<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
----------------
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
[_]Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-12716
KOPPERS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1588399
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
436 SEVENTH AVENUE
PITTSBURGH, PENNSYLVANIA 15219
(412) 227-2001
(Address of principal executive offices)
(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 periods 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
Voting and Non-Voting Common Stock, par value $.01 per share, outstanding at
October 31, 1996 amounted to 6,410,046 and 3,628,200 shares, respectively.
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<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KOPPERS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(THOUSANDS EXCEPT PER SHARE FIGURES)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ------------------
1996 1995 1996 1995
--------- --------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales.............................. $ 159,922 $ 140,885 $443,510 $398,664
Operating expenses:
Cost of sales........................ 134,729 118,528 376,150 331,423
Plant closing expenses............... 7,436 -- 7,436 --
Depreciation and amortization........ 5,708 4,464 16,298 13,047
Selling, general and administrative.. 8,893 6,916 22,355 19,949
--------- --------- -------- --------
Total operating expenses........... 156,766 129,908 422,239 364,419
--------- --------- -------- --------
Operating profit....................... 3,156 10,977 21,271 34,245
Equity in earnings of affiliates....... 2,016 2,460 6,427 6,688
Litigation judgment.................... 823 -- (10,123) --
Other income........................... -- 46 -- 153
--------- --------- -------- --------
Income before interest expense and
provision for income taxes............ 5,995 13,483 17,575 41,086
Interest expense....................... 4,104 3,858 12,462 11,298
--------- --------- -------- --------
Income before provision for income
taxes................................. 1,891 9,625 5,113 29,788
Provision for income taxes (benefit)... (653) 3,212 (414) 9,533
--------- --------- -------- --------
Net income............................. $ 2,544 $ 6,413 $ 5,527 $ 20,255
========= ========= ======== ========
Earnings per share of common stock..... $0.27 $0.62 $0.57 $1.96
========= ========= ======== ========
</TABLE>
See accompanying notes.
2
<PAGE>
KOPPERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995*
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 95 $ 1,618
Accounts receivable less allowance for doubtful
accounts of $359 in 1996
and $342 in 1995................................. 81,639 57,583
Inventories:
Raw materials................................... 31,608 38,584
Work in process................................. 2,477 2,419
Finished goods.................................. 45,164 44,363
LIFO reserve.................................... (7,774) (8,191)
--------- ---------
Total inventories............................. 71,475 77,175
Other............................................. 8,424 7,628
--------- ---------
Total current assets.......................... 161,633 144,004
Investments......................................... 52,561 49,041
Fixed assets........................................ 291,113 248,911
Less: accumulated depreciation.................... (115,428) (102,388)
--------- ---------
Net fixed assets................................ 175,685 146,523
Other assets........................................ 22,309 9,387
--------- ---------
Total assets.................................. $ 412,188 $ 348,955
========= =========
</TABLE>
- ------------
* Summarized from audited fiscal year 1995 balance sheet.
See accompanying notes.
3
<PAGE>
KOPPERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995*
------------- ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 37,154 $ 33,237
Accrued liabilities.............................. 43,245 21,672
Current portion of term loans.................... 5,148 9,000
-------- --------
Total current liabilities...................... 85,547 63,909
Long-term debt:
Revolving credit................................. 44,500 29,000
Term loans....................................... 53,772 26,000
Senior Notes..................................... 110,000 110,000
-------- --------
Total long-term debt........................... 208,272 165,000
Other long-term reserves........................... 47,242 41,816
-------- --------
Total liabilities.............................. 341,061 270,725
Series B Junior Convertible Preferred Stock; 2,600
shares designated and issued; liquidation value of
$100 per share.................................... -- 260
Common stock value subject to redemption........... 24,800 23,715
Voting common stock, $.01 par value: 40,000,000
shares authorized, 6,707,952 shares issued in 1996
and 1995.......................................... 67 67
Non-voting common stock $.01 par value: 10,000,000
shares authorized, 3,628,200 shares issued and
outstanding in 1996 and 2,338,200 in 1995......... 36 23
Capital in excess of par value..................... 11,675 12,964
Retained earnings.................................. 37,440 45,828
Cumulative translation adjustment.................. 1,625 (384)
Treasury stock, at cost, 1,422,906 shares in 1996
and 1,433,961 shares in 1995...................... (4,516) (4,243)
-------- --------
Total liabilities and stockholders' equity..... $412,188 $348,955
======== ========
</TABLE>
- ------------
* Summarized from audited fiscal year 1995 balance sheet.
See accompanying notes.
4
<PAGE>
KOPPERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
--------- ---------
(UNAUDITED)
<S> <C> <C>
Cash provided by operating activities..................... $ 31,688 $ 16,311
Cash used in investing activities:
Acquisitions and related capital expenditures........... (39,331) (27,426)
Capital expenditures.................................... (15,822) (11,071)
--------- ---------
Net cash used in investing activities................. (55,153) (38,497)
Cash provided by (used in) financing activities:
Borrowings from revolving credit........................ 124,750 121,000
Repayments of revolving credit.......................... (109,250) (114,000)
Repayment of long-term debt............................. (12,030) --
Proceeds from long-term debt............................ 35,950 15,000
Payment of deferred financing costs..................... (1,081) --
Net purchases of voting common stock.................... (1,811) (426)
Purchase of non-voting common stock..................... (12,250) --
Proceeds from exercise of warrants...................... -- 2,666
Dividends on common stock............................... (2,336) (1,483)
--------- ---------
Net cash provided by financing activities............. 21,942 22,757
--------- ---------
Net increase (decrease) in cash........................... (1,523) 571
Cash at beginning of period............................... 1,618 2,975
--------- ---------
Cash at end of period..................................... $ 95 $ 3,546
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.............................................. $ 13,883 $ 13,567
Income taxes.......................................... $ 1,609 $ 7,362
</TABLE>
See accompanying notes.
