<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO __________
COMMISSION FILE NUMBER: 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)
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 _____
At the date of this filing, there were 3,375,000 shares of the Registrant's
$.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.
<PAGE>
SHEFFIELD STEEL CORPORATION
FORM 10-Q
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of
January 31, 1997 and April 30, 1996 3
Consolidated Condensed Statements of Operations
for the three months and nine months ended
January 31, 1997 and January 31, 1996 4
Consolidated Condensed Statements of Cash Flows
for the nine months ended January 31, 1997 and
January 31, 1996 5
Notes to Consolidated Condensed Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
</TABLE>
2
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
January 31,
1997 April 30,
ASSETS Unaudited 1996
------ --------- ---------
<S> <C> <C>
Current assets:
Cash and equivalents $ 18 46
Accounts receivable, less allowance
for doubtful accounts
of $838 and $658 at January 31,
1997 and April 30, 1996,
respectively 16,755 21,607
Inventories 39,346 40,321
Other current assets 3,736 3,630
------- -------
Total current assets 59,855 65,604
Property, plant and equipment, net 66,689 68,461
Intangible assets, net 3,428 3,818
Other assets 3,480 3,509
Deferred income tax asset, net 2,039 1,790
------- -------
Total assets $ 135,491 143,182
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------
Current liabilities:
Current portion of long-term debt $ 717 717
Accounts payable 11,478 20,495
Accrued interest payable 2,250 4,500
Accrued liabilities 5,833 6,328
------- -------
Total current liabilities 20,278 32,040
Long-term debt, excluding current
portion,
less unamortized discount of $1,732
and $1,840
at January 31, 1997 and April 30,
1996, respectively 103,334 96,324
Other liabilities 10,558 8,433
------- -------
Total liabilities 134,170 136,797
------- -------
Stockholders' equity:
Common stock 34 34
Additional paid-in capital 2,536 3,591
Retained earnings (319) 4,037
------- -------
Total stockholders' equity 2,251 7,662
Less loans to stockholders 930 1,277
------- -------
1,321 6,385
------- -------
Total liabilities and
stockholders' equity $ 135,491 143,182
======= =======
See accompanying notes to consolidated condensed financial statements.
</TABLE>
3
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
--------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 34,909 38,956 124,835 124,660
Cost of sales 29,374 33,584 103,713 104,153
---------- --------- --------- ---------
Gross profit 5,535 5,372 21,122 20,507
Selling, general and administrative 2,928 2,805 9,422 8,831
expense
Depreciation and amortization expense 1,698 1,597 5,126 4,840
Postretirement benefit expense 642 904 2,119 2,712
---------- --------- --------- ---------
Operating income 267 66 4,455 4,124
Interest expense (2,956) (2,992) (8,810) (8,730)
Other Income - - - 500
---------- --------- --------- ---------
Loss from operations before (2,689) (2,926) (4,355) (4,106)
income tax benefit
Income tax benefit - 1,141 - 1,610
---------- --------- --------- ---------
Net loss $ (2,689) (1,785) (4,355) (2,496)
========== ========= ========= =========
Net loss per common share $ (.797) (.529) (1.29) (.740)
========== ========= ========= =========
Dividends per common share $ - - - .172
========== ========= ========= =========
Common shares outstanding 3,375,000 3,375,000 3,375,000 3,375,000
========== ========= ========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
-----------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(4,355) (2,496)
Depreciation and amortization 5,234 4,948
Gain on sale of idle equipment - (500)
Accrual of postretirement
benefits other than pensions,
net of cash paid 1,403 2,232
Changes in assets and liabilities (5,824) (7,467)
------- -------
Net cash used in operations (3,542) (3,283)
------- -------
Cash flows from investing activities:
Capital expenditures (2,964) (4,016)
Proceeds from sale of idle - 500
equipment ------- -------
Net cash used in (2,964) (3,516)
investing activities ------- -------
Cash flows from financing activities:
Net increase in long-term debt 6,902 9,224
Repurchase of bond warrants - (94)
Payment of debt issuance costs (75)
Payments in respect of stock (424) (507)
appreciation rights
Dividends paid - (1,749)
------- -------
Net cash provided by 6,478 6,799
financing activities ------- -------
Net decrease in cash (28) -
Cash at beginning of period 46 26
------- -------
Cash at end of period $ 18 26
======= =======
Supplemental disclosure of cash flow
- ------------------------------------
information
- -----------
Cash paid during the period for:
Interest $ 11,060 10,872
======= =======
Income taxes $ - 175
======= =======
Noncash items related to stock
repurchase:
Decrease in paid-in capital $ 1,055 -
======= =======
Increase in other liabilities $ 662 -
======= =======
Decrease in loans to stockholders $ 393 -
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JANUARY 31, 1997 AND 1996
(UNAUDITED)
1) BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES
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
approximately 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, merchant and special bar quality steel products, specialty
steel products, and fence posts. The Company's products are sold throughout
the continental United States.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements and should be read in
conjunction with the financial statements contained in the Company's Form
10-K, for the year ended April 30, 1996. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
quarter and nine months ended January 31, 1997 are not necessarily
indicative of the results that may be expected for the year ending April
30, 1997.
