<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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 April 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the transition period from to
-------- ----------
Commission file number: 33-67532
SHEFFIELD STEEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-2191557
(State or other (I.R.S. Employer
jurisdiction of incorporation) identification No.)
220 North Jefferson Street
Sand Springs, OK 74063
(Address of principal executive offices)
(918) 245-1335
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act: None
----
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter 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[ ]
At the date of this filing, there were 3,375,000 shares of the
Registrants $.01 par value Common Stock outstanding. The aggregate market value
of voting stock held by nonaffiliates is unknown as the Registrant's stock is
not traded on an established public trading market.
Documents Incorporated by Reference
1) Portions of the Registrants Proxy Statement dated July 31, 1997 are
incorporated by reference into Part III of this Report on Form 10-K.
<PAGE>
SHEFFIELD STEEL CORPORATION
FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
- ---- ----
Part I
<S> <C> <C>
1. Business 1-8
2. Properties 9
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
Part II
5. Market for the Registrant's Common Equity and Related Stockholder Matters 10
6. Selected Financial Data 11
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12-18
8. Financial Statements and Supplementary Data 18-38
9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 39
Part III
10. Directors and Executive Officers of the Registrant 39
11. Executive Compensation 39
12. Security Ownership of Certain Beneficial Owners and Management 39
13. Certain Relationships and Related Transactions 39
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 38-48
</TABLE>
<PAGE>
PART I
------
ITEM 1. BUSINESS
- ------- --------
Overview
- --------
Sheffield Steel Corporation (the "Company") is a mini-mill producer of
hot rolled steel bar products ("hot rolled bar products"), concrete reinforcing
bar ("rebar"), fabricated products including fabricated and epoxy-coated rebar
and steel fence posts ("fabricated products"), and various types of
semi-finished steel, known as billets ("semi-finished steel"). The Company's
primary manufacturing facility is located in Sand Springs, Oklahoma (the "Sand
Springs Facility"), where it conducts a full range of steelmaking activities,
including the melting of steel and casting of billets, and the processing of
billets into rebar, steel fence posts and a range of hot rolled bar products
including rounds, flats and squares. From the Sand Springs Facility, the Company
also ships billets to its two rolling mills in Joliet, Illinois (the "Joliet
Facility"), which produce hot rolled bar products, and transfers rebar to its
rebar fabrication plant in Kansas City, Missouri (the "Kansas City Plant"). The
Company also owns and operates a short line railroad consisting of approximately
seven miles of rail line between Sand Springs and Tulsa, Oklahoma that serves
primarily the operations of the Sand Springs Facility and, to a lesser extent,
third parties. The Sand Springs Facility and the Joliet Facility received ISO
9002 quality certification in November, 1995 and June, 1996, respectively.
On October 29, 1993, the Company's two principal operating subsidiaries
Sheffield-Sand Springs and Sheffield-Joliet were merged into Sheffield Steel
Corporation, with Sheffield Steel Corporation as the surviving corporation.
Substantially all of the Company's assets are owned directly by Sheffield Steel
Corporation, with the Company's other assets being owned by Sheffield's two
remaining wholly-owned subsidiaries, the Sand Springs Railway Company (the
"Railway Company") and Sheffield Steel Corporation-Oklahoma City (the "Oklahoma
City Mill").
This Annual Report on Form 10-K may contain forward-looking statements as
that term is defined in the Private Securities Litigation Reform Act of 1995.
Such statements are based on management's current expectations and are subject
to a number of factors and uncertainties which could cause results to differ
materially from those described in the forward-looking statements. There can be
no assurance that actual results or business conditions will not differ
materially from those anticipated or suggested in such forward-looking
statements as a result of various factors, including, but not limited to, the
following: the size and timing of significant orders, as well as deferral of
orders, over which the Company has no control; the variation in the Company's
sales cycles from customer to customer; increased competition posed by other
mini-mill producers; changes in pricing policies by the Company and its
competitors; the need to secure or build manufacturing capacity in order to meet
demand for the Company's products; the Company's success in expanding its sales
programs and its ability to gain increased market acceptance for its existing
product lines; the ability to scale up and successfully produce its products;
the potential for significant quarterly variations in the mix of sales among the
Company's products; the gain or loss of significant customers; shortages in the
availability of raw materials from the Company's suppliers; fluctuations in
energy costs; the costs of environmental compliance and the impact of government
regulations; the Company's relationship with its work force; the restrictive
covenants and tests contained in the Company's debt instruments, which could
limit the Company's operating and financial flexibility; and general economic
conditions.
1
<PAGE>
Manufacturing Process
The Company operates a steel mini-mill with melting, casting and rolling
operations. In contrast to integrated steel mills, which produce steel from coke
and iron ore through the use of blast furnaces and basic oxygen furnaces, a
mini-mill uses electric arc furnaces to melt and refine steel scrap. At the Sand
Springs Facility, steel scrap is conveyed by rail car from the Company's scrap
yard to the facility's melt shop, where the steel scrap is melted with
electricity in two 85-ton electric arc furnaces. The molten steel is then
conveyed to a six-strand continuous caster which casts various sizes and grades
of billets. These billets are then reheated, rolled and shaped into various
finished steel products at the Sand Springs or Joliet rolling mills or, to a
lesser extent, sold to third parties as semi-finished steel. The Sand Springs
rolling mill produces rebar, T-sections, which are further processed into fence
posts, and a range of hot rolled bar products. The Joliet rolling mills produce
an extensive range of hot rolled bar products.
Hot Rolled Bar Products. The Company has changed the name of this line of
------------------------
business from "MBQ products" to "hot rolled bar products" for the sole purpose
of conforming this product category to the designation used by the American Iron
and Steel Institute ("AISI"). This category includes all steel bar products
excluding rebar. There has been no change in Sheffield's strategy or product
line from previous filings. From its two rolling mills, the Joliet Facility
produces hot rolled bar products including, flats, squares, rounds, angles and
channels, which are generally non-standard sizes, shapes and chemistries that
are made to order for specific customer requirements. The Sand Springs Facility
has successfully entered certain hot rolled bar product markets, including
certain hot rolled bar squares, rounds, and flats. Construction of the new
rolling mill at the Sand Springs Facility, which was substantially completed in
fiscal 1995, has added manufacturing capacity for the Company's hot rolled bar
products. Hot rolled bar product sales were approximately 44% of total Company
revenues in fiscal 1997.
Rebar. The Company produces rebar at the Sand Springs Facility rolling
------
mill, where the bars are rolled in standard diameters from #4 rebar (1/2" or
13mm) to #18 rebar (2-1/4" or 57mm) and sheared to standard lengths from 20' to
60'. Rebar sales were approximately 32% of total Company revenues in fiscal
1997.
Fabricated Products. The Company manufactures two fabricated steel
--------------------
products: fence post and fabricated rebar, including epoxy-coated rebar. Sales
of these fabricated products were approximately 14% of the Company's total
revenues in fiscal 1997. The Company produces fence post in two weights (1.25
pounds per foot and 1.33 pounds per foot), in orange and green colors and
various lengths from four feet to eight feet. The Company believes that its
fence post is recognized as a quality leader in the industry.
Rebar shipped from the Sand Springs Facility to the Kansas City Plant is
fabricated and sold to highway and construction contractors in Kansas, Missouri
and adjacent markets. Typically, more than 35% of the annual fabricated rebar
tons sold are epoxy-coated prior to fabrication to protect against corrosion in
the field.
2
<PAGE>
Semi-finished Steel (billets). To meet customer and finished product
------------------------------
specifications, the Company produced in excess of 100 grades of steel during
fiscal 1997. Sales of billets to third parties are dependent on internal billet
requirements and widely varying market conditions. In the past three fiscal
years, shipments of billets to third parties have ranged between 8% and 18% of
total Company revenues. Sales of billets were approximately 8% of total Company
revenues in fiscal 1997.
The Railway. The Railway Company operates approximately seven miles of
------------
rail line between Sand Springs and Tulsa, Oklahoma, serving primarily the
operations of the Sand Springs Facility and, to a lesser extent, third parties.
Customers and Markets
Hot Rolled Bar Products. According to AISI, the size of the hot rolled
------------------------
bar product market in the U.S. was approximately 7.0 million tons in 1996. The
majority of hot rolled bar products produced at the Joliet Facility are sold
directly to original equipment manufacturers ("OEMs") and cold drawn bar
finishers, while the remainder is sold to steel service centers. Major end use
applications include farm equipment and auto parts, conveyor assemblies, pole
line hardware, wrenches and construction machinery. Hot rolled bar products
produced at the Sand Springs Facility are sold to both OEMs and steel service
centers.
While most hot rolled bar products are sold in standard sizes, shapes and
chemistries, the Joliet Facility focuses on applications which require
non-standard sizes, shapes or chemistries. The Joliet Facility also focuses on
meeting the requirements of hot rolled bar products customers with small volume
needs. The Company believes that these niche markets are unattractive to larger
volume producers of hot rolled bar products. The Joliet Facility aims to
maximize its production flexibility, since targeting customers with special
requirements in turn requires short production runs (often as low as five tons
per item), special manufacturing aids or additional inventories. The Company
believes that the Joliet Facility's focus allows it to act as the sole supplier
of particular shapes, sizes or steel chemistries to certain customers, while in
other cases it competes with a limited number of producers of specialty hot
rolled bar products.
The demand for consistent quality is very significant in the hot rolled
bar product market, where quality is measured by the adherence to specifications
related to chemical composition, surface quality, product integrity and size
tolerances. The capabilities of the melt shop at the Sand Springs Facility
contribute significantly to the Company's ability to maintain consistent quality
at a competitive cost.
The Company also strives to provide its hot rolled bar product customers
with superior service. To permit a high level of service consistent with
efficient production scheduling, the Company carries a customer-designated
finished goods inventory of hot rolled bar products in excess of 10,000 tons.
Both the Sand Springs Facility and the Joliet Facility have implemented an
internally developed bar-coded inventory tracking system which permits quick and
precise hot rolled bar inventories to be taken at any time. The Joliet Facility
has also developed a customer query system (the "Customer Query System") which
provides agents and major customers with direct computer access to the status of
their production orders, the availability of inventory designated for them and
to the Joliet Facility's production schedule for their products.
3
<PAGE>
Rebar. According to the AISI, the size of the rebar market in the U.S. was
------
approximately 6.3 million tons in 1996. The Company sells rebar to independent
fabricators who shear and bend the rebar to meet engineering or architectural
specifications for construction projects.
Rebar is a lower cost, higher volume commodity bar product for which
price is often the customer's decisive factor. Geographic proximity to
customers, which in turn determines both freight costs and delivery response
time, is also an important factor in the rebar market, where profit margins are
particularly tight and independent fabricators typically depend on quick mill
response rather than their own inventories to meet changing construction
schedules. Due to the importance of pricing, freight costs and delivery response
time, sales of rebar tend to be concentrated within close geographic proximity
to a rebar manufacturer's mini-mill.
The Company's rebar market is concentrated in the geographic area
surrounding the Sand Springs Facility. In the Company's primary market area of
Oklahoma, Kansas and portions of Nebraska, Missouri, Arkansas and northern
Texas, the Company enjoys a freight advantage over its competitors and believes
it has a market share in excess of 50%. Approximately half of the Company's
rebar shipments are made in this primary market area. The remaining rebar
shipments are made in the adjacent regions of Nebraska, Missouri, Arkansas and
Texas and in Louisiana, New Mexico and Colorado. Since pricing, freight costs
and delivery response times are important competitive factors in the rebar
market, the Company believes that efforts to penetrate more distant markets
would be uneconomical or impractical.
Demand for rebar tends to be influenced by trends in commercial and
residential construction, industrial investment in new plants and facilities,
and government spending on infrastructure projects and public sector buildings.
The Company has worked to build and maintain long-term relationships with
leading independent fabricators located in construction centers in the
south-central United States by providing them with competitive pricing, assured
product availability and reliable, prompt delivery and service. This strategy
permits the fabricators to compete successfully in the construction and
infrastructure markets, which helps to reinforce the Company's relationships
with such fabricators. Consequently, although rebar demand will fluctuate with
the trends in construction and industrial and public sector investment, strong
relationships with the dominant fabricators have helped support consistent rebar
sales volume during periods of reduced demand over the past several years.
Fabricated Products. The Company sells fence post to distributors and
--------------------
farm cooperatives. The Company believes that it is the dominant supplier of
fence post in the Oklahoma, Kansas, Missouri, and Arkansas market with more than
half of the market share in that area. Additional important markets for the
Company are in Texas, Mississippi, and Louisiana.
Fabricated rebar is shipped from the Kansas City Plant to construction
contractors in Missouri, Kansas, Nebraska and in contiguous markets. In recent
years the Company has experienced increased demand for epoxy-coated rebar from
contractors bidding on infrastructure projects. This has provided the Kansas
City Plant with a competitive advantage and contributed to a growth in
shipments.
4
<PAGE>
Semi-finished Steel (billets). Semi-finished steel is sold by the Company
------------------------------
to other steel mills or forgers for conversion into finished products. A portion
of the sales are made to accounts with continuing billet requirements and a
portion is sold in the "spot" market. In the latter instance, steel may be
exported to markets in Mexico, Canada, South America and the Caribbean. Sales
volume potential and pricing for semi-finished steel, particularly in the spot
market, is highly variable. The dominant competitive factors are availability
and price.
The Sand Springs Mill
The Company substantially completed construction of the new rolling mill
at the Sand Springs Facility in 1995 to further increase sales of higher margin
products by shifting productive billet capacity from semi-finished steel sales
to hot rolled bar products. The new rolling mill is capable of producing rebar
and high quality hot rolled bar products at low cost and, together with the
Joliet Facility, of ultimately processing most of the billets produced by the
Company into finished products. Final acceptance of the mill occurred in the
third quarter of 1997 after certain performance tests were satisfied. The
contract cost for construction of the new mill, including related infrastructure
improvements, was approximately $22 million. An additional $4 million was
expended for a new hot rolled bar finished goods warehouse, related material
handling equipment and a metallurgical laboratory.
During fiscal 1997, the Company commissioned an engineering study to
evaluate a bottleneck in the shear line which follows the new rolling mill in
the manufacturing process. On the basis of this study, the Company is
undertaking a project to raise the throughput capacity of the shear line. The
project is scheduled for completion in the fourth quarter of fiscal 1998.
Sales and Marketing
Hot rolled bar products produced at the Joliet Facility are sold
regionally by the Company's sales personnel and nationally through commissioned
sales representatives under exclusive agency arrangements with the Company. Hot
rolled bar products produced at the Sand Springs Facility and rebar are sold
through the Company's own sales force and the sales agencies which service the
Joliet Facility. The Company markets fence post directly to farm cooperatives
and to fence post distributors. While some semi-finished steel is sold to
accounts with continuing billet requirements, the remaining portion is sold
through semi-finished steel brokers on the "spot" market. As a result of adverse
weather conditions which impact construction activities and a normal seasonal
downturn in manufacturing levels, the Company typically experiences lower sales
volumes in its third fiscal quarter.
Raw Materials
The Company's primary raw material is steel scrap, which is generated
principally from industrial, automotive, demolition, railroad, obsolete and
other scrap sources and is purchased by the Company in the open market through a
limited number of steel scrap brokers and dealers or by direct purchase. The
cost of steel scrap is subject to market forces, including demand by other steel
producers and can fluctuate significantly. Product prices generally cannot be
adjusted in the short-term to recover large increases in steel scrap costs.
However, over longer periods of time, product prices and steel scrap prices have
tended to move in the same direction.
5
<PAGE>
The long-term demand for steel scrap and its importance to the domestic
steel industry may be expected to increase as mini-mill producers continue to
expand steel scrap-based electric arc furnace capacity. For the foreseeable
future, however, the Company believes that supplies of steel scrap will continue
to be available in sufficient quantities. In addition, a number of technologies
exist for the processing of iron ore into forms which may be substituted for
steel scrap in electric arc furnace-based steelmaking. Such forms include direct
reduced iron, hot briquetted iron, iron carbide and pig iron. A sustained
increase in the price of steel scrap could result in increased use of these
alternative materials. The Company has successfully employed scrap substitutes
in its manufacturing process to achieve quality characteristics and expects to
increase their usage in the future.
Energy
The Company's manufacturing process consumes large amounts of
electricity. The Company purchases its electrical needs at the Sand Springs
Facility from Public Service Company of Oklahoma ("PSO"). The Company believes
that its utility rates are among the lowest in the domestic long product
mini-mill steel industry. PSO is able to generate electricity at relatively low
rates, as its electric load is generated using western coal and local natural
gas as compared to the higher costs of electric utilities that generate electric
load using oil or nuclear power.
The Company also uses natural gas to reheat billets, but is not
considered a large natural gas user. Since deregulation of the natural gas
industry, natural gas requirements generally have been provided through
negotiated contract purchases of well-head gas transported through local
pipeline distribution networks. Although increases in the price of natural gas
might have an adverse impact on the Company's cost structure and the Company's
profitability, any such price increases would likely have a similar effect on
competitor's using natural gas and/or electricity generated by natural gas. The
majority of the Company's natural gas needs (both to reheat billets and as a
consumer of the electricity generated by natural gas) are at the Sand Springs
Facility in Oklahoma, a state with excess natural gas supplies. The Company has
been adequately supplied with natural gas in the past and expects an adequate
supply to be available in the future.
Competition
The Company competes with a number of domestic mini-mills in each of its
market segments. Common competitive factors in the steel bar business include:
price, proximity to market, quality and service, although their relative
importance varies in the different market segments.
In the market for hot rolled bar products, the Joliet Facility occupies a
niche position at the specialty end of the product range. The Company believes
that it acts as the sole supplier of particular shapes, sizes or steel
chemistries to certain customers. In other cases, the Company competes with a
limited number of other producers of specialty hot rolled bar products. The new
rolling mill enables the Sand Springs Facility to compete with mini-mill
producers of standard hot rolled bar products. Competitors vary from customer to
customer and by product depending on product specifications, requirements for
order sizes and inventory support.
6
<PAGE>
Since pricing, freight costs and delivery times are the most important
competitive factors in the sale of rebar, sales tend to be concentrated within
about 350 miles of a mini-mill. In the south-central United States, the Company
believes it enjoys a competitive advantage as the closest mill serving an area
comprising Oklahoma, Kansas, western Missouri and Arkansas, and parts of
northern Texas.
The Company is generally not in competition with foreign or integrated
steel mill producers. These mills have cost and freight disadvantages compared
to the Company and other domestic mini-mills which effectively preclude them
from competing in the lower priced hot rolled bar product and rebar markets.
Competitive factors in fence post sales include price, product quality
measured by durability, appearance, workmanship, freight costs and delivery
response time. The Company believes that the high quality of its fence post,
combined with a more aggressive sales effort, contributed to an increase in
market penetration in fiscal 1996 and fiscal 1997.
For fabricated rebar, primary competitors are independent fabrication
shops which are furnished with rebar from other mini-mills in the Midwest. In
recent years, the Company believes that increased demand for epoxy-coated
product from contractors bidding on infrastructure projects has provided the
Kansas City Plant with a competitive advantage and contributed to growth in
shipments. Other competitive factors include delivery performance, engineering
support and competitive pricing.
Employees
At April 30, 1997, the Company had approximately 670 employees, of
which approximately 73% are represented by one of three bargaining units
affiliated with the United Steelworkers of America. The Company is party to a
collective bargaining agreement covering approximately 308 hourly-paid
production and maintenance employees at the Sand Springs Facility. The
agreement, which was negotiated as of March 2, 1997 is for a three year period
expiring March 2, 2000. The agreement included wage increases, certain benefit
increases and changes to local work rules. The agreement also allowed for the
Company to reduce and reorganize its hourly workforce by approximately 70
positions, primarily maintenance related. Of the 70 positions, 42 were
eliminated through retirement offers effective June 1, 1997 and the remaining
positions will be eliminated through attrition.
The Company is also party to a collective bargaining agreement covering
approximately 147 hourly-paid production and maintenance employees at the Joliet
Facility, which expires on March 1, 1999 and a collective bargaining agreement
covering approximately 23 employees at the Kansas City Plant which expires on
October 31, 1999. The Railway Company employs approximately 19 people of which
one is represented by the Brotherhood of Locomotive Engineers, three are
represented by the United Transportation Union, two are represented by the
Brotherhood of Railway Carmen, two are represented by the Brotherhood of
Maintenance Of Way Employees and six are represented by the Transportation
Communications International Union. Industry-wide contracts with these unions
expired on December 31, 1994. The Brotherhood of Maintenance of Way Employees
have signed an agreement which expires January 1, 2001. The United
Transportation Union agreement is currently in arbitration and a decision is
expected shortly. The remaining unions continue to be involved in the collective
7
<PAGE>
Environmental Compliance
The Company is subject to a broad range of federal, state and local
environmental regulations and requirements, including those governing air
emissions and discharges into water, and the handling and disposal of solid
and/or hazardous wastes. The Company has spent substantial amounts to comply
with these regulations and requirements. In addition, in the event of a release
of a hazardous substance generated by the Company, the Company could potentially
be responsible for the remediation of contamination associated with such a
release.
Primarily because the melting process at the Sand Springs Facility
produces emission dust that contains lead, cadmium and other heavy metals, the
Company is classified, in the same manner as other similar mini-mills in its
industry, as a generator of hazardous waste. The Resource Conservation and
Recovery Act ("RCRA") regulates the management of emission control sludge/dust
from electric arc furnaces ("K061"). All of the K061 generated at the Sand
Springs Facility is shipped to Mexico, where a processor recovers the heavy
metals and chemically stabilizes the residual dust. If an accidental release of
K061 were to occur, the Company could be required to remediate such release.
Although current law permits the export of K061, there can be no assurance that
new legislation prohibiting the export of hazardous waste materials, including
K061, will not be enacted. In that event, the Company would have to find an
alternative means of treatment or disposal of the K061 in compliance with RCRA.
Although the Company believes that it could properly dispose of the K061
generated at the Sand Springs Facility by constructing an on-site recovery and
chemical stabilization processor or by shipping the K061 to a licensed domestic
treatment facility, there can be no assurance as to the availability of such
alternatives or the level of cost associated with them.
New regulations to be adopted under the 1990 Clean Air Act Amendments
("CAAA") may require the Company to make additional expenditures for air
emissions control or changes in the steelmaking process, or both. Because
regulations applicable to the Company's operations have not yet been promulgated
under the CAAA, the Company cannot at this time accurately estimate the costs,
if any, of compliance with the new regulations. Because these standards will
also apply to the Company's domestic competitors, they are not expected to
materially affect the Company's competitive position. The Company has submitted
an operating permit application under Title V of the CAAA which it anticipates
will be approved in calendar year 1998. Because the application has been judged
administratively complete by the regulators, the Company may continue to operate
normally pending the final approval.
Based on continuing review of applicable regulatory requirements by the
Company's internal environmental compliance officer and advice from independent
consultants, the Company believes that it is currently in substantial compliance
with applicable environmental requirements and does not currently anticipate the
need to make expenditures beyond those planned for within the normal budgeting
process for environmental control measures during fiscal 1998.
8
<PAGE>
ITEM 2. PROPERTIES
- ------- ----------
The Company owns the properties comprising the Sand Springs Facility and
the Joliet Facility. The Sand Springs Facility is located on approximately 148
acres of land in Sand Springs, Oklahoma. The Joliet Facility is located on
approximately 30 acres of land in Joliet, Illinois. The Company leases 9 acres
of land adjacent to the Joliet Facility from the Metropolitan Water Reclamation
District of Greater Chicago under a long term lease expiring in 2053. The
Company also leases the Kansas City Plant, containing approximately 77,100
square feet. In addition, the Company owns 4.5 acres of land in Oklahoma City,
Oklahoma that formerly comprised the Oklahoma City Mill.
The Sand Springs Facility consists of approximately 520,390 square feet
of floor space and contains two 85-ton electric arc furnaces, a six strand
billet continuous caster, a rolling mill, two warehouses and a fence post shop.
The total annual capacity of the Sand Springs Facility is approximately 615,000
tons of billet, approximately 360,000 tons of rebar and hot rolled bar products
and approximately 70,000 tons of fence post.
The Joliet Facility consists of approximately 334,305 square feet of
floor space and contains a 12" merchant bar mill and a 10" merchant bar mill.
The total annual capacity of the Joliet Facility is approximately 155,000 net
tons of hot rolled bar products.
The Railway Company provides freight service between Sand Springs and
Tulsa on seven miles of mainline track and 21 miles of spur line which connect
customer facilities with the main line. The Railway Company owns the mainline
track and three locomotives and operates a maintenance shop for normal repairs
and upkeep. The Railway Company also operates a transload facility and
warehouse.
The Railway Company has granted a security interest in substantially all
of its assets as security for the Railway Company's obligations under a bank
credit facility.
The Company has granted a first priority lien on substantially all of the
real property and equipment in favor of the Trustee for the benefit of the
holders of the First Mortgage Notes, and has granted a second priority lien
thereon in favor of its lender to secure future borrowings under the Company's
revolving credit facility.
ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------
The Company is not a party to any significant pending legal proceedings
other than litigation incidental to its business which the Company believes will
not materially affect its financial position, results of operations, or
liquidity. Such claims against the Company are ordinarily covered by insurance.
There can be no assurance, however, that insurance will be available in the
future at reasonable rates.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
Not applicable.
9
<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
- ------- ------------------------------------------------
STOCKHOLDER MATTERS
-------------------
The Company's Common Stock, par value $.01 per share, is not traded on an
established public trading market. As of the date of this filing, there were
approximately nine stockholders of record. There were no dividends paid during
the year ended April 30, 1997. Certain of the Company's loan agreements contain
limitations on the ability of the Company to pay cash dividends on Common Stock.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
The following selected consolidated financial data for the five years ended
April 30, 1997 has been derived from the Company's financial statements audited
by KPMG Peat Marwick LLP, independent auditors. The Company's financial
statements and the report thereon are included elsewhere in this Annual Report
on Form 10-K. The information below should be read in conjunction with the
Company's financial statements and the related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included in Item 7.
<TABLE>
<CAPTION>
(Dollars in thousands except per share and per ton data)
Fiscal Year Ended April 30,
----------------------------------------------------------------------------
1993 1994 1995 1996 1997
------------ ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data:
Sales ............................................ $ 144,026 $ 165,920 $ 175,753 $ 172,317 $ 170,865
Cost of sales .................................... 125,705 141,215 144,385 143,121 140,234
------- ------- ------- ------- -------
Gross profit...................................... 18,321 24,705 31,368 29,196 30,631
Selling, general and administrative expense....... 10,536 10,682 12,156 11,737 11,923
Depreciation and amortization .................... 5,714 4,941 5,930 6,567 6,775
Postretirement benefit expense other
than pensions................................. - 4,248 3,153 2,776 2,353
Restructuring charge [a].......................... 6,764 - - - 1,320
------- ------- ------- ------- -------
Operating income (loss)........................... (4,693) 4,834 10,129 8,116 8,260
Interest expense.................................. (5,707) (7,147) (8,049) (11,733) (11,769)
Other income (expense)............................ (103) (40) (58) 526 -
------- ------- ------- -------- -------
Income (loss) before income taxes and
extraordinary item (10,503) (2,353) 2,022 (3,091) (3,509)
Income tax (expense) benefit...................... 2,975 949 (197) - -
------- ------- ------- -------- -------
Income (loss) from continuing operations (7,528) (1,404) 1,825 (3,091) (3,509)
Extraordinary item - loss on retirement of
long-term debt, net of income tax benefit
of $1,346..................................... - (3,966) - - -
------- ------- ------- -------- -------
Net income (loss)................................. $ (7,528) $ (5,370) $ 1,825 $ (3,091) $ (3,509)
======= ======= ======= ======= =======
Per Share Data: [b]
Net income (loss) from continuing operations
per common and common equivalent share $ (2.23) $ (.42) $ .50 $ (.92) $ (1.04)
Net income (loss) per common and
common equivalent share....................... $ (2.23) $ (1.60) $ .50 $ (.92) $ (1.04)
Dividends per common share........................ .15 .15 .18 .52 -
Balance Sheet Data (at end of period):
Total assets...................................... $ 94,643 $ 115,958 $ 146,459 $ 143,182 $ 136,627
Long-term debt (including current portion)........ 56,707 72,629 93,170 97,041 96,550
Stockholders' equity.............................. 14,098 10,558 11,395 6,385 2,156
Other Data:
Capital expenditures.............................. $ 2,467 $ 1,667 $ 24,220 $ 4,978 $ 3,695
Net tons shipped.................................. 488,303 519,043 500,151 477,005 473,755
Average price per ton shipped .................... $ 291 $ 314 $ 351 $ 361 $ 361
Average production cost per ton shipped........... 256 271 290 300 296
Number of active employees at end of period....... 689 708 718 705 670
Ratio of earnings to fixed charges [c]............ - - 1.19 - -
</TABLE>
- -------------------------------------------------------
[a] In January 1993, the Company approved a restructuring plan which provided
for closure of the Oklahoma City Mill. In conjunction with this plan, the
Company recorded a nonrecurring charge aggregating $6,764. Of the total
charge, $6,330 relates to the estimated loss expected upon disposal of the
facility and plant protection, insurance, and other expenses associated with
this plan. The remaining charge relates to operating losses incurred from
the date of approval through April 30, 1993.
A restructuring charge of $1.3 million was recognized in fiscal 1997 as a
result of early retirement incentives included in a collective bargaining
agreement and salaried workforce reductions in Sand Springs.
[b] Restated to give retroactive recognition for a 3,375-for-one stock split
approved on September 15, 1993.
[c] Ratio of earnings to fixed charges is defined as income before income taxes,
extraordinary item, and cumulative effect of change in accounting principle
plus amortization of debt issuance cost and interest expense divided by the
sum of interest expense plus amortization of debt issuance costs. Earnings
were insufficient to cover fixed charges in 1993, 1994, 1996 and 1997 by
approximately $10,503, $2,353, $3,091 and $3,509, respectively.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto included
in item 8 of this Form 10-K.
General
- -------
The Company substantially completed construction of the new rolling mill
at the Sand Springs Facility in 1995 and accepted final commissioning in the
third quarter of fiscal 1997. The new rolling mill is capable of producing rebar
and high quality hot rolled bar products. The commissioning process took longer
than expected due to various mechanical equipment problems, process control
computer start up difficulties, integration of the new mill with existing
production elements, and certain employee training requirements. During fiscal
1997, the Company commissioned an engineering study to evaluate the shear line
that follows the new mill. On the basis of this study, the Company believes that
improvements to the shear line will increase the throughput capacity of the mill
and has scheduled the project for completion in the fourth quarter of fiscal
1998.
On December 18, 1996, the Company experienced a failure in the
transformer supporting its number one furnace at the Sand Springs Facility. A
spare transformer was promptly installed which subsequently failed for unrelated
reasons on January 5, 1997. Although the insurance settlement has not been
finalized, the Company's property, casualty and business interruption insurance
is expected to cover substantially all of the costs associated with the repair
of the transformers and increased operating costs incurred as a result of the
one furnace operation. The Company was able to satisfy rolling mill requirements
by supplementing billet production with outside billet purchases and shipments
of finished goods to customers were not affected in any way. Normal melting
operations resumed at the end of April, 1997.
In January, the Company restructured the operating functions at the Sand
Springs Facility resulting in a 14% reduction in the salaried workforce.
Severance costs recognized in the third quarter were approximately $250
thousand.
On March 2, 1997, the Company completed negotiation of a collective
bargaining agreement with the United Steelworkers of America which covers
approximately 310 hourly-paid production and maintenance employees at the Sand
Springs Facility. The new contract is for a term of three years expiring March
1, 2000. This collective bargaining agreement included wage increases, certain
benefit increases and changes to local work rules. The contract also allowed the
Company to reduce and reorganize its hourly workforce by approximately 70 hourly
positions, primarily maintenance related. Of the 70 positions, 42 employees were
eliminated through retirement offers effective June 1, 1997 and the remaining
positions will be eliminated through attrition. Non-recurring costs recognized
in the fourth quarter were approximately $1.07 million.
The Sand Springs Facility and the Joliet Facility received ISO 9002
certification from their registrar on November 10, 1995 and June 18, 1996,
respectively. This certification is expected to help the Company improve its
quality system and should aid entry into new hot rolled bar markets.
12
<PAGE>
June 1, 1997 and the remaining positions will be eliminated through attrition.
Retirement costs recognized in the fourth quarter were approximately $1.07
million.
The Sand Springs Facility and the Joliet Facility received ISO 9002
certification from its registrar, KPMG Quality Registrar, on November 10, 1995
and June 18, 1996, respectively. This certification is expected to help the
Company improve its quality system and should aid entry into new hot rolled bar
markets.
Results of Operations
- ---------------------
Fiscal 1997 As Compared to Fiscal 1996
Sales. Sales for the Company for fiscal 1997 were approximately $170.9
million as compared to sales of approximately $172.3 million for fiscal 1996, a
decrease of approximately $1.4 million or 0.8%. Sales decreased primarily as a
result of decreased sales of semi-finished steel.
Hot Rolled Bar Products. Shipments in fiscal 1997 were 174,290
------------------------
tons compared to 159,688 tons in fiscal 1996, an increase of 14,602 tons
or 9%. Sales of hot rolled bar products from the Joliet Facility
decreased primarily due to weak market conditions encountered during the
first fiscal quarter. Shipments of hot rolled bars produced at the Sand
Springs facility were up 66% in fiscal 1997 over the previous year due to
increased mill production of hot rolled bar products. The increased
production of hot rolled bar products was a result of new product trial
shipments as well as continued production orders. The average price per
ton for hot rolled bar products decreased to $435 per ton in fiscal 1997
from $461 per ton in fiscal 1996. The decrease in average price per ton
is due to both product mix and the ratio of hot rolled bar products sold
between the Sand Springs Facility and the Joliet Facility.
Rebar. Rebar shipments for fiscal 1997 were 185,745 tons as
------
compared to 169,316 tons in fiscal 1996. The average price per ton for
rebar decreased to $292 for fiscal 1997 from $293 per ton in fiscal 1996.
The increase in the tons shipped was primarily due to increased
production. Rebar shipments in the previous year were limited because
mill time was allocated to the development of new hot rolled bar
business.
Fabricated Products. Shipments of fabricated products in fiscal
--------------------
1997 were 53,208 tons, down from 54,444 tons in fiscal 1996. Shipments of
fabricated products from the Kansas City Plant decreased from the prior
year, primarily due to weak market demand in the fourth quarter.
Shipments of fence posts were consistent with the prior year. The average
price per ton for fabricated products decreased slightly to $460 per ton
in fiscal 1997 from $461 per ton in fiscal 1996.
