreement. Job descriptions and evaluations shall be kept up to date.
5. Where certain jobs were granted an inequity increase by the Company,
and which was added to the evaluated classified wage rate, then a
reevaluation of any such job shall not be cause for the Company to take
away the inequity increase granted such job.
6. It is understood that the Company is presently engaged in a program to
update job descriptions and evaluations for existing job
classifications. In case a job is reevaluated at a lower rate of pay,
the employee presently on that job shall receive no reduction in his
classified wage rate. Any employee whose current rate exceeds the
evaluated job rate shall continue to be paid the current rate until
such time as the employee leaves the job or the job is abolished. All
other employees hereafter assigned to the job shall receive the
evaluated job rate.
7. The members of the Union Shop Committee shall also act as the members
of the Union Job Evaluation Committee. Time lost by the members of the
Committee on problems dealing with job evaluation shall be paid for by
the Company in the same manner as provided for under Article 37,
Section 7, in the current Agreement.
8. The provisions of Article 11 & 12 are modified to the extent necessary
to allow for progression on the following jobs.
(a) Maintenance
(i) Mechanics
Mechanic A
Mechanic Apprentice (Progression Only)
(ii) Mobile Equipment
Mobile Mechanic A
Mobile Mechanic Apprentice (Progression Only)
(iii) Electrical
Electrician A
Electrician Apprentice (Progression Only)
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ARTICLE 14
DISCHARGES
1. Any employee guilty of habitual absenteeism, who does not report for
work for a period of five (5) days, may be dropped from the Company's
payroll and said employee's services and seniority terminated.
2. Any employee who is absent from work for a period of ten (10) days
without a justifiable reason or excuse may, upon proper notification
from the Company, be dropped from the Company's payroll and said
employee's services and seniority terminated.
3. (a) Discharge of regular employees may be made subject to cause
only, and all discharges are subject to review between the
Union and the Company under the grievance procedure.
(b) In the event that after a discharge or a suspension pending a
discharge the Company reinstates any employee so involved, it
may do so with full or part pay, or without any pay
whatsoever, for the period of the suspension or discharge.
(c) In the event that any discharge becomes the subject of
arbitration and if reinstatement is ordered, the arbitrator
may provide for reinstatement with full or partial pay, or
with no pay whatsoever, for the period of the discharge.
4. It is important that complaints regarding unjust or discriminatory
layoffs or discharges be handled promptly. Grievances must be signed by
the Chief Steward or his designated alternate and filed with the Human
Resources Department within three (3) working days of the layoff or
discharge; the Management will review and render a decision on the case
within three (3) working days of its receipt. If a decision of the
Management in such a case is not appealed within three (3) working
days, the matter will be considered closed.
5. It is understood that violation of Company rules is proper cause for
appropriate disciplinary action or discharge, subject to review under
the grievance procedure.
6. In the event a discharge becomes the subject of arbitration it must be
referred to arbitration within seven (7) days, it being understood that
the purpose of this clause is to have such arbitration held with all
reasonable dispatch.
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ARTICLE 15
VACATIONS
1. Paid vacations shall be granted as follows:
(a) Upon completion of one (1) year of employment, but less than
two (2) years - one (1) week.
(b) Upon completion of two (2) years of employment, but less than
seven (7) years - two (2) weeks.
(c) Upon completion of seven (7) years of employment, but less
than nine (9) years - two (2) weeks, plus one (1) day.
(d) Upon completion of nine (9) years of employment, but less than
ten (10) years - two (2) weeks, plus two (2) days.
(e) Upon completion of ten (10) years of employment, but less than
sixteen (16) years - three (3) weeks.
(f) Upon completion of sixteen (16) years of employment, but less
than seventeen (17) years - three (3) weeks, plus one (1) day.
(g) Upon completion of seventeen (17) years of employment, but
less than eighteen (18) years - three (3) weeks, plus two (2)
days.
(h) Upon completion of eighteen (18) years of employment, but less
than nineteen (19) years - three (3) weeks, plus three (3)
days.
(i) Upon completion of nineteen (19) years of employment, but less
than twenty (20) years - three (3) weeks, plus four (4) days.
(j) Upon completion of twenty (20) years of employment, but less
than twenty-three (23) years - four (4) weeks.
(k) Upon completion of twenty-three (23) years of employment, but
less than twenty-five years (25) - four (4) weeks, plus two
(2) days.
(l) Upon completion of twenty-five (25) years of employment, but
less than twenty eight (28) years - five (5) weeks.
(m) Upon completion of twenty-eight (28) years of employment, but
less than thirty (30) years - five (5) weeks, plus two (2)
days.
(n) All employees upon completing thirty (30) or more years of
employment shall be granted six (6) weeks vacation.
2. For vacations taken after 10/1/99, vacation is paid at straight time
for all hours taken (exception - Dupont shift employee taking a
vacation day on a holiday, Saturday or Sunday, shall be paid one and
one-half times (1.5x) base rate for all hours taken).
3. When vacation time includes a paid holiday, an additional day of
vacation shall be granted.
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4. All employees whose services are terminated for any cause whatsoever
shall receive, with their final pay, their earned vacation allowance.
(a) An employee who is placed on layoff prior to September 1st of
a calendar year may request that five (5) vacation days be
held in anticipation of a recall.
(b) Employees electing the option under 4 (a) who are recalled
after September 1st, or not recalled in that year, shall be
paid for the five (5) days.
5. Returning veterans shall be treated as having worked continuously for
the purpose of computing vacations.
6. Any employee entitled to six (6) weeks vacation may elect to take his
or her vacation in six (6) periods.
7. In the event that an employee is laid off and is later recalled, he may
be required to complete two (2) months of continuous employment before
taking any vacation to which he may be entitled.
8. Employees may elect to take one week of vacation pay in lieu of time
off at the discretion of the Company.
9. An employee may elect to take his vacation in individual days and
receive vacation pay for said day in his next regular pay period.
10. Effective October 1, 1994 the vacation year will begin on October 1 and
end the following September 30.
Employees will specify normal vacation preference in writing by
September 1 of each year on forms provided by the Company no later than
August 1 of each year. Normal vacation preferences may be changed upon
request for good and sufficient reasons.
The Company will notify employees whether their vacation requests are
granted by October 1 of each year. It is understood that selections of
preferred vacation made after October of each year will be on the basis
of the next senior employee denied the days, then "first come, first
served". The only time after October 1 that vacation schedules may be
altered by the Company is by job changes of a senior employee. The
junior employee shall then be notified within thirty (30) days that his
vacation schedule must be altered.
It is also understood that if a major shift in work schedule occurs
(for example, continuous shift to Dupont shift or vice versa) after the
vacation schedule has been completed, it may be necessary to reschedule
vacations.
11. Continuous shift employees with a fractional day of vacation remaining
may take a full day away from the job, (but only be paid for the
remaining vacation), without being charged an instance for absenteeism.
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<PAGE> 31
ARTICLE 16
TRANSFERS
1. When an employee is assigned to a job listed in Group 1 (see Schedule
1), whether due to bidding, layoff or transfer, said employee shall be
paid the classified rate of the job or task to which said employee is
assigned if said employee was previously classified, otherwise said
employee will be paid the miscellaneous rate until such time as the
said employee becomes competent to perform the work and is so
classified. An employee who fails to qualify for classification in a
120-hour working period (within his classification including Saturday,
Sunday, sixth and seventh day overtime) shall be placed under Section
(b). The Company and the Union may agree to extend the 120-hour working
period.
(a) When an employee is assigned to a job listed in Group II (see
Schedule 1), whether due to bidding, layoff or transfer, said
employee shall be paid the classified rate of the job or task
to which said employee is assigned if said employee was
previously classified for that job, otherwise said employee
will be paid the miscellaneous rate until such time as the
said employee becomes competent to perform the work and is so
classified. An employee who fails to qualify for
classification in a 200-hour working period (within his
classification including Saturday, Sunday, sixth and seventh
day overtime) shall be placed under Section (b). The Company
and the Union may agree to extend the 200-hour working period.
(b) In the event that an employee is removed under this Section,
he will be placed as if he were a miscellaneous employee and
he will return to miscellaneous work in his original plant.
2. An employee working on a task for which said employee has not been
classified and for which a "standard" has been established shall be
paid the "standard hours" times the rate for the job or task for such
time as said employee exceeds the standard.
3. A classified non-incentive employee temporarily assigned at the
convenience of the Company shall be paid for the remainder of the shift
or for the first full shift assignment, if the assignment is initially
made at the beginning of the shift, at the rate of the job on which
said employee worked immediately before the transfer or the rate of the
new job, whichever rate is higher. Classified incentive employees
temporarily reclassified or transferred from one job to another shall
be guaranteed at least the average earnings on their former job for the
remainder of the shift or for the first full shift assigned, if the
assignment is initially made at the beginning of the shift, provided
the transfer is at the convenience of the Company.
In the event the temporarily reassigned employee is replaced on his
job, he shall be paid the higher of the permanent and temporary rates.
Reassignments due to lack of work will not be cause for maintaining the
rate of the job from which transferred.
4. (a) Decrease in Workforce - See Article 12 - Paragraph 7 (a), (b)
and Paragraph 10.
