<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1996
REGISTRATION NO. 333-7395
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OLYMPIC STEEL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
Subject to Completion
July 19, 1996
PROSPECTUS LOGO
3,000,000 SHARES
OLYMPIC STEEL, INC.
COMMON STOCK
(WITHOUT PAR VALUE)
Of the 3,000,000 shares of Common Stock, without par value (the "Common Stock"),
being offered (the "Offering"), 2,500,000 shares are being sold by Olympic
Steel, Inc. (the "Company") and 500,000 shares are being sold by certain
shareholders of the Company (the "Selling Shareholders"). The Company will not
receive any proceeds from the sale of shares by the Selling Shareholders. See
"Selling Shareholders."
The Common Stock is quoted on the NASDAQ National Market ("NASDAQ") under the
symbol "ZEUS." On July 18, 1996, the last reported sales price on NASDAQ was
$29.00 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON STOCK
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT COMPANY(1) SHAREHOLDERS
<S> <C> <C> <C> <C>
Per Share......... $ $ $ $
Total(2).......... $ $ $ $
<FN>
- --------------------------------------------------------------------------------
(1) Before deducting expenses, payable by the Company, estimated at $300,000.
(2) The Company and the Selling Shareholders have granted to the Underwriters
30-day options to purchase up to 375,000 additional shares and 75,000
additional shares, respectively, of Common Stock (450,000 additional shares
in the aggregate), solely to cover over-allotments, if any. If the
Underwriters exercise such options in full, the total Price to Public,
Underwriting Discount, Proceeds to Company and Proceeds to Selling
Shareholders will be $ , $ , $ and $ ,
respectively. See "Underwriting."
</TABLE>
The Common Stock is offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the shares of Common Stock will be made at the
office of Salomon Brothers Inc, Seven World Trade Center, New York, New York, or
through the facilities of The Depository Trust Company, on or about August
, 1996.
SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MCDONALD & COMPANY
SECURITIES, INC.
The date of this Prospectus is August , 1996.
<PAGE> 3
INSIDE FRONT PAGE
(PICTURE FROM ANNUAL REPORT)
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements (including the notes
thereto) appearing elsewhere in this Prospectus or in the documents incorporated
herein by reference. Unless indicated otherwise, (i) all references in this
Prospectus to the "Company" or "Olympic" are to Olympic Steel, Inc. and its
subsidiaries and (ii) all information contained in this Prospectus assumes that
the Underwriters' over-allotment options are not exercised. Prospective
investors should carefully consider the information set forth under the heading
"Risk Factors."
THE COMPANY
Olympic Steel, Inc. is a leading steel service center that processes and
distributes flat-rolled carbon, stainless and tubular steel products from 11
facilities in six midwestern and eastern states. Total shipments in 1995
exceeded one million tons. The Company's services include both traditional
service center processes of cutting-to-length, slitting, shearing and roll
forming and higher value-added processes of blanking, tempering and plate
burning. The Company services a diverse base of over 3,200 active customers
throughout the midwestern, eastern and southern United States, as well as Mexico
and Puerto Rico.
Major customers include automobile manufacturers and stampers,
manufacturers of transportation equipment, material handling equipment,
electrical machinery, storage tanks, food service equipment, construction
equipment, agricultural equipment and appliances, general and plate fabricators,
and steel service centers. Sales to United States automotive manufacturers and
their suppliers and sales to steel service centers accounted for approximately
25% and 11%, respectively, of 1995 net sales. Sales to the Company's largest
customer accounted for less than 6% of 1995 net sales.
The Company believes that the steel service center and processing industry
continues to be driven by four primary trends: consolidation of industry
participants; increased outsourcing of manufacturing processes by domestic
manufacturers; shift by customers to fewer and larger suppliers; and increased
customer demand for higher quality products and services.
In recognition of these industry dynamics, the Company has focused its
business strategy on achieving profitable growth through the acquisition of
service centers and related businesses and investments in higher value-added
processing equipment and services, while continuing its commitment to expanding
and improving its sales force and information systems. The pursuit of this
strategy has allowed the Company to increase sales and operating income over the
past five years by compound annual growth rates of 22% and 32%, respectively.
Key elements in the implementation of this strategy include the following:
ACQUISITION OF LAFAYETTE STEEL: In January 1995, the Company acquired
Detroit-based Lafayette Steel Company ("Lafayette Steel") for approximately
$52.3 million. The acquisition has provided the Company an entry to the
automotive industry. Lafayette Steel has 14 major pieces of processing
equipment, including eight presses, giving the Company access to processing
capabilities in blanking. The Company has commenced an expansion of Lafayette
Steel's facilities, to be completed by the end of 1996, that will add 72,000
square feet and allow increased operating efficiencies. In 1995, Lafayette Steel
represented approximately $136.4 million, or 25%, of the Company's total net
sales.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON NASDAQ, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ
IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
3
<PAGE> 5
EXPANSION OF PLATE PROCESSING CAPABILITIES: Over the past two years, the
Company has more than doubled its plate processing capacity by adding four plate
burning tables. Substantially all of the new equipment uses advanced laser or
plasma cutting technology resulting in higher efficiency, improved quality and
lower costs. An additional three plasma burning tables are expected to be
installed before the end of 1996. This investment in plate processing equipment
will enable the Company to better respond to an accelerating trend of domestic
manufacturers which are outsourcing certain manufacturing processes and will
allow the Company to further increase its capabilities in higher value-added
processing services. The Company believes it is among the largest processors and
distributors of steel plate in the United States.
INVESTMENT IN NEW TEMPER MILL FACILITY: In January 1996, the Company
commenced operations at its new temper mill facility in Cleveland, constructed
at a cost of $17.2 million, with an annual capacity of 120,000 tons. The
facility operated at an average utilization rate of 45% for the first half of
1996. The Company expects the facility to operate at full capacity by year-end.
The temper mill is one of only six of its kind in the United States and
incorporates state-of-the-art technology and certain unique design
specifications in response to increased customer demand for higher tolerances
and flatness specifications.
COMMITMENT TO MODERNIZATION PROGRAM: The Company is in the early phases of
a modernization program that will include the substantial upgrade or replacement
of several pieces of existing processing equipment and information systems. The
actual timing and cost of the program is still under study; however, current
cost estimates range from $20 million to $40 million over the next several
years. This program will further improve the Company's operating efficiency and
cost competitiveness and expand existing capacity.
EXPANSION OF SALES FORCE: The Company believes it has among the largest
and most experienced sales force in the industry, which is a significant
competitive advantage. The Company's sales force has grown to 120 from 80 at the
beginning of 1994. The continuous interaction between the Company's sales force
and active and prospective customers provides the Company with valuable market
information. The Company remains committed to expanding and improving its sales
force.
Olympic believes its depth of management, strategically located facilities,
advanced information systems, reputation for quality and customer service,
extensive and experienced sales force and supplier relationships provide a
strong foundation for implementation of its strategy.
THE OFFERING
<TABLE>
<S> <C>
Common Stock being offered by:
The Company...................................... 2,500,000 shares
The Selling Shareholders......................... 500,000 shares
-----------------
Total......................................... 3,000,000 shares
Common Stock to be outstanding after the =================
Offering......................................... 11,100,000 shares(a)
NASDAQ symbol...................................... ZEUS
Use of proceeds.................................... To repay outstanding bank indebtedness.
See "Use of Proceeds."
<FN>
- ---------------
(a) Excludes 450,000 shares of Common Stock reserved for future issuance under
the Company's Stock Option Plan (the "Stock Option Plan"), of which options
for 152,500 shares are currently outstanding at an exercise price of $15.50
per share.
</TABLE>
4
<PAGE> 6
SUMMARY FINANCIAL AND OPERATING DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------------------------- --------------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales....................... $250,685 $275,415 $313,810 $381,906 $554,469 $ 291,153 $ 289,286
Cost of sales................... 202,110 220,626 250,707 304,777 446,513 233,798 225,545
-------- -------- -------- -------- -------- -------- --------
Gross margin.................. 48,575 54,789 63,103 77,129 107,956 57,355 63,741
Operating expenses.............. 41,272 46,635 50,519 58,836 85,855 43,925 46,477
-------- -------- -------- -------- -------- -------- --------
Operating income.............. 7,303 8,154 12,584 18,293 22,101 13,430 17,264
Interest and receivable
securitization expense........ 6,435 4,699 4,480 3,761 10,853 5,414 4,618
-------- -------- -------- -------- -------- -------- --------
Pre-tax income.............. 868 3,455 8,104 14,532 11,248 8,016 12,646
Income taxes.................... -- -- -- 13,634(a) 4,504 3,228 5,059
-------- -------- -------- -------- -------- -------- --------
Net income.................. $ 868 $ 3,455 $ 8,104 $ 898 $ 6,744 $ 4,788 $ 7,587
======== ======== ======== ======== ======== ======== ========
Net income per share(b)..... $ 0.12 $ 0.78 $ 0.56 $ 0.88
======== ======== ======== ========
Weighted average shares
outstanding(b)................ 7,778 8,600 8,600 8,600
-------- -------- -------- --------
OTHER DATA:
Capital expenditures............ $ 1,162 $ 3,972 $ 1,767 $ 17,070 $ 12,739 $ 9,399 $ 4,646
Depreciation and amortization... 1,479 1,481 1,646 1,834 3,264 1,576 2,021
Tons sold
Direct...................... 491 565 618 685 931 489 525
Toll........................ 2 2 3 10 155 92 78
-------- -------- -------- -------- -------- -------- --------
Total....................... 493 567 621 695 1,086 581 603
Gross margin.................... 19.4% 19.9% 20.1% 20.2% 19.5% 19.7% 22.0%
Operating income................ 2.9% 3.0% 4.0% 4.8% 4.0% 4.6% 6.0%
Pre-tax income.................. 0.3% 1.3% 2.6% 3.8% 2.0% 2.8% 4.4%
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------- 1996
BALANCE SHEET DATA: 1994 1995 -----------
-------- -------- (UNAUDITED)
<S> <C> <C> <C>
Current assets............................................................... $155,178 $124,371 $ 138,543
Current liabilities.......................................................... 37,767 31,226 43,324
Working capital.............................................................. 117,411 93,145 95,219
Total assets................................................................. 200,987 202,072 218,870
Total debt................................................................... 93,437 98,540 95,604
Shareholders' equity......................................................... 67,240 73,984 81,571
<FN>
- ---------------
(a) Effective January 1, 1994, the Company changed its income tax status from an
S corporation to a C corporation. This change required a reinstatement of
deferred income taxes as a one-time charge of $7.8 million.
(b) Shares outstanding and net income per share data for years prior to the
Company's initial public offering in 1994 are not meaningful and therefore
have not been presented.
</TABLE>
5
<PAGE> 7
RISK FACTORS
In addition to the other information in this Prospectus, prospective
purchasers should evaluate the following risk factors.
THE STEEL INDUSTRY; IMPACT OF CHANGING STEEL PRICES
The principal raw material used by the Company is flat-rolled carbon and
stainless steel that the Company typically purchases from steel producers. The
steel industry as a whole is cyclical, and at times pricing and availability in
the steel industry can be volatile due to numerous factors beyond the control of
the Company, including general, domestic and international economic conditions,
labor costs, production levels, competition, import duties and tariffs and
currency exchange rates. This volatility can significantly affect the
availability and costs of raw materials for the Company.
Steel service centers maintain substantial inventories of steel to
accommodate the short lead times and just-in-time delivery requirements of their
customers. Accordingly, the Company purchases steel in an effort to maintain its
inventory at levels that it believes to be appropriate to satisfy the
anticipated needs of its customers based upon historic buying practices,
contracts with customers and market conditions. The Company's commitments for
steel purchases are generally at prevailing market prices in effect at the time
the Company places its orders. The Company has no long-term, fixed-price steel
purchase contracts. When raw material prices increase, competitive conditions
will influence how much of the steel price increases can be passed on to the
Company's customers. When raw material prices decline, customer demands for
lower prices could result in lower sale prices and, as the Company uses existing
steel inventory, lower margins. Changing steel prices therefore could adversely
affect the Company's net sales, gross margins and net income.
FUTURE EXPANSION
Historically, the Company has grown internally by increasing sales to
existing customers, aggressively pursuing new customers and, in response to
customer demand, acquiring and upgrading processing equipment and services in
order to expand the range of value-added services it can offer. In addition,
growth has occurred through external expansion by the acquisition of other steel
service centers and related businesses. The Company intends to continue to
actively pursue its growth strategy in the future. See "Business--Business
Strategy." Although the Company has purchased equipment only in response to
identified customer demand, the future expansion of an existing facility or
construction of a new facility could have adverse effects on the Company's
results of operations due to the impact of the start-up costs and the potential
for underutilization in the start-up phase of a facility. To date, the Company
has been successful in integrating acquired businesses with its existing
businesses. However, acquisitions frequently result in unforeseen difficulties
and divert a disproportionate amount of management time and attention. There can
be no assurance that future acquisitions will occur or be successful. Moreover,
the incurrence of additional indebtedness to pay for expansion or acquisition
costs could adversely affect the Company's liquidity and financial strength and
the issuance of capital stock to effect acquisitions could result in dilution to
the Company's shareholders.
CYCLICALITY OF DEMAND; SALES TO THE AUTOMOTIVE INDUSTRY
Certain of the Company's products are sold to industries that experience
significant fluctuations in demand based on economic conditions or other matters
beyond the control of the Company. The Company's diversified customer and
geographic base reduce such cyclicality; however, no assurance can be given that
the Company will be able to increase or maintain its level of sales in periods
of economic stagnation or downturn.
Sales of the Company's products for use in the automotive industry
accounted for approximately 25% of the Company's net sales in 1995 and
approximately 23% of net sales for the first six months of 1996. Such sales
include sales directly to automotive manufacturers and to manufacturers of
automotive components and parts. The automotive industry experiences significant
fluctuations in demand based on
6
<PAGE> 8
numerous factors such as general economic conditions and consumer confidence.
The automotive industry is also subject, from time to time, to labor problems.
The contracts between the United Automobile Workers ("UAW") and the Canadian
Auto Workers ("CAW") and General Motors Corporation, Chrysler Corporation and
The Ford Motor Company in both the United States and Canada expire in September
1996 and there can be no assurance that new agreements will be ratified by the
UAW and CAW without a work stoppage. Any prolonged disruption in business
arising from such a work stoppage could have a material adverse effect on the
Company's results of operations.
DEPENDENCE ON KEY INDIVIDUALS
The Company is dependent, in large part, on its ability to retain the
services of its four principal executive officers. None of these officers has an
employment agreement with the Company; however, each officer is a significant
shareholder. The loss of any of these individuals could have a material adverse
effect on the Company. The Company currently maintains key man life insurance
policies on each of these individuals.
COMPETITION
The principal markets served by the Company are highly competitive. The
Company competes with steel service centers and, to a certain degree, steel
producers and intermediate steel processors on a regional basis. The Company has
different competitors for each of its products and within each region. Certain
of these competitors have financial and operating resources in excess of those
of the Company. While the Company has been able to successfully compete, no
assurance can be given that it will be able to continue to do so. Increased
competition could have a material adverse effect on the Company's net sales and
profitability. See "Business--Competition."
INDEBTEDNESS
The Company relies on internally generated funds, long-term borrowings, an
accounts receivable securitization program and sale and leaseback transactions
to meet its capital requirements, including strategic acquisitions, the purchase
and upgrading of processing equipment and services, the construction and
upgrading of related facilities and additional working capital. While the
Company will be repaying the term loans and a portion of the revolving credit
borrowings under its Credit Agreement, dated December 29, 1994, as amended (the
"Credit Facility"), with proceeds of the Offering, the Company will continue to
have significant financing expenses following the Offering. See "Use of
Proceeds" and "Capitalization."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 11,100,000 shares of
Common Stock outstanding (11,475,000 shares if the Underwriters' over-allotment
options are exercised in full). The shares sold in the Offering, plus the
4,000,000 shares sold in the Company's initial public offering in 1994 (the
"IPO") and an additional 506,000 shares held by non-affiliates will be freely
transferable by persons other than Affiliates without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"). Upon completion of the Offering, 3,596,500 shares (3,521,500 shares if
the Underwriters' over-allotment options are exercised in full) of outstanding
Common Stock (the "Affiliate Shares") will be held by "affiliates" of the
Company, as that term is defined under the Securities Act. The Affiliate Shares
are subject to lock-up agreements for a period of 90 days following the Offering
and may only be sold (absent a registration) in accordance with the volume and
other requirements of Rule 144 promulgated under the Securities Act. Sales of
substantial amounts of Common Stock in the public market, or the perception that
such sales may occur, could have a material adverse effect on the market price
of the Common Stock. See "Selling Shareholders," "Shares Eligible for Future
Sale" and "Underwriting."
7
<PAGE> 9
PREFERRED STOCK; STATE ANTI-TAKEOVER LAWS; CONTROL
The Board of Directors of the Company is authorized to issue, from time to
time, without any further action on the part of the Company's shareholders, up
to 2,500,000 shares of Voting Preferred Stock, without par value ("Voting
Preferred Stock"), and up to 2,500,000 shares of Non-voting Preferred Stock,
without par value ("Non-Voting Preferred Stock" and together with the Voting
Preferred Stock, the "Preferred Stock"), each in one or more series, with such
relative rights, powers, preferences and conversion rights as are determined by
the Board of Directors at the time of issuance. The issuance of shares of
Preferred Stock could adversely affect the holders of shares of Common Stock.
See "Description of Capital Stock--Preferred Stock." In addition, certain
statutory provisions of the Ohio General Corporation Law ("Ohio Law") and the
Company's Amended and Restated Articles of Incorporation ("Articles of
Incorporation") and Amended and Restated Code of Regulations ("Code of
Regulations") may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of the Company, including
transactions in which shareholders of the Company might otherwise receive a
premium for their shares over the then current market prices. See "Description
of Capital Stock--Certain Provisions of Ohio Law." Upon completion of the
Offering, the four principal executive officers of the Company will own
approximately 32.4% of the Common Stock (30.7% if the Underwriters'
over-allotment options are exercised in full). See "Selling Shareholders."
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
This Prospectus contains various forward-looking statements and information
that are based on management's beliefs as well as assumptions made by and
information currently available to management. When used in this document, the
words "expect," "believe," "estimate," "project" and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks, uncertainties and assumptions including those identified in this
section. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those expected, believed, estimated or projected.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of shares of
Common Stock being offered hereby are estimated to be approximately $68.6
million (assuming an offering price of $29.00 per share) after deducting the
estimated underwriting discount and Offering expenses payable by the Company.
The Company will use the net proceeds to repay a portion of its present
borrowings under its Credit Facility, including $24.0 million of term loans and
$44.6 million in revolving credit loans. For the first six months of 1996, the
average weighted interest rate applicable to such borrowings was 7.7%. The
Credit Facility matures on June 30, 1998, but each year the Company may extend
its maturity date one year with approval of the bank group. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The Company will not receive any of the proceeds from the sale of Common
Stock offered by the Selling Shareholders.
8
<PAGE> 10
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996 (i) on an actual basis and (ii) as adjusted to give effect to the sale
of the 2,500,000 shares of Common Stock offered hereby by the Company and the
application of the net proceeds to reduce bank indebtedness. See "Use of
Proceeds." This table should be read in conjunction with the consolidated
financial statements and the notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Short-Term Debt:
Current portion of long-term debt............................ $ 4,719 $ 1,919
======== ========
Long-Term Debt, Net of Current Portion:
Revolving credit agreement................................... $ 51,671 $ 7,096
Term loans................................................... 21,854 654
Industrial revenue bonds..................................... 9,460 9,460
Taxable rate notes........................................... 7,900 7,900
-------- --------
Total long-term debt.................................... 90,885 25,110
-------- --------
Shareholders' Equity:
Preferred stock, without par value,
5,000 shares authorized, no shares
issued or outstanding...................................... -- --
Common stock, without par value,
20,000 shares authorized, 8,600
shares issued and outstanding
(11,100 shares issued and
outstanding, as adjusted)(a)............................... 57,095 125,670
Retained earnings............................................ 24,476 24,476
-------- --------
Total shareholders' equity................................. 81,571 150,146
-------- --------
Total Capitalization....................................... $172,456 $175,256
======== ========
<FN>
- ---------------
(a) Excludes 450,000 shares of Common Stock reserved for future issuance under
the Stock Option Plan, of which options for 152,500 shares are currently
outstanding with an exercise price of $15.50 per share.
</TABLE>
9
<PAGE> 11
PRICE RANGE OF COMMON STOCK
The Company's Common Stock trades on NASDAQ under the symbol "ZEUS." The
following table sets forth, for the periods indicated, the high and low sales
prices of the Company's Common Stock on NASDAQ since the Company's March 1994
IPO:
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
-----------------
HIGH LOW
------ ------
<S> <C> <C>
1994
First quarter........................................................ $15.75 $13.00
Second quarter....................................................... 13.50 10.00
Third quarter........................................................ 14.00 10.25
Fourth quarter....................................................... 14.75 10.00
1995
First quarter........................................................ 11.50 9.50
Second quarter....................................................... 11.00 9.00
Third quarter........................................................ 10.88 8.88
Fourth quarter....................................................... 10.13 7.50
1996
First quarter........................................................ 10.88 8.50
Second quarter....................................................... 28.63 10.13
Third quarter (through July 18, 1996)................................ 30.00 23.00
</TABLE>
On July 18, 1996, the last reported sale price of the Common Stock on
NASDAQ was $29.00 per share. The Company believes there were approximately 3,652
beneficial holders of the Company's Common Stock on July 10, 1996.
DIVIDEND POLICY
The Company presently retains all of its earnings, and anticipates that all
of its future earnings will be retained to finance the expansion of its business
and does not anticipate paying cash dividends on its Common Stock in the
foreseeable future. Any determination to pay cash dividends in the future will
be at the discretion of the Board of Directors after taking into account various
factors, including the Company's financial condition, results of operations,
current and anticipated cash needs, plans for expansion and restrictions under
the Company's Credit Facility.