13
<PAGE>
Semi-finished Steel. Shipments of semi-finished steel to third
--------------------
parties for fiscal 1997 were 60,512 tons as compared to 93,557 tons in
fiscal 1996. The decrease of 33,045 tons or 35% was due to a weak market
for semi-finished steel products. Average sales price per ton for
semi-finished steel decreased to $214 per ton in fiscal year 1997 from
$225 per ton in fiscal 1996. The decrease in the average price per ton of
semi-finished steel was partially due to weak market demand and partially
due to selling a higher proportion of commodity grade steel.
Cost of Sales. The cost of sales for fiscal year 1997 was approximately
$140 million as compared to approximately $143 million for the fiscal year ended
1996. Cost of sales on an average per-ton basis decreased slightly from the
prior year to $298 from $302. The decrease in cost of sales per ton is due to
product mix, improved production rates, and a decrease in scrap raw material
costs from the prior year. The decrease is partially offset by slightly higher
conversion costs per ton in both the melt shop and Sand Springs rolling mill
primarily due to an electric furnace transformer failure and higher energy costs
in comparison to the prior year.
Gross Profit. Gross profit for fiscal 1997 was approximately $30.6
million as compared to approximately $29.2 million for fiscal 1996, an increase
of approximately $1.4 million or 4.9%. Gross profit as a percentage of net sales
for fiscal 1997 was 17.9% as compared to 16.9% for fiscal 1996. The increase in
gross profit in fiscal 1997 is due to the decrease in cost of sales and the
increase in sales as discussed above.
Selling, General and Administrative Expense. Selling, general and
administrative expense for fiscal 1997 was approximately $11.9 million,
reflecting an increase of approximately $0.2 million from 1996 levels. This
increase is due to additional selling expenses related to the expanded sales
efforts for hot rolled bar products.
Depreciation and Amortization. Depreciation and amortization for 1997 was
approximately $6.8 million as compared to approximately $6.6 million for 1996,
an increase of approximately $0.2 million or 3%. The increase in depreciation
expense was primarily the result of depreciation on capital expenditures made in
the prior year and the current year.
Postretirement Benefit Expense. Postretirement benefit expense decreased
to approximately $2.4 million for 1997 from approximately $2.8 million in 1996.
The decrease is primarily due to a decrease in the health care cost trend rates
as determined by an independent actuary.
Restructuring Expense. A restructuring charge of $1.3 million was
recognized in fiscal 1997 as a result of early retirement incentives included in
a collective bargaining agreement and salaried workforce reductions in Sand
Springs.
14
<PAGE>
Operating Income. Operating income was approximately $8.3 million for
fiscal 1997 as compared to operating income of approximately $8.1 million for
fiscal 1996, an increase of approximately $0.2 million. Operating income as a
percentage of sales for fiscal 1997 was 4.8% as compared to 4.7% for fiscal
1996. The slight increase is a result of higher gross profit as explained above,
offset by higher administrative expenses and the restructuring charge as
explained above.
Interest Expense. Interest expense for fiscal 1997 was approximately
$11.8 million as compared to approximately $11.7 million for fiscal 1996, an
increase of approximately $0.1 million or .3%. The increase was due to increased
average monthly borrowings under the Company's revolving credit facility to
support a slightly higher investment in working capital in comparison to the
prior year.
Fiscal 1996 As Compared to Fiscal 1995
Sales. Sales for the Company for fiscal 1996 were approximately $172.3
million as compared to sales of approximately $175.8 million for fiscal 1995, a
decrease of approximately $3.5 million or 2.0%. Sales decreased primarily as a
result of decreased demand in the market for semi-finished steel (billets).
Hot Rolled Bar Products. Shipments in fiscal 1996 were 159,688
------------------------
tons compared to 157,610 tons in fiscal 1995, an increase of 2,078 tons
or 1.3%. Sales of hot rolled bar products from the Joliet Facility
decreased due primarily to weak market conditions encountered during the
third fiscal quarter. Hot rolled bar product sales tons shipped from the
Sand Springs facility were up 74% in fiscal 1996 over the previous year
due to the introduction of additional hot rolled bar products rolled on
the new mill. Growth in hot rolled bar product shipments came as a result
of new product trial shipments and additional production orders as a
result of successful trials. Average price per ton for hot rolled bar
products stayed relatively constant at $461 per ton in fiscal 1996, as
compared to $462 per ton in fiscal 1995.
Rebar. Rebar shipments for fiscal 1996 were 169,316 tons as
------
compared to 161,198 tons in fiscal 1995, and the average price per ton
increased to $293 for fiscal 1996 from a fiscal 1995 price per ton of
$290. The increase in the tons shipped was related to additional tons
being produced on the new rolling mill over the previous year. Rebar
shipments were limited, however, because mill time was allocated to the
development of new hot rolled bar product business.
Fabricated Products. Shipments of fabricated products in fiscal
--------------------
1996 were 54,444 tons, up from 48,325 tons in fiscal 1995. Shipments of
fabricated products from the Kansas City Plant were consistent with the
prior year while shipments of fence post increased 5,786 tons. The
average price per ton for fabricated products of $461 per ton in fiscal
1996 was $14 per net ton higher than the average price per ton of $447 in
fiscal 1995. This price per ton increase was due to improved market
conditions in both the fence post and the rebar fabrication businesses.
15
<PAGE>
Semi-finished Steel. Shipments of semi-finished steel to third
--------------------
parties for fiscal 1996 were 93,557 tons as compared to fiscal 1995
shipments of 133,017 tons. The decrease of 39,460 tons or 29.7% was
primarily due to decreased market demand for semi-finished steel
products, industry-wide. Demand decreased during the summer of 1995 and
did not return to normal levels until the winter. Average sales price per
ton for semi-finished steel decreased from $236 per ton in fiscal year
1995 to $225 per ton in fiscal 1996. The decrease in the average price
per ton of semi-finished steel reflected the weaker market encountered
during the 1996 fiscal year.
Cost of Sales. The cost of sales for fiscal year 1996 was approximately
$143 million as compared to approximately $144 million for the fiscal year ended
1995. Cost of sales on an average per-ton basis was consistent with the prior
year on a product by product comparison. The costs per ton in the aggregate
increased from $290 in fiscal year 1995 to $300 in fiscal 1996 due to a higher
percentage of finished steel product sales. In fiscal 1996 semi-finished steel
shipments dropped by 39,460 tons and the loss of these lower cost products in
the mix caused the average cost to increase. Scrap prices were fairly consistent
between years.
Gross Profit. Gross profit for fiscal 1996 was approximately $29.2
million as compared to approximately $31.4 million for fiscal 1995, a decrease
of approximately $2.2 million or 7.4%. Gross profit as a percentage of net sales
for fiscal 1996 was 16.9% as compared to 17.8% for fiscal 1995. The decrease in
gross profit in fiscal 1996 was primarily due to reduced profitability of
semi-finished steel compared to fiscal 1995 caused by weaker market conditions
and to start up costs associated with the new rolling mill. While productivity
and yields improved over fiscal 1995, costs associated with the start up of the
new mill reduced gross profit margins.
Selling, General and Administrative Expense. Selling, general and
administrative expense for fiscal 1996 was approximately $11.7 million,
reflecting a decrease of approximately $.5 million from 1995 levels. This
decrease is the direct result of management's efforts to control overhead costs
throughout the Company.
Depreciation and Amortization. Depreciation and amortization for 1996 was
approximately $6.6 million as compared to approximately $5.9 million for 1995,
an increase of approximately $.7 million or 11.9%. The increase in depreciation
expense was primarily the result of capital expenditures related to the new
rolling mill.
Operating Income. Operating income was approximately $8.1 million for
fiscal 1996 as compared to operating income of approximately $10.1 million for
fiscal 1995, a decline of approximately $2.0 million. Operating income as a
percentage of sales for fiscal 1996 was 4.7% as compared to 5.8% for fiscal
1995. The decline was primarily due to expenses associated with the new mill
start up and the weaker market for semi-finished steel.
16
<PAGE>
Interest Expense. Interest expense for fiscal 1996 was approximately
$11.7 million as compared to approximately $8.0 million for fiscal 1995, an
increase of approximately $3.7 million or 46%. Interest expense in fiscal 1995 a
net of $2.1 million interest capitalized in connection with the financing of the
new mill construction. The remaining increase in financing costs was primarily
caused by a slightly higher lending rate in fiscal 1996 and the build up of
inventories to support the expanding hot rolled bar product business.
Other Income. The Company recognized other income of approximately $0.5
million which resulted from the sale of the machinery and equipment from the
idled Oklahoma City Mill.
Liquidity and Capital Resources
- -------------------------------
Fiscal 1997
As of April 30, 1997, the Company's long term indebtedness under the
First Mortgage Notes, net of unamortized discount attributable to detachable
stock warrants, was approximately $73.3 million. The Company's indebtedness
under its revolving credit agreements was approximately $21.7 million, leaving
approximately $17.8 million of borrowing availability at April 30, 1997. The
Company was in compliance with its debt covenants under its long-term debt
instruments as of April 30, 1997. See Note 5 to the Consolidated Financial
Statements for additional information.
Net cash provided by operating activities was approximately $4.7 million
in fiscal 1997, as compared to approximately $3.1 million in 1996. Earnings
before Interest, Taxes, Depreciation, Amortization, restructuring expense and
the non-cash portion of the postretirement benefit expense ("EBITDA") was
approximately $17.6 million for the year ending April 30, 1997 as compared to
$16.4 million in the prior year. Management of the Company believes that EBITDA
is a valuable measure of operating cash flow and is an indicator of Company's
ability to meet interest payments and fund capital expenditures. EBITDA does not
represent and should not be considered as an alternative to net income or cash
flow from operations as determined by generally accepted accounting principles
and EBITDA does not necessarily indicate whether cash flow will be sufficient
for cash requirements. The Company excluded restructuring expense from EBITDA
due to its non-recurring nature. Inventories were down approximately $3.2
million from the preceding year due primarily to the decreased production of
semi-finished steel since the electric furnace transformer failure in December.
Accounts payable decreased approximately $4.0 million primarily due to making
the final retainage payment related to the acceptance of the mill and a change
in the timing of payments at the Railway Company because of implementation of an
automated settlement system. Other liabilities increased approximately $1.4
million from the prior year, primarily due to the accrual of retirement
incentives related to the hourly work force restructuring discussed above.
17
<PAGE>
Cash used in investing activities in fiscal 1997 was approximately $3.7
million. The Company incurred approximately $3.7 million in capital
expenditures, consisting of $2.8 million of replacement and environmental
expenditures and $0.9 million of expenditures to improve and upgrade facilities.
Construction in progress at April 30, 1997 was approximately $2.7 million.
In fiscal 1997, approximately $1.1 million of cash flow was used for
financing activities. The primary uses were repayment of long-term debt and
payments to retired executives of the Company in respect of their stock
appreciation rights.
Fiscal 1996
Net cash provided by operating activities was approximately $3.1 million
in fiscal 1996, as compared to approximately $0.5 million in 1995. EBITDA was
approximately $16.9 million. Accounts receivable was down approximately $1.6
million from the preceding year while inventories grew by approximately $.3
million. Of this approximate $0.3 million increase in inventories, finished
goods increased approximately $3.3 million to support the new hot rolled bar
product line in Sand Springs and work in process inventory decreased by
approximately $4.1 million as the billet inventory that had been increased while
the new mill was under construction at the end of fiscal 1995 was reduced.
Accounts payable decreased approximately $2.6 million primarily due to timing of
payments to vendors.
Cash used in investing activities in fiscal 1996 was approximately $4.4
million, consisting principally of normal capital expenditures. The normal
capital expenditures amounted to approximately $5.0 million which was partially
offset by approximately $0.5 million received from the sale of machinery and
equipment from the Oklahoma City mill that had been held for sale. Capital
expenditures for fiscal 1996 were principally related to normal capital spending
with minor expenditures on the final elements of the new mill in Sand Springs.
Construction in progress at April 30, 1996 was approximately $3.9 million. The
outstanding commitment for retainage related to the new mill at April 30, 1996
was approximately $1.5 million.
In fiscal 1996, approximately $1.4 million of cash flow was provided by
financing activities. These funds were provided through issuance of long-term
debt used to acquire certain capital equipment. This source was partially
consumed by the payment of dividends, payments in respect of stock appreciation
rights, repayment of long-term debt, debt issuance costs, and repurchases of
common stock warrants.
At present the Company's cash flow from operating activities and
borrowing under the Revolving Credit Facility and Railway Credit Facility are
expected to be sufficient to fund the budget for capital improvements, and meet
any near-term working capital requirements.
18
<PAGE>
On a longer term basis, the Company has significant future debt service
obligations. The Company's ability to satisfy these obligations and to secure
adequate capital resources in the future will be dependent on its ability to
generate adequate operating cash flow. The Company expects that its cash flow
from operations, borrowings under its revolving credit facilities, and
refinancing options for new credit facilities will be sufficient to fund the
repayment of the First Mortgage Notes and other investing activities. This will
be dependent on its overall operating performance and be subject to general
business, financial and other factors affecting the Company and the domestic
steel industry, as well as prevailing economic conditions, certain of which are
beyond the control of the Company. The leveraged position of the Company and the
restrictive covenants contained in the Indenture related to the First Mortgage
Notes and the Revolving Credit Facility could significantly limit the Company's
ability to withstand competitive pressures or adverse economic conditions.
The Company is subject to a broad range of federal, state and local
environmental regulations and requirements, including those governing air
emissions and discharges into water, and the handling and disposal of solid
and/or hazardous wastes. Expenses incurred by the Company to comply with these
regulations and requirements were approximately $2.1 million in fiscal 1997,
approximately $1.7 million in fiscal 1996, and approximately $2.2 million in
fiscal 1995. Capital expenditures incurred by the Company to comply with these
requirements were approximately $0.7 million in fiscal 1997 and approximately
$0.4 million in fiscal 1996. In addition, in the event of a release of a
hazardous substance generated by the Company, the Company could be responsible
for the remediation of contamination associated with such a release. The Company
believes that it is currently in substantial compliance with all known material
and applicable environmental regulations.
The Company has not experienced any material adverse effects on
operations in recent years because of inflation, though margins can be affected
by inflationary conditions. The Company's primary cost components are ferrous
scrap, energy and labor, all of which are susceptible to domestic inflationary
pressures. Finished product prices, however, are influenced by general economic
conditions and competitive factors within the steel industry. While the Company
has generally been successful in passing on cost increases to its customers
through price adjustments, the effect of steel imports, severe market price
competition and under-utilized industry capacity has in the past, and could in
the future, limit the Company's ability to adjust pricing.
ITEM 8. FINANCIAL STATEMENTS
- ------- --------------------
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Sheffield Steel Corporation:
We have audited the accompanying consolidated balance sheets of Sheffield Steel
Corporation and subsidiaries as of April 30, 1996 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended April 30, 1997. In connection
with our audits of the consolidated financial statements, we have also audited
the financial statement schedule listed in the index at Item 14(a)2. These
consolidated financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sheffield Steel
Corporation and subsidiaries at April 30, 1996 and 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended April 30, 1997, in conformity with generally accepted accounting
principles. Also in our opinion, the related 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 set forth
therein.
KPMG Peat Marwick LLP
Tulsa, Oklahoma
June 27, 1997
20
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
April 30,
------------------------------
Assets 1996 1997
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 46 15
Accounts receivable, less allowance for doubtful accounts of
$658 at April 30, 1996 and 1997 21,607 20,856
Inventories 40,321 37,112
Prepaid expenses and other 914 1,452
Deferred income tax asset 2,716 2,689
--------- ---------
Total current assets 65,604 62,124
Property, plant and equipment, net 68,461 65,885
Property held for sale 457 439
Intangible asset, less accumulated amortization of $1,667
and $2,171 in 1996 and 1997, respectively 3,818 3,314
Other assets 347 290
Receivable from parent 2,705 2,705
Deferred income tax asset 1,790 1,817
--------- ---------
$ 143,182 136,574
========= =========
<CAPTION>
Liabilities and Stockholders' Equity
------------------------------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 717 936
Accounts payable 20,495 16,475
Accrued interest payable 4,500 4,500
Accrued liabilities 6,281 5,601
Due to affiliated company 47 49
--------- ---------
Total current liabilities 32,040 27,561
Long-term debt, excluding current portion, less unamortized discount of
$1,840 and $1,696 at April 30, 1996 and 1997, respectively 96,324 95,614
Accrued post-retirement benefit costs 7,823 9,095
Other liabilities 610 2,148
--------- ---------
Total liabilities 136,797 134,418
--------- ---------
Stockholders' equity:
Common stock, $.01 par value, authorized 10,000,000
shares, issued and outstanding 3,375,000 shares 34 34
Additional paid-in capital 3,591 2,536
Retained earnings 4,037 528
--------- ---------
Total stockholders' equity 7,662 3,098
Less loans to stockholders 1,277 942
--------- ---------
6,385 2,156
Commitments and contingencies
--------- ---------
$ 143,182 136,574
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share data)
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Sales $ 175,753 172,317 170,865
Cost of sales 144,385 143,121 140,234
--------- --------- ---------
Gross profit 31,368 29,196 30,631
Selling, general and administrative expense 12,156 11,737 11,923
Depreciation and amortization expense 5,930 6,567 6,775
Postretirement benefit expense other than pensions 3,153 2,776 2,353
Restructuring expense - - 1,320
--------- --------- ---------
Operating income 10,129 8,116 8,260
--------- --------- ---------
Other (expense) income:
Interest expense, net (8,049) (11,733) (11,769)
Other (58) 526 -
--------- --------- ---------
(8,107) (11,207) (11,769)
--------- --------- ---------
Income (loss) from operations before income
tax expense 2,022 (3,091) (3,509)
Income tax expense (197) - -
--------- --------- ---------
Net income (loss) $ 1,825 (3,091) (3,509)
========= ========= =========
Net income (loss) per common and common
equivalent share $ .50 (.92) (1.04)
========= ========= =========
Dividends per common share $ .18 .52 -
========= ========= =========
Common and common equivalent shares outstanding 3,649,588 3,375,000 3,375,000
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Year Ended April 30,
-------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Common stock $ 34 34 34
------- ------- -------
Additional paid-in capital:
Balance at beginning of year 3,997 3,685 3,591
Agreement to repurchase common stock - - (1,055)
Repurchase of common stock warrants (312) (94) -
------- ------- -------
Balance at end of year 3,685 3,591 2,536
------- ------- -------
Retained earnings:
Balance at beginning of year 7,652 8,877 4,037
Net income (loss) 1,825 (3,091) (3,509)
Dividends (600) (1,749) -
------- ------- -------
Balance at end of year 8,877 4,037 528
------- ------- -------
Total stockholders' equity $12,596 7,662 3,098
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,825 (3,091) (3,509)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 6,317 6,711 6,919
Loss (gain) on sale or retirement of assets 58 (526) -
Accrual of postretirement benefits other than
pensions, net of cash paid 2,523 1,747 1,272
Deferred income taxes 23 - -
Changes in assets and liabilities:
Accounts receivable (5,515) 1,564 751
Inventories (9,024) (303) 3,209
Prepaid expenses and other (563) (301) (538)
Other assets (115) 177 (54)
Accounts payable 4,806 (2,624) (4,020)
Accrued interest payable 100 - -
Accrued liabilities 74 (172) (680)
Due to affiliated company 4 - 2
Income taxes payable 123 (123) -
Other liabilities (121) 8 1,377
------- ------ ------
Total adjustments (1,310) 6,158 8,238
------- ------ ------
Net cash provided by operating activities 515 3,067 4,729
------- ------ ------
Cash flows from investing activities:
Capital expenditures (24,220) (4,978) (3,695)
Proceeds from sale of fixed assets 30 538 18
------- ------ ------
Net cash used in investing activities (24,190) (4,440) (3,677)
------- ------ ------
</TABLE>
(Continued)
24
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(In thousands)
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) under revolving lines of credit $ 19,553 2,081 (1,995)
Proceeds from issuance of long-term debt 659 2,195 2,075
Repayment of long-term debt (58) (549) (715)
Payment of debt issuance costs - (75) -
Payments in respect of stock appreciation rights (524) (416) (448)
Dividends paid (600) (1,749) -
Repurchase of common stock warrants (312) (94) -
------ ------ ------
Net cash provided by (used in) financing activities 18,718 1,393 (1,083)
------ ------ ------
Net (decrease) increase in cash and cash equivalents (4,957) 20 (31)
Cash and cash equivalents at beginning of year 4,983 26 46
------ ------ ------
Cash and cash equivalents at end of year $ 26 46 15
====== ====== ======
Supplemental Disclosure of Cash Flow Information
- ------------------------------------------------
Cash paid during the year for:
Interest $ 9,675 11,611 11,625
====== ====== ======
Income taxes $ 50 174 -
====== ====== ======
Noncash items:
Change in unfunded accumulated benefit obligation
included in other assets and other liabilities $ 163 558 53
====== ====== ======
Adjustment of property, plant and equipment to
reflect reclassification of idle assets to property
held for sale $ 157 - -
====== ====== ======
Adjustment of property, plant and equipment and
accounts payable representing amounts accrued
for fixed asset purchases $ 2,301 - -
====== ====== ======
Decrease in paid-in capital for stock repurchase agreement $ - - 1,055
====== ====== ======
Increase in other liabilities for stock repurchase agreement $ - - 662
====== ====== ======
Decrease in loans to stockholders related to stock
repurchase agreement $ - - 393
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
April 30, 1995, 1996 and 1997
(In thousands, except share data)
(1) Summary of Significant Accounting Policies
Organization and Nature of Business
The consolidated financial statements of Sheffield Steel Corporation
(the Company) include the accounts of its divisions, Sheffield
Steel-Sand Springs (Sand Springs), Sheffield Steel-Kansas City (Kansas
City), and Sheffield Steel-Joliet (Joliet) and its wholly owned
subsidiaries, Sheffield Steel Corporation-Oklahoma City (Oklahoma
City), and Sand Springs Railway Company (the Railway). HMK Enterprises,
Inc. (HMK) owns 95% of the currently issued and outstanding common
stock. All material intercompany transactions and balances have been
eliminated in consolidation.
The Company's primary business is the production of concrete
reinforcing bar, fence posts, and a range of hot rolled bar products
including rounds, flats and squares. The Company operates in an
economic environment wherein the commodity nature of both its products
for sale and its primary raw materials cause sales prices and purchase
costs to fluctuate, often on a short-term basis, due to the worldwide
supply and demand situation for those commodities. The supply and
demand factors for its products for sale and the supply and demand
factors for its primary raw materials correlate to a degree, but are
not necessarily the same. Therefore, margins between sales price and
production costs can fluctuate significantly on a short-term basis.
The Company sells to customers located throughout the continental
United States. The Company had one customer that accounted for
approximately 10% of sales for the year ended April 30, 1996 and no
customers that accounted for greater than 10% of sales for the years
ended April 30, 1997 and 1995. The Company grants credit to customers
under normal industry standards and terms. Policies and procedures have
been established which allow for proper evaluation of each customer's
creditworthiness as well as general economic conditions. Consequently,
an adverse change in those factors could effect the Company's estimate
of its bad debts.
Cash Equivalents
The Company considers all highly liquid debt instruments with a
maturity of three months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (as determined by the
first-in first-out method) or market. The cost of work-in-process and
finished goods inventories is based on standards which approximate
cost. Work-in-process and finished goods include direct labor and
allocated overhead.
Intangible Assets
Intangible assets consist primarily of goodwill and debt issuance
costs. The cost of goodwill is being amortized on a straight-line basis
over a period of 40 years. Debt issuance costs are amortized over the
term of the related indebtedness. It is the Company's policy to
recognize an impairment of the carrying value of goodwill when
management's best estimate of undiscounted future cash flows over the
remaining amortization period is less than the carrying amount.
26
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements, Continued
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is
provided over the estimated useful lives of the individual assets using
the straight-line method. The useful lives of the property and
equipment range from three to forty years. Significant renewals and
betterments are capitalized; costs of maintenance and repairs are
charged to expense as incurred. Interest costs for the construction of
certain long-term assets are capitalized and amortized over the
estimated useful lives of the related assets.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
The Company is a member of a group that files a consolidated income tax
return with HMK (the Group). The Group's tax-sharing agreement provides
that current and deferred income taxes be determined as if each member
of the Group were a separate taxpayer. All income taxes payable or
receivable are due to or from HMK.
Postretirement Benefits
The Company provides postretirement benefits to certain retirees and
their beneficiaries, generally for the remainder of their lives. The
Company measures the cost of its obligation based on an actuarially
determined present liability, the accumulated postretirement benefit
obligation (APBO). The net periodic costs are recognized as employees
render the services necessary to earn the postretirement benefits.
Environmental Compliance Costs
In October, 1996, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 96-1, Environmental
Remediation Liabilities. SOP 96-1 was adopted by the Company on May 1,
1997 and requires, among other things, environmental remediation
liabilities to be accrued when the criteria of Statement of Financial
Accounting Standards (SFAS) No. 5, Accounting for Contingencies, have
been met. The SOP also provides guidance with respect to the
measurement of the remediation liabilities. Such accounting is
consistent with the Company's current method of accounting for
environmental remediation costs and, therefore, adoption of this new
Statement will not have a material impact on the Company's financial
position, results of operations, or liquidity.
Revenue Recognition
Revenues from sales are recognized when products are shipped to
customers, except the Railway which recognizes revenues when services
are performed.
27
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements, Continued
Income (Loss) per Common and Common Equivalent Share
Income (loss) per share is based on the weighted average number of
common shares and dilutive common stock equivalents outstanding each
year. Outstanding stock purchase warrants (see Note 5[a]) and stock
options (see Note 12) are common stock equivalents but were excluded
from per-share computations in 1996 and 1997 since their effect on loss
per common share was anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Stock Option Plan
Prior to May 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. On May 1, 1996, the
Company adopted SFAS No. 123, Accounting for Stock-Based Compensation,
which permits entities to recognize as expense over the vesting period
the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply
the provisions of APB Opinion No. 25 and provide pro forma net income
and pro forma earnings per share disclosures for employee stock option
grants as if the fair-value-based method defined in SFAS No. 123 had
been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123.
(2) Fair Value of Financial Instruments
The Company defines the fair value of a financial instrument as the
amount at which the instrument could be exchanged in a current
transaction between willing parties. The carrying value of cash and
cash equivalents, trade accounts receivable and trade accounts payable
approximates the fair value because of the short maturity of those
instruments. The carrying amounts of notes payable to banks and an
equipment financing company (see Note 5) approximates the fair value
due to these debt instruments having variable interest rates similar to
those that are currently available to the Company. The fair value of
the first mortgage notes (see Note 5) at April 30, 1997, based on the
currently offered market price, is approximately $71.6 million versus a
carrying value of approximately $73.3 million.
28
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements, Continued
3) Inventories
The components of inventories are as follows:
<TABLE>
<CAPTION>
April 30,
-----------------------
1996 1997
---- ----
<S> <C> <C>
Raw materials and storeroom supplies $ 10,823 10,924
Work in process 15,640 10,978
Finished goods 13,858 15,210
------ ------
$ 40,321 37,112
====== ======
</TABLE>
(4) Property, Plant and Equipment
The components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
April 30,
-----------------------
1996 1997
---- ----
<S> <C> <C>
Land and buildings $ 16,448 16,483
Machinery and equipment 88,096 92,607
Roadbed and improvements 5,129 5,197
Construction in process 3,899 2,727
-------- --------
113,572 117,014
Less accumulated depreciation
and amortization 45,111 51,129
-------- --------
$ 68,461 65,885
======== ========
</TABLE>
Depreciation and amortization of property, plant and equipment charged
to operations in 1995, 1996 and 1997 was $5,388, $6,021 and $6,271,
respectively. Included in depreciation expense for 1995 is
approximately $500 related to the write-down of mill equipment replaced
during 1995. Approximately $2,078 and $25 of interest costs were
capitalized as part of property, plant and equipment in 1995 and 1996,
respectively. No interest costs were capitalized in 1997. Interest
costs incurred in 1995, 1996 and 1997 were $10,127, $11,758 and
$11,769, respectively.
The range of estimated useful lives for determining depreciation and
amortization of the major classes of assets are:
<TABLE>
<S> <C>
Buildings 5-25 years
Machinery and equipment 3-25 years
Roadbed and improvements 3-40 years
</TABLE>
29
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements, Continued
(5) Long-term Debt
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
April 30,
-----------------------
1996 1997
---- ----
<S> <C> <C>
First mortgage notes, net of unamortized
discount, effective rate 12.5% [a] $ 73,160 73,304
Revolving credit agreement [b] 18,660 18,417
Railway term loan [c] - 2,000
Railway revolving credit agreement [c] 3,019 1,267
Equipment notes [d] 2,202 1,562
------ ------
97,041 96,550
Less current portion 717 936
------ ------
$ 96,324 95,614
====== ======
</TABLE>
[a] On November 4, 1993, the Company issued $75 million of 12%
first mortgage notes due 2001 with warrants to purchase 10% of
the Company's common stock. The notes were sold in units
consisting of $1,000 principal amount and five warrants. Each
warrant entitles the holder to purchase one share of the
Company's common stock through November 1, 2001, at an
exercise price of $.01 per share, subject to adjustment. The
notes are secured by a first priority lien on substantially
all existing and future real property and equipment and a
second priority lien on inventory and accounts receivable.
Interest is payable semi-annually on May 1 and November 1 of
each year.
[b] The revolving credit agreement with a bank provides for
maximum borrowings of $40 million based on a percentage of
eligible accounts receivable and inventory. Borrowings are
secured by a first priority lien on inventory, accounts
receivable and related intangibles, and a second priority lien
on existing and future real property. Interest is computed at
prime plus a variable margin (based on the achievement of
certain interest coverage ratios) from 0 to 1% and is payable
monthly. At April 30, 1997, the interest rate was 9.5%. An
annual commitment fee of 1/4% is charged on the unused portion
of the revolving credit agreement. The agreement continues
through November 1, 2000 and thereafter on a year-to-year
basis until terminated by the Company or the lender.
[c] As of April 30, 1996, the Railway credit agreement with a bank
provided for a reducing revolving credit commitment with
maximum borrowings of $3 million. During 1997, the Railway
credit agreement was restructured and is now comprised of two
notes; a $2 million term loan with $0.5 million principal
payments each year with the final payment on July 31, 2000,
and a $1.5 million line of credit maturing July 31, 1998.
Obligations under the notes are secured by all of the assets
and capital stock of the Railway. Interest is computed at
prime plus a variable margin (based on the achievement of
certain interest coverage ratios) from 0 to 1% and is payable
quarterly. At April 30, 1997, the interest rate was 9.5%.
[d] At April 30, 1997, the Company had $1,562 in notes payable to
equipment financing companies and vendors. The notes are
payable in monthly principal installments of $63 plus interest
payable at variable rates. The notes mature on various dates
through 2002 and are secured by equipment.
30
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements, Continued
The aggregate maturities of long-term debt for the years ended April
30, are as follows:
<TABLE>
<S> <C>
1998 $ 936
1999 2,613
2000 689
2001 18,933
2002 75,075
------
Total maturities 98,246
Less unamortized discount (1,696)
------
$ 96,550
======
</TABLE>
Various agreements contain restrictive covenants including limitations
on additional borrowings, dividends and other distributions and the
retirement of stock. Additionally, certain agreements require
maintenance of specified levels of tangible net worth, working capital,
cash flow and performance ratios. In the event of default of the
restrictive covenants or failure to maintain the specified performance
measures, the commitments related to the credit agreements can be
withdrawn by the lender.
6) Income Taxes
The Company had no income tax expense or benefit for the years ended
April 30, 1996 and 1997. Income tax expense attributable to operations
for the year ended April 30, 1995 consists of the following:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Year ended April 30, 1995:
Federal $ (174) (20) (194)
State - (3) (3)
--- -- ---
$ (174) (23) (197)
=== == ===
</TABLE>
Income taxes attributable to operations differed from the amounts computed
by applying the U.S. federal income tax rate of 34% as a result of the
following:
<TABLE>
<CAPTION>
Year Ended April 30,
-----------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax (expense) benefit $ (687) 1,050 1,193
State income taxes, net of federal benefit (81) 124 140
Decrease (increase) in the valuation
allowance for deferred tax assets 659 (1,231) (1,032)
Other, net (88) 57 (301)
--- ----- -----
$ (197) - -
=== ===== =====
</TABLE>
31
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements, Continued
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below:
<TABLE>
<CAPTION>
April 30,
-------------------------
1996 1997
---- ----
<S> <C> <C>
Deductible temporary differences, excluding postretirement benefit
costs:
Inventories $ 1,066 1,338
Allowance for doubtful accounts 250 250
Accrued liabilities not deductible until paid 1,583 1,677
Restructuring charge 559 560
Net operating loss carryforwards 8,805 10,848
Alternative minimum tax credit carryforwards 962 962
Investment tax credit carryforwards 856 856
Other 103 12
------ ------
14,184 16,503
Less valuation allowance 3,409 4,441
------ ------
10,775 12,062
Taxable temporary difference - plant and equipment (9,242) (11,012)
------ ------
Net deferred tax asset, excluding postretirement
benefit costs 1,533 1,050
Postretirement benefit costs 2,973 3,456
------ ------
Net deferred tax asset $ 4,506 4,506
====== ======
</TABLE>
At April 30, 1997 the Company had available net operating loss (NOL)
carryforwards for regular federal tax purposes of approximately $28,800
which will expire as follows: $1,400, $400, $3,700, $4,200, $5,600,
$7,400 and $6,100 in the years ended 2000, 2002, 2007, 2008, 2009, 2011
and 2012, respectively. The Company has investment tax credit
carryforwards for tax purposes of $856 which the Company has fully
reserved as it is likely that those tax credits will not be utilized
prior to their expiration. The credits expire in various periods
through 2004. Company also has available $962 of alternative minimum
tax (AMT) credit carryforwards which may be used indefinitely to reduce
future federal regular income tax obligations.