2) NET LOSS PER SHARE OF COMMON STOCK
Loss per share of common stock is computed by dividing net loss applicable
to common stock by the weighted average number of common shares and
dilutive common stock equivalents outstanding each period. All options and
warrants were excluded from per-share computations since their effect on
loss per common share was anti-dilutive.
<TABLE>
<CAPTION>
3) INVENTORIES
The components of inventories are as follows:
January 31,
1997 April 30,
Unaudited 1996
--------- ---------
<S> <C> <C>
Raw materials and storeroom
supplies $ 11,271 10,823
Work in process 10,555 15,640
Finished goods 17,520 13,858
------ ------
$ 39,346 40,321
====== ======
</TABLE>
6
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, CONTINUED
4) RELATED PARTY TRANSACTIONS
On September 30, 1996, the Company finalized the terms of 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 Indenture. 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 Indenture.
7
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
The following discussion should be read in conjunction with the
Consolidated Condensed Financial Statements of the Company and the notes
thereto elsewhere in this Form 10-Q.
This Quarterly Report on Form 10-Q 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.
GENERAL
--------
On December 18, 1996, the Company experienced a failure in the transformer
supporting its number one furnace at its Sand Springs facility. A spare
transformer was promptly installed which subsequently failed for unrelated
reasons on January 5, 1997. Normal melting operations are expected to resume
by April 30, 1997. The Company will continue to run its number two electric
furnace at capacity and purchase billets to meet the semi-finished steel
requirements of its Sand Springs and Joliet rolling mills. The Company
maintains property and business interruption insurance which 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 has been able to satisfy rolling mill
requirements by supplementing billet production with outside billet purchases.
Shipments of finished goods to customers have not been, and are not expected to
be, affected in any way. The insurance policies have combined deductibles of
$350,000 which were recorded in the third fiscal quarter.
8
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
During the third quarter, the Company restructured the operating functions at
the Sand Springs facility resulting in a 14% reduction in the salaried
workforce. Severance costs of approximately $250 thousand were recognized and
charged to selling, general and administrative expenses in the third quarter.
The Company's collective bargaining agreement with the United Steelworkers of
America (the Union), which covers approximately 310 hourly-paid production and
maintenance employees at the Sand Springs facility, expired on March 1, 1997.
The Company reached a tentative agreement with the Union effective March 2,
1997, through March 1, 2000, which was ratified by the Union on March 8, 1997.
The Union agreement provides for an increase in hourly wages of $1.00 an hour
over the next three years and certain increased benefits. In conjunction with
the agreement, the Company is eliminating approximately 70 hourly positions,
primarily maintenance related. It is anticipated that the reduction in hourly
positions will be accomplished through retirement offers and voluntary
separation. The actual response to the offers and cost of such offers cannot be
accurately determined at this time, however, the Company expects to accrue
these severance and retirement costs in the fourth quarter.
During the third fiscal quarter, the Company accepted final commissioning of
the new mill at the Sand Springs facility and the final retainage was paid to
the contractor. The old mill, which was taken out of service in January, 1995,
was fully depreciated and was scrapped with the exception of approximately $32
thousand of equipment sold and approximately $143 thousand currently held for
sale.