10
<PAGE> 12
SELECTED FINANCIAL DATA
(in thousands, except per share data)
The selected financial data presented below have been derived from the
Company's consolidated financial statements which have been audited by Arthur
Andersen LLP, except that the data as of June 30, 1996 and for the six months
ended June 30, 1995 and 1996 are derived from unaudited consolidated financial
statements which, in the opinion of the Company, reflect all adjustments
necessary for a fair presentation. Such audited and unaudited consolidated
financial statements and related notes thereto appear elsewhere in this
Prospectus. Results for the six-month period ended June 30, 1996 are not
necessarily indicative of results for the year ending December 31, 1996. The
selected financial data presented below should be read in conjunction with, and
are qualified in their entirety by, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Consolidated Financial
Statements and other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------------ ---------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................... $250,685 $275,415 $313,810 $381,906 $554,469 $291,153 $289,286
Cost of sales............... 202,110 220,626 250,707 304,777 446,513 233,798 225,545
-------- -------- -------- -------- -------- -------- --------
Gross margin.............. 48,575 54,789 63,103 77,129 107,956 57,355 63,741
Operating expenses.......... 41,272 46,635 50,519 58,836 85,855 43,925 46,477
-------- -------- -------- -------- -------- -------- --------
Operating income.......... 7,303 8,154 12,584 18,293 22,101 13,430 17,264
Interest and receivable
securitization expense.... 6,435 4,699 4,480 3,761 10,853 5,414 4,618
-------- -------- -------- -------- -------- -------- --------
Pre-tax income............ 868 3,455 8,104 14,532 11,248 8,016 12,646
Income taxes................ -- -- -- 13,634(a) 4,504 3,228 5,059
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 868 $ 3,455 $ 8,104 $ 898 $ 6,744 $ 4,788 $ 7,587
======== ======== ======== ======== ======== ======== ========
Net income per
share(b).............. $ 0.12 $ 0.78 $ 0.56 $ 0.88
======== ======== ======== ========
Weighted average shares
outstanding(b).......... 7,778 8,600 8,600 8,600
-------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
BALANCE SHEET DATA: 1991 1992 1993 1994 1995 JUNE 30, 1996
-------- -------- -------- -------- -------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Current assets..................... $ 88,760 $105,196 $123,787 $155,178 $124,371 $ 138,543
Current liabilities................ 26,946 29,381 48,930 37,767 31,226 43,324
Working capital.................... 61,814 75,815 74,857 117,411 93,145 95,219
Total assets....................... 114,043 133,102 151,947 200,987 202,072 218,870
Total debt......................... 70,336 83,970 95,330 93,437 98,540 95,604
Shareholders' equity............... 18,288 20,993 9,347 67,240 73,984 81,571
<FN>
- ---------------
(a) Effective January 1, 1994, the Company changed its income tax status from an
S corporation to a C corporation. This change required a reinstatement of
deferred income taxes as a one-time charge of $7.8 million.
(b) Shares outstanding and net income per share data for years prior to the IPO
in 1994 are not meaningful and therefore have not been presented.
</TABLE>
11
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's results of operations are affected by numerous external
factors, such as general economic and political conditions, competition, and
steel pricing and availability.
Olympic sells a broad range of products, many of which have different gross
margins. Products that have more value-added processing generally have a greater
gross margin. Accordingly, the Company's overall gross margin is affected by
product mix and the amount of processing performed, as well as volatility in
selling prices and material purchase costs. With the acquisition of Lafayette
Steel as of January 1, 1995, the Company performs toll processing of
customer-owned steel. Toll processing, substantially all of which is performed
by Lafayette Steel, generally results in lower selling prices and gross margin
dollars per ton but higher gross margin percentages than the Company's
historical direct sales.
Financing costs include interest expense on debt and costs associated with
the $65.0 million accounts receivable securitization program which commenced in
December 1995 (the "Financing Costs"). Interest rates paid by the Company under
its Credit Facility are generally based on prime or LIBOR plus a premium (the
"Premium") determined quarterly, which varies with the Company's operating
performance and financial leverage. Receivable securitization costs are based on
commercial paper rates calculated on the amount of receivables sold.
In March 1994, the Company completed its IPO of 4,000,000 shares of its
Common Stock which generated net proceeds of $57.0 million.
The Company sells certain products internationally, primarily in Mexico and
Puerto Rico. All international sales and payments are made in United States
dollars. These sales historically involve the Company's direct representation of
steel producers and may be covered by letters of credit or trade receivable
insurance. Typically, international sales are more transactional in nature with
lower gross margins than domestic sales. Domestic steel producers generally
supply domestic customers before meeting foreign demand, particularly during
periods of supply constraints. As a result, domestic and international sales
tend to be countercyclical.
Because the Company conducts its operations generally on the basis of
short-term orders, backlog is not a meaningful indicator of future performance.
RESULTS OF OPERATIONS
The following table sets forth certain income statement data expressed as a
percentage of net sales:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................. 79.9 79.8 80.5 80.3 78.0
----- ----- ----- ----- -----
Gross margin.............................. 20.1 20.2 19.5 19.7 22.0
Operating expenses........................ 16.1 15.4 15.5 15.1 16.1
----- ----- ----- ----- -----
Operating income.......................... 4.0 4.8 4.0 4.6 6.0
Interest and receivable securitization
expense................................. 1.4 1.0 2.0 1.9 1.6
----- ----- ----- ----- -----
Pre-tax income............................ 2.6 3.8 2.0 2.8 4.4
Income taxes.............................. -- 1.5 0.8 1.1 1.7
Reinstatement of deferred income taxes.... -- 2.0 -- -- --
----- ----- ----- ----- -----
Net income........................... 2.6% 0.2% 1.2% 1.6% 2.6%
===== ===== ===== ===== =====
</TABLE>
12
<PAGE> 14
SECOND QUARTER AND FIRST HALF 1996 COMPARED TO SECOND QUARTER AND FIRST HALF
1995
Tons sold increased 10.4% to 308,861 in the second quarter of 1996 from
279,716 in the second quarter of 1995, and 3.8% in the first half of 1996 to
603,292 from 581,287 in the first half of 1995. Tons sold in the second quarter
of 1996 include 268,318 from direct sales and 40,543 from toll processing,
compared with 238,862 direct tons and 40,854 tolling tons in the comparable
period of 1995. Tons sold in the first half of 1996 include 525,529 from direct
sales and 77,763 from toll processing, compared with 489,023 direct tons and
92,264 tolling tons in the comparable period of 1995. Substantially all tolling
tons were processed by Lafayette Steel.
Net sales increased 3.2% to $146.7 million for the second quarter of 1996
from $142.1 million for the second quarter of 1995. For the first half of 1996,
net sales decreased 0.6% to $289.3 million from $291.2 million in the 1995
period. The decrease in net sales for the six month period is attributable to a
4.2% decline in average selling prices between periods, partially offset by an
increase in tons sold. International sales represented 5.7% and 5.3% of
consolidated net sales for the three and six month periods ended June 30, 1996,
compared to 1.8% and 1.7%, respectively, for the 1995 periods.
As a percentage of net sales, gross margin increased to 22.4% for the
second quarter of 1996 from 19.2% for 1995. For the six month period, gross
margin increased to 22.0% in 1996 from 19.7% in 1995. The margin increases
reflect the impact of centralized steel purchasing efforts and an increased
amount of higher value-added plate processing and tempering performed in 1996,
partially offset by lower tolling sales and increased international sales in
1996.
As a percentage of net sales, operating expenses increased to 15.9% for the
second quarter of 1996 from 15.2% for 1995, and to 16.1% for the first six
months of 1996 from 15.1% in 1995. The increases are primarily due to lower
average selling prices in 1996, and incremental costs associated with the new
Cleveland temper mill and Minneapolis plate processing facilities, expansion of
the Philadelphia plate processing, and higher management information systems
expenditures.
Financing Costs decreased to $2.3 million for the second quarter of 1996
from $2.8 million in 1995, and to $4.6 million for the first half of 1996 from
$5.4 million in 1995. The decreases are attributable to lower average borrowings
outstanding primarily as a result of lower inventory levels in 1996, lower
effective borrowing rates in 1996, and rate savings associated with the
receivable securitization program implemented in December 1995. The Company's
effective borrowing rate for both the second quarter and first half of 1996 was
7.4%, compared to 7.7% and 7.6%, respectively, in the comparable periods of
1995. These reductions were offset by interest costs associated with the
Cleveland temper mill equipment and facility financing that were expensed in
1996. Such costs were capitalized during the 1995 construction period.
Pre-tax income for the second quarter of 1996 increased 151.9% to $7.2
million from $2.9 million for 1995. For the first six months of 1996, pre-tax
income increased 57.8% to $12.6 million from $8.0 million for 1995. Income taxes
approximated 40% of pre-tax income for all periods presented. Net income for the
second quarter of 1996 increased 151.7% to $4.3 million, or $.50 per share, from
$1.7 million, or $.20 per share for the second quarter of 1995. Net income for
the first six months of 1996 increased 58.5% to $7.6 million, or $.88 per share,
from $4.8 million, or $.56 per share in the 1995 period.
1995 COMPARED TO 1994
Tons sold increased 56.4% to 1,086,042 in 1995 from 694,548 in 1994. Tons
sold in 1995 include 930,971 from direct sales and 155,071 from toll processing,
compared with 684,808 from direct sales and 9,740 from toll processing in 1994.
Net sales increased by $172.6 million, or 45.2%, to $554.5 million in 1995
from $381.9 million in 1994. The increase was primarily attributable to the
inclusion of Lafayette Steel's results of operations in 1995. All but one of the
Company's other operations achieved net sales increases in 1995. International
sales, which were less than 5% of total net sales in both 1995 and 1994, nearly
tripled between years as
13
<PAGE> 15
a result of domestic steel producers seeking foreign markets for their products
during the last half of 1995.
As a percentage of net sales, gross margin decreased to 19.5% from 20.2%
for 1994. The decrease was attributable to the impact of Lafayette Steel, which
had gross margins lower than the Company's other domestic operations, and an
increase in the comparatively lower margin international sales, offset by higher
gross margins from the Company's other domestic operations.
As a percentage of net sales, operating expenses remained relatively
constant between years. Operating expenses for 1995 included start-up costs
related to the Cleveland temper mill and Minneapolis plate processing
facilities.
Interest expense increased $7.0 million to $10.7 million in 1995 from $3.8
million in 1994. The increase was attributable to higher average borrowings
associated with the Lafayette Steel acquisition, the effect of higher priced
steel in inventory in 1995, and higher effective borrowing rates. Overall
effective borrowing rates increased to 7.7% in 1995 from 5.7% in 1994 as a
result of increases in the prime rate and LIBOR and higher Premiums. Premiums in
1995 ranged from 0.25% to 1% for prime, and 1.25% to 2% for LIBOR.
Pre-tax income decreased $3.3 million, or 22.6%, to $11.2 million in 1995
from $14.5 million in 1994. Income taxes computed on 1995 earnings represented
40.0% of pre-tax income or $4.5 million versus 40.1% or $5.8 million for 1994.
Income tax expense for 1994 included a one-time $7.8 million charge to record
deferred income taxes attributable to the termination in 1994 of the Company's S
corporation election associated with the IPO.
Net income totaled $6.7 million or $0.78 per share in 1995, compared to
$0.9 million, or $0.12 per share in 1994 after recording the reinstatement of
deferred income taxes. Excluding the reinstatement of deferred income taxes in
1994, net income would have been $1.12 per share.
1994 COMPARED TO 1993
Tons sold increased 11.8% to 694,548 in 1994 from 621,444 in 1993, which
was attributable to continued strong domestic demand. Net sales increased by
$68.1 million, or 21.7%, to $381.9 million in 1994 from $313.8 million in 1993.
Significant selling price increases of carbon products were pervasive which
correlated to purchase price increases being incurred. International sales
declined between years due to the inability to purchase domestic steel for
export at competitive prices.
As a percentage of net sales, gross margin increased slightly to 20.2% in
1994 from 20.1% in 1993, reflecting changes in product mix and the 1994 decline
in international sales. Purchase and selling price increases of most domestic
carbon products were significant and continuous since the beginning of 1993.
Overall, these increases did not impact gross margin percentages in 1994 as
market conditions allowed price increases to be passed on to the Company's
customers.
As a percentage of net sales, operating expenses decreased to 15.4% in 1994
from 16.1% in 1993. The improvement as a percentage of net sales was primarily
attributable to sales growth, as well as a reduction in executive compensation
as a result of the IPO.
Interest expense declined $0.7 million to $3.8 million in 1994 from $4.5
million in 1993. The decrease was attributable to lower average borrowings
offset partially by higher effective borrowing rates. The lower average
borrowings reflect the application of proceeds from the IPO, offset to a lesser
extent by increased borrowings for working capital growth. Effective borrowing
rates increased by 15 basis points in 1994 as a result of increases in prime and
LIBOR, offset by lower Premiums.
Pre-tax income increased $6.4 million, or 79.3%, to $14.5 million in 1994
from $8.1 million in 1993. Income taxes computed on 1994 earnings represented
40.1% of pre-tax income or $5.8 million.
Prior to 1994, the Company was treated as an S corporation for income tax
purposes and, accordingly, was not subject to federal income taxes and was
subject to minimal state income taxes. As a
14
<PAGE> 16
result of the IPO, the Company terminated its S corporation election in 1994 and
became fully subject to federal and state income taxation as a C corporation. In
connection with the change in tax status, deferred income tax liabilities of
$7.8 million were recorded as a charge to net income. Of the $7.8 million
deferred tax charge, $7.4 million is being paid in installments over six years
commencing in 1994.
After recording the reinstatement of deferred income taxes and C
corporation income taxes, the Company recorded net income of $0.9 million, or
$0.12 per share. Excluding the reinstatement of deferred income taxes, net
income for 1994 would have been $1.12 per share. There are no comparable
after-tax numbers for 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirement is to fund its growth,
including strategic acquisitions, the purchase and upgrading of processing
equipment and services, the construction and upgrading of related facilities and
additional working capital. The Company uses cash generated from operations,
long-term debt obligations, proceeds from the Company's accounts receivable
securitization program and sale and leaseback transactions to fund these
requirements. Historically, the Company has used revolving credit borrowings
under its Credit Facility to finance its working capital requirements and has
financed acquisitions and capital additions from the proceeds of long-term
indebtedness.
Net cash from operating activities primarily represents net income plus
non-cash charges for depreciation and amortization, and changes in working
capital. During the first six months of 1996, $8.9 million of net cash was
provided by operating activities, consisting of $9.6 million of net income and
non-cash charges, offset by $0.7 million of cash used for working capital
components.
As of June 30, 1996, $57.0 million of eligible receivables were sold under
the Company's accounts receivable securitization program, compared to $53.7
million at December 31, 1995. The amount of receivables sold by the Company
typically changes monthly depending upon the level of eligible receivables
available for sale at each month end.
Working capital at June 30, 1996 increased $2.1 million or 2.2% since
December 31, 1995. The increase was primarily attributable to increases in
inventory and accounts receivable, offset in part by an increase in accounts
payable.
During the first half of 1996, net cash used for investing activities
consisted of $4.6 million of capital expenditures, primarily related to
completion of the Cleveland temper mill facility, construction of additional
office space, commencement of a 72,000 square foot expansion of Lafayette
Steel's existing facility (scheduled for completion by the end of 1996), the
purchase of two additional plasma burning tables, and upgrading the Company's
information systems. Cash flows used for financing activities in the first half
of 1996 primarily consisted of net debt repayments totaling $2.6 million.
Approximately $21.5 million in unused revolving credit borrowing
availability existed under the Credit Facility at June 30, 1996. The Credit
Facility, which matures on June 30, 1998, contains restrictive covenants which
require minimum net worth levels, maintenance of certain financial ratios and
limitations on capital expenditures. The Company has remained in compliance with
these covenants since the inception of the Credit Facility.
The estimated net proceeds of the Offering to the Company will be
approximately $68.6 million (assuming an offering price of $29.00 per share;
$78.9 million if the Underwriter's over-allotment options are exercised in
full). The Company intends to use the net proceeds of this Offering to repay the
term loans and a portion of its revolving credit borrowings under the Credit
Facility. Upon consummation of this Offering and application of the estimated
net proceeds therefrom, aggregate borrowings outstanding under the Company's
Credit Facility will be approximately $7.1 million and there will be
approximately $66.0 million in unused borrowing availability.
The Company believes that funds available under the Credit Facility, other
credit and financing agreements and funds from operations will be sufficient to
provide the Company with the liquidity
15
<PAGE> 17
necessary to fund its anticipated working capital requirements and capital
expenditure requirements over the next 12 months. Capital requirements are
subject to change as business conditions warrant and opportunities arise. In
connection with its internal and external expansion strategies, the Company may
from time to time seek additional funds to finance other new facilities and
significant improvements to processing equipment to respond to customers'
demands.
IMPACT OF NEW ACCOUNTING STANDARDS
The Company was required to adopt Financial Accounting Standards Board
Statement No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," effective January 1, 1996. The adoption
had no impact on the reported results of the Company. The Company will comply
with disclosure requirements of Financial Accounting Standard Board Statement
No. 123, "Accounting for Stock Based Compensation," commencing with its December
31, 1996 consolidated financial statements.
EFFECTS OF INFLATION
Inflation generally affects the Company by increasing the cost of
personnel, processing equipment, purchased steel, and borrowings under the
Credit Facility. The Company does not believe that inflation has had a material
effect on its operating income over the periods presented. However, it has and
could have a material effect on the Company's Financing Costs based on
inflation's impact on amounts borrowed and prime, LIBOR, and commercial paper
rates.
16
<PAGE> 18
BUSINESS
THE COMPANY
The Company is a leading steel service center that processes and
distributes flat-rolled carbon, stainless and tubular steel products from 11
facilities in six midwestern and eastern states. The Company operates as an
intermediary between steel producers and manufacturers that require processed
steel for their operations. The Company purchases flat-rolled steel typically
from steel producers and responds to its customers' needs by processing steel to
customer specifications and by providing critical inventory and just-in-time
delivery services. Such services reduce customers' inventory levels, as well as
save time, labor and expense for customers, thereby reducing their overall
production costs. The Company's services include both traditional service center
processes of cutting-to-length, slitting, shearing and roll forming and higher
value-added processes of blanking, tempering and plate burning.
In January 1995, the Company completed the acquisition of Lafayette Steel,
an intermediate steel processor headquartered in Detroit, Michigan, which
primarily serves the automotive industry. Lafayette Steel's results of
operations are included in the Company's 1995 consolidated financial statements.
The Company is organized into regional operations with domestic processing
and distribution facilities in Connecticut, Pennsylvania, Ohio, Michigan,
Illinois and Minnesota, servicing a diverse base of over 3,200 active customers
located throughout the midwestern, eastern and southern United States. The
Company maintains a southern sales office in Greenville, South Carolina. Its
international sales office is located in Pittsburgh, Pennsylvania and services
customers primarily in Mexico and Puerto Rico.
The Company is incorporated under the laws of the State of Ohio. The
Company's executive offices are located at 5080 Richmond Road, Cleveland, Ohio
44146. Its telephone number is (216) 292-3800.
INDUSTRY OVERVIEW
The steel industry is comprised of three types of entities: steel
producers, intermediate steel processors and steel service centers. Steel
producers have historically emphasized the sale of steel to volume purchasers
and have generally viewed intermediate steel processors and steel service
centers as part of their customer base. However, all three entities can compete
for certain customers who purchase large quantities of steel. Intermediate steel
processors tend to serve as processors in large quantities for steel producers
and major industrial consumers of processed steel, including automobile and
appliance manufacturers.
Services provided by steel service centers can range from storage and
distribution of unprocessed metal products to complex, precision value-added
steel processing. Steel service centers respond directly to customer needs and
emphasize value-added processing of flat-rolled steel and plate pursuant to
specific customer demands, such as cutting-to-length, slitting, shearing, roll
forming, shape correction and surface improvement, blanking, tempering, plate
burning and stamping. These processes produce steel to specified lengths,
widths, shapes and surface characteristics through the use of specialized
equipment. Steel service centers typically have lower cost structures and
provide services and value-added processing not otherwise available from steel
producers.
End product manufacturers and other steel distributors have increasingly
sought to purchase steel on shorter lead times and with more frequent and
reliable deliveries than can normally be provided by steel producers. Steel
service centers generally have lower labor costs than steel producers and
consequently process steel on a more cost-effective basis. In addition, due to
this lower cost structure, steel service centers are able to handle orders in
quantities smaller than would be economical for steel producers. The net results
to customers purchasing products from steel service centers are lower inventory
levels, lower overall cost of raw materials and decreased manufacturing time and
operating expense. The Company believes that the increasing prevalence of
just-in-time inventory needs has made the value-added inventory, processing and
delivery functions performed by steel service centers increasingly important.
17
<PAGE> 19
CORPORATE HISTORY
The Company was founded in 1954 as a general steel service center. In the
early 1970's, Michael Siegal (CEO) and Bruce Adelstein (VP-Operations), sons of
two of the principals, began working at the Company. At the end of 1983, they
completed the purchase of the Company, assumed management control and, as part
of an effort to broaden the management base for future expansion, hired David
Wolfort (COO) as general manager. In 1987, Louis Schneeberger joined the Company
as Chief Financial Officer.
After acquiring control of the Company, management changed the Company's
business strategy from a focus on warehousing and distributing steel from a
single facility with no major processing equipment to a focus on growth,
geographic and customer diversity and value-added processing. An integral part
of the Company's growth has been the acquisition and start-up of several
processing and sales operations.