5
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) The Management's Discussion and Analysis of Financial Condition and
Results of Operations which follows these notes contains additional
information on the results of operations and the financial position of the
Company. Those comments should be read in conjunction with these notes.
The Company's annual report on Form 10-K for the fiscal year ended
December 31, 1995 includes additional information about the Company, its
operations, and its financial position, and should be read in conjunction
with this quarterly report on Form 10-Q.
(2) The results for the interim periods are not necessarily indicative of the
results to be expected for the full fiscal year.
(3) In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
(4) Results for the third quarter include $6.5 million of charges relating to
the closing of a tar distillation facility in Houston, TX with the charges
consisting primarily of write-downs of property and equipment, and accrued
liabilities provided for estimated costs of dismantling of equipment,
environmental remediation, and severance. Additionally, results for the
third quarter include $0.9 million of charges relating to the closing of a
small refractory materials facility in Carrollton, OH with the charges
consisting primarily of write-downs of property and equipment and
inventories, and estimated severance costs. Both facilities are expected
to operate for the remainder of 1996.
(5) Third quarter results also include $2.6 million of severance charges
related to a plan to reduce overhead and operating expenses. The charge
reflects estimated termination benefits for approximately 90 salaried
employees and consists of a $1.0 million charge to selling, general and
administrative expense, with the remaining $1.6 million charged to cost of
sales.
(6) On October 4, 1996 the Company negotiated an out-of-court settlement which
resulted in the Company making a cash payment of $12.7 million to Owens-
Corning Fiberglas Corporation. The settlement resulted in a $0.8 million
increase to earnings for the third quarter, reflecting the excess of
accrued charges over the settlement amount (See "Legal Proceedings").
(7) On October 2, 1996 the Company's Woodward, Alabama coke facility was
served with a proposed settlement agreement from the Jefferson County
Department of Health for emission violations which occurred between May
1992 and February 1996. Included as part of the proposed settlement
agreement is payment by the Company of a monetary penalty in the amount of
$2.3 million. The Company is negotiating the proposed settlement, and no
provision has been recorded as of September 30, 1996 (See "Legal
Proceedings").
(8) The Company, Beazer East, Inc. ("Beazer East") and CSX Transportation,
Inc. ("CSX"), following settlement negotiations, have reached an agreement
in principle to settle pending litigation. Under the terms of the proposed
settlement agreement, the Company would pay CSX $500,000 a year for five
years in exchange for CSX's agreement to enter into a new five-year sales
volume agreement. If the settlement agreement is consummated, the Company
would record a $2.5 million charge to pretax income (See "Legal
Proceedings").
6
<PAGE>
KOPPERS INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain sales and operating data, net of all
inter-segment transactions, for the Company's businesses for the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
NET SALES:
Coke Products............... $ 27,812 $ 19,424 $ 80,611 $ 56,728
Carbon Materials &
Chemicals.................. 68,030 54,533 178,609 152,648
Railroad & Utility Products. 64,080 66,928 184,290 189,288
-------- -------- -------- --------
Total..................... $159,922 $140,885 $443,510 $398,664
======== ======== ======== ========
SEGMENT SALES AS PERCENTAGE OF TOTAL:
Coke Products............... 17.4% 13.8% 18.2% 14.2%
Carbon Materials & Chemical. 42.5% 38.7% 40.3% 38.3%
Railroad & Utility Products. 40.1% 47.5% 41.5% 47.5%
-------- -------- -------- --------
Total..................... 100.0% 100.0% 100.0% 100.0%
GROSS MARGIN BY SEGMENT:
Coke Products............... 10.4% 11.6% 9.4% 11.6%
Carbon Materials &
Chemicals.................. 10.9% 15.7% 16.0% 19.6%
Railroad & Utility Products. 11.7% 17.2% 12.9% 16.2%
-------- -------- -------- --------
Total..................... 11.1% 15.9% 13.5% 16.9%
OPERATING MARGIN BY SEGMENT:
Coke Products............... 3.2% 4.3% 2.2% 4.0%
Carbon Materials &
Chemicals.................. 3.9% 8.9% 8.6% 12.3%
Railroad & Utility Products. 5.6% 11.9% 6.9% 10.7%
Corporate Unallocated
Overhead................... (2.5%) (1.9%) (1.9%) (1.8%)
-------- -------- -------- --------
Total..................... 2.0% 7.8% 4.8% 8.6%
</TABLE>
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1996 AND 1995.
Net Sales. Net sales for the three months ended September 30, 1996 were
13.5% higher than the same period in 1995, due primarily to the effect of
recent acquisitions in the Coke Products and Carbon Materials & Chemicals
businesses. Net sales for Coke Products increased by 43.2% due to sales of
approximately $10 million from the Monessen facility, which started production
in the fourth quarter of 1995. This effect was offset to some extent by a 9.6%
reduction in sales volumes at the Woodward facility primarily from the
suspension of shipments to McLouth Steel Products Corp. ("McLouth") as the
result of a bankruptcy filing in the second quarter of 1996. Net sales for
Carbon Materials & Chemicals increased by 24.8% due primarily to sales of
approximately $15 million from the Clairton facility acquired on April 1,
1996. The effect of the acquisition was offset to some extent by a reduction
in phthalic anhydride ("PAA") sales due to a 35.8% reduction in PAA prices
coupled with a 9.0% reduction in PAA volumes as the result of a planned
maintenance shutdown in the third quarter of 1996. Net sales for Railroad &
Utility Products decreased by 4.3% compared to the prior year quarter due to a
12.0% reduction in sales volumes for utility poles coupled with a 5.0% decline
in sales volumes for crossties sold to commercial markets.
7
<PAGE>
KOPPERS INDUSTRIES, INC.
