SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) November 29, 1996
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SCHNITZER STEEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
OREGON 0-22496 93-0341923
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
P.O. Box 10047
Portland, OR 97296-0047
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (503) 224-9900
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Page 1 of 13
Index to Exhibits on Page 10
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SCHNITZER STEEL INDUSTRIES, INC.
FORM 8-K/A
FEBRUARY 11, 1997
Item 2. Acquisition or Disposition of Assets
On November 29, 1996, PIC Acquisition Corporation ("PIC"), a wholly owned
subsidiary of Schnitzer Steel Industries, Inc. (the "Company"), acquired
4,079,225 shares of Common Stock of Proler International Corp. ("Proler")
(representing approximately 86% of the outstanding shares of Proler) for
$9.00 cash per share pursuant to a tender offer for all of the
outstanding shares of Common Stock of Proler. The tender offer commenced
on September 20, 1996 pursuant to the Agreement and Plan of Merger among
PIC, Proler, and the Company. PIC subsequently purchased an additional
342,600 shares of Common Stock of Proler, thereby increasing its
ownership to approximately 94% of the outstanding Proler shares. On
December 6, 1996, the Company completed the merger of PIC with and into
Proler. As a result of the merger, all remaining outstanding shares of
Proler Common Stock were converted into the right to receive the same
$9.00 per share in cash paid in the tender offer and Proler became a
wholly owned subsidiary of the Company.
The total amount of funds required to acquire Proler pursuant to the
tender offer and merger was approximately $42.5 million. The Company
borrowed these funds under its existing $100,000,000 unsecured revolving
credit facility with The First National Bank of Chicago, The Chase
Manhattan Bank, N.A., Wells Fargo Bank, N.A. and Seattle First National
Bank.
Proler is an environmental services company involved in the recovery and
recycling of scrap metals and industrial wastes. Through its joint
ventures, Proler exports ferrous scrap to foreign markets from scrap
collection, processing and deep water facilities in Los Angeles,
California; Providence, Rhode Island; Everett, Massachusetts; and Jersey
City, New Jersey. It is the Company's current intention that most of
Proler's assets will continue to be used in its business, although the
Company intends to review and consider disposing of Proler's businesses
outside of its core scrap metal recycling business.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
(1) The audited Consolidated Balance Sheets of Proler as of January
31, 1996 and 1995, and the related audited Consolidated
Statements of Operations, Stockholders' Equity and Cash Flows for
each of the three years in the period ended January 31, 1996, are
incorporated herein by reference from Part IV, Item 14. (a) 1. of
Proler's Form 10-K Annual Report (Commission File Number: 1-5276)
for the fiscal year ended January 31, 1996.
(2) The audited Combined Balance Sheets of Proler's Joint Operations
as of January 31, 1996 and 1995, and the related audited Combined
Statements of Operations, Stockholders' and Partners' Equity and
Cash Flows for each of the three years in the period ended
January 31, 1996, are incorporated herein by reference from Part
IV, Item 14 (a) 1. of Proler's Form 10-K Annual Report
(Commission File Number: 1-5276) for the fiscal year ended
January 31, 1996.
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SCHNITZER STEEL INDUSTRIES, INC.
FORM 8-K/A
FEBRUARY 11, 1997
(3) The unaudited Consolidated Balance Sheet of Proler as of July 31,
1996, and the related unaudited Consolidated Statements of
Operations and Cash Flows for each of the six months ended July
31, 1996 and 1995 (Incorporated by reference in the original Form
8-K filed by the Company on December 13, 1996).
(b) Pro Forma Financial Information
(1) Pro forma balance sheet combining the Company as of August 31,
1996 and Proler as of July 31, 1996 (unaudited).
(2) Pro forma statement of operations combining the Company for the
fiscal year ended August 31, 1996 and Proler for the twelve
months ended July 31, 1996 (unaudited).
(c) Exhibits
2. Agreement and Plan of Merger dated September 15, 1996
(Incorporated by reference in the original Form 8-K filed by the
Company on December 13 1996).
