<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996.
---------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-13028
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WCI STEEL, INC.
(Exact name of registrant as specified in its charter)
Ohio 34-1585405
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1040 Pine Ave., S.E., Warren, Ohio 44483-6528
(Address of principal executive offices) (Zip Code)
(330) 841-8218
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (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.
[X] Yes [ ] No
The number of shares of Common Stock (no par value, $.01 stated value)
of the registrant outstanding as of June 10, 1996 was 36,567,700.
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<PAGE> 2
WCI STEEL, INC. AND SUBSIDIARIES
INDEX
--------------------------------
Page No.
--------
PART I FINANCIAL INFORMATION
- - -------------------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
April 30, 1996 and October 31, 1995. 3
Condensed Consolidated Statements of Income for the three
months and six months ended April 30, 1996 and 1995. 4
Condensed Consolidated Statements of Cash Flows for the
six months ended April 30, 1996 and 1995. 5
Notes to Condensed Consolidated Financial Statements. 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II OTHER INFORMATION
- - ---------------------------
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
<PAGE> 3 PART I - FINANCIAL INFORMATION
<TABLE> WCI STEEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
( Dollars in thousands )
April 30, October 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.........................$ 134,238 $ 94,266
Short-term investments............................ 7,933 12,282
Accounts receivable, less allowances.............. 65,091 33,616
Inventories....................................... 81,405 101,089
Recoverable income taxes.......................... 2,125 5,960
Deferred income taxes............................. 8,268 11,102
Prepaid expenses.................................. 623 1,372
-------- --------
Total current assets......................... 299,683 259,687
Property, plant and equipment, net.................. 191,345 189,733
Intangible pension asset............................ 42,114 44,028
Other assets, net................................... 23,132 25,711
-------- --------
Total assets............................$ 556,274 $ 519,159
======== ========
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt.................$ 2,395 $ 2,323
Accounts payable.................................. 73,295 47,740
Accrued liabilities............................... 38,601 39,584
Income taxes...................................... 2,889 1,611
-------- --------
Total current liabilities.................... 117,180 91,258
Long-term debt, excluding current portion........... 210,295 211,531
Deferred income taxes............................... 9,323 10,367
Postretirement health benefits...................... 78,800 76,287
Pension benefits.................................... 45,563 44,027
Other liabilities................................... 26,435 26,194
-------- --------
Total liabilities....................... 487,596 459,664
-------- --------
Shareholders' equity
Common stock, no par value, stated value $.01 per
share, 40,000,000 shares authorized, 36,563,300
shares issued and outstanding at April 30, 1996
and October 31, 1995, respectively.............. 366 366
Additional paid-in capital........................ 487 458
Retained earnings................................. 67,825 58,671
-------- --------
Total shareholders' equity.............. 68,678 59,495
Commitments and contingencies....................... - -
Total liabilities and -------- --------
shareholders' equity....................$ 556,274 $ 519,159
======== ========
<FN>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</FN>
</TABLE>
<PAGE> 4
<TABLE> WCI STEEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
( Dollars in thousands, except per share data )
( Unaudited )
Three months Six months
ended April 30, ended April 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales..................... $ 166,959 $ 177,770 $ 315,452 $ 352,869
Operating costs and expenses
Cost of products sold........ 140,698 143,541 266,202 284,790
Depreciation and amortization 5,641 4,899 11,310 9,917
Selling, general and
administrative expenses..... 5,716 5,585 10,199 11,125
------- ------- ------- -------
152,055 154,025 287,711 305,832
------- ------- ------- -------
Operating income.............. 14,904 23,745 27,741 47,037
------- ------- ------- -------
Other income (expense)
Interest expense............. (6,247) (6,572) (12,510) (13,164)
Interest and other income, net 1,666 1,392 3,071 2,934
------- ------- ------- -------
(4,581) (5,180) (9,439) (10,230)
------- ------- ------- -------
Income before income taxes.... 10,323 18,565 18,302 36,807
Income tax expense............ (4,129) (7,426) (7,320) (14,759)
------- ------- ------- -------
Net income.................... $ 6,194 $ 11,139 $ 10,982 $ 22,048
======= ======= ======= =======
Weighted average common shares
issued and outstanding........ 36,563,300 36,575,500 36,563,300 36,575,500
INCOME PER COMMON SHARE
Net income per common share... $ .17 $ .30 $ .30 $ .60
======= ======= ======= =======
Dividends paid per
common share................ $ .05 $ - $ .05 $ -
======= ======= ======= =======
<FN>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</FN>
</TABLE>
<PAGE> 5
<TABLE> WCI STEEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
( Dollars in thousands)
( Unaudited ) Six months
ended April 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities
Net income........................................$ 10,982 $ 22,048
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization................ 9,845 9,917
Amortization of deferred blast furnace
maintenance costs.......................... 1,465 -
Amortization of financing costs.............. 1,091 1,090
Postretirement health benefits............... 2,513 5,025
Pension benefits............................. 3,450 -
Deferred income taxes........................ 1,790 1,713
Other........................................ (158) (980)
Cash provided (used) by changes in certain assets
and liabilities
Accounts receivable........................ (31,475) (141)
Inventories................................ 19,684 11,323
Prepaid expenses and other assets.......... 772 232
Accounts payable........................... 25,555 (12,376)
Accrued liabilities........................ (983) (4,576)
Income taxes payable and recoverable, net.. 5,113 (2,491)
Other liabilities.......................... 241 2,067
------- -------
Net cash provided by operating activities. 49,885 32,851
Cash flows from investing activities ------- -------
Additions to property, plant and equipment, net... (11,767) (7,431)
Deferred blast furnace maintenance costs.......... - (9,267)
Gross proceeds from the sale of assets............ 497 2,818
Short-term investments, net....................... 4,349 -
------- -------
Net cash used by investing activities..... (6,921) (13,880)
------- -------
Cash flows from financing activities
Principal payments of long-term debt.............. (1,164) (1,116)
Dividends paid ................................... (1,828) -
------- -------
Net cash used by financing activities..... (2,992) (1,116)
------- -------
Net increase in cash and cash equivalents.............. 39,972 17,855
Cash and cash equivalents at beginning of period....... 94,266 71,426
------- -------
Cash and cash equivalents at end of period.............$ 134,238 $ 89,281
======= =======
Supplemental disclosure of cash flow information
Cash paid for interest............................$ 11,487 $ 12,098
Cash paid for income taxes........................ 428 15,539
<FN>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</FN>
</TABLE>
<PAGE> 6 WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
( Unaudited )
Three and six month periods ended April 30, 1996 and 1995
NOTE 1 : BASIS OF PRESENTATION
WCI Steel, Inc. (Company or WCI) is a majority-owned subsidiary of The Renco
Group, Inc. (Renco or Parent). The financial information included herein is
unaudited; however, such information reflects all adjustments (consisting
solely of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the interim
periods. The results of operations for the three and six month periods ended
April 30, 1996 are not necessarily indicative of the results to be expected
for the full year.
These interim consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report to Shareholders filed on Form 10-K for the fiscal
year ended October 31, 1995.