Gross Profit. As a percent of net sales, gross profit decreased to 11.1% in
the third quarter of 1996 from 15.9% for the same period last year. This
decrease was due to decreases in gross margins to 10.4% from 11.6% for Coke
Products, to 10.9% from 15.7% for Carbon Materials & Chemicals, and to 11.7%
from 17.2% for Railroad & Utility Products. The decrease for Coke Products was
due primarily to a $0.9 million charge related to the closure of a small
refractory materials facility in Carrollton, OH which reduced gross margins by
3.1%. The reduction in gross profit for Carbon Materials & Chemicals was
primarily the result of a $6.5 million charge for the closing of the Houston
tar distillation facility, as well as a $0.6 million severance charge related
to force reductions at other locations. Without these total charges of $7.1
million, gross margins would have increased to 21.3% in 1996 as a 58.1%
increase in carbon pitch volumes related to the acquisition of the Clairton
facility in 1996 was offset in part by a 35.8% reduction in PAA prices in the
third quarter of 1996. Gross profit for Railroad & Utility Products was
impacted negatively by $1.0 million in severance charges, which reduced gross
margins by 1.6%. Additionally, margins were lower than the prior year period
due to higher unit costs for utility poles primarily caused by a 12.0%
reduction in sales volumes compared to the prior year.
Depreciation and Amortization. The increase in depreciation and amortization
for the three months ended September 30, 1996 as compared to the prior year
period was due primarily to the acquisition of the Clairton facility in April
1996, and the startup of the Monessen facility in November 1995.
Selling, General and Administrative Expense. Selling, general and
administrative expense for the three months ended September 30, 1996 increased
to 5.6% of net sales from 4.9% of net sales in the same period last year
primarily as a result of a $1.0 million severance charge in the third quarter
of 1996 to reduce salaried workforce costs.
Equity in Earnings of Affiliates. Equity in earnings of affiliates decreased
to $2.0 million for the three months ended September 30, 1996 from $2.5
million in the prior year period due primarily to lower earnings from
Tarconord A/S as a result of weaker European market conditions as compared to
the prior year.
Interest Expense. Interest expense increased $0.2 million in the third
quarter of 1996 as compared to the prior year due to additional indebtedness
to finance the acquisition of the Clairton facility in 1996.
Income Taxes. The Company's income tax benefit for the three months ended
September 30, 1996 as compared to an effective rate of 33.4% in the prior year
period was the result of lower earnings in 1996 coupled with projected energy
tax credits for Fiscal year 1996 for the Monessen coke facility.
Net Income. Net income for the three months ended September 30, 1996
compared to the same period last year decreased $3.9 million as the result of
plant closing charges of $7.4 million coupled with severance charges of $2.6
million, offset in part by lower tax expense of $3.9 million in 1996 as
compared to the prior year quarter.
Earnings Per Common Share. Earnings per common share for the three months
ended September 30, 1996 were $0.27 compared to $0.62 in the prior year
period. Without the plant closing and severance charges of $10.1 million,
earnings per common share for the third quarter of 1996 would have been $1.17
per share.
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1996 AND 1995.
Net Sales. Net sales for the nine months ended September 30, 1996 were 11.2%
higher than the same period in 1995, due primarily to the effect of
acquisitions in the Coke Products and Carbon Materials & Chemicals businesses.
Net sales for Coke Products increased by 42.1% due primarily to sales of
approximately $30 million from the Monessen facility. This increase was offset
to some extent by a 12.5% reduction in sales at the Woodward coke facility
resulting from suspensions of shipments to McLouth in 1996, as well as reduced
production in the first quarter of 1996 as the result of severe winter
weather. Net sales for Carbon Materials &
8
<PAGE>
KOPPERS INDUSTRIES, INC.
Chemicals increased by 17.0% due primarily to sales of approximately $30
million from the Clairton facility acquired on April 1, 1996 coupled with
higher sales as a result of increased demand from the aluminum industry. The
effect of the acquisition coupled with higher carbon pitch sales at other
locations was offset to some extent by a net reduction in PAA sales, as an
increase of 9.8% in PAA sales volumes was more than offset by a 36.4%
reduction in PAA prices. The decrease in net sales of 2.6% for Railroad &
Utility Products was partially due to a 12.5% reduction in sales volumes for
utility poles as a result of public utility deregulation and its impact on
maintenance programs and due to disruptions in shipments as a result of severe
winter weather in the first quarter of 1996.
Gross Profit. As a percent of net sales, gross profit decreased to 13.5% for
the nine months ended September 30, 1996 from 16.9% for the same period last
year. This decrease was due to decreases in gross margins to 9.4% from 11.6%
for Coke Products, to 16.0% from 19.6% for Carbon Materials & Chemicals, and
to 12.9% from 16.2% for Railroad & Utility Products. For Coke Products, a 3.5%
increase in coke prices could not offset the effect of a plant closing charge
of $0.9 million in 1996, representing a reduction in gross profit of 1.1%, and
the loss of sales to McLouth and the Gary, Indiana plant of U.S. Steel for the
second and third quarters of 1996. The decrease for Carbon Materials &
Chemicals was due to plant closing and severance charges totaling $7.1
million, or 4.0% of sales, as well as a 36.4% reduction in PAA prices, which
combined more than offset the positive earnings effect from the Clairton
acquisition. Excluding the closing and severance charges, gross margins for
Carbon Materials & Chemicals would have been 19.9%. The decrease in gross
profit for Railroad & Utility Products was due to higher unit costs for
utility poles as a result of a 12.5% decline in sales volumes and $0.6 million
of costs associated with labor disruptions and increased operating expenses as
a result of severe winter weather, both in the first quarter of 1996.
Additionally, severance charges of $1.0 million in 1996 resulted in a gross
margin reduction of 0.5% as compared to the prior year.
Depreciation and Amortization. The increase in depreciation and amortization
for the nine months ended September 30, 1996 as compared to the prior year was
due primarily to the acquisitions of the Clairton tar distillation facility in
April 1996, the Somerville wood treating facility in March 1995 and the
Monessen coke facility which started production in November 1995.
Selling, General and Administrative Expense. Selling, general and
administrative expense for the nine months ended September 30, 1996 was
consistent with the prior year at 5.0% of net sales, as severance charges of
$1.0 million in 1996 were offset in large part by a reduction in management
incentive accruals.
