-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TtcgQQ8jE/18rdawQf1R1rbKUghW1kT043znAOkkqkldDyxfdJRY866uFGjzSMTE LJepwCPmJ6Vtzq/ECX58mQ== 0000950124-00-000054.txt : 20000110 0000950124-00-000054.hdr.sgml : 20000110 ACCESSION NUMBER: 0000950124-00-000054 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 20000107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LACLEDE STEEL CO /DE/ CENTRAL INDEX KEY: 0000057187 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 430368310 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-03855 FILM NUMBER: 502866 BUSINESS ADDRESS: STREET 1: ONE METROPOLITAN SQ STREET 2: 211 N BROADWY CITY: ST LOUIS STATE: MO ZIP: 63102 BUSINESS PHONE: 3144251400 MAIL ADDRESS: STREET 1: ONE METROPOLITAN SQ CITY: ST LOUIS STATE: MO ZIP: 63102 10-K405 1 FORM 10K405 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT - - OF 1934 For the fiscal year ended SEPTEMBER 30, 1999 --------------------------------- OR ____________ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_______________________to_______________________ Commission file number 0-3855 -------------- LACLEDE STEEL COMPANY ------------------------------------------------------ (Exact name of Registrant as specified in its charter) DELAWARE 43-0368310 ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 440 NORTH 4TH STREET SUITE 300 ST. LOUIS, MISSOURI 63102 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (314) 425-1400 ------------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered NONE NONE - -------------------------------------- -------------------------------------- Securities registered pursuant to Section 12(g) of the Act: $.01 PAR VALUE, COMMON STOCK - -------------------------------------------------------------------------------- (Title of class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in any amendment to this Form 10-K. [X] At the date of filing of this report there were 4,056,140 shares of $.01 par value common stock outstanding. At December 6, 1999 the aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $1,750,000. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- NONE 2 ITEM 1. BUSINESS (A) GENERAL DEVELOPMENT OF BUSINESS Laclede Steel Company is a manufacturer of a wide range of carbon and alloy steel products, including pipe and tubular products, hot rolled products (primarily special quality bars), wire products, and welded chain. The Company converts its semifinished steel into products through its rolling mills and finishing plants. The Company produces wire products and welded chain utilizing rods purchased on the open market. Each of the Company's finishing facilities is located near its end markets and is specialized by product to optimize efficiency. PROCEEDINGS UNDER CHAPTER 11 On November 30, 1998, the Company and its subsidiaries, Laclede Chain Manufacturing Company and Laclede Mid America, Inc., filed voluntary petitions seeking reorganization under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Eastern District of Missouri (the "Bankruptcy Court"). These petitions are being jointly administered under Case Numbers 98-53121-399, 98-53122-399 and 98-53123-399, pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure. The Company is in possession of its properties and assets and continues to operate with its existing directors and officers as debtors-in-possession. As debtors-in-possession, the Company is authorized to operate its business, but may not engage in transactions outside of the normal course of business without approval, after notice and hearing, of the Bankruptcy Court. Pursuant to the provisions of the Bankruptcy Code, as of the petition date actions to collect pre-petition indebtedness owed by the Company are stayed and other pre-petition contractual obligations may not be enforced against the Company. In addition, as debtors-in-possession, the Company has the right, subject to the Bankruptcy Court's approval and certain other conditions, to assume or reject any pre-petition executory contracts and unexpired leases. Parties affected by these rejections may file claims with the Bankruptcy Court in accordance with the reorganization process. The Bankruptcy Court has approved payment of certain pre-petition liabilities such as employee wages and benefits. Furthermore, the Bankruptcy Court has allowed for the retention of legal and financial professionals. The Bankruptcy Court has approved an $85 million debtor-in-possession financing facility provided by a Bank Group led by BankAmerica Business Credit (the "DIP Facility"). The DIP Facility has provided it with the cash and liquidity to conduct its operations while it prepares a reorganization plan. The Company intends to present a plan of reorganization to the Bankruptcy Court to reorganize the Company's businesses and to restructure the Company's obligations. Under the provisions of the Bankruptcy Code, the Company had the exclusive right to file such plan at any time during the 120-day period following November 30, 1998. The exclusive filing time period has been extended by the Bankruptcy Court at the Company's request to January 31, 2000. GENERAL The Company is one of three full-line domestic producers of continuous weld pipe in the United States. In addition, the Company believes it is an important North American producer of oil tempered wire, which is used for applications such as mechanical springs and overhead garage door springs. Oil tempered wire has metallurgical properties that typically command a price premium over commodity grades of wire, and therefore, produces higher profit margins. The Company's manufactured and imported chain products give it a significant position in the truck and automobile tire chain and the hardware and industrial chain markets. The Company's special quality bars are primarily sold to forgers for finishing into a variety of products. - 2 - 3 The Company produces semi-finished steel at its Alton, Illinois Plant. Annual steelmaking capacity is estimated at 680,000 net tons. To improve productivity the Company is utilizing one electric furnace, which reduces production capacity to approximately 580,000 net tons per year. The Company purchases rods for its wire mill and the welded chain operation. At December 31, 1996 Ivaco Inc. of Montreal, Canada owned 2,018,650 shares of the Company's common stock or 49.8% of the total number of shares outstanding. On September 26, 1997, a subsidiary of Ivaco Inc. sold one-half of the Ivaco investment in the Company to Midwest Holdings, Inc., a wholly owned subsidiary of Birmingham Steel Corporation ("Midwest Holdings"). The securities of the Company sold consisted of 1,009,325 common shares and 183,334 shares of the Company's Series A preferred stock. The preferred shares are convertible into 859,834 common shares of the Company. Ivaco has provided Midwest Holdings with a limited right of first refusal with respect to such interests until September 24, 2002. At September 30, 1999 Birmingham Steel Corporation and affiliates owned 1,029,325 shares of the Company's common stock or 25.4% of the total number of shares outstanding and Ivaco Inc. owned 1,009,325 shares or 24.9% of the outstanding shares. (B) FINANCIAL INFORMATION The following table sets forth certain financial information relating to Registrant's operations:
Fiscal Nine-Month Year Ended Transition Period Ended Year Ended September 30, 1999 September 30, 1998 December 31, 1997 ------------------ ------------------ ----------------- (Thousands of Dollars) ---------------------- Net Sales $ 241,582 $ 232,289 $ 325,029 ========= ========= ========= Net Loss $ (21,353) $ (83,812) $ (3,007) ========= ========= ========= Identifiable Assets $ 190,071 $ 216,191 $ 313,820 ========= ========= =========
(C) DESCRIPTION OF BUSINESS The following table lists the Company's wide range of steel products: Pipe and Tubular Products: Continuous Weld Pipe - A53 Standard and Extra Heavy - API 5L Line Pipe - Coupling Stock - Fence Pipe - Rigid Conduit Shells Hot Rolled Products: Carbon and Alloy SBQ Bars Forging Billets Special Shapes Special Processing Wire Products: Cold Drawn Wire - High Carbon - Low Carbon Heat Treated Wire - Carbon Oil Tempered - Alloy Oil Tempered - Annealed Chain: Welded Chain - 3 - 4 The following table presents, for the periods indicated, the percentage of the Company's total sales by product class:
Nine-Month Fiscal Transition Period Year Ended Ended Year Ended September 30, 1999 September 30, 1998 December 31, 1997 ------------------ ------------------ ----------------- Product ------- Pipe and Tube 34.4% 35.5% 38.0% Hot Rolled 41.1% 44.0% 37.8% Wire 11.1% 11.8% 14.8% Chain 13.4% 8.7% 9.4% ---- --- --- Total 100% 100% 100% === === ===
Pipe and Tubular Products. The Company's tubular products consist primarily of continuous butt weld ("CBW") pipe which is sold in the U.S. and Canada to distributors and manufacturers. Pipe products are produced and finished at the Company's Alton and Fairless Hills, Pennsylvania Plants and finished at the Vandalia, Illinois Facility. The Company is one of only three full line producers of CBW pipe in the United States, due in part to the Company's lease from former competitor USX Corporation of its pipe manufacturing facilities at the Fairless Facility. In February 1997, the Company sold the assets of its electric weld structural and mechanical tubing operation, located in Benwood, West Virginia. After collection of a related note receivable, cash proceeds from the sale of these assets, which consist primarily of equipment and inventory, totaled approximately $11.0 million. The Company used the funds from the sale to improve its working capital position. Sale of these assets did not affect the Company's primary tubular business, continuous weld pipe. Hot Rolled Products. The Company's hot rolled products are produced at the Alton Plant and consist primarily of special quality bars ("SBQ") sold to manufacturers to be cold drawn or forged. Wire Products. The Company is a major manufacturer of wire products. These products include high and low carbon wire, oil-tempered wire, and annealed wire. The Company believes it is an important participant in the oil tempered wire market. Wire products are currently manufactured and finished at the Company's Fremont, Indiana Facility. The Fremont Facility is the Company's stand-alone oil tempered wire plant which the Company believes to be a state-of-the-art facility. The Company closed its Memphis, Tennessee wire mill in 1998 and sold a large portion of the assets, including its wire manufacturing equipment located in Memphis. Chain Products. Laclede Chain Manufacturing Company, one of the Company's wholly owned subsidiaries, produces welded chain and also imports a significant amount of chain for resale. Approximately 50% of its annual sales are attributable to sales of anti-skid devices for trucks and - 4 - 5 automobiles. The balance of the Company's chain products sales are in the hardware and industrial chain business. At September 30, 1999 the Company had an estimated sales backlog of approximately $15 million. Long-term sales commitments do not represent a significant portion of the business. Research and development activities of the Company have not been material. The Company manufactures steel from steel scrap purchased in the open market from numerous scrap suppliers. Since it does not produce its own raw materials, the Company is subject to the fluctuation in prices and availability of scrap. See Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) for additional discussion. Capital Improvements. While the Company has expanded and improved its downstream finishing facilities, it has also completed important capital improvements to the steelmaking operations at the Alton Plant. The primary objective of these improvements was