NOTE 2 : INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
the last-in, first-out (LIFO) method. The composition of inventories at
April 30, 1996 and October 31, 1995 follows:
<TABLE>
April 30, October 31,
1996 1995
----------- -----------
(Unaudited)
( Dollars in thousands )
<S> <C> <C>
Raw materials.........................$ 27,115 $ 41,471
Finished and semi-finished product.... 61,654 65,979
Supplies.............................. 318 571
-------- --------
89,087 108,021
Less LIFO reserve..................... 7,682 6,932
-------- --------
$ 81,405 $ 101,089
======== ========
</TABLE>
NOTE 3 : ENVIRONMENTAL MATTERS and OTHER CONTINGENCIES
The Company and other industrial companies have, in recent years, become
subject to increasingly demanding environmental standards imposed by federal,
state, and local environmental laws and regulations. It is the policy of the
Company to endeavor to comply with applicable environmental laws and
regulations. A liability has been established for an amount, which the
Company believes is adequate, based on information currently available, to
cover the costs of remedial actions it will likely be required to take to
comply with existing environmental laws and regulations.
On June 29, 1995, the Department of Justice, on behalf of the Environmental
Protection Agency (EPA), filed an action against WCI under the Clean Water
Act in the United States District Court for the Northern District of Ohio.
The action alleges numerous violations of the Company's National Pollution
Discharge Elimination System permit alleged to have occurred during the years
1989 through 1995, inclusive, and seeks civil penalties not to exceed the
statutory maximum of $25,000 per day per violation. On March 29, 1996, the
Justice Department on behalf of the EPA, instituted a civil action against
the Company in the United States District Court for the Northern District of
<PAGE> 7 WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
( Unaudited )
Three and six month periods ended April 30, 1996 and 1995
Ohio, Akron Division under the Clean Air Act, alleging violations by the
Company of the work practice, inspection and notice requirements for
demolition and renovation of the National Emission Standard for Hazardous Air
Pollutants for Asbestos and also violations of the particulate standard and
the opacity limits applicable to the Company's facilities in Warren, Ohio.
The Complaint seeks a civil penalty not to exceed the statutory maximum of
$25,000 per day per violation but does not specify the dates on which such
violations are alleged to have occurred and also seeks an injunction against
continuing violations. The Company believes that imposition of the statutory
maximum penalty for the alleged violations is unlikely based upon past
judicial penalties imposed under the Clean Water and Clean Air Act, and that
it has defenses to liability. However, no assurance can be given that the
Company will not be found to have liability and, if it has liability, that
the statutory maximum penalty will not be imposed. If the statutory maximum
penalty or a similarly substantial penalty were imposed, it could have a
material adverse effect on the Company. The Company is negotiating with the
EPA toward a settlement of these matters.
The Company has obtained a Resource Conservation and Recovery Act (RCRA)
storage permit for waste pickle liquor at its Warren facility acid
regeneration plant. As a provision of the permit, the Company will be
required to undertake a corrective action program with respect to historical
material handling practices at the Warren facility. The Company has
developed and submitted a workplan for the first investigation step of the
corrective action program, the RCRA Facility Investigation (RFI), to the EPA
and is presently negotiating the scope of the RFI with the EPA. The final
scope of the corrective action required to remediate or reclaim any
contamination that may be present at the Warren facility is dependent upon
the findings of the RFI and the development and approval of a corrective
action program. Accordingly, the Company is unable at this time to estimate
the final cost of the corrective action program or the period over which such
costs may be incurred.
On January 23, 1996 an action was instituted in the United States District
Court for the Northern District of Ohio Eastern Division (Akron) alleging in
substance that certain distributions to employees and benefit plans were
violative of certain agreements, Employee Retirement Income Security Act
(ERISA), National Labor Relations Act and common law. The plaintiffs, two
retired employees, seek declaratory and injunctive relief and damages and
allege that they bring this action as a class action. The Company denies the
plaintiffs allegations of liability and has filed for dismissal of the
action. The court has not ruled on the Company's motion.
In addition to the above matters, the Company is contingently liable with
respect to lawsuits and other claims incidental to the ordinary course of its
operations. Although the outcome of the above described matters, to the
extent they exceed applicable reserves, could have a material adverse effect
on the future operating results of the Company in a particular quarterly or
annual period, the Company believes that the effect of such matters will not
have a material adverse effect on the Company's consolidated financial
position.
<PAGE> 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth selected operating data of WCI for the periods
indicated below.
<TABLE>
Three months Six months
ended April 30, ended April 30,
1996 1995 1996 1995
( Dollars in thousands )
<S> <C> <C> <C> <C>
Net sales........................... $166,959 $177,770 $315,452 $352,869
Gross margin........................ 26,261 34,229 49,250 68,079
Gross margin as a % of net sales... 15.7% 19.3% 15.6% 19.3%
Operating income.................... 14,904 23,745 27,741 47,037
Operating income as a % of net sales 8.9% 13.4% 8.8% 13.3%
Net interest expense................ (4,852) (5,351) (9,792) (10,850)
------- ------- ------- -------
Net income................ $ 6,194 $ 11,139 $ 10,982 $ 22,048
======= ======= ======= =======
</TABLE>
Three Months Ended April 30, 1996
Compared To Three Months Ended April 30, 1995
Net sales for the three months ended April 30, 1996 were $167.0 million on
354,733 tons shipped, representing a 6.1% decrease in net sales and a 4.0%
increase in tons shipped over the three months ended April 30, 1995. Net
sales per ton shipped decreased 9.6% to $471 compared to $521 for the three
months ended April 30, 1995 due to lower prices realized on spot market sales
and to a lesser extent, a change in product mix. The 1996 period included
the sales of lower value-added semi-finished slabs and a slightly lower mix
of custom carbon, alloy and electrical steel products which accounted for
57.2% of total shipments in the 1996 quarter compared with 59.4% in the
second quarter of 1995.
Gross margin was $26.3 million for the three months ended April 30, 1996
compared to $34.2 million for the three months ended April 30, 1995. The
decline in gross margin reflects the lower sales prices and change in sales
mix offset by higher costs in the 1995 period related to the Company's blast
furnace reline.
Operating income was $14.9 million, $42 per ton shipped, for the three months
ended April 30, 1996 compared to $23.7 million, $70 per ton shipped, for the
three month period ended April 30, 1995. The decline in operating income per
ton in the 1996 period reflects the lower gross margin described above and
higher depreciation and amortization expense associated with the Company's
blast furnace reline completed in May 1995.
As a result of the items discussed above, net income was $6.2 million ($.17
per common share) for the three months ended April 30, 1996 compared to net
income of $11.1 million ($.30 per common share) for the three months ended
April 30, 1995.
<PAGE> 9
Six Months Ended April 30, 1996
Compared To Six Months Ended April 30, 1995
Net sales for the six months ended April 30, 1996 were $315.5 million on
690,820 tons shipped, representing a 10.6% decrease in net sales and a 0.2%
increase in tons shipped compared to the six months ended April 30, 1995.
Net sales per ton shipped decreased 10.7% to $457 compared to $512 for the
six months ended April 30, 1995 due to lower prices realized in the spot
market as well as a change in product mix. The 1996 period included the
sales of lower value added semi-finished slabs and a lower mix of custom
carbon, alloy and electrical steel products which accounted for 51.0% of
total shipments in the first half of 1996 compared with 57.1% in the first
half of 1995. The sales mix and volume were adversely effected by the 54 day
labor dispute with certain hourly employees which was concluded October 24,
1995. As of April 30, 1996 the Company had a backlog of 333,000 tons
compared to 340,000 tons at April 30, 1995.