(b) Regular Transfers - See Article 11 - Paragraph 1.(c).
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ARTICLE 17
LEAVES OF ABSENCE
1. Any member of the Union (not to exceed two (2) members) being elected
to permanent or temporary office or selected for appointive office by
officials of the International Union, shall be guaranteed reemployment
on his former job of his last employment with full seniority
accumulated during such absence.
2. Any member of the Union being elected as a delegate to any Union
activity necessitating a temporary leave of absence shall be granted
such leave and, at the end of the mission, shall be guaranteed
reemployment with full seniority accumulated during such absence.
3. Any employee may request a leave of absence not to exceed thirty (30)
days, provided said leave is not for the purpose of working elsewhere.
The Company, within its discretion, shall determine the advisability of
granting such leaves of absence. The Company will notify the Union
whenever leaves of absence are granted.
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ARTICLE 18
GRIEVANCES
1. A "grievance" shall be defined as a complaint regarding wages, hours of
employment and/or working conditions. The grievance must be taken up
within thirty (30) days of occurrence by the employee(s) involved.
2. All employee grievances which arise shall be adjusted in the following
manner:
(a) Between the aggrieved employee and the Department Steward or,
in his absence, the nearest available member of the Union's
Shop Committee on the one hand and the Department Foreman on
the other. If no satisfactory settlement is reached between
them within eight (8) hours, the complaint shall be reduced to
writing and shall be referred to:
(b) The Chief Steward and/or his designate, the Department Steward
in which the grievance originated and the Department
Superintendent and Foreman, who shall meet within seventy-two
(72) hours, excluding Saturdays, Sundays and holidays. In the
event a satisfactory agreement is not reached within
twenty-four (24) hours, the matter shall be referred to:
(c) The Shop Committee and representatives of the Company, who
shall meet once a week or whenever necessary. Any issue
discussed at one week's meeting shall be answered within seven
(7) calendar days. If the decision of management in such cases
in 2 (b) and 2 (c) is not appealed within fourteen (14)
calendar days from the date that is picked up and signed for
at the Human Resource Office by the Chief Steward or his
designate, the matter will be considered closed. In the event
of further failure to settle the grievance, the matter shall
be referred to:
(d) Representatives of the Union and representatives of the
Company. Any issue discussed at a Fourth Step Meeting shall be
answered within seven (7) calendar days. If a decision of the
Management in such a case is not appealed within seven (7)
calendar days, the matter will be considered closed. Both
parties by mutual consent may extend the seven (7) day period.
3. It is agreed that all matters pertaining to policy or to the
interpretation of any clause of this Agreement shall be dealt with
among the Shop Committee, representatives of the Union and Management
or any person designated by Management.
4. The Company shall supply the Union with all legally required, pertinent
information in connection with the adjustment of any grievance.
5. The Company and Union may at any time, by mutual agreement, refer a
grievance directly to arbitration in accordance with Article 19,
Arbitration.
6. The Company will pay any grievance pay within two (2) pay periods of
final grievance resolution.
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ARTICLE 19
ARBITRATION
1. Any dispute, which has not been satisfactorily settled with seven (7)
days after the fourth step of the grievance procedure, may be submitted
to arbitration by either party. In order to initiate this process,
either party may request, by written notice to the Director of the
Federal Mediation and Conciliation Service, a panel of names from the
lists maintained by said Service. A copy of the communication to said
Director will be forwarded to the other party to this Agreement at the
same time the original request is mailed. Employees covered by this
Agreement cannot, except through the Union, initiate or invoke the
arbitration procedure set forth in this Article.
(a) The Company and the Union shall attempt to mutually agree in
writing as to the statement of the issue to be arbitrated and
the arbitrator shall confine his decision to the particular
matter thus specified. In the event of a failure of the
parties to agree on a statement of the issue to be submitted,
the arbitrator shall confine his decision to the written
grievance.
2. Upon receipt of a request for arbitration, the Federal Mediation and
Conciliation Service will forward a duplicate panel of arbitrators to
both Company and Union. No arbitrator shall be appointed by the Service
who has not been approved by both parties. In the event the parties
fail to agree on an arbitrator after exhausting three (3) panels or
within three (3) months, whichever occurs first, the Federal Mediation
and Conciliation Service shall appoint an arbitrator.
3. Notwithstanding any other provision of this Agreement, no arbitrator
shall, without specific written agreement from the Company and the
Union with respect to the arbitration proceeding before him, be
authorized to add to, detract from or in any way alter the provisions
of this Agreement.
4. Either party may be represented by counsel at any hearing without prior
notification to the other party or the Service.
5. The award of the arbitrator shall be in writing and final and binding
upon the parties to this Agreement. The award shall be made within
thirty (30) days from the close of hearing, unless otherwise agreed to
by the parties.
6. The Company and the Union shall bear equally the fee and expenses of
the arbitrator.
7. Unless there is written mutual agreement between the parties that more
than one grievance may be heard by an arbitrator, an arbitrator will be
restricted to ruling on only one grievance.
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ARTICLE 20
MANAGEMENT
Management shall have the right to manage the affairs of the Company, subject to
the limitations and the grievance procedure set forth in this contract.
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ARTICLE 21
SAFETY AND HEALTH
1. The Company shall continue its practice of providing for the safety and
health of its employees while at work. Protective devices and other
equipment required by law to protect employees from injury shall be
provided by the Company. The Union agrees that it will encourage all
employees to work in a safe manner.
2. The parties agree to cooperate in achieving compliance with
governmental safety and environmental regulations.
3. If an employee has good reason to believe that an assigned job may
involve imminent danger to life or limb, the foreman and Union Steward
will be notified immediately. If the matter is not resolved, it will be
taken up with the Company Safety Representative for the purpose of
resolving the dispute. If the dispute is not then resolved, Management
shall make an immediate investigation of the imminent danger complaint,
including consideration as to the advisability of stopping the job
pending final determination of the dispute where in the opinion of
Management such action is warranted. If the decision of Management is
that the job is safe, the employee must perform the assigned job. If
the employee still feels an imminent danger exists, the Company Safety
Representative and the responsible Union Safety Representative shall
meet for the purpose of taking prompt action to determine whether the
condition is one involving imminent danger. It is agreed that neither
the Company nor the Union will accept or tolerate employee claims of
imminent danger which are capricious or otherwise not based on an
actual fear that imminent danger does exist.
4. The Union and Company agree to form a joint committee, which shall be
known as the Safety and Health Committee as follows:
(a) A committee of six (6) employees - two (2) to be appointed by
the Union, one (1) Shop Committee Member, and three (3) to be
appointed by the Company.
5. The Safety Committee shall meet monthly at the call of the designated
Safety Representative. The Committee shall discuss Safety and Health
problems and make recommendations to Management to carry out our
expressed mutual desire. Time lost by the employee members of the
Committee from their regular scheduled hours of work in attendance at
Safety Committee meetings shall be paid in the same manner as outlined
in Article 37, Stewards.
6. If an employee injured on the job disputes a Panel doctor's
determination that he is capable of returning to work, he may request a
second opinion from a physician of his choice at Company expense. The
employee is expected to report for work while awaiting the second
opinion. The employee shall extend his best efforts to arrange an
appointment within 48 hours. If an appointment cannot be arranged on
his own time, the Company will pay for reasonable time away from the
job for the purpose of having a consultation. In the event the two (2)
physicians differ in their opinion as to whether the employee is able
to return to work, they shall jointly select a third physician and the
majority decision shall prevail. The expense of the third physician
will be paid by the Company. injured employee is required to visit one
of the panel physicians for a thirty (30) day period. After this, the
employee may select the physician or practitioner of his choice.
7. The Company will provide once per contract year OSHA approved safety
glasses for employees only. If the Company's participating Opticians
are used, then the employee going to any of those locations will be
treated as in the past. If the employee wishes to choose an optician of
his/her choice, then the Company will pay a voucher allowance of
seventy-five ($75.00) dollars.
8. The Company will pay a voucher allowance of ninety($90.00) dollars once
every nine (9) months for safety shoes. After the second nine (9) month
period, the voucher allowance will be increased to one hundred
($100.00) dollars.
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ARTICLE 22
STRIKES AND LOCKOUTS
1. The Union will not cause or officially sanction its members to cause or
take part in any strikes (including sit-downs, stay-ins, slowdowns or
any other stoppages of work) and will cooperate with the Company in
every way possible to prevent any such stoppages of work and to
terminate such stoppages that may occur as soon as possible. The
Company agrees not to lock out any of the employees.
2. Any employee who violates the above provisions or Section shall be
subject to discipline or discharge.
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ARTICLE 23
INCENTIVE PAY
1. Incentive rates shall be so set that the average operator can earn 130%
of the base rate.
2. Machine-controlled operations will be set according to the following
procedure:
(a) Manual-controlled elements shall be set so that the average
operator working at an incentive pace can earn 130% of the
base rate.
(b) Machine-controlled elements shall be so set that the average
operator can earn 120% of the base rate. [See Article 27,
Sections 6(a), (b), (c) and (d).] It is understood that an
operator is not limited to earnings of 120%.