In 1987, the Company constructed a facility to house its first major piece
of processing equipment, a heavy gauge, cut-to-length line. Since that time, the
Company has added approximately 60 major pieces of processing equipment. Certain
equipment was purchased directly from equipment manufacturers while the balance
was acquired in the Company's acquisitions of other steel service centers and
related businesses, including 14 pieces purchased in the Lafayette Steel
acquisition.
BUSINESS STRATEGY
The Company believes that the steel service center and processing industry
continues to be driven by four primary trends: consolidation of industry
participants; increased outsourcing of manufacturing processes by domestic
manufacturers; shift by customers to fewer and larger suppliers; and increased
customer demand for higher quality products and services.
In recognition of these industry dynamics, the Company has focused its
business strategy on achieving profitable growth through the acquisition of
service centers and related businesses and investments in higher value-added
processing equipment and services, while continuing its commitment to expanding
and improving its sales force and information systems. The pursuit of this
strategy has allowed the Company to increase sales and operating profit over the
past five years by compound annual growth rates of 22% and 32%, respectively.
The Company plans to increase profits by strategically acquiring other
steel service centers and related businesses, acquiring and upgrading processing
equipment and services in response to customer demand, expanding into new
domestic and international markets, increasing sales to existing customers and
aggressively pursuing new customers. Olympic believes its depth of management,
strategically located facilities, advanced information systems, reputation for
quality and customer service, extensive and experienced sales force and supplier
relationships provide a strong foundation for implementation of its strategy.
Key elements of the Company's strategy are set forth below.
ACQUISITIONS. It is the Company's strategy to continue to make selective
acquisitions of profitable or turnaround steel service centers and related
businesses. Over the last nine years, the Company has made four major
acquisitions of other steel service centers:
In January 1995, the Company completed the acquisition of Lafayette
Steel for approximately $52.3 million. The acquisition has provided the
Company an entry to the automotive industry. Lafayette Steel is a
Detroit-based service center and toll processor primarily serving Michigan,
Illinois, Indiana and Ohio. Lafayette Steel's 14 major pieces of processing
equipment, including eight presses, have enabled the Company to broaden its
value-added processes by offering first stage blanking to its existing and
prospective customers. In 1995, Lafayette Steel represented approximately
$136.4 million, or 25% of the Company's total net sales. Subsequent to the
acquisition, Olympic has made significant operational changes. From a
purchasing perspective, Lafayette Steel has benefited from Olympic's
critical mass, purchasing discipline, and inventory management. From a
personnel standpoint, several key changes have been made to complement the
existing manage-
18
<PAGE> 20
ment team. These initial changes have focused on internal functions such as
plant operations, information systems, financial controls, and sales
management. These actions have resulted in an increase in operating margin
from 1.9% in 1995 to 5.5% in the first half of 1996 and a better positioned
and smaller inventory. As a result of the improvement in inventory
management, inventory turns improved from 3.9 in 1995 to 5.7 for the first
half of 1996. In April, 1996, the Company began a 72,000 square foot
expansion of its warehouse, at an estimated cost of approximately $4.0
million. The expansion is expected to result in a significant reduction in
outside storage and freight costs commencing in 1997.
Eastern Steel & Metal Company ("Eastern Steel") had ceased operations
prior to its purchase by the Company in 1990. The acquisition provided the
Company with access to the eastern market, as well as Eastern Steel's
processing equipment and its distribution facility that included seven
major pieces of processing equipment. In addition, the acquisition provided
the Company's Philadelphia operation with processing support. Olympic has
supported the operation by purchasing and upgrading its processing
equipment and providing working capital. Eastern Steel, which had no sales
at the time of its acquisition in 1990, has increased sales to $55 million
in 1995.
In 1990, Olympic purchased Juster Steel, Inc. ("Juster Steel"), a
profitable steel service center in Minneapolis, Minnesota, to expand into
the upper midwest and farmbelt states. Two of the former owners and
executive officers are now the Company's general managers for the Company's
Minneapolis operation. The Company has added sales and other personnel and
invested capital to purchase and upgrade major processing equipment and
facilities, including the new plate processing facility. Juster Steel
currently has 19 major pieces of processing equipment. Sales of Juster
Steel have increased from $63 million in 1989, the year prior to the
acquisition, to $108 million in 1995.
In 1987, the Company acquired Viking Steel Company ("Viking Steel"),
located in Chicago. Prior to the acquisition, Viking Steel's sales had
decreased significantly for several years. The acquisition broadened the
Company's geographic coverage through expansion into the Chicago market,
the largest steel consuming market in the United States, and extended its
product line into stainless steel. Olympic replaced the original management
team, purchased new processing equipment and in 1992 purchased a second
facility in Schaumburg, Illinois. Sales of Viking Steel have increased from
$5 million in 1987, the year prior to the acquisition, to $65 million in
1995.
INVESTMENT IN VALUE-ADDED PROCESSING EQUIPMENT. An integral part of the
Company's growth has been the purchase of major processing equipment and
construction of facilities. The Company will continue to invest to support its
growth through the addition of major equipment to its existing facilities. The
Company's philosophy is that equipment purchases should be driven by customer
demand. When the results of sales and marketing efforts to, and communication
with, existing and potential customers indicate that there is sufficient
customer demand for a particular product or service, the Company will purchase
the equipment or upgrade existing equipment to satisfy that demand.
Over the past two years, the Company has more than doubled its plate
processing capacity by adding four plate burning tables. The Company
completed a $7.4 million expansion project in Minneapolis in early 1995.
The project included the construction of a new 112,000 square foot plate
processing facility to house laser, plasma and oxygen burning tables and
shot blasting equipment. This investment in plate processing equipment will
enable the Company to respond to an accelerating trend of domestic
manufacturers outsourcing certain manufacturing processes and will allow
the Company to further increase its higher value-added processing services.
The Company believes it is among the largest processors and distributors of
steel plate in the United States. As the response to the new plate burning
capability has exceeded expectations, the Company has recently purchased
for the Minneapolis facility an additional plasma burning table. Two other
plasma burning tables are being added to the Chicago and Philadelphia
facilities and are expected to be operational by year-end.
In response to customer demands for higher tolerances and flatness
specifications, the Company purchased a four-high 1/2" by 72" temper mill
and heavy gauge cut-to-length line with a recoil option based on a
customized design. The new equipment, which is housed in a 127,000
19
<PAGE> 21
square foot building that was constructed on property adjoining the
Company's Cleveland facilities, is one of only six of its kind in the
United States and incorporates state-of-the-art technology and unique
design specifications. The new equipment permits the Company to process
steel to a more uniform thickness and flatness, upgrades the quality and
consistency of certain of the Company's products and increases the
Company's processing capacity by 120,000 tons per year. The new facility
was constructed at a cost of $17.6 million. Start-up operations commenced
in January 1996 and a second shift was added in June. The facility operated
at an average utilization rate of 45% for the first half of 1996 and the
Company expects the facility to operate at full capacity by year-end. The
new equipment has been designed to enable the Company to produce tempered
sheet or coil to customer specifications in smaller quantities than is
available from other sources. By offering customers greater flexibility
with respect to order size, the Company believes it can capture additional
market share.
The Company is in the early phases of a modernization program that
will include the substantial upgrade or replacement of several pieces of
existing processing equipment and information systems. The actual timing
and cost of the program is still under study; however, current cost
estimates range from $20 million to $40 million over the next several
years. This program will further improve the Company's operating efficiency
and cost competitiveness and expand existing capacity.
The expansion of plate processing capacity at the Minneapolis facility, as
well as expansion at the Philadelphia facility, and the addition of the new
temper mill facility in Cleveland were made in response to the growing trend
among capital equipment manufacturers to outsource non-core production
processes, such as plate processing, and to concentrate on engineering, design
and assembly. The Company expects to further benefit from this trend and is
purchasing and will purchase new equipment to meet this demand.
SALES AND MARKETING. The Company believes that its commitment to quality,
service and just-in-time delivery has enabled it to build and maintain strong
customer relationships, while expanding its geographic growth through the
continued upgrading and addition of sales personnel. The Company believes it has
among the largest and most experienced sales force in the industry which is a
significant competitive advantage. The Company's sales force has grown to 120
from 80 at the beginning of 1994. The efforts of these individuals translate
into approximately 300 direct daily sales calls to customers in 43 states. The
continuous interaction between the Company's sales force and active and
prospective customers provides the Company with valuable market information and
sales opportunities, including opportunities for outsourcing and increased
sales.
The Company's sales efforts are further supported by metallurgical
engineers and technical service personnel, who have specific expertise in carbon
and stainless steel and alloy plate.
In the international market, the Company's objective is to service foreign
customers by matching their steel requirements to a specific primary steel
producer. The Company functions as the sales arm of primary producers, giving
them access to customers that they might otherwise not sell or service. This
approach differs from the typical international steel trader that emphasizes
large commodity shipments. Although the Company works principally with domestic
steel producers, it continues to develop relationships with foreign steel
producers. All international sales and payments are made in United States
dollars. International sales were less than 5% of total net sales in both 1995
and 1994, and approximately 5.3% of net sales in the first half of 1996.
PRODUCTS, PROCESSING SERVICES, AND QUALITY STANDARDS
The Company maintains a substantial inventory of coil and plate steel
generally purchased from steel producers. Coil is in the form of a continuous
sheet, typically 36 to 96 inches wide, between 0.015 and 0.625 inches thick, and
rolled into 10 to 30 ton coils. Because of the size and weight of these coils
and the equipment required to move and process them into smaller sizes, such
coils do not meet the requirements, without further processing, of many
customers. Plate is typically thicker than coil and is processed by laser,
plasma or oxygen burning.
20
<PAGE> 22
Customer orders are entered into computerized order entry systems, and
appropriate inventory is then selected and scheduled for processing in
accordance with the customer's specified delivery date. The Company attempts to
maximize yield by combining customer orders for processing each purchased coil
to the fullest extent practicable.
The Company's services include both traditional service center processes of
cutting-to-length, slitting, shearing and roll forming and higher value-added
processes of blanking, tempering and plate burning to process steel to specified
lengths, widths and shapes pursuant to specific customer orders.
Cutting-to-length involves cutting steel along the width of the coil. Slitting
involves cutting steel to specified widths along the length of the coil.
Shearing is the process of cutting sheet steel, while roll forming is the
process in which flat rolled coils are formed into tubing. Blanking cuts the
steel into specific shapes with close tolerances. Tempering improves the
uniformity of the thickness and flatness of the steel through a cold rolling
process. Plate burning is the process of cutting steel into specific shapes and
sizes.
The following table sets forth the major pieces of processing equipment
used by geographic location.
<TABLE>
<CAPTION>
PROCESSING CLEVELAND(A) CHICAGO(B) DETROIT MINNEAPOLIS(B) CONNECTICUT PHILADELPHIA TOTAL
- ------------------------------ ------------ ---------- ------- -------------- ----------- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Cutting-to-length/decoiling... 3 1 3 3 3 - 13
Blanking...................... - - 8 - - - 8
Tempering..................... 1 - - - - - 1
Plate processing(c)........... 2 1 - 6 2 3 14
Slitting...................... - - 3 2 3 - 8
Shearing...................... 1 1 - 7 2 - 11
Roll forming.................. 4 - - - - - 4
Shot blasting................. - - - 1 - - 1
-- - -- -- -- - --
Total....................... 11 3 14 19 10 3 60
<FN>
- ---------------
(a) Consists of four facilities.
(b) Consists of two facilities.
(c) Includes a recently purchased plasma burning table for the Minneapolis
facility and two other plasma burning tables for the Chicago and
Philadelphia facilities that are expected to be operational by year-end.
</TABLE>
The Company's quality control system establishes controls and procedures
covering all aspects of its products from the time the material is ordered
through receipt, processing and shipment to the customer. These controls and
procedures encompass periodic supplier audits, inspection criteria, traceability
and certification. From time to time, the Company has undergone quality audits
by certain of its customers and has met all requirements of those customers. In
addition, the Philadelphia operation obtained the ISO 9002 certification in
1994, while certain of the Company's other operations are currently seeking to
obtain the ISO certification. Lafayette Steel is one of only a few domestic
service centers to earn Ford's Q1 quality rating. A quality testing lab is under
construction adjacent to the new temper mill facility in Cleveland.
21
<PAGE> 23
PROPERTIES
The Company believes that its properties are strategically situated
relative to its customers and each other, allowing the Company to support
customers from multiple locations. This permits the Company to provide inventory
and processing services that are available at one operation but not another.
Steel is shipped from the most advantageous facility, regardless of where the
order was taken. The facilities are located in the hubs of major steel
consumption markets, and within a 250-mile radius of most of the Company's
customers, a distance approximating the one-day driving and delivery limit for
truck shipments. The following table sets forth certain information concerning
the Company's properties:
<TABLE>
<CAPTION>
SQUARE
OPERATION LOCATION FOOTAGE FUNCTION OWNED OR LEASED
- ------------- ---------------------------- ------- ----------------------------- ---------------
<S> <C> <C> <C> <C>
Cleveland Cleveland, Ohio(a) 121,500 Corporate headquarters and Owned
coil processing and
distribution center
Cleveland, Ohio(a) 127,000 Coil processing, distribution Owned
center and offices
Cleveland, Ohio(a) 59,500 Plate processing and Leased(b)
distribution center
Cleveland, Ohio 118,500 Roll form processing, Owned
distribution center and
offices
Minneapolis Plymouth, Minnesota 192,000 Coil processing, distribution Owned
center and offices
Plymouth, Minnesota 112,000 Plate processing, Owned
distribution center and
offices
Lafayette Detroit, Michigan 257,000(c) Coil processing, distribution Owned
center and offices
Connecticut Milford, Connecticut 134,000 Coil and plate processing, Owned
distribution center and
offices
Chicago Schaumburg, Illinois 80,500 Distribution center and Owned
offices
Elk Grove Village, Illinois 47,500 Coil processing and Owned
distribution center
Philadelphia Lester, Pennsylvania 69,200 Plate processing, Leased
distribution center and
offices
<FN>
- ---------------
(a) These Cleveland facilities are adjacent properties.
(b) This facility is leased from a related party pursuant to the terms of a
triple net lease for $195,000 per year. The lease expires in June, 2000,
subject to two ten-year renewal options.
(c) Includes a 72,000 square foot warehouse expansion under construction and
expected to be completed by year-end.
</TABLE>
The Company also has a sales office in Greenville, South Carolina. Its
international sales office is located in Pittsburgh, Pennsylvania. All of the
properties listed in the table as owned are subject to mortgages securing
industrial revenue bonds, taxable rate notes and the Company's Credit Facility.
Management believes that the Company will be able to accommodate its capacity
needs for the immediate future at its existing facilities.
CUSTOMERS AND DISTRIBUTION
The Company processes steel for sale to over 3,200 domestic and foreign
customers. The Company has a diversified customer and geographic base, which
reduces the cyclicality of its business. The top 20 customers accounted for less
than 23% and 19% of net sales in 1995 and 1994, respectively. In addition, the
Company's largest customer accounted for less than 6% of 1995 net sales. Major
domestic customers include automobile manufacturers and stampers, manufacturers
of transportation equipment, material handling equipment, electrical machinery,
storage tanks, food service equipment, construction equipment, agricultural
equipment and appliances, general and plate fabricators, and steel service
centers. Sales to the three largest U.S. automobile manufacturers and their
suppliers, made principally by
22
<PAGE> 24
the Company's Lafayette Steel operation, and sales to other steel service
centers, accounted for approximately 25% and 11%, respectively, of the Company's
net sales in 1995.
While the Company ships products throughout the United States, most of its
customers are located in the midwestern, eastern and southern regions of the
United States. Most domestic customers are located within a 250-mile radius of
one of the Company's processing facilities, thus enabling an efficient delivery
system capable of handling a high frequency of short lead-time orders. The
Company transports most of its products directly to customers via independent
trucking firms, although the Company also owns and operates some trucks in
different locations to facilitate short-distance, multi-stop deliveries.
International products are shipped either directly from the steel producers to
the customer or to an intermediate processor, and then to the customer by rail,
truck or ocean carrier.
The Company produces its processed steel products to specific customer
orders as well as for stock. Many of the Company's customers commit to purchase
on a regular basis with the customer notifying the Company of specific release
dates as the processed products are required. Customers typically notify the
Company of release dates anywhere from a just-in-time basis up to three weeks
before the release date. Therefore, the Company is required to carry sufficient
inventory of raw materials to meet the short lead time and just-in-time delivery
requirements of its customers.
SUPPLIERS
Olympic concentrates on developing relationships with high-quality domestic
integrated and mini mills, as well as foreign steel producers, and becoming an
important customer to such producers. The Company is a major customer of
flat-rolled coil and plate for many of its principal suppliers, but is not
dependent on any one supplier. The Company purchases in bulk from steel
producers in quantities that are efficient for such producers. This enables the
Company to maintain a continued source of supply at what it believes to be
competitive prices. Olympic believes the accessibility and proximity of its
facilities to major domestic steel producers will continue to be an important
factor in maintaining strong relationships with them.
The Company purchases flat-rolled steel for processing from a number of
domestic and foreign producers of primary steel, including LTV Corporation,
National Steel Corporation, U.S. Steel Corporation, Bethlehem Steel and Dofasco,
Inc. The Company believes that its relationships with its suppliers are good.
The Company has no long-term commitments with any of its suppliers.
COMPETITION
The principal markets served by the Company are highly competitive. The
Company competes with other regional and national steel service centers, single
location service centers and, to a certain degree, steel producers and
intermediate steel processors on a regional basis. The Company has different
competitors for each of its products and within each geographic region. The
Company competes on the basis of price, product selection and availability,
customer service, quality and geographic proximity. Certain of the Company's
competitors have financial and operating resources in excess of those of the
Company.
With the exception of certain Canadian operations, foreign steel service
centers are not a material factor in the Company's principal domestic markets.
The Company competes for international sales with many domestic and foreign
steel traders and producers, none of whom dominates or controls the
international markets served by the Company. Many of these international
competitors are also suppliers to the Company.
23
<PAGE> 25
MANAGEMENT INFORMATION SYSTEMS
Information systems are a critical component of Olympic's growth strategy.
The Company has invested, and will continue to invest, in the advanced
technologies and human resource training required in this area. The Company
believes that its information systems provide it with a significant competitive
advantage. The Company's information systems focus on the following core
application areas:
INVENTORY MANAGEMENT. The Company's information systems track the status
of inventories in all locations on a daily basis. This real-time information is
essential in allowing the Company to closely monitor its inventory and to
continue to improve its inventory turns.
DIFFERENTIATED SERVICES TO CUSTOMERS. The Company's information services
allow it to provide value-added services to customers, including quality control
monitoring and reporting, just-in-time inventory management and shipping
services and on-line order status information.
ADVANCED CUSTOMER INTERACTION. The Company is actively pursuing
opportunities to streamline the cost and time associated with customer and
supplier communications, including electronic data interchange, direct links
from Olympic to key customer information systems and access to information
through the Internet.
INTERNAL COMMUNICATIONS. The Company believes that the continuous
interaction between its sales force and its customer base provides Olympic with
valuable market information and sales opportunities. Transactions are summarized
continuously and the systems generate reports that allow management to monitor
operational performance, as well as the performance for any particular customer.
EMPLOYEES
At June 30, 1996, the Company employed approximately 890 people.
Approximately 300 of the Company's hourly plant personnel at the Minneapolis and
Lafayette Steel facilities are represented by four separate collective
bargaining units. Collective bargaining agreements with these units expire in
1998 and 1999. The Company has never experienced a work stoppage and believes
that its relationship with its employees is good.
GOVERNMENT REGULATION
The Company's operations are governed by many laws and regulations,
including those relating to workplace safety and worker health, principally the
Occupational Safety and Health Act and regulations thereunder. The Company
believes that it is in material compliance with these laws and regulations and
does not believe that future compliance with such laws and regulations will have
a material adverse effect on its results of operations or financial condition.
ENVIRONMENTAL
The Company's facilities are subject to certain federal, state and local
requirements relating to the protection of the environment. The Company believes
that it is in material compliance with all environmental laws, does not
anticipate any material expenditures to meet environmental requirements and does
not believe that compliance with such laws and regulations will have a material
adverse effect on its results of operations or financial condition.
LEGAL PROCEEDINGS
The Company is party to various legal actions that it believes are ordinary
in nature and incidental to the operation of its business. In the opinion of
management, the outcome of the proceedings to which the Company is currently a
party will not have a material adverse effect upon its operations or financial
condition.
24
<PAGE> 26
MANAGEMENT
The Company attributes a portion of its success to the depth of its
management. In addition to the four principal executive officers identified
below, the Company's management team includes eleven general managers, its MIS
Director and its Treasurer and Corporate Controller. Members of the management
team have a diversity of backgrounds within the steel industry, including
management positions at steel producers and other steel service centers. They
average over 21 years of experience in the steel industry and 9 years with the
Company. This depth of management allows the Company to pursue and implement its
growth strategy.
The executive officers and the directors of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
- --------------------------------- --- -------------------------------------------
<S> <C> <C>
Michael D. Siegal................ 43 Chairman of the Board, President and Chief
Executive Officer
R. Louis Schneeberger............ 41 Chief Financial Officer; Director
David A. Wolfort................. 43 Chief Operating Officer; Director
Bruce S. Adelstein............... 42 Vice President -- Operations; Director
Martin H. Elrad.................. 56 Director
Thomas M. Forman................. 50 Director
Janice M. Margheret.............. 41 Director
</TABLE>
- ---------------
Michael D. Siegal has served as President and Chief Executive Officer of
the Company since 1984, and as Chairman of the Board of Directors since January
1, 1994. He has been employed by the Company in a variety of full-time
capacities since 1974. Mr. Siegal is a member of the Executive Committee for the
Steel Service Center Institute ("SSCI"). He is also a member of the American
Iron and Steel Institute, presently serving on its Associate Member Committee.