Gross margin was $49.3 million for the six months ended April 30, 1996
compared to $68.1 million for the six months ended April 30, 1995. The
decline in gross margin reflects the lower sales prices and the change in
product mix mentioned above offset by higher costs in the 1995 period related
to the Company's blast furnace reline.
Operating income was $27.7 million, $40 per ton shipped, for the six months
ended April 30, 1996 compared to $47.0 million, $68 per ton shipped, for the
six month period ended April 30, 1995. These operating results reflect the
lower gross margin described above and higher depreciation and amortization
expense associated with the Company's blast furnace reline completed in May
1995, offset somewhat by lower selling, general and administrative expenses
in 1996 due in part to the Company's variable compensation programs.
As a result of the items discussed above, net income was $11.0 million ($.30
per common share) for the six months ended April 30, 1996 compared to net
income of $22.0 million ($.60 per common share) for the six months ended
April 30, 1995.
Liquidity and Capital Resources
At April 30, 1996 the Company had $142.2 million of cash, cash equivalents,
and short-term investments with no borrowings outstanding under its $100
million revolving credit agreement which expires December 29, 1996.
WCI's liquidity requirements result from capital investments, working capital
requirements, postretirement health care and pension funding, interest
expense, and principal payments on its indebtedness. WCI has met these
requirements in 1996 and 1995 from cash provided by operating activities.
Cash provided by operating activities was $49.9 million for the six months
ended April 30, 1996 compared to $32.9 million for the six months ended April
30, 1995. This increase reflects significant changes in the components of
working capital as a result of resuming operations on October 25, 1995 after
settlement of a labor dispute with hourly workers offset by lower operating
income discussed previously.
The steel industry has become increasingly competitive as technological
developments have resulted in new capacity coming on line and has allowed
mini-mills to enter certain of the sheet markets, including certain WCI
markets, previously supplied by integrated producers. In addition,
<PAGE> 10
significant new steel making capacity is expected to come on line in late
1996 and 1997. This has resulted in significant investments in plant and
equipment throughout the industry which is expected to improve efficiency,
productivity and quality and further increase competition. The Company has an
extensive capital program designed to enhance or maintain its competitive
position. Capital expenditures for the six months ended April 30, 1996 and
1995 were $11.8 million and $16.7 million, respectively. Capital
expenditures in 1996 are expected to be approximately $35 million to $40
million in the aggregate. Major projects accounting for most of the planned
expenditures are the upgrade of the hot strip mill and the installation of a
hydrogen anneal facility. Management expects to fund the Company's capital
expenditures in 1996 from cash balances and cash provided by operating
activities.
The Company's debt repayment requirements are less than $2.5 million annually
through 2000. Management expects to generate funds sufficient to service
these debt obligations from cash flows from operations.
At pricing in effect on April 30, 1996, the Company has commitments under its
raw material supply contracts for blast furnace coke, iron ore and oxygen of
approximately $87.2 million for the remainder of fiscal 1996, and $112.1
million in the aggregate thereafter.
Environmental
WCI has made and will continue to make the necessary capital expenditures for
environmental remediation and compliance with environmental laws and
regulations. The Company believes that compliance with environmental
requirements as presently interpreted and enforced, including remediation of
existing conditions, could have a material adverse effect on the future
operating results of the Company in a particular quarterly or annual period.
But the effect of such matters should not have a material adverse impact on
its consolidated financial position.
Environmental laws and regulations have changed rapidly in recent years, and
WCI may become subject to more stringent environmental laws and regulations
in the future. Compliance with more stringent environmental laws and
regulations could have a material adverse effect on WCI's consolidated
financial position and future results of operations. The U.S. Environmental
Protection Agency has asserted certain alleged environmental violations
against the Company which are described in Note 3 to the condensed
consolidated financial statements.
Other
The Board of Directors on March 11, 1996 authorized a dividend payment of
five cents per common share payable April 8, 1996 to shareholders of record
on March 25, 1996.
According to corporate policy, WCI's board of directors expects to consider
paying a dividend at its next regular quarterly board meeting scheduled for
June 17, 1996. The company's operating results, cash needs, overall
prospects and other factors will be weighed when the board considers the
dividend. Per share dividends, if any, may vary materially from quarter to
quarter.
<PAGE> 11
PART II - OTHER INFORMATION
WCI STEEL, INC.
Item 1. Legal Proceedings
United States v. WCI Steel, Inc.
- - --------------------------------
On March 29, 1996, the United States of America, at the request of
the Administrator of the United States Environmental Protection Agency,
instituted a civil action against the Company in the United States District
Court for the Northern District of Ohio, Akron Division (File 4:96CV65) under
the Clean Air Act, alleging violations by the Company of the work practice,
inspection and notice requirements for demolition and renovation of the
National Emission Standard for Hazardous Air Pollutants for Asbestos and also
violations of the opacity limits applicable to the Company's facilities in
Warren, Ohio. The Complaint seeks a civil penalty not to exceed the statutory
maximum of $25,000 per day per violation and also an injunction against
continuing violations.
Thomas C. Williams, etc. v. WCI Steel, Inc.
- - -------------------------------------------
Reference is made to the description of this action contained in
the Company's Quarterly Report on Form 10-Q for the quarter ended January 31,
1996.
On March 28, 1996, two of the plaintiffs in this action, Thomas C.
Williams and Louis DeRose, presently active employees of the Company,
withdrew as parties to the action and voluntarily dismissed their claims
without prejudice to refiling. The action is being continued by the
remaining two plaintiffs, Roosevelt Cook and Ray L. Reber, who are retired
employees of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
The 1996 Annual Meeting of the Shareholders of the Company was held
on March 11, 1996.
At the meeting, the following incumbent directors of the Company
were re-elected to hold office until the next annual meeting of shareholders,
receiving the number of votes set opposite their respective names:
FOR ABSTAIN
--- -------
Ira Leon Rennert 35,726,144 143,757
James V. Stack 35,726,044 143,857
Justin W. D'Atri 35,726,144 143,757
Arthur W. Fried 35,726,144 143,757
William Schwartz 35,726,144 143,757
At the meeting, the shareholders voted to amend sections 2 and 5 of
Article II of the Code of Regulations of the Company as proposed in the
Schedule to the Proxy Statement for the meeting. The vote was:
For: 34,746,504 Against: 931,252 Abstain: 49,375
On April 1, 1996, Edward R. Caine assumed office as President and a
director, increasing the number of directors to six.
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
A list of the exhibits required to be filed as part of this
Report on Form 10-Q is set forth in the "Exhibit Index" which
immediately precedes such exhibits, and is incorporated herein
by reference.
(b) Reports on Form 8-K:
No report on Form 8-K was filed during the quarter ended
April 30, 1996.
<PAGE> 13
WCI STEEL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WCI STEEL, INC.
(registrant)
Date: June 10, 1996 /S/ BRET W. WISE
-----------------------------
Bret W. Wise
Vice President and
Chief Financial Officer
(principal financial officer)
<PAGE> 14
WCI STEEL, INC.
EXHIBIT INDEX
Exhibit Number Description
3.2 Code of Regulations as amended at shareholder
meeting - March 11, 1996
10.1 Amendment No.4 dated February 23, 1996 to
the amended and restated Loan and Security
Agreement with Congress Financial Corporation
and Security Pacific Business Credit Inc.
which provides consent, subject to certain
terms and conditions, for the Company to
declare and pay dividends to its shareholders
in any fiscal year commencing with the fiscal
year ended October 31, 1996. (Superseded by
Amendment No.5 below.)