A valuation allowance is required when it is more likely than not that
all or a portion of the deferred tax assets will not be realized. The
ultimate realization of the deferred tax assets is dependent upon
future profitability. Fiscal 1990 capped a three-year period in which
the Company generated approximately $19 million and $11.5 million in
book and tax earnings, respectively. During fiscal 1991 through fiscal
1994, the Company incurred approximately $12.4 million in taxable
losses as a result of steel bar prices, significant losses from
operations at Oklahoma City, and a $5.3 million loss on the early
retirement of debt. A recovery of steel bar prices which began in
fiscal 1994 and continued into 1995 resulted in the Company generating
$3.6 million in taxable income. In 1995, the Company started up a new
rolling mill which passed the required performance tests and was
accepted during fiscal 1997. Productivity expectations of the mill are
linked to the future operating performance of the Company. Management
has introduced new mill products and made progress toward achieving the
full potential of the new mill. However, there can be no assurance that
the mill will reach the forecasted production goals or that the Company
will achieve future profitability. Accordingly, a valuation allowance
has been established at April 30, 1997, to reduce the deferred tax
assets to a level which, more likely than not, will be realized.
32
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements, Continued
Future annual postretirement benefit costs are expected to exceed
deductible amounts for many years and it is anticipated that all of the
deferred tax assets related thereto will be utilized as such amounts
become deductible. Accordingly, management did not establish a
valuation allowance for the deferred tax asset related to future annual
postretirement benefit costs. In order to fully realize the remaining
net deferred tax asset, the Company will need to generate future
taxable income of approximately $7,100 of which approximately $6,900 is
required to fully utilize existing AMT credit carryforwards. Based upon
historical taxable income trends and projections for future taxable
income over the periods which the deferred tax assets are deductible,
management believes it is more likely than not that the Company will
realize the benefits of the net deferred assets, net of the existing
valuation allowance, at April 30, 1997.
(7) Employee Benefit Plans
Sand Springs and Joliet have defined benefit plans covering
substantially all of their employees. Benefits are generally based on
years of service and the employee's compensation during the last ten
years of employment. The Company's funding policy is to contribute
annually at least the minimum amount necessary to avoid a deficiency in
the funding standard. The Company received a waiver of the minimum
funding standard in the amount of $776 for the plan year ended December
31, 1984, which is being amortized over 15 years. Net periodic pension
expense for these plans included the following:
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------
1994 1996 1997
---- ---- ----
<S> <C> <C> <C>
Service cost $ 619 653 747
Interest cost 1,201 1,306 1,462
Net amortization and deferral 845 2,575 420
Actual return on plan assets (1,550) (3,420) (1,483)
----- ----- -----
$ 1,115 1,114 1,146
===== ===== =====
</TABLE>
The following table sets forth the funded status of the Company's plans, as
determined by an independent actuary:
<TABLE>
<CAPTION>
April 30, 1996 April 30, 1997
--------------------------- ---------------------------
Accumulated Assets Accumulated Assets
Benefits Exceed Benefits Exceed
Exceed Accumulated Exceed Accumulated
Assets Benefits Assets Benefits
------ -------- ------ --------
<S> <C> <C> <C> <C>
Actuarial present value of vested benefit
obligation $ 2,741 13,691 2,527 15,658
===== ====== ===== ======
Accumulated benefit obligation $ 2,770 14,035 2,556 15,998
===== ====== ===== ======
Projected benefit obligation 2,950 16,858 2,737 18,451
Plan assets at fair value 2,578 16,912 2,313 19,340
----- ------ ----- ------
Projected benefit obligation in excess of
plan assets 372 ( 54) 424 (889)
Unrecognized net gain 114 2,732 151 2,371
Unrecognized prior service cost (484) 101 (494) 94
Unrecognized net transition liability (35) (3,306) (11) (2,774)
Adjustment required to recognize
minimum liability 225 - 173 -
----- ------ ----- ------
Net pension liability (asset) $ 192 (527) 243 (1,198)
===== ====== ===== ======
</TABLE>
33
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Plan assets consist primarily of U.S. government obligations and
marketable equity securities. The unrecognized net transition
obligations are being amortized over periods of 14-15 years.
Major assumptions used in the accounting for the pension plans were as
follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Discount rate 7.25% 7.50%
Rate of increase in compensation levels 0%-5% 0%-4%
Expected long-term rate of return on assets 8.0% 8.0%
</TABLE>
Certain divisions of the Company maintain defined contribution plans in
which various groups of employees participate. Total Company
contributions for these plans amounted to $57, $85, and $81 in 1995,
1996, and 1997, respectively.
(8) Postretirement Benefits Other Than Pensions
The Company provides postretirement health and life insurance benefits
to certain retirees and their beneficiaries, generally for the
remainder of their lives. The Plan is contributory, with retiree
contributions adjusted annually, and contains other cost-sharing
features such as deductibles, co-insurance, and Medicare. The Company's
policy is to fund accumulated postretirement benefits on a
"pay-as-you-go" basis. Net periodic postretirement benefit costs for
1995, 1996 and 1997 include the following components:
<TABLE>
<CAPTION>
Year Ended April 30,
------------------------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Service cost $ 359 326 321
Interest cost 1,825 1,690 1,372
Net amortization 969 760 660
----- ----- -----
$3,153 2,776 2,353
===== ===== =====
</TABLE>
The following table sets forth the APBO and the amount of the net
postretirement benefit liability as determined by an actuary and
recognized in the balance sheet at April 30, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Retirees $ 12,727 10,173
Fully eligible active plan participants 4,245 4,522
Other active plan participants 8,035 4,848
------ ------
Accumulated post retirement benefit
obligation 25,007 19,543
Unrecognized transition obligation (24,391) (22,956)
Unrecognized net gain 7,207 12,508
------ ------
Accrued postretirement benefit cost $ 7,823 9,095
====== ======
</TABLE>
The annual discount rate used in determining the APBO was 7.25 and 7.5%
at April 30, 1996 and 1997, respectively. Also, for measurement
purposes, HMO trend rates of 8.5% and 6.3% and medical trend rates of
12.0% and 11.0% were used for the hourly and salaried medical indemnity
plans, respectively. The medical and HMO trend rates are assumed to
decline one-half percent per year to an ultimate level of 5.5%. The
health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost
trend rates by one percentage point in each year would increase the
APBO as of April 30, 1997, by $2,800 and the aggregate service and
interest cost components of net periodic postretirement benefit costs
by $268.
34
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(9) Operating Leases
The Company is obligated under various noncancelable operating leases
for certain land and buildings. These leases generally contain
inflationary rent escalations and require the Company to pay all
executory costs such as maintenance and insurance. Rental expense for
operating leases (except those with lease terms of a month or less that
were not renewed) was $260, $277 and $313 for the years ended April 30,
1995, 1996 and 1997, respectively.
Future minimum lease payments under noncancelable operating leases
(with initial or remaining lease terms in excess of one year) for the
years ending April 30, are as follows:
<TABLE>
<S> <C>
1998 $ 328
1999 328
2000 337
2001 353
2002 353
Later years 570
-----
Total $2,269
=====
</TABLE>
(10) Commitments and Contingencies
The Company is partially self-insured for certain risks consisting
primarily of employee health insurance programs and workers'
compensation. Probable losses and claims are accrued as they become
estimable. The Company maintains letters of credit totaling
approximately $2.0 million in accordance with workers' compensation
arrangements.
The Company is involved in claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on
the Company's financial position, results of operations, or liquidity.
(11) Related Party Transactions
An affiliated company provides management and business services to the
Company, including, but not limited to, financial, marketing, executive
personnel, corporate development, human resources, and limited legal
services. The Company believes that transactions with related parties
are at costs that could be obtained from third parties. Management fees
charged during the years ended April 30, 1995, 1996 and 1997, were
approximately $598, $573 and $569, respectively. In addition, the
Company purchases general liability, workers' compensation and other
insurance through an affiliated company which provides risk management
services, including procuring and maintaining property and casualty
insurance coverage; reviewing and recommending alternative financing
methods for insurance coverage; identifying and evaluating risk
exposures, and preparing and filing proof of loss statements for
insured claims. Total fees paid for insurance services during the years
ended April 30, 1995, 1996 and 1997, were approximately $224, $115 and
$115 respectively.
During fiscal year 1993, certain minority shareholders issued $1,000 of
notes receivable to the Company. The notes bear interest at an annual
rate of 7.61% and are secured by common stock of the Company. Principal
and interest are due on February 1, 2007, unless extended at the
Company's option until February 1, 2012. The principal balance
outstanding as of April 30, 1996 and 1997 was $1,000 and $700,
respectively.
35
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
On September 30, 1996, the Company signed an agreement to repurchase
50,625 shares of the Company's common stock from two minority
shareholders who formerly were officers of the Company. The stock
repurchase is pursuant to the Amended and Restated Stockholder's
Agreement dated September 15, 1993 and the stock purchase price was
calculated in accordance with said agreement. Certain payments,
including those to reacquire the Company's common stock, are currently
not permitted under the terms of the Company's first mortgage notes and
revolving credit agreements. As a result of this transaction, $393 of
notes receivable from the former shareholders was satisfied, the
Company recorded a note payable in the amount of $662 and decreased
paid-in capital by $1,055. The note payable will accrue simple interest
at 6.02% and will be repaid in five annual installments beginning when,
and only when, the purchase of the shares is permitted under the
Company's credit agreements.
The Company has a receivable of $2,205 from HMK related to certain tax
attributes allocated to the Company. Under an agreement with HMK, the
receivable will be realized by reducing future income taxes otherwise
payable by the Company to HMK. In addition, the Company advanced $500
to HMK to secure a letter of credit for the Joliet insurance program.
(12) Stock Options
On September 15, 1993, the Board of Directors adopted, and the
stockholders of the Company approved, the Company's 1993 Employee,
Director and Consultant Stock Option Plan (the Stock Option Plan). The
Stock Option Plan provides for the grant of incentive options to key
employees of the Company and nonqualified stock options to key
employees, directors, and consultants of the Company. A total of
580,000 shares of the Company's common stock, which would represent
approximately 13.4% of the Company's common stock on a fully diluted
basis, have been reserved for issuance under the Stock Option Plan. The
options vest in three years and may be exercised within 10 years from
the grant date at a price not less than the fair market value of the
stock at the time the options are granted. Fair market value for
purposes of determining the exercise price is determined by the
performance-based formula prescribed in the Stock Option Plan. At April
30, 1997, there were 124,000 additional shares available for grant
under the Plan.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock
options in the financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its
stock options under SFAS No. 123, the Company's net income would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997
------
<S> <C>
Net income:
As reported $ (3,509)
=====
Pro forma $ (3,578)
=====
Earnings per share:
As reported $ (1.04)
====
Pro forma $ (1.06)
====
</TABLE>
The per share weighted-average fair value of stock options granted
during 1997 was $4.83 on the date of grant using the minimum value
method with the following assumptions: expected dividend yield of
approximately 1.0%, risk-free interest rate of 6.38%, and an expected
life of five years. Pro forma net income reflects only options granted
in 1997. Therefore, the full impact of calculating compensation cost
for stock options under SFAS No. 123 is not reflected in the pro forma
net income amounts presented above because compensation cost is
reflected over the options' vesting
36
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
period of three years and compensation cost for options granted prior
to May 1, 1994 is not considered.
37
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The options outstanding and activity during the periods indicated is as
follows:
<TABLE>
<CAPTION>
Weighted
Average
Options Exercise Price
------- --------------
<S> <C> <C>
At May 1, 1994 474,609 $ 7.41
Granted - -
Exercised - -
Canceled - -
-------
At April 30, 1995 474,609 7.41
Granted - -
Exercised - -
Canceled (69,609) -
-------
At April 30, 1996 405,000 7.41
Granted 51,000 20.52
Exercised - -
Canceled - -
-------
At April 30, 1997 456,000 $ 8.87
=======
</TABLE>
Exercise prices for options outstanding as of April 30, 1997 ranged
from $7.41 to $20.52. The weighted-average remaining contractual life
of those options is 6.34 years. There were 405,000 shares exercisable
as of April 30, 1996 and 1997. There were no shares exercisable at
April 30, 1995.
In connection with the adoption of the Stock Option Plan, the Company
elected to terminate its Stock Appreciation Rights Plan (SAR). Existing
liabilities under the SAR plan were frozen at their current level. All
vested rights become exercisable upon the participants' termination.
Included in accrued liabilities and other liabilities at April 30, 1996
and 1997, are $873 and $368, respectively, representing the present
value of the SAR's based on vesting and retirement dates.
(13) Restructuring Expense
During 1997, the Company recognized costs related to workforce
reductions. Approximately 42 hourly employees accepted early retirement
incentives resulting in costs of approximately $1,070 during the fourth
quarter. In addition, 14 salaried employees were involuntarily
terminated in the third quarter resulting in severance costs totaling
approximately $250.
38
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------- ------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
- -------- --------------------------------
The information included under the caption entitled "Management" in
Sheffield Steel Corporation's Proxy Statement dated July 31, 1997, with respect
to directors and executive officers of the Company is incorporated herein by
reference in response to this item.
Because the Company does not have a class of securities registered under
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), none
of its directors, executive officers or ten percent or greater securityholders
are subject to the reporting requirements of Section 16(a) of the Exchange Act.
Accordingly, disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not applicable.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
The information regarding compensation of the Company's executive
officers is included under the caption entitled "Executive Compensation" in
Sheffield Steel Corporation's Proxy Statement dated July 31, 1997, and is
incorporated herein by reference in response to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
The information regarding beneficial ownership of the Company's Common
Stock by certain beneficial owners and by management is included under the
caption entitled "Share Ownership" in Sheffield Steel Corporation's Proxy
Statement dated July 31, 1997, and is incorporated herein by reference in
response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
The information regarding certain relationships and related transactions
with management and others is included under the caption entitled "Certain
Transactions" in Sheffield Steel Corporation's Proxy Statement dated July 31,
1997, and is incorporated herein by reference in response to this item.
39
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------- ---------------------------------------------------------------
ITEM 14(a)1. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS COVERED BY REPORT
- ------------ ------------------------------------------------------------
OF INDEPENDENT AUDITORS
- -----------------------
The Consolidated Financial Statements of Sheffield Steel Corporation are
included in Item 8:
Independent Auditors' Report
Consolidated Balance Sheets - April 30, 1996 and 1997
Consolidated Statements of Operations - Years ended April 30,
1995, 1996 and 1997
Consolidated Statements of Stockholders' Equity - Years Ended
April 30, 1995, 1996 and 1997
Consolidated Statements of Cash Flows - Years Ended April 30,
1995, 1996 and 1997
Notes to Consolidated Financial Statements - April 30, 1995, 1996
and 1997
ITEM 14(a)2. INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
- ------------ ---------------------------------------------------
The following consolidated financial statement schedules of Sheffield
Steel Corporation are included in Item 14(d):
<TABLE>
<CAPTION>
Form 10-K Schedules Description Page Number
------------------- ----------- -----------
<S> <C> <C>
II Valuation and Qualifying Accounts 45
</TABLE>
Schedules other than those listed above have been omitted because they
are not applicable. Columns omitted from schedules filed have been omitted
because the information is not applicable.
40
<PAGE>
ITEM 14(a)3. EXHIBITS
The exhibits listed on the Exhibit Index below are filed or incorporated
by reference as part of this report and such Exhibit Index is hereby
incorporated herein by reference.
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Sequentially
No. Description numbered page
- ----------- -------------------------------------------------------------------------- -----------------
<S> <C> <C>
3.1 Certificate of Incorporation of the Registrant, as amended
(Incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-67532, filed
with the Securities and Exchange Commission on August 17, 1993).
3.2 By-Laws of the Registrant (Incorporated by reference to Exhibit 3.2 to
the Registrant's Registration Statement on Form S-1, Registration No.
33-67532, filed with the Securities and Exchange Commission on August
17, 1993).
4.1 Indenture for First Mortgage Notes (including form of First Mortgage
Note registered thereunder), dated as of November 1, 1993, between
Sheffield Steel Corporation and Shawmut Bank Connecticut, N.A., as
Trustee (Incorporated by reference to Exhibit 4.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31, 1993).
4.2 Receivable and Inventory Financing Agreement, dated as of January
16, 1992, between HMK Industries of Oklahoma, Inc., Sheffield Steel
Corporation, Sheffield Steel Corporation-Joliet, Sheffield Steel
Corporation-Oklahoma City and NationsBank of Georgia, N.A.
(Incorporated by reference to Exhibit 4.2 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-67532, filed
with the Securities and Exchange Commission on August 17, 1993).
4.3 Guaranty, dated January 16, 1992, from HMK Industries of Oklahoma,
Inc. to NationsBank of Georgia, N.A. (Incorporated by reference to
Exhibit 4.3 to the Registrant's Registration Statement on Form S-1,
Registration No. 33-67532, filed with the Securities and Exchange
Commission on August 17, 1993).
4.4 Mortgage and Security Agreement, dated January 16, 1992, between
Sheffield Steel Corporation and NationsBank of Georgia, N.A.
(Incorporated by reference to Exhibit 4.4 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-67532, filed
with the Securities and Exchange Commission on August 17, 1993).
4.5 Mortgage and Security Agreement, dated January 16, 1992, between
Sheffield Steel Corporation-Joliet and NationsBank of Georgia, N.A.
(Incorporated by reference to Exhibit 4.5 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-67532, filed
with the Securities and Exchange Commission on August 17, 1993).
4.6 Stock Pledge Agreement, dated January 16, 1992, between HMK
Industries of Oklahoma, Inc. and NationsBank of Georgia, N.A.
(Incorporated by reference to Exhibit 4.6 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-67532, filed
with the Securities and Exchange Commission on August 17, 1993).
</TABLE>
41
<PAGE>
<TABLE>
<S> <C> <C>
4.7 First Amendment to Receivable and Inventory Financing Agreement,
dated August 13, 1993 between HMK Industries of Oklahoma, Inc.,
Sheffield Steel Corporation, Sheffield Steel Corporation-Joliet,
Sheffield Steel Corporation-Oklahoma City and NationsBank of
Georgia, N.A. (Incorporated by reference to Exhibit 4.24 to the
Registrant's Registration Statement on Form S-1, Registration No. 33-
67532, filed with the Securities and Exchange Commission on August
17, 1993).
4.8 Warrant Agreement, dated November 1, 1993, between Sheffield Steel
Corporation and Shawmut Bank Connecticut, N.A., as Warrant Agent
(Incorporated by reference to Exhibit 4.8 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31,
1993).
4.9 Intercreditor Agreement, dated November 1, 1993, between Sheffield
Steel Corporation, NationsBank of Georgia, N.A., and Shawmut Bank
Connecticut, N.A., as Trustee (Incorporated by reference to Exhibit
4.9 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended October 31, 1993).
4.10 Security Agreement, dated November 1, 1993, between Sheffield Steel
Corporation and Shawmut Bank Connecticut, N.A., as Collateral Agent
and Trustee (Incorporated by reference to Exhibit 4.10 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1993).
4.11 Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing, dated November 1, 1993, between Sheffield Steel Corporation
and Shawmut Bank Connecticut, N.A., as Collateral Agent, Trustee and
Mortgagee (relating to property located in Joliet, Illinois)
(Incorporated by reference to Exhibit 4.11 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31,
1993).
4.12 Mortgage, Assignment of Leases, Security Agreement and Fixture
Filing, dated November 1, 1993, between Sheffield Steel Corporation
and Shawmut Bank Connecticut, N.A., as Collateral Agent, Trustee and
Mortgagee (relating to property located in Sand Springs, Oklahoma)
(Incorporated by reference to Exhibit 4.12 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31,
1993).
4.13 Second Amendment to Receivable and Inventory Financing Agreement,
dated November 1, 1993 between Sheffield Steel Corporation-Oklahoma
City, Sheffield Steel Corporation, and NationsBank of Georgia, N.A.
(Incorporated by reference to Exhibit 4.13 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31,
1993).
4.14 Third Amendment to Receivable and Inventory Financing Agreement,
dated December 13, 1994 between Sheffield Steel Corporation and
NationsBank of Georgia, N.A. (Incorporated by reference to Exhibit
4.14 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended October 31, 1993).
4.15 Fourth Amendment to Receivable and Inventory Financing Agreement,
dated October 30, 1995 between Sheffield Steel Corporation and
NationsBank of Georgia, N.A. (Incorporated by reference to Exhibit
4.15 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended October 31, 1995).
4.16 Fifth Amendment to Receivable and Inventory Financing Agreement,
dated April 19, 1996 between Sheffield Steel Corporation and
NationsBank of Georgia, N.A.
10.1 Intentionally Omitted.
</TABLE>
42
<PAGE>
10.2 Income Tax Expense Allocation Policy and Tax Sharing Agreement,
effective May 1, 1991 between HMK Enterprises, Inc. and Sheffield
Steel Corporation, Sheffield Steel Corporation-Joliet, Sheffield
Steel Corporation-Oklahoma City and Sand Springs Railway Company
(Incorporated by reference to Exhibit 10.2 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-67532,
filed with the Securities and Exchange Commission on August 17,
1993).
10.3 Management Services Agreement, dated October 1, 1993 between HMK
Enterprises, Inc. and Sheffield Steel Corporation (Incorporated by
reference to Exhibit 10.3 to the Registrant's Registration
Statement on Form S-1, Registration No. 33-67532, filed with the
Securities and Exchange Commission on August 17, 1993).
10.4 Insurance Services Agreement, dated October 1, 1993 between HMK
Enterprises, Inc. and Sheffield Steel Corporation (Incorporated by
reference to Exhibit 10.4 to the Registrant's Registration
Statement on Form S-1, Registration No. 33-67532, filed with the
Securities and Exchange Commission on August 17, 1993).
10.5 Design, Manufacturing and Installation Contract, dated
December 10, 1993, between Sheffield Steel Corporation and Morgan-
Pomini Company (Incorporated by reference to Exhibit 10.5 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1993).
10.6 Form of Master Loan and Security Agreement between Sheffield Steel
Corporation and the CIT Group/Equipment Financing, Inc. dated
July 14, 1994 (Incorporated by reference to Exhibit 10.6 to the
Registrant's Annual Report on Form 10-K for the year ended
April 30, 1994).
10.7 Restated Credit Agreement, dated April 23, 1991, between Sand
Springs Railway Company and Bank of Oklahoma (Incorporated by
reference to Exhibit 4.7 to the Registrant's Registration Statement
on Form S-1, Registration No. 33-67532, filed with the Securities
and Exchange Commission on August 17, 1993).
10.8 Amendment to Restated Credit Agreement, dated May 31, 1992, between
Sand Springs Railway Company and Bank of Oklahoma (Incorporated by
reference to Exhibit 4.8 to the Registrant's Registration Statement
on Form S-1, Registration No. 33-67532, filed with the Securities
and Exchange Commission on August 17, 1993).
10.9 Promissory Note, dated April 23, 1991, executed by Sand Springs
Railway Company in the amount of $1.9 million in favor of Bank of
Oklahoma (Incorporated by reference to Exhibit 4.9 to the
Registrant's Registration Statement on Form S-1, Registration
No. 33-67532, filed with the Securities and Exchange Commission on
August 17, 1993).
10.10 Amendment to Assignment of Transportation Agreement, dated
April 23, 1991 between Sand Springs Railway Company and Bank of
Oklahoma (Incorporated by reference to Exhibit 4.10 to the
Registrant's Registration Statement on Form S-1, Registration
No. 33-67532, filed with the Securities and Exchange Commission on
August 17, 1993).
10.11 Amendment to Assignment of User Contracts, dated April 23, 1991
between Sand Springs Railway Company and Bank of Oklahoma
(Incorporated by reference to Exhibit 4.11 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-67532,
filed with the Securities and Exchange Commission on
August 17, 1993).
10.12 Amendment to Pledge and Security Agreement, dated April 23, 1991
between Sand Springs Railway Company and Bank of Oklahoma
(Incorporated by reference to Exhibit 4.12 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-67532,
filed with the Securities and Exchange Commission on August 17,
1993).
43
<PAGE>
10.13 Amendment to Security Agreements, dated April 23, 1991 between Sand
Springs Railway Company and Bank of Oklahoma (Incorporated by
reference to Exhibit 4.13 to the Registrant's Registration
Statement on Form S-1, Registration No. 33-67532, filed with the
Securities and Exchange Commission on August 17, 1993).
10.14 Amendment to Real Estate Mortgage and Security Agreement, dated
April 23, 1991 between Sand Springs Railway Company and Bank of
Oklahoma (Incorporated by reference to Exhibit 4.14 to the
Registrant's Registration Statement on Form S-1, Registration
No. 33-67532, filed with the Securities and Exchange Commission on
August 17, 1993).
10.15 Amendment to Real Estate Mortgage and Security Agreement, dated
April 23, 1991 between Sand Springs Railway Company and Bank of
Oklahoma (Incorporated by reference to Exhibit 4.15 to the
Registrant's Registration Statement on Form S-1, Registration
No. 33-67532, filed with the Securities and Exchange Commission on
August 17, 1993).
10.16 Assignment of Transportation Agreement, dated December 10, 1987
between Sand Springs Railway Company and Bank of Oklahoma
(Incorporated by reference to Exhibit 4.16 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-67532,
filed with the Securities and Exchange Commission on
August 17, 1993).
10.17 Assignment of User Contracts, dated December 10, 1987 between Sand
Springs Railway Company and Bank of Oklahoma (Incorporated by
reference to Exhibit 4.17 to the Registrant's Registration
Statement on Form S-1, Registration No. 33-67532, filed with the
Securities and Exchange Commission on August 17, 1993).
10.18 Security Agreement, dated December 10, 1987 between Sand Springs
Railway Company and Bank of Oklahoma (Incorporated by reference to
Exhibit 4.18 to the Registrant's Registration Statement on Form
S-1, Registration No. 33-67532, filed with the Securities and
Exchange Commission on August 17, 1993).
10.19 Security Agreement, dated December 10, 1987 between Sand Springs
Railway Company and Bank of Oklahoma (Incorporated by reference to
Exhibit 4.19 to the Registrant's Registration Statement on Form
S-1, Registration No. 33-67532, filed with the Securities and
Exchange Commission on August 17, 1993).
10.20 Real Estate Mortgage and Security Agreement, dated December 10,
1987 between Sand Springs Railway Company and Bank of Oklahoma
(Incorporated by reference to Exhibit 10.20 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-67532,
filed with the Securities and Exchange Commission on August 17,
1993).
10.21 Real Estate Mortgage and Security Agreement, dated December 10,
1987 between Sand Springs Railway Company and Bank of Oklahoma
(Incorporated by reference to Exhibit 4.21 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-67532,
filed with the Securities and Exchange Commission on August 17,
1993).
10.22 Pledge and Security Agreement, dated December 10, 1987 between Sand
Springs Railway Company and Bank of Oklahoma (Incorporated by
reference to Exhibit 4.22 to the Registrant's Registration
Statement on Form S-1, Registration No. 33-67532, filed with the
Securities and Exchange Commission on August 17, 1993).
44
<PAGE>
10.23 Guaranty Agreement, dated December 10, 1987 between HMK Industries
of Oklahoma, Inc. and Sand Springs Railway Company (Incorporated by
reference to Exhibit 4.23 to the Registrant's Registration
Statement on Form S-1, Registration No. 33-67532, filed with the
Securities and Exchange Commission on August 17, 1993).
10.24 Second Amendment to Restated Credit Agreement, dated September 24,
1993 between Sand Springs Railway Company and Bank of Oklahoma
(Incorporated by reference to Exhibit 4.25 to the Registrant's
Registration Statement on Form S-1, Registration No. 33-67532,
filed with the Securities and Exchange Commission on August 17,
1993).
10.25 Subordination Agreement dated November 10, 1995, between Sheffield
Steel Corporation and the CIT Group/Equipment Financing, Inc.
10.26 First Amendment to Master Loan and Security Agreement between
Sheffield Steel Corporation and the CIT Group/Equipment Financing,
Inc. dated April 25th, 1995.
10.27 Second Amendment to Master Loan and Security Agreement between
Sheffield Steel Corporation and the CIT Group/Equipment Financing,
Inc. dated July 2, 1996.
*10.28 Sheffield Steel Corporation 1993 Employee, Director and Consultant
Stock Option Plan (Incorporated by reference to Exhibit 10.1 to the
Registrant's Registration Statement on Form S-1, Registration
No. 33-67532, filed with the Securities and Exchange Commission on
August 17, 1993).
10.29 Second Amendment to Real Estate Mortgage and Security Agreement,
dated July 31, 1996 between Sand Springs Railway Company and Bank
of Oklahoma, N.A.
10.30 Third Amendment to Real Estate Mortgage and Security Agreement,
dated July 31, 1996 between Sand Springs Railway Company and Bank
of Oklahoma, N.A.
10.31 Fourth Amendment to Restated Credit Agreement, date July 31, 1996
between Sand Springs Railway Company and Bank of Oklahoma, N.A.
10.32 Promissory Note, date July 31, 1996, executed by Sand Springs
Railway Company in the amount of $1.5 million in favor of Bank of
Oklahoma, N.A.
10.33 Promissory Note, date July 31, 1996, executed by Sand Springs
Railway Company in the amount of $2 million in favor of Bank of
Oklahoma, N.A.
10.34 Real Time Pricing Program Agreement dated June 1, 1996 between
Sheffield Steel Corporation and Public Service Company of Oklahoma.
** 10.35 Agreement between the United Steelworkers of America and the Sand
Springs Division of Sheffield Steel Corporation dated
March 2, 1997.
** 12 Statement re Computation of Ratio of Earnings to Fixed Charges.
** 13 Statement re Computation of EBITDA.
21 Subsidiaries of the Registrant (Incorporated by reference to
Exhibit 21 to the Registrant's Registration Statement on Form S-1,
Registration No. 33-67532, filed with the Securities and Exchange
Commission on August 17, 1993).
45
<PAGE>
99 Proxy Statement, dated July 31, 1997, in connection with the 1997
Annual Meeting of Stockholders
* Executive Compensation Plans and Arrangements
** Filed herewith.
ITEM 14(b). REPORTS ON FORM 8-K
- ---------- -------------------
No reports on Form 8-K were filed during the fourth quarter ended
April 30, 1997.
ITEM 14(c). EXHIBITS
- ---------- --------
The response to this portion of item 14 is submitted as a separate
section of this report.
ITEM 14(d). CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
- ---------- -----------------------------------------
46
<PAGE>
Schedule II
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended April 30, 1997, 1996 and 1995
(In thousands)
<TABLE>
<CAPTION>
Balance Charged to Balance
April 30, Costs and Deductions - April 30,
1996 Expenses Write-offs 1997
---- -------- ---------- ----
<S> <C> <C> <C> <C>
Accounts receivable - allowance for
doubtful accounts $ 658 - - 658
=== ====== ======== ===
<CAPTION>
Balance Charged to Balance
April 30, Costs and Deductions - April 30,
1995 Expenses Write-offs 1996
---- -------- ---------- ----
<S> <C> <C> <C> <C>
Accounts receivable - allowance for
doubtful accounts $ 461 197 - 658
=== === ======== ===
<CAPTION>
Balance Charged to Balance
April 30, Costs and Deductions - April 30,
1994 Expenses Write-offs 1995
---- -------- ---------- ----
<S> <C> <C> <C> <C>
Accounts receivable - allowance for
doubtful accounts $ 432 36 (7) 461
=== ==== ==== ===
</TABLE>
47
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SHEFFIELD STEEL CORPORATION
July 25, 1997 /s/ Robert W. Ackerman
- -------------------------- -----------------------------
Date Robert W. Ackerman, President
and Chief Executive Officer
July 25, 1997 /s/ Stephen R. Johnson
- -------------------------- -----------------------------
Date Stephen R. Johnson, Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacity and on the dates indicated.
July 25, 1997 /s/ Robert W. Ackerman
- -------------------------- ----------------------------
Date Robert W. Ackerman, Director
July 25, 1997 /s/ Steven E. Karol
- -------------------------- ----------------------------
Date Steven E. Karol, Director
July 25, 1997 /s/ Dale S. Okonow
- -------------------------- ----------------------------
Date Dale S. Okonow, Director
July 25, 1997 /s/ Jane M. Karol
- -------------------------- ----------------------------
Date Jane M. Karol, Director
July 25, 1997 /s/ Howard H. Stevenson
- -------------------------- ----------------------------
Date Howard H. Stevenson, Director
July 25, 1997 /s/ John D. Lefler
- -------------------------- ----------------------------
Date John D. Lefler, Director
48
<PAGE>
================================================================================
SHEFFIELD STEEL CORPORATION
================================================================================
EXHIBIT 10.35
SHEFFIELD STEEL
SAND SPRINGS DIVISION
AGREEMENT WITH
UNITED STEELWORKERS OF AMERICA
LOCAL 2741
MARCH 2, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
AGREEMENT.............................................................1
SECTION 1 -- PURPOSE AND INTENT OF THE PARTIES........................2
SECTION 2 -- SCOPE OF THE AGREEMENT...................................3
RECOGNITION........................................................3
DEFINITION OF EMPLOYEE.............................................3
SCOPE..............................................................3
NON-UNION PERSONNEL................................................3
HOURLY SUPERVISOR..................................................4
CONTRACTING OUT....................................................5
CONTRACTING OUT COMMITTEE..........................................6
NOTIFICATION.......................................................7
LOCAL WORKING CONDITIONS...........................................9
SECTION 3 -- MANAGEMENT..............................................12
SECTION 4 -- RESPONSIBILITIES OF THE PARTIES.........................13
NON-DISCRIMINATION AND CIVIL RIGHTS...............................13
SECTION 5 -- UNION MEMBERSHIP AND CHECKOFF...........................15
UNION MEMBERSHIP..................................................15
CHECKOFF..........................................................15
PAC CHECKOFF......................................................17
INDEMNITY CLAUSE..................................................17
SECTION 6 -- GRIEVANCE PROCEDURE.....................................18
GRIEVANCE COMMITTEE...............................................18
INTENT............................................................18
STEP 1 -- SUPERVISOR..............................................18
STEP 2 -- SUPERINTENDENT..........................................19
STEP 3 - VICE PRESIDENT OF OPERATIONS.............................19
AUTHORITY.........................................................20
SECTION 7 -- ARBITRATION.............................................21
STEP 4 -- ARBITRATION.............................................21
TIME LIMITS.......................................................22
AWARDS............................................................22
UNION GRIEVANCES..................................................23
LOCAL UNION GRIEVANCES............................................24
SUSPENSION OF GRIEVANCE PROCEDURE.................................24
ACCESS TO A PLANT.................................................25
EXPEDITED ARBITRATION PROCEDURE...................................25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SECTION 8 -- DISCHARGE AND SUSPENSION -- SUBJECT TO JUSTICE AND
DIGNITY CLAUSE.......................................................28
DISCHARGE CASES...................................................28
PURPOSE........................................................28
PROCEDURE......................................................28
REINSTATEMENT BY COMPANY.......................................29
ARBITRATION....................................................29
SUSPENSION OF PROCEDURE........................................29
SUSPENSION CASES..................................................30
PURPOSE........................................................30
PROCEDURE......................................................30
REINSTATEMENT BY COMPANY.......................................31
ARBITRATION....................................................31
SUSPENSION OF PROCEDURE........................................32
UNION REPRESENTATION...........................................32
DISCIPLINARY RECORDS..............................................32
JUSTICE AND DIGNITY PROGRAM.......................................32
PROGRESSIVE DISCIPLINE POLICY.....................................33
SECTION 9 - RATE OF PAY..............................................35
STANDARD HOURLY WAGE RATE.........................................35
DETERMINATION OF HOURLY RATE CLASSIFICATION FOR NEW OR CHANGED
JOB...............................................................35
WAGE RATE INEQUITY GRIEVANCES.....................................39
NEW AND ADJUSTED INCENTIVES.......................................39
BASIS FOR CALCULATION OF INCENTIVE EARNINGS.......................43
EXISTING INCENTIVES...............................................44
CORRECTION OF ERRORS..............................................44
OBSOLETE PRACTICE WITH RESPECT TO RATES OF PAY....................45
MISCELLANEOUS.....................................................45
SHIFT DIFFERENTIALS...............................................45
SUNDAY PREMIUM PAY................................................47
TENTH DAY PREMIUM.................................................48
SECTION 10 - HOURS OF WORK...........................................49
SCOPE.............................................................49
NORMAL WORKDAY....................................................49
NORMAL WORK PATTERN...............................................49
SCHEDULE..........................................................49
REPORTING ALLOWANCES..............................................51
ALLOWED TIME......................................................52
ABSENTEEISM.......................................................52
ABSENTEE POLICY...................................................53
ATTENDANCE BONUS..................................................55
ALLOWANCE FOR JURY OR WITNESS SERVICE.............................56
</TABLE>
<PAGE>
TABLE OF CONTENTS
AGREEMENT
1.This Agreement dated March 2, 1997, is between the Sand Springs Division
of Sheffield Steel Corporation, an HMK Group Company (hereinafter referred
to as the "Company") and the United Steelworkers of America, AFL-CIO-CLC;
Local 2741 (hereinafter referred to as the "Union").