Equity in Earnings of Affiliates. Equity in earnings of affiliates decreased
to $6.4 million for the nine months ended September 30, 1996 from $6.7 million
in the prior year period due primarily to lower earnings from Tarconord A/S as
a result of weaker European market conditions.
Interest Expense. Interest expense increased $1.2 million for the nine
months ended September 30, 1996 compared to the prior year primarily as a
result of the additional $40 million in indebtedness to finance the
acquisition of the Clairton facility.
Income Taxes. The Company's income tax benefit for the nine months ended
September 30, 1996 as compared to an effective rate of 32.0% in the prior year
period was due primarily to lower earnings in 1996 coupled with projected tax
credits for fiscal year 1996 for the Monessen coke facility.
Net Income. Net income for the nine months ended September 30, 1996 as
compared to the prior year decreased by $14.7 million due primarily to one-
time charges for the settlement of the OCF Litigation (as hereinafter defined)
of $10.1 million, and plant closing and severance charges of $10.1 million,
offset in part by a negative effective tax rate in 1996. Earnings from the
recently acquired Monessen and Clairton facilities were offset by lower PAA
prices, the suspension of shipments to McLouth, and the severe winter weather
in 1996.
9
<PAGE>
KOPPERS INDUSTRIES, INC.
Earnings Per Common Share. Earnings per common share for the nine months
ended September 30, 1996 were $0.57 compared to $1.96 in the prior year
period. Without the litigation charge of $10.1 million and the plant closing
and severance charges of $10.1 million, earnings for the nine months ended
September 30, 1996 would have been $2.30 per common share.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996 the Company had cash and cash equivalents of $0.1
million and $46.8 million of availability under the revolving credit facility
for working capital purposes, subject to restrictions imposed under various
debt covenants and the indenture related to the Company's long-term bonds.
As of September 30, 1996 $8.7 million of commitments were utilized by
outstanding standby letters of credit and there were $44.5 million in
outstanding borrowings for working capital purposes.
Cash provided by operating activities totaled $31.7 million for the nine
months ended September 30, 1996 compared to $16.3 million for the same period
last year, as lower net income of $14.7 million in 1996 was offset by a lower
increase in working capital of $15.5 million as compared to the prior year,
attributable in part to a $10.1 million provision for the litigation with
Owens Corning Fiberglas Corporation (the "OCF Litigation") and a $2.6 million
severance reserve. Additionally, $7.4 million in plant closing reserves were
recorded in the third quarter of 1996, and cash dividends from equity
investees exceeded prior year amounts by $3.3 million.
On October 4, 1996 the Company settled the litigation with Owens-Corning
Fiberglas Corporation ("OCF") which was to be appealed to the United States
Court of Appeals for the Sixth Circuit. The 1990 case was filed by OCF and
involved matters which occurred during the mid-1970's to mid-1980's before
Koppers Industries came into existence. The case went to trial in early 1996
and, in April 1996, resulted in a jury verdict against the Company for $10.3
million plus legal fees and claims for pre-trial and post-trial interest. The
Company has entered into a confidential settlement with OCF under which the
Company is to pay $12.7 million, in settlement of all claims. The Company had
provided reserves of $14 million at March 31, 1996 ($11 million in the first
quarter of 1996 and $3 million in prior periods) in connection with the OCF
Litigation, and obtained from the lenders, under the various bank credit
facilities, consents to exclude for the first two quarters of 1996 the $11
million charge to earnings from the calculation of ratios contained in certain
financial covenants under such facilities. In addition, the indenture related
to the Company's long-term bonds restricts the Company's ability to incur
certain types of indebtedness unless the ratio of cash flow to fixed charges
in each of the four quarters preceding the incurrence of such indebtedness is
greater than 2.5 to 1. The Company's $11 million charge to earnings in the
first quarter of 1996, coupled with third quarter 1996 charges for plant
closings and severance totaling $10.1 million, will adversely affect the
Company's ability to incur additional indebtedness until the fourth quarter of
1997. The Company believes that its cash flows from operations and available
borrowings under its bank credit facilities will be sufficient to fund its
anticipated liquidity requirements for the next twelve months.
Capital expenditures excluding acquisitions were $15.8 million for the nine
months ended September 30, 1996 versus $11.1 million for the same period last
year, with the increase in 1996 due primarily to capital improvements at the
Stickney PAA plant and the Monessen coke facility.
Financing activities provided $21.9 million in cash for the nine months
ended September 30, 1996 compared to $22.8 million for the same period last
year. Cash supplied by financing activities reflects the $35.0 million term
loan for the Clairton acquisition and an increase in the revolving credit loan
of $15.5 million, with significant uses of cash including a $12.0 million
repayment on other term debt and a $12.3 million purchase of non-voting common
stock. See Note 12 of the Notes to Financial Statements on page 44 of the
Company's 1995 Form 10-K.
10
<PAGE>
KOPPERS INDUSTRIES, INC.
Environmental Matters
From time to time, the Company is served with notices of violations and
requests for information relating to environmental compliance matters at the
various facilities it owns and operates. On June 12, 1996, the Pennsylvania
Department of Environmental Protection ("PADEP") issued a notice of violation
in connection with alleged noncompliance with the terms of a consent order and
agreement related to the Company's coke facility in Monessen, PA, alleging
that the Company had not implemented the corrective actions required under the
agreement in a timely fashion. PADEP has calculated that a stipulated penalty
in the amount of $261,000 may be requested for the alleged untimely actions.
The Company has completed the implementation of the corrective actions at
issue and is in the process of conducting settlement negotiations with PADEP
to agree upon the amount of the stipulated penalty which PADEP will request.
On October 21, 1996 the Company was served with an information request
pursuant to Section 308 of the Clean Water Act from the United States
Environmental Protection Agency ("USEPA") requesting information on waste
water discharges from all facilities owned or operated by the Company. The
Company is in the process of responding to this request. There can be no
assurance that the USEPA will not require additional actions in connection
with this request.