He served as National Chairman of Israel Bonds during the period 1991-1993 and
presently serves as a member of the Executive Committee of the Development
Corporation for Israel and as budget chairman for the Cleveland Jewish Community
Federation. He is a member of the Board of Directors of American National Bank
(Cleveland, Ohio) and the Cleveland Lumberjacks, a professional hockey team.
R. Louis Schneeberger has served as Chief Financial Officer and director of
the Company since 1987. Prior to that time, Mr. Schneeberger was employed by
Arthur Andersen LLP for ten years, concentrating on mergers, acquisitions, and
auditing. He is also Chairman of the Board of Directors of Royal Appliance Mfg.
Co. (a New York Stock Exchange listed company that is an assembler and marketer
of vacuum cleaners and other floor care products), a certified public accountant
and a trustee of the Achievement Center for Children.
David A. Wolfort has served as Chief Operating Officer since 1995 and a
director of the Company since 1987. He previously served as Vice
President -- Commercial from 1987 to 1995, after having joined the Company in
1984 as General Manager. Mr. Wolfort's duties include the management of all
sales, purchasing and operational aspects of each region. Prior to joining the
Company, Mr. Wolfort spent eight years with Sharon Steel, a primary steel
producer, in a variety of sales assignments, including General Manager-Field
Sales, Sharon Steel Products and was a steel fellow with the American Iron and
Steel Institute. Mr. Wolfort is the past president of SSCI's Northern Ohio
Chapter and is presently a member of its Governmental Affairs Committee and a
National Chapter Director.
Bruce S. Adelstein serves as Vice President -- Operations. He has served as
a Vice President and a director of the Company since 1984. He has been employed
full-time by the Company in a variety of operating capacities since 1972. Mr.
Adelstein's duties include the supervision of steel processing, corporate
regional steel purchasing and specific regional sales.
25
<PAGE> 27
Martin H. Elrad has served as a director of the Company since 1987. He is a
private investor and has also served for over five years as President of Solon
Leasing Co.
Thomas M. Forman has served as a director of the Company since March, 1994.
He has served as Vice President of Sealy Corporation since 1994. Previously, he
served as President of Forman Capital, Inc. from 1991 to 1994. Prior thereto, he
served as Executive Vice President and a member of the board of directors of
Bridgestone/Firestone, Inc. for two years.
Janice M. Margheret has served as a director of the Company since March,
1994. She has served as Senior Vice President of Pioneer-Standard Electronics,
Inc. since 1993 and President of Pioneer-Standard Canada, Inc. since 1994. Prior
thereto, she served as a Vice President and Controller of Pioneer-Standard for
over five years.
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of the date of this
Prospectus and as adjusted to reflect the sale of shares of Common Stock offered
by the Company and the Selling Shareholders, each of whom is an executive
officer and a director of the Company.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING(A)
------------------------ SHARES ------------------------
NAME NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- ---------------------------- --------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Michael D. Siegal(b)........ 1,727,500 20.1% 125,000 1,602,500 14.4%
Bruce S. Adelstein(c)....... 1,679,000 19.5 125,000 1,554,000 14.0
R. Louis Schneeberger(d).... 368,000 4.3 125,000 243,000 2.2
David A. Wolfort(e)......... 322,000 3.7 125,000 197,000 1.8
<FN>
- ---------------
(a) Assuming no exercise of the Underwriters' over-allotment options to purchase
up to 375,000 shares of Common Stock from the Company and 18,750 shares of
Common Stock from each of the Selling Shareholders. If the overallotment
options are exercised in full, the Selling Shareholders' ownership would be
as follows: Mr. Siegal -- 13.8%, Mr. Adelstein -- 13.4%, Mr.
Schneeberger -- 2.0% and Mr. Wolfort -- 1.6%.
(b) Does not include 138,000 shares held in various trusts for the benefit of
Mr. Siegal's children. Mr. Siegal disclaims beneficial ownership of such
shares.
(c) Does not include 138,000 shares held in various trusts for the benefit of
certain of Mr. Adelstein's family members. Mr. Adelstein disclaims
beneficial ownership of such shares.
(d) Does not include 92,000 shares held in various trusts for the benefit of Mr.
Schneeberger's children. Mr. Schneeberger disclaims beneficial ownership of
such shares.
(e) Does not include 138,000 shares held in various trusts for the benefit of
Mr. Wolfort's children. Mr. Wolfort disclaims beneficial ownership of such
shares.
</TABLE>
26
<PAGE> 28
DESCRIPTION OF CAPITAL STOCK
The Company's Articles of Incorporation provide that the authorized capital
stock of the Company consists of 20,000,000 shares of Common Stock and 5,000,000
shares of Preferred Stock. The Preferred Stock is divided into two classes
consisting of 2,500,000 shares of Voting Preferred Stock and 2,500,000 shares of
Non-Voting Preferred Stock.
COMMON STOCK
All outstanding shares of Common Stock (including the shares offered by the
Selling Shareholders in the Offering) are, and the shares offered by the Company
in the Offering will be, when issued and paid for, fully paid and nonassessable.
Subject to preferences that may be applicable to holders of any outstanding
shares of Preferred Stock, holders of shares of Common Stock are entitled to
such dividends as may be declared by the Board of Directors out of funds legally
available therefor. Upon liquidation, dissolution or winding-up of the Company,
the assets legally available for distribution to shareholders are distributable
ratably among the holders of shares of Common Stock at that time outstanding,
subject to prior distribution rights of creditors of the Company and to the
preferential right of any outstanding shares of Preferred Stock. The holders of
shares of Common Stock are entitled to one vote for each share held on all
matters properly submitted to a vote of shareholders and do not have cumulative
voting rights. Therefore, the holders of a majority of the shares of Common
Stock voted in an election of directors can elect all of the directors then
standing for election, subject to any rights of the holders of any outstanding
Preferred Stock. Pursuant to the Company's Code of Regulations, the Company's
Board of Directors is divided into two classes of directors serving staggered
two year terms. The affirmative vote of the holders of a majority of the shares
of Common Stock is required to approve mergers, sales of assets or other
corporate transactions required to be submitted to the shareholders for approval
under Ohio Law.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is authorized to determine certain rights, preferences,
privileges and restrictions granted to and imposed upon any unissued shares of
Preferred Stock and to fix the number of shares of any series of Preferred Stock
and the designation of such series, without any vote or action by the
shareholders of the Company. The issuance of Preferred Stock could be used, in
certain circumstances, as a method of delaying or preventing a change of control
of the Company. Under Ohio law and the Company's Articles of Incorporation, the
Board of Directors could, without any action by holders of shares of Common
Stock, issue shares of Preferred Stock which could have a detrimental effect on
the rights of holders of shares of Common Stock, including loss of voting
control.
LIMITATION OF DIRECTOR LIABILITY
Under Ohio Law, a director's liability to the Company or its shareholders
for damages is limited to only those situations where it is proven by clear and
convincing evidence that the director's action or failure to act involved an act
or omission undertaken with deliberate intent to cause injury to the Company or
undertaken with reckless disregard for the best interests of the Company, and
those situations involving unlawful loans, asset distributions, dividend
payments or share repurchases. As a result, shareholders may be unable to
recover monetary damages against directors for actions which constitute gross
negligence or which are in violation of their fiduciary duties, although it may
be possible to obtain injunctive or other equitable relief with respect to such
actions.
The Company's Code of Regulations contains provisions indemnifying
directors and officers of the Company to the fullest extent permitted by Ohio
Law and providing for the advancement of expenses incurred in connection with an
action upon the receipt of an appropriate undertaking to repay said amount if it
is determined that the individual in question is not entitled to
indemnification.
27
<PAGE> 29
CERTAIN PROVISIONS OF OHIO LAW
As an Ohio corporation, the Company is subject to certain provisions of
Ohio Law which may discourage or render more difficult an unsolicited takeover
of the Company. Among these are provisions that (i) prohibit certain mergers,
sales of assets, issuances or purchases of securities, liquidation or
dissolution, or reclassification of the then outstanding shares of an Ohio
corporation involving certain holders of stock representing 10% or more of the
voting power, unless such transactions are either approved by the directors in
office prior to the 10% shareholder becoming such or involve a 10% shareholder
which has been such for at least three years and certain requirements related to
the price and form of consideration to be received by shareholders are met and
(ii) provide Ohio corporations with the right to recover profits realized under
certain circumstances by persons engaged in "greenmailing" or who otherwise sell
securities of a corporation within 18 months of proposing to acquire such
corporation.
In addition, pursuant to Section 1701.831 of the Ohio Law, the purchase of
certain levels of voting power of the Company (one-fifth or more, one-third or
more, or a majority) can be made only with the prior authorization of the
holders of at least a majority of the total voting power of the Company and the
separate prior authorization of the holders of at least a majority of the voting
power held by shareholders other than the proposed purchaser, officers of the
Company and directors of the Company who are also employees.
The Code of Regulations establishes an advance notice procedure with regard
to the nomination, other than by or at the direction of the Board of Directors,
of candidates for election as directors of the Company. In general, notice must
be received by the Company not less than 90 days prior to the first anniversary
of the prior year's annual meeting and must contain certain specified
information concerning the person to be nominated and the shareholder submitting
the nomination.
It is possible that these provisions, as well as the classification of the
Board of Directors, the ability of the Board to issue additional shares of
Common Stock or Preferred Stock and the percentage of ownership held by the
executive officers and directors of the Company, will discourage other persons
from making a tender offer for, or acquisitions of, substantial amounts of
shares of the Company's Common Stock, or may delay changes in control or
management of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Chase Mellon
Shareholder Services, L.L.C., Pittsburgh, Pennsylvania.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 11,100,000 shares of
Common Stock outstanding (11,475,000 shares if the Underwriters over-allotment
options are exercised in full). The shares sold in the Offering, plus the
4,000,000 shares sold in the Company's IPO in 1994 and an additional 506,000
shares held by non-affiliates will be freely transferable by persons other than
Affiliates without restriction or further registration under the Securities Act.
Upon completion of the Offering, 3,596,500 Affiliate Shares (3,521,500 shares if
the Underwriters' over-allotment options are exercised in full) will be held by
Affiliates of the Company. The Affiliate Shares are subject to lock-up
agreements described below, and may only be sold (absent a registration) in
accordance with the volume and other requirements of Rule 144 promulgated under
the Securities Act.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least two
years, including an Affiliate, is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of 1% of the then
outstanding Common Stock or the average weekly trading volume in the Common
Stock in composite trading on all exchanges during the four calendar weeks
preceding such sale.
28
<PAGE> 30
The Company and the Selling Shareholders have entered into lock-up
agreements with the Underwriters wherein they have agreed not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, or announce
the offering of, any shares of Common Stock or any securities convertible into
or exchangeable or exercisable for shares of Common Stock, except for shares of
Common Stock offered hereby, and, in the case of the Company, shares issuable
pursuant to employee benefit plans, for a period of 90 days from the date of
this Prospectus, without the prior written consent of the Representatives.
The Company has reserved 450,000 shares of Common Stock to be issued under
its Stock Option Plan. Options to purchase an aggregate of 152,500 shares of
Common Stock are currently outstanding under the Stock Option Plan.
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
by and among the Company, the Selling Shareholders and the Underwriters, the
Company and the Selling Shareholders have agreed to sell to each of the entities
named below (the "Underwriters") and each of the Underwriters for whom Salomon
Brothers Inc, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and McDonald & Company Securities Inc. are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Company and the Selling Shareholders the number of shares of Common Stock
set forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
<S> <C>
Salomon Brothers Inc .......................................................
Goldman, Sachs & Co.........................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................................
McDonald & Company Securities, Inc..........................................
---------
Total.................................................................. 3,000,000
=========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of Common Stock offered hereby (other than the shares covered by the
Underwriters' over-allotment options described below) if any shares of Common
Stock are purchased. In the event of a default by any Underwriter, the
Underwriting Agreement provides that, in certain circumstances, purchase
commitments of the non defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company and the Selling Shareholders have been advised by the
Representatives that the several Underwriters propose initially to offer the
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share
to other dealers. After the initial offering, the public offering price and such
concessions may be changed.
The Company and the Selling Shareholders have granted to the Underwriters
options, exercisable within 30 days after the date of this Prospectus, to
purchase up to 375,000 additional shares and 75,000 additional shares,
respectively, of Common Stock (450,000 additional shares of Common Stock in the
aggregate), at the same price per share as the initial shares of Common Stock to
be purchased by the Underwriters. The Underwriters may exercise the options only
to cover over-allotments, if any, in the sale
29
<PAGE> 31
of shares of Common Stock that the Underwriters have agreed to purchase. The
Underwriting Agreement provides that each Underwriter will have a firm
commitment subject to certain conditions to purchase the same proportion of the
option shares as the number of shares of Common Stock to be purchased and
offered by such Underwriter in the above table bears to the total number of
shares of Common Stock initially offered by the Underwriters hereby.
The Company and the Selling Shareholders have agreed not to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock of the
Company or any security convertible into or exchangeable for such Common Stock
for a period of 90 days from the date of this Prospectus without the prior
written consent of the Representatives. See "Shares Eligible for Future Sale."
In connection with the Offering, certain Underwriters and selling group
members who are qualifying registered market makers on NASDAQ may engage in
passive market making transactions in the Common Stock on NASDAQ in accordance
with Rule 10b-6A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), during the two business day period before commencement of
offers or sales of Common Stock in the Offering. Passive market making
transactions must comply with certain volume and price limitations and must be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for the security, and if all
independent bids are lowered below the passive market maker's bid, then such bid
must be lowered when certain purchase limits are exceeded.
The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the several Underwriters against certain liabilities
under the Securities Act, or contribute to payments the Underwriters may be
required to make in respect thereof.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Shareholders by Kahn, Kleinman, Yanowitz &
Arnson Co., L.P.A., Cleveland, Ohio. Marc H. Morgenstern, a principal of such
law firm, is the Secretary of the Company and is the trustee of various trusts
for the benefit of Messrs. Siegal's and Schneeberger's children that own 230,000
shares of Common Stock. See "Selling Shareholders." In addition, certain
attorneys in the firm own shares of Common Stock. Certain legal matters will be
passed upon for the Underwriters by Jones, Day, Reavis & Pogue, Cleveland, Ohio.
EXPERTS
The audited consolidated financial statements included in this Prospectus
and elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
30
<PAGE> 32
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission ("Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at Seven World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60601. Copies
of such materials may be obtained at prescribed rates by writing the Commission,
Public Reference Section, 450 Fifth Street, N.Y., Washington, D.C. 20549. The
Commission maintains a Web site, located at http://www.sec.gov., that contains
reports, proxy information statements and other information regarding
registrants, including the Company, that file electronically with the
Commission.
The Company has filed with the Commission a registration statement (the
"Registration Statement," which term shall include any amendment thereto) on
Form S-3 under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain portions of which are omitted as permitted by the rules and regulations
of the Commission and to which reference is hereby made. For further information
regarding the Company and the shares of Common Stock offered hereby, reference
is hereby made to the Registration Statement and such exhibits and schedules
thereto.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and an opinion thereon expressed by its
independent accountants and with quarterly reports containing unaudited summary
financial information for each of the first three quarters of each year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. The Company will provide, without charge to each
person to whom a copy of this Prospectus has been delivered, upon oral or
written request of such person, a copy of any and all of the documents
incorporated herein by reference (not including exhibits). Requests for such
copies should be directed to R. Louis Schneeberger, Chief Financial Officer,
Olympic Steel, Inc., 5080 Richmond Road, Bedford Heights, Ohio 44146, telephone:
(216) 292-3800.
The following documents filed with the Commission by the Company (File No.
0-23320) are incorporated herein by reference: (a) the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995 ("Form 10-K"), (b) the
Company's Quarterly Reports on Form 10-Q for the quarterly periods ended March
31, 1996 and June 30, 1996, respectively, and (c) all documents filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act,
subsequent to the date of this Prospectus and prior to the termination of this
Offering. Any statement contained herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
31
<PAGE> 33
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants............................................. F-2
Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993................................................... F-3
Consolidated Balance Sheets as of December 31, 1995 and 1994......................... F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993................................................... F-5
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993................................................... F-6
Notes to Consolidated Financial Statements for the years ended December 31, 1995,
1994 and 1993...................................................................... F-7
Supplementary Financial Information.................................................. F-15
Consolidated Statements of Income for the three and six months ended
June 30, 1996 and 1995............................................................. F-16
Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995................ F-17
Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and 1995............................................................. F-18
Notes to Consolidated Financial Statements for the three and six months ended June
30, 1996 and 1995.................................................................. F-19
</TABLE>
F-1
<PAGE> 34
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and
the Board of Directors of
Olympic Steel, Inc.:
We have audited the accompanying consolidated balance sheets of Olympic
Steel, Inc. (an Ohio corporation) and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Olympic Steel, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Arthur Andersen LLP sig
Arthur Andersen LLP
Cleveland, Ohio,
February 6, 1996.
F-2
<PAGE> 35
OLYMPIC STEEL, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales............................................ $554,469 $381,906 $313,810
Cost of sales........................................ 446,513 304,777 250,707
-------- -------- --------
Gross margin.................................... 107,956 77,129 63,103
Operating expenses
Warehouse and processing........................... 28,307 19,806 14,607
Administrative and general......................... 21,345 14,090 14,596
Distribution....................................... 16,155 11,734 9,899
Selling............................................ 13,692 9,466 8,485
Occupancy.......................................... 3,092 1,906 1,419
Depreciation and amortization...................... 3,264 1,834 1,513
-------- -------- --------
Total operating expenses........................ 85,855 58,836 50,519
-------- -------- --------
Operating income................................ 22,101 18,293 12,584
Interest expense..................................... 10,746 3,761 4,480
Receivable securitization expense.................... 107 -- --
-------- -------- --------
Income before taxes............................. 11,248 14,532 8,104
Income taxes......................................... 4,504 5,834 --
Reinstatement of deferred income taxes............... -- 7,800 --
-------- -------- --------
Net income...................................... $ 6,744 $ 898 $ 8,104
======== ======== ========
Net income per share............................ $ 0.78 $ 0.12
======== ========
Weighted average shares outstanding............. 8,600 7,778
Pro forma income data (unaudited):
Income before taxes................................ $ 14,532 $ 8,104
Supplemental pro forma adjustments:
Interest savings................................ 501 2,118
Reduction in compensation....................... 83 2,071
Income taxes.................................... (6,067) (4,917)
-------- --------
Pro forma net income................................. $ 9,049 $ 7,376
======== ========
Pro forma net income per share....................... $ 1.05 $ 0.86
======== ========
Pro forma weighted average shares outstanding........ 8,600 8,600
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
F-3
<PAGE> 36
OLYMPIC STEEL, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Cash................................................................ $ 1,884 $ 718
Accounts receivable................................................. 7,405 43,644
Inventories......................................................... 112,986 109,059
Prepaid expenses and other.......................................... 2,096 1,757
-------- --------
Total current assets........................................... 124,371 155,178
-------- --------
Property and equipment.............................................. 78,452 51,493
Accumulated depreciation............................................ (10,886) (7,965)
-------- --------
Net property and equipment..................................... 67,566 43,528
-------- --------
Goodwill............................................................ 10,135 --
Unexpended industrial revenue bond funds............................ -- 2,281
-------- --------
Total assets................................................... $202,072 $200,987
======== ========
LIABILITIES
Current portion of long-term debt................................... $ 4,768 $ 2,260
Accounts payable.................................................... 15,220 26,426
Accrued payroll..................................................... 2,922 2,461
Accrued and deferred income taxes................................... 3,246 2,980
Other accrued liabilities........................................... 5,070 3,640
-------- --------
Total current liabilities...................................... 31,226 37,767
-------- --------
Revolving credit agreement.......................................... 51,338 59,752
Term loans.......................................................... 24,969 12,000
Industrial revenue bonds............................................ 9,565 10,825
Taxable rate notes.................................................. 7,900 8,600
-------- --------
Total long-term debt........................................... 93,772 91,177
-------- --------
Deferred income taxes............................................... 3,090 4,803
-------- --------
Total liabilities................................................. 128,088 133,747
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock, without par value, 5,000 shares authorized, no
shares issued or outstanding...................................... -- --
Common stock, without par value, 20,000 shares authorized, 8,600
shares issued and outstanding..................................... 57,095 57,095
Retained earnings................................................... 16,889 10,145
-------- --------
Total shareholders' equity..................................... 73,984 67,240
-------- --------
Total liabilities and shareholders' equity..................... $202,072 $200,987
======== ========
<FN>
The accompanying notes are an integral part of these balance sheets.