2.The Company agrees that during the life of this Agreement, its
successors and assigns will agree to be bound by this Agreement. If the
Company is sold, it will guarantee that any buyer will agree to sign and
be bound by this Agreement for the remaining term of this Agreement.
1
<PAGE>
SECTION 1 - PURPOSE AND INTENT OF THE PARTIES
SECTION 1 -- PURPOSE AND INTENT OF THE PARTIES
3.The purpose of the Company and the Union in entering into this Labor
Agreement is to set forth their agreement on wages, hours of work, and
other terms and conditions of employment.
4.The Company and the Union encourage the highest possible degree of
friendly, cooperative relationships between their respective
representatives at all levels and with and between all employees.
5.The representatives of the Company and the Union shall continue to
provide such advance notice as is reasonable under the circumstances on
all matters of importance in the administration of the terms of the Labor
Agreement, including changes or innovations effecting the relations
between the parties.
2
<PAGE>
SECTION 2 - SCOPE OF THE AGREEMENT
SECTION 2 -- SCOPE OF THE AGREEMENT
RECOGNITION
6. The Company hereby recognizes the Union as the exclusive bargaining
representative for all of the Company's hourly-paid production and maintenance
employees at its Sand Springs plant; excluding all security, office janitors,
timekeepers, timeclerks, clerks, office employees, inspectors, chemists,
technical employees, any employees on monthly salaries, and supervisors as
defined in the National Labor Relations Act, as amended.
DEFINITION OF EMPLOYEE
7.The term "employee" or "employees" as used in this Agreement shall refer to
those employees within the Union as described in Paragraph 6.
SCOPE
8. When the Company establishes a new or changed job so that duties involving
a significant amount of production and/or maintenance work, to be performed
on a job within the Union (or, in the case of new work to be performed on
such a job) are combined with duties not normally performed on a job within
the Union, the resulting job shall be considered as within the Union.
NON-UNION PERSONNEL
9.Employees excluded from the Union will not perform work ordinarily performed
by Union employees except in cases of emergency or training. The penalty for
non-union personnel performing Union work shall be paid at a minimum of eight
(8) hours at the straight time rate.
10.Any employee transferred out of the Union to a permanent position with the
Company shall not retain any Union seniority rights and said employee cannot
return to a Union position except as a new hire.
3
<PAGE>
SECTION 2 -- SCOPE OF THE AGREEMENT
HOURLY SUPERVISOR
11.Each department or area of the plant will identify in writing, employees to
be used as hourly supervisors as the need arises. Only the employees so listed
will be used to fill hourly supervisor positions in those respective areas.
12.The following table will identify the maximum number of employees by
department or area that may be listed as hourly supervisors. Hourly supervisors
will have sufficient knowledge to perform the job so assigned.
<TABLE>
<S> <C>
CASTING 2
FURNACE 2
MILL, WAREHOUSE, SHIPPING, RECLAIM 5
POST SHOP 2
TRANSPORTATION/SERVICES 2
MECHANICAL MAINTENANCE 2
ELECTRICAL MAINTENANCE 2
</TABLE>
13.The names on the list for each area may change from time to time if those
listed no longer want to fill hourly supervisor positions, or are no longer
wanted by the Company to fill those positions.
14.The number of employees used as weekly hourly supervisors will be limited to
a maximum of five (5) employees, during any given week, on a plant wide basis,
unless expanded by mutual agreement.
15.Unforeseen daily vacancies may at times cause the total number of hourly
supervisors to be more than five (5) on any given day.
16.An employee assigned as an hourly supervisor shall continue to accrue
seniority during such assignment.
4
<PAGE>
SECTION 2 -- SCOPE OF THE AGREEMENT
17.An employee assigned as an hourly supervisor on a weekly basis will not work
in the Union during the week of such assignment.
18.An employee assigned as an hourly supervisor; on a daily basis during the
workweek will become the least eligible employee in the seniority unit for
overtime purposes during the workday so assigned. Such an employee shall not
work more days in the workweek performing Union works than are worked by the
employees in his seniority unit.
19.An employee assigned as an hourly supervisor will not issue discipline. An
employee will not be called by either party in the grievance procedure or
arbitration to testify as a witness regarding any events involving discipline,
which occurred, while the employee was assigned as an hourly supervisor.
20.An hourly supervisor will receive a rate of pay two (2) job classes above the
highest position under his supervision.
CONTRACTING OUT
21.It is the Company's intention to use its employees, when reasonable and
practical, for work at the plant covered by this Agreement. The parties have
existing rights and obligations with respect to various types of contracting
out.
22.The following paragraphs supplement additional protection for Union employees
or affirm existing management rights, whichever the case may be, as to those
types of contracting out specified below:
23.Production, service, day-to-day maintenance, and repair work within the plant
in which the practice has been to have such work performed by employees, or
where the practice has been to have such work performed by both employees and by
5
<PAGE>
SECTION 2 -- SCOPE OF THE AGREEMENT
contractors, shall not be contracted out for performance within the plant,
unless otherwise mutually agreed pursuant to Paragraphs 26 through 30.
24.Production, service, day-to-day maintenance, and repair work within the plant
in which the practice has been to have such work performed by employees of
contractors may continue to be contracted out, unless otherwise mutually agreed
pursuant to Paragraphs 26 through 30.
25.New construction including major installation, major replacement, major
reconstruction of equipment, and productive facilities at the plant may be
contracted out, subject to any rights and obligations of the parties.
CONTRACTING OUT COMMITTEE
26.A regularly constituted committee, the Contracting Out Committee, consisting
of not more than four (4) persons, half of whom shall be members of the Union
and designated by the Union in writing to the Company, and the other half
designated in writing to the Union by the Vice President of Operations, shall
attempt to resolve problems in connection with the operation, application and
administration of the foregoing provisions.
27.The Company shall designate in writing to the Union one (1) person who shall
be the "Contracting Out Coordinator." This person shall be responsible for
day-to-day coordination of contracting out matters, proper notification to the
Union, and arranging meetings of the Contracting Out Committee. The Company
reserves the right to designate a new "Contracting Out Coordinator" at any time
by issuing written notice.
6
<PAGE>
SECTION 2 -- SCOPE OF THE AGREEMENT
28.In addition to the requirements of Paragraph 31, such committee may discuss
any other current issues with respect to contracting out brought to the
attention of the committee.
29.Such committee shall meet at least one (1) time each month. In addition to
the rights granted to the Contracting Out Committee outlined in the Contracting
Out Subsection, the committee may also initiate discussions of purchased items
such as the necessity, cost, and quality of products purchased.
30.It is the intent of the parties that the members of the Contracting Out
Committee shall engage in discussions of problems involved in this field in a
good-faith effort to arrive at mutual understanding so that disputes and
grievances can be avoided. If either the Company or Union members of the
committee feel that this is not being done, they may appeal to the Staff
Representative of the Union and the appropriate representative of the Company
for review of the complaint about the failure of the committee to properly
function. Such appeal shall result in a prompt investigation by the Staff
Representative and the Company representative designated for such review. This
provision should in no way affect the rights of the parties in connection with
the processing of any grievance relating to the subject of contracting out.
NOTIFICATION
31.Before the Company decides to contract out work which comes within the scope
of this section and without effecting the existing rights and obligations of the
parties with respect to contracting out as set forth in the Contracting Out
Subsection, the Company will notify the Union members of the committee of work
to be performed within the plant and outside the plant.
32.Such notice will be given in advance of the final decision to contract out
the work. Such notice shall be in writing, except
7
<PAGE>
SECTION 2 -- SCOPE OF THE AGREEMENT
where emergency requirements prevent such timely notice. Such notice shall be
sufficient to advise the Union members of the committee of the location, type,
scope, duration, and timetable of the work to be performed so that the Union
members of the committee can adequately form an opinion as to the reasons for
such contracting out. Such notice shall generally contain the information set
forth below:
1. Location of work:
2. Type of work:
a. Service
b. Maintenance
c. Major Rebuilds
d. New Construction
3. Description of work:
a. Crafts Involved
b. Special Equipment
c. Special Skills
d. Warranty Work
e. Estimated cost of work to be performed.
4. Estimated duration of work:
5. Anticipated utilization of Union forces during the period:
6. Effect on operations if work not completed in timely
fashion.
33.Either the Union members of the committee or the Company members of the
committee may convene a prompt meeting of the committee. Should the Union
committee members believe discussion to be necessary, they shall so request the
Company committee members in writing within five (5) days (excluding Saturdays,
Sundays, and Holidays) after receipt of such notice and such a discussion shall
be held within three (3) days (excluding Saturdays, Sundays, and Holidays)
thereafter. The Union members of the committee may include in the meeting the
Union representative from the department in which the problem arises. At such
meeting the parties should review in detail the plans for the work to be
performed and the reasons for contracting out such work. The Company members of
the committee shall give full consideration to any comments or suggestions by
the Union members of the committee and to any alternate plans proposed by the
Union members of the committee for the performance of the
8
<PAGE>
SECTION 2 -- SCOPE OF THE AGREEMENT
work by Union personnel. Should the committee resolve the matter, such
resolution shall be final and binding but only as to that matter under
consideration and shall not affect future determinations under Paragraphs 23 and
24. Except in emergency situations, such discussions shall take place before any
final decision is made as to whether or not such work will be contracted out. If
after the discussion is held and the matter is not resolved, a grievance may be
filed within thirty (30) days under step 2 of the grievance and arbitration
procedure.
34. Should it be found in the arbitration of a grievance alleging a failure of
the Company to provide the notice required under Paragraph 31 that such notice
was not provided, that the failure to notify was not due to an emergency
requirement, and that such failure deprived the Union of a reasonable
opportunity to suggest and discuss practicable alternatives to contracting out,
the arbitrator shall have the authority to fashion a remedy, at his discretion,
that he deems appropriate to the circumstances of the particular case. Such
remedy, if awarded, may include earnings to grievants who would have performed
the work, if they can be reasonably identified.
LOCAL WORKING CONDITIONS
35.The term "Local Working Conditions" as used herein means specific practices
or customs which reflect detailed application of the subject matter within the
scope of wages, hours of work, or other terms and conditions of employment and
includes local agreements, written or oral, on such matters. It is recognized
that it is impracticable to set forth in this Agreement all of these working
conditions, which are of a local nature only, or to state specifically in this
Agreement which of these matters should be changed or eliminated. The following
provisions provide general principles and procedures, which explain the status
of these matters and furnish necessary guideposts for the parties hereto.
36.It is recognized that an employee does not have the right to have a local
working condition established in any given situation or plant where such
condition has not existed during
9
<PAGE>
SECTION 2 -- SCOPE OF THE AGREEMENT
the term of this Agreement or to have an existing local working condition
changed or eliminated, except to the extent necessary to require the application
of a specific provision of this Agreement.
37.In no case shall local working conditions be effective to deprive any
employee of rights under this Agreement. Should any employee believe that a
local working condition is depriving him of the benefits of this Agreement, he
shall have recourse to the grievance procedure and arbitration, if necessary, to
require that the local working conditions be changed or eliminated to provide
the benefits established by this Agreement.
38.Should there be any local working conditions in effect which provide benefits
that are in excess of or in addition to the benefits established by this
Agreement, they shall remain in effect for the term of this Agreement, except as
they are changed or eliminated by mutual agreement or in accordance with
Paragraph 39.
39.The Company shall have the right to change or eliminate any local working
condition if, as the result of action taken by the Company under Section 3 -
Management, the basis for the existence of the local working condition is
changed or eliminated, thereby making it unnecessary to continue such local
working condition; provided, however, that when such a change or elimination is
made by the Company, any affected employee shall have recourse to the grievance
procedure and arbitration, if necessary, to have the Company justify its action.
40.No new local working condition shall hereafter be established or agreed to
which changes or modifies any of the provisions of this Agreement, unless it is
approved in writing by the Staff Representative of the Union and the Vice
President of Operations of the Company.
10
<PAGE>
SECTION 2 -- SCOPE OF THE AGREEMENT
41. The settlement of a grievance prior to arbitration under this subsection
shall not constitute a precedent in the settlement of grievances in other
situations in this area.
42. Each party shall as a matter of policy encourage the prompt settlement of
problems in this area by mutual agreement at the local level.
11
<PAGE>
SECTION 3 -- MANAGEMENT
SECTION 3 -- MANAGEMENT
43.The Company retains the exclusive right to manage the business and direct the
working forces. The Company, in the exercise of its rights, shall comply with
the provisions of this Agreement.
44.The rights to manage the business and plants and to direct the working forces
include the right to hire, suspend or discharge for proper cause, or transfer,
the right to retire in accordance with the provisions of the appropriate Pension
Agreement, and the right to relieve employees from duty because of lack of work
or for other legitimate reasons.
12
<PAGE>
SECTION 4 - RESPONSIBILITIES OF THE PARTIES
SECTION 4 -- RESPONSIBILITIES OF THE PARTIES
45.Each of the parties hereto acknowledges the rights and responsibilities of
the other party and agrees to discharge its responsibilities under this
Agreement.
46. The Union (its officers and representatives at all levels) and all employees
are bound to observe the provisions of this Agreement.
47. The Company (its officers and representatives at all levels) is bound
to observe the provisions of this Agreement.
48.In addition to the responsibilities that may be provided elsewhere in this
Agreement, the following shall be observed:
49.There shall be no strikes, work stoppages or interruption or impeding of
work. No officer or representative of the Union shall authorize, instigate, aid
or condone any such activities. No employee shall participate in any such
activities.
50.......There shall be no lockouts by the Company.
NON-DISCRIMINATION AND CIVIL RIGHTS.
51.It is the continuing policy of the Company and the Union that the provisions
of this Agreement shall be applied to all employees without regard to race,
color, religion, creed, disability, sex or national origin. The representatives
of the Union and the Company in all steps of the grievance procedure and in all
dealings between the parties shall comply with this provision.
52.A joint committee on civil rights shall be established at the plant. The
Union representation on the committee shall be no more than three (3) members of
the Union, in addition to the President and Chairperson of the Grievance
Committee. The
13
<PAGE>
Section 4 - RESPONSIBILITIES OF THE PARTIES
Union members on the committee shall be certified to the Vice
President of Operations by the Union and the Company members shall be certified
to the Union.
53.The Company and Union members of the committee shall meet at mutually
agreeable times. The committee shall review matters involving civil rights and
advise the Company and the Union concerning them, but shall have no jurisdiction
over the filing or processing of grievances. This provision shall not affect any
existing right to file a grievance nor does it enlarge the time limits for
filing and processing grievances.
54As used in this Agreement, male nouns and pronouns are intended and construed
to include the female gender.
55. The right of the Company to discipline an employee for a violation of
this Agreement shall be limited to the failure of such employee to
discharge his responsibilities as an employee and may not in any way be
based upon the failure of such employee to discharge his
responsibilities as a representative or officer of the Union.
14
<PAGE>
SECTION 5 - UNION MEMBERSHIP AND CHECKOFF
SECTION 5 -- UNION MEMBERSHIP AND CHECKOFF
UNION MEMBERSHIP
56.Each employee who on the effective date of this Agreement is a member of the
Union in good standing and each employee who becomes a member after that date
shall, as a condition of employment, maintain his membership in the Union.
57.Each employee hired shall, as a condition of employment, upon completing the
probationary period, acquire and maintain membership in the Union.
58.For the purposes of this section, an employee shall not be deemed to have
lost his membership in the Union in good standing until the International
Secretary/Treasurer of the Union shall have determined that the membership of
such employee in the Union is not in good standing and shall have given the
Company a notice in writing of that fact.
CHECKOFF
59.The Company will check off monthly dues, assessments and initiation fees each
as designated by the International Secretary/Treasurer of the Union, as
membership dues in the Union, on the forms agreed to by the Company and the
Union.
60.At the time of his employment, the Company will suggest that each new
employee voluntarily execute an authorization for the checkoff of union dues on
the form. A copy of such authorization card for the checkoff of union dues shall
be forwarded to the Financial Secretary of the Local Union along with the
membership application of such employee.
61.Deductions on the basis of authorization cards submitted to the Company shall
commence with respect to dues for the month in which the Company receives such
authorization card or in
15
<PAGE>
SECTION 5 - UNION MEMBERSHIP AND CHECKOFF
which such card becomes effective, whichever is later. Dues for a given month
shall be deducted from the first pay closed and calculated in the succeeding
month.
62.In cases of earnings insufficient to cover deduction of dues, the dues shall
be deducted from the next pay in which there are sufficient earnings, or a
double deduction may be made from the first pay of the following month,
provided, however, that the accumulation of dues shall be limited to two (2)
months. The International Secretary/Treasurer of the Union shall be provided
with a list of those employees for whom double deduction has been made.
63.The Union will be notified of the reason for non-transmission of dues in case
of interplant transfer, lay-off, discharge, resignation, leave of absence, sick
leave, retirement, death or insufficient earnings.
64.An employee who is promoted or transferred from a job in the Union to a job
outside the Union, as defined above, shall be removed from the checkoff list on
the first of the month following the date of such promotion or transfer.
Similarly, an employee returned to a job within the Union for more than five (5)
days in any one (1) month shall be reinstated on the checkoff list for such
month.
65.Unless the Company is otherwise notified, the only Union membership dues
deducted for payment to the Union from the pay of the employee who has furnished
an authorization, shall be the monthly union dues. The Company will deduct
assessments as designated by the International Secretary/Treasurer. With respect
to checkoff authorization cards submitted directly to the Company, the Company
will deduct initiation fees, unless specifically requested not to do so by the
Local Union Financial Secretary, after such checkoff
16
<PAGE>
SECTION 5 - UNION MEMBERSHIP AND CHECKOFF
authorization cards have become effective. The International Secretary/Treasurer
of the Union shall be provided with a list of those employees for whom
initiation fees have been deducted under this paragraph.
PAC CHECKOFF
66.The Company will deduct from one (1) pay of an employee in each month "PAC"
contributions are provided, and the Company is furnished with a voluntarily
signed "PAC" card permitting such deduction.
67.Such contributions, when deducted, shall be remitted to International
Secretary/Treasurer, Political Action Fund, United Steelworkers of America,
AFL-CIO-CLC, Five Gateway Center, Pittsburgh, PA 15222.
68.The amount to be deducted will be as specified on the signed card.
69.Such deductions, when made, will be remitted promptly on a separate check,
with information showing the itemized employee deductions, with copies of such
supplied to the Local Union Financial Secretary.
INDEMNITY CLAUSE
70.The Union shall indemnify and save the Company harmless against any and all
claims, demands, suits, or other forms of liability that shall arise out of or
by reason of action taken by the Company for the purpose of complying with any
of the provisions of this section, or in reliance on any list, notice of
assignment furnished under any of such provisions.
17
<PAGE>
SECTION 6 - GRIEVANCE PROCEDURE
SECTION 6 -- GRIEVANCE PROCEDURE
GRIEVANCE COMMITTEE
71.The employees shall select a Grievance Committee consisting of not less than
three (3) or more than five (5) employees of the Union, including the Local
Union President. One member of the committee shall be designated as the
chairperson. The Union shall designate such shop stewards and departmental
committee persons as deemed necessary in departments and subdivisions of the
plant areas. The Union will furnish the Company with a list of committee persons
and stewards and any changes thereof. These designated Union members will be
afforded such time off without pay, as may be required for the purpose of
investigating the facts essential to the settlement of any request or complaint.
INTENT
72.The purpose of this section is to provide an orderly method for the
settlement of a request or complaint between the parties over the
interpretation, application of, or claim of a violation of the provisions of
this Agreement. Such a request or complaint shall be defined as a grievance
under this Agreement and must be presented within five (5) working days of the
occurrence giving rise to the grievance, or within five (5) working days after
the employee shall have reasonably had knowledge thereof, and shall be processed
in accordance with the following steps, time limits, and conditions herein set
forth.
STEP 1 -- SUPERVISOR
73.The employee(s) shall first orally discuss his grievance with his supervisor.
If the aggrieved employee requests, his shop steward and/or Grievance Committee
person shall be given an opportunity to be present. If the grievance is not
settled following discussion, it shall be set forth in writing, signed by the
employee, and given to his supervisor who shall within five (5) working days
after receipt thereof, give his written answer to the shop steward or Grievance
Committee person. The
18
<PAGE>
SECTION 6 - GRIEVANCE PROCEDURE
grievance shall include the provision or provisions of the Agreement allegedly
violated.
74.The supervisor shall have the authority to settle this grievance at this
step. The shop steward and/or Grievance Committee person shall have the
authority to settle, withdraw or refer the grievance to the Chairperson of the
Union Grievance Committee. Settlements in this step shall not be precedent
setting.
STEP 2 -- SUPERINTENDENT
75.Within five (5) working days after receipt of the supervisor's answer, the
Chairperson of the Union Grievance Committee may appeal the grievance in writing
to the department superintendent. Such appeal shall be effected by delivery of
the grievance to the department superintendent. The departmental superintendent
shall meet with the Union Grievance Committee and the aggrieved employee(s) at a
mutually agreed upon time, for the purpose of discussing and attempting to
settle such grievance as may not have been settled during step 1 of the
grievance procedure. The Union may amend the grievance at this step. The
departmental superintendent shall, within five (5) working days after discussion
of a grievance, give its answer in writing to the Chairperson of the Union
Grievance Committee.
STEP 3 - VICE PRESIDENT OF OPERATIONS
76.If the grievance is not settled in step 2, the Chairperson of the Union
Grievance Committee may request that the grievance be discussed at a meeting
between the Vice President of Operations and the Staff Representative of the
Union and the Union Grievance Committee. The request for such a meeting must be
made by the Chairperson of the Union Grievance Committee within five (5) working
days after the Union receives the Company's answer in step 2. Such meeting shall
be held at a time to be mutually agreed upon between the parties. The
19
<PAGE>
SECTION 6 - GRIEVANCE PROCEDURE
Company shall, within five (5) working days after a discussion of the grievance
at this step, give its answer in writing to the Staff Representative of the
Union.
AUTHORITY
77.The Vice President of Operations and/or his designated representative shall
have the authority to resolve any grievance at any step of the grievance
procedure. The Union Grievance Committee shall have the authority to settle,
withdraw or appeal any grievance.
20
<PAGE>
SECTION 7 -- ARBITRATION
SECTION 7 -- ARBITRATION
STEP 4 -- ARBITRATION
78.If the grievance is not settled in step 3, the Staff Representative of the
Union may request that the grievance be submitted to arbitration in accordance
with the procedure and conditions set forth herein. The Union within ten (10)
working days must make the request for arbitration after the Union receives the
Company's answer in step 3 of the grievance procedure. Concurrently with this
request for arbitration, the Union shall request the Director of the Federal
Mediation and Conciliation Service to submit the names of seven (7)
disinterested and qualified persons to act as impartial arbitrators. From such
list of seven (7) persons, the Company and the Union shall alternately strike
one (1) name until six (6) names have been eliminated, and the person who
remains on the list shall be selected to act as the impartial arbitrator. If the
arbitrator selected is not available to hear the case within thirty (30)
calendar days after his selection, the parties hereto shall jointly request the
Federal Mediation and Conciliation Service to furnish a new panel of seven (7)
arbitrators, and the selection of the arbitrator shall be made in accordance
with the provisions set forth in step 4. The arbitrator shall submit his
decision in writing within thirty (30) calendar days after the conclusion of the
hearing or hearings, as the case may be, and the decision of the arbitrator so
rendered shall be final and binding upon the employee(s) involved and the
parties to this Agreement. The compensation and necessary expense of the
arbitrator shall be borne equally by the Company and the Union.
79.The arbitrator shall have jurisdiction and authority only to interpret, apply
or determine compliance with the provisions of this Agreement and such local
working conditions as may hereafter be in effect, insofar as shall be necessary
to the determination of grievances appealed to the arbitrator. The arbitrator
shall not have jurisdiction or authority to add to,
21
<PAGE>
SECTION 7 - ARBITRATION
detract from or alter in any way the provisions of this Agreement. The
arbitrator shall also have jurisdiction and authority only to interpret, apply
or determine compliance with respect to the Pension Agreement, The Supplemental
Unemployment Benefits (SUB) Program and the Insurance Agreement between the
parties (including the Program of Insurance Benefits [PIB]) in order to dispose
of grievances properly arising under Section 18 of this Agreement. The
arbitrator shall not have authority to add to, detract from or alter in any way
the provisions of the Pension Agreement, the Supplemental Unemployment Benefits
(SUB) Program, and the Insurance Agreement (including PIB).
TIME LIMITS
80.The Parties agree to follow each of the foregoing steps in the processing of
a grievance and, if in any step, the Union fails to proceed within the time
limits therein set forth, the grievance shall be considered settled, based upon
the Company's answer in the last step through which it was processed. The
Parties further agree that if, in any step, the Company's representative fails
to give his written answer within the time limits set forth, the grievance shall
be granted; or the Union may appeal the grievance to the next step at the
expiration of the time limits. If the Company fails to give a timely answer in
step 1 or step 2 of the grievance procedure, the resulting forfeiture shall not
be precedent setting. All time limitations set forth herein may be extended by
mutual agreement. All time limitations set forth herein shall be exclusive of
Saturdays, Sundays and Holidays.
AWARDS
81.Awards by the arbitrator may or may not be retroactive as the equities of
particular cases may demand, but the following limitations shall be observed in
any case where the arbitrator's award is retroactive. The effective date for
adjustment of grievances relating to:
22
<PAGE>
SECTION 7 - ARBITRATION
82.Suspension and discharge cases or cases involving rates of pay for new or
changed jobs or new or changed incentives shall be determined in accordance with
the provisions of Section 8 and Section 9, respectively, of this Agreement.
83.Seniority cases shall be the date of the occurrence or non-occurrence of the
event upon which the grievance is based, but in no event earlier than thirty
(30) days prior to the date of which the grievance was filed, except as
otherwise provided in Section 13.
84.Rates of pay (other than new or changed jobs or new or changed incentives),
shift differentials, overtime, allowed time, allowance for jury service,
Holidays, Sunday premium, vacations and any other matter which is not of a
continuing nature, shall be the date of the occurrence or non-occurrence of the
event upon which the grievance is based.
85.The effective date for adjustment of grievances involving matters other than
those referred to in Paragraphs 82, 83 and 84, and which are of a continuing
nature, shall be no earlier than thirty (30) days prior to the date the
grievance was first presented in written form.
86.Arbitration awards involving the payment of monies for a retroactive period
shall be implemented promptly by the parties in accordance with Paragraph 89 of
this Agreement.
UNION GRIEVANCES
87.The grievance and arbitration procedure may be utilized by the Union in
processing grievances which allege a violation of the obligations of the Company
to the Union as such, and the grievance shall be placed in step 3. In processing
such grievances, the Union shall observe the specified time limits in
23
<PAGE>
SECTION 7 - ARBITRATION
appealing and the Company shall observe the specified time limits in answering.
LOCAL UNION GRIEVANCES
88.The Chairperson of the Union Grievance Committee may file grievances in
writing at the step 2 level if he believes this to be necessary, concerning any
alleged violations of the Agreement, and signatures of affected employees shall
not be required.
89.In any grievance settlement involving retroactive payments, the appropriate
Union and Company representatives shall expeditiously determine the identity of
the payees and the specific amount owed each payee. Payment shall be made
promptly but, in any event within thirty (30) days after such determination.
90.In cases involving large numbers of employees, extended periods of
retroactivity or complex incentive applications, in order to expedite payment,
the parties shall, wherever possible, agree upon the identity of the payees and
the specific procedures for determining the amounts. The Company commits itself,
following such agreement, to make payment at the earliest date in light of the
procedures agreed upon and will, within two (2) weeks following such agreement,
notify the Grievance Committee of the date when such payment will be made.
SUSPENSION OF GRIEVANCE PROCEDURE
91.If this Agreement is violated by the occurrence of a strike, work stoppage or
interruption or impeding of work at the plant, no grievance shall be discussed
or processed at the step 2 level or above while such violation continues, but
under no circumstances shall any grievance concerning employees engaged in the
violation be discussed or processed while such violation continues.
24
<PAGE>
SECTION 7 -- ARBITRATION
ACCESS TO A PLANT
92.The Staff Representative of the Union, the President of the Local Union, and
other Local Union representatives shall have the right to come on Company
property during normal working hours for the purpose of investigating grievances
so long as they do not interfere with production. The Human Resource Office
shall be notified in advance of any such visit.
EXPEDITED ARBITRATION PROCEDURE
93.Notwithstanding any other provision of this Agreement, the following
Expedited Arbitration Procedure is designated to provide prompt and efficient
handling of routine grievances.
94.The Expedited Arbitration Procedure shall be implemented in light of the
circumstances existing at the plant, with due regard to the following:
95.The Union and the Company may appeal grievances to an arbitrator under this
Expedited Arbitration Procedure by mutual agreement between the Staff
Representative and the Vice President of Operations.
96.All grievances appealed to step 3 of the grievance procedure shall be
reviewed by each respective 3rd step representative at the 3rd step meeting. The
parties will determine whether such grievance does not warrant disposition in
the 3rd step but is rather appropriate for expedited arbitration and therefore
agree to refer such grievance back to the 2nd step parties for review and
disposition. Any grievance so referred back to the 2nd step parties and for
which no agreement can be reached for disposing of the same, may then be
appealed by the Chairperson of the Grievance Committee to the Expedited
Arbitration Procedure Subsection. Such appeal shall be made within ten (10) days
(excluding Saturdays, Sundays, and Holidays) after the date the grievance is
referred to step 2. If the grievance is not so
25
<PAGE>
SECTION 7 -- ARBITRATION
appealed to the Expedited Arbitration Procedure Subsection, it shall be
considered withdrawn.
97.As soon as it is determined that a grievance is to be processed under this
procedure, the local parties shall notify the FMCS as outlined in the
Arbitration Section for a panel of arbitrators. Therefore, the rules of the
Expedited Arbitration Procedure Subsection shall apply.
98.The hearing shall be conducted in accordance with the following:
99.The hearing shall be informal;
100.No briefs shall be filed or transcripts made;
101.There shall be no formal evidence rules;
102.A previously designated local representative shall present each party's
case.
103.The arbitrator shall have the obligation of assuring that all necessary
facts and considerations are brought before him by the representatives of the
parties. In all respects, he shall assure that the hearing is fair.
104.If the arbitrator or the parties conclude at the hearing that the issues
involved are of such complexity or significance as to require further
consideration by the parties, the case shall be referred to the Staff
Representative of the Union and his Company counterpart and it shall be
processed as though appealed on such date.
105.The arbitrator shall issue a decision no later than 48 hours after
conclusion of the hearing (excluding Saturdays, Sundays,
26
<PAGE>
SECTION 7 -- ARBITRATION
and Holidays), if possible. His decision shall be based on the records developed
by the parties before and at the hearing, and shall include a brief written
explanation of basis for this conclusion. These decisions shall not be cited as
a precedent in any discussion at any step of the grievance or arbitration
procedure. The authority of the arbitrator shall be the same as those provided
in this Arbitration Section.
106.Any grievance appealed to this Expedited Arbitration Procedure must be
confined to issues which do not involve novel problems and which have limited
contractual significance or complexity.
107.The Company agrees that it shall not subpoena or call as a witness in
arbitration proceedings any employee from the Union. The Union agrees that it
shall not subpoena or call as a witness in such proceedings any non-Union
employee.
27
<PAGE>
SECTION 8 -- DISCHARGE AND SUSPENSION -- SUBJECT TO JUSTICE AND DIGNITY CLAUSE
DISCHARGE CASES
PURPOSE
108.The purpose of this subsection is to provide for the disposition of
complaints involving the discharge of employees and to establish a special
procedure for the prompt review of such cases. Complaints concerning discharges
shall be handled in accordance with the procedure set forth in Paragraphs 109
through 112.
PROCEDURE
109.An employee shall not be peremptorily discharged. In all cases in which the
Company may conclude that an employee's conduct may justify discharge, he shall
be suspended for not more than five (5) calendar days, and given written notice
of such action. In all cases of discharge a copy of the discharge notice shall
be promptly furnished to such employee and the Chairperson of the Grievance
Committee.
110.Within five (5) calendar days after the date of suspension, if the employee
believes that he has been unjustly dealt with, he may request and shall be
granted, a hearing and a statement of the offense before a Company
representative (status of department head or higher) designated by the Vice
President of Operations, with the Grievance Committee present. At such hearing,
the facts concerning the case shall be made available to all parties.
111.After such hearing, the Company may conclude whether the discharge shall be
affirmed, modified, or revoked, and shall confirm that decision in writing to
the employee and the Chairperson of the Grievance Committee.