to substantially reduce production costs and provide access to new markets. Because of the bankruptcy filing, and liquidity issues, the Company's capital expenditures were minimal in recent years. For further information and for discussion of future capital expenditure plans, please refer to MD&A. COMPETITION The Company believes that the principal competitive factors affecting its business are price, quality and customer service. Price sensitivity in markets for the Company's products is primarily driven by competitive factors. Domestic. The Company faces competition from regional mini-mill companies and fully integrated steel mills, and such competition can be expected to continue. Moreover, the addition of new sheet capacity in the industry has had and will continue to have a favorable impact on production costs of the Company's tubular product competitors. The Company also expects increased competition in its bar product business as announced increases in capacity materialize. Foreign. The Company also faces competition from foreign steel producers. Foreign competition increased in 1998 and early 1999 to unprecedented levels, declining somewhat in recent months. Foreign competition may further increase in the future, due to factors such as changes in currency exchange rates, repeal of duties on foreign-produced steel or the enactment of restrictive or burdensome regulations or taxes that affect domestic but not foreign steel manufacturers. Many foreign steel producers are owned, controlled or subsidized by their governments and their decisions with respect to production and sales may be influenced more by political and economic policy considerations than by prevailing market conditions. ENVIRONMENTAL MATTERS In general, the Company is subject to a broad range of federal, state and local environmental regulations, including those governing discharges into the air and water, the handling and disposal of solid and/or hazardous wastes and the remediation of contamination associated with the release of hazardous substances. The domestic steel industry, including the Company, has spent substantial amounts to comply with these requirements. Although the Company believes it is in substantial compliance with the various environmental regulations applicable to its business, there can be no assurance that future changes in environmental regulations will not require the Company to incur significant costs in order to comply with such future regulations. Specifically, like all electric arc furnace (EAF) steel producers, the Company generates EAF dust as part of the steelmaking process. For some time, the EPA has classified EAF dust as a designated hazardous waste. Over a period of years, the Company accumulated approximately 145,000 tons of this - 5 - 6 material on-site at the Alton Plant, pending development of technology for economical treatment. The Company received approval of a modified closure plan for disposition of this existing EAF dust with the Illinois EPA, and has completed the closure of all piles in place. In December 1997, the Company idled its High Temperature Metal Recovery facility (HTMR) after the facility was damaged in an accident. This facility was used to dispose of the Company's EAF dust generated in the Alton Facility. Since 1997 the Company has disposed of the EAF dust through alternative methods. In 1998 Management evaluated the HTMR facility and the decision was made to permanently shut down the operation. EMPLOYEES As of September 30, 1999, the Company employed approximately 1,200 employees, approximately 220 of whom are classified as management, administrative and sales personnel. The Company's 575 hourly employees at the Alton Plant are covered by a collective bargaining agreement that expires in September of 2001. In connection with the bankruptcy proceedings the Company is negotiating an amendment and extension of the collective bargaining agreement. None of the Company's other employees are covered by a collective bargaining agreement. The Company has never experienced a strike, and it believes that its relations with its employees are good. The compensation for the majority of the Company's employees is based partially on productivity in accordance with various incentive plans. ITEM 2. PROPERTIES. The Company's steelmaking facilities are located on a 400-acre site in Alton, Illinois, and consist of two electric furnaces with a casting production capacity of over 680,000 net tons per year, a ladle metallurgy facility, a continuous bloom casting facility, a roughing mill and 14-inch bar mill, 8-inch bar mill, 22-inch strip mill and facilities for the manufacture of continuous butt-weld pipe. To improve productivity the Company is utilizing one electric furnace, which reduces production capacity to approximately 580,000 net tons per year. The Company also has a pipe finishing plant in Vandalia, Illinois, a chain manufacturing plant in Maryville, Missouri, and a wire oil tempering facility in Fremont, Indiana. The Company operates a pipe mill in Fairless Hills, Pennsylvania which is leased from USX Corporation. The lease expires September 30, 2001 with an option to renew until September 30, 2006. The Company's property is well maintained and adequate for production of its existing product line. The majority of the Company's properties are owned in fee. In connection with its reorganization under the Bankruptcy Code, the Company rejected its lease for space for corporate offices in the Metropolitan Square Building and now leases space at 440 North Fourth Street in downtown St. Louis under a lease expiring on November 30, 2001, with an option to extend to November 30, 2004. ITEM 3. LEGAL PROCEEDINGS The Company and its subsidiaries, Laclede Chain Manufacturing Company and Laclede Mid America, Inc., filed voluntary petitions seeking reorganization under Chapter 11 of the United States Bankruptcy Code on November 30, 1998. Additional information related to the filing is set forth under Part 1, Item 1 and Part II, Item 7 of this Form 10-K and Note 1 of the Notes to Consolidated Financial Statements. Such information is incorporated herein by reference. There are other various claims pending involving the Company and its subsidiaries with respect to environmental, hazardous substance, product liability, personal injury, and other matters arising out of the routine conduct of its business. Such claims that arose prior to November 30, 1998 are subject to the automatic stay of the United States Bankruptcy Code. - 6 - 7 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Laclede's common stock is traded on the OTC Bulletin Board System and the symbol is LCLDQ. As of December 20, 1999 there were 507 stockholders of record.
MARKET PRICE RANGE 1999 1998 ---- ---- BY QUARTER HIGH LOW HIGH LOW ---------- ---- --- ---- --- First $ 5/8 $ 5/32 $ 5-5/8 $ 3 Second 1/2 7/32 5-1/4 3-1/4 Third 11/16 3/8 3-3/8 1/4 Fourth 1-7/8 7/16 5/8 1/8
1999 1998 ---- ---- Dividends Per Share Paid on Common Stock None None
Payment of dividends on common stock was limited by the Company's Loan and Security Agreement and is prohibited by the covenants in the DIP Facility. See Note 6 to the Company's Consolidated Financial Statements. In addition, the Certificate of Designation for the Company's outstanding Series A Preferred Stock provides that the Company shall not declare or pay any dividends on the Company's common stock unless full cumulative dividends have been paid or declared on the Series A Preferred Stock. At this date, full cumulative dividends have not been paid or declared on the Series A Preferred Stock. - 7 - 8 ITEM 6. SELECTED FINANCIAL DATA FIVE-YEAR FINANCIAL SUMMARY (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
Nine-Month Fiscal Transition Period Year Ended Ended September 30, September 30 Years Ended December 31 ------------------------------------------ 1999 1998 1997 1996 1995 ---------- ---------- ---------- ---------- ---------- Net Sales $ 241,582 $ 232,289 $ 325,029 $ 335,381 $ 320,350 Restructuring, Asset Impairment and other Charges (Credits) $ 7,177 $ 27,646 $ (987) $ 1,559 $ 17,694 Net Loss $ (21,353)* $ (83,812) $ (3,007) $ (9,985) $ (10,137) Basic and Diluted Net Loss Per Common Share $ (5.28) $ (20.73) $ (0.83) $ (2.50) $ (2.50) Other Financial Data: Total Assets $ 190,071 $ 216,191 $ 313,820 $ 331,110 $ 349,778 Working Capital 20,476 (78,734) 55,899 62,001 87,759 Capital Expenditures 1,510 3,848 3,016 10,726 13,847 Long-Term Debt (Subject to Compromise in 1999) 25,990 -- 109,157 107,889 118,791 Stockholders' Equity (Deficit) (85,986) (103,019) 21,101 17,245 16,518 Stockholders' Equity (Deficit) Per Common Share $ (21.20) $ (25.40) $ 5.20 $ 4.25 $ 4.07 Cash Dividends Per Common Share $ -- $ -- $ -- $ -- $ --
* Includes $6,052 in reorganization costs, $6,215 in non-cash periodic pension costs recorded in excess of current service costs, and $7,177 in restructuring, asset impairment and other charges (credits). ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview In order to preserve its operational strength and the assets of its businesses, on November 30, 1998, the Company sought protection of the federal bankruptcy laws by filing a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. Under Chapter 11 the Company continues to conduct business in the ordinary course under the protection of the Bankruptcy Court, while a reorganization plan is developed to restructure its obligations and its operations. There can be no assurance that the reorganization plan will be successful. As discussed below, since filing for protection under Chapter 11, the Company has substantially improved its operating performance, primarily as the result of cost reduction and productivity improvements. The Company has experienced operating losses since 1995. In early 1998, management developed a plan to reorganize operations and improve operating efficiencies. This plan included the consolidation of Wire and Tubular Operations, improvement in operations in the Melt Shop and 14" Bar - 8 - 9 Mill at the Alton Plant, and consolidation of certain administrative functions. The shutdown of the Memphis Plant and consolidation of Wire Operations in the Fremont Plant was completed in the third quarter of 1998. The Company's tubular products are currently produced at the Alton and Fairless Plants, with finishing operations also performed at the Vandalia Plant. With current production and shipping requirements, the Alton and Fairless Plants are each operating at levels substantially below capacity. Management's plan included consolidation of pipe-making operations in order to improve production efficiencies and reduce the overall costs. In connection with the development of a reorganization plan while under the protection of the Bankruptcy Court, the Company is negotiating with the United Steelworkers of America, representing workers at the Alton Plant, regarding the consolidation of pipe-making operations. The Company has also developed a capital program to improve the operating efficiency of the Melt Shop and 14" Bar Mill at the Alton Plant. Implementation of this program will depend upon obtaining adequate financing. In this regard the Company is negotiating with potential lenders, with the intention of utilizing government loan guarantees recently made available under the Emergency Steel Guarantee Loan Program. At this time there is no assurance that the loan guarantees or funds for the capital program will be available to the Company. OPERATING RESULTS 1997 TO 1999 On October 22, 1998 the Company changed its fiscal year end from December 31 to September 30. Accordingly, results of operations for the transition period ended September 30, 1998 cover a nine-month period. In the twelve months ended September 30, 1999 the Company incurred a net loss of $21.4 million. Included