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consents of La Guardia & Petrella, L.L.C.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: February 11, 1997
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SCHNITZER STEEL INDUSTRIES, INC.
By/s/Barry A.Rosen
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Barry A. Rosen
Vice President, Finance
<PAGE>
SCHNITZER STEEL INDUSTRIES, INC.
PRO FORMA FINANCIAL INFORMATION
The following pro forma condensed combined statements (The Statements) give
effect to the November 29, 1996 acquisition of Proler International Corp.
(Proler) by Schnitzer Steel Industries, Inc. (SSI) for the periods explained
therein. The acquisition was accounted for as a purchase. The Statements do not
purport to be indicative of the results which would actually have been obtained
had the acquisition occurred as of the date or at the beginning of the periods
indicated or which may be obtained in the future. The Statements should be read
in conjunction with the respective historical financial information of SSI and
Proler.
<PAGE>
SCHNITZER STEEL INDUSTRIES, INC.
PRO FORMA COMBINED BALANCE SHEET
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
SSI Proler
Twelve Months Twelve Months Pro Forma
Ended Ended -------------------------------
August 31, 1996 July 31, 1996 Adjustments Combined
----------------- --------------- ------------ -------------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash $ 1,896 $ 263 $ $ 2,159
Accounts receivable 23,542 2,148 (100) (3) 25,590
Accounts receivable from related parties 1,058 1,058
Inventories 90,746 2,703 (600) (3) 92,849
Deferred income taxes 3,128 3,128
Prepaid expenses and other 4,118 872 4,990
Assets held for sale 6,203 (3) 6,203
----------------- --------------- ------------ -------------
TOTAL CURRENT ASSETS 124,488 5,986 5,503 135,977
----------------- --------------- ------------ -------------
NET PROPERTY, PLANT & EQUIPMENT 150,517 6,273 (1,851) (3) 154,939
----------------- --------------- ------------ -------------
OTHER ASSETS:
Goodwill 43,445 43,445
Investments in joint venture partnerships 9,909 53,642 7,358 (3) 70,909
Advances to joint venture partnerships 4,163 4,163
Other assets 4,967 4,281 9,248
----------------- --------------- ------------ -------------
62,484 57,923 7,358 127,765
----------------- --------------- ------------ -------------
$ 337,489 $ 70,182 $ 11,010 $ 418,681
================= =============== ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 254 $ 25,900 $ (25,900)(2) $ 254
Accounts payable 17,877 4,672 22,549
Accrued payroll liabilities 4,135 4,135
Deferred revenue 392 392
Current portion of environmental liabilities 2,202 2,202
Other accrued liabilities 6,360 2,905 1,442 (4) 10,707
----------------- --------------- ------------ -------------
TOTAL CURRENT LIABILITIES 31,220 33,477 (24,458) 40,239
----------------- --------------- ------------ -------------
DEFERRED INCOME TAXES 15,994 - 15,994
----------------- --------------- ------------ -------------
LONG-TERM DEBT LESS CURRENT PORTION 44,475 68,356 (1) 112,831
----------------- --------------- ------------ -------------
ENVIRONMENTAL LIABILITIES,
NET OF CURRENT PORTION 20,736 1,200 21,936
----------------- --------------- ------------ -------------
OTHER LONG-TERM LIABILITIES 1,251 2,617 3,868
----------------- --------------- ------------ -------------
SHAREHOLDERS' EQUITY:
Preferred stock
Common stock 10,348 5,351 (5,351) (5) 10,348
Additional paid-in capital 113,747 192 (192) (5) 113,747
Treasury stock (6,057) 6,057 (5)
Retained earnings 99,718 33,402 (33,402) (5) 99,718
----------------- --------------- ------------ -------------
TOTAL SHAREHOLDERS' EQUITY 223,813 32,888 (32,888) 223,813
----------------- --------------- ------------ -------------
$ 337,489 $ 70,182 $ 11,010 $ 418,681
================= =============== ============ =============
</TABLE>
<PAGE>
SCHNITZER STEEL INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED BALANCE SHEET
AS OF AUGUST 31, 1996
The pro forma combined balance sheet presents the audited balances of Schnitzer
Steel Industries, Inc. (SSI) as of August 31, 1996 and the unaudited balances of
Proler International Corp. (Proler) as of July 31, 1996. The pro forma combined
balance sheet assumes that the acquisition of Proler occurred as of August 31,
1996. However, the pro forma combined balances are not necessarily indicative of
balances which would have resulted had the acquisition of Proler actually
occurred on August 31, 1996. This statement should be read in conjunction with
the other financial statements and notes thereto either appearing elsewhere
herein or incorporated by reference herein.