28
<PAGE>
SECTION 8 - DISCHARGE AND SUSPENSION - SUBJECT TO JUSTICE AND
DIGNITY CLAUSE
112. In the event the discharge is affirmed or modified the employee may within
five (5) calendar days after notice of such action file a grievance in step 2
for further processing.
REINSTATEMENT BY COMPANY
113. Should the discharge be revoked by the Company, the Company, in the
absence of mutual agreement to the contrary, shall reinstate and compensate the
employees affected for the time lost on the basis of an equitable lump sum
payment mutually agreed to by the parties or, in the absence of agreement, make
him whole in the manner set forth in Paragraphs 114 and 115.
ARBITRATION
114. Should the discharge case be appealed to arbitration and should the
arbitrator determine that the employee has been discharged without proper cause,
the Company shall reinstate the employee and make him whole for the period of
his discharge, which shall include providing him such earning and other benefits
as he would have received except for such discharge, and offsetting such
earnings or other amounts as he would not have received except for such
discharge. In discharge cases, the arbitrator may, where circumstances warrant,
modify or eliminate the offset of such earnings or other amounts as would not
have been received except for such discharge.
115. The arbitrator shall have jurisdiction to modify the discharge limited to
discretion to reduce, or not require the Company to pay the compensation
provided in Paragraph 113, if in his judgment, the facts warrant such an award.
SUSPENSION OF PROCEDURE
116. When a strike, work stoppage, or interruption or impeding of work is in
progress, the Company shall not be required to hold any hearings or notify
employees under this section if the employees are participating in such
violation of
29
<PAGE>
SECTION 8 - DISCHARGE AND SUSPENSION - SUBJECT TO JUSTICE AND DIGNITY CLAUSE
this Agreement or if it is impracticable for the Company to do so because of
such violation. In such cases, the time for holding hearings or notifying the
employees shall start to run upon the termination of the strike, work stoppage,
interruption or impeding of work.
SUSPENSION CASES
PURPOSE
117. The purpose of this subsection is to provide for the disposition of
complaints involving such suspension of employees and to establish a special
procedure for the prompt review of such cases. Complaints concerning suspension
shall be handled in accordance with the procedures set forth in Paragraphs 118
through 121.
PROCEDURE
118. Employees may be suspended for violation of Company rules or for failure to
do their jobs properly, but shall not be suspended for a period of over five (5)
calendar days for similar conduct or action as provided for under the
Progressive Discipline Policy. Employees so suspended shall be given written
notice of such action. In all cases of suspension for any period of time, a copy
of the suspension notice shall be promptly furnished to such employee's
grievance committee person.
119. Within five (5) calendar days after the date of suspension, if the
employee believes that he has been unjustly dealt with, he may request and shall
be granted, a hearing and a statement of the offense before a representative
(status of department head or higher) designated by the Vice President of
Operations, with the grievance committee person present. At such hearing, the
facts concerning the case shall be made available to all parties.
120. After such hearing, the Company may conclude whether the suspension shall
be affirmed, modified, extended or revoked.
30
<PAGE>
SECTION 8 - DISCHARGE AND SUSPENSION - SUBJECT TO JUSTICE AND DIGNITY CLAUSE
121. In the event the suspension is affirmed, extended or modified, the
employee may within five (5) calendar days after notice of such action file a
grievance in step 2 in accordance with the procedures of Section 6.
REINSTATEMENT BY COMPANY
122. Should the suspension be revoked by the Company, the Company, in the
absence of mutual agreement to the contrary, shall reinstate and compensate the
employee effected for the time lost on the basis of an equitable lump sum
payment mutually agreed to by the parties or, in the absence of agreement, make
him whole in the manner set forth in Paragraph 123 and 124.
ARBITRATION
123. Should the suspension case be appealed to arbitration and should the
arbitrator determine that the employee has been suspended without proper cause,
the Company shall reinstate the employee and make him whole for the period of
his suspension, which shall include providing him such earnings and other
benefits as he would have received except for such suspension. In suspension
cases, the arbitrator may, where circumstances warrant, modify or eliminate the
offset of such earnings or other amounts as would not have been received except
for such suspension.
124. Should it be determined by the arbitrator that an employee has been
suspended for cause, the arbitrator shall not have jurisdiction to modify the
degree of discipline imposed by the Company; provided, however, that in a case
arising out of a strike or work stoppage the arbitrator shall have discretion,
if he finds that the Company has proper cause for discipline but does not have
proper cause for such suspension, to modify the penalty; provided, further, that
in the case the arbitrator
31
<PAGE>
SECTION 8 - DISCHARGE AND SUSPENSION - SUBJECT TO JUSTICE AND
DIGNITY CLAUSE
modifies the suspension he shall have discretion to reduce or not require the
Company to pay the compensation provided in Paragraph 122 if, in his judgment,
the facts warrant such an award.
SUSPENSION OF PROCEDURE
125.When a strike, work stoppage, or interruption or impeding of work is in
progress, the Company shall not be required to hold any hearings or notify
employees under this section, if the employees are participating in such
violation of this Agreement, or if it is impracticable for the Company to do so
because of such violation. In such cases, the time limits for holding hearings
or notifying the employees shall start upon the termination of the strike, work
stoppage, interruption or impeding of work.
UNION REPRESENTATION
126.Any employee who is summoned to meet in the office of a supervisor for the
purpose of discussing possible disciplinary action shall be accompanied by his
grievance committee person or his assistant grievance committee person provided
such representative is then at work or otherwise available.
DISCIPLINARY RECORDS
127. The Company in arbitration proceedings will not make use of any personnel
records of previous disciplinary action against the employee involved, where the
disciplinary action occurred two (2) or more working years prior to the date of
the event, which is the subject of such arbitration.
JUSTICE AND DIGNITY PROGRAM
128.The Union and the Company shall adopt the following Justice and Dignity
Procedure:
129.All employees will remain actively at work until the resolution of
grievances or complaints challenging their discipline, except discipline issued
under the Absentee Policy.
32
<PAGE>
SECTION 8 - DISCHARGE AND SUSPENSION - SUBJECT TO JUSTICE AND
DIGNITY CLAUSE
130.Under the procedure, the employee is automatically retained on the job for
five (5) calendar days. He must, however, file a grievance within that five (5)
day period at the step 2 level, protesting the Company's decision to discipline
him. If he does so, he continues actively on the job to which his seniority
entitles him, pending resolution of the grievance. When the ultimate resolution
of the grievance upholds a suspension or discharge, that discipline is effective
for all purposes on the day following the resolution.
131.The procedure does not cover employees whose conduct threatens the safety of
other employees, supervision, the plant or its equipment. Such conduct includes
theft, the use or distribution of drugs or alcohol on company property,
fighting, striking or threatening a supervisor with bodily harm, insubordination
that endangers safety, possession of firearms and destruction of company
property. Similarly, conduct violating the no-strike clause is not covered.
132.Nothing in the Justice and Dignity Procedure affects whatever right the
Company may currently have to relieve an employee for the balance of the shift.
PROGRESSIVE DISCIPLINE POLICY
133. This policy will provide for a four (4) step procedure involving similar
types of conduct or actions:
a. First Step - Oral Warning
b. Second Step - Written Warning
c. Third Step - Second Written Warning
d. Fourth Step - Discharge
33
<PAGE>
SECTION 8 -- DISCHARGE AND SUSPENSION -- SUBJECT TO JUSTICE AND DIGNITY CLAUSE
134.To ensure that all parties are aware that a discipline warning has been
issued under this procedure, the discipline warning notice must be signed by the
effected employee and/or his departmental committee person. By signing said
form, the effected employee does not admit guilt on his part nor does it take
away from his right to file a grievance protesting the discipline.
135.The Local Union Recording Secretary will be given notice and copies of
written warnings given to employees.
34
<PAGE>
SECTION 9 -- RATE OF PAY
SECTION 9 - RATE OF PAY
STANDARD HOURLY WAGE RATE
136. The standard hourly wage rate for the respective job classes and the
effective dates thereof shall be as set forth in Appendix A of this Agreement.
137. The standard hourly wage rate established for a job is recognized as the
rate of fair pay on such job and is the minimum rate of pay for all hours of
work. The Base Rates for Incentive Calculations as set forth in Appendix A is
added to the standard hourly wage rate.
138. The established rate of pay for each production, maintenance, trade or
craft, or apprentice job as defined pursuant to Appendix A, shall apply to any
employee during such time as the employee is required to perform such work.
DETERMINATION OF HOURLY RATE CLASSIFICATION FOR NEW OR CHANGED JOB
139. The August 1, 1971, Job Description and Classification Manual (hereinafter
referred to as the Manual) agreed to by the parties is hereby made a part of
this Agreement and shall be used to describe and classify all new or changed
jobs, in accordance with the following procedure:
140. This procedure is not to be construed or interpreted in any way as a
license for a review of job descriptions and classifications currently in effect
except as provided below:
141. All new jobs, including trade or craft jobs, established on or after
August 1, 1971, shall be classified by the provisions set forth in the Manual.
153. All jobs that are changed in job content (requirements of the job as to
training, skill, responsibility, effort or working
35
<PAGE>
SECTION 9 - RATE OF PAY
conditions) on or after August 1, 1971, shall be reclassified only in those
factors effected by the change, using only Section V of the Manual - "The Basic
Factors and Instructions for Their Application" and Section VI of the Manual -
"Conventions for Classification of Designated Jobs" where applicable. When and
if the net total of the changes in the factors effected equals less than one (1)
full job class, a supplementary record shall be established to maintain the job
description and classification on the current basis. To enable a subsequent
adjustment of the job description and classification for an accumulation of such
changes, equals a net total of one (1) full job class or more, a new job
description and classification for the job shall be established in accordance
with Paragraph 141.
142. The job description and classification for each job in effect as of the
date of this Agreement shall continue in effect unless (a) the Company changes
the job content (requirements of the job as to the training, skill,
responsibility, effort and working conditions) to the extent of one (1) full job
class or more; (b) the job is terminated or not occupied during a period of one
year; or (c) the description and classification is changed in accordance with
mutual agreement of officially designated representatives of the Company and the
Union.
143. When and if the Company, at its discretion, establishes a new job or
changes the job content (requirements of the job as to training, skill,
responsibility, effort and working conditions) of an existing job to the extent
of one (1) full job class or more, the Company will install a tentative wage
rate, based on the best information available, as to the anticipated duties and
requirements of the new or changed job, and a new job description and
classification for the new or changed job shall be established in accordance
with the following procedure:
36
<PAGE>
SECTION 9 - RATE OF PAY
144. Within thirty (30) working days after the startup of the operation
involving a new job or the event resulting in a change in job content to the
extent of one (1) full job class or more of an existing job, the Company will
develop a description and classification of the job in accordance with the
provisions of the Manual. The proposed description and classification will,
during such period, be submitted to the Union Rate and Incentive Committee
(consisting of three (3) members designated by the Union) and at the same time a
copy shall be sent to a designated representative of the International Union. If
the job involves new type facilities or a new type job, special designation of
this fact shall be made. Within fifteen (15) days after submission, the Union
Rate and Incentive Committee and Company shall:
145. Discuss and determine the accuracy of the job description;
146. Review and attempt to agree on the proposed classification.
147. If the Company and the Union Rate and Incentive Committee are unable to
agree upon the description and classification, the Company shall, at the end of
such period, replace the tentative rate by installing the proposed
classification, and the standard hourly wage rate for the job class to which the
job is thus assigned, shall apply in accordance with the provisions of Section
9.
148. The Union Rate and Incentive Committee shall be exclusively responsible
for the filing of the grievances and may, at any time within thirty (30) days
from the date of installation of the proposed classification, file a grievance,
in step 2, with the Company representative designated by the VP of Operations,
alleging that the job is improperly described and/or classified under the
provisions of the Manual. Thereupon, the Union Rate
37
<PAGE>
SECTION 9 - RATE OF PAY
and Incentive Committee and the company representative shall prepare and
mutually sign a stipulation setting forth the factors, factor codings and/or the
principal details of the job description which are in dispute. Thereafter, such
grievance shall be referred by the respective parties to their step 3
representatives for further consideration and such grievance shall be processed
under the grievance and the arbitration procedures of this Agreement.
149. In the event the step 3 representatives are unable to agree on the proposed
description and classification they shall, within thirty (30) days after the
appeal to arbitration of the Company step 3, answer, prepare and mutually sign
within such a period, a stipulation (which may amend the stipulation set forth
by the Union Rate and Incentive Committee and the Company representative) with a
copy submitted to the aforementioned representative of the International Union.
If submitted to arbitration, the issue shall be limited to the accuracy of the
job description, and/or the factors as stipulated at that time by the respective
step 3 representatives as being in dispute. The arbitrator shall decide the
question of conformity of the factor codings to the provisions of the manual
and/or the accuracy of the job description as to the duties assigned to the job.
His decision shall be effective as of the date when the new job was established
or the change or changes installed.
150. Within thirty (30) days after the signing of the stipulation provided for
in Paragraph 150, either step 3 representative may make a request in writing to
the other step 3 representative for further review. Any agreement reached in the
review meeting shall be binding on both parties. If the Director of the Wage
Department of the International Union so requests, the Company will agree to a
reasonable extension of time in step 3 to facilitate the procedure outlined
herein.
38
<PAGE>
SECTION 9 - RATE OF PAY
151. In the event the Company does not develop a new job description and
classification, the Union Rate and Incentive Committee may, if filed promptly in
step 2, process a grievance under the Grievance and Arbitration Procedures of
this Agreement, requesting that a job description and classification be
developed and installed in accordance with the provisions of the Manual. The
resulting classification shall be effective as of the date the new job was
established or the change or changes installed.
WAGE RATE INEQUITY GRIEVANCES
153. No basis shall exist for an employee to allege that a wage rate inequity
exists and no grievance on behalf of an employee alleging a wage rate inequity
shall be filed or processed during the term of this Agreement.
NEW AND ADJUSTED INCENTIVES
154. The Company, at its discretion, may establish new incentives to cover: (a)
new jobs; or (b) jobs covered by an existing incentive plan where, during a
current three (3) month period, the straight time average hourly earnings of
employees under the plan are equal to, or less than, the average of the standard
hourly wage rates for such employees.
155. The following shall apply to the adjustment or replacement of incentives:
156. The Company shall adjust an incentive to preserve its integrity when it
requires modification to reflect new or changed conditions which are not
sufficiently extensive to require cancellation and replacement of the incentive
which, result from mechanical improvements made by the Company in the interest
of improved methods or products, or from changes in equipment, manufacturing
processes or methods, materials processed, or quality or manufacturing
standards. Such adjustment shall be made effective as of the new date of the new
or changed
39
<PAGE>
SECTION 9 - RATE OF PAY
conditions requiring it, and shall be established in accordance with the
procedure set forth in Paragraph 170.
157.The Company shall establish a new incentive to replace an existing
incentive when such new or changed conditions as defined in Paragraph 156 are of
such magnitude that replacement of the incentive is required.
158.In the event that an incentive is to be replaced pursuant to Paragraph 157,
and such replacement incentive is not ready for installation, the Company shall
cancel the incentive to be replaced and shall establish an interim period, until
such replacement incentive is applied, as follows:
159.The interim period shall continue until the Company installs the new
incentive, which shall be at the earliest practicable date following
cancellation of the incentive to be replaced, but not later than six (6) months
from such cancellation, unless such period is extended by mutual agreement
between the Company and the Grievance Committee.
160.Each employee on the respective job during the interim period shall
receive, in addition to the applicable standard hourly wage rate, a special
hourly interim allowance equal to the percentage equivalent of the straight time
average hourly earnings (which does not include the applicable hourly additive)
above the Base Rate for Incentive Calculation of all regularly assigned
incumbents of the job during the three (3) months immediately preceding the
changed condition, provided the average performance of such three (3) month
period is maintained. If the job involved is a new job, the interim allowance
shall be the average interim allowance.
161.Such special hourly interim allowance shall be identified with the job;
apply to any employee while on such job; and
40
<PAGE>
SECTION 9 - RATE OF PAY
continue in effect until the replacement of the cancelled incentive becomes
effective.
162.In case an employee receiving a special hourly interim allowance voluntarily
maintains a performance appreciably below that of the three (3) months
immediately preceding the changed condition, after notification to such employee
and the grievance committee person representing the employee. Application of the
special hourly interim allowance may be suspended during such further portion of
the interim period as the lower rate of performance voluntarily is maintained.
163.New incentives established pursuant to Paragraphs 154 and 156 shall be
established in accordance with the following procedures:
164.The Company will develop the proposed incentive.
165.The proposal will be submitted to the Union Rate and Incentive Committee
along with such additional employees as the committee and the Company shall deem
appropriate. The Company shall explain the incentive for the purpose of arriving
at agreement with such committee as to its installation. The Company shall, at
such time, furnish such explanation with regard to the development and
determination of the incentive as shall reasonably be required in order to
enable the committee and such employees to understand how such incentive was
developed and determined and shall afford them a reasonable opportunity to be
heard with regard to the proposed incentive.
166.If agreement is not reached, the matter shall be reviewed in detail by the
Union Rate and Incentive Committee and the Company for the purpose of arriving
at mutual agreement as to installation of the incentive.
41
<PAGE>
SECTION 9 - RATE OF PAY
167.Should agreement not be reached, the proposed incentive may be installed by
the Company and the employees effected may at any time after thirty (30) days,
but within one hundred eighty (180) days following installation, file a
grievance in step 2 alleging that the incentive does not provide equitable
incentive compensation. Such grievance shall be processed under the grievance
and arbitration procedure of this Agreement. If the grievance is submitted to
the arbitration procedure, the arbitrator shall decide the question of equitable
incentive compensation and the decision of the arbitrator shall be effective as
of the date when the incentive was put into effect.
168. In the event the Company does not develop an incentive, as provided in
Paragraph 157, the employee(s) effected may, if filed promptly in step 2,
process a grievance under the grievance and arbitration procedures of this
Agreement requesting that an incentive be installed in accordance with the
provisions of this subsection. If the grievance is submitted to arbitration, the
decision of the arbitrator shall be effective as of the date the grievance was
filed.
169.When an incentive is replaced, pursuant to Paragraph 157, the incentive
earnings (which do not include the applicable hourly additive) expressed as
percentage above the Base Rate for Incentive Calculation on the replacement
incentive for a job covered thereunder shall not be less than the percentage of
incentive earnings (which do not include the applicable hourly additive)
received as an average by regularly assigned incumbents of that job under the
replaced incentive during the three (3) months preceding the new or changed
conditions provided that the average performance during such three (3) month
period is maintained. As to any job which did not exist under the replaced
incentive, the average percentage calculated for jobs which did exist shall
apply under the same conditions.
42
<PAGE>
SECTION 9 - RATE OF PAY
170. Adjusted incentives, established pursuant to Paragraph 156 shall be
established in accordance with the following procedure:
171.The Company will develop and install the adjustment as soon as practicable.
172.The adjustment will be submitted to the Union Rate and Incentive Committee
for the purpose of notification, and the Company shall furnish such explanation
of the adjustment as shall reasonably be required to enable the committee to
understand how such adjustment was developed.
173.The employees affected may at any time after thirty (30) days, but within
one hundred eighty (180) days following installation, file a grievance in step 2
which shall be processed under the grievance and arbitration procedure of this
Agreement. If the grievance is submitted to the arbitration procedure, the
arbitrator shall decide the issue of compliance with the requirements of
Paragraph 156 and the decision of the arbitrator shall be effective as of the
date when the adjustment was put into effect.
174.In the event the Company does not adjust an incentive, as provided in
Paragraph 156, the employee or employees affected may, if filed promptly, in
step 2 process a grievance under the grievance and arbitration procedures of
this Agreement requesting that an adjustment to the incentives be installed in
accordance with the provisions of this subsection.
BASIS FOR CALCULATION OF INCENTIVE EARNINGS
175.The applicable standard hourly wage rates shall be the established rates of
pay for all hours of work.
176.The hourly wage rates identified as Base Rates for Incentive Calculations in
Appendices A.1, A.2 and A.3 of this Agreement
43
<PAGE>
SECTION 9 - RATE OF PAY
shall be the base rate from which to calculate incentive earnings.
177.An "add-on", equivalent to the difference between the applicable Standard
Hourly Wage Rate, and the Base Rate for Incentive Calculations listed in
Appendices A.1, A.2 and A.3 shall be added for all hours of work on incentive
jobs.
EXISTING INCENTIVES
178.All existing incentives, including all existing rates incidental to each
incentive (such as hourly, base, piecework, tonnage, premium, bonus, stand-by,
etc.) shall remain in effect until replaced or adjusted by mutual agreement of
the appropriate Union Rate and Incentive Committee and Company representative or
until replaced or adjusted by the Company in accordance with the New and
Adjusted Incentives Subsection.
179.Each employee, while compensated under an existing incentive, shall receive
for the applicable single or multiple number of eight-hour turns, in effect, the
highest of the following:
180.The total earnings under such incentive, including the appropriate add-on as
provided by Paragraph 177,
181.The total amount arrived at by multiplying the hours worked by the existing
fixed occupational hourly rate, if any; or
182.The total amount arrived at by multiplying the hours worked by the
applicable standard hourly wage rate.
CORRECTION OF ERRORS
183.Notwithstanding any provisions of this section, errors in application of
rates of pay shall be corrected.
44
<PAGE>
SECTION 9 - RATE OF PAY
OBSOLETE PRACTICE WITH RESPECT TO RATES OF PAY
184.Rates of pay practices, which are inconsistent with the provisions of this
section, shall terminate as of the date of this Agreement.
MISCELLANEOUS
185.In the event an employee is assigned temporarily at the request or direction
of the Company from his regular job to another job, such employee, in accordance
with the provisions of this section, shall receive the established rate of pay
for the job performed, In addition, while performing work under such
circumstances, such employee shall receive such special allowance as may be
required to equal the earnings that otherwise would have been realized by the
employee. This provision shall not affect the rights of any employee or the
Company under any other provision of this Agreement.
SHIFT DIFFERENTIALS
186.For hours worked on the afternoon shift there shall be paid a premium rate
of 30 cents per hour. For hours worked on the night shift there shall be paid a
premium rate of 45 cents per hour.
187.For purposes of applying the aforesaid shift differentials, all hours worked
by an employee during the workday shall be considered as worked on the shift on
which he is regularly scheduled to start work, except:
188.An employee regularly scheduled for the day shift who completes his regular
eight (8) hour turn and continues to work into the afternoon shift, shall be
paid the afternoon shift differential for all hours worked on the afternoon
shift.
189.Similarly, an employee who is regularly scheduled for the afternoon shift
who completes his regular eight (8) hour turn
45
<PAGE>
SECTION 9 - RATE OF PAY
and continues to work into the night shift, shall be paid the night shift
differential for all hours worked on the night shift.
190.Similarly, an employee who is regularly scheduled for the night shift who
completes his regular eight (8) hour turn and continues to work into the day
shift in excess of four (4) hours shall continue to receive the night shift
differential for the first four (4) hours worked on the day shift and shall be
paid no differential for all hours worked in excess of four (4) on the day
shift.
191.An employee regularly scheduled for the day shift who completes his regular
eight (8) hour turn, and after leaving the Company's premises, is called out for
the afternoon or night shift within the same workday, shall be paid the
applicable shift differential for the hours worked on the afternoon or night
shift.
192.Shifts shall be identified in accordance with the following:
193.DAY SHIFT includes all turns regularly scheduled to commence between 6:00
a.m. and 8:00 a.m., inclusive.
194.AFTERNOON SHIFT includes all turns regularly scheduled to commence between
2:00 p.m. and 4:00 p.m., inclusive.
195.NIGHT SHIFT includes all turns regularly scheduled to commence between 10:00
p.m. and 12:00 Midnight, inclusive.
196.Shift differential shall be included in the calculation of overtime
compensation. Shift differential shall not be added to the base hourly rate for
the purpose of calculating incentive earnings, but shall be computed by
multiplying the hours worked by the applicable differential, and the amount so
determined shall be added to earnings.
46
<PAGE>
SECTION 9 - RATE OF PAY
197.Any hours worked by an employee on a regularly scheduled shift, which
commences at a time not specified in Paragraph 192 above shall be paid as
follows:
198.For hours worked which would fall in the prevailing day turn of the
department, no shift differential shall be paid.
199.For hours worked which would fall in the prevailing afternoon turn of the
department, the afternoon shift differential shall be paid.
200.For hours worked which would fall in the prevailing night turn of the
department, the night shift shall be paid.
201.The shift differential, which applies to the shift on which time is made up,
shall be paid for make-up time.
202.Shift differential shall be paid for allowed time or reporting time when the
hours for which payment is made would have called for a shift differential, if
worked.
SUNDAY PREMIUM PAY
203.For each hour worked by an employee on Sunday, which is not paid for on an
overtime basis, shall be paid a premium of 25% based on his regular rate of pay
(as defined in Paragraph 263 of Section 11 hereof).
204.For the purpose of this provision, Sunday shall be deemed to be the
twenty-four (24) hours beginning with the turn-change time nearest to 12:01
a.m., Sunday.
205.Sunday premium, based on the hourly wage rate, shall be paid for reporting
allowance hours.
47
<PAGE>
SECTION 9 - RATE OF PAY
TENTH DAY PREMIUM
206.An employee who is scheduled and works a ten (10) consecutive day schedule
which begins on a Tuesday of one week, and ends on a Thursday of the next week,
shall be paid a tenth day premium at the overtime rate for all hours worked on
such tenth consecutive day.
207.The hours worked under the 10th day premium will count for the purpose of
determining overtime liability.
48
<PAGE>
SECTION 10 -- HOURS OF WORK
SECTION 10 - HOURS OF WORK
SCOPE
208.This section defines the normal hours of work and shall not be construed as
a guarantee of hours of work per day or per week. This section shall not be
considered as any basis for the calculation or payment of overtime, which is
covered solely by Section 11 - Overtime and Holidays.
NORMAL WORKDAY
209.The normal workday shall be eight (8) hours of work in a twenty-four (24)
hour period. The hours of work shall be consecutive, except when an unpaid lunch
service period is provided, or where local working conditions provide otherwise.
NORMAL WORK PATTERN
210.The normal work pattern shall be five (5) consecutive workdays beginning on
the first day of any seven (7) consecutive day period with the last two (2) days
being the normal days off. The seven (7) consecutive day period may begin on any
day of the calendar week. Days off cannot be split in your workweek unless by
mutual consent of the Union and the Company.
211.A work pattern of less or more than five (5) workdays in the seven (7)
consecutive day period, shall not be considered as deviating from the normal
work pattern provided the workdays are consecutive.
SCHEDULE
212.All employees shall be scheduled on the basis of the normal work pattern
except where: (a) such schedules regularly would require the payment of
overtime; (b) deviations from the normal work pattern are necessary because of
breakdowns or other matters beyond the control of the Company; or (c) schedules
deviating from the normal work pattern as established by
49
<PAGE>
SECTION 10 -- HOURS OF WORK
agreement between the Company and the Union Executive Committee.
213.Schedules showing employees' workdays (days and hours) shall be posted no
later than 2:00 p.m. on Thursday of the week preceding the calendar week in
which the schedule becomes effective, unless otherwise agreed upon by the
parties. Schedules will not be changed after 2:00 p.m. on Thursday, except for
breakdowns or other matters beyond the control of the Company. Schedules will
not be changed after 2:00 p.m. on Thursday for the sole purpose of avoiding
overtime.
214.Any employee, whose last scheduled turn ends prior to the posting of his
schedule for the following week, will be given an opportunity to obtain
information relating to his next scheduled turn. This procedure will also be
applicable with respect to employees returning from vacation.
215.Employees cannot be required to work schedule changes made after the
Thursday posting unless the Company first makes a good faith effort to find
replacements in compliance with the Contract for the affected employee(s) who
have previous commitments and want the time off. The employee must notify the
Company that he does not want to work on the rescheduled day no later than the
end of his first full shift following the posting of the change. If the Company
cannot find a replacement, the employee will have the right to find a qualified
replacement, defined as a person in the department who has held or currently
holds the position being filled, who is willing to work. If neither the Company
nor the affected employee can find a replacement, the effected employee will
have to work the schedule.
216.If the replacement is found, the effected employee will not be charged an
absentee occurrence.
50
<PAGE>
SECTION 10 -- HOURS OF WORK
217.When an employee is called to work on his scheduled day off, to fill an
emergency vacancy or to perform emergency work which in no way effects the
remainder of his scheduled work, such employee will be permitted to complete his
schedule provided work is available.
REPORTING ALLOWANCES
218.An employee who is scheduled or notified to report for work and who does
report for work, shall be provided with and assigned to a minimum of four (4)
hours of work on the job for which he was scheduled or notified to report. In
the event work is not available, he shall be assigned or reassigned to another
job and paid at the job class rate for which he reported. In the event, he
reports for work, and no work is available, he shall be released from duty
before he works a minimum of four (4) hours and he shall be paid for the hours
worked in accordance with Section 9 - Rates of Pay, and credited with a
reporting allowance equal to the standard hourly wage rate of the job for which
he was scheduled or notified to report multiplied by the unutilized portion of
the four (4) hour minimum. Shift Differential and Sunday Premium additions, if
any, shall apply in accordance with the provisions of Section 9.
219.The provisions of this Reporting Allowance Subsection shall not apply in the
event that:
220.Strikes, work stoppages in connection with labor disputes, breakdown occurs
after the starting time of the employee's shift or turn, failure of utilities
beyond the control of the Company, or acts of God interfere with work being
provided, or
221.An employee is not put to work or is laid off after having been put to
work either at his own request or due to his own fault; or
51
<PAGE>
SECTION 10 -- HOURS OF WORK
222.An employee refuses to accept an assignment or reassignment within the
first four (4) hours as provided in Paragraph 218; or
223.The Company gives reasonable notice of a change in scheduled reporting
time, or that an employee need not report. The Company and the Union Grievance
Committee shall promptly determine what constitutes reasonable notice.
ALLOWED TIME
224.If an employee, while engaged in work for which he was scheduled, is injured
and a physician determines the employee is not physically fit to continue to
perform such work, he shall be paid in accordance with Paragraph 385 for the
remaining hours of his regularly scheduled workday.
225.Employees injured during their scheduled shift and requesting to visit a
medical facility shall be paid for the time so spent within the limits of their
scheduled shift in going to and from and while at the clinic. Employees visiting
a medical facility while off duty will not be paid for time so spent. Employees
shall be paid any wages for time lost on their shift, because of follow up
appointments for work incurred injuries. The Company will pay statutorily
required mileage for work related re-treatment visits and will make all follow
up appointments.
ABSENTEEISM
226.Employees who are unable to report for work as scheduled should call their
supervisor, or other person designated, as far in advance as possible. Failure
to follow this procedure will subject the employee to discipline under the
"Progressive Discipline Policy".
52
<PAGE>
SECTION 10 -- HOURS OF WORK
ABSENTEE POLICY
227.Absenteeism will subject the employee to disciplinary action, as required,
and based on absence records which will be maintained, starting with the
employee's first occurrence of absence.
228.Absenteeism is defined as being absent from work on any scheduled workday or
being late on any scheduled workday by more than two (2) hours, or leaving early
on any scheduled workday, by more than two (2) hours.
229.Unless such absence from work is covered by Paragraphs 230 and 231, each day
of absence will be counted as an occurrence. By way of example, an employee
absent three (3) consecutive days, without clearance as defined in Paragraphs
230 and 231, would be charged with three (3) occurrences. Additionally, an
employee absent for one (1) day on three (3) separate occasions would also be
charged with three (3) occurrences.
230.Absence, as defined by the Agreement, due to bereavement, military
obligation, jury duty or union business will not be recorded as an occurrence of
absence. In addition, an absence for the death of a brother-in-law or
sister-in-law (one (1) day in Tulsa area or up to three (3) days outside Tulsa
area) and subpoenaed witness service will not count as an occurrence of absence.
231.Absences, including hospital confinement, work incurred injuries, medical
emergencies of an employee's immediate family members (living in the home),
including immediate family members (mother, father, son or daughter) not living
in the home, and confirmed illnesses will not be recorded as an occurrence of
absence, provided that a written statement is given to the Human Resources
Department on or before the day
53
<PAGE>
SECTION 10 -- HOURS OF WORK
the employee returns to work. (This does not relieve the employee of the
responsibility to provide a release to return to work form prior to Thursday for
scheduling purposes.)
232.A written statement must be signed by the doctor and must state the date on
which the employee was ill or injured and that the illness or injury prevented
him from working during the period of absence.
233.For each thirty (30) consecutive days without an occurrence, an employee
with active occurrence(s) on his record will have one (1) occurrence deducted
from his attendance record. An employee while on layoff status, disciplinary
suspension, leave of absence, sickness and accident or workers' compensation
leave shall not accumulate any days toward this thirty (30) consecutive day
period.
234.All absence records and warning slips which are twelve (12) months old or
older, shall not be considered for purposes of disciplinary action. However, all
absentee records become part of the employee's personnel file.
235.Instances of being tardy or leaving early represent another form of
absenteeism. For purposes of establishing a tardy/leave early policy in
conjunction with the absentee occurrence policy, three (3) tardy/leave early
occurrences will count as one (1) absence occurrence. The same non-occurrence
counting events for absences will apply to the tardy/leave early policy (refer
to Paragraphs 230 and 231). For each ten (10) days worked, a tardy/leave early
one-third (1/3) occurrence will be removed.
236.Corrective discipline will be administered according to the following:
54
<PAGE>
SECTION 10 -- HOURS OF WORK
237.Three (3) active occurrences within a consecutive twelve (12) month period -
verbal warning.
238.Five (5) active occurrences within a consecutive twelve (12) month period -
written warning.
239.Seven (7) active occurrences within a consecutive twelve (12) month period -
second written warning and employee on probation for the remainder of the twelve
(12) month period.
240.Any additional occurrences of absence during the probationary period will
subject the employee to immediate discharge.
ATTENDANCE BONUS
241.For each thirty (30) consecutive days without an occurrence, an employee
will earn four (4) hours of vacation pay. An employee, while on layoff status,
disciplinary suspension, leave of absence, or off for reasons covered under
Paragraph 231, shall not accumulate hours toward the attendance bonus program.
An employee may earn up to forty (40) hours credit and then must decide if he
wishes to schedule a week of vacation or take pay in lieu of vacation for his
forty (40) hours. (The accumulation of forty (40) hours may cross calendar years
but no more than forty (40) hours may be accumulated before the employee must
make his decision.)
242.Additionally, if an employee accumulates less than forty (40) hours at the
end of the calendar year, he may elect to take pay in lieu of vacation for those
hours.
243.If the employee earns more than forty (40) hours in the calendar year, he
may elect to take the excess as pay in lieu of vacation, or carry such hours
into the next year.