3. There shall be no favoritism in the distribution of incentive work.
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ARTICLE 24
CHANGE IN METHOD OF PAYMENT
There shall be no change in the standard hour method of payment for any
employees covered by this contract without the agreement of the Union. It is
further agreed that all piece rates and day work, wherever possible, shall be
converted to the standard hour system as soon as is practical.
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ARTICLE 25
TIME STUDIES
1. The Company agrees to establish courses in time study techniques in
order to train Union personnel. No more than two (2) employees will be
trained at any one time. The Union will submit the names of the
designated employees to the Company.
2. Time lost attending these courses by such employees shall be paid for
by the Company at their classified rate. While attending these courses,
such employees will be under the supervision of the Control Department.
3. The Union Time Study man shall be provided with or have access to the
records (copies) of the Time Study Department. Other than if it be
absolutely necessary in the processing of a grievance, the Time Study
information and records furnished to the Union Time Study
Representative by the Company cannot be removed from the Company
premises. In the event that it is deemed necessary in the processing of
a grievance to take such records off the premises, the Union Time Study
Representative must sign a receipt for such written information and
records that he requests to remove from the Company premises. In no
event will the records or information being made available to the Union
Time Study Representative be passed on to Company competitors.
4. The Union Time Study man will be assigned to regularly work the first
shift during the Monday through Friday workweek on a job for which he
is qualified.
5. The Union Time Study man and the alternate shall not be subject to the
layoff provision of the contract, in effect they will have
super-seniority (only to be exceeded by that of the Shop Committee),
but shall be subject to all other provisions of the contract.
6. No Union Time Study man or alternate shall be promoted or transferred
out of the bargaining unit until he is released by the Plant Shop
Committee of the Union.
7. The Steward or, in his absence, the operator shall be informed of any
proposed time studies and the reason for which the studies are being
taken.
8. When a study is completed, the Time Study Observer will inform the
Steward or, in his absence, the operator of the following:
(a) Name and classification of operator studied.
(b) Total time of study.
(c) Number of pieces or units produced.
(d) The total number of strikeouts used during the study.
(e) The performance rating factor for each element.
9. The Company will furnish the Union with a copy of the operation number
and standard for all jobs studied. The Union shall have the right to
question all time studies and, upon request, the Company will furnish
the Union with a copy of the time study in issue. As may be necessary,
the Union may request to have longer time studies taken on time values
that are in issue.
39
<PAGE> 41
ARTICLE 26
MAKING THE TIME STUDY
1. The Time Study Observer will contact the Foreman regarding the
operations to be studied. The employee working on the operation will be
informed by the Foreman that an analysis is to be made and a time study
is to be taken.
2. The Observer will discuss any improvements with the Foreman, and the
Foreman will instruct the Operator.
3. Divide the job into its elements and arrange them advantageously on the
sheet.
4. Make elements as short as possible without interfering with accurate
observations.
5. Describe elements exactly.
6. Assign numbers to the elements in the order of their first occurrence,
as 1, 2, 3, 4, etc. If an element is repeated after its first
occurrence, use the same number that was first used.
7. At the beginning of the first element to be included in the study,
start the hour-decimal watch and read the time of day on the ordinary
watch.
8. Record the time of day.
9. Record the hour-decimal watch reading:
(a) At the completion of Element 1, record the watch reading in
Column 1 opposite the heading "Continuous," the reading at the
end of Element 2 in Column 2 opposite heading "Continuous,"
etc.
(b) Allow the watch to run continuously.
(c) At the completion of the first piece, allow the watch to run
and return to column for second piece following the same
procedure for next pieces.
10. When an operation is being time studied for the purpose of setting a
rate a sufficient number of pieces shall be studied, the number to be
governed by the nature of the job. In all cases the total number of
pieces observed shall be at least twenty (20) or the total time of the
study shall be at least thirty (30) minutes, whichever in the
discretion of the Time Study Observer is more appropriate. In the event
an operation in its entirety takes less than thirty (30) minutes, the
entire operation shall be studied. When a detailed time study is
completed, a rate will be issued. In the event a study is not
completed, the Steward will be advised of the reasons and the
incomplete study will be destroyed in his presence.
11. At the completion of the last element to be included in the study,
record the time of day as indicated on any ordinary watch.
12. Make a note of the effort and skill for each element on the front of
the sheet by checking the term that applies.
13. Sign and date the time study.
40
<PAGE> 42
ARTICLE 27
ESTABLISHING THE STANDARD
1. The first step of the computations is to determine elemental elapsed
times by subtracting successive watch readings. These times are to be
recorded in column marked "Individual."
2. Before taking up the summary of the elapsed times, the study should be
carefully examined for abnormal values. If any are found, they should
be indicated so that they can be readily distinguished and excluded
from the summary. No time shall be excluded unless it is noted on the
study. No watch readings shall be struck out in the taking of a time
study unless a clear explanation of the reason for the exclusion
appears on the observation sheet. Strikeouts which are decided upon
after the Time Study Observer has left the department will be shown on
the Time Study Summary Sheet with the high strikeouts summarized and
the low strikeouts summarized and the two totals listed separately.
Should there be a dispute as to the number of strikeouts, only those
values which are more than one standard deviation above or below the
mean may be eliminated.
3. After elimination of abnormal values, the elapsed time for occurrence
of each element is added and the average determined. The full decimal,
to four (4) places, should be shown in this average.
4. The average time for each element will be leveled to an average or
normal time by multiplying by the leveling factor determined by the
following chart:
<TABLE>
<CAPTION>
SKILL EFFORT
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
+15 A1 +13 A1
+13 A2 Super +12 A2 Excessive
-------------------------------------------------------------------------------
+11 B1 +10 B1
+ 8 B2 Excellent + 8 B2 Excellent
-------------------------------------------------------------------------------
+ 6 C1 + 5 C1
+ 3 C2 Good + 2 C2 Good
-------------------------------------------------------------------------------
0 D Average 0 D Average
-------------------------------------------------------------------------------
- 5 E1 - 4 E1
-10 E2 Fair - 8 E2 Fair
-------------------------------------------------------------------------------
-16 F1 -12 F1
-22 F2 Poor -17 F2 Poor
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CONDITIONS CONSISTENCY
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
+ 6 A Ideal + 4 A Perfect
-------------------------------------------------------------------------------
+ 4 B Excellent + 3 B Excellent
-------------------------------------------------------------------------------
+ 2 C Good + 1 C Good
-------------------------------------------------------------------------------
0 D Average 0 D Average
-------------------------------------------------------------------------------
- 3 E Fair - 2 E Fair
-------------------------------------------------------------------------------
- 7 F Poor - 4 F Poor
-------------------------------------------------------------------------------
</TABLE>
General Rating for Study Skill/Effort/Conditions/Consistency
5. Skill and effort ratings were marked at completion of time study.
Conditions and consistency will be marked after subtraction of elapsed
time.
6. The next step is to assign several standard allowances to the
normalized time for certain factors not taken into consideration by the
watch readings.
(a) Fatigue refers to the physical exertion required by the task.
A minimum fatigue allowance of 5% will be made on all elements
of machine and handling time.
41
<PAGE> 43
(b) Personal needs are required since it is necessary for the
operator to go to the rest room, or secure drink of water,
etc. Minimum allowance 5%.
(c) Contingency refers to possible elements in the operation that
are reasonably expected to occur but timing and length of
occurrence are unpredictable. Lack of material or servicing,
minor adjustments and power failures of short duration would
be properly appraised as contingency elements. Minimum
allowance 5%.
(d) Machine-Controlled Allowance refers to all elements that are
machine-controlled. A 5% allowance will be applied only to the
elements which are machine-controlled.
7. The "allowed time" for each element is determined by adding the allowed
time for personal, fatigue, contingencies, (and machine-controlled
allowance as may be required) for each element to the normalized time.
8. The "standard time" for the task is determined by adding the allowed
time for each element.
42
<PAGE> 44
ARTICLE 28
RETIMING OF JOBS
The Union shall be informed of any proposed change before retiming.
1. Permanent standards once established will not be increased or decreased
unless there is a definite change in the following:
(a) Change in design.
(b) Change in materials.
(c) Change in tools or equipment.
(d) Change in methods.
(e) Change in quality standards.
(f) Work added to or removed from job.
(g) Mathematical errors in setting the timing of the rate are to
be corrected within ninety (90) days of the effective date of
the time study or rate.
2. Whenever any of the above changes take place which affect time values,
only that portion of the time value affected by the change will be
adjusted. Sufficient additional elements (which may include all
elements) to those affected by the change may be studied to determine
the effect of the change on existing values. Recorded or standard time
values, where established, shall not be changed unless there has been a
10% change in the time value of the element. Only the time value of
that element will be changed.
3. When the elements are established for retiming, they shall be as
identical as possible to prior studies on the operation. When a change
is to be made in an operation and the old time value is not broken down
into elements, a time study may be taken before the change is made in
order to establish the elements of the existing time value, but the old
time value will not be changed as a result of this study. When the
change in the operation is made, the provisions of Sections 2 and 3 of
this Article will apply.
5. When an old order repeats and there is no original study, the
operations will be time studied and the rates will not be changed, but
inflated to the original standard. When any further change in the
operation is made, the provisions of Sections 2 and 3 of this Article
will apply.