in the net loss is $6.1 million for reorganization expenses (primarily professional fees incurred in connection with the bankruptcy proceedings), $11.7 million in pension curtailment losses, and $6.2 million in non-cash periodic pension costs in excess of current service costs. As discussed in Note 7 to the Consolidated Financial Statements, termination of the Company's hourly and salaried pension plans will be an integral part of the plan of reorganization. Management believes the pension liabilities, other than costs for service subsequent to the bankruptcy filing date, will be assumed by the Pension Benefit Guaranty Corporation. In fiscal 1999 the Company also recorded income of $4.6 million, recognizing settlements of class action lawsuits involving electrode manufacturers. Excluding these charges and credits, the net loss for the year ended September 30, 1999 was approximately $2.0 million. The net loss for the nine-month transition period ended September 30, 1998 was $83.8 million. In 1998 the Company recorded asset impairment and other charges of $27.6 million, including losses of approximately $4.6 million and $15.4 million related to the shutdown of its Memphis plant and HTMR facility, respectively. Additionally, the Company also recorded charges of $7.6 million in connection with the retirements of several officers of the Company and certain restructuring expenses. Included in this amount is approximately $5.8 million in primarily non-cash settlement and curtailment expenses relating to the Company's Key Employee Retirement Plan. The Company also recorded a provision for income taxes in 1998 of $31.1 million, reflecting a valuation allowance for deferred tax assets. See Note 5 to the Consolidated Financial Statements for additional discussion. The net loss for 1997 was $3.0 million. In the first quarter of 1997 the Company realized an after-tax gain of $.6 million on the sale of its Benwood Facility. - 9 - 10 The change in net sales for the last three fiscal periods is analyzed as follows:
(In Thousands) ------------------------------------------------------------------------- Nine-Month Transition Twelve Months Ended Period Ended September 30, 1999 Vs. September 30, 1998 Vs. Twelve Months Ended Nine Months Ended September 30, 1998 September 30, 1997 1997 Vs. 1996 ------------------ ------------------ ------------- Decrease in net sales $ (70,380) $ (13,067) $ (10,352) Comprised of: Decrease in volume $ (52,151) $ (5,562) $ (13,107) Increase (Decrease) in price $ (18,229) $ (7,505) $ 2,755
In the twelve months ended September 30, 1999 total steel shipments declined by 21.1% compared to the twelve-month period ended September 30, 1998. Average selling prices for pipe and tubular products decreased by 8.6%, while prices for hot rolled and semi-finished products declined by 5.6% and 3.8%, respectively. Shipments of chain products increased by 2.8% in 1999 over the prior twelve-month period. Cost of products sold decreased by $86.0 million, or 27.7%, in the year ended September 30, 1999, compared to the preceding twelve months. This reflects the reduction in steel shipments and a decline in average scrap prices of approximately 26%. In addition, in fiscal 1999 there were significant productivity improvements and reductions in maintenance costs and plant overhead costs at the Alton Plant. In the 1998 transition period, the decrease in net sales of $13.1 million compared to nine months ended September 30, 1997 reflects a 2.6% decrease in steel shipments, which primarily occurred in the third quarter. In the third quarter of 1998 steel shipments declined 14.0% when compared to the third quarter of 1997. This reflects the overall decline in demand for steel products and the unprecedented increase in foreign imports. For the nine-month transition period ended September 30, 1998 pipe and tubular selling prices declined about 4.5%. This was partially offset by higher price realizations on hot rolled and wire products. Cost of products sold increased $10.1 million in the first nine months of 1998 versus the comparable period of 1997, despite the decrease in shipping volume. This reflects the negative effect which the Company's inventory reduction program had on production and maintenance costs per ton. In addition, costs were negatively impacted by increases in workers' compensation expenses and provision for slow moving and obsolete inventories. Selling, general and administrative expenses decreased by $2.7 million in the year ended September 30, 1999 when compared to the proceeding twelve-month period. The reduction in Alton Plant overhead expenses mentioned above, and the decrease in selling general and administrative expenses, is primarily due to a significant reduction in salaried employees since early 1998. The relocation of the corporate offices in November 1999 will reduce future selling general and administrative expenses by approximately $250 thousand annually. Selling, general and administrative expenses increased slightly in the nine-month transition period ended September 30, 1998 due to higher professional fees related to restructuring. Interest expense increased in 1998 due to higher interest rates which more than offset lower amounts outstanding. - 10 - 11 Interest expense decreased approximately $4.1 million in the year ended September 30, 1999 when compared to the proceeding twelve-month period. This reflects a decrease in borrowings under the Company's debtor-in-possession financing facility, and the discontinuance of recording interest expense on unsecured and undersecured prepetition debt pursuant to AICPA Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). General inflation has not had a significant effect on the Company's sales and revenues, which are more related to factors such as domestic steel capacity, currency levels, demands for the Company's products and the impact of foreign steel imports. Imported steel typically has the greatest impact on the Company's tubular products. DIVISIONS AND SUBSIDIARIES The Company's subsidiary, Laclede Mid America Inc. operates an oil tempered wire facility in Fremont, Indiana. In 1998 the Fremont Plant increased its production of certain higher grades of oil tempered wire, utilizing technology developed in connection with the project to produce wire for suspension springs. In 1999 the Board of Directors approved a $1.5 million capital project to install an additional oil tempered line, which will increase overall plant capacity by approximately 15%. The Company's wholly owned subsidiary, Laclede Chain Manufacturing Company, operates a manufacturing plant in Maryville, Missouri and a warehouse and sales operation in Portland, Oregon. The Laclede Chain operation made a significant contribution to operating results in the year ended September 1999, reflecting significant traction chain sales in the winter of 1998-99. Under an agreement with USX Corporation the Company leases the Pipe Mill Operations located at the Fairless Works in Bucks County, Pennsylvania. Shipments of continuous weld pipe from the Fairless Plant represented 37.1% of tubular products sales in fiscal 1999 and 33.8% in the nine-month transition period ended September 30, 1998. The Company also operates a tubular finishing plant in Vandalia, Illinois. The Vandalia facility processes semi-finished pipe produced at the Alton and Fairless Pipe Mills. Shipments of continuous weld pipe from the Vandalia Plant represented 47.9% of tubular products sales in fiscal 1999 and 46.6% in the nine-month transition period ended September 30, 1998. LIQUIDITY AND CAPITAL RESOURCES For the year ended September 30, 1999 operating activities provided approximately $19.0 million in cash. Cash flow from financing activities used $18.3 million in cash, primarily as the result of a reduction in borrowing under the Company's bank facility. Investing activities used $.7 million in cash flow in the period. At September 30, 1999, $61.9 million in borrowings were outstanding under the Company's bank facility. Operating activities provided $4.5 million in cash and investing activities provided $1.0 million in cash flow in the nine-month transition period ended September 30, 1998. In January 1998 the Company completed the sale and leaseback transaction for the Ladle Metallurgy Facility at the Alton Plant. This note receivable collection under the sale and leaseback transaction provided the Company with $3.6 million in cash. In September 1998 the Company completed the sale of a portion of the Memphis Wire Plant, realizing approximately $1.2 million in cash. Capital expenditures for the nine-month transition period ended September 30, 1998 totaled $3.8 million. - 11 - 12 On November 30, 1998, the Company obtained an $85.0 million, thirteen-month debtor-in-possession financing facility from its existing lenders, which replaced its existing Bank Credit Facility. On December 23, 1998, the Court issued an Order approving the new facility. On December 17, 1999 the debtor-in-possession financing facility was extended to June 30, 2000. The $85.0 million DIP Facility provides for revolving credit loans based on accounts receivable and inventory levels. As of December 31, 1999 the Company had unused availability under its DIP Facility of approximately $7.2 million. In connection with the DIP facility, as amended, the Company must maintain compliance with several restrictive covenants, including the maintenance of specified levels of operating cash flow and minimum operating contributions from the Alton Steel Operations, as defined. The Company's projections indicate that availability under the debtor-in-possession facility should be adequate to finance its operations until exit from bankruptcy, and all planned capital expenditures, which will be approximately $3.0 million during the nine months ending June 30, 2000. The Company will present a plan of reorganization to the Bankruptcy Court to reorganize the Company's businesses and to restructure the Company's obligations. In connection with this plan the Company anticipates obtaining exit financing which will be adequate to finance its operations after emerging from bankruptcy, presently anticipated during the first-half of calendar 2000. Although the Company believes that the anticipated cash flow from future operations and borrowings under the DIP Facility and anticipated exit financing should provide sufficient liquidity for the Company to meet its debt service requirements and fund ongoing operations, there can be no assurance these or other possible sources will be adequate. As previously mentioned the Company is also negotiating with potential lenders with the intention of utilizing government loan guarantees recently made available in the Emergency Steel Guarantee Loan Program, to provide funds for capital expenditures for the Melt Shop and 14" Bar Mill at the Alton Plant. YEAR 2000 MATTERS The Company has been focused on the year 2000 issue since 1996. The first phase of the Company's year 2000 management was to designate a project leader, identify specific plant and business operation team leaders and create a list of business and information systems and non-information systems that required assessment. The second phase was to form teams to evaluate identified systems for year 2000 readiness. The third phase was to develop a schedule to achieve readiness and repair and/or replace non-ready systems. The Company has completed phases one, two and three. In early 2000, the Company will begin year-end processing and follow-up testing. The Company believes it is year 2000 ready in all material respects at December 31, 1999. Business and Information Systems ("IT Systems"): The Company believes that its mainframe business computer system is year 2000 ready at December 31, 1999. The Company has replaced or upgraded