In August 1996, a consultant was engaged to estimate the costs to cure
environmental liabilities related to Proler's properties. In November 1996,
under AICPA Statement of Position No. 96-1, Proler recorded a liability of
$8,600,000 for the probable costs to remediate these properties based upon the
consultant's estimates.
The following schedule summarizes preliminary adjustments reflected in the pro
forma combined balance sheet :
(1) Adjustment to record borrowings under line of credit to finance the
acquisition of Proler and to refinance Proler's debt outstanding at the
date of acquisition.
(2) Adjustment to remove Proler debt which was retired upon consummation of
the acquisition.
(3) Adjustment to restate reported assets acquired at fair market value.
(4) Adjustment to record liabilities for exit costs, employee termination
costs and relocation costs.
(5) Adjustment to eliminate Proler's equity accounts.
Certain reclassifications have been made to the Proler balance sheet to conform
with the presentation used by SSI.
<PAGE>
SCHNITZER STEEL INDUSTRIES, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
SSI Proler
Twelve Months Twelve Months Pro Forma
Ended Ended -----------------------------------
August 31, 1996 July 31, 1996 Adjustments Combined
---------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
REVENUES $ 339,352 $ 14,134 $ (4,303) (5) $ 349,183
--------------- ---------------- -------------- ---------------
COSTS AND EXPENSES:
Cost of goods sold and
other operating expenses 290,841 15,684 (8,279) (1)(5) 298,246
Selling and administrative 18,860 5,102 (4,789) (6) 19,173
Research and development 1,310 (1,310) (5)
Asset write-downs and other charges 17,159 (17,159) (4)
--------------- ---------------- -------------- ---------------
309,701 39,255 (31,537) 317,419
--------------- ---------------- -------------- ---------------
Income (Loss) From Joint Ventures 3,291 (789) 2,502
--------------- ---------------- -------------- ---------------
INCOME (LOSS) FROM OPERATIONS 32,942 (25,910) 27,234 34,266
--------------- ---------------- -------------- ---------------
OTHER INCOME (EXPENSE):
Interest (expense) income, net (3,814) (1,067) (2,929) (2)(3) (7,810)
Gain on sale of assets 209 209
Other income, net 1,452 387 1,839
--------------- ---------------- -------------- ---------------
(2,153) (680) (2,929) (5,762)
--------------- ---------------- -------------- ---------------
INCOME BEFORE INCOME TAXES 30,789 (26,590) 24,305 28,504
(Provision For) Benefit
From Income Taxes (10,006) (143) 743 (7) (9,406)
--------------- ---------------- -------------- ---------------
NET INCOME (LOSS) $ 20,783 $ (26,733) $ 25,048 $ 19,098
=============== ================ ============== ===============
EARNINGS PER SHARE $ 2.24 $ 2.05
=============== ===============
SHARES USED IN CALCULATION
9,295,705 9,295,705
=============== ===============
</TABLE>
<PAGE>
SCHNITZER STEEL INDUSTRIES, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED AUGUST 31, 1996
The pro forma condensed combined statement of operations presents the audited
balances of Schnitzer Steel Industries, Inc. (SSI) for the twelve months ended
August 31, 1996 and the unaudited balances of Proler International Corp.