6. When an old order repeats and there is an original study, provided a
change occurs, a study will be taken and the language of the present
contract will apply.
43
<PAGE> 45
ARTICLE 29
NEW PRODUCTS
Whenever the Company makes a change in a product or introduces a new product,
incentive standards for identical operations that existed prior to the change
and are still performed on the changed product or new product shall not be
changed. Disputes which arise under this Article will be subject to the
grievance procedure, beginning in the third step.
44
<PAGE> 46
ARTICLE 30
TEMPORARY TIME VALUES
1. Temporary or estimated time values established for an item being
manufactured shall become permanent values at the end of three (3)
months from the date the item repeats on a new manufacturing order,
unless a permanent value is established at an earlier date. If the
original order is for a large quantity, the employer and the Union
shall negotiate for a shorter time than three (3) months for the
establishment of temporary value as the permanent value.
2. When a production run is interrupted by a short run job on which no
time values have been established, the employee shall receive no less
than his average hourly earnings for the production run.
45
<PAGE> 47
ARTICLE 31
JURY DUTY
An employee called for jury duty will be reimbursed the difference between the
amount he is paid for such service, not including transportation allowances, and
his straight time hourly classified rate for time lost from work up to ten (10)
working days.
An employee called as a juror for a coroner's inquest will be reimbursed on the
same basis as above.
46
<PAGE> 48
ARTICLE 32
FUNERAL LEAVE
1. An employee who has completed his or her probationary period with the
Company and who is scheduled to work may be excused from work because
of a death in his or her immediate family. When excused he or she shall
be paid an allowance for the hours he or she is scheduled to work on
Monday through Friday, not to exceed eight (8) times his or her
classified rate of pay, for each day excused, for not more than three
(3) days.
2. The funeral benefit will terminate at the end of the day of the
funeral. If the employee does not attend the funeral of the deceased,
pay allowance as provided herein will not be allowed.
3. "Immediate family," for the purpose of this Section, is defined as
mother, father, mother-in-law, father-in-law, spouse, son, daughter,
brother, sister, grandchild and grandparent.
4. In the event of the death of a brother-in-law or sister-in-law, an
employee who has completed his or her probationary period may be
excused from work on the day of the funeral (or if the funeral is held
on Sunday, Monday will be the day excused). The pay for this absence
will not exceed eight (8) times his or her classified rate of pay.
5. If the day of the funeral is on a Saturday and the employee is
scheduled to work on that day, he/she will be paid straight time.
47
<PAGE> 49
ARTICLE 33
NO DISCRIMINATION
There shall be no discrimination in the wages, hours or other terms and
conditions of employment on account of sex, race, color, age, creed or national
origin, veterans status, disability, or handicap. Word used in masculine gender
applies also to the feminine gender.
48
<PAGE> 50
ARTICLE 34
EMPLOYEE RATINGS
Hourly employees covered by this Agreement shall be given their ratings in
writing within one hundred twenty (120) hours after any new rating or change in
rating is made. A copy of the employees' ratings shall be furnished to the
Union.
49
<PAGE> 51
ARTICLE 35
COMPANY POLICY REGARDING SUPERVISORY PERSONNEL
Supervisors shall not perform production or maintenance work, except in cases
where circumstances create an emergency.
50
<PAGE> 52
ARTICLE 36
FAMILY LEAVE
The parties agree that they shall comply with the Family and Medical Leave Act
of 1993.
In administering family leave, the Company and Union shall comply with
regulations/directives promulgated by the Federal Government.
An employee shall be able to retain five (5) vacation days (40 hours) when
taking Family Leave.
The parties agree that maternity shall continue to be treated as a disability in
accordance with Federal/State statutes.
51
<PAGE> 53
ARTICLE 37
STEWARDS
1. Stewards, including the Chief Steward and the Assistant Chief Steward,
in their respective departments shall remain in said departments on
their respective shift and crew until all other employees are laid off
(including temporary layoffs) or transferred from that department,
provided said employee is competent to perform the available work.
2. Shop Committee and Stewards shall be the last to be laid off and the
first to be recalled on a factory-wide basis, provided said employee is
competent to perform the available work.
3. In the event a Department Steward is laid off or transferred out of his
department due to a lack of work, his rights as Steward shall cease.
4. The Chief Steward shall have seniority over all employees in the
bargaining unit, on a factory-wide basis.
5. A Steward shall be permitted to leave his job for the purpose of
assisting in adjusting grievances. In such cases, the Foreman shall be
notified, and, when necessary, the Foreman shall be given an
opportunity to replace the Steward with another operator.
6. Required time lost on Company property by Union representatives in
settling differences, disputes or grievances shall be paid for by the
Company.
7. Payment for time lost by Stewards in the settlement of grievances shall
be made as follows:
(a) Stewards working on non-incentive operations at the time he or
she is handling a grievance shall be paid the rate for the job
he or she was performing.
(b) Stewards working on incentive operations at the time he or she
is called upon to assist in the settlement of a grievance
shall immediately punch out and his or her average earned rate
at the time of punching out shall be paid for the time spent
in handling the grievance.
8. Payment for time lost at grievance (including arbitration hearings held
off the plant site) and negotiation meetings with the Company shall be
limited to six (6) members.
52
<PAGE> 54
ARTICLE 38
GROUP INSURANCE
1. The Company agrees to provide all employees in the bargaining group and
pay the premium for the following benefits:
(a) Life Insurance and Accidental Death and Dismemberment
increased as follows:
$31,000 effective July 1, 1999
$32,000 effective July 1, 2000
Effective July 1, 1999, employees shall have the opportunity
to purchase an additional $31,000 ($32,000 effective July 1,
2000) at age-based group rates.
(b) Weekly Accident and Sickness benefits for twenty-six (26)
weeks as follows:
$280, effective July 1, 1999
$290, effective July 1, 2000
2. Until December 31, 1999 the Company agrees to continue the Blue
Cross/Blue Shield Plan of Western PA. The Company agrees to pay the
increased costs of the program for its employees and dependents. The
employee will pay the premium specified in paragraph 38.4.
(a) Cost Containment Provisions
(i) Second surgical opinion required for non-emergency
elective surgery.
(ii) Ambulatory surgery must be done on an out-patient
basis.
(iii) Room and board charges on either Friday or Saturday
before non-emergency elective surgery are not
covered.
(iv) Pre-admission testing must be done on an out-patient
basis. If done in-patient, the room and board expense
are not covered.
(b) Hospital Coverage - 120 day plan, full ward or semi-private;
In-Hospital extras - unlimited; Surgical - prevailing fee;
Maternity - 10 days plus extra charges. Eligible dependent
children - from date of birth to age 19, students to age 23,
disabled child to any age.
(c) Hospital outpatient surgical - subject to $25 deductible; 3
per family annually. At the Company's request, this deductible
can be eliminated from the plans.
(d) Outpatient Diagnostic X-ray and Diagnostic Medical Laboratory
- no deductible, no maximum.
(e) Home and office visits for employee only when unable to work.
Maximum 21 visits. $25 deductible per year.
(f) Major medical - $200 deductible individual, two per family per
calendar year; 80/20 co insurance. Effective July 1, 1996 the
major medical maximum is $800,000 (effective 7/1/97 -
$900,000; 7/1/98 - $1,000,000).
(g) Major Medical - An annual out-of-pocket maximum under major
medical of $2000 per individual (20% of $10,000 in major
medical charges eligible for payment). This out-of-pocket
maximum does not include nor pertain to mental/nervous
charges.
53
<PAGE> 55
(h) In-Hospital medical benefits (as an overnight patient in an
accredited hospital because of a disease or injury, such as
heart attack, pneumonia, diabetes, or contagious disease) are
provided for the services of a doctor of medicine or of
osteopathy up to a maximum of 120 days for each period of
hospitalization - Prevailing Fee.
(i) Prescription Plan - Premier plan of Blue Cross/Blue Shield
employee co-pay $4 generic/$6 name brand. The Company will
also establish a mail order drug plan. Once established, this
will require that any prescriptions exceeding thirty (30) days
be purchased through mail.
3. Effective January 1, 2000, the Company will offer the Select Blue Plan
of Highmark Blue Cross/Blue Shield. The Company agrees to pay the
increased costs of the program of its employees and dependents. The
employee will pay the premium specified in paragraph 38.4.
If there is a premium increase during the life of this contract, the
Company reserves the right to change insurance carriers, provided the
change does not affect the benefit levels set forth in the plans.
The following are the major parameters for the Select Blue Plan:
(a) The physician office visit co-payment is $10.00.
(b) The emergency room co-payment is $25.00.
(c) Out of network parameters
(i) Deductible - $200 individual/$400 family
(ii) Out of Pocket Maximum (after deductible) - $800
individual/$1600 family per calendar year.
(iii) Out of service co-payment - 80/20 coverage except for
outpatient mental benefits 50/50.
(d) Prescription Co-payments
i. Generic - $8.00
ii. Brand - $12.00
(e) The Company will also establish a mail order drug plan. Once
established this will require that any prescriptions exceeding
thirty (30) days will be purchased through the mail.