its desktop computers that were not year 2000 ready. Non-IT Systems: There are a number of non-IT system issues at the Company's Alton, Illinois facility. Several systems related to the electric melt shop have had software upgrades or been replaced including the power measurement software, the ladle metallurgy furnace, the caster control system and the chemical analysis equipment. The Alton facility's 14-inch mill also has a number of systems that have had software upgrades or been replaced including the process logic control system and the mill's tracking device and monitor equipment. In addition, with respect to several systems related to the Alton 14" mill the Company has received assurances from various equipment or software vendors as to year 2000 readiness. - 12 - 13 No material year 2000 compliance issues have been identified at the Company's Fremont Wire Mill, Fairless Hills Pipe Mill or the Vandalia Pipe Finishing Facility. Customers and Vendors: The Company has communicated with its significant customers and vendors to understand their year 2000 issues and how they might prepare themselves to manage these issues as they relate to the Company. To date, no significant customers or vendors have informed the Company that a material year 2000 issue exists which would have a material effect on the Company. The Company has in place a comprehensive contingency plan to address year 2000 readiness matters that would interfere with or interrupt its manufacturing process. This plan includes backing up all significant computer files, the intentional shut-down of the Alton facility immediately prior to Saturday, January 1, 2000 and a systematic start-up of each separate operating unit within the Alton facility on the next scheduled day of the plant operations. Based on the Company's current assessment, the costs of addressing potential problems are not currently expected to have a material adverse impact on the Company's financial position, results of operations or cash flows in future periods. If the Company or its customers or vendors identify year 2000 issues in the future, however, and are unable to resolve such issues in a timely manner; it could result in a material financial risk. Accordingly, the Company plans to devote the necessary resources to resolve all significant year 2000 issues in a timely manner. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The foregoing Management's Discussion and Analysis and other portions of this report on Form 10-K, contain various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Sections 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events, including the following: statements regarding the overall demand for steel; statements regarding the ability to maintain sales prices; statements regarding productivity improvement programs; statements regarding the Company's profitability; statements regarding future borrowing capacity; statements regarding Year 2000 compliance and statements regarding future pension funding requirements. In addition, statements containing expressions such as "believes", "anticipates" or "expects" used in the Company's periodic reports on Forms 10-K, 10-Q and 8-K filed with the SEC are intended to identify forward-looking statements. Forward-looking statements by the Company and its management are based on estimates, projections, beliefs and assumptions of management and are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information, or otherwise. The Company cautions that these and similar statements included in this report and in previously filed periodic reports including reports filed on Forms 10-K, 10-Q and 8-K and further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statement, including, without limitation, the following: decline in sales prices for steel products; increases in the cost of steel scrap; failure to obtain significant benefits from the Company's cost reduction and productivity improvement programs; increased domestic or foreign steel competition; decreases in the market value of the Company's qualified pension plan assets; increases in financing costs, labor relations, and adverse developments arising from the Chapter 11 proceedings and adverse developments in the timing or results from the Company's current business plan. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company considered the provision of Financial Reporting Release No. 48 "Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative Information about Market Risk Inherent in Derivative - 13 - 14 Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments". The Company had no holdings of derivative financial or commodity instruments at September 30, 1999. A review of the Company's other financial instruments and risk exposures at that date revealed that the Company had exposure to interest rate risk due to the floating rate DIP Facility debt of $61.9 million. The Company utilized sensitivity analyses to assess the potential effect of this risk and concluded that near-term changes in interest rates should not materially adversely affect the Company's financial position, results of operations or cash flow. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The index to the Financial Statements of the Company and the independent auditors' report of Deloitte & Touche LLP appear on pages 20 and 46, respectively. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NONE PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY (a) Certain information with respect to each of the directors of the Company is set forth below, including any positions they hold with the Company and their business experience the past five years:
NAME, AGE, OTHER POSITIONS WITH THE COMPANY, SERVED AS A PRINCIPAL OCCUPATION AND DIRECTORSHIPS OF OTHER COMPANIES DIRECTOR SINCE - --------------------------------------------------------- -------------- Michael H. Lane, 56 . . . . . . . . . . . . . . . 1997 Executive Vice President, Chief Financial Officer (January 1999 to date); Vice President - Finance, Treasurer and Secretary (1983 to 1999). Wayne P. E. Mang, 62 . . . . . . . . . . . . . . . 1997 President and Chief Operating Officer, Russel Metals (steel product processor and distributor) (1982 to 1997). Director of Wainbee Holdings, Inc. and Maverick Tube Corporation. Philip R. Morgan, 51 . . . . . . . . . . . . . . . 1997 President, Chief Executive Officer and Director, Morgan Construction Company (supplier of steel rolling mill technology and equipment) (1986 to date). Robert H. Quenon, 71 . . . . . . . . . . . . . . . 1992 Mining Consultant (1991 to date); Chairman of the Board, Federal Reserve Bank of St. Louis (1993 to 1995); Chairman (1990 to 1991) and President and Chief Executive Officer (1983 to 1990) of Peabody Holding Company, Inc. (coal mining and sales); Director of Ameren Corporation, and Director of Newmont Mining Corporation. George H. Walker III, 68 . . . . . . . . . . . . . 1990 Chairman of the Board, Stifel Financial Corp. (investment banking firm) and its principal subsidiary, Stifel, Nicolaus & Company, Incorporated (stock brokerage firm) (1979 to date); Director of Laidlaw Corp., EAC Corporation, Western & Southern Life Insurance Company and Macroeconomic Advisers.
- 14 - 15 The executive officers of the Company and their ages are as follows:
NAME AGE POSITION ---- --- -------- Thomas E. Brew, Jr. 57 President and Chief Executive Officer Michael H. Lane 56 Executive Vice President Chief Financial Officer Ralph M. Cassell 57 Vice President-Wire and Chain James T. Caporaletti 57 Vice President & General Manager-Tubular Products
Thomas E. Brew, Jr. of Argus Management Corporation was elected President and Chief Executive Officer by the Board of Directors on February 26, 1998. Mr. Brew had been Executive Vice President of Argus Management Corporation (a consulting firm) since July 1997. From November 1994 until July 1997 Mr. Brew was President, CEO and Chairman of the Board of Directors of Kurzweil Applied Intelligence, Inc. (a software development company). Prior to 1994 Mr. Brew served as Executive Vice President of Argus Management Corporation. Michael H. Lane was elected Executive Vice President and Chief Financial Officer in 1999 and Vice President - Finance, Treasurer and Secretary of the Company in 1983. Mr. Lane was elected to the Board of Directors in 1997. Ralph M. Cassell was appointed President Laclede Wire Company (Laclede Mid America) and Laclede Chain Manufacturing Company on October 28, 1998. Mr. Cassell is Vice President of Laclede Steel Company. Prior to October 1998 Mr. Cassell served as Vice President and General Manager of Laclede Wire Company and also as Director Quality Management for Laclede Steel Company. James T. Caporaletti was appointed Vice President and General Manager of Tubular Products on September 30, 1999. Mr. Caporaletti was appointed Director of Tubular Operations in April 1999, Manager - Tubular Operations in July 1998, and Plant Manager - Fairless Works in October 1991. - 15 - 16 ITEM 11. EXECUTIVE COMPENSATION The following table presents summary information concerning compensation for services rendered to the Company during the fiscal year ended September 30, 1999 and the last three fiscal years by those persons who at September 30, 1999 were the Chief Executive Officer and the other executive officers.
Annual Compensation ------------------- Other Annual All Other Name and Fiscal Bonus Compensation Compensation Principal Position Year Salary ($) ($) (2) ($) (3) ($) (4) - ------------------ ---- ---------- ------- ------- ------- Thomas E. Brew (5) 1999 $ 673,373 $ -- $ -- $ -- President and Chief 1998(1) 439,808 -- -- -- Executive Officer Michael H. Lane (6) 1999 $ 243,504 $ -- $ 13,188 $ 18,157 Executive Vice President , 1998(1) 182,628 -- -- 17,252 Chief Financial Officer 1997 243,504 -- 13,101 19,773 1996 243,504 -- 190,297 19,767 James T. Caporaletti 1999 $ 102,461 $ -- $ -- $ 2,570 Vice President and 1998(1) 61,304 -- -- 1,463 General Manager of 1997 75,323 -- -- 1,800 Tubular Products 1996 73,311 -- -- 1,750 Ralph M. Cassell 1999 $ 148,334 $ -- $ -- $ 3,008 Vice President- 1998(1) 91,170 -- -- 3,332 Wire and Chain 1997 111,000 28,860 -- 3,733 1996 108,000 -- -- 3,668 Thomas W. Calhoun (7) 1999 $ 103,080 $ -- $ -- $ 1,613 Vice President and 1998(1) 73,269 -- -- 44 General Manager of Tubular Products