10.2 Amendment No.5 dated March 8, 1996 to the
amended and restated Loan and Security
Agreement with Congress Financial Corporation
and Security Pacific Business Credit Inc.
which provides consent, subject to certain
terms and conditions, for the Company to make
loans and pay management fees to the Renco
Group and to declare and pay dividends to its
shareholders in any fiscal year commencing
with fiscal year ended October 31, 1996.
27. Financial Data Schedule
CODE OF REGULATIONS
OF
WCI STEEL, INC.
(formerly WARREN CONSOLIDATED INDUSTRIES, INC.)
as amended - March 11, 1996
ARTICLE I
Section 1. Annual Meeting. The annual meeting of
the shareholders of this Company, for the purpose of fixing or
changing the number of directors of the Company, electing
directors and transacting such other business as may come before
the meeting, shall be held on such date, at such time and at such
place as may be designated by the board of directors. If the
annual meeting is not held or if directors are not elected at the
meeting, the directors may be elected at any special meeting
called and held for that purpose.
Section 2. Special Meetings. Special meetings of
the shareholders may be called at any time by the president or a
vice-president or a majority of the board of directors acting
with or without a meeting, or the holder or holders of one-fourth
of all the shares outstanding and entitled to vote thereat.
Section 3. Place of Meetings. Meetings of
shareholders shall be held at the office of the Company unless
the board of directors decides that a meeting shall be held at
some other place within or without the State of Ohio and causes
the notice thereof to so state.
Section 4. Notices of Meetings. Unless waived, a
written, printed, or typewritten notice of each annual or special
meeting, stating the day, hour and place and the purpose or
purposes thereof shall be served upon or mailed to each
shareholder of record entitled to vote or entitled to notice, not
more than sixty (60) days nor less than seven (7) days before any
such meeting. If mailed, it shall be directed to a shareholder
at his or her address as the same appears on the records of the
Company.
Section 5. Organization. At each meeting of the
shareholders, the president or, in his absence, the
vice-president, or, in the absence of the president and the
vice-president, a chairman chosen by a majority in interest of
the shareholders present in person or by proxy and entitled to
vote, shall act as chairman, and the secretary of the Company,
or, if the secretary of the Company not be present, the assistant
secretary, or if the secretary and the assistant secretary not be
present, any person whom the chairman of the meeting shall
appoint, shall act as secretary of the meeting.
Section 6. Order of Business and Procedure. The
order of business at all meetings of the shareholders and all
matters relating to the manner of conducting the meeting shall be
determined by the chairman of the meeting, whose decisions may be
overruled only by majority vote of the shareholders present and
entitled to vote at the meeting in person or by proxy. Meetings
shall be conducted in a manner designed to accomplish the
business of the meeting in a prompt and orderly fashion and to be
fair and equitable to all shareholders, but it shall not be
necessary to follow any manual of parliamentary procedure.
ARTICLE II
Board of Directors
Section 1. General Powers of Board. The powers of
the Company shall be exercised, its business and affairs
conducted, and its property controlled by the board of directors,
except as otherwise provided by the law of Ohio or in the
articles of incorporation.
Section 2. Number and Election of Directors. The
Board of Directors shall consist of such number of directors, not
less than five nor more than seven, as shall be fixed from time
to time by the Board of Directors. At each meeting of the
shareholders for the election of directors at which a quorum is
present, the persons receiving the greatest number of votes cast
by the holders of each class of stock shall be the directors
elected by such class of stock.
Section 3. Term of Office. Unless he shall earlier
resign, be removed, die, or be adjudged mentally incompetent,
each director shall hold office until the sine die adjournment of
the annual meeting of shareholders for the election of directors
next succeeding his election, or the taking by the shareholders
of an action in writing in lieu of such meeting, or, if for any
reason the election of directors shall not be held at such annual
meeting or any adjournment thereof, until the sine die
adjournment of the special meeting of the shareholders for the
election of directors held thereafter as provided for in Section
1 of Article I of this code, or the taking by the shareholders of
an action in writing in lieu of such meeting, and until his
successor is elected and qualified.
Section 4. Resignations. Any director of the
Company may resign at any time by giving written notice to the
president or the secretary of the Company. Such resignation
shall take effect at the time specified therein, and unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 5. Vacancies. Vacancies in the Board of
Directors shall be filled by the affirmative vote of the holders
of a majority of the shares which elected the directors to be
replaced, and each director elected shall serve until the next
annual election of directors and the election of his successor.
In addition, vacancies (including any vacancy resulting
from an increase in the number of directors) may be filled by the
remaining directors even though less than a majority of the whole
authorized number of directors, to serve for the unexpired term.
Section 6. Meetings of the Board. A meeting of the
board of directors shall be held immediately following the
adjournment of each shareholders' meeting at which directors are
elected, and notice of such meeting need not be given.
Section 6.1 The board of directors may, by
bylaws or resolutions, provide for other meetings of the board.
Section 6.2 Special meetings of the board of
directors may be held at any time upon call of the president, a
vice-president, the secretary, or any two members of the board.
Section 6.3 Notice of any special meeting of
the board of directors shall be mailed to each director,
addressed to him at his residence or usual place of business, at
least three days before the day on which the meeting is to be
held, or shall be sent to him at such place by telegraph, cable,
radio, or wireless, or be given personally or by telephone not
later than the day before the day on which the meeting is to be
held. Every such notice shall state the time and place of the
meeting but need not state the purposes thereof. Notice of any
meeting of the board need not be given to any director if waived
by him in writing or by telegraph, cable, radio or wireless,
whether before or after such meeting be held, or if he shall be
present at such meeting.
Section 6.4 All meetings of the board shall be
held at the principal office of the Company or at such other
place, within or without the State of Ohio, as the board may
determine from time to time and as may be specified in the notice
thereof.
Section 7. Action by Board.
Section 7.1 A majority of the number of
directors in office constitutes a quorum of the board for the
transaction of business.
Section 7.2 The act of a majority of the
directors present at any meeting at which a quorum is present,
shall be the act of the board of directors.
Section 7.3 Any action which may be taken at a
meeting of the board of directors may be taken without a meeting
if a consent in writing or writings, setting forth the action so
taken, shall be signed by all of the directors, and filed with or
entered upon the records of the corporation.
ARTICLE III
Officers
Section 1. General Provisions. The officers of the
Company shall be a president, such number of vice-presidents as
the board may from time to time determine, a secretary, a
treasurer and such other officers as the directors may elect.
Any person may hold any two or more offices and perform the
duties thereof, except as otherwise provided by the law of Ohio.
If one person is chosen to hold the offices of secretary and
treasurer, he shall be known as secretary-treasurer of the
Company. All the duties and obligations assigned to, and all the
references made to, both the secretary and the treasurer in these
regulations shall apply to the secretary-treasurer if one person
be elected to both of these offices.
Section 2. Election, Terms of Office, and
Qualification. The officers of the Company named in Section 1 of
this Article III shall be elected by and hold office during the
pleasure of the board of directors. At any time after one year
following the reelection of a full slate of such officers, an
election of officers shall be held within thirty days after
delivery to the president, the vice-president, or the secretary
of a written request for such election by any director. The
notice of the meeting held in response to such request shall
specify that an election of officers is one of the purposes
thereof. The qualifications of all officers shall be such as the
board of directors may see fit to impose.