In September 1996 the Company was served with a notice of violation from the
Illinois Environmental Protection Agency ("IEPA") relating to 15 releases of
hazardous materials which occurred at or from its facility located in
Stickney, Illinois between January 24, 1990 and May 3, 1996. Although the
Company believes that all such releases were remediated when they occurred and
intends to enter into negotiations with the IEPA to resolve this matter, there
can be no assurance that the IEPA will not require additional actions in
connection with this matter.
The Company was recently served with a draft settlement agreement (the
"Draft Jefferson Agreement") from the Jefferson County Board of Health
("Jefferson County") in connection with various alleged violations of
Jefferson County's air pollution control rules and regulations for emissions
from coke oven batteries at the Company's Woodward, Alabama facility. The
Draft Jefferson Agreement requires the Company to institute operational
changes, install monitoring and control equipment, employ an independent
certified observer, and proposes a civil penalty in the amount of $2.3
million. The Company has entered into negotiations to revise the terms of the
Draft Jefferson Agreement. However, in the event that those negotiations are
unsuccessful, the Company might have to pay a significant fine, incur capital
expenditures and might have to reduce operations of the coke batteries at
Woodward through shutting down the oldest coke batteries, resulting in a loss
of approximately one-third of production capacity. The resolution of this
matter could have a negative effect on the business, financial condition, and
results of operations of the Company. See "Legal Proceedings."
Pending Litigation
On May 24, 1996 the Company was served with a Complaint by CSX (the "CSX
Complaint"), one of its principal customers, filed in federal district court
in Florida in March 1996 alleging that the Company failed to fulfill
environmental obligations under two contracts executed by CSX and the
Company's predecessor in 1988 and performed by the Company. The CSX Complaint
also sought reimbursement of any damages incurred in connection with a 1992
lawsuit filed by Beazer East against CSX in which Beazer East sought
contribution for environmental cleanup at certain facilities including some
presently owned by the Company.
The Company, CSX and Beazer East have reached an agreement in principle to
settle the claims raised in the CSX Complaint and the Beazer East Complaint
against CSX. Under the terms of the proposed settlement agreement (the "CSX
Settlement"), the Company would pay CSX $500,000 a year for five years, in
exchange for CSX's agreement to enter into a new five-year sales volume
agreement. If the CSX Settlement is
11
<PAGE>
KOPPERS INDUSTRIES, INC.
consummated, this would result in a $2.5 million charge to pretax income. In
addition, Beazer East would be released from its obligations under the
indemnity which was part of the purchase agreement at the formation of Koppers
Industries only in connection with the Company's facility located at Green
Spring, West Virginia, and CSX would have responsibility for, and would
indemnify the Company against, environmental liabilities, damages, losses and
costs, to the extent attributable to acts or omissions at that facility prior
to the date of execution of the CSX Settlement, except for liabilities
relating to offsite disposal, which would continue to be the responsibility of
Beazer East.
If the CSX Settlement is not consummated, the Company is unable to predict
the ultimate outcome of this matter or the likelihood that Beazer East will
seek to recover all or a portion of any damages and expenses from the Company,
and, if so, the extent of any such amounts. As a result, there can be no
assurance that the resolution of this matter would not have a material adverse
effect on the Company's business, financial condition, cash flow and results
of operations.
Plant Closings and Severance Charges
Results for the third quarter include $6.5 million of charges relating to
the closing of a tar distillation facility in Houston, TX with the charges
comprised primarily of write- downs of property and equipment, and accrued
liabilities provided for estimated costs of dismantling of equipment,
environmental remediation, and severance. Additionally, results for the third
quarter include $0.9 million of charges relating to the closing of a small
refractory materials facility in Carrollton, OH with the charges comprised
primarily of write-downs of property and equipment and inventories, and
estimated severance costs. Third quarter results also include $2.6 million of
additional severance charges related to a plan to reduce overhead and
operating expenses. The charge reflects estimated termination benefits for
approximately 90 salaried employees and consists of a $1.0 million charge to
selling, general and administrative expense, with the remaining $1.6 million
to cost of sales. Upon expected completion of the plan in mid-1997, management
estimates that expenses for salaries and benefits will be reduced by
approximately $3 million annually.
12
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 4, 1996 the Company settled the litigation with OCF which was to
be appealed to the United States Court of Appeals for the Sixth Circuit. The
1990 case was filed by OCF and involved matters which occurred during the mid-
1970's to mid-1980's before Koppers Industries came into existence. The case
went to trial in early 1996 and, in April 1996 resulted in a jury verdict
against the Company for $10.3 million plus legal fees and claims for pre-trial
and post-trial interest. The Company has entered into a confidential
settlement with OCF under which Koppers Industries paid $12.7 million, in
settlement of all claims.
The Company was recently served with a draft settlement agreement from the
Jefferson County Board of Health in connection with various alleged violations
of Jefferson County's air pollution control rules and regulations for
emissions from coke oven batteries at the facility located in Woodward,
Alabama. The Draft Jefferson Agreement requires the Company to institute
operational changes, install monitoring equipment, and employ an independent
certified observer to resolve the problem. In addition, the Draft Jefferson
Agreement proposes a civil penalty in the amount of $2.3 million. The Company
has entered into negotiations with Jefferson County to revise the terms of the
Draft Jefferson Agreement, including an extension in the period of time for
compliance, and to reduce the amount of the proposed fine. However, in the
event that those negotiations are unsuccessful, the Company might have to pay
a significant fine and might have to reduce operations of the coke batteries
at Woodward through shutting down the oldest coke batteries, resulting in a
loss of approximately one-third of production capacity. Such a reduction in
operation could have a material adverse effect on the business, financial
condition, or results of operations of the Company.