(1) The 1998 fiscal year is the nine-month transition period beginning January 1, 1998 and ending September 30, 1998. (2) No bonuses were earned under the Company's Discretionary Incentive Compensation Plan for the years reported. Mr. Cassell's 1997 bonus was earned based on results from wire operations. (3) Amount reported as Other Annual Compensation in 1996 for Mr. Lane consists primarily of income tax payments related to Company contributions to the Key Employee Retirement Plan. Such contributions represent taxable income to Plan participants and, under the terms of the Plan, the Company was obligated to reimburse participants for the payment of such taxes. Other amounts in this column relate to tax payments on permanent life insurance premiums and tax assistance. - 16 - 17 Certain perquisites which the executive officers received in the years reported the aggregate amount of which did not exceed the lesser of $50,000 or 10% of any such officer's salary and bonus, are not included in other Annual Compensation. (4) The amounts shown represent life insurance premiums paid by the Company on behalf of the executive officers and matching amount paid by the Company under a defined contribution plan. (5) Payments were made to Argus Management Corporation, which employs Mr. Brew who was engaged by the Board of Directors in February 1998. He is the Executive Vice President of Argus Management Corporation. (6) Mr. Lane has entered into an amendment to his employment agreement with the Company, see "Employment Contracts" below. (7) Mr. Calhoun resigned during 1999. BENEFIT PLANS The Company maintains the Laclede Salaried Employees' Pension Plan (the "Pension Plan"), a defined benefit plan which provides a monthly pension to salaried employees of the Company (excluding employees covered by a collective bargaining agreement) who retire or terminate with vested rights in accordance with the provisions of the Pension Plan. Benefits are based upon years of credited service and covered compensation offset by the participant's Primary Insurance Amount under the Federal Social Security Act. In connection with the bankruptcy proceedings the Company expects the Pension Benefit Guaranty Corporation to terminate the Pension Plan and assume responsibility for payment of pension benefits, which could result in a reduction of benefits for some participants, including executive officers. The Company also maintains the Key Employee Retirement Plan (the "Supplement Plan"), the purpose of which is to provide additional retirement income to certain key employees of the Company, including certain of the executive officers. Benefits for former executive officers McKinney, Hebenstreit and Nethington were fully funded at the time of their retirement. The Company, therefore, had no further payment requirements as the result of their retirement. Benefits for former Vice President-Administration, Larry J. Schnurbusch, were partially funded and he has filed a claim with the Bankruptcy Court for unpaid benefits under the Plan of approximately $925,000. Under the Supplement Plan, the eligible employees were guaranteed that the total amount received by them each year during retirement from the Pension Plan, Federal Social Security and the Supplement Plan would be equal to 70% of the average of their highest aggregate three consecutive calendar year salary and bonus during their last 10 years of employment with the Company ("Salary Level"), assuming retirement at age 60. In connection with a company-wide cost reduction program initiated in 1996, in October 1996 the executive officers agreed to a reduction in retirement benefits under the Supplement Plan by a change in the percentage of Salary Level benefits from 70 to 65%. If the employee retires prior to age 60, the applicable percentage of the Salary Level will be reduced 2.5% for each year of retirement age below age 60. Upon termination of employment, a covered employee or his beneficiary at any time prior to commencement of benefits under the Supplement Plan may select the payment of all benefits due under the Supplement Plan in one lump sum payment. The Supplement Plan's funds are held and invested by a trustee. Pursuant to the November 14, 1990 amendment to the Supplement Plan (the "1990 Amendment") the funds held under the Supplement Plan for then participants were transferred to a separate trust under which the employees participating in the Supplement Fund were the direct beneficiaries. - 17 - 18 Mr. Lane is the only remaining key employee participating in the Supplement Plan. He has accumulated 27 years of credited service, and his current salary level eligible for benefits under the Supplement Plan is $326,193. The aggregate annual benefits payable to him pursuant to the Pension Plan, the Supplement Plan and Federal Social Security at his present age is approximately $190,000. Because of the transfer of funds in connection with the 1990 Amendment, the Company has no payment requirement with respect to future termination of employment of Mr. Lane. The Company also maintains the Laclede Steel Company Salaried Employees' Profit Sharing Plan (the "Profit Sharing Plan") for the purposes of encouraging eligible employees to develop initiative and productivity and providing employees with additional retirement benefits. The Profit Sharing Plan is intended to qualify as a cash deferred compensation arrangement under Section 401(k) of the Internal Revenue Code. Salaried employees of the Company are eligible to participate in the Profit Sharing Plan. COMPENSATION OF DIRECTORS Directors who are not otherwise employed by the Company receive a $1,125 monthly retainer and a per diem fee of $1,125, plus expenses, for Board or committee meetings attended. The Chairman of the Board, Wayne P. E. Mang, receives a $2,250 monthly retainer fee. EMPLOYMENT CONTRACTS On February 25, 1999 the United States Bankruptcy Court for the Eastern District of Missouri entered an order approving each of (a) the Company's Key Employee Incentive Retention Plan; (b) the assumption of the Consulting Agreement with Argus Management Corporation and Thomas E. Brew, Jr., President of the Company; and (c) and the assumption of the Amended and Restated Employment Agreements between the Company, Michael H. Lane and Larry J. Schnurbusch. Mr. Schnurbusch retired from the Company during 1999 and, as a result, his Restated Employment Agreement has terminated. Present participants in the Key Employee Incentive Retention Plan are Michael H. Lane, Executive Vice President and Ralph M. Cassell, Vice President of the Company and President of Laclede Chain Manufacturing Co. and Laclede Mid-America, Inc. This plan calls for the payment of one year's salary as a retention bonus to each of the covered individuals upon successful confirmation by the Bankruptcy Court. Payment is due upon confirmation of a Plan of Reorganization. There are no interim payments and no payment is made to a participant (i) unless he remains in the employ of the Company, or in Mr. Cassell's case, its subsidiaries, on the date of confirmation, or (ii) if the employee is terminated with cause prior to that time. If the Company's bankruptcy proceeding is converted to a liquidation under Chapter 7 of the United States Bankruptcy Code then the retention bonus paid to such employee is reduced to one-half salary and is payable on conversion of the bankruptcy case. Mr. Lane's bonus upon a successful reorganization of the Company currently would be $243,500. Mr. Cassell's bonus would currently be $150,000. The Consulting Agreement with Argus Management Corporation and Thomas E. Brew, Jr. provides for Mr. Brew to act as President of the Company for the period of one year provided that either party may terminate the Agreement with four (4) weeks prior written notice. Compensation under that Agreement is $12,000 per week, together with reimbursement of expenses, including Mr. Brew's weekly travel expenses to his home in Boston. Massachusetts as well as reasonable housing and automobile expenses while Mr. Brew is in the Alton/St. Louis area. Mr. Lane's Employment Agreement provides for Mr. Lane to hold the position of Executive Vice President for a term to expire December 31, 2000 at an annual salary of $243,500. Mr. Lane's agreement continues in force thereafter for successive one-year periods, but is terminable by the Company on ninety (90) days notice. If Mr. Lane remains in the employ of the Company through December 31, 2000 or if he is terminated without "good cause" or leaves the Company for "employee good reason," both as defined in that agreement, the Company also will pay Mr. Lane a severance benefit in a lump sum equal to the amount of his annual base salary, currently, $243,500. Separately, - 18 - 19 Mr. Lane is entitled to benefits under the Company's Key Employee Retirement Plan, payable to him on the first business day after he ceases for any reason to be a full-time employee of the Company. Mr. Lane's benefits under that Plan have been fully funded for a number of years. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following information is furnished with respect to each person known by management of the Company to be the beneficial owner of more than 5% of the outstanding Common Stock of the Company, each director of the Company, each executive officer of the Company and all directors and executive officers as a group. The information is furnished as of December 1, 1999.
Shares of Shares of Series A Common Stock Preferred Stock Name and Address of Beneficially Percent of Beneficially Percent of Beneficial Owner Owned (1) Class Owned (1) Class - ---------------- --------- ----- --------- ----- Birmingham Steel Corporation (2) 1,029,325 25.38% 183,334 44.00% 1000 Urban Center Drive, Suite 300 Birmingham, AL 35242 Ivaco Inc. (2) 1,009,325 24.88% 183,333 44.00% Place Mercantile 770 Rue Sherbrooke ouest Montreal, Quebec, Canada H3A 1G1 James T. Caporaletti -- -- Ralph M. Cassell 50 * -- Michael H. Lane 10,600 * 5,000 1.20% Wayne P. E. Mang 100 * -- Thomas E. Brew, Jr. -- -- Philip R. Morgan 1,000 * -- Robert H. Quenon 300 * -- George H. Walker III (3) 1,000 * -- All Directors and Executive 13,050 * 5,000 1.20% Officers as a Group (8 persons)
* Represents less than one percent of the outstanding Common Stock of the Company. (1) Beneficial ownership of shares, as determined in accordance with applicable Securities and Exchange Commission rules, includes shares as to which a person directly or indirectly has or shares voting power and/or investment power. Unless otherwise indicated, each holder has sole voting and investment power over the shares reported. (2) On September 26, 1997, a subsidiary of Ivaco Inc. ("Ivaco"), sold one-half of the Ivaco investment in the Company to a wholly owned subsidiary of Birmingham Steel Corporation ("Midwest Holdings"). The securities of the Company sold consisted of 1,009,325 common shares and 183,334 shares of the Company's Series A preferred stock. The preferred shares are convertible into 859,834 common shares of the Company. The transaction was effected through the sale of a wholly owned subsidiary of Ivaco which contained such shares to Midwest Holdings. In connection with the transaction Ivaco, among other things, gave Midwest Holdings the voting rights on Ivaco's remaining investment in the Company's common stock and, in any additional common stock Ivaco may own as a - 19 - 20 result of the conversion of Ivaco's remaining Series A preferred stock, subject to certain limitations. In addition, Ivaco agreed not to sell any portion of its remaining investment in the Company prior to September 24, 1998 and has provided Midwest Holdings with a limited right of first refusal with respect to such interests until September 24, 2002. On July 29, 1998, Robert A. Garvey, Joseph Alvarado and William R. Lucas, Jr., each an officer of Birmingham Steel, resigned as directors of the Company. Following this action, no representatives of Birmingham Steel held positions on the Company's Board of Directors. In addition, on September 24, 1998, Midwest Holdings notified LCL Holdings I, pursuant to Section 2 (the "Voting Agreement") of the Purchase Agreement, it was canceling the Voting Agreement and the Proxy which was granted to Midwest Holdings by LCL Holdings I on September 26, 1997, relating to the 1,009,325 Holdings I Common Shares and the 183,333 Holdings I Preferred Shares owned by LCL Holdings I (collectively, the "Shares"), as to any and all of such Shares. This information is based upon Schedule 13D forms of Ivaco and Birmingham Steel, filed on September 30, 1997 and October 8, 1998, respectively. (3) Does not include 1,000 shares of Common Stock owned by Mr. Walker's wife. Mr. Walker disclaims beneficial ownership of such shares. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Prior to January 1, 1998, the Company was self-insured for workers' compensation liabilities. Ivaco Inc. guaranteed a $4.0 million surety bond covering such liabilities. Claims paid subsequent to December 31, 1997 related to pre-1998 occurrences have been charged against the surety bond guaranteed by Ivaco Inc. PART IV ITEM 14. EXHIBITS FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) DOCUMENTS FILED AS PART OF THIS REPORT The following is an index of the financial statements and schedules included in this Report. (1) FINANCIAL STATEMENTS LACLEDE STEEL COMPANY AND SUBSIDIARIES