Section 3. Additional Officers, Agents, etc. In
addition to the officers mentioned in Section 1 of this Article
III, the Company may have a chairman of the board and such other
officers, committees, agents, and factors as the board of
directors may deem necessary and may appoint, each of whom or
each member of which shall hold office for such period, have such
authority, and perform such duties as may be provided in this
Code of Regulations, or as the board of directors may from time
to time determine. The board of directors may delegate to any
officer or committee the power to appoint any subordinate
officers, committees, agents or factors. In the absence of any
officer of the corporation, or for any other reason the board of
directors may deem sufficient, the board of directors may
delegate, for the time being, the powers and duties, or any of
them, of such officer to any other officer, or to any director.
Section 4. Removal. Any officer of the Company may
be removed, either with or without cause, at any time, by
resolution adopted by the board of directors at any meeting of
the board, the notices (or waivers of notice) of which shall have
specified that such removal action was to be considered. Any
officer appointed not by the board of directors but by an officer
or committee to which the board shall have delegated the power of
appointment may be removed, whether with or without cause, by the
committee or superior officer (including successors) who made the
appointment, or by any committee or officer upon whom such power
of removal may be conferred by the board of directors.
Section 5. Resignations. Any officer may resign at
any time by giving written notice to the board of directors, or
to the president, or to the secretary of the Company. Any such
resignation shall take effect at the time specified therein, and
unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 6. Vacancies. A vacancy in any office
because of death, resignation, removal, disqualification, or
otherwise, shall be filled in the manner prescribed in this Code
of Regulations for regular appointments or elections to such
office.
ARTICLE IV
Duties of the Officers
Section 1. The President. The president shall have
power and authority to manage and have general supervision over
the business of the Company and over its several officers,
subject, however, to the control of the board of directors. The
president, if present, shall preside at all meetings of
shareholders, shall see that all orders and resolutions of the
board of directors are carried into effect, and shall from time
to time report to the board of directors all matters within his
knowledge which the interests of the Company may require to be
brought to the notice of the board. He may sign with the
secretary, the treasurer or any other proper officer of the
Company thereunto authorized by the board of directors,
certificates for shares in the Company. He may sign, execute and
deliver in the name of the Company all deeds, mortgages, bonds,
contracts, or other instruments when specially authorized by the
board of directors; and he may cause the seal of the Company, if
any, to be affixed to any instrument requiring the same; and, in
general, perform all duties incident to his respective office and
such other duties as from time to time may be assigned to him by
the board of directors.
Section 2. Vice-Presidents. The vice-presidents
shall perform such duties as are conferred upon them by this Code
of Regulations or as may from time to time be assigned to them by
the board of directors or the president. The authority of
vice-presidents to sign in the name of the Company all
certificates for shares and authorized deeds, mortgages, bonds,
contracts, notes and other instruments, shall be coordinate with
like authority of the president.
Section 3. The Treasurer. If required by the board
of directors, the treasurer shall give bond for the faithful
discharge of his duties in such sum and with such sureties as the
board of directors shall determine. He shall:
Section 3.1 Have charge and custody of, and be
responsible for, all funds, securities, notes, contracts, deeds,
documents, and all other indicia of title in the Company and
valuable effects of the Company; receive and give receipts for
monies due and payable to the Company from any sources
whatsoever; deposit all such monies in the name of the Company in
such banks, trust companies, or other depositories as shall be
selected by or pursuant to the directions of the board of
directors; cause such funds to be discharged by checks or drafts
on the authorized depositories of the Company, signed as the
board of directors may require; and monitor the accuracy of the
amounts of, and cause to be preserved proper vouchers for, all
monies to be disbursed;
Section 3.2 Have the right to require from time
to time reports or statements giving such information as he may
desire with respect to any and all financial transactions of the
Company from the officers or agents transacting the same;
Section 3.3 Keep or cause to be kept at the
principal office or such other office or offices of the Company
as the board of directors shall from time to time designate
correct records of the business and transactions of the Company
and exhibit such records to any of the directors of the Company
upon application at such office;
Section 3.4 Have charge of the audit and
statistical departments of the Company;
Section 3.5 Render to the president or the
board of directors whenever they shall require him so to do an
account of the financial condition of the Company and of all his
transactions as treasurer and as soon as practicable after the
close of each fiscal year, make and submit to the board of
directors a like report for such fiscal year; and
Section 3.6 Exhibit at all reasonable times his
cash, books and other records to any of the directors of the
Company upon application.
Section 4. The Secretary. The secretary shall:
Section 4.1 Keep the minutes of all meetings of
the shareholders and of the board of directors in one or more
books provided for that purpose;
Section 4.2 See that all notices are duly given
in accordance with the provisions of this Code of Regulations or
as required by law;
Section 4.3 Be custodian of the corporate
records and, if one is provided, of the seal of the Company, and
see that such seal is affixed to all certificates for shares
prior to the issue thereof and to all other documents to which
the seal is required to be affixed and the execution of which on
behalf of the Company under its seal is duly authorized in
accordance with the provisions of this code;
Section 4.4 Have charge, directly or through
such transfer agent or transfer agents and registrar or
registrars as the board of directors shall appoint, of the issue,
transfer and registration of certificates for shares in the
Company and of the records thereof, such records to be kept in
such manner as to show at any time the number of shares in the
Company issued and outstanding, the manner in which and time when
such stock was paid for, the names and addresses of the holders
of record thereof, the number and classes of shares held by each,
and the time when each became such holder of record;
Section 4.5 Exhibit at all reasonable times to
any directors, upon application, the aforesaid records of the
issue, transfer, and registration of such certificates;
Section 4.6 Sign (or see that the treasurer or
other proper officer of the Company thereunto authorized by the
board of directors shall sign), with the president certificates
for shares in the Company;
Section 4.7 See that the books, reports,
statements, certificates, and all other documents and records
required by law are properly kept and filed; and
Section 4.8 In general, perform all duties
incident to the office of secretary and such other duties as from
time to time may be assigned to him by the president or the board
of directors.
In the event the board of directors shall elect an
assistant secretary, he shall perform such duties as are
conferred upon him by the officers of the Company, or the board
of directors, and in the absence or the inability of the
secretary to act, shall perform all the duties of the secretary
and when so acting shall have all the powers of the secretary.
ARTICLE V
Indemnification of Directors and Officers
The Company shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened or
pending action, suit, or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he,
his testator, or intestate is or was a director, officer,
employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust or
other enterprise, or as a member of any committee or similar body
against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or
proceeding or the defense or settlement thereof or any claim,
issue, or matter therein, to the fullest extent permitted by the
laws of Ohio as they may exist from time to time. To assure
indemnification under this provision of all such persons who are
or were "fiduciaries" of an employee benefit plan governed by the
Act of Congress entitled "Employee Retirement Income Security Act
of 1974", as amended from time to time, this paragraph shall, for
the purposes hereof, be interpreted as follows: an "other
enterprise" shall be deemed to include an employee benefit plan;
the Company shall be deemed to have requested a person to serve
an employee benefit plan where the performance by such person of
his duties to the Company also imposes duties on, or otherwise
involves services by, such person to the plan or participants or
beneficiaries of the plan; excise taxes assessed on a person with
respect to an employee benefit plan pursuant to said Act of
Congress shall be deemed "fines"; and action taken or omitted by
a person with respect to an employee benefit plan in the
performance of such person's duties for a purpose reasonably
believed by such person to be in the interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Company. The
foregoing provisions of this paragraph shall be deemed to be a
contract between the Company and each director and officer who
serves in such capacity at any time while this paragraph is in
effect, and any repeal or modification thereof shall not affect
any rights or obligations then existing with respect to any state
of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in
part upon any such state of facts.