On May 24, 1996 the Company was served with a Complaint by CSX, one of its
principal customers, filed in federal district court in Florida in March 1996
in connection with two contracts executed by CSX and the Company's predecessor
in 1988 and performed by the Company. The principal allegations of the CSX
Complaint are that the Company failed to fulfill its obligations under the
contracts to (i) use certain profits and surcharges received under the
contracts to investigate and remediate historic contamination at certain of
the Company's facilities and comply with ongoing environmental cleanup costs
and (ii) relieve CSX from liability for environmental cleanup costs at all
wood treating facilities owned and operated by the Company's predecessor (the
"Wood Treating Facilities"). The CSX Complaint sought reimbursement of any
damages or expenses incurred in connection with a 1992 lawsuit filed by Beazer
East against CSX in which Beazer East sought, among other things, contribution
for environmental cleanup at the Wood Treating Facilities.
The Company, CSX and Beazer East have reached an agreement in principle to
settle the claims raised in the CSX Complaint and the Beazer East Complaint
against CSX. Under the terms of the proposed settlement, the Company would pay
CSX $500,000 a year for five years, in exchange for CSX's agreement to enter
into a new five-year sales volume agreement.
If the CSX Settlement is consummated, the Company believes that
substantially all investigative and remedial costs at the Green Spring
facility will be paid for by CSX and Beazer East. However, there can be no
assurance that either CSX or Beazer East will perform their respective
obligations under the CSX Settlement and if the Company were required to pay
such costs, it could have a material adverse impact on the business, financial
condition, and results of operations of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11. Statement Regarding Computation of Per Share Earnings.
13
<PAGE>
KOPPERS INDUSTRIES, INC.
10.26 Employment Contract for Donald N. Sweet dated August 1, 1996.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30,
1996.
14
<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.
Koppers Industries, Inc.
(Registrant)
Date: /s/ Donald E. Davis
.....................................
DONALD E. DAVIS,
Chief Financial Officer
(Principal Financial Officer,
Principal Accounting Officer)
15
<PAGE>
Exhibit 10.26
AGREEMENT
THIS AGREEMENT (this "Agreement"), made as of the 1st day of August, 1996,
between Koppers Industries, Inc., (the "Company"), and Donald N. Sweet of
Pittsburgh, Pennsylvania (the "Employee").
1. Company and Employee agree that Employee's employment as the Vice
President and General Manager, Coke Products of the Company shall be and hereby
is terminated effective August 1, 1996.
2. Company agrees to employ Employee and Employee agrees to be employed
effective August 1, 1996, in the position of Director of Business Development.
Employee's responsibility as the Director of Business Development shall be to
provide consulting and other services as requested by the Chief Executive
Officer in writing. If Employee accepts any employment or engages in any
consulting activities for any person or entity other than the Company, he shall
notify immediately in writing the Chief Executive Officer of the identity of
the person or entity by whom he is engaged and of the nature of the
engagement. Employee shall not be assigned consulting or other services by the
Company which conflict or interfere with his employment or consulting
activities for persons or entities other than the Company. The compensation
and benefits due Employee under this Agreement shall not be reduced as the
result of Employee's engaging in work for any person or entity other than the
Company during the term of this Agreement.
3. This Agreement shall commence on August 1, 1996 and shall continue for a
period of two (2) years, and Employee's employment with the Company shall
terminate effective July 31, 1998.
<PAGE>
4. Employee's present base salary of $11,650 per month shall continue
during the term of this Agreement. These salary payments are in lieu of all
severance payments to which the Employee would have been entitled upon
termination.
Employee will be entitled to be reimbursed for ordinary and necessary
business expenses, approved in advance in writing, incurred by Employee in
connection with the performance of his assigned duties.
The Company will provide Employee with benefits equal to those provided
other salaried employees, except that Employee shall not be entitled to payment
for his membership in the Duquesne Club and shall not participate in any Koppers
Bonus or Incentive Plan after December 31, 1996. Employee's Bonus or Incentive
payments shall be paid solely on the basis of the Incentive Letter given to the
Employee dated March 26, 1996.
5. As a material inducement to the Company to enter into this Agreement and
in consideration of the compensation to be paid to Employee under this
Agreement, Employee covenants and agrees that for two (2) years following August
1, 1996, the Employee shall not engage, whether as principal or as agent,
officer, director, employee, consultant, shareholder, or otherwise, in any
business which competes directly with the tar and coke businesses of the Company
or its subsidiaries. Employee further agrees that during the two (2) year term
of this Agreement, Employee shall not solicit any business directly competitive
with the tar and coke business of the Company by means of solicitation of, or
trading with, any
2
<PAGE>
customer, prospective customer, supplier, or prospective supplier of Company.
The provisions of this paragraph shall not prohibit employee from engaging in
passive investment in the securities of publicly traded corporations which might
compete directly with the Company's tar and coke business.
6. If Employee violates any of the provisions of this Agreement, the
Company shall promptly notify Employee in writing and with particularity of the
activity believed to be in violation of this Agreement, and shall afford
Employee the opportunity to cure the alleged breach within thirty (30) days of
receipt, by Employee, of the Company's notice of breach. If Employee does not
cure the alleged breech within the thirty (30) day cure period provided herein,
the Company shall be entitled to terminate this Agreement without notice;
however, Employee may appeal any such action by the Company to arbitration as
provided in this Agreement.
7. The parties agree that any violation of the noncompetition terms of this
Agreement by Employee will result in immediate and irreparable harm to the
Company and the Company shall be entitled to a preliminary injunction from a
court of equity pending arbitration of the question whether Employee has
violated the noncompetition terms of this Agreement, Should any court or
arbitrator find any provision of this Agreement to be less than fully
enforceable due to its breadth or restrictiveness, or for any other reason, the
parties hereto intend that the court or arbitrator shall enforce the provision
to the full extent permissible by applicable law.