Page ---- Consolidated Balance Sheets, September 30, 1999 and 1998 . . . . . . . . . . . 23 - 24 Consolidated Statements of Operations for the fiscal year ended September 30, 1999, the nine-month transition period ended September 30, 1998 and the year ended December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Consolidated Statements of Stockholders' Equity (Deficit) for the fiscal year ended September 30, 1999 and for the nine-month transition period ended September 30, 1998 and the year ended December 31, 1997. . . . . . . . . . . . . 26 Consolidated Statements of Cash Flows for the year ended September 30, 1999, the nine-month transition period ended September 30, 1998 and the year ended December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . 28 - 45 Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . . . . . . 46 - 47
- 20 - 21 (2) CONSOLIDATED FINANCIAL STATEMENT SCHEDULES NONE (3) EXHIBITS The following is an index of the exhibits included in this Report or incorporated herein by reference. (3) (a) Registrant's Certificate of Incorporation as restated October 28, 1996. (Incorporated by reference to Exhibit (3) in Registrant's Quarterly Report on Form 10-Q for September 30, 1996.) (3) (b) By-laws of Registrant amended October 21, 1998. (Incorporated by reference to Exhibit (3) (b) in Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1998.) (4) (a) Registrant's Postpetition Loan and Security Agreement dated December 1, 1998. (Incorporated by reference to Exhibit (4) (e) in Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1998.) (4) (b) First Amendment to Postpetition Loan and Security Agreement dated December 23, 1998. (Incorporated by reference to Exhibit (4) (f) in Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1998.) (4) (c) Second Amendment to Postpetition Loan and Security Agreement dated July 1, 1999. (Incorporated by reference to Exhibit (4) (e) in Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1999.) (4) (d) Third Amendment to Postpetition Loan and Security Agreement dated December 17, 1999. (4) (e) Certificate of Designation of Series A Preferred Stock dated July 30, 1996. (Incorporated by reference to Exhibit (4) (i) in the Registrant's Quarterly Report on Form 10-Q for June 30, 1996.) (10) (a) Stock Purchase Agreement dated July 30, 1996 between Ivaco Inc. and Laclede Steel Company. (Incorporated by reference to Exhibit (10) (a) of Registrant's Quarterly Report on Form l0-Q for June 30, 1996.) (10) (b) Management Stock Purchase Agreements dated July 30, 1996 between Laclede Steel Company and John B. McKinney, Michael H. Lane, J. William Hebenstreit, Larry J. Schnurbusch and H. Bruce Nethington. (Incorporated by reference to Exhibit (10) (b) of Registrant's Quarterly Report on Form 10-Q for June 30, 1996.) (10) (c) Restated Employment Agreement dated as of January 13, 1999 between Laclede Steel Company and Michael H. Lane. (10) (d) Registration Rights Agreement dated July 30, 1996 between Laclede Steel Company and Ivaco Inc., John B. McKinney, Michael H. Lane, J. William Hebenstreit, Larry J. Schnurbusch and H. Bruce Nethington. (Incorporated by reference to Exhibit (10) (d) of Registrant's Quarterly Report on Form 10-Q dated June 30, 1996.) - 21 - 22 (10) (e) Restated Key Employee Retirement Plan dated October 16, 1996. (Incorporated by reference to Exhibit (10) (g) in Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.) (10) (f) Consulting Agreement dated November 23, 1998 between Argus Management Corporation, Thomas E. Brew, Jr. and Laclede Steel Company. (Incorporated by reference to Exhibit (10) (j) in Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1998.) (22) Subsidiaries of Registrant. Instruments with respect to long-term debt issues have been omitted where the amount of securities authorized under such instruments does not exceed 10% of the total consolidated assets of the Registrant. Registrant hereby agrees to furnish a copy of any such instrument to the Commission upon its request. NOTE Copies of exhibits will be supplied upon written request and payment of the Registrant's fee of $.25 per page requested. (b) REPORTS ON FORM 8-K NONE - 22 - 23 LACLEDE STEEL COMPANY AND SUBSIDIARIES (DEBTORS-IN-POSSESSION) CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS 1999 1998 - ------ ---- ---- CURRENT ASSETS: Cash $ 205 $ 192 Accounts receivable - less allowances of $2,849 in 1999 and $3,172 in 1998 37,956 39,761 Prepaid expenses 4,130 1,936 Inventories: Finished 34,298 37,871 Semi-finished 7,082 11,595 Raw materials 4,627 3,478 Supplies 11,593 12,922 --------- ---------- Total inventories 57,600 65,866 --------- ---------- Total current assets 99,891 107,755 --------- ---------- NON-CURRENT ASSETS: Intangible pension costs 5 12,271 Other 6,348 7,118 --------- ---------- Total non-current assets 6,353 19,389 --------- ---------- PLANT AND EQUIPMENT - At cost: Land 1,253 1,544 Buildings 26,418 27,784 Machinery and equipment 190,656 191,250 --------- ---------- 218,327 220,578 Less accumulated depreciation 134,500 131,531 --------- ---------- Total plant and equipment 83,827 89,047 --------- ---------- TOTAL $ 190,071 $ 216,191 ========= ==========
See notes to consolidated financial statements. - 23 - 24
LIABILITIES AND STOCKHOLDERS' DEFICIT 1999 1998 - ------------------------------------- ---- ---- CURRENT LIABILITIES: Accounts payable $ 10,421 $ 56,357 Accrued compensation 4,162 5,400 Current portion of long-term debt 61,877 106,048 Accrued costs of pension plans - 15,000 Other 2,955 3,684 ---------- ---------- Total current liabilities 79,415 186,489 ---------- ---------- NON-CURRENT LIABILITIES: Accrued costs of pension plans - 57,328 Accrued postretirement medical benefits - 73,470 Other 6,392 1,923 ---------- ---------- Total non-current liabilities 6,392 132,721 ---------- ---------- COMMITMENTS AND CONTINGENCIES - - ---------- ---------- LIABILITIES SUBJECT TO COMPROMISE: Accounts payable and accrued expenses 50,294 - Accrued costs of pension plans 40,341 - Accrued postretirement medical benefits 70,626 - Long-term debt 25,990 - Other 2,999 - ---------- ---------- Total liabilities subject to compromise 190,250 - ---------- ---------- STOCKHOLDERS' DEFICIT: Convertible preferred stock, no par value, authorized 2,000,000 shares; issued and outstanding 416,667 shares (liquidation preference of $6,250) 83 83 Common stock, $.01 par value, authorized 25,000,000 shares; issued and outstanding 4,056,140 shares 41 41 Capital in excess of par 59,420 59,482 Accumulated deficit (120,472) (99,119) Accumulated other comprehensive loss (25,058) (63,506) ---------- ---------- Total stockholders' deficit (85,986) (103,019) ---------- ---------- TOTAL $ 190,071 $ 216,191 ========== ==========
See notes to consolidated financial statements. - 24 - 25 LACLEDE STEEL COMPANY AND SUBSIDIARIES (DEBTORS-IN-POSSESSION) CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FISCAL YEAR ENDED SEPTEMBER 30, 1999, THE NINE-MONTH TRANSITION PERIOD ENDED SEPTEMBER 30, 1998, AND THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1999 1998 1997 (nine months) ---------- ---------- ---------- NET SALES $ 241,582 $ 232,289 $ 325,029 ---------- ---------- ---------- COSTS AND EXPENSES: Cost of products sold (includes $6,166 related to periodic Pension cost recorded in excess of current service costs in 1999) 224,953 233,585 299,570 Selling, general and administrative expenses 11,482 10,466 13,654 Depreciation 6,251 5,081 7,696 Interest expense (contractual interest - $8,365 in 1999) 6,910 8,183 10,046 Asset impairments and other charges (credits) 7,177 27,646 (987) ---------- ---------- ---------- Total costs and expenses 256,773 284,961 329,979 ---------- ---------- ---------- Reorganization costs 6,052 - - ---------- ---------- ---------- LOSS BEFORE INCOME TAXES (21,243) (52,672) (4,950) PROVISION (BENEFITS) FOR INCOME TAXES 110 31,140 (1,943) ---------- ---------- ---------- NET LOSS (21,353) (83,812) (3,007) PREFERRED STOCK DIVIDEND REQUIREMENT (62) (281) (375) ---------- ---------- ---------- (contractual dividends - $375 in 1999) NET LOSS AVAILABLE TO COMMON STOCKHOLDERS (21,415) (84,093) (3,382) OTHER COMPREHENSIVE INCOME (LOSS) NET OF INCOME TAXES: Minimum pension liability adjustment 38,448 (40,027) 7,238 ---------- ---------- ---------- COMPREHENSIVE INCOME (LOSS) $ 17,033 $ (124,120) $ 3,856 ========== ========== ========== BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (5.28) $ (20.73) $ (0.83) ========== ========== ==========
See notes to consolidated financial statements. - 25 - 26 LACLEDE STEEL COMPANY AND SUBSIDIARIES (DEBTORS-IN-POSSESSION) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) FISCAL YEAR ENDED SEPTEMBER 30, 1999, THE NINE MONTH TRANSITION PERIOD ENDED SEPTEMBER 30, 1998, AND THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT SHARE DATA)
1999 1998 1997 ---- ---- ---- CONVERTIBLE PREFERRED STOCK (416,667 shares issued) $ 83 $ 83 $ 83 --------- ---------- --------- COMMON STOCK (4,056,140 shares issued) 41 41 41 --------- ---------- --------- CAPITAL IN EXCESS OF PAR VALUE: Beginning balance 59,482 59,763 60,138 Dividend requirement on convertible preferred stock (62) (281) (375) --------- ---------- --------- Ending balance 59,420 59,482 59,763 --------- ---------- --------- ACCUMULATED DEFICIT: Beginning balance (99,119) (15,307) (12,300) Net loss (21,353) (83,812) (3,007) --------- ---------- --------- Ending balance (120,472) (99,119) (15,307) --------- ---------- --------- ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Beginning balance (63,506) (23,479) (30,717) Other comprehensive income (loss) 38,448 (40,027) 7,238 --------- ---------- --------- Ending balance (25,058) (63,506) (23,479) --------- ---------- --------- TOTAL STOCKHOLDERS' (DEFICIT) EQUITY $ (85,986) $ (103,019) $ 21,101 ========= ========== =========
See notes to consolidated financial statements. - 26 - 27 LACLEDE STEEL COMPANY AND SUBSIDIARIES (DEBTORS-IN-POSSESSION) CONSOLIDATED STATEMENTS OF CASH FLOWS FISCAL YEAR ENDED SEPTEMBER 30, 1999, THE NINE-MONTH TRANSITION PERIOD ENDED SEPTEMBER 30, 1998, AND THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
1999 1998 1997 (nine months) ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (21,353) $ (83,812) $ (3,007) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 6,251 5,081 7,696 Reorganization items 6,052 - - Asset impairments and other charges (credits) 11,738 25,260 (987) Change in deferred income taxes - 31,010 (2,279) Changes in assets and liabilities that provided (used) cash: Accounts receivable 1,805 521 (1,510) Inventories 8,266 16,940 3,504 Accounts payable, accrued expenses and other assets 4,366 12,961 (2,983) Pension cost greater than (less than) funding 7,031 (1,066) (4,977) Accrued postretirement medical benefits (2,844) (2,394) (3,918) ---------- ---------- ---------- Net cash provided by (used in) operating activities before Reorganization Items 21,312 4,501 (8,461) Operating Cash Flow from Reorganization Items - Bankruptcy related professional fees paid (2,342) - - ---------- ---------- ---------- Net cash provided by (used in) operating activities 18,970 4,501 (8,461) ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,510) (3,848) (3,016) Proceeds from sale of assets 834 4,818 10,972 ---------- ---------- ---------- Net cash provided by (used in) investing activities (676) 970 7,956 ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowing (repayments) under revolving credit loan (18,181) (4,087) 390 Proceeds from term loan - - 4,079 Payments on long-term debt - (1,378) (3,329) Payment of financing costs (100) - (592) ---------- ---------- ---------- Net cash provided by (used in) financing activities (18,281) (5,465) 548 ---------- ---------- ---------- CASH: Net increase during the year 13 6 43 At beginning of year 192 186 143 ---------- ---------- ---------- At end of year $ 205 $ 192 $ 186 ========== ========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 7,198 $ 8,309 $ 10,057 Income tax payments (refunds) - net (6,800) 130 337