RESULTS OF OPERATIONS
Three month period ended January 31, 1997
-----------------------------------------
SALES. Net sales for the Company for the third quarter were approximately
$34.9 million as compared to net sales of approximately $38.9 million in the
third quarter of fiscal 1996, a decrease of approximately $4.1 million or 10%.
Shipping levels in the third quarter decreased 18% to 92,909 tons from 112,835
tons in the third quarter of fiscal 1996, primarily due to decreased rebar and
semi-finished steel shipments. However, sales decreases were partially offset
by an increase in average selling prices from $345 per ton in the third quarter
of fiscal 1996 to $376 per ton in the third quarter of fiscal 1997 due
primarily to product sales mix. Average net selling prices in the third fiscal
quarter were lower for MBQ products and higher for rebar, fabricated products
and semi-finished steel than in the same period in prior year.
Shipments of rebar for the third quarter decreased 15.5% as compared to
the same quarter in the prior year due to weaker market demand primarily caused
by weather conditions in the south and southwest. Shipments of MBQ products
from Sand Springs increased 44% from the same period in the prior year due
primarily to increased production of MBQ products. Joliet shipments of MBQ
products increased 4% over the same quarter in the prior year due to increased
market demand. Fabricated product sales increased 3% over the same period in
the prior year due to a stronger market for fence posts. Shipments of semi-
finished steel for the third quarter decreased 72% due to the Company's
decision to decrease melt shop production due to a weak billet market.
9
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
COST OF SALES. The cost of sales for the third quarter decreased to
approximately $29.3 million as compared to approximately $33.6 million for the
same quarter in the prior year. As a percentage of sales, cost of sales
decreased from 86% of sales in the third quarter of the prior year to 84% of
sales in the third quarter this year primarily due to product mix. On an
average per-ton basis, cost of sales increased from $297 per ton for the third
quarter of fiscal 1996 to $316 per ton for the third quarter fiscal 1997. The
increase in cost of sales per ton is due to product mix, the costs associated
with the transformer failure, new product development in the rolling mill and
higher energy costs, primarily natural gas, in both the melt shop and rolling
mill offset by slightly lower scrap raw material costs.
GROSS PROFIT. Gross profit for the Company for the third quarter was
approximately $5.5 million as compared to a gross profit of approximately $5.4
million for the same quarter in the prior year, an increase of approximately
$0.1 million or 2%. Gross profit for the Company as a percentage of sales was
15.9% for the third quarter as compared to 13.8% for the same quarter in the
prior year. The increase in gross profit as a percentage of sales is a result
of higher average selling prices partially offset by increased cost of sales
per ton as discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses for the Company for the third quarter were
approximately $2.9 million as compared to approximately $2.8 million for the
third quarter of fiscal 1996, an increase of approximately $0.1 million or 4%.
The primary reason for the increase is severance costs recognized in
conjunction with the reorganization of the salaried workforce at the Sand
Springs facility.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased in
the third quarter approximately $0.1 million to $1.7 million, up from $1.6
million for the third quarter in the prior year due to depreciation on capital
expenditures incurred in the prior year and the current year.
POSTRETIREMENT BENEFIT EXPENSE. Postretirement benefit expense decreased
in the third quarter approximately $0.3 million to $0.6 million, down from $0.9
million for the third quarter in the prior year. The decrease in estimated
fiscal 1997 expense is due to a decrease in the health care cost trend rates as
determined by an independent actuary.
OPERATING INCOME. Operating income for the third quarter was
approximately $0.3 million as compared to approximately $70 thousand for same
quarter in the prior year, an increase of approximately $0.2 million or 300%.
Operating income for the Company as a percentage of sales for the third quarter
was 0.76% as compared to 0.17% for the same quarter in the prior year. The
increase was primarily due to improved gross profit as discussed above.
INTEREST EXPENSE. Interest expense decreased slightly compared to the
third quarter in the prior year. This decrease was due to decreased average
monthly borrowings under the Company's revolving credit facility to support a
slightly lower investment in working capital in comparison to the same period
in the prior year.