4. The monthly employee contribution for all classes of coverage will be
$20.00 pre-tax. (Effective January 1, 2000 - $25.00 pre-tax).
5. Employees laid off will be covered by the Blue/Cross Blue/Shield
insurance (Select Blue Plan after 1/1/2000) for three (3) months
following layoff, provided they continue to contribute the amount set
forth in Section 4 above.
6. (a) For employees retiring 1/1/2000 or earlier the Company will
offer continuation of medical insurance (but not the
prescription drug card) for retirees age 62 to 65 with 25
years of continuous service. This insurance will be effective
only while the retiree is between the ages of 62 and 65.
54
<PAGE> 56
(b) For employees retiring 2/1/2000 or later the Company will
offer continuation of medical insurance (Select Blue) for
retirees age 62 to 65 with 25 years of continuous service.
This insurance will be effective only while the retiree is
between the ages of 62 and 65.
(c) For the life of this agreement the retiree will contribute 55%
of the full coverage cost based upon the active and retired
groups combined.
(d) The Company's contribution for this coverage in the future
shall be limited to the amount of the Company contribution as
of June 4, 2001 based upon the rate for retirees as a
separately rated group.
55
<PAGE> 57
ARTICLE 39
PENSIONS
1. The Company agrees to keep the pension plan adopted June 1, 1955, in
effect during the labor contract, together with all the improvements
made to date.
2. The present hourly pension program shall be increased as follows:
(a) Effective July 1, 1993 there shall be no maximum service
benefit for calculation of retirement benefit. An employee may
retire at age 62 with ten (10) years continuous service with
non-reduced benefits.
(b) Effective January 1, 1989 vesting in the Carbide/Graphite
Pension Plan for Hourly Bargaining Unit employees at St. Marys
will be reduced from ten (10) years of continuous service to
five (5) years of continuous service.
(c) Effective July 1, 1999, the normal retirement benefit will be
$27.50 per month per year of service (an increase of $1.50).
3. The complete pension program as amended, will be made available in
booklet form.
4. Effective 6/3/96 the paid-up life insurance for retirees will be
increased by $500.00 to $2000.00.
5. Effective 6/7/93 the service requirement for Disability Retirement will
be ten (10) years of continuous service.
56
<PAGE> 58
ARTICLE 40
WAGES
1. The starting rate for employees hired for "Carbon Manufacturing,
Machine Finishing and Maintenance" jobs is set forth in Schedule 1.
After completing the probationary period, employees shall be paid a
minimum of the miscellaneous rate as set forth in Schedule 1.
2. A schedule of the classified rates is attached in Schedule 1 and
becomes part of this Agreement.
3. Wages shall not be subject to arbitration.
4. Annual increases:
Effective June 7, 1999, no increase will be applied to any
wage classification.
Effective June 5, 2000, a general wage increase of thirty
cents ($.30) applied to all wage classifications.
Effective June 5, 2000, jobs listed in Group III are granted
an additional adjustment of ten cents ($.10) per hour.
57
<PAGE> 59
ARTICLE 41
SCOPE OF AGREEMENT
1. This Agreement expresses the understanding of the parties in respect to
matters deemed by them to be applicable to the bargaining unit, and it
shall not be changed or modified except by mutual consent in writing.
2. This Agreement and any supplements which may be added to this Agreement
shall supersede all previous agreements.
58
<PAGE> 60
ARTICLE 42
CONFLICT OF LAWS
It is mutually agreed that if the adoption or amendments of any State or Federal
law conflict with or are contrary to any provision of this Agreement,
negotiations will be opened to make necessary adjustments, but the negotiations
will be confined to changes necessary to comply with the new or amended law.
59
<PAGE> 61
ARTICLE 43
EXPIRATION AND RENEWAL
This Agreement shall remain in effect from June 7, 1999, to 12:01 A.M. June 4,
2001, and shall thereafter automatically renew for one (1) year from year to
year, unless either party gives written notice to the other at least sixty (60)
days prior to any expiration time of intention to modify or terminate the
Agreement. In the event such a notice is received, then, upon request, a
conference shall be arranged between the parties for within ten (10) days after
receipt of such notice.
The parties having met for the purpose of negotiating a Collective Bargaining
Agreement, declare that the foregoing represents the sole and complete Agreement
between the Company and the Union for the period of June 7, 1999 to and
including midnight, June 4, 2001, and further that each had the opportunity to
bargain on all issued and matters during negotiations and that all other
requests and proposals made by both of the parties are waived and withdrawn
herewith, and each party relieves the other of any obligation it might have to
bargain with the other during the term of this Agreement on matters not
specifically included in this Agreement.
THE CARBIDE/GRAPHITE GROUP INTERNATIONAL UNION OF ELECTRICAL,
ST. MARYS PLANT TECHNICAL, SALARIED, MACHINE, AND
FURNITURE WORKERS, AFL-CIO,
LOCAL UNION 502
R. G. Bennett W. Donachy
W. E. Damian E. J. Greenawalt
J. A. Ditson B. J. Sherry
L. E. Ehrensberger W. F. Gausman
N. L. Plows R. M. Grunthaner
D. Gustafson
S. P. Herzing
R. A. Larkin
Each party had the opportunity to bargain on all issues and alter the language.
All other requests and proposals made by both parties are hereby waived and
withdrawn.
- ----------------------------------- -----------------------------------
R. G. Bennett W. Donachy
- ----------------------------------- -----------------------------------
W. E. Damian E. J. Greenawalt
- ----------------------------------- -----------------------------------
J. A. Ditson B. J. Sherry
- ----------------------------------- -----------------------------------
L. E. Ehrensberger W. F. Gausman
- ----------------------------------- -----------------------------------
N. L. Plows R. M. Grunthaner
-----------------------------------
D. Gustafson
-----------------------------------
S. P. Herzing
-----------------------------------
R. A. Larkin
60
<PAGE> 62
ARTICLE 44
SCHEDULE 1
RATE SCHEDULE
It is understood and agreed that the Starting and Miscellaneous Rates in CARBON
MANUFACTURING, MACHINE FINISHING AND MAINTENANCE JOBS are:
<TABLE>
<CAPTION>
START MISC.
----- -----
<S> <C> <C>
(a) Effective 6/7/1999 $11.57 $12.84
(b) Effective 6/5/2000 $11.87 $13.14
</TABLE>
The Classified Rates for the jobs are:
61
<PAGE> 63
GROUP I
<TABLE>
<CAPTION>
6/7/99 6/5/00
Job Class. Class.
No. Title Rate Rate
<C> <S> <C> <C>
020 Sweeper 12.84 13.14
034 Shipping Equipment Operator 13.20 13.50
052 Project Utility Operator 13.61 13.91
149 Granular Materials Operator 13.21 13.51
201 14" Press Mixer 13.17 13.47
205 14" Press Operator 13.35 13.65
211 14" Press Tubman 13.13 13.43
227 Clean Plates 12.84 13.14
233 Tube Driller Operator 12.93 13.23
275 Miscellaneous Labor 12.84 13.14
303 Universal Mill Operator 13.27 13.57
304 Outside Mill Operator 13.27 13.57
306 Inspector/Relief Operator 13.38 13.68
310 48 Press Operator 13.34 13.64
311 48 Mixer Loader/Unloader 13.21 13.51
312 48 Scrap Crusher 13.31 13.61
313 48 Mix Weigher 13.21 13.51
319 Equipment Operator 13.03 13.33
323 Double Deck Operator 13.20 13.50
327 Opening Kilns 12.84 13.14
333 Cleaning Rods by Hand 12.84 13.14
336 Carbottom Utility Operator 13.18 13.48
338 Cleaning Plates by Hand 12.84 13.14
354 25 Press Operator 13.34 13.64
355 25 Mix Weigher 13.17 13.47
356 25 Scrap Crusher 13.22 13.52
357 25 Tubman 13.04 13.34
416 Stock Clerk 13.03 13.33
602 Crushing Graphite 12.84 13.14
605 Crushing Lampblack 12.84 13.14
610 Sludge Operator 12.90 13.20
640 Product Processor 13.35 13.65
642 Picking Up Graphite 12.84 13.14
643 Prod. Proc. Wheelabrator 13.03 13.33
650 Picking Up Bake Scrap 12.84 13.14
663 Banding Rods 12.84 13.14
664 Sand House Operator 12.96 13.26
700 Pitch Impregnator Operator 13.49 13.79
701 Pitch Impregnator Helper 13.34 13.64
712 Sand Drag 13.57 13.87
715 Hyster Operator 13.03 13.33
720 Keener Cleaner Operator 12.95 13.25
721 Process Materials Operator 13.57 13.87
722 Custom Furnace Loader & Unloader 13.24 13.54
723 Kostkutter Loader/Unloader 13.11 13.41
724 Copper Cleaning 13.94 14.24
725 Clean Graphitized PI Material 12.84 13.14
726 Wheelabrator Operator 13.09 13.39
727 Wheelabrator Helper 13.03 13.33
746 Rail Car Unloader 13.10 13.40
</TABLE>
62
<PAGE> 64
<TABLE>
<C> <S> <C> <C>
747 KVS Crusher Operator 13.00 13.30
</TABLE>
63
<PAGE> 65
<TABLE>
<C> <S> <C> <C>
750 Mass Utility Operator 13.20 13.50
760 Sagger Utility Operator 13.12 13.42
794 Shotblast Cleaning 13.12 13.42
831 Utility Operator 13.34 13.64
833 Saw Operator 13.02 13.32
835 Screen Operator 13.02 13.32
837 Janitor/Equip. Operator 13.03 13.33
913 Mill Payloader Operator 12.98 13.28
915 Payloader Operator 12.98 13.28
</TABLE>
GROUP II
<TABLE>
<CAPTION>
6/7/99 6/5/00
Job Class. Class.