(Proler) for the twelve months ended July 31, 1996. The pro forma condensed
combined statement of operations assumes that the acquisition of Proler occurred
as of the beginning of the twelve months ended August 31, 1996. However, the pro
forma combined balances are not necessarily indicative of balances which would
have resulted had the acquisition of Proler actually occurred at the beginning
of the twelve months presented. This statement should be read in conjunction
with the other financial statements and notes thereto either appearing elsewhere
herein or incorporated by reference herein.
The following adjustments are reflected in the pro forma condensed combined
statement of operations for the twelve months ended August 31, 1996 :
(1) Adjustment to decrease depreciation expense by $982,000 to reflect the
restatement to fair value and adjustments in estimated useful lives of
Proler's property, plant and equipment as a result of the acquisition.
(2) Adjustment to remove interest expense of $1,067,000 incurred by Proler
related to debt retired upon acquisition by SSI.
(3) Adjustment to record interest expense of $3,996,000 on the borrowings
used to fund the acquisition and to refinance Proler's debt outstanding
at the date of acquisition.
(4) Adjustment to reflect elimination of asset write-downs.
(5) Adjustment to eliminate revenues of $4,303,000, cost of goods and other
operating costs of $7,297,000 and research and development costs of
$1,310,000 related to operations that have been classified as assets
held for sale as a result of the acquisition.
(6) Adjustment to reflect changes in selling and administrative costs due
to the combining of administrative functions as a result of the
acquisition.
(7) Adjustment of the income tax provision due to the effects of the pro
forma adjustments on income before taxes.
<PAGE>
SCHNITZER STEEL INDUSTRIES, INC.
FORM 8-K/A
INDEX TO EXHIBITS
Exhibit
Number Page
2. Agreement and Plan of Merger dated September 15, 1996
(Incorporated by reference in the original Form 8-K filed
by the company on December 13,1996).
23.1 Consent of Coopers & Lybrand L.L.P. 11
23.2 Consents of LaGuardia & Petrella, L.L.C. 12
SCHNITZER STEEL INDUSTRIES, INC.
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statement of
Schnitzer Steel Industries, Inc. on Form S-8 (File No. 33-87008) of our reports
dated April 29, 1996, on our audits of the consolidated financial statements of
Proler International Corp. and subsidiaries and the combined financial
statements of Proler International Corp.'s Joint Operations as of January 31,
1996 and 1995, and for each of the three years in the period ended January 31,
1996, which reports have been incorporated by reference in this Current Report
on Form 8-K/A.
/S/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Houston, Texas
February 11, 1997
SCHNITZER STEEL INDUSTRIES, INC.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the registration
statement of Schnitzer Steel Industries, Inc. on Form S-8 (File No. 33-87008)
our report dated March 18, 1996 which appears on page 60 of the Proler
International Corp. Annual Report on Form 10-K for the year ended January 31,
1996. We also consent to the incorporation by reference of such report in the
Current Report on Form 8-K/A of Schnitzer Steel industries, Inc.
dated February 11, 1997 reporting its acquisition of Proler International Corp.
/s/ La Guardia & Petrella, L.L.C.
La Guardia & Petrella, L.L.C.
February 10, 1997
Fort Lee, New Jersey
<PAGE>
SCHNITZER STEEL INDUSTRIES, INC.
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statement of
Schnitzer Steel Industries, Inc. on Form S-8 (File No. 33-87008) our report
dated February 26, 1996 which appears on page 61 of the Proler International
Corp. Annual Report on Form 10-K for the year ended January 31, 1996. We also
consent to the incorporation by reference of such report in the Current Report
on form 8-K/A of Schnitzer Steel Industries, Inc.
dated February 11, 1997 reporting its acquisition of Proler International Corp.
/s/ La Guardia & Petrella, L.L.C.
La Guardia & Petrella, L.L.C.
February 10, 1997
Fort Lee, New Jersey