10
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
INCOME TAX. The Company has not recorded a benefit for income taxes as a
result of the net loss. 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. Accordingly, a valuation allowance has been recorded for a portion
of the deferred tax asset at January 31, 1997. The amount of the deferred tax
assets considered realizable, however, could change if estimates of future
taxable income change.
Nine month period ended January 31, 1997
----------------------------------------
SALES. Net sales for the nine months ended January 31, 1997 were
approximately $124.8 million as compared to net sales of approximately $124.6
million for the nine month period ended January 31, 1996, an increase of
approximately $0.2 million or 0.14%. Shipping levels for the nine month period
of 1997 increased 2% to 351,304 tons from 345,049 tons for the same period in
the prior year, reflecting good rebar and MBQ product demand. However,
shipping increases were partially offset by a decrease in average selling
prices from $361 per ton for the nine month period ending January 31, 1996 to
$355 per ton for the same period in 1997. The decrease in average selling
prices is attributable primarily to market conditions and product mix.
Shipments of rebar for the nine month period ending January 31, 1997
increased 12% as compared to the same period in the prior year primarily due to
increased market demand. Shipments of MBQ Products from Sand Springs increased
79% from the same period in the prior year due to increased production of MBQ
products while Joliet shipments of MBQ products decreased 5% due to weaker
market demand compared to the same period in the prior year. Shipments of
semi-finished steel decreased 26% from the same period in the prior year due
primarily to decreased sales in the third fiscal quarter as discussed above.
Shipments of fabricated products for the nine month period ending January 31,
1997 did not fluctuate materially as compared to the same period in the prior
year.
COST OF SALES. The cost of sales for the nine month period ended January
31, 1997 decreased to approximately $103.7 million as compared to approximately
$104.2 million for the same period in the prior year. Cost of sales decreased
as a percentage of sales to 83% compared with 83.5% for the same period in the
prior year. On an average per-ton basis, cost of sales decreased from $302 per
ton for the nine month period ending January 31, 1996 to $295 per ton for the
nine month period ending January 31, 1997. The decrease in cost of sales per
ton is due to a decrease in scrap raw material costs of approximately $8 per
ton compared to the same period in the prior year. However, the decrease in
cost of sales per ton is partially offset by higher conversion costs per ton in
the melt shop and rolling mill because of higher energy costs, the costs
associated with the transformer failure and costs of new product development in
the rolling mill in comparison to the same period in the prior year.
11
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
GROSS PROFIT. Gross profit for the Company for the nine month period
ending January 31, 1997 was approximately $21.1 million as compared to a gross
profit of approximately $20.5 million for same period in the prior year, an
increase of approximately $0.6 million or 3%. Gross profit for the Company as
a percentage of sales was 16.9% as compared to 16.5% for the same period in the
prior year. The increase in gross profit as a percentage of sales is a result
of lower cost of sales per ton as discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses for the Company for the nine month period ending
January 31, 1997 were approximately $9.4 million as compared to approximately
$8.8 million for the same period in the prior year, an increase of
approximately $0.6 million or 6.7%. The primary reason for the increase is
severance costs recognized in conjunction with the reorganization of the salary
workforce at the Sand Springs facility as well as selling expenses related to
additional MBQ product sales.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the nine
month period ending January 31, 1997 increased approximately $0.3 million to
approximately $5.1 million, up from approximately $4.8 million for the same
period in the prior year due to depreciation on capital expenditures incurred
in the prior year and current year.
POSTRETIREMENT BENEFIT EXPENSE. Postretirement benefit expense decreased
for the nine months ended January 31, 1997 approximately $0.6 million to $2.1
million, down from $2.7 million for the same period in the prior year. The
decrease in estimated fiscal 1997 expense is due to a decrease in the health
care cost trend rates as determined by an independent actuary.
OPERATING INCOME. Operating income for the nine month period ending
January 31, 1997 was approximately $4.5 million as compared to approximately
$4.1 million for same period in the prior year, an increase of approximately
$0.3 million or 8%. Operating income for the Company as a percentage of sales
increased to 3.6% up from 3.3% for the same period in the prior year. The
increase in operating income was primarily due to increased sales and gross
profit offset by the additional selling, general and administrative expenses as
discussed above.