No. Title Rate Rate
<C> <S> <C> <C>
066 Bricklayer Helper 13.43 13.73
067 Maintenance Parts Attendant 14.56 14.86
071 Oiler 14.26 14.56
076 Building Maintenance 14.42 14.72
314 48" Control Room Operator 13.87 14.17
360 Kiln Attendant 13.93 14.23
615 Maintenance Equipment Operator 14.06 14.36
620 Vacuum Operator 14.06 14.36
706 Graphite Crane Operator 13.34 13.64
719 Power Monitor 14.18 14.48
</TABLE>
GROUP III
<TABLE>
<CAPTION>
6/7/98 6/5/00
Job Class. Class.
No. Title Rate Rate
<C> <S> <C> <C>
069 Maintenance Mechanic A 16.73 17.13
070 Maintenance Electrician A 16.75 17.15
072 Mobile Mechanic A 17.48 17.88
</TABLE>
Employees moved out of progression where an established progression system
exists will be treated as Group II employees.
64
<PAGE> 66
ARTICLE 45
SCHEDULE 2
WAGE SCHEDULE
ELECTRICAL APPRENTICE AND
MACHINIST APPRENTICE
<TABLE>
<CAPTION>
6 1 1.5 2 2.5 3 3.5 4
Start Months Year Years Years Years Years Years Years
- ----- ------ ---- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
82.5 83.75 85 87.5 90 92.5 95 97.5 100
</TABLE>
MAINTENANCE MECHANIC, AND
MOBILE MECHANIC APPRENTICE
<TABLE>
<CAPTION>
6 1 1.5 2 2.5 3
Start Months Year Years Years Years Years
- ----- ------ ---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
82.5 84.35 86.20 89.90 93.60 97.30 100
</TABLE>
65
<PAGE> 67
ARTICLE 46
SCHEDULE 3
SUPPLEMENTS TO THE LABOR AGREEMENT
BETWEEN
THE CARBIDE/GRAPHITE GROUP, INC.
AND
INTERNATIONAL UNION OF ELECTRICAL,
TECHNICAL, SALARIED, MACHINE AND FURNITURE WORKERS
AFL-CIO LOCAL UNION 502
CONTENTS
SUPP NO. SUBJECT
1 Classification Reinstatement
2 Filling of Temporary Vacancies
3 Maintenance Banding
4 Overtime Canvassing - Maintenance Outside, & Mechanical
5 Substitution of Rates - Plant 3
6 Miscellaneous Labor - Processing
7 25 Inch and 48 Inch Extrusion Press Incentive
8 Incentive System - Pitch Treater
9 Dupont Shift Agreement Sample
10 Cleaning Area Product Processor Incentive
11 Dupont Maintenance Agreement
12 Universal Mill Operator Incentive
13 Longitudinal Graphitizing Crew Incentive Plan
14 Mechanical & Electrical Maintenance Overtime Agreement
15 48" Press Incentive Agreement
16 Rescaling of Incentives
17 Expansion
66
<PAGE> 68
CLASSIFICATION REINSTATEMENT
SUPPLEMENT NO. 1
Any classifications, plants, or supplements that are deleted from this contract,
shall be reinstated as in previous contract, if the job is reinstated during the
life of this agreement, and any wage increases will be applied to the
classification. The effective date of this supplement is June 7, 1999 through
June 4, 2001.
67
<PAGE> 69
FILLING OF TEMPORARY VACANCY
SUPPLEMENT NO. 2
This supplement entered into on the 7th day of June, 1999 by the Company and the
Union is hereby extended for the duration of the present labor agreement
existing between the parties. The effective dates of the Supplement are June 7,
1999 through June 4, 2001.
This supplement is applicable to Kiln Attendants, Power Monitors, Pitch
Impregnation Operators (while on continuous shift) and 48" Control Room
Operators.
The jobs listed above will fill their own vacancies for the purpose of temporary
vacancies.
68
<PAGE> 70
MAINTENANCE BANDING
SUPPLEMENT NO. 3
The repair of all banders from this date will be offered to the senior employee
in the Maintenance Department. Seniority will prevail. The employee is also to
repair nailguns, airdrills, port-a-powers, jack hammers, etc. The employee will
normally work day shift. The employee is to fall in line for overtime during the
week, Saturday and Sunday. The employee may also be called upon to perform other
duties deemed necessary by the Company.
This amendment is entered into on the 7th day of June, 1993 by the Company and
the Union and is hereby extended for the duration of the present Labor Agreement
existing between the parties. The effective dates of the Supplement are June 7,
1999 to June 4, 2001.
69
<PAGE> 71
OVERTIME CANVASSING - MAINTENANCE OUTSIDE,
MECHANICAL
SUPPLEMENT NO. 4
The procedure for overtime canvassing in MAINTENANCE as described above shall be
conducted as follows:
1. If work required is estimated to be one (1) hour or less duration, then
any qualified personnel may be assigned to perform the work without
resorting to call-in pay.
2. If the work estimate exceeds one (1) hour, then normal overtime
canvassing will be performed.
3. If the work required exceeds one (1) hour, then the low employee(s) on
the overtime list will be compensated at time and one-half (1-1/2) (if
work would have been covered by scheduled overtime) or two (2) times
(if a call-in would have been required) for the actual hours worked.
This amendment is entered into on the 7th day of June, 1993 by the Company and
the Union and is hereby extended for the duration of the present Labor Agreement
existing between the parties. The effective dates of the Supplement are June 7,
1999 to June 4, 2001.
70
<PAGE> 72
SUBSTITUTION OF RATES - PLANT 3
SUPPLEMENT NO. 5
1. This Supplement entered into this 20th day of October, 1972, is for the
purpose of setting forth and continuing the past practice of
substitution of rates in Plant 3. The effective dates of this
Supplement are June 7, 1999 through June 4, 2001.
2. To the extent necessary the provisions of Article 30 of the parties'
labor Agreement are amended or expanded to provide the following:
3 The past practice of substituting rates on incentive jobs in
Departments 17 (Cleaning), 19 (Extrusion), 20 (Baking) and 49 (Banding)
of Plant 3 will be continued in the following manner.
4. For jobs not currently on incentive in these Departments, the Company
will immediately start a review to determine whether they can be placed
on incentive.
5. While the Company will make every effort possible to take time studies
establishing permanent rates and eliminating substitution, the parties
to this Supplement recognize that substitution may have to be resorted
to in the Departments listed in Section 3 above where A grades (for
extrusion only), short runs, mixed or partial decks or cleaning or
banding insufficient material to time study are involved.
6. Employees desiring a substituted rate must request such from Time Study
through their foreman. Final determination of the rate to be
substituted will be the responsibility of the Time Study Department.
7. A substituted rate will be on a one-time only basis, i.e., remain in
effect only for the duration of the particular job for which it was
requested. If an identical job repeats, a substitute rate must be
requested again.
8. The Article 30 (Temporary Time Values) has not been considered
applicable to this practice and will not be so considered.
9. The parties agree and understand that substitution of rates is not to
be considered a factory-wide general practice. The scope of this
Supplement is limited to Departments and jobs set forth in Sections 3
and 5 above.
71
<PAGE> 73
MISCELLANEOUS LABOR - PROCESSING
SUPPLEMENT NO. 6
1. This Supplement entered into on the 1st day of February, 1978, by the
Company and the Union is hereby extended for the duration of the
present labor Agreement existing between the parties. The effective
dates of the Supplement are June 7, 1999 through June 4, 2001.
2. To the extent necessary the provisions of the parties' present labor
Agreement are amended or expanded to provide the following.
3. It is agreed by both parties that all premium jobs will be offered to
miscellaneous laborers in accordance with their seniority.
4. The foreman shall give the employee, in line of seniority, the jobs
available at the start of the shift and the number of days on each job
when possible.
5. An employee may refuse a premium job, but, when he refuses, he shall be
deprived of all incentive jobs for that day.
6. If the job is refused down the line of seniority, the junior qualified
employee must accept the job assignment.
7. When the list of miscellaneous employees has been exhausted and
additional premium jobs occur, canvassing will revert to the senior
miscellaneous employee not assigned to a premium job at that time
consistent with #5 and #6 above.
8. An employee filing in long term will immediately be credited with
average overtime hours. An employee filling in day-to-day will be
credited with average overtime hours after fourteen (14) calendar days.
9. This Supplement supersedes all other Supplements, written agreements or
oral understandings between the parties with reference to the subject
matter herein.