ARTICLE VI
Seal
The board of directors may provide a corporate seal,
which shall be in the form of a circle and shall bear the full
name of the Company, and the words "Seal" and "Ohio".
ARTICLE VII
Amendment of Regulations
This Code of Regulations may be amended or added to, or
repealed and superseded by a new Code of Regulations, at any
annual or special meeting of shareholders in the notice (or
waivers of notice) of which the intention to consider such
amendment, addi- tion, or repeal is stated, by the affirmative
vote of the holders of record of two-thirds of the shares
entitled to vote thereon.
ARTICLE VIII
Shares and Their Transfer
Section 1. Certificate for Shares. Every owner of
one or more shares in the Company shall be entitled to a
certificate, which shall be in such form as the board of
directors shall prescribe, certifying the number and class of
paid-up shares in the Company owned by him. The certificates for
the respective classes of such shares shall be numbered in the
order in which they shall be issued and shall be signed in the
name of the Company by the president or any vice-president and by
the secretary, or any other proper officer of the Company
thereunto authorized by the board of directors, or the treasurer,
and the seal of the Company, if any, may be affixed thereto. A
record shall be kept of the name of the person, firm, or
corporation owning the snares represented by each such
certificate and the number of shares represented thereby, the
date thereof, and in case of cancellation, the date of
cancellation. Every certificate surrendered to the Company for
exchange or transfer shall be cancelled and no new certificate or
certificates shall be issued in exchange for any existing
certificates until such existing certificates shall have been so
cancelled, except in cases provided for in Section 2 of this
Article.
Section 2. Lost, Destroyed and Mutilated
Certificates. If any certificates for shares in this Company
become worn, defaced, or mutilated but are still substantially
intact and recognizable, the directors, upon production and
surrender thereof, shall order the same cancelled and shall issue
a new certificate in lieu of same. The holder of any shares in
the Company shall immediately notify the Company if a certificate
therefor shall be lost, destroyed, or mutilated beyond
recognition, and the board of directors may, in its discretion,
require the owner oz the certificate which has been lost,
destroyed, mutilated beyond recognition, or his legal
representative, to give the Company a bond in such sum and with
such surety or sureties as it may direct, not exceeding double
the value of the stock, to indemnify the Company against any
claim that may be made against it on account of the alleged loss,
destruction, or mutilation of any such certificate. The board of
directors may, however, in its discretion, refuse to issue any
such new certificate except pursuant to legal proceedings, under
the laws of the State of Ohio in such case made and provided.
Section 3. Transfers of Shares. Transfers of
shares in the Company shall be made only on the books of the
Company by the registered holder thereof, his legal guardian,
executor, or administrator, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the
secretary of the Company or with a transfer agent appointed by
the board of directors, and on surrender of the certificate or
certificates for such shares. The person in whose name shares
stand on the books of the Company shall, to the full extent
permitted.by law, be deemed the owner thereof for all purposes as
regards the Company.
Section 4. Time. In counting days when computing
time limits in this Code of Regulations, each shareholder and the
Company shall always start the day immediately succeeding the day
on which occurred the action from which the time is to be
computed. Any action otherwise meeting the requirements of this
Code of Regulations will be sufficient if completed before
midnight of the last day of the time period allowed.
Section 5. Regulations. The board of directors may
make such rules and regulations as it may deem expedient, not
inconsistent with this Code of Regulations, concerning the issue,
transfer, and registration of certificates for shares in the
Company. It may appoint one or more transfer agents or one or
more registrars or both, and may require all certificates for
shares to bear the signature of either or both.
ARTICLE IX
Restriction of Duties
Section 1. Opportunities. No officer, director, or
shareholder shall, except as set forth in a contract in writing
signed by him with the Company, have any duty, either at law or
in equity, to offer or communicate to the Company any opportunity
to engage in any business or other transaction, venture,
activity, association, or enterprise.
Section 2. Competition. Except as set forth in a
contract with the Company, each officer, director, and
shareholder shall have the right to compete with the Company in
any business activity, market, geographic area, or otherwise.
ARTICLE X
Miscellaneous
Section XI Section and Other Headings. The section
and other headings contained in this Code of Regulations are for
reference purposes only and shall not be deemed to be a part of
this Code of Regulations or to affect the meaning or
interpretation of this Code of Regulations.
Section 1. Gender. When used in this Code of
Regulations the gender of each personal pronoun shall also be
construed to mean and include each other gender.
AMENDMENT NO. 4 TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
as of February 23, 1996
WCI Steel, Inc.
1040 Pine Avenue, S.E.
Warren, Ohio 44482
Gentlemen:
Congress Financial Corporation, a California corporation
("Congress") and Security Pacific Business Credit Inc., a
Delaware corporation ("Security Pacific", and together with
Congress, individually and collectively, "Lenders") and Congress
Financial Corporation, as agent for Lenders (in such capacity,
"Agent") have entered into financing arrangements with WC1 Steel,
Inc., an Ohio corporation ("Borrower"), pursuant to which Agent
on behalf of Lenders may make loans and advances and provide
other financial accommodations to Borrower as set forth in the
Amended and Restated Loan and Security Agreement, dated as of
December 29, 1992, by and among Agent, Lenders and Borrower as
amended and supplemented pursuant to Amendment No. 1 to Amended
and Restated Loan and Security Agreement, dated as of
December 14, 1993, Amendment No. 2 to Amended and Restated Loan
and Security Agreement, dated as of July 13, 1994, and Amendment
No. 3 to Amended and Restated Loan and Security Agreement, dated
as of March 28, 1995 (as the same now exists or may hereafter be
further amended, modified, supplemented, extended, renewed,
restated or replaced, the "Loan Agreement") and the other
Financing Agreements (as such term is defined therein).
Borrower has requested that each of Agent and Lenders enter
into an amendment to the Loan Agreement and Lenders and Agent are
willing to agree to such amendment subject to the terms and
conditions contained herein. By this Amendment, Agent, Lenders
and Borrower desire and intend to evidence such amendment.
In consideration of the foregoing, and the respective
agreements and covenants contained herein, the parties hereto
agree as follows:
1. Definitions. For purposes of this Amendment, unless
otherwise defined herein, all terms used herein, shall have the
respective meanings assigned to such terms in the Loan Agreement.