</TABLE>
F-4
<PAGE> 37
OLYMPIC STEEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 6,744 $ 898 $ 8,104
Adjustments to reconcile net income to net cash from
(used for) operating activities-
Depreciation...................................... 3,004 1,702 1,513
Amortization...................................... 260 132 133
Long-term deferred income taxes................... (1,713) 4,803 --
-------- -------- --------
8,295 7,535 9,750
Changes in working capital:
Accounts receivable.................................. 54,076 (7,018) (53)
Inventories.......................................... 24,310 (23,713) (17,915)
Prepaid expenses and other........................... (165) (491) (373)
Accounts payable..................................... (27,590) 109 2,313
Accrued payroll and other accrued liabilities........ 959 2,648 (682)
Accrued and deferred income taxes.................... (134) 2,980 --
-------- -------- --------
51,456 (25,485) (16,710)
-------- -------- --------
Net cash from (used for) operating activities..... 59,751 (17,950) (6,960)
-------- -------- --------
Cash flows from investing activities:
Acquisition of Lafayette Steel (including working
capital of $28,532)............................... (52,345) -- --
Temper mill facility and equipment................... (7,979) (8,689) (28)
Plate facility and equipment......................... (2,063) (5,327) --
Tubing facility and equipment........................ (1,448) (1,401) --
Other capital expenditures, net...................... (1,249) (1,653) (1,739)
-------- -------- --------
Net cash used for investing activities............ (65,084) (17,070) (1,767)
-------- -------- --------
Cash flows from financing activities:
Revolving credit agreement........................... (8,414) (18,233) 8,944
Proceeds from term loans............................. 16,100 12,000 --
Proceeds from industrial revenue bond borrowings..... -- 6,000 --
Proceeds from taxable rate note borrowings........... -- -- 10,000
Net proceeds from initial public offering............ -- 56,995 --
Repayment of term loans.............................. (1,208) -- --
Repayment of industrial revenue bonds................ (1,560) (960) (960)
Repayment of taxable rate notes...................... (700) (700) --
Repayment of real estate mortgages................... -- -- (6,624)
Unexpended industrial revenue bond funds............. 2,281 (2,281) --
S corporation dividends paid......................... -- (17,500) (2,250)
-------- -------- --------
Net cash from financing activities................ 6,499 35,321 9,110
-------- -------- --------
Cash:
Net increase......................................... 1,166 301 383
Beginning balance.................................... 718 417 34
-------- -------- --------
Ending balance....................................... $ 1,884 $ 718 $ 417
======== ======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
F-5
<PAGE> 38
OLYMPIC STEEL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS
-------- --------
<S> <C> <C>
Balance at December 31, 1992........................................ $ 100 $ 20,893
Net income........................................................ -- 8,104
Dividends declared at $4.29 per share............................. -- (19,750)
-------- --------
Balance at December 31, 1993........................................ 100 9,247
Net income........................................................ -- 898
Net proceeds from sale of 4,000 shares of common stock............ 56,995 --
-------- --------
Balance at December 31, 1994........................................ 57,095 10,145
Net Income........................................................ -- 6,744
-------- --------
Balance at December 31, 1995........................................ $ 57,095 $ 16,889
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
F-6
<PAGE> 39
OLYMPIC STEEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Olympic Steel, Inc. and its wholly-owned subsidiaries (collectively the Company
or Olympic), after elimination of intercompany accounts and transactions.
Certain amounts in the 1994 and 1993 consolidated financial statements have been
reclassified to conform with the 1995 presentation.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATION RISKS
The Company is a major customer of flat-rolled coil and plate steel for
many of its principal suppliers, but is not dependent on any one supplier. In
1995, the Company purchased approximately 16% of its total steel requirements
from a single supplier.
INVENTORIES
Inventories are stated at the lower of cost or market and include the cost
of purchased steel, internal and external processing and freight. Cost is
determined using the specific identification method.
PROPERTY AND EQUIPMENT, AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives ranging from 3 to 30
years.
GOODWILL AND AMORTIZATION
Goodwill includes the cost in excess of fair value of the net assets
acquired and is being amortized on a straight-line method over 40 years. In the
event that facts and circumstances indicate that the value of goodwill or other
long-term assets may be impaired, the Company evaluates recoverability to
determine if a write-down to market value is required. Goodwill amortization
expense totaled $260 in 1995. Amortization expense in 1994 and 1993, which
totaled $132 and $133, respectively, related to a covenant not to compete
agreement that expired in 1994.
REVENUE RECOGNITION
Revenue is recognized when steel is shipped to the customer. Sales returns
and allowances are treated as reductions to sales and are provided for based on
historical experience and current estimates.
INCOME TAXES
In the first quarter of 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." SFAS No. 109 utilizes the liability method and deferred taxes are
determined based on the estimated future tax effects of differences between the
financial and tax bases of assets and liabilities given the provisions of
enacted tax laws.
F-7
<PAGE> 40
OLYMPIC STEEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
EARNINGS PER SHARE
Earnings per share has been calculated based on the weighted average number
of shares outstanding. Shares outstanding were 4.6 million from January 1, 1994
through March 16, 1994, and 8.6 million since March 17, 1994. Per share data for
1993 is not meaningful and therefore has not been presented. Primary and fully
diluted earnings per share are the same because outstanding stock options
granted are anti-dilutive.
IMPACT OF NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," and SFAS No. 123, "Accounting for Stock-Based Compensation."
Management does not anticipate the adoption of SFAS No. 121 or SFAS No. 123 to
have a material effect on the Company's financial statements.
2. PUBLIC OFFERING OF COMMON STOCK:
The Company completed its initial public offering of 4 million common
shares in March, 1994 (the IPO). The $56,995 of net proceeds were used to pay a
$17,500 final S corporation dividend, and the remaining proceeds were used to
repay $39,495 of borrowings under the revolving credit agreement.
3. ACQUISITION:
Effective January 1, 1995, the Company completed the acquisition of
substantially all of the assets and assumed certain liabilities of Lafayette
Steel Company (Lafayette Steel). Lafayette Steel is an intermediate steel
processor headquartered in Detroit, Michigan, primarily serving the automotive
industry.
The final purchase price totaled $69,833 and exceeded the net book value of
the assets acquired by $13,000. The adjusted cash portion of the purchase price,
including fees and expenses and the repayment of $30,069 of Lafayette Steel's
existing bank debt, totaled $52,345.
The acquisition has been accounted for as a purchase and, accordingly,
assets and liabilities are reflected at estimated fair values. The final
purchase price allocation resulted in goodwill of $10,395, which is being
amortized over 40 years.
The following unaudited pro forma condensed statement of income for 1994
gives effect to the acquisition of Lafayette Steel as if it had occurred on
January 1, 1994. The pro forma information is based upon the historical
financial statements of the Company and Lafayette Steel, giving effect to the
acquisition under the purchase method of accounting. The pro forma financial
information has been prepared by Olympic's management based upon the audited
financial statements of Lafayette Steel. This pro forma information is presented
in response to applicable accounting rules relating to business acquisitions. It
is not necessarily indicative of the actual results that would have been
achieved had the acquisition occurred as of January 1, 1994, and is not
necessarily indicative of future results of the combined companies.
F-8
<PAGE> 41
OLYMPIC STEEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
OLYMPIC LAFAYETTE ADJUSTMENTS OLYMPIC
-------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales................................... $381,906 $ 148,996 $ - $ 530,902
Cost of sales............................... 304,777 127,603 (1,888)(a) 430,492
-------- --------- --------- ---------
Gross margin.............................. 77,129 21,393 1,888 100,410
Operating expenses........................ 58,836 22,441 (1,282)(b) 79,995
-------- --------- --------- ---------
Operating income (loss)................ 18,293 (1,048) 3,170 20,415
Interest expense............................ 3,761 2,194 949(c) 6,904
-------- --------- --------- ---------
Income (loss) before income taxes...... 14,532 (3,242) 2,221 13,511
Income taxes................................ 5,834 -- (410)(d) 5,424
Reinstatement of deferred income taxes...... 7,800 -- -- 7,800
-------- --------- --------- ---------
Net income (loss)...................... $ 898 $ (3,242) $ 2,631 $ 287
======== ========= ========= =========
Net income per share........................ $ 0.12 $ 0.04
======== =========
Weighted average shares outstanding....... 7,778 7,778
======== =========
<FN>
- ---------------
(a) Reflects restatement of inventory from LIFO to the specific identification
costing method.
(b) To reduce shareholder and executive compensation and benefits, to reduce
depreciation expense for the difference between historical cost and the
fair value of assets acquired, to reduce certain professional fees,
including those relating to the acquisition, and to record goodwill
amortization.
(c) To record interest expense relating to incremental debt incurred for the
acquisition.
(d) To record an income tax benefit for Lafayette Steel's pre-tax loss, after
giving effect to pro forma adjustments, at Olympic's 1994 effective income
tax rate.
</TABLE>
4. ACCOUNTS RECEIVABLE:
On December 19, 1995, the Company entered into a three-year agreement to
sell, on a revolving basis, through its wholly-owned entity, Olympic Steel
Receivables LLC, an undivided interest in a designated pool of its trade
accounts receivable. The maximum amount of receivables that can be sold is
$65,000, with the amount sold at any month end measurement date dependent upon
the level of defined eligible receivables. The Company, as agent for the
purchaser of the receivables, retains collection and administrative
responsibilities for the participating interests sold. As collections reduce the
receivables included in the pool, the Company may sell additional undivided
interests in new receivables up to the $65,000 limit. The amount of receivables
sold by the Company typically will change monthly depending upon the level of
defined eligible receivables available for sale each month end.
On December 19, 1995, $53,671 of receivables were sold and reflected as a
reduction of accounts receivable in the accompanying consolidated balance
sheets. The proceeds from the sale were used to reduce borrowings under the
Company's revolving credit agreement and are reflected as operating cash flows
in the accompanying consolidated statements of cash flows. Costs of the program,
which primarily consist of the purchaser's financing cost of issuing commercial
paper backed by the receivables, totaled $107 in 1995, and have been classified
as receivable securitization expense in the accompanying consolidated statements
of income.
Accounts receivable are presented net of allowances for doubtful accounts
of $811 and $563 as of December 31, 1995 and 1994, respectively. Bad debt
expense totaled $763 in 1995, $362 in 1994 and $380 in 1993.
F-9
<PAGE> 42
OLYMPIC STEEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
5. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Land and improvements................... $ 7,128 $ 6,049
Buildings and improvements.............. 25,975 18,745
Machinery and equipment................. 22,588 8,651
Furniture and fixtures.................. 2,039 1,237
Computer equipment...................... 2,817 1,841
Vehicles................................ 358 383
Construction in progress................ 17,547 14,587
-------- --------
78,452 51,493
Less accumulated depreciation........... (10,886) (7,965)
-------- --------
Total property and equipment.......... $ 67,566 $ 43,528
======== ========
</TABLE>
Construction in progress at December 31, 1995 includes $16,696 related to
the Company's new 127,000 square foot facility adjacent to the existing
Cleveland facilities which houses a temper mill and cut-to-length line with a
recoil option. The facility and equipment began operating in the beginning of
1996, and is anticipated to be running at full capacity by the end of 1996. As
of December 31, 1995, $1,141 of capitalized interest has been expended and
included in construction in progress for this project. A portion of the project
is being financed with bank term debt.
6. REVOLVING CREDIT AGREEMENT:
The Company has been operating under various multi-bank revolving credit
agreements for many years. On December 29, 1994, the Company entered into a new
secured credit facility with a bank group to finance the acquisition of
Lafayette Steel. The facility was amended in December 1995, in conjunction with
the accounts receivable securitization program. As of December 31, 1995, the
facility consists of a secured revolving credit component with maximum
availability, based upon collateral levels, of $80,000, term loan components of
$32,000 and letter of credit commitments of $11,034. The agreement matures on
June 30, 1998. Each year, the Company may request to extend its maturity date
one year with the approval of the bank group.
Borrowings under the revolving credit component are secured by inventory,
foreign accounts receivable, and certain other equipment and real property. Term
loans and letters of credit are collateralized by the equipment and real
property being financed.
The revolving credit agreement balance includes $9,768 and $7,752 of checks
issued that have not cleared the bank as of December 31, 1995 and 1994,
respectively. As of December 31, 1995, $5,200 of term loans were not yet drawn
upon. Annual principal amortization of $2,800 for term borrowings outstanding at
December 31, 1995 are payable each June 30.
The Company has the option to borrow based on the agent bank's base rate or
the London Interbank Offered Rate (LIBOR). The interest rate changes every three
months based on the Company's operating performance and leverage ratio. As of
December 31, 1995, the interest rates were base plus 1% or LIBOR plus 2%, which
resulted in a year-end weighted average interest rate of 8.0%. The effective
interest rate for all credit agreement borrowings amounted to 7.9% in 1995, 5.6%
in 1994, and 5.5% in 1993. Interest on the base rate option is payable quarterly
in arrears while interest on the LIBOR option is payable at the end of the LIBOR
interest period, which ranges from one to six months. The agreement also
includes a commitment fee of .25% of the average unused portion which is payable
quarterly in arrears.
F-10
<PAGE> 43
OLYMPIC STEEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
7. TAXABLE RATE NOTES:
In October 1993, the Company completed a $10,000 refinancing of its real
estate in Minneapolis, Minnesota; Milford, Connecticut; Elk Grove Village,
Illinois; and Cleveland, Ohio. The refinancing was in the form of taxable rate
notes. The term of the notes is 15 years with annual principal payments of $700
for the first 10 years and $600 for years 11 through 15. As of December 31,
1995, $8,600 was outstanding. The notes are backed by a three year bank letter
of credit, expiring October 15, 1998, and are secured by a first mortgage on the
Chicago, Connecticut and Minneapolis land and buildings and a second mortgage on
certain Cleveland real estate. The interest rate changes each week based on the
taxable rate note market. As of December 31, 1995, the effective interest rate
was 7.4%.
8. INDUSTRIAL REVENUE BONDS:
The long-term portion of industrial revenue bonds at December 31, 1995 and
1994, consisted of the following:
<TABLE>
<CAPTION>
EFFECTIVE
INTEREST
DESCRIPTION OF BONDS RATE AT 12/31/95 1995 1994
- ------------------------------------------------------ ---------------- ------ -------
<S> <C> <C> <C>
$6,000 variable rate bonds due 1995 through 2004...... 7.1% $4,800 $ 5,400
$2,660 variable rate bonds due 1992 through 2004...... 7.4% 1,715 1,925
$4,800 variable rate bonds due 1992 through 2004...... 7.2% 3,050 3,400
$3,350 variable rate bonds due 1988 through 1996...... 5.5% -- 100
------ -------
$9,565 $10,825
------ -------
</TABLE>
These bonds are backed by standby letters of credit, expiring June 30, 1998
with the revolving credit bank group which has a first lien on certain land,
building and equipment.
9. SCHEDULED DEBT MATURITIES, INTEREST, DEBT CARRYING VALUES AND COVENANTS:
Scheduled maturities of all long-term debt for the years succeeding
December 31, 1995 are $4,768 in 1996, $4,669 in 1997, $5,554 in 1998 and $4,670
in both 1999 and 2000 and $22,871 thereafter. These scheduled maturities exclude
$5,200 of term loans which will not be drawn until 1996 and will be amortized at
10% annually over the next 10 years.
The overall effective interest rate for all debt amounted to 7.7% in 1995,
5.7% in 1994, and 5.5% in 1993. Interest paid was $11,823, $3,843 and $4,540 for
the years ended December 31, 1995, 1994 and 1993, respectively.
Interest expense of $1,021 in 1995 and $208 in 1994 was capitalized in
conjunction with the temper mill and plate facility projects.
Management believes the carrying values of its long-term debt approximate
their fair values, as each of the Company's debt arrangements bear interest at
rates that vary based on a bank's base rate, LIBOR, the short-term tax exempt
revenue bond index or taxable rate note market.
Under the long-term debt agreements, the Company is subject to certain
covenants such as minimum net worth, capital expenditure limitations, and
interest coverages. The Company was in compliance with all covenants as of
December 31, 1995.
10. INCOME TAXES:
Prior to January 1, 1994, the Company was treated as an S corporation for
income tax purposes and, accordingly, was not subject to federal income taxes
and was subject to only minimal state income taxes. In connection with the
initial public offering, the Company terminated its S corporation election and
became fully subject to federal and state income taxation as a C corporation. As
a result, deferred income tax liabilities of $7,800 as of January 1, 1994 were
reinstated and included in income tax expense in the first quarter of 1994.
F-11
<PAGE> 44
OLYMPIC STEEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The components of the Company's net deferred tax liability at December 31
are as follows:
<TABLE>
<CAPTION>
ASSET/(LIABILITY) 1995 1994
----------------------------------------------- ------- -------
<S> <C> <C>
Accrued income taxes........................... $(2,092) $(2,280)
Current deferred income taxes:
LIFO inventory reserves...................... (1,842) (1,842)
Other temporary items........................ 688 1,142
------- -------
Total current deferred income taxes............ (1,154) (700)
------- -------
Accrued and deferred income taxes.............. (3,246) (2,980)
------- -------
Long-term deferred income taxes:
LIFO inventory reserve.................... (1,655) (3,531)
Tax in excess of book depreciation........ (1,435) (1,272)
------- -------
Total long-term deferred income taxes.......... (3,090) (4,803)
------- -------
Total current and deferred income taxes........ $(6,336) $(7,783)
======= =======
</TABLE>
The following table reconciles the U.S. federal statutory rate to the
Company's effective tax rate:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
U.S. federal statutory rate.................... 35.0% 35.0%
State and local taxes, net of federal
benefit...................................... 4.4 5.0
All other, net................................. 0.6 0.1
------- -------
Effective income tax rate...................... 40.0% 40.1%
------- -------
</TABLE>
The tax provision includes a current provision of $6,443 and $8,024 in 1995
and 1994, respectively, and a deferred benefit of $1,939 in 1995 and $2,190 in
1994.
Income taxes paid in 1995 and 1994 totaled $6,191 and $5,944, respectively.
State and local income taxes paid in 1993, when the Company was an S
corporation, totaled $52.
11. RETIREMENT PLANS:
The Company has several retirement plans consisting of a profit-sharing
plan and a 401(k) plan covering all non-union employees, and two separate 401(k)
plans covering all union employees.
Company contributions for the non-union profit-sharing plan are in
discretionary amounts as determined annually by the Board of Directors. For each
of the last three years, Company contributions were 4% of each eligible
employee's W-2 earnings. The non-union 401(k) retirement plan allows eligible
employees to contribute up to 10% of their W-2 earnings. The Company
contribution is determined annually by the Board of Directors and is based on a
percentage of eligible employees' contributions. For each of the last three
years, the Company matched one half of each eligible employee's contribution.
The same matching level was approved for 1996.
Company contributions for each of the last three years for the union plans
were 3% of eligible W-2 wages plus one half of the first 4% of each employee's
contribution.
Retirement plan expense amounted to $1,762, $1,035 and $964 for the years
ended December 31, 1995, 1994 and 1993, respectively.
F-12
<PAGE> 45
OLYMPIC STEEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
12. STOCK OPTIONS:
In January 1994, the Stock Option Plan (Option Plan) was adopted by the
Board of Directors and approved by the shareholders of the Company. Pursuant to
the provisions of the Option Plan, key employees of the Company, non-employee
directors and consultants may be offered the opportunity to acquire shares of
Common Stock by the grant of stock options, including both incentive stock
options (ISOs) and nonqualified stock options. ISOs are not available to
non-employee directors or consultants. A total of 450,000 shares of Common Stock
has been reserved for options under the Option Plan. The purchase price of a
share of Common Stock pursuant to an ISO will not be less than the fair market
value of a share of Common Stock at the grant date. The Option Plan will
terminate on January 5, 2004. Termination of the Option Plan will not affect
outstanding options.
During 1995 and 1994, nonqualified options to purchase 20,000 and 120,000
shares, respectively, were issued under the Option Plan to the Company's general
managers and outside directors at an exercise price of $15.50 per share. All of
these options were outstanding at December 31, 1995 and vest over a period of
five years at a rate of 20% per year commencing on the first anniversary of the
date of grant.
13. COMMITMENTS AND CONTINGENCIES:
The Company leases certain warehouses, sales offices and processing
equipment under long-term lease agreements. The leases are classified as
operating and expire at various dates through 2000. In some cases the leases
include options to extend. Rent expense was $2,873, $2,512 and $2,705 for the
years ended December 31, 1995, 1994 and 1993, respectively.
Future minimum lease payments as of December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996...... $2,748
1997...... 1,765
1998...... 819
1999...... 417
2000...... 289
Thereafter.. 133
------
$6,171
======
</TABLE>
The Company is a defendant in various legal proceedings and claims that
arise in the ordinary course of business. In the opinion of management, the
outcome of the proceedings to which the Company is currently a party will not
have a material adverse effect upon its operations or financial position.
14. RELATED PARTY TRANSACTIONS:
A related entity handles a portion of the freight activity for the
Company's Cleveland division. Payments to this entity approximated $3,199,
$2,880 and $2,293 for the years ended December 31, 1995, 1994 and 1993,
respectively. There is no common ownership or management of this entity with the
Company. Another related entity owns one of the Cleveland warehouses and leases
it to the Company at an annual rental of $195. The lease expires June 2000 and
has two remaining renewal options of 10 years each.
F-13
<PAGE> 46
OLYMPIC STEEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
15. UNAUDITED PRO FORMA INFORMATION:
The unaudited pro forma net income for the years ended December 31, 1994
and 1993 (i) reflects the reduction in interest expense resulting from the
application of net proceeds from the sale of 4 million shares of Common Stock in
the IPO on March 17, 1994, to repay approximately $39,495 of indebtedness with a
weighted average interest rate of 5.3% in 1993 and 6.0% in 1994, (ii) reflects
the reduction of compensation expense for officers and certain retiring
employees net of additional costs to be incurred as a public company and (iii)
assumes the Company is subject to income tax as a C corporation, and in 1994
excludes the one-time $7,800 income tax charge for the reinstatement of deferred
income taxes resulting from the change in the Company's income tax status from
an S corporation to a C corporation. Unaudited pro forma net income per share
has been calculated by dividing pro forma net income by the number of shares
outstanding after the IPO.
F-14
<PAGE> 47
OLYMPIC STEEL, INC.
SUPPLEMENTARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
- --------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $149,058 $142,095 $132,673 $130,643 $554,469
Gross margin........................... 30,012 27,343 24,887 25,714 107,956
Operating income....................... 7,717 5,713 4,269 4,402 22,101
Income before taxes.................... 5,150 2,866 1,375 1,857 11,248
Net income............................. 3,067 1,721 835 1,121 6,744
Net income per share................. $ 0.36 $ 0.20 $ 0.10 $ 0.13 $ 0.78
Weighted average shares
outstanding....................... 8,600 8,600 8,600 8,600 8,600
</TABLE>
<TABLE>
<CAPTION>
1994 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
- --------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $ 93,493 $ 95,473 $ 98,636 $ 94,304 $381,906
Gross margin........................... 18,839 19,363 19,954 18,973 77,129
Operating income....................... 4,714 4,059 5,258 4,262 18,293
Income before taxes.................... 3,722 3,370 4,331 3,109 14,532
Net income (loss)(a)................... (5,567) 2,022 2,577 1,866 898
Net income (loss) per share(a)....... (1.06) 0.24 0.30 0.22 0.12
Weighted average shares
outstanding....................... 5,267 8,600 8,600 8,600 7,778
Pro forma net income(b)................ $ 2,584 $ 2,022 $ 2,577 $ 1,866 $ 9,049
Pro forma net income per share(c).... $ 0.30 $ 0.24 $ 0.30 $ 0.22 $ 1.05
Pro forma weighted average shares
outstanding(c).................... 8,600 8,600 8,600 8,600 8,600
<FN>
- ---------------
(a) Effective January 1, 1994 the Company changed its income tax status from an
S corporation to a C corporation. This change required a reinstatement of
deferred income taxes as a one-time charge to first quarter's earnings of
$7,800.
(b) Unaudited pro forma net income (i) reflects the reduction in interest
expense resulting from the application of net proceeds from the sale of
4,000 shares of Common Stock on March 17, 1994, (ii) reflects the reduction
of certain compensation expense and (iii) assumes the Company is subject to
income tax as a C corporation. See Note 15 to Notes to Consolidated
Financial Statements.
(c) Unaudited pro forma net income per share has been calculated by dividing pro
forma net income by 8,600 shares, the number of shares outstanding after the
IPO.
</TABLE>
F-15
<PAGE> 48
OLYMPIC STEEL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales................................... $146,697 $142,095 $289,286 $291,153
Cost of sales............................... 113,882 114,752 225,545 233,798
-------- -------- -------- --------
Gross margin.............................. 32,815 27,343 63,741 57,355
Operating expenses
Warehouse and processing.................. 6,937 7,010 14,341 14,604
Administrative and general................ 6,286 5,460 12,377 11,033
Distribution.............................. 4,505 4,048 8,748 8,111
Selling................................... 3,571 3,441 7,037 7,068
Occupancy................................. 944 766 1,953 1,533
Depreciation and amortization............. 1,027 905 2,021 1,576
-------- -------- -------- --------
Total operating expenses............... 23,270 21,630 46,477 43,925
-------- -------- -------- --------
Operating income....................... 9,545 5,713 17,264 13,430
Interest expense............................ 1,447 2,847 2,923 5,414
Receivable securitization expense........... 879 -- 1,695 --
-------- -------- -------- --------
Income before taxes....................... 7,219 2,866 12,646 8,016
Income taxes................................ 2,888 1,145 5,059 3,228
-------- -------- -------- --------
Net income................................ $ 4,331 $ 1,721 $ 7,587 $ 4,788
======== ======== ======== ========
Net income per share...................... $ 0.50 $ 0.20 $ 0.88 $ 0.56
======== ======== ======== ========
Weighted average shares outstanding....... 8,600 8,600 8,600 8,600
======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
F-16
<PAGE> 49
OLYMPIC STEEL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
--------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash.............................................................. $ 3,518 $ 1,884
Accounts receivable............................................... 15,821 7,405
Inventories....................................................... 116,614 112,986
Prepaid expenses and other........................................ 2,590 2,096
-------- --------
Total current assets............................................ 138,543 124,371
-------- --------
Property and equipment............................................ 83,098 78,452
Accumulated depreciation.......................................... (12,776) (10,886)
-------- --------
Net property and equipment...................................... 70,322 67,566
-------- --------
Goodwill.......................................................... 10,005 10,135
-------- --------
Total assets.................................................... $ 218,870 $202,072
========= ========
LIABILITIES
Current portion of long-term debt................................. $ 4,719 $ 4,768
Accounts payable.................................................. 26,961 15,220
Accrued payroll................................................... 3,964 2,922
Accrued and deferred income taxes................................. 2,420 3,246
Other accrued liabilities......................................... 5,260 5,070
-------- --------
Total current liabilities....................................... 43,324 31,226
-------- --------
Revolving credit agreement........................................ 51,671 51,338
Term loans........................................................ 21,854 24,969
Industrial revenue bonds.......................................... 9,460 9,565
Taxable rate notes................................................ 7,900 7,900
-------- --------
Total long-term debt............................................ 90,885 93,772
-------- --------
Deferred income taxes............................................. 3,090 3,090
-------- --------
Total liabilities............................................... 137,299 128,088
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock................................................... -- --
Common stock...................................................... 57,095 57,095
Retained earnings................................................. 24,476 16,889
-------- --------
Total shareholders' equity...................................... 81,571 73,984
-------- --------
Total liabilities and shareholders' equity...................... $218,870 $202,072
======== ========
<FN>
The accompanying notes are an integral part of these balance sheets.
</TABLE>
F-17
<PAGE> 50
OLYMPIC STEEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income......................................................... $ 7,587 $ 4,788
Adjustments to reconcile net income to net cash from (used for)
operating activities --
Depreciation.................................................. 1,891 1,463
Amortization of goodwill...................................... 130 113
Long-term deferred income taxes............................... -- (678)
------- --------
9,608 5,686
Changes in working capital:
Accounts receivable................................................ (8,726) (10,741)
Inventories........................................................ (3,628) (2,032)
Prepaid expenses and other......................................... (494) (225)
Accounts payable................................................... 11,741 (16,396)
Accrued payroll and other accrued liabilities...................... 1,231 2,947
Accrued and deferred income taxes.................................. (826) (2,161)
------- --------
(702) (28,608)
------- --------
Net cash from (used for) operating activities................... 8,906 (22,922)
------- --------
Cash flows from investing activities:
Acquisition of Lafayette Steel (including working capital of
$28,532)........................................................ -- (52,395)
Temper mill facility and equipment................................. (893) (5,192)
Plate facility and equipment....................................... -- (2,063)
Tubing facility and equipment...................................... -- (1,129)
Lafayette facility expansion....................................... (430) --
Additional plate processing equipment.............................. (410) --
Other capital expenditures, net.................................... (2,913) (1,015)
------- --------
Net cash used for investing activities.......................... (4,646) (61,794)
------- --------
Cash flows from financing activities:
Revolving credit agreement......................................... 333 69,065
Proceeds from term loans........................................... -- 16,100
Repayment of long-term debt........................................ (2,959) (1,509)
Unexpended industrial revenue bond funds........................... -- 2,281
------- --------
Net cash from (used for) financing activities................... (2,626) 85,937
------- --------
Cash:
Net increase....................................................... 1,634 1,221
Beginning balance.................................................. 1,884 718
------- --------
Ending balance..................................................... $ 3,518 $ 1,939
======= ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
F-18
<PAGE> 51
OLYMPIC STEEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
The accompanying consolidated financial statements have been prepared from
the financial records of Olympic Steel and its wholly-owned subsidiaries,
without audit and reflect all adjustments which are, in the opinion of
management, necessary to fairly present the results of the interim periods
covered by this report. All significant intercompany transactions and balances
have been eliminated in consolidation.
(1) EARNINGS PER SHARE:
Earnings per share have been calculated based on the weighted average
shares outstanding during each of the periods presented. Primary and fully
diluted earnings per share are the same as the effect of dilutive outstanding
stock options was immaterial.
(2) LONG-TERM DEBT:
Interest rates under the Company's various credit agreements are generally
based on prime or LIBOR plus a premium determined quarterly, which varies with
the Company's operating performance and financial leverage. Borrowing rates for
the first five months of 1996 were prime plus 1% and LIBOR plus 2%. Commencing
June 1, 1996, rates decreased to prime plus .5% and LIBOR plus 1.5%. The
majority of the Company's borrowings are based on the LIBOR option. The overall
effective interest rate for all debt for both the three and six month periods
ended June 30, 1996 amounted to 7.4%, compared to 7.7% and 7.6%, respectively,
in 1995.
Included in the revolving credit balances on the accompanying consolidated
balance sheets are $12.7 million and $9.8 million of checks issued that have not
cleared the bank as of June 30, 1996 and December 31, 1995, respectively.
(3) SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid during the six months ended June 30, 1996 and 1995 totaled
$3.2 million and $5.4 million, respectively. Income taxes paid during the six
months ended June 30, 1996 and 1995 totaled $6.1 million and $6.0 million,
respectively.
F-19
<PAGE> 52
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE COMMON STOCK OFFERED HEREBY TO ANY PERSON BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 6
Use of Proceeds........................ 8
Capitalization......................... 9
Price Range of Common Stock............ 10
Dividend Policy........................ 10
Selected Financial Data................ 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 12
Business............................... 17
Management............................. 25
Selling Shareholders................... 26
Description of Capital Stock........... 27
Shares Eligible for Future Sale........ 28
Underwriting........................... 29
Legal Matters.......................... 30
Experts................................ 30
Available Information.................. 31
Incorporation of Certain Documents by
Reference............................ 31
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
3,000,000 SHARES
OLYMPIC STEEL, INC.
COMMON STOCK
(WITHOUT PAR VALUE)
LOGO
SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MCDONALD & COMPANY
SECURITIES, INC.
PROSPECTUS
DATED AUGUST , 1996
<PAGE> 53
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by the
Registrant in connection with the issuance and distribution of the shares of
Common Stock being registered hereby, other than underwriting discounts and
commissions.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee....................... $ 32,864
National Association of Securities Dealers, Inc. Filing Fee............... 10,031
Printing Costs............................................................ 100,000
Accounting Fees and Expenses.............................................. 20,000
Legal Fees and Expenses (not including Blue Sky).......................... 100,000
Blue Sky Fees and Expenses................................................ 7,500
Transfer Agent and Registrar Fees......................................... 5,000
Miscellaneous............................................................. 24,605
-------
Total................................................................ $300,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under certain circumstances provided in Article V of the Registrant's Code
of Regulations and subject to Section 1701.13 of the Ohio General Corporation
Law (which sets forth the conditions and limitations governing the
indemnification of officers, directors and other persons), the Registrant will
indemnify any director or officer or any former director or officer of the
Registrant against losses, damages, or liabilities reasonably incurred by such
director or officer by reason of the fact that he is or was such director or
officer in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative. The
Company maintains liability insurance for all of its directors and officers.
This insurance also insures the Company against amounts payable to indemnify
directors and officers, subject to policy limits and retention amounts.
Reference is made to Section 8 of the Underwriting Agreement (Exhibit 1.1
to this Registration Statement) which provides for indemnification of the
Registrant's officers, directors and controlling persons by the Underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933, as amended.
II-1
<PAGE> 54
ITEM 16. EXHIBITS
(A) EXHIBITS. The following Exhibits are filed herewith and made a part
hereof.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
------- --------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
4.1 Credit Agreement dated December 29, 1994 by and among the Registrant, five
banks and National City Bank, Agent*
4.2 First Amendment to Credit Agreement dated June 9, 1995 by and among the
Registrant, five banks and National City Bank, Agent**
4.3 Second Amendment to Credit Agreement dated December 19, 1995 by and among
the Registrant, five banks and National City Bank, Agent***
4.4 Receivables Purchase Agreement dated December 19, 1995 among the
Registrant, Olympic Steel Receivables LLC, Olympic Steel Receivables, Inc.
and Clipper Receivables Corporation as Purchaser***
4.5 Purchase and Sale Agreement dated December 19, 1995 among the Registrant,
Olympic Steel Lafayette, Inc. and Olympic Steel Receivables LLC***
Information concerning certain of the Registrant's other long-term debt is
set forth in Notes 7 and 8 of Notes to Financial Statements. The
Registrant hereby agrees to furnish copies of such instruments to the
Commission upon request.
5.1 Opinion of Kahn, Kleinman, Yanowitz & Arnson Co., L.P.A. as to the
validity of the Securities being offered
23.1 Consent of Kahn, Kleinman, Yanowitz & Arnson Co., L.P.A. (included in
Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP****
24.1 Directors and Officers Powers of Attorney****
<FN>
- ---------------
* Incorporated by reference to an Exhibit included in Registrant's Current
Report on Form 8-K filed with the Commission on January 17, 1995.
** Incorporated by reference to the Exhibit included in Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995 filed with the
Commission on August 3, 1995.
*** Incorporated by reference to the Exhibit with the same exhibit number
included in Registrant's Annual Report on Form 10-K filed with the
Commission on March 20, 1996.
**** Previously filed.
</TABLE>
II-2
<PAGE> 55
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
1. That for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide public offering thereof.
2. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
3. For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430(A) and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
4. For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering hereof.
II-3
<PAGE> 56
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS THE
REQUIREMENTS FOR FILING A FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
REGISTRATION STATEMENT (NO. 333-7395) TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CLEVELAND, STATE OF OHIO,
ON JULY 19, 1996.
OLYMPIC STEEL, INC.
July 19, 1996 By: /s/ R. Louis Schneeberger
----------------------------------
R. Louis Schneeberger,
Chief Financial Officer and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED AND ON THE DATES INDICATED.
<TABLE>
<C> <S>
July 19, 1996 *
Michael D. Siegal
President, Chairman of the Board
and Chief Executive Officer
July 19, 1996 /s/ R. Louis Schneeberger
R. Louis Schneeberger
Chief Financial Officer
and Director
July 19, 1996 *
David A. Wolfort
Chief Operating Officer
and Director
July 19, 1996 *
Bruce S. Adelstein
Vice President -- Operations
and Director
July 19, 1996 *
Richard T. Marabito
Treasurer and Corporate Controller
(Principal Accounting Officer)
July 19, 1996 *
Martin H. Elrad, Director
July 19, 1996 *
Thomas M. Forman, Director
July 19, 1996 *
Janice M. Margheret, Director
</TABLE>
* The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-3 pursuant to the Powers
of Attorney executed by the above-named officers and directors of the Company
and which are being filed herewith with the Securities and Exchange Commission
on behalf of such officers and directors.
By: /s/ R. Louis Schneeberger July 19, 1996
----------------------------
R. Louis Schneeberger,
Attorney-in-Fact
II-4
<PAGE> 57
OLYMPIC STEEL, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- ------- -----------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
4.1 Credit Agreement dated December 29, 1994 by and among the Registrant, five banks
and National City Bank, Agent*
4.2 First Amendment to Credit Agreement dated June 9, 1995 by and among the Registrant,
five banks and National City Bank, Agent**
4.3 Second Amendment to Credit Agreement dated December 19, 1995 by and among the
Registrant, five banks and National City Bank, Agent***
4.4 Receivables Purchase Agreement dated December 19, 1995 among the Registrant,
Olympic Steel Receivables LLC, Olympic Steel Receivables, Inc. and Clipper
Receivables Corporation as Purchaser***
4.5 Purchase and Sale Agreement dated December 19, 1995 among the Registrant, Olympic
Steel Lafayette, Inc. and Olympic Steel Receivables LLC***
Information concerning certain of the Registrant's other long-term debt is set
forth in Notes 7 and 8 of Notes to Financial Statements. The Registrant hereby
agrees to furnish copies of such instruments to the Commission upon request.
5.1 Opinion of Kahn, Kleinman, Yanowitz & Arnson Co., L.P.A. as to the validity of the
Securities being offered
23.1 Consent of Kahn, Kleinman, Yanowitz & Arnson Co., L.P.A. (included in Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP****
24.1 Directors and Officers Powers of Attorney****
<FN>
- ---------------
* Incorporated by reference to an Exhibit included in Registrant's Current
Report on Form 8-K filed with the Commission on January 17, 1995.
** Incorporated by reference to the Exhibit included in Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995 filed with the
Commission on August 3, 1995.
*** Incorporated by reference to the Exhibit with the same exhibit number
included in Registrant's Annual Report on Form 10-K filed with the
Commission on March 20, 1996.
**** Previously filed.
</TABLE>
<PAGE> 1
EXHIBIT 1.1
Olympic Steel, Inc.
3,000,000 Shares*
Common Stock
(without par value)
Underwriting Agreement
New York, New York
____________, 1996
Salomon Brothers Inc
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
McDonald & Company Securities, Inc.
As Representatives of the several Underwriters
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs and Mesdames:
Olympic Steel, Inc., an Ohio corporation (the "Company"),
proposes to sell to the underwriters named in Schedule I hereto (the
"Underwriters"), for whom you are acting as representatives (the
"Representatives"), 2,500,000 shares of Common Stock, without par value (the
"Common Stock"), of the Company, and each of the persons named in Schedule II
hereto (the "Selling Shareholders") severally proposes to sell to the
Underwriters the number of shares of Common Stock (in the aggregate, 500,000
shares of Common Stock) set forth opposite such Selling Shareholder's name on
Schedule II hereto. Such 2,500,000 shares of Common Stock and 500,000 shares of
Common Stock are referred to, collectively, herein as the "Underwritten
Securities". The Company proposes to grant to the Underwriters an option (the
"Company Option") to purchase up to 375,000 additional shares of Common Stock,
and each of the Selling Shareholders severally proposes to grant to the
Underwriters an option (each, a "Shareholder Option" and collectively, the
"Shareholder Options"; and together with the Company Option, the "Options") to
purchase up to the number of shares of Common Stock (up to 75,000 shares in the
aggregate) set forth opposite such Selling Shareholder's name on Schedule III
hereto. The shares
- --------
* Plus options described herein to purchase from Olympic Steel, Inc. and
the Selling Shareholders up to 450,000 additional shares of Common
Stock solely to cover over-allotments.
<PAGE> 2
2
of Common Stock subject to the Options are herein referred to as the "Option
Securities", and the Underwritten Securities and the Option Securities are
herein referred to, collectively, as the "Securities".
1. Representations and Warranties.
-------------------------------
(a) The Company represents and warrants to, and agrees with,
each Underwriter as set forth below in this Section 1. Certain terms used in
this Section 1 and hereafter in this Agreement are defined in the second
paragraph of paragraph (i) hereof.
(i) The Company meets the requirements for use of Form
S-3 under the Securities Act of 1933, as amended (the "Securities
Act"), and has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (Registration No. 333-07395) on
such form, as amended by Amendment No. 1 thereto dated July 19, 1996,
including a related preliminary prospectus, for the registration under
the Securities Act of the offering and sale of the Securities. The
Company may have filed one or more further amendments thereto,
including a related preliminary prospectus, each of which has
previously been furnished to you. The Company will next file with the
Commission either (A) prior to effectiveness of such registration
statement, as so amended, a further amendment to such registration
statement (including the form of final prospectus) or (B) after
effectiveness of such registration statement, a final prospectus in
accordance with Rules 430A and 424(b)(1) or (4). In the case of clause
(B), the Company has included in such registration statement, as
amended at the Effective Date, all information (other than Rule 430A
Information) required by the Securities Act and the rules and
regulations thereunder to be included in the Prospectus with respect to
the Securities and the offering thereof. As filed, such amendment and
form of final prospectus, or such final prospectus, shall contain all
Rule 430A Information, together with all other such required
information, with respect to the Securities and the offering thereof
and, except to the extent the Representatives shall agree in writing to
a modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company has advised you, prior to
the Execution Time, will be included or made therein.
The terms that follow, when used in this Agreement with
initial capital letters, shall have the meanings indicated. The term
"Effective Date" shall mean each date that the Registration Statement
and any post-effective amendment or amendments thereto became or become
effective under the Securities Act. "Execution Time" shall mean the
date and time that this Agreement is executed and delivered by the
parties hereto. "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in the first paragraph of this paragraph (i) and
any preliminary prospectus included in the Registration Statement at
the Effective Date that omits Rule 430A Information. "Prospectus" shall
mean the prospectus relating to the Securities that is first filed
pursuant to Rule 424(b) after the Execution Time or, if no filing
pursuant to Rule 424(b) is required, shall mean the form of final
prospectus
<PAGE> 3
3
relating to the Securities included in the Registration Statement at
the Effective Date. "Registration Statement" shall mean the
registration statement referred to in the first paragraph of this
paragraph (i), including exhibits and financial statements, as amended
at the Execution Time (or, if not effective at the Execution Time, in
the form in which it shall become effective) and, in the event any
post-effective amendment thereto becomes effective prior to the Closing
Date, shall also mean such registration statement as so amended. Such
term shall include any Rule 430A Information deemed to be included
therein at the Effective Date as provided by Rule 430A. "Rule 424",
"Rule 430A" and "Regulation S-K" refer to such rules under the
Securities Act. "Rule 430A Information" means information with respect
to the Securities and the offering thereof permitted to be omitted from
the Registration Statement when it becomes effective pursuant to Rule
430A. Any reference herein to the Registration Statement, a Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 which were filed under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), on or before the Effective Date of the
Registration Statement or the issue date of such Preliminary Prospectus
or the Prospectus, as the case may be; and any reference herein to the
terms "amend", "amendment" or "supplement" with respect to the
Registration Statement, any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include the filing of any document
under the Exchange Act after the Effective Date of the Registration
Statement, or the issue date of any Preliminary Prospectus or the
Prospectus, as the case may be, deemed to be incorporated therein by
reference.
(ii) On the Effective Date, the Registration Statement did or
will, and when the Prospectus is first filed (if required) in
accordance with Rule 424(b), and on the Closing Date (as hereinafter
defined), the Prospectus (and any supplements thereto) will, comply in
all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the respective rules and
regulations thereunder; on the Effective Date, the Registration
Statement did not or will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date, the Prospectus, if not filed
pursuant to Rule 424(b), did not or will not, and on the date of any
filing pursuant to Rule 424(b), and on the Closing Date or the
Settlement Date (as hereinafter defined), as the case may be, the
Prospectus (together with any supplements thereto) will not, include
any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to
the information contained in or omitted from the Registration Statement
or the Prospectus (or any supplement thereto) in reliance on and in
conformity with information furnished in writing to the Company by or
on behalf of any Underwriter through the Representatives specifically
for inclusion in the Registration Statement or the Prospectus (or any
supplement thereto).