72
<PAGE> 74
25 INCH AND 48 INCH EXTRUSION PRESS INCENTIVE
SUPPLEMENT NO. 7
1. This Supplemental Agreement is entered into on this 22nd day of April,
1981, between Airco Carbon, A Division of Airco, Inc., with respect to
that portion of its manufacturing facilities located in St. Marys,
Pennsylvania, and the International Union of Electrical, Radio, Machine
and Furniture Workers, AFL-CIO and its Local Union 502. The effective
dates of this supplement are June 7, 1999 through June 4, 2001.
(a) The capacity (or Choke point) of the system will be determined
for each size, and/or Grade if applicable, that is extruded on
the 25 Inch Press or the 48 Inch Press.
(b) The rate will be established so that when production reaches a
rate which is 95% of the capacity of the press system the crew
members can earn 150% of their base rate. This Agreement, does
not apply to the Inside Mill Operator and Mill Payloader
Operator.
(c) In case of equipment failure or breakdown the above mentioned
level of earnings will not apply.
(d) "Down Time" such as clean up, lunch time, die changes,
equipment failure, etc., will be paid at the appropriate
classified rate, unless covered in other agreements. Shower
time will be paid according to the present agreements (regular
policy for the 25 Inch Press and "Hands On-Hands Off" policy
on the 48 Inch Press).
(e) Should there be any changes affecting these presses, such as
new or changed equipment, changes in formulation, or changes
in mix size which affect the capacity (or Choke point), the
new capacity will be determined and a new rate established
using the 95% of capacity equals 150% earnings relationships.
(f) Should the extrusion press revert back to "Bulk Pitch" this
agreement will be void and the existing methods of determining
earnings will apply.
(g) Present methods of paying for scrap pieces, or mixes, will
apply.
(h) Rate changes for these two (2) presses will be made according
to the provisions of Article 28 of the present Labor
Agreement.
(i) If a change is made in the operation of a press, such as going
on continuous shift or going off continuous shift then the
shower time allowance will be changed if warranted. The shower
time will be paid according to the applicable policy (Regular
or "Hands On-Hands Off").
2. This Supplement supersedes all other Supplements, written agreements or
oral understandings between the parties with reference to the subject
matter.
73
<PAGE> 75
INCENTIVE SYSTEM - PITCH TREATER
SUPPLEMENT NO. 8
1. This Supplement entered into on the 9th day of February, 1973, by the
Company and the Union is hereby extended for the duration of the
present labor Agreement existing between the parties. The effective
dates of the Supplement are June 7, 1999 through June 4, 2001.
2. To the extent necessary the provisions of the parties' present labor
Agreement are amended or expanded to provide the following:
3. Both parties recognize that it is impractical to install a standard
hour element system at the Pitch Treater. Consequently, it is agreed to
place in effect an incentive system based on the following:
(a) Baskets unloaded per day.
(b) Pounds unloaded per day.
(c) Crew size.
Example
-------
Four man crew/2 sides - 12 baskets/day unloaded
Three man crew/2 sides - 8.16 baskets/day unloaded
Five man crew/3 sides - 16.70 baskets/day unloaded
4. The average weight/basket will be recalculated at the beginning of each
month using the previous month production figures. Any change in cycle
time, or any other change in loading-unloading procedures, or basket
size would warrant a recalculation of the rate.
5. For other information concerning methods of payment, "Down-Time,"
"Blue-Dot" material, etc., refer to agreements dated 2/9/73 and 8/12/80
and all pertinent information associated with these agreements.
6. Unique to the Pitch Treater incentive system, the base incentive rate
will be equivalent to the classified rate.
7. The Supplement became effective on March 5, 1973, and will remain in
effect until the expiration of the present Contract. Thereafter, upon
the expiration of the Labor Agreement, either party may reopen the
Supplement for the purposes of amendment or termination. In the event
that the Supplement is not reopened, it will automatically renew itself
and remain in effect through the expiration date of the then existing
Labor Agreement.
8. This Supplement supersedes all other Supplements, written agreements or
oral understandings between the parties with reference to the subject
matter herein.
74
<PAGE> 76
DUPONT SHIFT
SUPPLEMENT NO. 9
This Supplemental Agreement, dated June 7, 1993, is between The Carbide/Graphite
Group, Inc. (hereinafter referred to as the "Company") and the International
Union of Electrical, Technical, Salaried, Machine and Furniture Workers, AFL-CIO
Local Union 502 (hereinafter referred to as the "Union").
Objective. This Supplemental Agreement is entered into in order to temporarily
modify certain terms and conditions of the Agreement between the parties dated
June 7, 1993, to permit adoption of the so-called 12-Hour Schedule for a
temporary period and involving only certain employees of the Graph, Bake and
Plant 3 departments.
Duration. This Supplemental Agreement shall be in effect from June 7, 1999 to
and including June 4, 2001, except that either party may give written notice to
the other to terminate the Supplement Agreement. To become effective such
termination notice must be received two weeks preceding the Monday when it is
desired to terminate the Supplemental Agreement and revert fully to the terms of
the basic Agreement.
The basic Agreement is modified for the purposes of this experiment as follows:
ARTICLE 4 - Hours
Section 4. "12-hour shift schedule" as used in this Agreement shall be
jobs that normally require work of three 12-hour or four 12-hour days a
week.
ARTICLE 7 - Rest Periods
Participating employees will be granted rest periods totaling 30
minutes for each 12-hour shift, wherever practical during such periods.
ARTICLE 8 - Overtime and Night Bonus
Section 5. Participating employees upon completing a full 12-hour shift
and obliged to work overtime for a period of four (4) hours may take a
30-minute lunch period for which he will be paid.
ARTICLE 9 - Holidays
Section 10. Participating employees will not have the option of taking
another day off without pay.
ARTICLE 15 - Vacations
It is agreed for the purpose of this Agreement that a day's vacation
(12 hours) will be counted as a day and one-half towards his/her
allotted time.
ARTICLE 32 -Funeral Leave
Section 1. Participating employees when excused shall be paid an
allowance not to exceed 24 hours at the classified rate of pay he/she
is scheduled to work.
ARTICLE 40 - Wages
"12-Hour Shift Wage Schedule". A reduction factor of .90748 will be
applied to the base rate of a classification.
75
<PAGE> 77
Scope of the Supplemental Agreement. It is understood and agreed that no
obligation exists on either party to continue either temporarily or permanently
the 12-hour shift schedule beyond the period set forth in this Supplemental
Agreement, or to utilize a similar schedule with other groups of bargaining unit
employees.
The above represents the general overview of a Dupont schedule agreement which
replaces a normal 8-hour continuous shift schedule. Specific agreements within a
plant, department, or classification will be posted in that area under glass.
76
<PAGE> 78
CLEANING AREA PRODUCT PROCESSOR INCENTIVE
SUPPLEMENT NO. 10
A. This supplement entered into on the 3rd day of June, 1991 by the
Company and the Union is hereby extended for the duration of the
present labor agreement existing between the parties.
Effective 6/3/91 the Product Processor (Job #640 in the Wheelabrator
Department, #17 only) will be paid on an incentive system when required
to identify material by virtue of physical identification, utilizing an
electric grinder with a Carborundum wheel, drill or other techniques.
The physical identification operation is to be performed as the
material exits the cleaning machine and the Product Processor's
incentive earnings will be calculated by multiplying the base rate of
Job #640 by the earned percentage of the Wheelabrator operator (Job
#726) for the cleaning operation.
This policy is valid only when the physical identification is being
performed as previously stated and it is to be understood that any
changes to methods, tools or physical identification requirements will
void this agreement, subject to review by the Company for an amended
policy.
B. Effective 3/13/95 the Product Processor (Job #640 in the Wheelabrator
Department, #17 only) will be paid on an incentive system whenever the
Central Cleaning Crew (Wheelabrator Operator, Job #726 and Wheelabrator
Helper, Job #727) is on incentive.
The Product Processor's incentive earnings will be calculated by
multiplying the base rate of Job #640 by one half (fifty percent) of
the earned percentage of the Wheelabrator operator (Job #726) for the
cleaning operation.
It is agreed by the Union that this supplement will not be considered
as a basis for incentive pay for Product Processors in other plants.
This supplement entered into on the 13th day of March, 1995 by the
Company and the Union is hereby extended for the duration of the
present labor agreement existing between the parties. The effective
dates of this Supplement are June 7, 1999 to June 4, 2001.
C. Effective June 7, 1999, the following will occur within the Central
Cleaning Area, Department 17:
1. Product Processors, Job #640, Department 56 in the Cleaning
Area, Department 17 will be reclassified as Job #643, Product
Processor-Wheelabrator.
2. The pay rate for this job will be the same as the Wheelabrator
Helper.
3. As Product Processor-Wheelabrator, the employees who were
formerly Product Processors shall be eligible for incentive
and Supplement #16 will be deleted.
4. Should this Agreement result in a "decrease in the quality of
the inspection function," Management may cancel this Agreement
with two weeks notice.
5. In the event #4 occurs the present Supplement #16 shall again
apply.
The arrangement expressly states that Management has not changed its
Policy concerning inspection jobs being unsuitable for incentive.