55
<PAGE>
SECTION 10 -- HOURS OF WORK
244.An employee who establishes forty (40) hours credit may elect to schedule
time off as long as there are no schedule conflicts defined as: (a) manpower
needs; (b) a conflict with a scheduled regular vacation; or (c) an attendance
bonus vacation previously scheduled, on a first schedule basis. Continuous
service shall prevail when two (2) or more employees attain forty (40) hours
credit on the same date.
ALLOWANCE FOR JURY OR WITNESS SERVICE
245.An employee who is called for jury service, or subpoenaed as a witness,
shall be excused from work for the days on which he serves. Service, as used
herein, includes required reporting for jury or witness duty, when summoned,
whether or not he is used. Such employee shall receive, for each day of service
on which he otherwise would have worked, the amount calculated by the Company in
accordance with the following formula. Pay shall be based on the number of days
the employee would have worked had he not been performing jury service (plus any
Holiday in such period which he would not have worked) and the pay for each day
shall be eight (8) times his average straight time hourly rate (including
applicable incentive earnings but excluding shift differentials, Sunday and
overtime premiums) during the last payroll period worked prior to service. The
employee will present proof that he did serve or report as a juror, or was
subpoenaed and reported as a witness, to the Human Resources Department within
two (2) weeks of serving, in order to avoid unexcused absences.
ALLOWANCE FOR FUNERAL LEAVE
246.When death occurs to an employee's legal spouse, mother, father,
mother-in-law, father-in-law, son, daughter, brother, sister, grandparents,
grandchildren (including stepfather, stepmother, stepchildren, stepbrother or
stepsister when they have lived with the employee in an immediate family
relationship), an employee, upon request, will be excused and paid for up to a
maximum of three (3) scheduled shifts (or for
56
<PAGE>
SECTION 10 -- HOURS OF WORK
fewer shifts as the employee may be absent) which fall within a three (3)
consecutive calendar day period; provided, however, that one such calendar day
shall include the day of the funeral and it is established that the employee
attended the funeral. Payment shall be eight (8) times his average straight time
hourly earnings (as computed for jury pay). An employee will not receive funeral
pay when it duplicates pay received for time not worked for any other reason.
Time thus paid will not be counted as hours worked for purposes of determining
overtime or premium pay liability.
OVERTIME
247.The parties recognize that schedules that regularly require overtime for
extended periods should not be used solely for the purpose of preventing the
recall of laid-off or demoted employees.
248.When employees qualified to perform the work could be recalled because it is
reasonably foreseeable that there will be work for such employees for a period
of two (2) or more weeks, and the Company determines that such work should
nevertheless be done on an overtime basis instead of recalling such employees,
it will first notify the Union and, upon the request of the appropriate
grievance committee person, will discuss its reasons and review with him any
suggested alternative in an effort to reach a mutually satisfactory solution.
Such discussion and review will constitute full compliance with the requirements
of these Paragraphs 247 and 248.
57
<PAGE>
SECTION 10 -- HOURS OF WORK
ELECTRIC FURNACE DEPARTMENT OVERTIME AGREEMENT
249.The following procedure will be followed:
A. When the filling of a vacancy is necessary, assign a straight
time employee if available.
B. The employee on duty who is working on the job will be offered
the double.
C. The employee regularly scheduled on the job on the following turn
will be called.
D. The employee regularly scheduled on the job, which is scheduled
off, will be called.
E. In the event A, B, C or D does not desire the overtime, the
employees on the turn may move up in the line of progression and
the lowest vacancy may be filled by the senior employee accepting
the overtime assignment from the turn prior to where the vacancy
occurs.
F. If a vacancy is not filled by A, B, C, D or E, a weekly overtime
request list will be available in the furnace, casting, and crane
areas for signatures and badge numbers of employees desiring
overtime.
G. If a vacancy is not filled by A, B, C, D, E or F, the overtime
shall be offered by seniority in the line of progression.
ELECTRIC FURNACE MILLWRIGHT AND OILER OVERTIME AGREEMENT
250.The following procedure will be followed:
A. When the filling of a vacancy is necessary, assign a straight
time employee if available.
B. The employee on duty who is working on the job will be offered
the double.
C. The employee regularly scheduled on the job on the following turn
will be called.
D. The employee regularly scheduled on the job that is scheduled off
will be called.
58
<PAGE>
SECTION 10 -- HOURS OF WORK
E. In the event A, B, C or D does not desire the overtime, the other
employee on the turn, if qualified, will be asked. If the vacancy
is still not filled, the remaining assigned department employees
will be asked by seniority as defined by Paragraph 313
CASTING TECHNICIAN OVERTIME AGREEMENT
251.The following procedure will be followed:
A. When the filling of a temporary vacancy is necessary, assign a
straight time employee if available.
B. The employee on duty who is working on the job will be offered
the double.
C. In the event A or B does not desire the overtime, the overtime
will be offered to the other qualified Casting Technicians by
seniority.
SWITCHING OVERTIME AGREEMENT
252.The following procedure will be followed:
A. When the filling of a vacancy is necessary, assign a straight
time employee if available.
B. The employee on duty who is working on the job will be offered
the double.
C. The employee regularly scheduled on the job on the following turn
will be called.
D. The employee regularly scheduled on the job who is scheduled off
will be called.
E. In the event A, B, C or D does not desire the overtime, the
department will be polled by seniority to fill the vacancy with a
qualified replacement.
59
<PAGE>
SECTION 10 -- HOURS OF WORK
MERCHANT MILL OVERTIME AGREEMENT
253.The following procedure will be followed:
A. When the filling of a vacancy is necessary, assign a straight
time employee if available.
B. The employee on duty who is working on the job will be offered
the double.
C. The employee regularly scheduled on the job on the following turn
will be called.
D. The employee regularly scheduled on the job that is scheduled off
will be called.
E. In the event A, B, C or D does not desire the overtime, the
employees on the turn may move up in the line of progression and
the lowest vacancy may be filled by the senior employee
requesting the overtime assignment from the turn prior to where
the vacancy occurs.
F. If a vacancy is not filled by A, B, C, D or E, a weekly overtime
request list will be available for signatures and badge numbers
of employees desiring overtime.
G. If a vacancy is not filled by A, B, C, D, E or F, the overtime
shall be offered by seniority in the line of progression.
POST SHOP DEPARTMENT OVERTIME AGREEMENT
254.The following procedure will be followed:
A. When the filling of a vacancy is necessary, assign a straight
time employee if available.
B. The employee on duty who is working on the job will be offered
the double.
C. The employee regularly scheduled on the job on the following turn
will be called.
D. The employee regularly scheduled on the job that is scheduled off
will be called.
E. In the event A, B, C, or D does not desire the overtime, the
vacancy may be filled by the senior employee
60
<PAGE>
SECTION 10 -- HOURS OF WORK
requesting the overtime assignment from the turn prior to where
the vacancy occurs. An overtime request list will be available in
each spell room during the first half of each turn for signatures
and badge numbers.
F. Unit employees will be scheduled for down turn non-scheduled
overtime on the basis of seniority as defined by Paragraphs 313
and 314.
255.The department will be considered a single unit for scheduling and filling
temporary day-to-day vacancies, but each line will be considered separate units
in the event of breakdowns and release of a crew during a schedule period.
MACHINE SHOP OVERTIME AGREEMENT
256.Overtime opportunity shall be on the basis of relative equal distribution
for the machinist(s).
ELECTRICAL MAINTENANCE OVERTIME AGREEMENT
257.Assigned Electrical Maintenance
The following procedure will be followed:
A. When the filling of a vacancy is necessary, assign a straight
time employee if available.
B. The employee on duty who is working on the job will be offered
the double.
C. The employee regularly scheduled on the job on the following turn
will be called.
D. The employee regularly scheduled on the job who is scheduled off
will be called.
258.Shop Electrical Maintenance
Overtime opportunity shall be on the basis of relative equal distribution for
those normally scheduled in the Electric Shop.
61
<PAGE>
SECTION 10 -- HOURS OF WORK
RECLAIM OVERTIME AGREEMENT
259.A.For assignment of overtime on a daily basis during a normal five (5) day
workweek, the employee working that particular job will be offered the
overtime.
B.For assignment of overtime on a sixth (6th) or seventh (7th) day (of a
normal five (5) day workweek,) the overtime will be filled by seniority and
incumbency.
62
<PAGE>
SECTION 11 - OVERTIME AND HOLIDAYS
SECTION 11 -- OVERTIME AND HOLIDAYS
PURPOSE
260. This section provides the basis for the calculation of, and payment for,
overtime and Holidays, and shall not be construed as a guarantee of hours of
work per day or per week.
DEFINITION OF TERMS
261. The payroll week shall consist of seven (7) consecutive days beginning at
12:01 a.m. Sunday, or at the turn changing hour nearest to that time.
262. The workday for the purpose of this section is the twenty-four (24) hour
period beginning with the time the employee begins work.
263. The regular rate of pay, as the term is used in this section, shall mean
the hourly rate which the employee would have received for the work, had it been
performed during non-overtime hours, such regular rate of pay shall be the
average straight time hourly earnings (including incentive) as computed in
accordance with existing practices.
CONDITIONS UNDER WHICH OVERTIME RATES SHALL BE PAID
264. Overtime at the rate of one and one-half times the regular rate of pay
shall be paid for:
265. Hours worked in excess of eight (8) hours in a workday;
266. Hours worked in excess of forty (40) hours in a payroll week;
267. Hours worked on the sixth (6th) or seventh (7th) workday in a payroll week
during which work was performed on five (5) other workdays;
63
<PAGE>
SECTION 11 - OVERTIME AND HOLIDAYS
268.If an employee is scheduled six (6) or seven (7) days in a payroll week, and
the schedule is changed so that the employee is laid off on any of the first
five (5) scheduled days, whether consecutive or not, but the employee works his
scheduled sixth (6th) or seventh (7th) day, the employee will receive overtime
for such sixth (6th) or seventh (7th) day as if the employee had worked the
first five (5) days of the scheduled payroll week.
269.Hours worked on a second reporting in the same workday where the employee
has been recalled or required to report to the plant after working less than
eight (8) hours on his first shift, provided that his failure to work eight (8)
hours on his first reporting was not caused by any of the factors mentioned in
Paragraphs 220, 221, 222 and 223 for purposes of disqualifying an employee for
reporting allowance.
270.For all hours worked by an employee on any of the Holidays specified below,
overtime shall be paid at the overtime rate of two and one-half times the
regular rate of pay.
271...........................The Holidays specified are:
January 1
Good Friday (Friday before Easter)
Memorial Day, which shall be the last Monday in May
July 4
Labor Day
Thanksgiving
Day after Thanksgiving
Day before Christmas Day
Christmas Day
272.The Holiday shall be the twenty-four (24) hour period beginning at the
turn-changing hour nearest to 12:01 a.m. of the
64
<PAGE>
SECTION 11 - OVERTIME AND HOLIDAYS
Holiday. If the calendar Holiday is on Sunday, for the purposes of this
Agreement, the Holiday shall be the following Monday.
PAY FOR HOLIDAYS NOT WORKED
273.Each employee shall receive Holiday pay for each of the nine (9) Holidays,
provided the employee meets the eligibility requirements at the time of such
designated Holiday.
65
<PAGE>
SECTION 11 - OVERTIME AND HOLIDAYS
ELIGIBILITY REQUIREMENTS FOR HOLIDAY PAY FOR HOLIDAYS NOT WORKED
274.......................An eligible employee is one who:
275.....Has worked four (4) weeks since his last hire;
276.Performs work or is on vacation in the payroll period in which a Holiday
occurs; or if he is laid off for such payroll period, performs work or is on
vacation in both the payroll period preceding and the payroll period following
the payroll period in which the Holiday occurs.
277.Works as scheduled or assigned both on his last scheduled workday prior to
the Holiday and his first scheduled workday following the Holiday; provided
however, absence on such day or days if supported by reasonable proof of just
cause will not effect eligibility.
278Failure to work on a Holiday, when scheduled to work, shall disqualify an
employee for unworked Holiday pay; provided however, absence on such day is
supported by reasonable proof of just cause will not effect eligibility.
279An eligible employee who would otherwise be entitled to pay for an unworked
Holiday, and who shall be scheduled, pursuant to the provisions of Section 12 -
Vacations, to take a vacation during a period when such Holiday occurs shall be
paid for the unworked Holiday in addition to his vacation pay (for this purpose,
the provision of Paragraph 277 shall not apply to affect eligibility). This
provision shall apply to:
66
<PAGE>
SECTION 11 - OVERTIME AND HOLIDAYS
A. An employee whose vacation has been scheduled prior to his layoff
and who thereafter is laid off and takes his vacation as
scheduled, or
B. An employee who is not at work at the time his vacation is
scheduled, but who thereafter returns to work and then is absent
from work during a Holiday week because of his scheduled vacation.
An employee who is not working at the time his vacation commences
is not eligible for Holiday pay for a Holiday occurring during his
vacation within the meaning of Paragraphs 276 and 277.
CALCULATION OF UNWORKED HOLIDAY PAY
280.An employee who does not work on a Holiday and who meets the eligibility
requirements for unworked Holiday pay shall be paid eight (8) times his average
straight time earnings (which includes incentive) per hour during the pay period
immediately preceding the pay period in which such Holiday occurs exclusive of
shift, Sunday, and overtime premiums.
REPORTING PAY
281.An employee who shall be entitled to reporting pay on a Holiday under the
provisions of Section 10 - Hours of Work, and who would otherwise be entitled to
Holiday pay for that day shall, in addition to such reporting pay, be paid
Holiday pay.
282.An employee who shall work more than four (4) hours on such Holiday and who
would otherwise be entitled to Holiday pay shall, in addition to being paid for
the hours worked by him on that day, be paid an amount equal to the excess of
eight (8) over the number of hours actually worked on that day times his average
straight time earnings which includes incentive during the pay period in which
such Holiday occurs, exclusive of shift, Sunday and overtime premiums, unless he
shall voluntarily quit work before completing eight (8) hours of work on that
day, in
67
<PAGE>
SECTION 11 - OVERTIME AND HOLIDAYS
which event he shall not be entitled to any Holiday pay for that day.
NON-DUPLICATION
283.Hours compensated for at overtime rates shall not be counted further for any
purpose in determining overtime liability under the same or any other
provisions, provided, however, that a paid Holiday, whether worked or not, shall
be counted for purposes of computing overtime liability.
284.Except as above provided, hours paid for, but not worked, shall not be
counted in determining overtime liability.
68
<PAGE>
SECTION 12 -- VACATIONS
SECTION 12 -- VACATIONS
ELIGIBILITY
285.To be eligible for a vacation in any calendar year during the term of this
Agreement, the employee must:
286.Have one (1) year or more of continuous service, and
287.Have worked 1040 hours in the preceding calendar year; except:
A. In the case of an employee who completes one (1) year of
continuous service in such calendar year, must have worked 1040
hours or more since his date of hire.
B. In the case of an employee with more than one (1) year of
continuous service who fails to work 1040 hours in any calendar
year due to a layoff or illness, shall receive one (1) week of
vacation; provided the employee had met the eligibility
requirement in the prior year.
C. In the case of an employee with more than one (1) year of
continuous service who fails to work 1040 hours in any calendar
year due to a work related disability, shall receive his regular
vacation entitlement for up to two (2) years, including the year
in which the disability was incurred.
D. The Company shall follow the federal statutes in regard to an
individual's vacation entitlement while on military leave.
288.An employee, even though otherwise eligible under the Section 12 --
Eligibility Subsection forfeits the right to receive vacation benefits under
this section if he quits, retires, dies, or is discharged prior to January 1, of
the vacation year.
LENGTH OF VACATIONS AND AMOUNT OF VACATION PAY
69
<PAGE>
SECTION 12 -- VACATIONS
289. An eligible employee who has attained the years of continuous service
indicated in the following table in the respective calendar years of this
Agreement shall receive vacation corresponding to such years of continuous
service as shown in the following table:
---------------------------------------------------------
Years of Service Weeks of vacation
1 but less than 3 1 Week
3 but less than 10 2 Weeks
10 but less than 17 3 Weeks
17 but less than 25 4 Weeks
25 or more 5 Weeks
---------------------------------------------------------
290.A week of vacation shall consist of seven (7) consecutive days.
SCHEDULING OF VACATIONS
291.On or promptly after October 1, of each year, each employee entitled or
expected to become entitled to take vacation time off in the following year will
be requested to specify in writing (not later than thirty (30) days after the
receipt of such request), on a form provided by the Company, the vacation period
or periods he desires.
292.Notice will be given an employee at least sixty (60) days in advance of the
date the vacation period is scheduled to start, but in any event not later than
January 1, of the year in which the vacation is to be taken.
293.Vacations will, so far as practicable, be granted at times most desired by
employees (longer service employees being given preference as to choice), but
the final right to allot vacation periods and to change such allotments is
exclusively reserved to the Company in order to insure orderly operation of the
plant.
70
<PAGE>
SECTION 12 -- VACATIONS
294.Any employee absent from work because of layoff, disability, or leave of
absence at the time employees are requested to specify the vacation periods they
desire and who has not previously requested and been allotted a vacation period
for the calendar year, may be notified by the Company that a period is being
allotted as his vacation period but that he has the right within fourteen (14)
days to request some other vacation period. If such employee notifies the
Company in writing, within fourteen (14) days after such notice is sent, that he
desires some other vacation period, he shall be entitled to have his vacation
scheduled in accordance with Paragraph 293.
295.If an employee is on layoff from the plant at any time before the beginning
of his scheduled vacation, hereunder, he may request to have his vacation start
at any time during such layoff and if the Company agrees to grant his request,
the Company shall have the right to set forth the appropriate conditions under
which the Company grants his request.
296.Where an employee transfers from one seniority unit to another, subsequent
to January 1 in any given year, he shall take his vacation in accordance with
the schedule established in his old seniority unit, except as orderly operations
of his new seniority unit preclude it. He shall not be entitled to have any
regular vacation schedule previously established in his new seniority unit
changed because of his entry into that unit. Should there be a conflict between
the transferred employee and an employee in the unit, the employee in the unit
shall retain his preference in competition with the transferred employee,
regardless of continuous service.
REGULAR VACATIONS
297.Vacations may be scheduled throughout the calendar year.
298.The Company may, with the consent of the employee, pay him vacation
allowance, in lieu of time off for vacation, for any
71
<PAGE>
SECTION 12 -- VACATIONS
weeks of regular vacation in excess of two (2) weeks in any one (1) calendar
year.
299.Regular vacation shall be scheduled in a single period of consecutive weeks.
However, in the event the orderly operations of the plant require regular
vacations of two (2) or more weeks may be scheduled in two (2) periods, neither,
of which may be less than one (1) week. With the consent of the employee,
regular vacation may be scheduled in any number of periods, none of which may be
less than one (1) week.
300.In case the Company desires to schedule regular vacations for employees
during a shutdown period instead of in accordance with the previously
established vacation schedules for that year, the Company shall give effected
employee(s) sixty (60) days notice of such intent. In the absence of such
notice, employee(s) shall have the option to take his regular vacation during
the shutdown period or to be laid off during the shutdown and to take his
regular vacation at the previously scheduled time.
301.Any employee otherwise entitled to vacation, pursuant to Section 12 --
Vacations of this Agreement in the calendar year in which he retires under the
terms of any pension agreement between the parties which makes him eligible for
a special initial pension amount, but who has not taken such vacation prior to
the date of such retirement, shall not be required to take a vacation in that
calendar year and shall not be entitled to vacation pay for that calendar year.
302.The calendar week containing New Year's Day may be taken as a week of
vacation for either the year preceding New Year's Day or the year in which New
Year's Day falls, except when New Year's Day falls on a Sunday, provided such
vacation week has been scheduled in accordance with this section.
72
<PAGE>
SECTION 12 -- VACATIONS
303.If the Company in its sole discretion, schedules a shutdown of any operation
during the calendar week containing Christmas Day, any employee who is not
scheduled to work due to the shutdown in such week and who has completed his
vacation entitlement for that year may elect to reschedule a week of regular
vacation for which the employee has qualified and will be entitled in the
following calendar year into the shutdown week; provided, however that vacation
pay for such vacation week, calculated as though the week were scheduled and
taken in the next following year will be paid on the regular payday for the pay
period in which the shutdown vacation falls; and provided further that no
vacation pay for a vacation rescheduled hereunder will be paid to an employee
who quits, retires, dies, or is discharged prior to January 1 of the year from
which the shutdown vacation was rescheduled. In the application of this
Paragraph 303, when the basis for calculation of an employee's vacation pay for
the following calendar year is not available, his vacation payment hereunder
shall be made on the basis for calculation of his vacation pay in the current
calendar year with appropriate adjustment to be made when the basis for the
following calendar year becomes available.
VACATION SCHEDULING GRIEVANCES
304.It is recognized that the parties locally have the burden of resolving
disputes relating to the scheduling of individual vacations pursuant to the
Schedule of Vacations Subsection. Should they be unable to do so, any such
request or complaint in order to be considered further, must be referred to the
procedure provided in Section 6 -- Step 1 of this Agreement not later than
fifteen (15) days after notification of the scheduled vacation (or changed
scheduled vacation) is given to the employee.
305.In the resolution of a request or complaint under this subsection, the
Company's determination as to the scheduling required to conform to the
requirements of operations shall be evaluated on the same basis as heretofore.
73
<PAGE>
SECTION 12 -- VACATIONS
VACATION PAY
306.All vacation weeks will equal forty (40) times the Average Hourly Vacation
Rate (A.H.V.R.). The A.H.V.R. equals all Standard Hourly Wage Rate earnings as
shown in Appendix A (including incentives); exclusive of overtime premium,
Sunday premium, Holiday premium, shift differential, vacation pay, pay in lieu
of vacation, and unworked Holiday pay divided by all hours worked. The A.H.V.R.
will be used to calculate any vacation hours earned under the absentee policy.
307.Any employee who did not work in the prior year shall have his vacation pay
computed on the basis of his last calculated vacation rate.
VACATION ALLOWANCE
308.The Union and the Company agree that their mutual objective is to afford
maximum opportunity to the employees to obtain their vacations and to attain
maximum production. All employees eligible for vacation shall be granted their
vacation except as provided in Paragraph 298.
309.The vacation allowance due an employee shall be computed as provided in the
Section 12 -- Vacation Pay Subsection.
310. Any payment of vacation allowance pursuant to this section shall not
require the Company to reschedule the vacation of any other employee.
74
<PAGE>
SECTION 13 -- SENIORITY
==========================================================
SECTION 13 -- SENIORITY
SENIORITY STATUS OF EMPLOYEES
311.Continuous service (seniority) shall be calculated from date of first
employment or re-employment following a break in continuous service in
accordance with the Break in Continuous Service Subsection, whichever is later.
312.In recognition, however, of the responsibility of the Company for the
efficient operation of the plant, it is understood and agreed that in all cases
of:
FILLING PERMANENT VACANCIES
313.Selections will be made on the basis of plant wide seniority, providing the
senior bidder possesses the necessary physical and mental abilities to perform
all the work normally required by the job.
DECREASE IN FORCES, DEMOTIONS, OR RECALLS AFTER LAYOFFS
314.Selections will be made on the basis of plant wide seniority, providing the
senior employee possesses the necessary physical abilities to perform all the
work normally required by the job.
315.For the purpose of applying Paragraphs 313 and 314, when the International
Representative and the Union Grievance Committee are in dispute with the
Manager, Employee Relations as to an employee's ability to perform the job, the
Company will determine the employee's present ability by means of a trial period
to see whether or not he can satisfactorily perform all duties of the job. An
employee, to qualify for the job, must be able to perform all of the duties of
the job without further training. The trial period will be ten (10) working days
for the effected employee.
75
<PAGE>
SECTION 13 -- SENIORITY
==========================================================
NEW HIRES/PROBATIONARY EMPLOYEES
316.Newly hired employees and those employees hired after a break in continuity
of service will be regarded as probationary employees for the first eight (8)
weeks of actual work. Probationary employees may be laid off or discharged as
exclusively determined by the Company. Future new hires will be hired and
scheduled as full time employees. The probationary period will be used for
training and evaluation. When new employees start working on the same date, the
greater continuous service will be given the employee in age.
317.When an employee completes any portion of the probationary period and is
laid off and then is later recalled, said employee will be required to work only
the remaining amount of time needed to complete the original probationary
period.
318.After completing four (4) weeks, an employee shall receive unworked Holiday
pay. Upon successfully completing the eight (8) week probationary period, the
employee will be eligible (a) to bid on permanent vacancies, and (b) for all
health benefits effective the first day following the completion of the eight
(8) week probationary period.
RATES OF PAY
319.A bid is not finalized or accepted until the end of the forty-five (45) day
trial period in which an employee may elect to reject the bid, or the Company
may elect to reject the bidder, in compliance with the Agreement. The employee
must actually work forty-five (45) days in the department in which he bid.
ADDITIONAL BENEFITS
320.Upon attaining two (2) years of continuous service, an employee will become
eligible to participate in the Supplemental Unemployment Benefit Plan and the
Gainsharing Plan. Upon
76
<PAGE>
SECTION 13 -- SENIORITY
==========================================================
attaining four (4) years of continuous service, an employee will become eligible
to participate in the Attendance Bonus Plan.
BREAK IN CONTINUOUS SERVICE
321.Continuous service shall be broken in the manner set forth below:
322................................................Quit;
323.Discharge, provided that if the employee is rehired within six (6) months
the break in continuous service shall be removed;
324..................Layoff in excess of one (1) year;
325.Exceeding a leave of absence that shall be considered voluntary quitting;
326.Violation and/or misuse of conditions of an authorized leave;
327.Absence for five (5) consecutive working days without properly notifying the
Company, in which case the employee shall be considered to have quit
voluntarily. Where an employee is delayed in giving notice by causes beyond his
own control, he shall notify the Company as soon as possible under the
circumstances;
328.Failure to report to work from layoff within fourteen (14) days after
written notice to report has been sent to his last address as it appears on the
records of the Company and allowing usual time for delivery to such address. (It
shall be the duty of all employees to notify the Company in writing of any
change of address);
329................................................Retires;
77
<PAGE>
SECTION 13 - SENIORITY
======================================================
330.Acceptance of severance as outlined in Section 16.
331.If an employee is absent because of physical disability in excess of two (2)
years, he shall continue to accumulate continuous service during such absence
for an additional period equal to (a) three (3) years, or (b) the excess, if
any, of his length of continuous service at commencement of such absence over
two (2) years, whichever is less. Any accumulation in excess of two (2) years
during such absence shall be counted, however, only for purposes of Section 13,
including local agreements thereunder, and shall not be counted for any other
purpose under this or any other Agreement between the Company and the
International Union. In order to avoid a break in service within the above
period after an absence in excess of two (2) years, an employee absent due to
physical disability must report for work promptly upon termination of the cause.
332.Absence due to a compensable disability incurred during the course of
employment shall not break continuous service, provided such individual returned
to work within thirty (30) days after final payment of statutory compensation
for such disability, or after the end of the period used in calculating a lump
sum payment.
DETERMINATION OF SENIORITY UNIT
333.Seniority shall be applied in the seniority unit, which may be an entire
department or any subdivision thereof, as established or agreed upon. Employees
who acquire a permanent vacancy shall hold job incumbency on that job. Such
employees retain their incumbent right to such job until they voluntarily
relinquish such rights by permanently transferring to another job.
78
<PAGE>
SECTION 13 - SENIORITY
======================================================
PERMANENT VACANCIES
334.A permanent vacancy is a vacancy to which no employee has seniority
entitlement.
335.A permanent vacancy is filled first from within the department by moving up
from job level to job level within the unit line of progression based on plant
seniority with any resultant unfilled unit vacancy being filled from within the
department. Any remaining permanent vacancies are filled by bid from plant wide
competition.
336.Permanent vacancies for plant wide competition shall be posted for a period
of ten (10) calendar days. Individual bid applications are to be filed in
writing with the Department of Human Resources. The successful candidates will
be scheduled on the next work schedule following the posting period.
337.During the bid period and until the successful candidate is on the job, the
vacancy will be filled under the Temporary Vacancy Subsection provisions.
338.Employees, who hold job incumbency rights on permanent jobs in the
department in which an opening occurs and who are not currently working in the
department, shall have prior right to return to fill such openings before they
are open for bid.
339.Any employee who declines to fill a permanent vacancy shall not exercise his
seniority rights to displace the employee who was awarded the vacancy in his
place, but will be permitted to exercise his seniority rights to fill future
vacancies and shall hold his full seniority rights on his job so far as cutbacks
and layoffs are concerned.
79
<PAGE>
SECTION 13 - SENIORITY
======================================================
340.A bidding employee who is absent because of a disability resulting from an
industrial accident at the time of a plant wide bid award shall be considered
for the position in accordance with the Section 13 - Seniority Status of
Employees Subsection, except that the seniority factor of physical fitness shall
be considered on the basis of the physical fitness for the job reasonably
expected to exist upon the employee's return to work. In the event such bidding
employee is awarded the job, on that basis, he shall be awarded job incumbency
as of the date of the original bid award.
341.An employee who is awarded a bid on a permanent vacancy in any other
department than the department in which he holds an incumbency shall retain his
seniority in the department from which he transferred for a period of forty-five
(45) days of actual work. During this forty-five (45) day period, he holds no
incumbency rights in the department to which he bid and may not exercise his
seniority rights for further advancement in that line of progression. At the end
of this period, he shall establish seniority in the new department as of his
first working day there.
TEMPORARY VACANCIES
342.A temporary vacancy is a vacancy to which some employee has seniority
entitlement, but is not available.
343.Temporary vacancies shall be filled by moving up from job level to job level
within the unit line of progression on the turn based on plant seniority. In the
event the first eligible employee on the turn does not desire the assignment,
the second and subsequently less senior employees in the line of progression
will be offered the vacancy, and if not so filled voluntarily, the least senior
qualified employee will be assigned to fill the temporary vacancy consistent
with the safety and efficiency of
80
<PAGE>
SECTION 13 - SENIORITY
======================================================
the operation. A seniority unit employee so assigned will have preference over
such senior employee(s) on all temporary vacancies that may occur on such higher
job during the next thirty (30) days only.
344.The above method of filling temporary vacancies shall prevail; unless by
mutual agreement between the Union Executive Committee and the Vice President of
Operations or his designated representative, some other effective method is
agreed upon, such as job bidding or job training for the job ahead.
345.From time to time when temporary increases in manpower needs are necessary
for semi-skilled or skilled labor needed during maintenance down times, a
temporary vacancy bid will be posted and awarded in compliance with Paragraph
313. The notice will contain information describing what types of skills are
required, why the temporary vacancy exists and how long the temporary vacancy is
expected to last.
346.If the vacancy extends thirty (30) days beyond the posted time period, the
Union Executive Committee and the Vice President of Operations and/or his
designated representative(s) will meet to determine whether the vacancy should
be terminated, extended or bid as a permanent vacancy.
FORCE REDUCTION AND RECALL
347.In the event a decrease of work, other than decreases which may occur from
day-to-day, results in the reduction to an average of thirty-two (32) hours per
week for the employees in the seniority unit and a further decrease of work
appears eminent, which in the Company's judgement may continue for an extended
period and will necessitate a decrease of force or a reduction in hours worked
for such employees below an average
81
<PAGE>
SECTION 13 - SENIORITY
======================================================
of thirty-two (32) hours per week, the Company and the Grievance Committee will
confer in an attempt to agree as to whether a decrease of force shall be
effected in accordance with this section or the available hours of work shall be
distributed as equally between such employees as is practical with due regard
for the particular skills and abilities required to perform the available work.
In the event of disagreement, the Company shall not divide the work on a basis
less than thirty-two (32) hours per week.
348.Demotions, layoffs, and other reductions in force shall be made in
descending job sequence order from job level to job level in the line of
progression starting with the highest job, and with the employee on such job
having the least length of plant service. The sequence on a recall shall be made
in the reverse order so that the same experienced people shall return to jobs in
the same positions relative to one another that existed prior to the reduction.
LAYOFFS FROM THE SENIORITY UNIT
349.An employee reduced out of his line of progression and seniority unit due to
a reduction in force shall be added to the displaced and unassigned employee
list.
DISPLACED AND UNASSIGNED EMPLOYEES
350.The purpose of this section is to provide a procedure for assignment of
displaced and unassigned employees to temporary vacancies on a weekly basis.
351.Definitions used in this procedure shall be as follows:
352."Displaced Employee" is an employee displaced from his seniority unit and
eligible for assignment.
82
<PAGE>
SECTION 13 - SENIORITY
======================================================
353."Unassigned Employee" is an employee who does not have incumbency rights in
a seniority unit.
354.Displaced and unassigned employees shall be reassigned to departments on the
basis of seniority and preference and scheduled in the department on the basis
of seniority.
355.Displaced and unassigned employees will be reassigned on the basis of plant
seniority to temporary vacancies as follows:
356.All "Displaced and Unassigned Employees" will indicate on a "Preferred
Assignment List" their preference for assignment to each of the current five (5)
departments. These five (5) departments are Steel Production, Merchant Mill,
Warehouse, Post Shop, and Reclaim. Each employee will assign a number from one
(1) to five (5) to each department with the number "1" being the most preferred
and the number "5" being the least preferred.
357.Each schedule day, the weekly temporary vacancies will be filled from the
preferred assignment list by seniority.
358.For Example: Mr. John Doe is the senior displaced or unassigned employee. He
signs up on his preferred assignment list as follows.
------------------------------------------------------------
STEEL WARE-
NAME PROD. MILL HOUSE POST RECLAIM
---- ----- ---- ----- ---- -------
Doe, J. 5 1 4 2 3
------------------------------------------------------------
359.If a temporary vacancy exists in the Mill, Mr. Doe will be assigned to the
Mill. If no vacancy exists in the Mill, the next preference for Mr. Doe would be
the Post Shop, then Reclaim, and so forth, until a vacancy exists in the
preferred order to which he will be assigned.
83
<PAGE>
SECTION 13 - SENIORITY
======================================================
360.An employee may change his preferred assignment list at any time.
361.Probationary employees may not indicate a preference until completing their
probationary period. Probationary employees will be assigned at the discretion
of the Company.
362.In the event of a change in the manpower requirements after the schedule has
been posted or a legitimate schedule mistake has been made in this procedure,
the employee will be allowed to exercise his seniority rights to bump the junior
employee(s) assigned from the displaced and unassigned employee list for that
week. Any error made in the proper assignment of an employee to his new
department will be resolved immediately.