INTEREST EXPENSE. Interest expense for the nine month period ending
January 31, 1997 increased slightly compared to the same period in the prior
year. The increase was due to increased average borrowings under the Company's
revolving credit facility during the nine months period in comparison to the
same period in the prior year.
INCOME TAX. The Company has not recorded a benefit for income taxes as a
result of the net loss. 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. Accordingly, a valuation allowance has been recorded for a portion
of the deferred tax asset at January 31, 1997. The amount of the deferred tax
assets considered realizable, however, could change if estimates of future
taxable income change.
12
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
As of January 31, 1997, the Company's long-term indebtedness was
approximately $103 million, excluding current portion of $0.7 million, after
giving effect to an unamortized discount attributable to detachable stock
warrants of approximately $1.7 million. The Company had approximately $8.2
million of borrowing availability at January 31, 1997 under its revolving
credit agreements.
Cash flow used by operations was approximately $3.5 million for the nine
month period ended January 31, 1997, as compared with cash flow used in
operations of approximately $3.3 million for the nine month period ended
January 31, 1996. Cash used in investing activities in the nine months ended
January 31, 1997 was approximately $3.0 million, consisting principally of
required replacement of plant equipment. For the nine month period ended
January 31, 1997, cash provided by financing activities consisted of increased
borrowings under the Company's revolving credit facility and contractual
payments to retired executives of the Company in respect of their stock
appreciation rights.
The Company's cash flow from operations, borrowings under the Revolving
Credit Facility and Railway Credit Facility, and recoveries of payments under
the Company's property casualty and business interruption insurance policies
for losses associated with the transformer failure are expected to be
sufficient to fund the budget for capital improvements, and meet near-term
working capital requirements.
On a longer term basis, the Company has significant future debt service
obligations. The Company's ability to satisfy these obligations is dependent
on its ability to generate adequate cash flow from operations. 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 long term debt and other investing
activities. The Company's future operating results are dependent on its
overall operating performance and are 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.
CAPITAL EXPENDITURES
Capital expenditures for the nine month period ended January 31, 1997 were
approximately $3.0 million, consisting primarily of normal capital projects
required or deemed economically attractive, throughout the Company. The
Company anticipates capital expenditures of approximately $.85 million during
the fourth quarter of fiscal 1997, consisting of normal capital projects and
expenditures related to an on-site oxygen plant which was placed in service
late in the third quarter of fiscal 1997. The Company's cash flow from
operations and borrowings under its revolving credit facilities are expected to
be sufficient to meet any near-term working capital requirements the Company
may have and to fund anticipated capital improvements.
13
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. 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 HOLERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
No exhibits.
A. Reports on Form 8-K
No reports on Form 8-K were filed during the third quarter ended January 31,
1997.
14
<PAGE>
SHEFFIELD STEEL CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q to be signed on its behalf
by the undersigned thereunto duly authorized.
SHEFFIELD STEEL CORPORATION
Date: March 13, 1997 /s/ Robert W. Ackerman
------------------ -----------------------
Robert W. Ackerman, President
and Chief Executive Officer
Date: March 13, 1997 /s/ Stephen R. Johnson
------------------ -----------------------
Stephen R. Johnson, Vice President
and Chief Financial Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED JANUARY 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 18
<SECURITIES> 0
<RECEIVABLES> 16,755
<ALLOWANCES> 0
<INVENTORY> 39,346
<CURRENT-ASSETS> 59,855
<PP&E> 66,689
<DEPRECIATION> 0
<TOTAL-ASSETS> 135,491
<CURRENT-LIABILITIES> 20,278
<BONDS> 103,334
0
0
<COMMON> 34
<OTHER-SE> 2,217
<TOTAL-LIABILITY-AND-EQUITY> 135,491
<SALES> 124,835
<TOTAL-REVENUES> 124,835
<CGS> 103,713
<TOTAL-COSTS> 103,713
<OTHER-EXPENSES> 5,126
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,810
<INCOME-PRETAX> (4,355)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,355)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,355)
<EPS-PRIMARY> (1.29)
<EPS-DILUTED> (1.29)
</TABLE>