<PAGE> 4
4
(iii) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Ohio, with full corporate power and authority to own,
lease and operate the properties used and useful in its business and to
conduct such business as described in the Prospectus, and is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction where the nature of the
business conducted by it or the assets owned or leased by it requires
it to be so qualified, except where the failure to be so qualified or
in good standing would not individually or in the aggregate have a
material adverse effect on the condition (financial or otherwise),
business, results of operations or business prospects of the Company
and its subsidiaries, taken as a whole (a "Material Adverse Effect").
(iv) The Company has no "significant subsidiaries" (as
such term is defined in Rule 1-02(w) of Regulation S-X under the
Securities Act), other than Olympic Steel Lafayette, Inc. and Olympic
Steel Minneapolis, Inc. (collectively, the "Subsidiaries") and the
Company's wholly-owned, unconsolidated finance subsidiaries. For
purposes of this Agreement, the term "subsidiary" or "subsidiaries"
shall not include such unconsolidated finance subsidiaries.
(v) Each of the Subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its state of incorporation, with full corporate power and
authority to own, lease and operate the properties used and useful in
its business and to conduct such business as described in the
Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction
where the nature of the business conducted by it or the assets owned or
leased by it requires it to be so qualified, except where the failure
to be so qualified or in good standing would not individually or in the
aggregate have a Material Adverse Effect.
(vi) The Company's authorized equity capitalization is
as set forth in the Prospectus under "Capitalization"; the capital
stock of the Company conforms to the description thereof contained in
the Prospectus; all of the outstanding shares of capital stock have
been duly authorized, validly issued, fully paid and nonassessable; the
Securities have been duly authorized; those of the Securities to be
sold by the Selling Shareholders are, and, when and if issued and
delivered and paid for by the Underwriters pursuant to this Agreement,
those of the Securities to be sold by the Company will be, validly
issued, fully paid and nonassessable; the Securities are duly
authorized for quotation and trading, subject to official notice of
issuance, on the National Association of Securities Dealers Automated
Quotation National Market ("NASDAQ NM"); the certificates for the
Securities are in valid and sufficient form; and the holders of
outstanding shares of capital stock of the Company are not entitled to
preemptive or other rights to subscribe for the Securities or for any
shares of any other class of capital stock of the Company. No holders
of securities of the Company have rights to the registration of such
securities under the Registration Statement or otherwise.
<PAGE> 5
5
(vii) There is no pending or, to the best knowledge of
the Company, threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries of a character required to be
disclosed in the Registration Statement that is not adequately
disclosed in the Prospectus, and there is no franchise, contract or
other document of a character required to be described in the
Registration Statement or Prospectus, or to be filed as an exhibit to
the Registration Statement, that is not described or filed as required.
(viii) This Agreement has been duly authorized, executed
and delivered by the Company and is a valid and binding obligation of
the Company.
(ix) Neither the issuance, offering and sale of the
Securities, nor the consummation of any other of the transactions
herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach of, or constitute a default under the
charter, bylaws or code of regulations of the Company or any Subsidiary
or the terms of any indenture or other agreement or instrument to which
the Company or such Subsidiary is a party or by which any of its
respective properties are bound or affected, or any order, regulation
or judgment applicable to the Company or such Subsidiary of any court,
regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over the Company or such Subsidiary.
(x) No consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
of the transactions contemplated herein, except such as have been
obtained under the Securities Act and such as may be required under the
blue sky laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the Underwriters.
(xi) Neither the Company nor any Subsidiary is in
violation of its charter, bylaws or code of regulations or of any law,
ordinance, administrative or governmental rule or regulation applicable
to the Company or such Subsidiary or of any decree of any court or
governmental agency or body having jurisdiction over the Company or
such Subsidiary, or in default in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any material agreement, indenture,
lease or other instrument to which the Company or such Subsidiary is a
party or by which it or any of its properties may be bound or affected,
except where such violation or default will not have a Material Adverse
Effect.
(xii) The Company and each Subsidiary have all licenses,
consents, approvals, authorizations, permits, franchises and other
agreements as are necessary to own and maintain its respective business
properties and to conduct businesses in the manner described in the
Prospectus, except where the failure to have any such licenses,
consents, approvals, authorizations, permits, franchises and other
agreements would not have a Material Adverse Effect, and the Company
and each Subsidiary are in compliance
<PAGE> 6
6
in all material respects with such licenses, consents, approvals,
authorizations, permits, franchises and other agreements, each of which
is in full force and effect.
(xiii) The accountants of the Company, Arthur Andersen LLP
("Arthur Andersen"), who have audited the financial statements filed or
to be filed as part of the Registration Statement and the Prospectus
(or any amendments or supplements thereto) are independent public
accountants with respect to the Company as required by the Securities
Act.
(xiv) The audited financial statements and financial
statement schedules included in the Registration Statement and the
Prospectus and reported on by Arthur Andersen comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act, the Exchange Act and the related published rules and
regulations.
(xv) The financial statements (including the pro forma
financial information contained therein) of the Company included in the
Registration Statement and the Prospectus (and any amendments or
supplements thereto), together with the related schedules and notes,
present fairly the consolidated financial position, results of
operations, changes in shareholders' equity and cash flows of the
Company on the basis stated in the Registration Statement and the
Prospectus at the respective dates or for the respective periods to
which they apply; such statements and related schedules and notes have
been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except
as disclosed therein; and the other financial and statistical
information and data set forth or included in the Registration
Statement and the Prospectus (and any amendments or supplements
thereto) present fairly the information purported to be shown and have
been prepared on a basis consistent with such financial statements and
the books and records of the Company.
(xvi) Except as disclosed or contemplated by the
Registration Statement and the Prospectus (or any amendments or
supplements thereto), subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
(or any amendments or supplements thereto), neither the Company nor any
subsidiary has incurred any liability or obligation, direct or
contingent, or entered into any transaction not in the ordinary course
of business that is material to the Company and its subsidiaries, taken
as a whole, and there has been no material change in the capital stock
of the Company or any subsidiary, any material increase in the
short-term debt or long-term debt of the Company and its subsidiaries,
taken as a whole, or any material adverse change, or any development
involving or that may reasonably be expected to involve, a prospective
material adverse change, in the condition (financial or otherwise),
business, net worth, results of operations or prospects of the Company
and its subsidiaries, taken as a whole.
<PAGE> 7
7
(xvii) The Company and each Subsidiary have good and
marketable title to all property (real and personal) and assets owned
by the Company or such Subsidiary, as the case may be, free and clear
of all liens, claims, security interests or other encumbrances, except
such as are described in the Registration Statement and the Prospectus
(or any supplements or amendments thereto) or in a document filed as an
exhibit to the Registration Statement or such as are not materially
burdensome and do not interfere in any material respect with the
conduct of the business of the Company or such Subsidiary, as the case
may be, and the property held under lease by the Company or any
Subsidiary is held by it under valid, subsisting and enforceable
leases.
(xviii) The Company has not distributed and will not
distribute prior to the Closing Date or Settlement Date, as the case
may be, any offering material in connection with the offering and sale
of the Securities other than the Registration Statement, the
Preliminary Prospectuses, the Prospectus or other materials, if any,
permitted by the Securities Act.
(xix) The Company has not taken and will not take,
directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or
manipulation of the price of the Common Stock.
(xx) The Company is not subject to registration
as an "investment company" under the Investment Company Act of 1940.
(xxi) The Company has received a written representation
from each of its four principal executive officers indicating his
intention to continue in his present role with the Company.
(b) Each Selling Shareholder represents and warrants to, and
agrees with, each Underwriter that:
(i) Such Selling Shareholder is the lawful owner of the
Securities to be sold by such Selling Shareholder hereunder and upon
sale and delivery of, and payment for, such Securities, as provided
herein, such Selling Shareholder will convey good and marketable title
to such Securities, free and clear of all liens, encumbrances, equities
and claims whatsoever.
(ii) Such Selling Shareholder has no reason to believe
that the representations and warranties of the Company contained in
this Section 1 are not true and correct, is familiar with the
Registration Statement and has no knowledge of any material fact,
condition or information not disclosed in the Prospectus or any
supplement thereto which has had or may have a Material Adverse Effect,
and the sale of Securities by such Selling Shareholder pursuant hereto
is not prompted by any information concerning the Company or any of its
subsidiaries which is not set forth in the Prospectus or any supplement
thereto.
<PAGE> 8
8
(iii) Such Selling Shareholder has not taken and will not
take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result,
under the Exchange Act or otherwise, in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Securities.
(iv) No consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
by such Selling Shareholder of the transactions contemplated herein,
except such as may have been obtained under the Securities Act and such
as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the
Underwriters and such other approvals as have been obtained.
(v) Neither the sale of the Securities being sold by
such Selling Shareholder nor the consummation of any other of the
transactions herein contemplated by such Selling Shareholder or the
fulfillment of the terms hereof by such Selling Shareholder will
conflict with, result in a breach or violation of, or constitute a
default under any law of the terms of any indenture or other agreement
or instrument to which such Selling Shareholder is a party or bound, or
any judgment, order or decree applicable to such Selling Shareholder of
any court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over such Selling Shareholder.
In respect of any statements in or omissions from the Registration Statement or
the Prospectus or any supplement thereto made in reliance upon and in conformity
with information furnished in writing to the Company or the Representatives by
any Selling Shareholder specifically for use in connection with the preparation
thereof, such Selling Shareholder hereby makes the same representations and
warranties to each Underwriter as the Company makes to such Underwriter under
paragraph (a)(ii) of this Section.
2. Purchase and Sale.
------------------
(a) Subject to the terms and conditions and in reliance on the
representations and warranties herein set forth, the Company and each Selling
Shareholder (as to the number of shares of Common Stock set forth opposite his
name in Schedule II hereto) agree, severally and not jointly, to sell to each
Underwriter, and each Underwriter agrees, severally and not jointly, to purchase
from the Company and the Selling Shareholders, at a purchase price of $_______
per share, the number of the Underwritten Securities set forth opposite such
Underwriter's name in Schedule I hereto.
(b) Subject to the terms and conditions and in reliance on the
representations and warranties herein set forth, (i) the Company hereby grants
to the several Underwriters the Company Option to purchase, severally and not
jointly, up to 375,000 shares of the Option Securities at the same purchase
price per share as the Underwriters shall pay for the Underwritten Securities
and (ii) each Selling Shareholder hereby severally grants to the several
Underwriters
<PAGE> 9
9
the Shareholder Option to purchase, severally and not jointly, up to the number
of shares of the Option Securities (up to 75,000 shares in the aggregate) set
forth opposite his name on Schedule III hereto. The Options may be exercised
only to cover over-allotments in the sale of the Underwritten Securities by the
Underwriters. The Options, if exercised, must be exercised together and may be
exercised in whole or in part at any time (but not more than once) on or before
the 30th day after the date of the Prospectus upon written or facsimile notice
by the Representatives to the Company and the Selling Shareholders setting
forth the aggregate number of shares of the Option Securities as to which the
several Underwriters are exercising the Options and the Settlement Date. The
maximum number of shares of the Option Securities to be sold by the Company
and each of the Selling Shareholders is set forth in Schedule III hereto. In
the event that the Underwriters exercise the Options for less than 450,000
shares, the number of shares of the Option Securities to be purchased from and
sold by each party listed on Schedule III shall be, as nearly as practicable,
in the same proportion to each other as are the number of shares of the Option
Securities listed opposite their respective names on said Schedule III. The
number of shares of Option Securities to be purchased by each Underwriter shall
be the same percentage of the total number of shares of the Option Securities
to be purchased by the several Underwriters as such Underwriter is purchasing
the Underwritten Securities, subject to such adjustments as you in your
absolute discretion shall make to eliminate any fractional shares.
3. DELIVERY AND PAYMENT. Delivery of and payment for the
Underwritten Securities and the Option Securities (if the Options provided for
in Section 2(b) hereof shall have been exercised on or before the third business
day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
________, 1996, or such later date (not later than ________, 1996) as the
Representatives shall designate, which date and time may be postponed by
agreement among the Representatives and the Company or as provided in Section 9
hereof (such date and time of delivery and payment for the Securities being
herein called the "Closing Date"). Delivery of the Securities to be made on the
Closing Date shall be made to the Representatives for the respective accounts of
the several Underwriters against payment by the several Underwriters through the
Representatives of the respective aggregate purchase prices of the Securities
being sold by the Company and each of the Selling Shareholders to or upon the
order of the Company and each of the Selling Shareholders by certified or
official bank check or checks drawn on or by a New York Clearing House bank and
payable in same day funds. Delivery of the Underwritten Securities and the
Option Securities to be made on the Closing Date shall be made at such location
in New York, New York, as the Representatives shall reasonably designate at
least one business day in advance of the Closing Date and payment for such
Securities shall be made at the office of Kahn, Kleinman, Yanowitz & Arnson
Co., L.P.A. Certificates for the Securities shall be registered in such names
and in such denominations as the Representatives may request not less than
three business days in advance of the Closing Date.
The Company and the Selling Shareholders agree to have the
Securities available for inspection, checking and packaging by the
Representatives in New York, New York, not later than 1:00 PM on the business
day prior to the Closing Date.
<PAGE> 10
10
Each Selling Shareholder will pay all applicable state
transfer taxes, if any, involved in the transfer to the several Underwriters of
the Securities to be purchased by them from such Selling Shareholder and the
respective Underwriters will pay any additional stock transfer taxes involved in
further transfers.
If the Options provided for in Section 2(b) hereof are exercised after the
third business day prior to the Closing Date, the Company will deliver (at the
expense of the Company) to the Representatives, at such location as the
Representatives shall designate, at the time and on the date specified by the
Representatives (which shall be within three business days after exercise of
said option and which time and date of delivery of and payment for the Option
Securities being called the "Settlement Date"), certificates for the Option
Securities in such names and denominations as the Representatives shall have
requested against payment of the purchase price thereof to or upon the order of
the Company and the Selling Shareholders by certified or official bank check or
checks drawn on or by a New York Clearing House bank and payable in same day
funds. Delivery of the Option Securities shall be made at such location in New
York, New York as the Representatives shall reasonably designate at least one
business day in advance of the Settlement Date and payment for the Option
Securities shall be made at the office of Kahn, Kleinman, Yanowitz & Arnson
Co., L.P.A. If settlement for the Option Securities occurs after the Closing
Date, the Company and such Selling Shareholders will deliver to the
Representatives on the Settlement Date for the Option Securities, and the
obligation of the Underwriters to purchase the Option Securities shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of and through such date the opinions, certificates and letters
delivered on the Closing Date pursuant to Section 6 hereof.
4. OFFERING BY UNDERWRITERS. It is understood that the
several Underwriters propose to offer the Securities for sale to the public as
set forth in the Prospectus.
5. AGREEMENTS.
(a) The Company agrees with the several Underwriters
that:
(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof to become effective. Prior to the termination of the
offering of the Securities, the Company will not file any amendment of
the Registration Statement or supplement to the Prospectus (including,
without limitation, any document incorporated by reference therein)
without the prior consent of the Representatives. Subject to the
foregoing sentence, if the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Prospectus is
otherwise required under Rule 424(b), the Company will cause the
Prospectus, properly completed, and any supplement thereto to be filed
with the Commission pursuant to the applicable paragraph of Rule 424(b)
within the time period prescribed therein and will provide evidence
satisfactory to the Representatives of such timely filing. The Company
will promptly advise the Representatives (A) when the Registration
Statement, if not effective at the Execution Time, and any amendment
thereto,
<PAGE> 11
11
shall have become effective, (B) when the Prospectus, and any
supplement thereto, shall have been filed (if required) with the
Commission pursuant to Rule 424(b), (C) when, prior to termination of
the offering of the Securities, any amendment to the Registration
Statement shall have been filed or become effective, (D) of any request
by the Commission for any amendment of the Registration Statement or
supplement to the Prospectus or for any additional information, (E) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (F) of the receipt
by the Company of any notification with respect to the suspension of
the qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The
Company will use its best efforts to prevent the issuance of any such
stop order and, if issued, to obtain as soon as possible the withdrawal
thereof.
(ii) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Securities Act, any
event occurs as a result of which the Prospectus as then supplemented
would include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein in the light
of the circumstances under which they were made not misleading, or if
it shall be necessary to amend the Registration Statement or supplement
the Prospectus to comply with the Securities Act or the rules and
regulations thereunder, the Company promptly will prepare and file with
the Commission, subject to the second sentence of paragraph (a)(i) of
this Section 5, an amendment or supplement that will correct such
statement or omission or effect such compliance.
(iii) As soon as practicable, the Company will make
generally available to its security holders and to the Representatives
an earnings statement or statements of the Company that will satisfy
the provisions of Section 11(a) of the Securities Act and Rule 158
under the Securities Act.
(iv) The Company will furnish to the Representatives and
counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including exhibits thereto) and to each other
Underwriter a copy of the Registration Statement (without exhibits
thereto) and, so long as delivery of a prospectus by an Underwriter or
dealer may be required by the Securities Act, as many copies of each
Preliminary Prospectus and the Prospectus and any supplement thereto as
the Representatives may reasonably request. The Company will pay the
expenses of printing or other production of all documents relating to
the offering of the Securities.
(v) The Company will cooperate with the Underwriters to
arrange for the qualification of the Securities for sale under the laws
of such jurisdictions as the Representatives may designate, will
maintain such qualifications in effect so long as required for the
distribution of the Securities and will pay the fee of the National
Association of Securities Dealers, Inc. in connection with its review
of the offering.
<PAGE> 12
12
(vi) The Company will not, for a period of 90 days
following the Execution Time, without the prior written consent of the
Representatives, offer, sell or contract to sell, or otherwise dispose
of, directly or indirectly, or announce the offering of, any other
shares of Common Stock or any securities convertible into, or
exchangeable for, shares of Common Stock; provided, however, that the
Company may issue and sell Common Stock pursuant to any employee
benefit plan in effect at the Execution Time.
(vii) The Company confirms as of the date hereof that the
Company is in compliance with all provisions of Section 1 of the Laws
of Florida, Chapter 92-198, An Act Relating to Disclosure of Doing
Business with Cuba, and the Company further agrees that if the Company
commences engaging in business with the government of Cuba or with any
person or affiliate located in Cuba after the date the Registration
Statement becomes or has become effective with the Commission or with
the Florida Department of Banking and Finance (the "Department"),
whichever date is later, or if the information reported in the
Prospectus, if any, concerning the Company's business with Cuba or with
any person or affiliate located in Cuba changes in any material way,
the Company will provide the Department notice of such business or
change, as appropriate, in the form acceptable to the Department.
(b) Each Selling Shareholder agrees with the several
Underwriters that he will not during the period of 90 days following the
Execution Time, without the prior written consent of the Representatives, offer,
sell or contract to sell, or otherwise dispose of, directly or indirectly, or
announce the offering of, any other shares of Common Stock beneficially
owned by such person, or any securities convertible into, or exchangeable for,
shares of Common Stock, other than shares of Common Stock disposed of as bona
fide gifts.
6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time, the Closing Date and any Settlement Date, to the accuracy of
the statements of the Company and the Selling Shareholders made in any
certificates pursuant to the provisions hereof, to the performance by the
Company and the Selling Shareholders of their respective obligations hereunder
and to the following additional conditions:
(a) If the Registration Statement has not become effective
prior to the Execution Time, unless the Representatives agree in writing to a
later time, the Registration Statement will become effective not later than (i)
6:00 PM New York City time on the date of determination of the public offering
price, if such determination occurred at or prior to 3:00 PM New York City time
on such date or (ii) 12:00 Noon on the business day following the day on which
the public offering price was determined, if such determination occurred after
3:00 PM New York City time on such date; if filing of the Prospectus, or any
supplement thereto, is required pursuant to Rule 424(b), the Prospectus, and any
such supplement, will be filed in the manner and within the time period required
by Rule 424(b); and no stop order suspending the effectiveness of the
Registration
<PAGE> 13
13
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or threatened.