77
<PAGE> 79
DUPONT MAINTENANCE
SUPPLEMENT NO. 11
This supplement entered into on this 6th day of October 1997 by the Company and
the Union is hereby extended for the duration of the present labor agreement
existing between the parties. The effective dates of the Supplement are June 7,
1999 through June 4, 2001.
The purpose of this supplement is to set forth the details of the Dupont
Maintenance Crew as initially started in Plant 3.
1. Duties will include all maintenance and preventative maintenance work
in designated area of responsibility.
2. Plant 3 designated area will include the areas from Coke Unloading
through the Press Operations.
3. Maintenance personnel included in the crew will work the standard
Dupont shift, paired with the 48" press crews.
4. Each crew will consist of one (1) Electrical Maintenance and two (2)
Mechanical Maintenance personnel.
5. Apprentices will not serve as part of the crews.
6. Pay rate has been established at the standard Dupont reduction rate
(classified rate * 0.90748) plus 10% for all hours worked.
7. Dupont rules regarding vacations, holidays, (no contract days), etc.
will govern (see Supplement #9).
8. The crew will receive normal work order assignments from the
Maintenance Coordinators. Emergency work will be assigned by the area
supervisors.
9. Journeymen electrical and mechanical maintenance personnel will be
canvassed for openings on the crews.
10. It is understood and agreed that no obligation exists on either party
to continue this agreement either temporarily or permanently, and may
rescind this agreement at any time by giving two (2) weeks notice to
the other party.
78
<PAGE> 80
UNIVERSAL MILL OPERATOR INCENTIVE
SUPPLEMENT NO. 12
1. This Supplement entered into on the 1st day of April, 1987, by the
Company and the Union is hereby extended for the duration of the
present labor Agreement existing between the parties. The effective
dates of this supplement are June 7, 1999 through June 4, 2001.
2. To the extent necessary the provisions of the parties' present labor
Agreement are amended or expanded to provide the following.
3. The Company and Union mutually agree that the continuous shift
universal mill operator who supplies materials to the presses will be
paid incentive as follows:
(a) If two or more presses are operating, the payment will be the
average incentive produced by those presses; total hours
earned on all presses divided by number of presses in
operation.
(b) If the 48" press only is operating, the payment will be the
incentive rate produced on that press.
(c) If the 25" press only is operating, the payment will be the
incentive rate produced on that press.
(d) If the 14" press only is operating, the payment will be as
follows:
<TABLE>
<CAPTION>
14" Press Incentive Mill Incentive
<S> <C>
Less than 100% No Incentive
100% - 109% 103%
110% - 119% 106%
120% - 129% 109%
130% - 139% 112%
140% - 149% 115%
150% - 159% 118%
160% or greater 121%
</TABLE>
(e) When the 14" press is not running but the outside mill is
running, (Example: milling graphite for Plant I) no incentive
will be paid.
4. This Supplement supersedes all other Supplements, written agreements or
oral understandings between the parties with reference to the subject
matter herein.
79
<PAGE> 81
LONGITUDINAL GRAPHITIZING
CREW INCENTIVE PLAN
SUPPLEMENT NO. 13 EXTENSION
It is agreed and understood by the parties that the conditions set forth in the
Supplemental Agreement for the Longitudinal Graph, dated November 24, 1980, be
extended through June 4, 2001.
Multiple time studies to determine permanent rates were begun in June, 1981. As
permanent rates for individual operations are set, they will replace temporary
standards presently being used.
Although a Saw Operator job was established, Utility Operators will continue to
be utilized to operate the saw if the need arises.
80
<PAGE> 82
MECHANICAL AND ELECTRICAL
MAINTENANCE OVERTIME AGREEMENT
SUPPLEMENT NO. 14
This supplement entered into on the 3rd day of June, 1996 by the Company and the
Union is hereby extended for the duration of the present agreement between the
parties. The effective dates of this supplement are June 7, 1999 to June 4,
2001.
OVERTIME WILL BE CANVASSED AS FOLLOWS
1. Offered to the employee on the job for the first day only.
2. Offered to the low person on the shift overtime occurs by shift.
3. Weekend and Holiday overtime will be offered to low person in the
department.
4. All work assignments on Sunday will be canvassed from low person on
Sunday list.
5. In the event of a force, low person on shift available for canvassing.
6. If employee has boxed vacation, he cannot be asked or forced.
OVERTIME IS CHARGED
1. If employee works overtime.
2. If employee refuses overtime.
3. Overtime will be charged for only the overtime hours that he is
canvassed, worked, or refused.
OVERTIME IS NOT CHARGED
1. If employee is not available on the day of canvassing.
2. If employee is on vacation or has weekend boxed.
3. Overtime canvassing will be performed to satisfy contract Article 8.
4. Overtime is calculated on a weekly basis.
81
<PAGE> 83
48" PRESS
INCENTIVE AGREEMENT
SUPPLEMENT NO. 15
This supplement entered into on the 7th day of June, 1999 by the Company and the
Union is hereby extended for the duration of the present agreement between the
parties. The effective dates of this supplement are June 7, 1999 to June 4,
2001.
1. During the "initial" period (until a replacement system is agreed
upon), the Press Crew will be paid 185% while the Press is running. If
a shift includes a die change (and the change is done in the allotted
time), the crew shall be paid 210% for the shift.
2. The Press Crew on incentive will consist of the Press Operator, Scrap
Monkey and Control Room Operator. If it becomes necessary, Management
may add additional Crew members.
3. If manual scribing is required because the scribing machine is
inoperable, a person will be assigned to help scribe 14" and 16"
electrodes. If the machine is operable but is incapable for keeping up
with Press output, in the judgment of Management, an extra scribing
person will be assigned.
4. When the new mixing system is fully operational, a new Supplement No.
15 will be established in accordance with the following.
a. It is agreed that full Press capacity shall be rewarded by pay
at 185% (maximum).
b. The scale shall be established so that 90% capacity is 155%
and shall be prorated between 90% and full capacity.
c. In the event the parties cannot agree, Management shall
establish a scale as indicated above. The Union may grieve
and/or arbitrate the fairness of the Management plan.
d. In the event of future changes increasing press capacity, the
scale above shall be recalculated using the principles
indicated in "a.," "b.," and "c." above.
e. If a shift includes a die change and the change is done in the
allotted time; the crew shall be paid 210% for the shift.
5. The objective of this plan is to maximize the productivity of the 48"
Press without sacrificing quality.
6. The 48" Press Crew is committed to providing its best effort to
maximize production on the 48" Press.
7. The provisions pertaining to Control Room Operator in the earlier 48"
Press Agreement will be included in pertinent sections of the Contract.
82
<PAGE> 84
RESCALING OF INCENTIVES
SUPPLEMENT NO. 16
This supplement entered into on the 7th day of June, 1999 by the Company and the
Union is hereby extended for the duration of the present Labor agreement between
the parties. The effective dates of this supplement are June 7, 1999 to June 4,
2001.
1. During the life of this contract, the incentive systems currently in
operation at the St. Marys plant shall be reduced by a factor. This
factor shall vary by department and was created to reduce incentive pay
and lower unit production cost.
2. The following are the reduction factors by group:
<TABLE>
<CAPTION>
GROUP FACTOR
<S> <C>
25" Press .956285
Mass Bake .829788
Sagger Bake .940861
Carbottom Bake .871560
Central Cleaning .925000
Pitch Treating .852018
Longitudinal Graph (Loaders) .742575
Longitudinal Graph (Saw Man) .934344
Q.C.& I. .929649
</TABLE>
3. To calculate incentive, the reduction factor shall be multiplied by
earned hours.
83
<PAGE> 85
EXPANSION
SUPPLEMENT NO. 17
This supplement entered into on the 7th day of June, 1999 by the Company and the
Union is hereby extended for the duration of the present labor agreement
existing between the parties. The effective dates of the Supplement are June 7,
1999 through June 4, 2001.
Any new expansion incentive plan will be created so that the incentive dollar is
no higher than any other C/G competing location.
84
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No.333-16843, 333-57543 and 333-78527) of The
Carbide/Graphic Group, Inc. and Subsidiaries of our report dated September 8,
1999 relating to the financial statements and financial statement schedule,
which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
October 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY INCLUDED UNDER ITEM 8 OF THIS
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JUL-31-1999
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 38,816
<ALLOWANCES> (819)
<INVENTORY> 73,621
<CURRENT-ASSETS> 136,292
<PP&E> 337,848
<DEPRECIATION> (207,506)
<TOTAL-ASSETS> 274,416
<CURRENT-LIABILITIES> 60,688
<BONDS> 110,500
0
0
<COMMON> 99
<OTHER-SE> 81,218
<TOTAL-LIABILITY-AND-EQUITY> 274,416
<SALES> 240,130
<TOTAL-REVENUES> 240,130
<CGS> 202,888
<TOTAL-COSTS> 217,813
<OTHER-EXPENSES> 15,043
<LOSS-PROVISION> 120
<INTEREST-EXPENSE> 6,617
<INCOME-PRETAX> 657
<INCOME-TAX> 259
<INCOME-CONTINUING> 398
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 398
<EPS-BASIC> $0.05
<EPS-DILUTED> $0.05
</TABLE>