363.In the event of improper layoff or failure to recall an employee in
accordance with his seniority rights, in the absence of mutual agreement to an
equitable lump sum payment, he shall be made whole for the period during which
he is entitled to retroactivity in the same manner set forth in Paragraphs 114
and 115.
364.A displaced employee must return to his home department if a vacancy exists
in said department before application of this procedure.
365.A displaced or unassigned employee shall not displace an incumbent
department employee unless the incumbent is the junior person in the plant and
the displaced or unassigned employee has been on layoff from the plant for the
preceding three (3) weeks and is capable of performing the job in accordance
with Paragraph 313.
84
<PAGE>
SECTION 13 - SENIORITY
======================================================
PROMOTIONAL RIGHTS OF DISPLACED AND UNASSIGNED EMPLOYEES
366.An employee assigned to a vacancy in a seniority unit under the provisions
of this section shall have no seniority rights in that unit in competition with
an employee holding incumbency rights in that seniority unit.
TEMPORARY DEPARTMENT SHUTDOWN
367.Employees laid off from their seniority unit due to a department shutdown of
three (3) weeks or less will be laid off from the plant, but may, at the
employee's option, be added to the bottom of the displaced and unassigned list
during such period.
SENIORITY STATUS OF GRIEVANCE COMMITTEE PERSON AND LOCAL UNION OFFICERS
368.When a decrease in force continues to the point at which the President, Vice
President, Recording Secretary, Financial Secretary, Treasurer and Grievance
Committee would otherwise be laid off, they shall be retained in active
employment so long as a work force is at work in the plant.
369.It is understood that the above officers must have local union duties
directly allocated to daily contract administration and/or grievance processing
in order to exercise these super seniority rights. In other words, they are
members of the Negotiating and/or Grievance Committees.
370.Notwithstanding the provisions of any local seniority agreement, service
accumulated by an employee in a seniority unit or on a job solely as the result
of retention at work in accordance with this paragraph or its counterpart in
prior Agreements, shall not enable any such employee to claim relative seniority
status in excess of that which he would have had except for such service.
85
<PAGE>
SECTION 13 - SENIORITY
======================================================
MANNING OF NEW FACILITIES
371.In the event new facilities are installed at the plant, the International
Staff Representative, Union Executive Committee, Vice President of Operations or
his designated representative(s) will meet and decide the method of manning such
facility.
LEAVE OF ABSENCE FOR EMPLOYEES WHO ACCEPT POSITIONS WITH LOCAL UNION
372.Leaves of absence for the purpose of accepting positions with the Local
Union shall be available to a reasonable number of employees. Adequate notice of
intent to apply for leave shall be afforded the Company to enable proper
provision to be made to fill the job to be vacated.
373.Leaves of absence shall be for a period not to exceed three (3) years, and
may be renewed for a further period by mutual consent.
374.Continuous service shall not be broken by the leave of absence and will
continue to accrue.
LEAVES OF ABSENCE FOR EMPLOYEES WHO ACCEPT POSITIONS WITH THE
INTERNATIONAL UNION
375.This provision shall be applicable to those employees who heretofore have
been granted such a leave of absence and who are occupying such positions, and
also applicable to any employee who may thereafter be granted such a leave of
absence.
376.Leaves of absence for the purpose of accepting positions with the
International Union shall be available to a reasonable number of employees.
Adequate notice of intent to apply for leave shall be afforded the Company to
enable proper provisions to be made to fill the job to be vacated.
86
<PAGE>
SECTION 13 - SENIORITY
======================================================
377.Any such leaves of absence shall be continued for the period the employee
uninterruptedly continues in a full-time position with the International Union,
United Steelworkers of America.
378.An employee's continuous service for all purposes, except seniority
purposes, shall be arrested at the commencement of such leave of absence.
Continuous service for seniority purposes shall accumulate during such leave of
absence. In the event the employee returns to active employment with the Company
from such leave of absence, the period of the leave of absence shall not be
counted as continuous service for any purpose except seniority purposes but any
continuous service accumulated after such return shall be added to the arrested
continuous service for all purposes except seniority purposes and to the
accumulated continuous service for seniority purposes.
379.Leave of absence (except in case of extended sickness) for longer than
thirty (30) days shall be granted only by mutual written consent of the Company
and the Union. This limitation does not apply to interplant transfers.
87
<PAGE>
SECTION 14 - SAFETY AND HEALTH
=============================================================
SECTION 14 -- SAFETY AND HEALTH
OBJECTIVES AND OBLIGATIONS OF THE PARTIES
380.The Company and the Union will cooperate in their continuing objective to
eliminate accidents and health hazards. The Company shall make reasonable
provisions for the safety and health of its employees during the hours of their
employment. The Company, the Union, and the employees recognize their
obligations under existing federal and state laws with respect to safety and
health matters.
381.If devices which emit ionizing radiation are used, the Company will continue
to maintain safety standards with respect to such devices not less rigid than
those adopted from time to time by the Nuclear Regulatory Commission and will
maintain procedures designed to safeguard employees and will instruct them as to
safe working procedures involving such devices.
382.The Company will continue its program of periodic in-plant air sampling and
noise testing under the direction of qualified personnel. Where the Union
co-chairperson of the Safety and Health Committee alleges a significant
on-the-job health hazard due to in-plant air pollution or noise, the Company
will also make such additional tests and investigations as are necessary and
shall notify the Union co-chairperson of the Safety and Health Committee when
such a test is to take place. A report based on such additional tests and
investigations shall be reviewed and discussed with the Joint Safety and Health
Committee. For such surveys conducted at the request of the Union co-chairperson
of the Safety and Health Committee, a written summary of the sampling and
testing results and the conclusions of the investigation shall be provided to
the Safety and Health Committee.
88
<PAGE>
SECTION 14 - SAFETY AND HEALTH
=============================================================
383.When the Company uses toxic substances, which endanger the health and safety
of employees, it shall inform the effected employees what hazards are involved
and what measures are taken to protect the employees. Upon the request of the
Union co-chairperson of the Safety and Health Committee, the Company shall
provide, in writing, requested information from material safety data sheets, or
their equivalent, on toxic substances to which employees are exposed in the work
place; provided that when the information is considered proprietary, the Company
shall so advise the Union co-chairperson and provide sufficient information for
the Union to make further inquiry.
384.The Company shall provide adequate first aid for all employees during their
working hours.
385.An employee who, as a result of an industrial accident, is unable to return
to his assigned job for the balance of the shift on which he was injured, will
be paid for any wages lost on that shift.
PROTECTIVE DEVICES, WEARING APPAREL, AND EQUIPMENT
386.Protective devices, wearing apparel and other equipment necessary to
properly protect employees from injury shall be provided by the Company in
accordance with current practices or as such practices may be improved by the
Company. Goggles, gas masks, face shields, respirators, all gloves, fireproof,
waterproof, acid-proof and all protective apparel when necessary and required,
shall be provided by the Company, without cost, except that the Company may
assess a fair charge to cover loss or willful destruction thereof by the
employee. Where any such equipment or clothing is now provided, the present
practice concerning charge for loss or willful destruction by the employee
89
<PAGE>
SECTION 14 - SAFETY AND HEALTH
=============================================================
shall continue. Proper heating and ventilating systems shall be
installed where needed and maintained in good working condition.
FLAME RETARDANT JACKETS AND HOT METAL GLOVES
387.........................................Merchant Mill
-------------
Flame retardant jackets and hot metal gloves will be furnished to anyone
assigned to burn scrap.
388...............................................Warehouse
---------
Flame retardant jackets and hot metal gloves will be furnished to anyone working
in the Warehouse, as needed.
DISPUTES
389.An employee or group of employees who believe that they are being required
to work under conditions which are unsafe or unhealthy beyond the normal hazard
inherent in the operation in question, shall discuss the matter with his
supervisor in an attempt to resolve the matter. If a dispute exists after such
discussion, the employee or group of employees shall have the right to:
390.File a grievance in step 2 of the grievance procedure for preferred handling
in such procedure and arbitration; or
391.Relief from job(s), without loss of their right to return to such job(s),
and at the Company's discretion, assignment to such other employment as may be
available in the plant; provided however, that no employee other than
communicating the facts relating to the safety of the job, shall take any steps
to prevent another employee from working on the job. Should either the Company
or the arbitrator conclude that an unsafe condition within the meaning of this
section existed and should the employee not have been assigned to other
available equal or
90
<PAGE>
SECTION 14 - SAFETY AND HEALTH
=============================================================
higher rated work, he shall be paid the earnings he otherwise would have
received.
392.It is recognized that emergency circumstances may exist and the local
parties are authorized to make mutually satisfactory arrangements for immediate
arbitration to handle such situations in an expeditious manner.
JOINT SAFETY AND HEALTH COMMITTEE
393.A Safety and Health Committee consisting of three (3) employees designated
by the Union and three (3) company representatives designated by the Company
shall be established at the plant. The Union and the Company shall designate
their respective co-chairperson and shall certify to each other in writing such
co-chairperson and committee members.
394.The committee shall hold monthly meetings at times determined by the
co-chairpersons who may also agree to hold special meetings. Each co-chairperson
shall submit a proposed agenda to the other co-chairperson at least five (5)
days prior to the monthly meeting. The Company co-chairperson shall provide the
Union co-chairperson with minutes of the monthly meeting. Prior to such monthly
meeting, the co-chairperson or their designees shall engage in an inspection of
mutually selected areas of the plant. At the conclusion of the inspection, a
written report shall be prepared by the Company setting forth their findings.
One copy of the report shall be furnished to the Union co-chairperson. Time
consumed on committee work by committee members designated by the Union shall
not be considered hours worked to be compensated by the Company. The function of
the committee shall be to advise the plant concerning safety and health matters,
but not to handle grievances. In the discharge of its function, the committee
shall: (a) consider existing practices and rules relating to safety and
91
<PAGE>
SECTION 14 - SAFETY AND HEALTH
=============================================================
health; (b) formulate suggested changes in existing practices and rules; (c)
review proposed new safety and health programs developed by the Company and (d)
review accident statistics including OSHA form 200, trends and disabling
injuries which have occurred in the plant and make appropriate recommendations.
395.The Union co-chairperson or his representative will be afforded time off,
without pay, as may be required to visit departments at all reasonable times for
the purpose of transacting the legitimate business of the committee, after
notice to the head of the department to be visited or his designated
representative. If the committee member is at work, permission (shall not be
unreasonably withheld) from his department head or his designated
representative. If the Union co-chairperson or his representative is not at
work, he shall be granted access to the plant at all reasonable times for the
purpose of conducting the legitimate business of the committee after notice to
the head of the department to be visited or his designated representative.
396.Advice of the Safety and Health Committee, together with supporting
suggestions, recommendations, and reasons, shall be submitted to the
departmental superintendent for his consideration and for such action as he may
consider consistent with the Company's responsibility to provide for the safety
and health of its employees during the hours of their employment and the mutual
objective set forth in Section 14. From time to time the Safety and Health
Committee shall review the operation of this section with a view to achieving
maximum understanding as to how the Company and the Union can most effectively
cooperate in achieving the objective set forth in Section 14.
92
<PAGE>
SECTION 14 - SAFETY AND HEALTH
==========================================================
397.When the Company introduces new personal protective apparel or extends the
use of protective apparel to new areas, or issues new rules relating to the use
of protective apparel, the matter will be discussed with the members of the
Safety and Health Committee, in advance, with the objective of increasing
cooperation. Should differences result from such discussions, a grievance may be
filed in step 2 by the chairperson of the Grievance Committee within thirty (30)
days thereafter. In the event that the grievance progresses through the
grievance procedure to arbitration, the arbitrator shall determine whether such
rule or requirement is appropriate to achieve the objective set forth in Section
14.
398.In the event the Company requires an employee to testify at the formal
investigation into the cause(s) of a disabling injury, the employee may arrange
to have the Union co-chairperson of the Safety and Health Committee or, in his
absence, the Union member of such committee designated by the Union
co-chairperson, present as an observer at the proceedings for the period of time
required to take the employee's testimony. The Union co-chairperson will be
furnished with a copy of such record as is made of the employee's testimony. In
addition, in the case of accidents which result in disabling injury or death, or
accidents which could have resulted in disabling injury or death, and require a
fact-finding investigation. The Company will, as soon as is practicable after
such accident, notify the Union co-chairperson of the Safety and Health
Committee or the Union member of such committee designated by the Union
co-chairperson to act in his absence. Said person shall have the right to visit
the scene of the accident promptly upon such notification, if he so desires,
accompanied by the Company co-chairperson or his designated representative and
the Company will add the Union co-chairperson of the Safety and Health
Committee, or the Union member of such committee designated
93
<PAGE>
SECTION 14 - SAFETY AND HEALTH
==========================================================
by the Union co-chairperson to act in his absence, to the notification list for
such accidents. After making its investigation, the Company will supply to the
Union co-chairperson of the Safety and Health Committee, a statement of the
nature of the injury, the circumstances of the accident, and any recommendations
available at that time, and will consider any recommendations he makes regarding
the report. In such cases, when requested by the Union co-chairperson, the
Company co-chairperson of the Safety and Health Committee or his designated
representative will review the statement with the Union co-chairperson. Also, in
such cases, the Company Co-chairperson of the Safety and Health Committee or his
designated representative, when requested by the Union co-chairperson, will
visit the scene of the accident with the Union co-chairperson or, in his
absence, his designated substitute.
399.The Company will provide the International Union Safety and Health
Department with the prompt notification of any accident resulting in a fatality
to a Union member. This notification shall be either oral or written and include
the date of the fatality, the plant, and if known, the cause of the fatality.
The Company will provide the International Union Safety and Health Department
with a copy of the fatal accident report that is given to the Local Union Safety
and Health Committee when such report becomes available. Any necessary
discussion or other communication on this data between the Company and the
International Union will be with the individual designated to provide such
information.
400.Once each year the Company will provide to the International Union Safety
and Health Department the OSHA Form 200 Summary of Occupational Injuries and
Illnesses or its equivalent for the plant. Upon request and for specific
locations where detailed information is necessary, the Company will
94
<PAGE>
SECTION 14 - SAFETY AND HEALTH
==========================================================
provide a copy of the OSHA Form 200 Log of Occupational Injuries and Illnesses
or its equivalent.
401.If in the event of special circumstances the Director of the International
Union Safety and Health Department or member of his staff desires access to the
plant, such access may be approved on a case-by-case basis through the office of
the Manager, Employee Relations. The Manager, Employee Relations or his
representative shall accompany the Union representative.
DISCIPLINARY RECORDS
402.Written records of disciplinary action against an employee involved in the
violation of a safety rule, but not involving a penalty of time off, will not be
used by the Company in any arbitration proceeding where such action occurred one
or more years prior to the date of the event which is the subject of such
arbitration.
403.When a written safety warning is made involving a violation of a safety
procedure or rule by an employee which does not involve discipline, a copy of
that report will be given to the employee.
ALCOHOLISM AND DRUG ABUSE
404.Alcoholism and drug abuses are recognized by the parties to be treatable
conditions. Without detracting from the existing rights and obligation of the
parties recognized in other provisions of this Agreement, the Company and the
Union agree to cooperate in encouraging employees afflicted with alcohol or drug
abuse to undergo a coordinated Employee Assistance Program directed to the
objective of their rehabilitation. The acceptance of Employee Assistance shall
subject the employee to alcohol/drug testing for a period of one (1) year
beginning on the release from treatment date. Should an employee request
95
<PAGE>
SECTION 14 - SAFETY AND HEALTH
==========================================================
entrance into such a program, such request shall not jeopardize the employee's
job security or future promotional opportunities. Drug and alcohol testing is
appropriate when based on factors that indicate that an employee is using or has
used drugs or alcohol in violation of the substance abuse policy, drawn from
specific objective and articulate facts which may be inferred from those facts
in light of every day experience. Reasonable cause also exists when such factors
are present and the employee is involved in an accident or injury that is
reportable to OSHA or any federal, state or local government agency. OSHA
reportable injuries include any injury requiring medical attention or lost time
from work. Medical attention does not include first aid treatment rendered at
the plant.
There will be no random drug and alcohol testing.
SAFETY AND HEALTH TRAINING
405.The Company recognizes the special need to provide appropriate safety and
health training to all employees. The Company presently has safety and health
training that provides either the training described below or the basis for such
training as it relates to the needs of the Company and its plant.
406.Training programs shall recognize that there are different needs for safety
and health training for newly hired employees, employees who are transferred or
assigned to a new job, and employees who require periodic retraining. The Safety
and Health Committee may make recommendations on these and other safety
education matters.
TRAINING OF NEWLY HIRED EMPLOYEES
407.Newly hired employees shall receive training in the general recognition of
safety and health hazards, their statutory and basic labor contract rights and
obligations and the purpose and functions of the Company's Safety and Health
Department, the
96
<PAGE>
SECTION 14 - SAFETY AND HEALTH
==========================================================
Joint Safety and Health Committee and the International Union Safety and Health
Department. In addition, upon initial assignment to a job, such employees shall
receive training on the nature of the operation or process, the safety and
health hazards of the job, the safe working procedures, and purpose, use and
limitations of personal protective equipment required, and other controls or
precautions associated with the job.
408. The Union co-chairperson of the Safety and Health Committee and the
International Union Safety and Health Department or a designee shall, upon
request, be afforded the opportunity to review the training program for newly
hired employees at the plant level.
TRAINING OF OTHER EMPLOYEES
409. The training of employees other than those newly hired by the Company shall
be directed to the hazards of the job or jobs on which they are required to
work. Such training shall include hazard recognition, safe working procedures,
purpose, use and limitations of special personal protective equipment required,
and any other appropriate specialized instruction.
RETRAINING
410. As required by an employee's job and assignment area, periodic retraining
shall be given on safe working procedures, hazard recognition, and other
necessary procedures and precautions.
MEDICAL RECORDS
411. The Company shall maintain the confidentiality of reports of medical
examinations of its employees and shall only furnish such reports to a physician
designated by the employee upon the written authorization of the employee;
provided, that the Company may use or supply medical examination reports of its
employees in response to subpoenas, requests to the
97
<PAGE>
SECTION 14 - SAFETY AND HEALTH
==========================================================
Company by any Governmental agency authorized by law to obtain such reports, and
in arbitration or litigation of any claim or action involving the Company.
Whenever the Company physician detects a medical condition, which, in his
judgment, requires further medical attention, the Company physician shall advise
the employee of such condition or to consult with his personal physician.
<PAGE>
SECTION 15 - MILITARY SERVICE
==========================================================
SECTION 15 -- MILITARY SERVICE
RE-EMPLOYMENT
412.The Company shall accord to each employee who applies for re-employment
after conclusion of his military service with the United States such
re-employment rights as he shall be entitled to under then existing statutes.
413.Reasonable programs of training shall be employed in the event employees do
not qualify to perform the work on the job which they might have attained except
for absence in such service.
414.Any employee so applying for reinstatement shall be granted upon request a
leave of absence without pay not to exceed sixty (60) days before he shall be
required to return to work.
415.Any employee entitled to reinstatement under this Section who applies for
re-employment and who desires to pursue a course of study in accordance with the
Federal Law granting him such opportunity before returning to his employment
with the Company shall be granted a leave of absence for such purpose. Such
leave of absence shall not constitute a break in the record of continuous
service of such employee but shall be included therein provided the employee
reports promptly for re-employment after the completion or termination of such
course of study. Any such employee must notify the Company and the Union in
writing at least once each year of his continued interest to resume active
employment with the Company upon completing or terminating such course of study.
99
<PAGE>
SECTION 15 - MILITARY SERVICE
==========================================================
416.Any employee entitled to reinstatement under this section who returns with
service-connected disability incurred during the course of his service shall be
assigned to any vacancy which shall be suitable to such impaired condition
during the continuance of such disability irrespective of seniority; provided,
however, that such impairment is of a nature as to render the veteran's
returning to his own job or department onerous or impossible; and provided
further that the veteran meets the minimum physical requirements for the job
available or for the job as the Company may be able to adjust it to meet the
veteran's impairment.
VACATIONS
417.An employee who, after being honorably discharged from the military service
of the United States, is reinstated pursuant to this Section shall be entitled
to a vacation with pay or, in lieu thereof, to vacation allowance in and for the
calendar year in which he is reinstated in accordance with the provisions of
Section 12 - Vacations, of this Agreement, without regard to any requirement
other than an adequate record of continuous service.
MILITARY ENCAMPMENT ALLOWANCE
418.An employee with one (1) or more years of continuous service who is required
to attend an encampment of the Reserve of the Armed Forces or National Guard
shall be paid, for a period not to exceed two (2) weeks in any calendar year,
the difference between the amount paid by the Government (not including travel,
subsistence and quarters allowance) and the amount calculated by the Company in
accordance with the following formula. Such pay shall be based on the number of
days such employee would have worked had he not been attending such encampment
during such two (2) weeks (plus any Holiday in such two (2) weeks which he would
have not worked) and the pay for each such day shall be eight (8) times
100
<PAGE>
SECTION 15 - MILITARY SERVICE
==========================================================
his average straight-time hourly rate of earnings (including applicable
incentive earnings but excluding shift differentials and Sunday and overtime
premiums) during the last payroll period worked prior to the encampment. If the
period of such encampment exceeds two (2) weeks in any calendar year, the period
on which such pay shall be based shall be the first two (2) weeks he would have
worked during such period.
101
<PAGE>
SECTION 16 - SEVERANCE ALLOWANCE
SECTION 16 -- SEVERANCE ALLOWANCE
CONDITION OF ALLOWANCE
419.When, in the sole judgment of the Company, it decides to close permanently
the plant or discontinue permanently a department of the plant or substantial
portion thereof and terminate the employment of individuals, an employee whose
employment is terminated either directly or indirectly as a result thereof
because he was not entitled to other employment with the Company pursuant to the
provisions of Section 13 - Seniority of this Agreement and Paragraph 423 shall
be entitled to a severance allowance in accordance with and subject to the
following provisions.
420.Before the Company shall finally decide to close permanently the plant or
discontinue permanently a department of the plant, it shall give the Union, when
practicable, advance written notification of its intention. Such notification
shall be given at least ninety (90) days prior to the proposed closure date, and
the Company will thereafter meet with appropriate Union representatives in order
to provide them with an opportunity to discuss the Company's proposed course of
action. Upon conclusion of such meetings, which in no event shall be less than
thirty (30) days prior to the proposed closure or partial closure date, the
Company shall advise the Union of its final decision. The final closure decision
shall be the exclusive function of the Company. This notification provision
shall not be interpreted to offset the Company's right to lay off or in any
other way reduce or increase the working force in accordance with its presently
existing rights as set forth in Section 3 of this Agreement.
ELIGIBILITY
421.Such an employee to be eligible for a severance allowance shall have
accumulated three (3) or more years of continuous
102
<PAGE>
SECTION 16 - SEVERANCE ALLOWANCE
Company service as computed in accordance with Section 13 - Seniority of this
Agreement.
422.In lieu of severance allowance, the Company may offer an eligible employee a
job, in the same job class for which he is qualified, in another plant of the
Company. The employee shall have the option of either accepting such new
employment or requesting his severance allowance. If an employee accepts such
other employment, his continuous service record shall be deemed to have
commenced as of the date of the transfer, except for the purpose of severance
pay under this section and for purposes of Section 12 - Vacations, his previous
continuous service record shall be maintained and not be deemed to have been
broken by the transfer.
423.As an exception to Paragraph 422, an employee otherwise eligible for
severance pay who is entitled pursuant to Section 13 - Seniority to a job in the
same job class in another part of the plant shall not be entitled to severance
pay whether he accepts or rejects the transfer. If such transfer results
directly in the permanent displacement of some other employee, the latter shall
be eligible for severance pay provided he otherwise qualifies under the terms of
this section.
SCALE OF ALLOWANCE
424.An eligible individual shall receive severance allowance based upon the
following weeks for the corresponding continuous Company service:
<TABLE>
<CAPTION>
-------------------------------------------------------
Weeks of
Severance
Continuous Company Service Allowance
-------------------------------------------------------
<S> <C>
3 years but less than 5 years 4
5 years but less than 7 years 6
7 years but less than 10 years 7
</TABLE>
103
<PAGE>
SECTION 16 - SEVERANCE ALLOWANCE
10 years or more 8
-------------------------------------------------------
CALCULATION OF ALLOWANCE
425.A week's severance allowance shall be determined in accordance with the
provisions for calculation of vacation allowance as set forth in Section 12 -
Vacations.
PAYMENT OF ALLOWANCE AND TERMINATION
426.Payment shall be made in a lump sum at the time of termination.
427.Acceptance of severance allowance shall terminate employment and continuous
service for all purposes under this Agreement.
NON-DUPLICATION OF ALLOWANCE
428.Severance allowance shall not be duplicated for the same severance, whether
the other obligation arises by reason of contract, law, or otherwise. If an
individual is or shall become entitled to any discharge, liquidation, severance
or dismissal allowance or payment of similar kind by reason of any law of the
United States of America or any of the states, districts, or territories thereof
subject to its jurisdiction, the total amount of such payments shall be deducted
from the severance allowance to which the individual may be entitled under this
section, or any payment made by the Company under this section may be offset
against such payments. Statutory unemployment compensation payments shall be
excluded from the non-duplication provisions of this paragraph.
ELECTION CONCERNING LAYOFF STATUS
429.Notwithstanding any other provisions of this Agreement an employee who would
otherwise have been terminated in accordance with the applicable provisions of
this Agreement and under the circumstances specified in the Condition of
Allowance Section may, at such time, elect to be placed upon layoff status
104
<PAGE>
SECTION 16 - SEVERANCE ALLOWANCE
for thirty (30) days or to continue on layoff status for an additional thirty
(30) days if he had already been on layoff status. At the end of such thirty
(30) day period he may elect to continue on layoff status or to be terminated
and receive severance allowance if he is eligible to any such allowance under
the provisions of this Section 16; provided, however, if he elects to continue
on layoff status after the thirty (30) day period specified above, and is unable
to secure employment with the Company within an additional sixty (60) day
period, at the conclusion of such additional sixty (60) day period he may elect
to be terminated and receive severance allowance if he is eligible for such
allowance. Any Supplemental Unemployment Benefit payment received by him for any
period after the beginning of such thirty (30) day period shall be deducted from
any such severance allowance to which he would have been otherwise eligible at
the beginning of such thirty (30) day period.
105
<PAGE>
SECTION 17 - PRIOR AGREEMENTS
SECTION 17 -- PRIOR AGREEMENTS
430.The terms and conditions established by this Agreement replace those
established by the Agreement dated May 1, 1992, except as otherwise specified in
this Agreement.
431.Any grievance which, as of the effective date of this Agreement, has been
presented in writing and is in the process of adjustment under the grievance
procedure of such prior Agreement shall be continued to be processed under the
grievance and arbitration procedures of this Agreement and settled in accordance
with the applicable provisions of such prior Agreement for the period prior to
the effective date of this Agreement and for any period thereafter in accordance
with the applicable provisions of this Agreement.
432.Any grievance filed on or after the effective date of this Agreement which
is based on the occurrence or non-occurrence of an event which arose prior to
the effective date of this Agreement must be a proper subject for a grievance
under this Agreement and processed in accordance with the grievance and
arbitration procedure of this Agreement. Such grievance shall be settled in
accordance with the applicable provisions of the prior Agreement, for the period
prior to the effective date of this Agreement, and for any period thereafter in
accordance with the applicable provisions of this Agreement.
106
<PAGE>
SECTION 18 -- SUB AND INSURANCE GRIEVANCES
SECTION 18 -- SUB AND INSURANCE GRIEVANCES
433. The following procedure shall apply only to disputes concerning the
Supplemental Unemployment Benefit Plan (SUB) and the Insurance Agreement
(including the Program of Insurance Benefits [PIB]), but it shall not apply to a
claim under the PIB for life insurance.
434. If any difference shall arise between the Company and any employee as to
the benefits payable to him (a) pursuant to the SUB, or (b) pursuant to the
Insurance Agreement (including PIB) because his claim was denied in whole or in
part; or between the Company and the Union as to the interpretation or
application of or compliance with the provisions of the SUB, and such difference
is not resolved by discussion with a representative of the Company, it shall, if
presented in writing under the following provisions, become a SUB grievance or
an Insurance grievance. A SUB grievance or an Insurance grievance (in either
case hereinafter referred to as grievance) shall be disposed of in the manner
described below:
435. A grievance must, in order to be considered, be presented in writing within
thirty (30) days after the action giving rise to such difference on a form which
shall be dated and signed by the employee involved and the representative
designated by the Local Union to handle such grievances and presented to a local
representative of the Company designated to receive and handle such grievances.
Such grievance shall be initiated in step 2, under Section 6, and processed
through arbitration if necessary.
107
<PAGE>
SECTION 19 - SUPPLEMENTAL UNEMPLOYMENT BENEFITS
SECTION 19 -- SUPPLEMENTAL UNEMPLOYMENT BENEFITS
DESCRIPTION OF PLAN
436. The Supplemental Unemployment Benefit Plan effective March 2, 1997, (the
Plan) is contained in a booklet entitled "1997 Supplemental Unemployment Benefit
Plan," a copy of which will be provided each employee. Such booklet constitutes
a part of this section as though incorporated herein.
COVERAGE
437. The Plan shall, for the period specified in the termination provisions of
this Agreement, be applicable to the employees represented by the Union.
438. There shall be one trust fund under the Plan applicable to all employees
covered by the Plan and any determinations under the Plan will be based on the
experience with respect to everyone covered thereby.
REPORTS TO THE UNION
439. The Company will provide the Union with information on the forms agreed to
by the parties and at the times indicated thereon, and such additional
information as will reasonably be required for the purpose of enabling the Union
to be properly informed concerning operations of the Plan.
108
<PAGE>
SECTION 20 - TERMINATION DATE
SECTION 20 -- TERMINATION DATE
440. Except as otherwise provided below, this Agreement shall terminate at the
expiration of sixty (60) days after either party shall give written notice of
termination to the other party but in any event shall not terminate earlier than
12:01 a.m. March 2, 2000.
441. If either party gives such notice it may include therein notice of its
desire to negotiate with respect to Insurance, Pensions, and Supplemental
Unemployment Benefits (existing provisions or agreements as to Insurance,
Pensions, and Supplemental Unemployment Benefits to the contrary
notwithstanding), and the parties shall meet within thirty (30) days thereafter
to negotiate with respect to such matters. If the parties shall not agree with
respect to such matters by the end of sixty (60) days after the giving of such
notice, either party may thereafter resort to strike or lockout, as the case may
be, in support of its position in respect to such matters as well as any other
matter in dispute (the existing agreements or provisions with respect to
Insurance, Pensions, and Supplemental Unemployment Benefits to the contrary
notwithstanding).
442. Notwithstanding any other provisions of this Agreement, or the termination
of any or all other portions hereof, the Insurance, Pensions, and Supplemental
Unemployment Benefits Program shall remain in effect until 12:01 a.m. March 3,
2000.
443. Any notice to be given under this Agreement shall be given by registered
mail. Notices given by the Company shall be addressed to the District Director,
United Steelworkers of America, 12821 Industrial Road, Houston, TX 77015, and
notices given by the Union shall be addressed to the Human Resources Executive,
Sheffield Steel Corporation, P. O. Box 218, Sand Springs, OK 74063. Either party
may by written notice,
109
<PAGE>
SECTION 20 - TERMINATION DATE
change the address to which the registered mail notices shall be given.
110
<PAGE>
SECTION 21 - SIGNATURE PAGES
SIGNATURE PAGES
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
in the respective names by their respective representatives thereunto duly
authorized this 2nd day of March 1997.
SIGNATURE PAGE
-----------------------------------------------------------------
United Steelworkers
of America AFL-CIO-CLC
-----------------------------------------------------------------
George M. Becker
President
Leo W. Gerard
Secretary/Treasurer
Richard H. Davis
VP Administration
Leon Lynch
VP Human Affairs
Jack R. Golden
District Director
111
<PAGE>
SECTION 21 - SIGNATURE PAGES
SIGNATURE PAGE - LOCAL 2741
- -------------------------------------------------------------------
Alton W. Davis Jerry Flourney
VP of Operations Staff Representative
John W. Kachel James L. Earls,
Director, Human Resources President
Steven R. Morgan Carl E. Sanders,
Mgr. Employee Relations Vice President
Jim R. Crompton Robin A. Hendricks,
Supt. Steel Production Treasurer
Robert F. Sefchick Daniel L. Comer
Supt. Merchant Mill Recording Secretary
Leslie L. Kelly Donald A. Summers,
Corporate Controller Financial Secretary
112
<PAGE>
SECTION 21 - SIGNATURE PAGES
Jon C. Heath Kenneth W. Ingram,
Chief Engineer Grievance Committee
113
<PAGE>
APPENDIX A -- WAGES
APPENDIX A -- WAGES
WAGE TABLE A.1
A.1 Hourly Wage Rate for Sand Springs Plant - Effective March 2, 1997.
<TABLE>
<CAPTION>
----------------------------------------------------------------
STD. HRLY.
JOB CLASS B.R.I.C. ADD-ON WAGE RATE
----------------------------------------------------------------
<S> <C> <C> <C>
1-2 4.600 4.660 9.260
3 4.719 4.688 9.407
4 4.838 4.716 9.554
5 4.957 4.744 9.701
6 5.076 4.772 9.848
7 5.195 4.800 9.995
8 5.314 4.828 10.142
9 5.433 4.856 10.289
10 5.552 4.884 10.436
11 5.671 4.912 10.583
12 5.790 4.940 10.730
13 5.909 4.968 10.877
14 6.028 4.996 11.024
15 6.147 5.024 11.171
16 6.266 5.052 11.318
17 6.385 5.080 11.465
18 6.504 5.108 11.612
19 6.623 5.136 11.759
20 6.742 5.164 11.906
21 6.861 5.192 12.053
22 6.980 5.220 12.200
23 7.099 5.248 12.347
24 7.218 5.276 12.494
----------------------------------------------------------------
</TABLE>
114
<PAGE>
APPENDIX A -- WAGES
WAGE TABLE A.2
A.2 Hourly Wage Rate for Sand Springs Plant - Effective March 2, 1998
<TABLE>
<CAPTION>
----------------------------------------------------------------
STD. HRLY.