2. Dividends. Section 7.7(b) of the Loan Agreement is
hereby deleted in its entirety and the following substituted
therefor:
"(b) Borrower may in any fiscal year commencing with
the fiscal year of Borrower ending October 31, 1996
declare and pay dividends to its shareholders
(including dividends in respect of common and preferred
stock) not to exceed, in any fiscal year, in the
aggregate, an amount equal to: (i) fifty (50%) percent
of the cumulative After-Tax Profits of Borrower (or if
cumulative After-Tax Profits shall be a loss, minus one
hundred (100%) percent of such loss) earned subsequent
to October 31, 1995 and prior to the date of the
declaration and payment occurs (treating such period as
a single accounting period) minus (ii) the aggregate
amount of all loans made by Borrower to Renco Group
(net of repayments and prepayments) in the then current
fiscal year and still outstanding minus (iii) the
aggregate amount of all management fees paid by
Borrower to Renco Group in the then current fiscal
year, other than the monthly management fees
contemplated under section 7.6(b)(ii) above minus (iv)
the aggregate amount of all monthly management fees
paid by Borrower to Renco Group as contemplated under
section 7.6(b)(ii) above in the preceding fiscal years
commencing with the fiscal year ending October 31, 1996
minus (v) the aggregate amount of all dividends
declared and paid by Borrower to its shareholders, all
loans made by Borrower to Renco Group (net of
repayments and prepayments) and still outstanding and
all management fees paid by Borrower to Renco Group
(other than the monthly management fees contemplated
under Section 7.6(b)(ii) above paid in the preceding
years commencing with the fiscal year ending
October 31, 1996), in each case as paid in the
preceding fiscal years commencing with the fiscal year
ending October 31, 1996; provided, that, each of the
following conditions is satisfied as of the date of the
payment of each such dividends, as determined by Agent;
(A) no Event of Default, or act, event or condition,
which with notice, passage of time or both would
constitute an Event of Default exists or has occurred
and is continuing or would exist or occur after giving
effect to the declaration and payment of such dividend;
(B) there are sufficient legally available funds
therefor; (C) at the time such dividends are to be
paid, and after giving effect thereto, Borrower shall
have Excess Availability of not less than $5,000,000;
and (D) Agent shall have received not less than ten
(10) days prior notice of the declaration and payment
of any such dividend."
3. Conditions Precedent. The effectiveness of the
amendments to the Loan Agreement provided for herein shall only
be effective upon the satisfaction of each of the following
conditions precedent in a manner reasonably satisfactory to
Agent:
(a) no Event of Default, or act, condition or event
which with notice or passage of time or both would constitute an
Event of Default shall exist or have occurred; and
(b) Agent shall have received an original of this
Amendment, duly authorized, executed and delivered by Borrower,
and Lenders.
4. Effect of this Amendment. Except as modified pursuant
hereto, no other changes or modifications to the Financing
Agreements are intended or implied and in all other respects the
Financing Agreements are hereby specifically ratified, restated
and confirmed by all parties hereto as of the effective date
hereof. To the extent of conflict between the terms of this
Amendment and the other Financing Agreements, the terms of this
Amendment shall control. The Loan Agreement and this Amendment
shall read and be construed as one agreement.
5. Further Assurances. The parties hereto shall execute
and deliver such additional documents and take such additional
actions as may be necessary or desirable to effectuate the
provisions and purposes of this Amendment.
6. Governing Law. The requests and obligations hereunder
of each of the parties hereto shall be governed by and
interpreted and determined in accordance with the laws of the
State of New York.
7. Binding Effect. This Amendment shall be binding upon
and inure to the benefit of each of the parties hereto and their
respective successors and assigns.
8. Counterparts. This Amendment may be executed in any
number of counterparts, but all of such counterparts shall
together constitute but one and the same agreement. In making
proof of this Amendment, it shall not be necessary to produce or
account for more than one counterpart thereof singed by each of
the parties hereto.
Please indicate the acknowledgment and agreement of
Borrower to the foregoing by signing in the space provided below.
The consent contained herein shall only be effective after the
receipt by Agent of an original of this Amendment duly
authorized, executed and delivered by Borrower and each of
Lenders.
Very truly yours,
CONGRESS FINANCIAL CORPORATION,
in its individual capacity and
as agent
By: /S/ LAURENCE S. FORTE
Title: VICE PRESIDENT
SECURITY PACIFIC BUSINESS CREDIT INC.
By: /S/ MICHAEL LEMISZKO
Title: VICE PRESIDENT
ACKNOWLEDGED AND AGREED:
WCI STEEL, INC.
By: /S/ BRET W. WISE
Title: VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
AMENDMENT NO. 5 TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
as of March 8, 1996
WCI Steel, Inc.
1040 Pine Avenue, S.E.
Warren, Ohio 44482
Gentlemen;
Congress Financial Corporation, a California corporation
("Congress") and Security Pacific Business Credit Inc., a
Delaware corporation ("Security Pacific", and together with
Congress, individually and collectively, "Lenders") and Congress
Financial Corporation, as agent for Lenders (in such capacity,
"Agent") have entered into financing arrangements with WCI Steel,
Inc., an Ohio corporation ("Borrower"), pursuant to which Agent
on behalf of Lenders may make loans and advances and provide
other financial accommodations to Borrower, as set forth in the
Amended and Restated Loan and Security Agreement, dated as of
December 29, 1992, by and among Agent, Lenders and Borrower as
amended and supplemented pursuant to Amendment No. 1 to Amended
and Restated Loan and Security Agreement, dated as of
December 14, 1993, Amendment No. 2 to Amended and Restated Loan
and Security Agreement, dated as of July 13, 1994, Amendment
No. 3 to Amended and Restated Loan and Security Agreement, dated
as of March 28, 1995, and Amendment No. 4 to Amended and Restated
Loan and Security Agreement, dated as of February 23, 1996 (as
the same now exists or may hereafter be further amended,
modified, supplemented, extended, renewed, restated or replaced,
the "Loan Agreement") and the other Financing Agreements (as such
term is defined in the Loan Agreement).
Borrower has requested that each of Agent and Lenders enter
into an amendment to the Loan Agreement and Lenders and Agent are
willing to agree to such amendment subject to the terms and
conditions contained herein. By this Amendment, Agent, Lenders
and Borrower desire and intend to evidence such amendment.
In consideration of the foregoing, and the respective
agreements and covenants contained herein, and for other good and
valuable consideration, the adequacy and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. For purposes of this Amendment, unless
otherwise defined herein, all terms used herein, shall have the
respective meanings assigned to such terms in the Loan Agreement.