(b) The Company shall have furnished to the Representatives
the opinion of Kahn, Kleinman, Yanowitz & Arnson Co., L.P.A., counsel for the
Company, dated the Closing Date or the Settlement Date, as the case may be, to
the effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Ohio, with full corporate power and authority to own and
lease its properties and conduct its business as described in the
Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction
that requires such qualification wherein it owns or leases properties;
(ii) each of the Subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its state of incorporation, with full corporate power and
authority to own and lease its properties and conduct its business as
described in the Prospectus, and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction that requires such qualification wherein it owns or leases
properties;
(iii) the Company's authorized equity capitalization is
as set forth in the Prospectus; the capital stock of the Company
conforms to the description thereof contained in the Prospectus; the
outstanding shares of capital stock (including the Securities being
sold hereunder by the Selling Shareholders) have been duly and validly
authorized and issued and are fully paid and nonassessable; the
Securities being sold by the Company hereunder have been duly and
validly authorized; those of the Securities to be sold by the Selling
Shareholders are, and, when issued and delivered to and paid for by the
Underwriters pursuant to this Agreement, those of the Securities to be
sold by the Company will be, fully paid and nonassessable; the
Securities being sold by the Selling Shareholders are duly authorized
for quotation on the NASDAQ NM; the Securities being sold hereunder by
the Company are duly authorized for quotation, subject to official
notice of issuance, on the NASDAQ NM; the certificates for the
Securities are in valid and sufficient form; and to the best knowledge
of counsel, the holders of outstanding shares of capital stock of the
Company are not entitled to preemptive or other rights to subscribe for
the Securities;
(iv) to the best knowledge of such counsel, there is no
pending or threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries of a character required to be
disclosed in the Registration Statement that is not adequately
disclosed in the Prospectus, and there is no franchise, contract or
other document of a character required to be described in the
Registration Statement or Prospectus, or to be filed as an exhibit to
the Registration Statement, that is not described or filed as required;
<PAGE> 14
14
(v) the Registration Statement has become effective
under the Securities Act; any required filing of the Prospectus, and
any supplements thereto, pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); to the best
knowledge of such counsel, no stop order suspending the effectiveness
of the Registration Statement has been issued, no proceedings for that
purpose have been instituted or threatened and the Registration
Statement and the Prospectus (other than the financial statements and
other financial and statistical information contained therein as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Securities
Act and the rules and regulations thereunder; and such counsel has no
reason to believe that at the Effective Date the Registration Statement
contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus as of its
date and as of the Closing Date or any Settlement Date, as the case may
be, includes any untrue statement of a material fact or omits to state
a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
(vi) this Agreement has been duly authorized, executed
and delivered by the Company;
(vii) no consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
of the transactions contemplated herein, except such as have been
obtained under the Securities Act and such as may be required under the
blue sky laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the Underwriters and such other
approvals (specified in such opinion) as have been obtained;
(viii) neither the issuance and sale of the Securities,
nor the consummation of any other of the transactions herein
contemplated nor the fulfillment of the terms hereof will conflict
with, result in a breach or violation of, or constitute a default under
any law or the charter, bylaws or code of regulations of the Company or
any Subsidiary or the terms of any indenture or other agreement or
instrument known to such counsel and to which the Company or such
Subsidiary is a party or bound or any judgment, order or decree known
to such counsel to be applicable to the Company or such Subsidiary of
any court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Company or such Subsidiary;
(ix) to the best knowledge of such counsel, no holders
of securities of the Company have rights to the registration of such
securities under the Registration Statement; and
(x) to the best knowledge of such counsel, the Company
and each Subsidiary has all licenses, consents, approvals,
authorizations, permits, franchises and other agreements as are
necessary to own and maintain its respective business properties
<PAGE> 15
15
and to conduct its businesses in the manner described in the
Prospectus, except where the failure to have any such permits,
franchises and other agreements would not have a Material Adverse
Effect, and the Company and each Subsidiary are in compliance with all
such licenses, consents, approvals, authorizations, permits, franchises
and other agreements, each of which is in full force and effect.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of Ohio or the
United States, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters and (B) as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. References to the Prospectus in
this paragraph (b) include any supplements thereto at the Closing Date.
(c) The Selling Shareholders shall have furnished to the
Representatives the opinion of Kahn, Kleinman, Yanowitz & Arnson Co., L.P.A.,
counsel for the Selling Shareholders, dated the Closing Date to the effect that:
(i) this Agreement has been duly executed and delivered
by the Selling Shareholders, any power of attorney executed in
connection herewith has been duly executed and delivered by the person
executing the same and each Selling Shareholder has full legal right
and authority to sell, transfer and deliver in the manner provided in
this Agreement the Securities being sold by such Selling Shareholder
hereunder;
(ii) the delivery by each Selling Shareholder to the
several Underwriters of certificates for the Securities being sold
hereunder by such Selling Shareholder against payment therefor as
provided herein, will pass good and marketable title to such Securities
to the several Underwriters, free and clear of all liens, encumbrances,
equities and claims whatsoever;
(iii) no consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
by any Selling Shareholder of the transactions contemplated herein,
except such as may have been obtained under the Securities Act and such
as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the
Underwriters and such other approvals (specified in such opinion) as
have been obtained; and
(iv) neither the sale of the Securities being sold by
any Selling Shareholder nor the consummation of any other of the
transactions herein contemplated by any Selling Shareholder or the
fulfillment of the terms hereof by any Selling Shareholder will
conflict with, result in a breach or violation of, or constitute a
default under any law or the terms of any indenture or other agreement
or instrument known to such counsel and to which any Selling
Shareholder is a party or bound, or any judgment, order or decree known
to such counsel to be applicable to any Selling Shareholder of any
<PAGE> 16
16
court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over any Selling Shareholder.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of Ohio or the
United States, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters, and (B) as to
matters of fact, to the extent they deem proper, on certificates of the Selling
Shareholders and public officials.
(d) The Representatives shall have received from Jones, Day,
Reavis & Pogue, counsel for the Underwriters, such opinion or opinions, dated
the Closing Date or the Settlement Date, as the case may be, with respect to the
issuance and sale of the Securities, the Registration Statement, the Prospectus
(together with any supplement thereto) and other related matters as the
Representatives may reasonably require, and the Company shall have furnished to
such counsel such documents as they request for the purpose of enabling them to
pass upon such matters.
(e) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman, Chief Executive Officer and
President of the Company and the Chief Financial Officer of the Company, dated
the Closing Date or the Settlement Date, as the case may be, to the effect that
the signers of such certificate have examined the Registration Statement, the
Prospectus, any supplements to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company
in this Agreement are true and correct in all material respects on and
as of the Closing Date or the Settlement Date, as the case may be, with
the same effect as if made on the Closing Date or the Settlement Date,
as the case may be, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to the Closing Date or the Settlement Date, as
the case may be;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the respective dates as of which information
is given in the Prospectus (exclusive of any supplement thereto), there
has been no material adverse change in the condition or prospects
(financial or otherwise), earnings, business or properties of the
Company and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except as set
forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).
(f) Each Selling Shareholder shall have furnished to the
Representatives a certificate, signed by such Selling Shareholder, dated the
Closing Date or the Settlement Date, as the case may be, to the effect that the
signer of such certificate has carefully examined the
<PAGE> 17
17
Registration Statement, the Prospectus, any supplement to the Prospectus and
this Agreement and that the representations and warranties of such Selling
Shareholder in this Agreement are true and correct in all material respects on
and as of the Closing Date or the Settlement Date, as the case may be, with the
same effect as if made on the Closing Date or the Settlement Date, as the case
may be.
(g) At the Execution Time and at the Closing Date or the
Settlement Date, as the case may be, Arthur Andersen shall have furnished to the
Representatives a letter or letters, dated respectively as of the Execution Time
and of the Closing Date or the Settlement Date, as the case may be, in form and
substance satisfactory to the Representatives, confirming that they are
independent accountants with respect to the Company within the meaning of the
Securities Act and the applicable published rules and regulations thereunder and
stating in effect that:
(i) in their opinion the audited consolidated financial
statements and financial statement schedules included or incorporated
in the Registration Statement and the Prospectus and reported on by
them comply in form in all material respects with the applicable
accounting requirements of the Securities Act and the Exchange Act and
the related published rules and regulations;
(ii) on the basis of a reading of the latest unaudited
consolidated financial statements made available by the Company;
carrying out certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the comments
set forth in such letter; a reading of the minutes of the meetings of
the shareholders, directors and audit and compensation committees of
the board of directors of the Company and the subsidiaries; and
inquiries of certain officials of the Company who have responsibility
for financial and accounting matters of the Company and its
subsidiaries as to transactions and events subsequent to December 31,
1995, nothing came to their attention which caused them to believe
that:
(1) any unaudited financial statements included or
incorporated in the Registration Statement and the Prospectus
do not comply as to form in all material respects with
applicable accounting requirements and with the published
rules and regulations of the Commission with respect to
financial statements included or incorporated in quarterly
reports on Form 10-Q under the Exchange Act; and said
unaudited financial statements are not in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included or incorporated in the Registration
Statement and the Prospectus; and
(2) with respect to the period from June 30, 1996 to
five business days prior to the Execution Time, the Closing
Date or the Settlement Date, as the case may be, there were
any increases in the consolidated long-term debt of the
Company or capital stock of the Company or decreases in the
consolidated
<PAGE> 18
18
shareholders' equity or consolidated net current assets of the
Company as compared with the amounts shown on the June 30,
1996 consolidated balance sheet included in the Registration
Statement and the Prospectus, or for the period from July 1,
1996 to five business days prior to the Execution Time, the
Closing Date or the Settlement Date, as the case may be, there
were any decreases, as compared with the corresponding period
in the preceding year, in consolidated net sales or income
before income taxes or in total or per share amounts of
consolidated net income of the Company, except in all
instances for increases or decreases set forth in such letter
and which are acceptable to the Representatives, in which case
the letter shall be accompanied by an explanation by the
Company as to the significance thereof unless said explanation
is not deemed necessary by the Representatives; and
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature (which is
limited to accounting, financial or statistical information
derived from the general accounting records of the Company and its
subsidiaries) set forth or incorporated in the Registration Statement
and the Prospectus, including the information specified by the
Representatives, agrees with the accounting records of the Company and
its subsidiaries, excluding any questions of legal interpretation.
References to the Prospectus in paragraph (g) include any
supplement thereto at the date of the letter or letters referred to therein.
(h) Subsequent to the Execution Time or, if earlier, the
respective dates as of which information is given in the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of any
supplement thereto), there shall not have been (i) any increase or decrease of
the type referred to in paragraph (g)(i)(2) of this Section 6 or (ii) any
change, or any development involving a prospective change, in or affecting the
business or properties of the Company or any Subsidiary the effect of which, in
any case referred to in clause (i) or (ii) above, is, in the judgment of the
Representatives, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Registration Statement (exclusive of any amendment thereof)
and the Prospectus (exclusive of any supplement thereto).
(i) Prior to the Closing Date or the Settlement Date, as the
case may be, the Company shall have furnished to the Representatives such
further information, certificates and documents as the Representatives may
reasonably request.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the
<PAGE> 19
19
Closing Date by the Representatives. Notice of such cancellation shall be given
to the Company and the Selling Shareholders in writing or by telephone or
telegraph confirmed in writing.
7. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied
or because of any refusal, inability or failure on the part of the Company or
any Selling Shareholder to perform any agreement herein or comply with any
provision hereof other than by reason of a default by any of the Underwriters or
because of any termination pursuant to Section 10 hereof, the Company will
reimburse the Underwriters severally upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by them in connection with the proposed purchase and sale of the
Securities.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter
and each person who controls any Underwriter within the meaning of either the
Securities Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based on any untrue statement or alleged untrue statement of a material fact
contained in the registration statement for the registration of the Securities
as originally filed or in any subsequently filed amendment to the registration
statement relating to the Securities, or in any Preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based on the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based on any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance on and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter through the Representatives specifically for inclusion therein.
This indemnity agreement will be in addition to any liability that the Company
may otherwise have.
(b) Each Selling Shareholder agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement, each Underwriter, the directors, officers, employees and
agents of each Underwriter and each person who controls the Company or any
Underwriter within the meaning of either the Securities Act or the Exchange Act
to the same extent as the foregoing indemnity from the Company to each
Underwriter, but only with reference to written information furnished to the
Company by or on behalf of such Selling Shareholder specifically for inclusion
in the documents referred to in the
<PAGE> 20
20
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any Selling Shareholder may otherwise have.
(c) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either the Securities Act or the Exchange Act, to the same extent as
the foregoing indemnity to each Underwriter, but only with reference to written
information relating to such Underwriter furnished to the Company by or on
behalf of such Underwriter through the Representatives specifically for
inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability that any Underwriter
may otherwise have. The Company and each Selling Shareholder acknowledge that
the statements set forth in the last paragraph of the cover page, in the first
two paragraphs on page 3 and under the heading "Underwriting" (except the last
paragraph) in any Preliminary Prospectus and the Prospectus constitute the only
written information furnished by or on behalf of the several Underwriters for
inclusion in any Preliminary Prospectus or the Prospectus, and you, as the
Representatives, confirm that such statements are correct.
(d) Promptly after receipt by any indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a), (b) or (c) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a), (b) or (c) above. The indemnifying party shall be
entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties that are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent
<PAGE> 21
21
to the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise
or consent includes an unconditional release of each indemnified party from
all liability arising out of such claim, action, suit or proceeding.
(e) In the event that the indemnity provided in paragraph (a),
(b) or (c) of this Section 8 is unavailable to or insufficient to hold harmless
an indemnified party for any reason, the Company, the Selling Shareholders and
the Underwriters agree to contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively, "Losses") to
which the Company, one or more of the Selling Shareholders and one or more of
the Underwriters may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Company, by the Selling Shareholders, and
by the Underwriters from the offering of the Securities; provided, however, that
in no case shall any Underwriter (except as may be provided in any agreement
among underwriters relating to the offering of the Securities) be responsible
for any amount in excess of the underwriting discount or commission applicable
to the Securities purchased by such Underwriter hereunder. If the allocation
provided by the immediately preceding sentence is unavailable for any reason,
the Company, the Selling Shareholders and the Underwriters shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company, of the Selling Shareholders, and of the
Underwriters, in connection with the statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. Benefits
received by the Company and by the Selling Shareholders shall be deemed to be
equal to the total net proceeds from the offering (before deducting expenses)
received by each of them, and benefits received by the Underwriters shall be
deemed to be equal to the total underwriting discounts and commissions, in each
case as set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company, the Selling Shareholders or the
Underwriters. The Company, the Selling Shareholders and the Underwriters agree
that it would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation that does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this paragraph (e), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls an
Underwriter within the meaning of either the Securities Act or the Exchange Act
and each director, officer, employee and agent of an Underwriter shall have the
same rights to contribution as such Underwriter, and each person who controls
the Company within the meaning of either the Securities Act or the Exchange Act,
each officer of the Company who shall have signed the Registration Statement and
each director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (e).
9. DEFAULT BY AN UNDERWRITER. If any one or more Underwriters
shall fail to purchase and pay for any of the Securities agreed to be purchased
by such Underwriter or
<PAGE> 22
22
Underwriters hereunder and such failure to purchase shall constitute a default
in the performance of its or their obligations under this Agreement, the
remaining Underwriters shall be obligated severally to take up and pay for (in
the respective proportions that the amount of Securities set forth opposite
their names in Schedule I hereto bears to the aggregate amount of Securities set
forth opposite the names of all the remaining Underwriters) the Securities that
the defaulting Underwriter or Underwriters agreed but failed to purchase;
provided, however, that in the event that the aggregate amount of Securities
that the defaulting Underwriter or Underwriters agreed but failed to purchase
shall exceed 10% of the aggregate amount of Securities set forth in Schedule I
hereto, the remaining Underwriters shall have the right to purchase all, but
shall not be under any obligation to purchase any, of the Securities, and, if
such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by the Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representatives shall determine in order that the required
changes in the Registration Statement and the Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Company, the Selling Shareholders and any nondefaulting Underwriter for damages
occasioned by its default hereunder.
10. TERMINATION. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company prior to delivery of and payment for the Securities, if prior to
such time (i) trading in the Company's Common Stock shall have been suspended by
the Commission or NASDAQ NM or trading in securities generally on the New York
Stock Exchange or NASDAQ NM shall have been suspended or limited or minimum
prices shall have been established on such Exchange or Market System, (ii) a
banking moratorium shall have been declared either by federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on the financial markets is such as
to make it, in the judgment of the Representatives, impracticable or inadvisable
to proceed with the offering or delivery of the Securities as contemplated by
the Prospectus (exclusive of any supplement thereto).
11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers, of each Selling Shareholder and of the Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter,
any Selling Shareholder or the Company or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.
12. NOTICES. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representatives, will be
mailed, delivered or telegraphed and confirmed to them in care of Salomon
Brothers Inc at Seven World Trade Center, New York,
<PAGE> 23
23
New York 10048, Attention: Legal Department (telecopy number (212) 783-2274),
with copies to Robert A. Yolles, Esq. at the address set forth in the
Registration Statement; or, if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at Olympic Steel, Inc., 5080 Richmond Road,
Bedford Heights, Ohio 44146-1392, Attention: Chief Executive Officer, with
copies to Marc H. Morgenstern, Esq. at the address set forth in the Registration
Statement; or if sent to the Selling Shareholders, will be mailed, delivered or
telegraphed and confirmed to them at the addresses set forth in Schedule II
hereto.
13. SUCCESSORS. This Agreement will inure to the benefit
of and be binding on the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and no other person will have any right or obligation hereunder.
14. APPLICABLE LAW. This Agreement will be governed and
construed in accordance with the laws of the State of New York.
<PAGE> 24
24
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the several Underwriters.
Very truly yours,
OLYMPIC STEEL, INC.
By:
------------------------------------------
Michael D. Siegal
Chairman of the Board, President and
Chief Executive Officer
SELLING SHAREHOLDERS
------------------------------------------
Michael D. Siegal
------------------------------------------
Bruce S. Adelstein
------------------------------------------
R. Louis Schneeberger
------------------------------------------
David A. Wolfort
<PAGE> 25
25
The foregoing Agreement is hereby
confirmed and accepted as of the date first
above written.
Salomon Brothers Inc
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
McDonald & Company Securities, Inc.
By: Salomon Brothers Inc
By:
---------------------------------
Vice President
For itself and the other several Underwriters
named in Schedule I to the foregoing
Agreement.
<PAGE> 26
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
UNDERWRITTEN SECURITIES
UNDERWRITERS TO BE PURCHASED
- ----------------------------------------------------------------------------- -----------------------------
<S> <C>
Salomon Brothers Inc ......................................................
Goldman, Sachs & Co. ......................................................
Merrill Lynch, Pierce, Fenner & Smith .....................................
Incorporated
McDonald & Company Securities, Inc. .......................................
-----------------------------
Total............................................................. 3,000,000
=============================
</TABLE>
<PAGE> 27
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITTEN
ADDRESSES OF SECURITIES
SELLING SHAREHOLDERS SELLING SHAREHOLDERS TO BE SOLD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Michael D. Siegal 5080 Richmond Road 125,000
Bedford Heights, OH 44146
Fax: 216/292-3974
- ----------------------------------------------------------------------------------------------------------------------
Bruce S. Adelstein 5080 Richmond Road 125,000
Bedford Heights, OH 44146
Fax: 216/292-3974
- ----------------------------------------------------------------------------------------------------------------------
R. Louis Schneeberger 5080 Richmond Road 125,000
Bedford Heights, OH 44146
Fax: 216/292-3974
- ----------------------------------------------------------------------------------------------------------------------
David A. Wolfort 5080 Richmond Road 125,000
Bedford Heights, OH 44146
Fax: 216/292-3974
- ----------------------------------------------------------------------------------------------------------------------
Total 500,000
=========================
</TABLE>
<PAGE> 28
SCHEDULE III
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF
SHARES OF OPTION
SECURITIES TO BE SOLD
- ----------------------------------------------------------------------------- ------------------------
<S> <C>
Company ................................................................... 375,000
Michael D. Siegal ......................................................... 18,750
Bruce S. Adelstein ........................................................ 18,750
R. Louis Schneeberger ..................................................... 18,750
David A. Wolfort .......................................................... 18,750
------------------------
Total............................................................. 450,000
========================
</TABLE>
<PAGE> 29
EXHIBIT A
OLYMPIC STEEL, INC.
Public Offering of Shares of Common Stock
-----------------------------------------
Salomon Brothers Inc
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
McDonald & Company Securities, Inc.
As Representatives of the several Underwriters
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement"), by and among Olympic
Steel, Inc., an Ohio corporation (the "Company"), certain Selling Shareholders
named therein and each of you as representatives of a group of Underwriters
named therein, relating to an underwritten public offering of Common Stock,
without par value (the "Common Stock"), of the Company.
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned agrees not to offer, sell or contract to
sell, or otherwise dispose of, directly or indirectly, or announce an offering
of, any shares of Common Stock beneficially owned by the undersigned or any
securities convertible into, or exchangeable for, shares of Common Stock for a
period of 90 days following the date of the Prospectus (as defined in the
Underwriting Agreement) without your prior written consent, other than shares of
Common Stock disposed of as bona fide gifts.
If for any reason the Underwriting Agreement shall be terminated prior
to the Closing Date (as defined in the Underwriting Agreement), the agreement
set forth above shall likewise be terminated.
Yours very truly,
[SIGNATURE OF EACH SELLING SHAREHOLDER]
[NAME AND ADDRESS OF EACH SELLING
SHAREHOLDER]
<PAGE> 1
Exhibit 5.1
KAHN, KLEINMAN, YANOWITZ & ARNSON CO., L.P.A.
ATTORNEYS AT LAW
THE TOWER AT ERIEVIEW
SUITE 2600
CLEVELAND, OHIO 44114-1824
(216) 696-3311
FAX (216) 696-1009 26TH FLOOR
FAX (216) 696-1524 25TH FLOOR
July 19, 1996
Olympic Steel, Inc.
5080 Richmond Road
Cleveland, Ohio 44146-1392
In connection with the filing by Olympic Steel, Inc., an Ohio corporation
(the "Company"), with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933, as amended, of a Registration
Statement on Form S-3, as amended (333-7395), with respect to up to 3,450,000
Common Shares, without par value, of the Company (the "Shares"), to be sold by
the Company and certain selling shareholders, we have examined the following:
(i) the Amended and Restated Articles of Incorporation, as currently in effect,
(ii) the Amended and Restated Code of Regulations of the Company, as currently
in effect; (iii) the Registration Statement on Form S-3, as amended (including
Exhibits thereto) filed with the Securities and Exchange Commission; (iv) the
form of Underwriting Agreement pursuant to which the Shares are to be purchased
by the Underwriters and resold in a public offering; and (v) the records
relating to the organization of the Company and such other documents as we deem
it necessary to examine as a basis for the opinions hereinafter expressed.
Based on the foregoing, we are of the opinion that:
(i) The Company is incorporated and validly existing under the laws of the
State of Ohio.
(ii) The Shares to be issued and sold by the Company, when issued and sold
in the manner contemplated by the Registration Statement, will be
legally issued, fully paid and non-assessable.
(iii) The Shares to be sold by the selling shareholders, when sold in the
manner contemplated by the Registration Statement, will be fully paid
and non-assessable.
We consent to the filing of this opinion with the Registration Statement
and to the use of our name therein under the caption "Legal Matters."
Very truly yours,
/s/ Kahn, Kleinman, Yanowitz & Arnson Co., L.P.A.
Kahn, Kleinman, Yanowitz & Arnson
Co., L.P.A.