3
<PAGE>
EMPLOYEE HAS CAREFULLY READ AND CONSIDERED THE PROVISIONS OF THIS AGREEMENT AND
AGREES THAT THE RESTRICTIONS ARE FAIR AND REASONABLE AND ARE REASONABLY REQUIRED
FOR THE PROTECTION OF THE INTERESTS OF THE COMPANY. THE PARTIES AGREE THAT THESE
RESTRICTIONS ARE BEING ENTERED INTO TO INDUCE THE COMPANY TO ENTER INTO THIS
AGREEMENT AND HAVE BEEN REQUIRED BY THE COMPANY TO PRESERVE THE GOODWILL
ASSOCIATED WITH THE BUSINESS.
8. The covenants and provisions of this Agreement are severable, and if any
portion is held to be unlawful or unenforceable, the remaining terms and
conditions will remain in full force and effect.
9. Should any durational or geographical restriction on business activities
covered under this Agreement be found to be less than fully enforceable due to
its breadth of restrictiveness, the parties intend that any court or arbitrator
will enforce the remaining provisions to the full extent permissible by
construing such provisions to cover only that duration, extent or activity which
may be enforceable.
10. Employee shall not use any confidential information, nor shall Employee
disclose or permit to be disclosed to any third party during or after the term
of his employment, any confidential information without the prior express
written consent of Company. By the term "confidential information" as used
herein, the Parties mean the Company's special techniques, processes,
analyses, methods, forms, hardware systems, software programs, and/or pricing
or customer or supplier lists which are not generally known in the
4
<PAGE>
industry, which the Company has protected against disclosure. Employee shall not
be prohibited, by this Paragraph, from disclosing confidential information (1)
which at the time of receipt or thereafter becomes publicly known through no
wrongful act of Employee, or (2) is received from a third party not under an
obligation to keep such information confidential, or (3) as required to be
disclosed by Employee pursuant to any law, regulation, or legal process.
11. As a material inducement to the Company to enter into this Agreement,
Employee irrevocably and unconditionally releases, acquits, and forever
discharges the Company and each of the Company's owners, stockholders,
predecessors, successors, assigns, agents, directors, officers, employees,
representatives, attorneys, divisions, subsidiaries, affiliates, and other
related entities (collectively, "Company Releasees"), from any and all charges,
complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts, and expenses including attorneys' fees, costs actually
incurred, and damages of any description (herein "Claims"), known and unknown,
which Employee may have or claim to have against Company Releasees, including,
but not limited to, Claims arising from any alleged violation of any federal,
state or local statutes, ordinances, executive orders, or common law principles
relating to employment, discrimination in employment, the termination of
employment, the payment of wages and benefits (provided, however, that nothing
in this paragraph shall constitute
5
<PAGE>
a release of any obligations for any amounts payable to Employee under any of
the Company's benefit plans, which plans shall operate in accordance with their
own terms, including Employee's accrued pension benefits and Employee's rights
under the Company's Stock Option Plan, Survivor Benefit Plan and the
Stockholders' Agreement), or any other Claims relating to or arising from, in
connection with or during Employee's employment or the termination of his
employment. The foregoing waiver and release of Claims does not include Claims
which by law cannot be waived and does not include Claims arising in connection
with enforcement of this Agreement.
12. Employee acknowledges that in executing this Agreement he does not rely
upon any representation or statement made by any of the Company Releasees.
13. It is expressly understood that neither Employee nor the Company has
any obligation to provide any other payments or benefits.
14. The Company shall provide Employee with executive outplacement services
from a service mutually agreeable to Employee and the Company, at a cost to the
Company not to exceed $10,000.00, which amount will be deducted from the last
payments to be received under Paragraph 4 of this Agreement.
15. The Company shall reimburse to Employee his reasonable attorney fees in
connection with negotiation of this Agreement, in an amount not to exceed
$2,500.00.
6
<PAGE>
16. The Company acknowledges that Employee has been granted ownership of
his computer and associated equipment.
17. EMPLOYEE ACKNOWLEDGES THAT HE HAS READ CAREFULLY AND UNDERSTANDS
FULLY THE PROVISIONS OF THIS AGREEMENT INCLUDING THE RELEASE OF CLAIMS AND
HAS HAD SUFFICIENT TIME AND OPPORTUNITY TO CONSULT WITH AND HAS CONSULTED
WITH LEGAL ADVISORS PRIOR TO EXECUTING THIS AGREEMENT.
18. If a dispute, controversy, or potential controversy arises under or in
connection with this Agreement, the parties agree first to try in good faith
to settle such dispute or controversy. The parties shall first try to resolve
any such dispute or controversy by discussion between Employee and the
Company's Vice President - Human Resources, who shall have authority to resolve
any such dispute or controversy on behalf of the Company. The parties shall
reduce to writing any resolution of any dispute, controversy, or potential
controversy achieved through such discussions. The parties shall try to
expedite the resolution of all such disputes and controversies, and shall
complete their negotiations in this regard within no more than thirty days from
the commencement of their discussions under this Paragraph.
If the parties have not resolved the dispute, controversy, or potential
controversy by direct negotiations within thirty (30) days of initiating
negotiations, any party may initiate arbitration as herein provided. With the
exception to disputes involving violation of the noncompetition terms of this
Agreement (where Employer may seek a preliminary injunction lending arbitration
of
7
<PAGE>
the question whether Employee is in violation of the noncompetition terms
of this Agreement), all disputes, controversies, or potential controversies
arising under or in connection with this Agreement which are not resolved by
negotiation shall be decided by arbitration before a single arbitrator
selected by agreement of the parties. In the event that the parties cannot
agree upon the selection of an arbitrator, the parties agree that the American
Arbitration Association in Pittsburgh Pennsylvania will select the arbitrator.
The arbitrator shall be selected within thirty (30) days after unsuccessful
conclusion of their efforts to resolve their dispute, controversy or potential
controversy through negotiation.
The arbitrator shall decide the dispute, controversy or potential
controversy in accordance with the following procedures:
(a) Within ten (10) days of the selection of an arbitrator, each party
shall submit to the arbitrator its written position (the "initial
Submission") provided that neither memorandum of position shall exceed
10 pages, double spaced plus such other documentary evidence as the
parties deem necessary. In connection with the Initial Submission,
neither of the parties may submit (and the arbitrator may not accept)
any additional documentation (including affidavits).