2. Loans, Investments, Guarantees. Section 7.5 of the
Loan Agreement is hereby deleted in its entirety and the
following substituted therefor:
"(c) loans by Borrower to Renco Group not to
exceed, in any fiscal year commencing with the fiscal
year of Borrower ending October 31, 1995, in the
aggregate, an amount equal to: (I) fifty (50%) percent
of the cumulative After-Tax Profits of Borrower (or if
cumulative After-Tax Profits shall be a loss, minus one
hundred (100%) percent of such loss) earned subsequent
to October 31, 1995 and prior to the date such loan
occurs (treating such period as a single accounting
period) minus (ii) the aggregate amount of all
dividends declared and paid by Borrower to its
shareholders in the then current fiscal year minus
(iii) the aggregate amount of all management fees paid
by Borrower to Renco Group in the then current fiscal
year, other than the monthly management fees
contemplated under Section 7.6(b)(ii) below minus (iv)
the aggregate amount of all loans made by Borrower to
Renco Group (net of repayments and prepayments) and
still outstanding, all dividends declared and paid by
Borrower to its shareholders and all management fees
paid by Borrower to Renco Group (other than the monthly
management fees contemplated under Section 7.6(b)(ii)
below paid in the preceding fiscal years commencing
with the fiscal year ending October 31, 1996), in each
case as paid in the immediately preceding fiscal years
commencing with the fiscal year ending October 31,
1996; provided, that, each of the following conditions
is satisfied as of the date of each such loan, as
determined by Agent: (A) no Event of Default or act,
condition or event which with notice or passage of time
or both would constitute an Event of Default exists or
has occurred and is continuing or would exist or occur
after giving effect to such loan; (B) at the time of
such loan and after giving effect thereto, Borrower
shall have Excess Availability of not less than
$5,000,000; and Agent shall have received not less
than ten (10) days prior notice of any such loan;"
3. Transactions with Affiliates. Section 7.5(b)(iii) of
the Loan Agreement is hereby deleted in its entirety and the
following substituted therefor:
"(iii) Borrower may in any fiscal year commencing
with the fiscal year of Borrower ending October 31,
1996 pay to Renco Group management fees (in addition to
those permitted to be paid under Section 7.6(b)(ii)
above) not to exceed, in any fiscal year, in the
aggregate, an amount equal to: (I) fifty (50%) percent
of the cumulative After-Tax Profits of Borrower (or if
cumulative After-Tax Profits shall be a loss, minus one
hundred (100%) percent of such loss) earned subsequent
to October 31, 1995 and prior to the date the payment
occurs (treating such period as a single accounting
period) minus (ii) the aggregate amount of all
dividends declared and paid by Borrower to its
shareholders in the then current fiscal year minus
(iii) the aggregate amount of all loans made by
Borrower to Renco Group in then current fiscal year
(net of repayments and prepayments) and still
outstanding minus (iv) the aggregate amount of all
management fees paid by Borrower to Renco Group (other
than the monthly management fees contemplated under
Section 7.6(b)(ii) above paid in the preceding fiscal
years commencing with the fiscal year ending
October 31, 1996), all loans made by Borrower to Renco
Group (net of repayments and prepayments) and still
outstanding, and all dividends declared and paid by
Borrower to its shareholders, in each case as paid in
the preceding fiscal years commencing with the fiscal
year ending October 31, 1996; provided, that, each of
the following conditions is satisfied as of the date of
payment of any such management fees, as determined by
Agent: (A) no Event of Default or act, condition or
event which with notice or passage of time or both
would constitute an Event of Default exists or has
occurred and is continuing or would exist or occur
after giving effect to the payment of such fee; (B) at
the time of the payment of such fee and after giving
effect thereto, Borrower shall have Excess Availability
of not less than $5,000,000; and Agent shall have
received not less than ten (10) days prior notice of
any such management fees;"
4. Dividends. Section 7.7(b) of the Loan Agreement is
hereby deleted in its entirety and the following substituted
therefor:
"(b) Borrower may in any fiscal year commencing
with the fiscal year of Borrower ending October 31,
1996 declare and pay dividends to its shareholders
(including dividends in respect of common and preferred
stock) not to exceed, in any fiscal year, in the
aggregate, an amount equal to: (I) fifty (50%) percent
of the cumulative After-Tax Profits of Borrower (or if
cumulative After-Tax Profits shall be a loss, minus one
hundred (100%) percent at such loss) earned subsequent
to October 31, 1995 and prior to the date of the
declaration and payment occurs (treating such period as
a single accounting period) minus (ii) the aggregate
amount of all loans made by Borrower to Renco Group
(net of repayments and prepayments) in the then current
fiscal year and still outstanding minus (iii) the
aggregate amount of all management fees paid by
Borrower to Renco Group in the then current fiscal
year, other than the monthly management fees
contemplated under Section 7.6(b)(ii) hereof minus (iv)
the aggregate amount of all dividends declared and paid
by Borrower to its shareholders, all loans made by
Borrower to Renco Group (net of repayments and
prepayments) and still outstanding and all management
fees paid by Borrower to Renco Group (other than the
monthly management fees contemplated under Section
7.6(b)(ii) above paid in the preceding years commencing
with the fiscal year ending October 31, 1996), in each
case as paid in the preceding fiscal years commencing
with the fiscal year ending October 31, 1996; provided,
that, each of the following conditions is satisfied as
of the date of the payment of each such dividends, as
determined by Agent: (A) no Event of Default, or act,
event or condition, which with notice, passage of time
or both would constitute an Event of Default exists or
has occurred and is continuing or would exist or occur
after giving effect to the declaration and payment of
such dividend; (B) there are sufficient legally
available funds therefor; at the time such
dividends are to be paid, and after giving effect
thereto, Borrower shall have Excess Availability of not
less than $5,000,000; and (D) Agent shall have received
not less than ten (10) days prior notice of the
declaration and payment of any such dividend."
5. Conditions Precedent. The effectiveness of the
amendments to the Loan Agreement provided for herein shall only
be effective upon the satisfaction of each of the following
conditions precedent in a manner reasonably satisfactory to
Agent:
(a) no Event of Default, or act, condition or event
which with notice or passage of time or both would constitute an
Event of Default shall exist or have occurred; and
(b) Agent shall have received an original of this
Amendment, duly authorized, executed and delivered by Borrower,
and Lenders.
6. Effect of this Amendment. Except as modified pursuant
hereto, no other changes or modifications to the Financing
Agreements are intended or implied and in all other respects the
Financing Agreements are hereby specifically ratified, restated
and confirmed by all parties hereto as of the effective date
hereof. To the extent of any conflict between the terms of this
Amendment and the other Financing Agreements, the terms of this
Amendment shall control. The Loan Agreement and this Amendment
shall be read and be construed as one agreement.
7. Further Assurances. The parties hereto shall execute
and deliver such additional documents and take such additional
actions as may be necessary or desirable to effectuate the
provisions and purposes or this Amendment.
8. Governing Law. The rights and obligations hereunder of
each of the parties hereto shall be governed by and interpreted
and determined in accordance with the laws of the State of New
York.
9. Binding Effect. This Amendment shall be binding upon
and inure to the benefit of each of the parties hereto and their
respective successors and assigns.
10. Counterparts. This Amendment may be executed in any
number of counterparts, but all of such counterparts shall
together constitute but one and the same agreement. In making
proof of this Amendment, it shall not be necessary to produce or
account for more than one counterpart thereof signed by each of
the parties hereto.
Please indicate the acknowledgment and agreement of
Borrower to the foregoing by signing in the space provided below.
The amendments contained herein shall only be effective after the
receipt by Agent of an original of this Amendment duly
authorized, executed and delivered by Borrower and each of
Lenders.
Very truly yours,
CONGRESS FINANCIAL CORPORATION,
in its individual capacity and
as agent
By : /S/ LAURENCE S. FORTE
Title: VICE PRESIDENT
SECURITY PACIFIC BUSINESS CREDIT INC.
By: /S/ MICHAEL LEMISZKO
Title: VICE PRESIDENT
ACKNOWLEDGED AND AGREED:
WCI STEEL, INC.
By: /S/ BRET W. WISE
Title: VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AT APRIL 30, 1996 (Unaudited) AND THE
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTH PERIOD ENDED
APRIL 30, 1996 (Unaudited) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> APR-30-1996
<CASH> 134,238
<SECURITIES> 7,933
<RECEIVABLES> 67,349
<ALLOWANCES> 2,258
<INVENTORY> 81,405
<CURRENT-ASSETS> 299,683
<PP&E> 291,563
<DEPRECIATION> 100,218
<TOTAL-ASSETS> 556,274
<CURRENT-LIABILITIES> 117,180
<BONDS> 210,295
0
0
<COMMON> 366
<OTHER-SE> 68,312
<TOTAL-LIABILITY-AND-EQUITY> 556,274
<SALES> 315,452
<TOTAL-REVENUES> 315,452
<CGS> 266,202
<TOTAL-COSTS> 266,202
<OTHER-EXPENSES> 21,593
<LOSS-PROVISION> (84)
<INTEREST-EXPENSE> 12,510
<INCOME-PRETAX> 18,302
<INCOME-TAX> 7,320
<INCOME-CONTINUING> 10,982
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,982
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