JOB CLASS B.R.I.C. ADD-ON WAGE RATE
----------------------------------------------------------------
<S> <C> <C> <C>
1-2 4.900 4.660 9.560
3 5.019 4.688 9.707
4 5.138 4.716 9.854
5 5.257 4.744 10.001
6 5.376 4.772 10.148
7 5.495 4.800 10.295
8 5.614 4.828 10.442
9 5.733 4.856 10.589
10 5.852 4.884 10.736
11 5.971 4.912 10.883
12 6.090 4.940 11.030
13 6.209 4.968 11.177
14 6.328 4.996 11.324
15 6.447 5.024 11.471
16 6.566 5.052 11.618
17 6.685 5.080 11.765
18 6.804 5.108 11.912
19 6.923 5.136 12.059
20 7.042 5.164 12.206
21 7.161 5.192 12.353
22 7.280 5.220 12.500
23 7.399 5.248 12.647
24 7.518 5.276 12.794
----------------------------------------------------------------
</TABLE>
115
<PAGE>
APPENDIX A -- WAGES
WAGE TABLE A.3
A.3 Hourly Wage Rate for Sand Springs Plant - Effective March 2, 1999.
<TABLE>
<CAPTION>
---------------------------------------------------------------------
STD. HRLY.
JOB CLASS B.R.I.C. ADD-ON WAGE RATE
---------------------------------------------------------------------
<S> <C> <C> <C>
1-2 5.200 4.660 9.860
3 5.319 4.688 10.007
4 5.438 4.716 10.154
5 5.557 4.744 10.301
6 5.676 4.772 10.448
7 5.795 4.800 10.595
8 5.914 4.828 10.742
9 6.033 4.856 10.889
10 6.152 4.884 11.036
11 6.271 4.912 11.183
12 6.390 4.940 11.330
13 6.509 4.968 11.477
14 6.628 4.996 11.624
15 6.747 5.024 11.771
16 6.866 5.052 11.918
17 6.985 5.080 12.065
18 7.104 5.108 12.212
19 7.223 5.136 12.359
20 7.342 5.164 12.506
21 7.461 5.192 12.653
22 7.580 5.220 12.800
23 7.699 5.248 12.947
24 7.818 5.276 13.094
---------------------------------------------------------------------
</TABLE>
116
<PAGE>
APPENDIX A -- WAGES
WAGE TABLE A.4
A.4 TRADE OR CRAFT RATES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
JOB CLASS
------------------
A B C
-------------------------------------------------------------------------
<S> <C> <C> <C>
Maintenance Technician 22 20 18
Baghouse Repair Technician 22 20 18
Caster Repair Technician 22 20 18
Carpenter 16 14 12
Electrician 18 16 14
Electronic Technician 20 18 16
Machinist 18 16 14
Millwright 18 16 14
Pipe Fitter 18 16 14
Roll Turner 17 15 13
Welder 18 16 14
Sr. Fabricator 18
Fabricator (CWS Welder) 16
Trades Helper (Apprentice-starting job class-zone 6)
-------------------------------------------------------------------------
</TABLE>
A.5 APPRENTICE RATES
Apprentice rates will be established as set forth in Appendix C.
117
<PAGE>
APPENDIX B -- TESTING
APPENDIX B -- TESTING
1. While the Union preserves fully its right to challenge through the
grievance procedure the present or future use of tests, the Union and
the Company agree that where tests are used by the Company as an aid in
making determinations of the qualifications of an employee, such a test
must in any event be a job-related test. A job related test, whether
oral, written or in the form of an actual work demonstration, is one
which measures whether an employee can satisfactorily meet the specific
requirements of that job including the ability to absorb any training
which may necessarily be provided in connection with that job. A written
test may not be used unless the job requires reading comprehension,
writing or arithmetical skills, and may be used to measure the
comprehension and skills required for such job.
2. All tests shall be:
A. Fair in their makeup and in their administration;
B. Free of cultural, racial and ethnic bias.
3. Testing procedures, shall in all cases include notification to the
employee of his deficiencies and an offer to counsel him as to how he
may overcome such deficiencies.
4. Where a test is used by the Company as an aid in making a determination
of the qualifications of an employee, and where the use of the test is
challenged properly in the grievance procedure, the following is hereby
agreed to:
A. The Company will furnish to a designated representative of the International
Union a copy of the disputed test and all such background and related
materials as may be relevant and available.
118
<PAGE>
APPENDIX B -- TESTING
B. All such tests and materials will be held in strictest confidence and will
not be copied or disclosed to any other person; provided that such tests and
materials may be disclosed to an expert in the testing field for the purpose
of preparation of the Union's position in the grievance procedure and to an
arbitrator, if the case proceeds to that step. All tests and materials will
be returned to the Company following resolution of the dispute.
C. Copies of transcripts and exhibits presented in the arbitration of cases
involving the challenge to a test will also be held in strictest confidence
and will not be copied or otherwise published.
5. In the determination of ability and physical fitness as used to fill
apprenticeship vacancies in accordance with the applicable seniority
provisions of the Agreement, the Company shall be limited to the use of
such examinations and testing procedures, which are:
A. Job related,
B. Fair in their makeup and their administration, and,
C. Free of cultural, racial or ethnic bias.
Any test used by the Company as an aid in making determinations of the
qualifications of an applicant must be job-related tests. A job related
test, whether oral, written or in the form of an actual work
demonstration, is one that measures whether an applicant can
satisfactorily meet the specific requirements of the given craft,
including the ability to absorb the appropriate training.
119
<PAGE>
APPENDIX C -- APPRENTICES
APPENDIX C -- APPRENTICES
An Apprenticeship Team composed of representatives of the Union and the Company
shall be established.
The Team shall review the contents of the existing apprenticeship programs for
the purpose of (a) developing uniform standards relating to educational
attainment through classroom or similar study by apprenticeship periods;
(b) developing uniform standards relating to on-the-job work achievement
and the time schedules of required experience by type and/or class of
work by apprenticeship periods, and; (c) developing uniform standards for
determining the level, if any, of advanced apprenticeship credit to be
allocated to employees transferring to an apprenticeship program from a
related job.
1. Any testing for apprenticeship positions will be done by the guidelines set
forth in the current contract under Appendix B Testing, and any test
selected for this purpose shall be discussed by the Union/Management
Apprenticeship Team.
2. The Team to establish standards of advancement will consist of:
. Manager, Employee Relations
. 1st Line Maintenance Supervisor
. Union Senior Representative
. Skilled Maintenance Person
. Skilled Maintenance Person
3. Promotions will be based upon acquired knowledge, skill, and experience.
The Promotion Review Team will consist of:
. Skilled Union Maintenance Person (Mentor)
. 1st Line Maintenance Supervisor
. Union Representative
. Human Resource Representative
. VP of Operations or Director, Human Resources.
There is not a "quota" on promotions.
4. Each maintenance person below a Maintenance Tech A will have a Progress
Sheet which will document their progress. This Progress Sheet will be
available to the employee and maintained in the Departmental Maintenance
Offices. At least on a quarterly basis, the supervisor and employee will
review the Progress Sheet.
5. Through the Apprenticeship Team, any upgrading or changing of the program
will be made without upsetting or stalling the current program and any
transitions will be worked in as smoothly as possible.
120
<PAGE>
APPENDIX C -- APPRENTICES
6. The Apprenticeship Team may discuss short programs to upgrade and keep
current in technology "A" class craftsman.
Examples: Films, Seminars, etc.
7. An apprentice who gets temporarily cut back out of maintenance and is still
working inside the plant can continue his classroom studies as long as it
does not interfere with his scheduled hours. He will be paid straight time
for all class room studies at the appropriate apprentice rate.
8. The Apprenticeship Team will work jointly to improve and accelerate, where
possible, all of the apprenticeship programs. However, the Company retains
the right to make final decisions regarding the curriculum of all
apprenticeship training.
9. The Company will endeavor to obtain the most qualified instructors
reasonably available for all classroom training.
10. The Vice President of Operations and Director of Human Resources will meet
with the Apprenticeship Team and the supervisors quarterly to jointly
evaluate the future manning needs. The final determination of all
maintenance manning levels shall be made by the Vice President of
Operations.
11. When a vacancy occurs or when a future vacancy is foreseen, these entry-
level jobs in each craft will be filled by plant wide bids into the
apprenticeship program. If a vacancy occurs and there is an "A" or "C"
class craftsman already in the plant, the Union and Company can mutually
agree to bid the vacancy as either an "A" or "C" class position or an
apprentice.
12. When, through mutual agreement it is determined that it is necessary to
fill a maintenance position from outside the company, a level "C" will be
hired.
121
<PAGE>
APPENDIX D - CONTRACTING OUT
APPENDIX D - CONTRACTING OUT
This will confirm our understanding that effective for the term of the Labor
Agreement a trade and craft employee in a steel producing operation* as defined
in the CWS manual shall be guaranteed forty (40) hours of pay per week at his
SHWR so long as there are craft employees of contractors working in the plant on
the same trade and craft functions and duties which would otherwise be performed
by the employees for whom the guarantee is provided. This guarantee shall apply
only to those trade and craft plant employees who receive less than forty (40)
hours of pay in a week or who are on layoff and would otherwise perform the work
they are available for work.
The forty (40) hour guarantee provided by the preceding paragraph shall be
extended to trade and craft helpers and to employees occupying maintenance
non-craft jobs in Job Class 6 and above, who would otherwise have been assigned
to work with the trade and craft employees for those hours to which the forty
(40) hour guarantee is applicable under the preceding paragraph.
An employee to whom the foregoing guarantee is applicable may be assigned to
perform work in his craft or, in the case of other employees to a job in the
same job class or higher than the job to which the guarantee is applied at any
location throughout the plant irrespective of seniority unit rules or practices.
An employee who elects not to accept such an assignment shall not be eligible
for the guarantees provided herein.
The number of employees protected by this guarantee shall not exceed the lesser
of the number of contractor employees of similar skill and job content or,
alternately, exceed the number of plant trade and craft employees and eligible
maintenance non-craft employees who are working less than forty (40) hours
122
<PAGE>
APPENDIX D -- CONTRACTING OUT
plus the number who are on layoff. The recipients and distribution shall be
determined by the local parties. Such guarantee shall not be applicable with
respect to outside contractors employees working in the plant on new
construction, including major installation, major replacement, and major
reconstruction of equipment and productive facilities.
Any practice or local working condition requiring The Company to retrieve work,
which has been contracted out, shall be waived for the duration of this
Agreement.
123
<PAGE>
APPENDIX D -- CONTRACTING OUT
Notwithstanding the foregoing, nothing in this guarantee shall prevent the
Company from retrieving contracted out work.
*As set forth in the 1969 Incentive Arbitration Award.
124
<PAGE>
APPENDIX E - LABOR/MANAGEMENT PARTICIPATION TEAMS
APPENDIX E - LABOR/MANAGEMENT PARTICIPATION TEAMS
The following understandings have been agreed upon regarding an Agreement for
Labor/Management Participation Teams.
The strength and effectiveness of an industrial enterprise in a democratic
society require a cooperative effort between labor and the Company at several
levels of interaction. The parties hereto recognize that if steelworkers are to
continue among the best compensated employees in the industrial world and if
steel companies are to meet domestic mini mill and international competition,
the parties must pursue their joint objectives with renewed dedication,
innovation, initiative and cooperation.
Collective bargaining has proven to be a successful instrument in achieving
common goals and objectives in the employment relationship between steel labor
and the Company. It is recognized that there are continuing problems at the
level of the work site, which significantly impact that relationship. Solutions
to these problems, by all parties working together are vital if the quality of
work and work life for all employees is to be enhanced and if the
competitiveness and proficiency of the business enterprise is to be improved.
The parties recognize that a cooperative approach between employees and
supervision at the work site in a department or similar unit is essential to the
solution of problems effecting them. Many problems at this level are not readily
subject to resolution under existing contractual programs and practices, but do
effect the ongoing relationships between labor and the Company at that level and
the overall competitiveness of the industrial enterprise. Joint
125
<PAGE>
APPENDIX E - LABOR/MANAGEMENT PARTICIPATION TEAMS
participation in reaching goals and solving problems at a level which involves
all employees is an essential ingredient in any effort to improve the
effectiveness of the company's performance and to provide employees with a
measure of involvement while adding dignity and worth to their work life.
In pursuit of these objectives, the parties believe that the Union and the
Company can best implement a cooperative approach through the establishment of
Participation Teams (Teams) of employees and supervision in work groups and
problem solving teams within departments or similar units at the plant.
Accordingly, it is agreed that the following way of doing and conducting our
business will be undertaken with respect to Participation Teams.
126
<PAGE>
APPENDIX E - LABOR/MANAGEMENT PARTICIPATION TEAMS
1. A Steering Committee composed of:
. Vice President of Operations
. Two Department Superintendents
. Human Resource Director
. Local Union President
. Local Union Vice President
. Two selected by the Local Union Representatives
will be established at the plant level to coordinate the activities of the
participation teams at the department or unit level. A Participation Team
will be made up of a team leader facilitator and two (2) to four (4) team
members recruited by the team leader, from the appropriate unit. Employee
members and supervision members may be equal in number. All employees will
have frequent opportunities to volunteer and participate in Participation
Teams. Leader/facilitators will be selected by the Steering Committee.
2. The division's employees will receive training in team building. This
training will be furnished by the Company.
3. Teams will be assigned specific goals on which to work from the Steering
Committee. Such goals will be based upon the overall goals developed for the
division. A leader for a team will be appointed by the Steering Committee and
may be either a Company employee or a Union employee. Union employees, who
have received the appropriate training, will be given responsibility for
specific teams.
4. The teams, using the problem solving techniques taught in the team
building course, will work on their assigned goals. The team will regularly
report their progress to the Steering Committee, departments, and the plant
in general. When a recommended solution is reached, the Team will present the
recommended solution to the Steering Committee and to others the Team may
decide to invite to their presentation.
5. The Steering Committee will have responsibility and authority to
authorize spending up to $5,000 to fund a recommended solution. If the
capital amount is above this figure, the Vice President of Operations will
review the request.
6. The Vice President of Operations will chair the Steering Committee. This
committee will meet a minimum of once per month. This committee will review
the current status of the teams, evaluate the progress of the teams,
recommend training possibilities, and ensure the continuity of the
Participation Teams.
7. Each employee member of a Participation Team shall be compensated as if
worked for time spent away from work in committee or team activities.
8. Participation Team meetings shall normally be held during normal working
hours. Within the parameters of the goal assigned, a Participation Team shall
be free to discuss, consider and decide upon proposed means to improve
department or unit performance, employee morale and dignity, and conditions
of the work site. Appropriate subjects, among others, which a team may be
assigned include: New equipment specs, installation and training; use of
production facilities; quality of products and quality of the work
environment; production efficiencies; operational problems; work methods;
standard
127
<PAGE>
APPENDIX E - LABOR/MANAGEMENT PARTICIPATION TEAMS
work practices; safety and environmental health; scheduling and reporting
arrangements; absenteeism and overtime; incentive coverage and yield; job
alignments; contracting; and energy conservation and transportation pool. The
Steering Committee and the Participation Teams shall have no jurisdiction
over the initiation of, or the processing of complaints or grievances. The
Steering Committee and the Participation Teams shall have no authority to add
to, detract from, or change the terms of the Agreement.
9. A Participation Team shall be free to consider and recommend a full range
of responses to implement performance improvement, including but not limited
to, such items as bonus payments or changes in incentive performance pay. A
Participation Team may also consider one-time startup bonuses for employees
on new facilities who reach target levels in specified periods.
128
<PAGE>
APPENDIX F -- GAINSHARING
APPENDIX F - GAINSHARING
This language explains the rules governing Sheffield's Gainsharing program.
Following the narrative, is an example of the format to be followed. This
program is intended to encourage efficient operation and utilization of
resources at all levels. The program should allow us to renew our capital
equipment, improve our competitive position and reward the efforts of our
employees.
The Company will be responsible for the preparation of an annual Business Plan,
which will be reviewed on a quarterly basis by the Union and Company Executive
Committees to discuss actual performance.
Actual gainsharing calculations will be based on audited financial statements of
Sheffield as certified by an independent CPA firm. The Union shall have the
right to request an additional audit of the certified financial statements by an
independent accounting firm in Tulsa (selected by mutual agreement) prior to the
final gainsharing payment each year. The cost of this audit to be borne by the
Company.
Financial Statements will be prepared in accordance with Generally Accepted
Accounting Standards on the accrual basis. This plan will follow the layout of
these statements as closely as possible in order to present the Gainsharing
calculation in an understandable manner.
Working capital and fixed asset interest. Working capital interest represents
- ---------------
interest paid by the Company to its lenders for the inventory and accounts
receivable loans.
129
<PAGE>
APPENDIX F -- GAINSHARING
Fixed asset interest represents interest paid by the Company to its lenders for
loans associated with the purchase of or secured by plant equipment.
The rates and other costs paid for servicing these loans are determined by the
individual loan agreements.
Fixed asset principal is the amount paid to a lending institution to repay debt
- ---------------------
(principal) secured by the fixed assets of this company on debt committed to as
of May 1, 1988. This is not interest; interest is included in the above
paragraph.
"The first priority distribution of available funds" (PDAF #1) pool is net
- -------------------------------------------------------------------
income after tax, taken from the audited Financial Statements, plus depreciation
and amortization taken that year, minus fixed asset principal for debt incurred
prior to May 1, 1988.
The first deduction from the PDAF pool shall be for capital expenditures.
---------------
Sheffield will each year invest in capital spending to replace and maintain
existing equipment, increase capacity, save costs, enter into new product lines,
and other strategic improvements. The actual amount of capital expense incurred
each year will be deducted in full, up to $3,000,000. If the total amount in any
given year exceeds $3,000,000, 20% of the amount over $3,000,000 will be
deducted in the year incurred and the balance will be spread out equally over
the next four (4) fiscal years.
The second deduction from the PDAF pool shall be for HMK and Sheffield
----------------
employees.
130
<PAGE>
APPENDIX F -- GAINSHARING
If funds are still available after the deduction for capital expenditures as
outlined above, the second deduction shall be as follows:
1. 15 % of PDAF #1, capped at $500,000, will be distributed to the Union
employees.
2. 5% of PDAF #1, capped at $166,500, will be distributed to the Salaried
employees.
3. 15% of PDAF #1, capped at $500,000, will be distributed to HMK.
If there are not enough funds in the PDAF, after the deductions for capital
expenditures, to allow for a full distribution as outlined above, 100% of the
remaining funds will be distributed to the groups (HMK, Union, and Salaried
employees) per the following percentages:
Union 42.86%
HMK 42.86%
Salaried 14.28%
The third deduction from the PDAF is for working capital. If there are still
---------------
funds available after the first two deductions outlined above, up to $1,000,000
per year, will be reserved for working capital. This money will stay in the
Company and be used as normal working capital to meet the day-to-day capital
needs of the Company, or be used to pay down the working capital loan which
reduces interest payments and increases the Company's line of available credit.
The funds remaining after the three deductions outlined above shall be
distributed as follows
131
<PAGE>
APPENDIX F -- GAINSHARING
1. The Union employees shall receive the greater of
a. 25% of the remaining funds minus the funds allotted to the Union in the
second deduction; or
b. 10% of the remainder after the three deductions.
The total amount of gainsharing funds paid to the Union under this
program is subject to a cap of the total numbers of hours worked by
participating Union employees, times $5.00 dollars per hour.
2. HMK shall receive an amount equal to the aggregate amount distributed
to the Union.
3. The Salaried employees shall receive an amount equal to 33.3% of the
aggregate amount distributed to the Union.
All funds remaining after these final distributions will be discretionary
funds to be used in the best interest of the Company and its stockholders,
as authorized by the Board of Directors.
DISTRIBUTION OF FUNDS
One-half of the funds to be distributed to the Union will be paid the 7th
day of June following the close of each fiscal year. The remaining one-half
will be paid after Sheffield's outside auditors' audit and the Union/
Company independent auditor's review, if any.
Any and all monies due to the Union Members at the end of the last fiscal
year of this contract under the Gainsharing Program will be distributed in
the normal way even though this contract has expired.
GAINSHARING FORMAT
PDAF No. 1 = Net income after tax
----------
132
<PAGE>
APPENDIX F -- GAINSHARING
Plus............ Depreciation and amortization
Minus........... Fixed Asset Principal
Deductions From PDAF No. 1
- --------------------------
1. Capital spending -
Amount spent in full, up to $3 million per year. All over $3 million in any
year will be deducted 20% during year spent and the balance distributed
equally over the next four (4) years.
2. 15% of PDAF #1 distributed to hourly employees - capped at total of
$500,000.
15% of PDAF #1 to HMK - capped at $500,000.
5% of PDAF #1 to salary employees - capped at $166,500.
3. Working capital - up to $1 million per year if available in PDAF #1 after
deducting #1 and #2 above.
Remaining Funds = PDAF #1 Minus the three (3) Deductions on the line above.
- ---------------
Union employees will receive the greater of
25% times (Remaining Funds minus Deduction #2) or,
10% of Remaining Funds.
133
<PAGE>
APPENDIX F -- GAINSHARING
This amount, in aggregate, is capped at $5 times the number of hours worked
during the year by the participating Union employees.
HOUR ELIGIBILITY CALCULATION
An individual employee's share is determined by the number of actual hours
worked plus unworked Holiday hours and vacation hours. If the employee works one
(1) hour up to and including 520 hours per fiscal year (May 1 through April 30),
he will receive a 25% share. If the employee works 521 hours up to and including
1040 hours per fiscal year, he will receive a 50% share. If the employee works
1041 hours up to and including 1560 hours per fiscal year, he will receive a 75%
share. If the employee works 1561 hours or more in a fiscal year, he will
receive a 100% share.
EXAMPLE
Assume the Union Gainsharing Pool amount is $750,000. Also assume that
twenty-five (25) employees will receive a 25% share, seventy-five (75) employees
will receive a 50% share, and two-hundred (200) employees will receive a full
100% share.
Then:[25 (25% of X) + [75 (50% of X)] + [200 (X)] = $750,000
6.25X + 37.5X + 200X = $ 750,000
243.75X = $ 750,000
X = $3,076.923
134
<PAGE>
APPENDIX F -- GAINSHARING
Therefore:
25 people to receive $769.23 = (25% of 3,076.923) = $19,230.77
75 people to receive $1,1538.46 = (50% of 3,076.923) = $115,384.63
200 people to receive $3,076.92 = (100% of 3,076.923) = $615,384.60
-----------
$750,000.00
135
<PAGE>
APPENDIX G -- MISCELLANEOUS
APPENDIX G -- MISCELLANEOUS
PAY DISCREPANCIES
Effective February 1, 1986, when an error is made on an employee's pay,
exceeding a $25.00 amount, the correction will be made as soon as practical
after verification of the error - but no later than the end of the second
workday. Those amounts less than $25.00 will be included in the employee's next
regular paycheck. If not, the correction will be made immediately.
STRANDER
When an original strander (listed below) is cut back from the strander position
because of a reduction in force, he shall be assigned to a job to which he would
be entitled on the basis of seniority and paid at no less than Job Class 15 when
such assignments are in the Furnace and Casting unit. This rate preservation
shall not apply to an employee who permanently transfers from the strander
position.
--------------------------------------------------------
BADGE NAME C.S.D
--------------------------------------------------------
394 Denton, Don 6/27/65
LADLE OPERATORS
Ladle Operators shall receive Job Class 17 after successfully completing
training to assume the additional duties of calculating and adding alloys at the
trim station.
MELT SHOP TEMPORARY VACANCIES
It is agreed that in the Furnace line of progression, day-to-day vacancies will
be filled by moving up on the furnace. For example, the Third Helper on #1
furnace will move up to Second Helper on #1 and the Second Helper on #1 will
move up to First Helper on #1 furnace.
For weekly vacancies, the senior Third Helper between #1 and #2 furnace will
move up to Second Helper on whichever furnace
136
<PAGE>
APPENDIX G -- MISCELLANEOUS
has the vacancy. Likewise, the senior Second Helper between #1 and #2 furnaces
will move to the First Helper vacancy regardless of which furnace the vacancy is
occurring.
Obviously, the person must be qualified to perform the job to be eligible to
move up.
LABORERS
Laborers will be assigned the duties of cleaning the "jack stands" in the Melt
Shop as they are available to perform such work. Furnace helpers will also
continue to be responsible for this work as the need occurs.
PROCEDURE FOR FILLING MAINTENANCE JOBS IN ALL OPERATING DEPARTMENTS
Any Maintenance employee desiring to have a particular maintenance job in the
plant will fill out an assignment job request card. This card is available from
and to be returned to the Manager of Employee Relations, and will be held on
file for the desired job opening.
When a temporary vacancy (3 weeks or longer) or permanent vacancy occurs in an
operating department and no employee has a job assignment request card on file,
employees of the maintenance department shall be asked by seniority (most senior
to the least senior) to fill the vacancy. In the event no employee accepts the
vacancy, the vacancy shall be filled by the least senior qualified employee.
Job assignment request cards shall be available for the filling of jobs within
the departments as well as a method of transferring maintenance personnel from
department to department.
137
<PAGE>
APPENDIX G -- MISCELLANEOUS
MAINTENANCE & SERVICE LUNCH AND COFFEE BREAK
Historically, the Maintenance and Service Departments have been scheduled for a
casual lunch period of thirty (30) minutes, or a total of 8-1/2 hours of
in-plant time on a straight time basis. Under this scheduling practice "hurry
up" calls occurring during the lunch break have been honored, with time made
available for after repairs are completed to finish lunch. An employee answering
such call received time and one-half as the result of having his "free" time
interrupted.
In lieu of this scheduling practice, the Company agrees to schedule an eight (8)
hour on-the-job basis, to more realistically parallel methods pertaining to
lunch "on the fly" in effect in operating department, when the following
conditions are met.
1. Maintenance and Service personnel will report to their regular stations.
When work assignments are made, each employee will take his lunch to the
work area assigned, if the amount of work overlaps the lunch period.
2. Lunch time under normal conditions (on the fly) will be permitted in a
period from 3-1/2 to 5-1/2 hours after start of shift.
3. All calls for service will be honored, including those that may occur
during lunch. When calls occur under these conditions, twenty (20) minutes
for lunch will be allowed upon completion of repairs.
4. One ten (10) minute coffee break in the area assigned, before lunch and one
after lunch will be allowed.
138
<PAGE>
APPENDIX G -- MISCELLANEOUS
ELECTRICAL MAINTENANCE - DEPARTMENTAL PROCEDURES
ELECTRICIAN
Oklahoma State Department of Health Electrical License, City of Sand Springs
License, and testing fees will be at Company expense for those employees
qualified under the Administration of the Oklahoma State Department of Health.
ELECTRONIC TECHNICIAN
1. The Company will provide the training materials for employees who are
Electricians, providing a basis for qualification for Electronic
Technicians. The cost of training materials will be reimbursed to the
employee by the Company upon graduation. The Company will determine the
number of trainees at any given time which will not normally exceed the
normal force of electronic technicians.
2. Selections shall be in accordance with Section 13.
SHIFT ROTATION
The Electricians will be rotated on shifts except for special or seasonal
requirements.
MOBILE CRANE BREAKING-IN PERIOD
This Agreement covers the break-in period for an operator on the large mobile
cranes at Job Class 12. This period covers the time required for the new
incumbent to work with the regular operator to become familiar with the controls
and crane handling procedures.
1. The period will be a maximum of thirty (30) days or shorter, to be
determined by the Company and by the operators learning ability.
139
<PAGE>
APPENDIX G--MISCELLANEOUS
2. The new operator will be paid at Job Class 10 during this learning period.
RECLAIM DEPARTMENT LUNCH AND COFFEE BREAKS
It is mutually agreed between the Company and the Union, the following procedure
will be met in regard to lunch periods and coffee breaks under normal conditions
on an eight (8) hour on-the-job basis: (3 turns):
1. Twenty (20) minutes for lunch will be allowed in a period from 3-1/2 to
5-1/2 hours after start of shift.
2. One ten (10) minute coffee break before lunch and one after lunch will be
allowed.
3. All calls for service will be honored, including those that may occur
during open lunch box, or other means of food supply. When calls occur
under these conditions, twenty (20) minutes for lunch will be allowed upon
completion of work.
4. Billet loading and material handling duties are incorporated into all
positions in the Reclaim Department.
5. Reclaim incentive is to be paid to all employees working in Reclaim on a
daily basis, whether or not they are incumbent Reclaim Department
employees.
140
<PAGE>
APPENDIX H - LINE OF PROGRESSIONS
<TABLE>
<CAPTION>
MELT SHOP
<S> <C> <C> <C> <C> <C> <C>
Ladle Strand First Locomotive Retractory *Water Melt Shop
Crane (16) Operator (18) Helper (22) Engineer (12) Builder (15) Treater (12) Laborer (3)
Charging Ladle Second Switching Gradall/Pit
Crane (13) (17/15) Helper (14) (9) Operator (12)
Casting Runout Third Refractory Number indicates Job Class
Crane (11) Operator (13) Helper (10) Helper (7)
Indicates Progression
Stockhouse Casting
Crane (8) Utility (9) Indicates Regression
Scrap Ladle
Crane (8) Helper (6)
</TABLE>
*Water Treater originally bid by interdepartmental bid. The senior bidder was
awarded position and the next senior bidder was designated as an assistant Water
Treater for weekly vacations and sickness relief. The assistant is trained for
qualification into the Water Treater position and becomes the permanent Water
Treater upon a permanent vacancy. Succeeding vacancies will be bid
interdepartmental for the assistant's position.
141
<PAGE>
APPENDIX H--LINE OF PROGRESSIONS
MILL/WAREHOUSE/SHIPPING/RECLAIM
<TABLE>
<S> <C> <C> <C> <C> <C>
Roller Assistant Table Operator Shipping Crane Crane Operator Sorter/Loader Labor Pool
(23) (12) (8) (6) (11) (3)
Mill Operator Shear Operator #1 Hooker Shear Operator New Products Crane
(21) (12) (5) (7) (8)
Roll/Guide Builder Spell Person #2 Hooker Checker Loader Asset Sorter/Loader
(16) (10) (4) (6) (6)
Utility Mill Service Crane Spotter Number indicates Job Class
(11) (10) (6)
Indicates Progression
Crane Operator Utility Stocker
(10) (8) (5) Indicates Regression
Load Lugger Material Handler 1. Spell person will spell all five positions.
(6) (4)
2. Warehouse personnel will be assigned to
Hotbed Operator Sheer Helper Mill as needed during delays or downturns.
(8) (3)
</TABLE>
142
<PAGE>
APPENDIX H--LINE OF PROGRESSIONS
ROLL TURNING DEPARTMENT
ROLL
TURNER A (17)
ROLL TURNER Number indicates Job Class
APPRENTICE
Indicates Progression
Indicates Regression
If there are at least two (2) Class A Roll Turners scheduled in the Roll Turner
Department, all permanent vacancies above (2) will be bid plant wide as an
apprentice.
143
<PAGE>
POST SHOP
Paint Booth Operator
11
Tractor Operator
10
Straightner Operator
7
Shear Operator
7
Post Press Operator
9
Crop Shear Operator
5
Punch Press Operator
7
Conveyor Loader Utility
7 7
Bundler
8
Post Press Helper
6
Shear Helper
3
144
<PAGE>
MECHANICAL MAINTENANCE
MACHINIST MILLWRIGHT WELDER PIPE FITTER
(18) (18) (18) (18)
MACHINIST MILLWRIGHT WELDER PIPE FITTER
APPRENTICE APPRENTICE APPRENTICE APPRENTICE
CONSTRUCTION
CARPENTER
(16)
ELECTRONIC TECHNICIAN
(20)
CARPENTER
ELECTRICIAN
(18) Number indicates
ELECTRICAL Number indicates Job Class
APPRENTICE
Indicates Progression
ELECTRICIAN
Indicates Regression
BAGHOUSE REPAIR
Apprentice jobs filled by plant-wide bid.
Note: So long as the operations are
functioning without problems,
the banders will be permitted
BAGHOUSE
REPAIR
TECHNICIAN
(22)
The Junior Baghouse Technician shall be assigned to perform preventive
maintenance on the lime system and carbon injector on days both technicians are
working.
*Regresses back to last incumbent job.
145
<PAGE>
CASTER REPAIR TECHNICIAN
*CASTER
REPAIR
TECHNICIAN (22)
*Regresses back to last incumbent job
Exhibit 12
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(In thousands, except ratios)
<TABLE>
<CAPTION>
Years Ended April 30,
----------------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt $ 5,707 $ 7,384 $ 10,127 $ 11,758 $ 11,769
Amortization of debt issue costs 174 422 474 476 368
------- ------ -------- -------- --------
Total fixed charges $ 5,881 $ 7,806 $ 10,601 $ 12,234 $ 12,137
====== ===== ====== ====== ======
Earnings, as defined:
Income (loss) before income taxes
and extraordinary item $ (10,503) $ (2,353) $ 2,022 $ (3,091) $ (3,509)
Fixed charges (as shown above) 5,881 7,806 10,601 12,234 12,137
------ ----- ------ ------ ------
Earnings available for fixed charges $ (4,622) $ 5,453 $ 12,623 $ 9,143 $ 8,628
====== ===== ====== ======= =======
Ratio of earnings to fixed charges - .70x 1.19x .75x .71x
======== ==== ===== ===== =====
</TABLE>
<PAGE>
Exhibit 13
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
Computation of Earnings Before Interest, Taxes, Depreciation,
Amortization, and Non-cash Post-retirement Benefit Expense (EBITDA)
(In thousands)
<TABLE>
<CAPTION>
Years Ended April 30,
------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net income (loss) $ 1,825 (3,091) (3,509)
Interest expense 8,049 11,733 11,769
Income tax expense 197 - -
Depreciation and amortization 5,930 6,567 6,775
Accrual of post-retirement benefit
expense, net of cash paid 2,523 1,747 1,272
------- ------- ------
EBITDA $ 18,524 $ 16,956 $ 16,307
======= ======= ======
Restructuring expense - - 1,320
------- ------- ------
EBITDA, excluding restructuring expense $ 18,524 $ 16,956 $ 17,627
======= ======= ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE TWELVE MONTHS ENDED APRIL 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<CASH> 15
<SECURITIES> 0
<RECEIVABLES> 20,856
<ALLOWANCES> 658
<INVENTORY> 37,112
<CURRENT-ASSETS> 62,124
<PP&E> 65,885
<DEPRECIATION> 51,129
<TOTAL-ASSETS> 136,574
<CURRENT-LIABILITIES> 27,561
<BONDS> 95,614
0
0
<COMMON> 34
<OTHER-SE> 3,064
<TOTAL-LIABILITY-AND-EQUITY> 136,574
<SALES> 170,865
<TOTAL-REVENUES> 170,865
<CGS> 140,234
<TOTAL-COSTS> 140,234
<OTHER-EXPENSES> 6,775
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,769
<INCOME-PRETAX> (3,509)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,509)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,509)
<EPS-PRIMARY> (1.04)
<EPS-DILUTED> (1.04)
</TABLE>