(b) Within ten (10) days of the delivery of the Initial Submission, each
party may submit to the arbitrator and the other party a reply
memorandum (the "Reply
8
<PAGE>
Submission"), provided that neither reply memorandum shall exceed 5
pages, double spaced. In connection with the Reply Submission, neither
of the parties may submit (and the arbitrator may not accept) any
additional documentation (including affidavits).
(c) Within ten 10 days of the expiration of the period for the delivery of
the Reply Submission, the arbitrator, if he or she deems it necessary
or advisable, may call a hearing which may be by telephone conference
(the "Hearing"). The arbitrator shall schedule the Hearing within
fifteen (15) days of determining that a Hearing shall be held. The
arbitrator shall advise the parties as to the form of the hearing,
which may be of one of two types. If the Arbitrator believes that
clarification of the positions of the parties is necessary or
advisable, the arbitrator may call a Hearing to ask representatives
and counsel for the parties questions with respect to the issue to be
decided and positions of the parties. If the Arbitrator believes that
there are credibility issues which are best resolved with testimony,
the arbitrator may call a Hearing in addition to hear the testimony of
those witnesses central to the credibility dispute, either in person
or by telephone as the arbitrator may determine. At Hearing, neither
party may offer (and the arbitrator may not accept) any testimony the
substance of which has not been extensively set forth in the previous
9
<PAGE>
submissions of the parties (including affidavits), and neither party
may offer (and the arbitrator may not accept) additional documentary
evidence.
(d) Within ten (10) days after the later to occur, if such is to occur, of
(a) the Hearing or (b) the Reply Submission, the arbitrator shall
render his or her position.
(e) The arbitrator shall promptly notify the parties in writing of the
decision, together with the amount of any dispute resolution costs
arising with respect thereto (the "Notice of Decision"). The Notice of
Decision shall contain a concise explanation of the decision and the
grounds thereof or, not to exceed three (3) pages, double spaced.
(f) The decision of the arbitrator shall be final, binding and not subject
to appeal.
(g) All dispute resolution costs, which shall include any fee for the
arbitrator for services rendered shall be borne by the unsuccessful
party. If neither party is fully successful, the arbitrator may
allocate the dispute resolution costs. Each party is to pay its own
counsel fee and expenses.
This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, whether written or oral,
relating to the subject matter of this Agreement.
10
<PAGE>
This Agreement shall be governed under the laws of the Commonwealth of
Pennsylvania, and the parties consent to the jurisdiction of the courts of the
Commonwealth of Pennsylvania for the purpose of enforcing this Agreement.
ATTEST: KOPPERS INDUSTRIES, INC.
By: By:
------------------------------ ------------------------------
Name: Name:
--------------------------- ----------------------------
Title: Title:
-------------------------- ---------------------------
WITNESS: /s/ Lauren A. Harford EMPLOYEE: /s/ Donald N. Sweet
------------------------- ------------------------
11
<PAGE>
EXHIBIT 11
KOPPERS INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1996 1995 1996 1995
--------- ---------- --------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Voting common stock outstanding....... 5,279,406 5,441,889 5,291,865 5,379,201
Non-Voting common stock outstanding... 3,628,200 -- 3,948,182 --
Series B Junior Convertible Preferred
Stock................................ -- 2,340,000 -- 2,340,000
Common stock equivalents.............. 459,405 2,585,655 462,506 2,613,939
--------- ---------- --------- ----------
Common stock outstanding, including
convertible securities............. 9,367,011 10,367,544 9,702,553 10,333,140
Net income to common stockholders
(000's).............................. $2,544 $8,730 $5,527 $13,841
Primary earnings per common share..... $0.27 $0.62 $0.57 $1.96
========= ========== ========= ==========
FULLY DILUTED EARNINGS PER SHARE:
Voting common stock outstanding....... 5,279,406 5,441,889 5,291,665 5,379,201
Non-Voting common stock outstanding... 3,628,200 -- 3,948,182 --
Series B Junior Convertible Preferred
Stock................................ -- 2,340,000 -- 2,340,000
Common stock equivalents.............. 459,405 2,585,655 462,506 2,652,798
--------- ---------- --------- ----------
Common stock outstanding, including
convertible securities............. 9,367,011 10,367,544 9,702,553 10,371,999
Net income to common stockholders
(000's).............................. $2,544 $8,730 $5,527 $13,841
Fully diluted earnings per common
share................................ $0.27 $0.62 $0.57 $1.95
========= ========== ========= ==========
</TABLE>
All shares of Series B Junior Convertible Preferred Stock were converted
into non-voting common stock on a one-for-nine hundred basis in March 1996.
Common stock equivalents include stock options granted to management and stock
warrants granted to certain lenders. Each stock option awarded to management
gives the holder the right to purchase an equal amount of common stock at the
listed exercise price and becomes exercisable one year after the date of
grant. All outstanding stock warrants were exercised during 1995.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 95
<SECURITIES> 0
<RECEIVABLES> 81,998
<ALLOWANCES> (359)
<INVENTORY> 71,475
<CURRENT-ASSETS> 161,633
<PP&E> 291,113
<DEPRECIATION> (115,428)
<TOTAL-ASSETS> 412,188
<CURRENT-LIABILITIES> 85,547
<BONDS> 110,000
0
0
<COMMON> 46,327
<OTHER-SE> 24,800
<TOTAL-LIABILITY-AND-EQUITY> 412,188
<SALES> 443,510
<TOTAL-REVENUES> 0
<CGS> 376,150
<TOTAL-COSTS> 422,239
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (10,123)
<INTEREST-EXPENSE> 12,462
<INCOME-PRETAX> 5,113
<INCOME-TAX> (414)
<INCOME-CONTINUING> 5,527
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,527
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0
</TABLE>