See notes to consolidated financial statements. - 27 - 28 LACLEDE STEEL COMPANY AND SUBSIDIARIES (DEBTORS-IN-POSSESSION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999, NINE-MONTH TRANSITION PERIOD ENDED SEPTEMBER 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997. 1. BANKRUPTCY PROCEEDINGS On November 30, 1998, as a result of deterioration in steel demand and selling prices, recurring losses, capital deficiency and funding requirements of its defined benefit pension plans, Laclede Steel Company and subsidiaries (the "Company") filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (the "Code"). The Company is operating as debtors-in-possession under the Code, which protects it from its creditors pending reorganization under the jurisdiction of the Bankruptcy Court. As a debtors-in-possession, the Company is authorized to operate its business but may not engage in transactions outside the ordinary course of business without approval of the Bankruptcy Court. A statutory creditors committee has been appointed in this Chapter 11 case. As part of the Chapter 11 reorganization process, the Company has attempted to notify all known or potential creditors of the Chapter 11 filing for the purpose of identifying all prepetition claims against the Company. In the Chapter 11 case, substantially all of the liabilities as of the filing date are subject to settlement under a plan of reorganization. Generally, actions to enforce or otherwise effect repayment of all prepetition liabilities as well as all pending litigation against the Company are stayed while the Company continues its business operations as debtors-in-possession. Schedules have been filed by the Company with the Bankruptcy Court setting forth the assets and liabilities of the debtors as of the filing date as reflected in the Company's accounting records. Differences between amounts reflected in such schedules and claims filed by creditors will be investigated and amicably resolved or adjudicated before the Bankruptcy Court. The ultimate amount and settlement terms for such liabilities are subject to a plan of reorganization, and accordingly, are not presently determinable. Under the Bankruptcy Code, the Company may elect to assume or reject real estate leases, employment contracts, personal property leases, service contracts and other executory pre-petition contracts, subject to Bankruptcy Court review. The Company cannot presently determine or reasonably estimate the ultimate liability that may result from rejecting leases or from filing of claims for any rejected contracts, and no provisions have been made for these items. The Company expects the Pension Benefit Guaranty Corporation ("PBGC") to assume its obligations under its defined benefit pension plans for its salaried and hourly employees, which would result in the PBGC becoming one of its largest unsecured creditors. The termination of these plans will be an integral part of the plan of reorganization. As of November 30, 1998, the Company had a significant unfunded obligation related to these pension plans. The Company has made no contributions to the pension plans since filing Chapter 11 on the basis that the Company believes prepetition pension obligations can only be paid with Bankruptcy Court approval or as part of a plan of reorganization. The disposition of the Company's postretirement medical obligations has not as yet been determined and these obligations have been included as liabilities subject to compromise. Pursuant to the provisions of the Bankruptcy Code, the Company continues to incur the cost of the postretirement medical plans. The Bankruptcy Court has approved the payment of certain prepetition liabilities such as employee wages and benefits. The Bankruptcy Court has also allowed for the retention of legal and financial professionals. These professional fees represent the majority of reorganization items recorded in the consolidated statements of operations in 1999 and, to the extent unpaid, are liabilities not subject to compromise. - 28 - 29 At the time of filing Chapter 11, the Company's receivables, inventory, and certain plant and equipment were pledged as collateral under a Loan and Security Agreement with a bank group. Subsequent to the filing, with the approval of the Bankruptcy Court, the Company entered into an amended Loan And Security Agreement with BankAmerica (the "DIP Facility"), which provides for borrowing up to $85 million. The DIP Facility provides for revolving credit based on eligible receivables and inventory similar to the previous Loan and Security Agreement. In addition, virtually all assets of the Company have been granted as collateral to the Loan and Security Agreement, except for certain assets of Laclede Chain Manufacturing Company. See Note 6 for further description. The Company's consolidated financial statements have been prepared in accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code". In addition the consolidated financial statements have been prepared using accounting principles applicable to a going concern, which contemplates the realization of assets and the payment of liabilities in the ordinary course of business. As a result of the Chapter 11 filing, such realization of assets and liquidation of liabilities is subject to uncertainty. The financial statements include reclassifications made to reflect the liabilities which have been deferred under the Chapter 11 proceedings as "Liabilities Subject to Compromise". Certain accounting and business practices have been adopted that are applicable to companies that are operating under Chapter 11. The Company's goal is to file a plan of reorganization in early 2000 and have it confirmed by the Bankruptcy Court by the middle of 2000. The completion and acceptance of the plan of reorganization by the Company's creditors are an integral part of the Company's continued existence. While management believes the Company has made adequate provision for the liabilities to be incurred in connection with Chapter 11 claims, there can be no assurance as to the amount of the ultimate liabilities, the impact of such liabilities on a plan of reorganization or how such liabilities will be treated in a plan of reorganization. The Company's continued existence is also dependent on its ability to achieve future profitable operations, the assumption of the Company's obligations under its defined benefit plans by the PBGC, and continued compliance with all debt covenants under the DIP Facility. 2. NATURE OF OPERATIONS The Company is a manufacturer of carbon and alloy steel products, including pipe products, hot rolled products, wire products and welded chain. The Company's continuous butt weld pipe is sold in the U.S. and Canada to distributors and manufacturers. Hot rolled products consist primarily of special quality bars sold to manufacturers to be cold drawn or forged. Wire products include high and low carbon wire, oil tempered wire used for mechanical springs, overhead door springs, automotive suspension and brake springs, and annealed wire and rod. Laclede Chain Manufacturing Company, a wholly owned subsidiary, produces chain products and also imports a significant amount of chain. Approximately one-half of the chain business is attributable to sales of anti-skid devices for trucks and automobiles and the balance is in sales of hardware and industrial chain. 3. CHANGE IN FISCAL YEAR Effective September 30, 1998 the Company changed its year-end from December 31 to September 30. The consolidated statements of operations and comprehensive income (loss), stockholders' deficit, and cash flows are presented for the fiscal year ended September 30, 1999, the nine-month transition period ended September 30, 1998 and the year ended December 31, 1997. - 29 - 30 4. ACCOUNTING POLICIES The Company's significant accounting policies are summarized as follows: PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of Laclede Steel Company and its subsidiaries. All intercompany accounts and transactions have been eliminated. INVENTORIES - Inventories of finished and semi-finished products, raw materials and supplies are stated at the lower of cost, predominantly moving average, or market. Market determination is based on the net realizable value of the total of the components of each major category of inventory. PLANT AND EQUIPMENT - Plant and equipment, consisting primarily of steelmaking and related facilities, are carried at cost. Major renewals and betterments are capitalized, while replacements, rebuilding costs and repairs are charged to operations. DEPRECIATION - The Company follows the policy of providing for depreciation of plant and equipment by charging operations with amounts sufficient to amortize the cost over the following estimated useful lives: Buildings and improvements 20 to 45 years Machinery and equipment 4 to 25 years Office furniture and equipment 2 to 10 years
Depreciation is computed on the straight-line method for financial reporting purposes. IMPAIRMENT OF LONG-LIVED ASSETS AND OTHER INTANGIBLE ASSETS - Management periodically reviews the carrying value of its long-lived tangible and intangible assets to determine if an impairment has occurred or whether changes in circumstances have occurred that would require a revision to the remaining useful life. In making such determination, management evaluates the performance, on an undiscounted basis, of the underlying operations or assets which give rise to such amount. See Note 8 for further discussion of impairment charges. INCOME TAXES - Deferred income taxes are provided for the temporary differences between the tax basis of the Company's assets and liabilities and their financial reporting amounts at each year end, utilizing currently enacted tax rates. See Note 5 for further discussion and a description of significant temporary differences. PER SHARE DATA AND PREFERRED STOCK DIVIDENDS - Per share amounts for the fiscal year ended September 30, 1999, the nine-month transition period ended September 30, 1998, and the year ended December 31, 1997 have been calculated based on weighted average shares outstanding of 4,056,140. Net loss per common share was computed by dividing the net loss, after deducting convertible preferred dividend requirements of $62,000 in 1999, $281,000 in 1998, and $375,000 in 1997 by the weighted average shares outstanding. Per share amounts do not reflect the impact of additional shares of the convertible preferred stock of 1,954,168 as to do so would be antidilutive. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - 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. - 30 - 31 CERTAIN SIGNIFICANT ESTIMATES - Amounts reported for pensions and postretirement medical benefits and their related deferred tax assets are subject to significant fluctuation due to changes in interest rates. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS - The Company manufactures steel from steel scrap purchased in the open market from numerous scrap suppliers and generated in the course of its steel production. Since it does not produce its own raw materials, the Company is subject to the fluctuation in prices and availability of scrap. Approximately 48% of the Company's employees are covered by a collective bargaining agreement, which expires in September 2001. In connection with the development of a reorganization plan while under the protection of the Bankruptcy Court, the Company is negotiating with the United Steelworkers of America, representing workers at the Alton Plant, regarding the amendment and extension of the collective bargaining agreement. FAIR VALUE OF FINANCIAL INSTRUMENTS - Trade accounts receivable, trade accounts payable and accrued liabilities are financial instruments for which the carrying value approximates fair value because of the short-term maturity of these instruments. The Company's notes receivable and debt approximate fair market value due to the interest rates included in the notes receivable and debt which approximate current market rates for similar instruments. As a result of the Company's Chapter 11 filing, a limited market has developed for the trading of financial instruments included as liabilities subject to compromise. Since the market for such claims against the Company under Chapter 11 is not well developed, no reliable source of market price is available. 5. INCOME TAXES FASB Statement No. 109, Accounting for Income Taxes, requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. In evaluating deferred tax assets as of December 31, 1997, management believed that Company-wide cost reductions and productivity improvements previously implemented would return the Company to profitability during 1998, as discussed further below. During the nine-month transition period ended September 30, 1998, significant operating losses caused management to no longer believe that operating income would be sufficient to realize the Company's tax benefits. Consequently, a valuation allowance of $72.5 million was recorded, of which $48.3 million was reflected in the provision for income taxes and the remaining amount was reflected as an adjustment to the minimum pension liability, reported as a reduction of stockholder's equity (deficit). As of December 31, 1997, management believed that it was more likely than not that all of the net operating loss ("NOL") carryforwards would by utilized prior to their expiration. The NOL carryforwards, as well as the existing deductible temporary differences, with the exception of differences relating to the minimum pension liability adjustment and the postretirement medical benefits, were largely offset by the existing taxable temporary differences relating to accelerated depreciation which were scheduled to reverse within the carryforward period. Furthermore, any recorded deferred tax assets associated with these future tax benefits which would be offset by the reversal of the accelerated depreciation were expected to be realized by the achievement of future profitable operations. The Company experienced profitable operations in 1993, 1994, and 1995, exclusive of nonrecurring/unusual charges in connection with restructuring and modifying the operations of the Company. While the Company experienced significant operating losses in 1996, management believed 1997 would have been a profitable year were it not for the unanticipated losses associated with the union contract negotiations, the related decrease in productivity in the periods surrounding the termination of the contract and the year-end inventory - 31 - 32 write-offs. The Company has had a history of generating NOL carryforwards and then utilizing such NOL carryforwards to reduce regular income taxes in future periods. Therefore, management believed that no valuation allowance was necessary for the deferred tax assets at December 31, 1997. Federal and state income taxes are associated with operating income (loss), as well as other comprehensive income (loss) (additional minimum pension liabilities). The Company's provision for (benefit from) income taxes for both statement of operations and other comprehensive income (loss) is as follows (in thousands):
Fiscal Nine-Month Year Transition Period Year Ended Ended Ended September 30, September 30, December 31, 1999 1998 1997 ---- ---- ---- STATEMENT OF OPERATIONS: Current and deferred taxes, exclusive of valuation allowance $ (7,186) $ (17,205) $ (1,943) Valuation allowance 7,296 48,345 -- --------- --------- -------- Total $ 110 $ 31,140 $ (1,943) OTHER COMPREHENSIVE INCOME (LOSS): Current and deferred taxes, exclusive of valuation allowance 14,610 (9,742) $ 4,436 Valuation allowance (14,610) 24,132 -- --------- --------- -------- Total -- 14,390 4,436 --------- --------- -------- TOTAL $ 110 $ 45,530 $ 2,493 ========= ========= ========
The provision (benefit) for income taxes consists of the following (in thousands):
Fiscal Nine-Month Year Transition Period Year Ended Ended Ended September 30, September 30, December 31, 1999 1998 1997 ---- ---- ---- Current state income tax provision $ 110 $ 130 $ 336 Deferred income tax benefit (exclusive of the effect of the valuation allowance) (7,296) (17,335) (2,279) Increase in valuation allowance for deferred tax 7,296 48,345 - --------- --------- -------- Provision (benefit) for income taxes $ 110 $ 31,140 $ (1,943) ========= ========= ========
- 32 - 33 Deferred tax assets and liabilities are comprised of the following (in thousands):
Fiscal Nine-Month Year Transition Period Ended Ended September 30, September 30, 1999 1998 ------------- ------------- Deferred tax assets: Pension liabilities $ 15,311 $ 22,561 Postretirement medical benefits 26,838 27,919 Net operating loss and alternative minimum tax carryovers 38,709 40,429 Allowances on receivables 1,083 1,205 Other 4,791 5,102 ----------- ----------- Total deferred tax assets $ 86,732 $ 97,216 ----------- ----------- Deferred tax liabilities: Depreciation (21,569) (24,739) ----------- ----------- Net deferred tax asset 65,163 72,477 Valuation allowance (65,163) (72,477) ----------- ----------- Net deferred tax asset $ - $ - =========== ===========
In connection with the Alternative Minimum Tax Rules ("AMT"), the Company had available AMT credit carryforwards of approximately $2.5 million, which may be used indefinitely to reduce regular federal income taxes. Additionally, for regular tax purposes, the Company had available as of September 30, 1999, NOL carryforwards of approximately $95.3 million, $67.7 million after carryback of specified losses in connection with Section 172 of the Internal revenue Code as discussed below. These NOL carryforwards expire in various amounts from 2008 through 2019. Section 172 on the Internal Revenue Code ("Code") allows a 10-year carryback for specified liability losses, as defined. During 1998 and 1999, the Company filed federal and state refund claims based upon the carryback of $27.6 million of specified liability losses from the tax years December 31, 1995 through September 30, 1998. The carryback claims, if fully recovered, would provide a current tax benefit of approximately $10.1 million. In addition, if the carryback claims are fully recovered the Company's regular tax NOL carryforwards will be approximately $67.7 million and additional deferred tax assets would be recharacterized from tax loss carryforwards to alternative minimum tax credit carryforwards. However, Section 172 of the Code is an unsettled area of the law and the amount of refunds that will ultimately be recovered will not be determinable until the completion of the final examination of the refund claims by the Internal Revenue Service. During the year ended September 30, 1999, the Company received refunds of $6.8 million from the Internal Revenue Service and the State of Missouri in connection with the carryback claims, but the Company has not as yet recognized this potential tax benefit in the Consolidated Statement of operations. If the aforementioned carryback claims are not ultimately recovered, an NOL carryforward of approximately $95.3 million would be available as of September 30, 1999. - 33 - 34 The applicable statutory federal income tax rate of 34% for the fiscal year ended September 30, 1999, the nine-month transition period ended September 30, 1998, and the year ended December 31, 1997 is reconciled to the effective income tax rate as follows (in thousands):
Fiscal Nine-Month Year Transition Year Ended Period Ended Ended September 30, September 30, December 31, 1999 1998 1997 ------------- -------------- ------------ Federal income tax credit computed at statutory tax rate $ (7,223) $ (17,908) $ (1,651) Change in valuation allowance 7,296 48,345 -- State income taxes net 110 -- (399) Other (73) 703 107 --------- --------- -------- Provision (benefit) for income taxes $ 110 $ 31,140 $ (1,943) ========= ========= ========
Under Section 382 of the Internal Revenue Code of 1986, as amended, if the percentage of stock (by value) of a corporation (the "Loss Corporation") that is owned by one or more "five-percent shareholders" has increased by more than 50 percentage points over the lowest percentage of stock owned by the same shareholders during a three year testing period (an "Ownership Change"), the use of pre-ownership change net operating losses of the Loss Corporation following such Ownership Change will be limited based on the value of the Loss Corporation immediately before the Ownership Change occurs (a "Section 382 Limitation"). Although the Company believes that the transactions consummated pursuant to the Purchase Agreement between Ivaco and Birmingham Steel on September 26, 1997, in which Birmingham Steel acquired approximately 25% of the Company's common stock from Ivaco, should not result in an Ownership Change, future transactions involving persons who are not or who during the ensuing thirty-six month period become "five-percent shareholders" as defined in Section 382 may trigger an Ownership Change. If such an Ownership Change occurs, the Company's use of its existing net operating loss carryovers at such time will be subject to a Section 382 Limitation based on the value of the Company on the date of such an Ownership Change. There are numerous and complex tax issues associated with the Company's filing for protection under Chapter 11 of the Bankruptcy Code and the future reorganization, such as potential abandonment of assets, discharge of indebtedness or sale of property. The impact of these tax issues will effect the amount of tax attribute carryforwards and deferred taxes; however, such impact cannot be determined at this time. - 34 - 35 6. DEBT The components of the Company's debt are as follows (in thousands):
September 30 ------------------------- 1999 1998 ---------- ---------- SECURED DEBT: Bank Loan and Security Agreement: Revolving Loan $ 55,221 $ 72,429 Term Loan 6,656 7,629 ---------- ---------- 61,877 80,058 UNSECURED AND UNDERSECURED DEBT: Solid Waste Disposal Revenue Bonds: 8.375% Bonds 5,905 5,905 8.500% Bonds 9,430 9,430 8% Pollution Control Revenue Bonds 8,040 8,040 8% Industrial development Revenue Bonds 615 615 Notes payable 2,000 2,000 ---------- ---------- Total Debt 87,867 106,048 Less: Debt Classified as Current 61,877 106,048 ---------- ---------- Unsecured and Undersecured Debt Classified as Subject to Compromise $ 25,990 $ -- ========== ==========
SECURED DEBT - At September 30, 1998, the Company had a Loan and Security Agreement with its banks, which had been amended and restated to provide a total credit facility, subject to a borrowing base formula, of up to $85.0 million and a term loan of $7.6 million. Interest on the Revolving Loan was payable at either prime plus 2% or a Eurodollar rate, at the Company's option. Interest on the Term Loan was payable at either prime plus 2-1/2% or a Eurodollar rate, also at the Company's option. Under the terms of the Loan and Security Agreement, the Company granted security interests in accounts receivable and inventory to the participating banks. The Term Loan was secured by certain plant and equipment. In connection with the Company's bankruptcy filing, the Bankruptcy Court authorized the Company to borrow funds under an amended and restated Loan and Security Agreement (the "DIP Facility"). The DIP Facility provides for revolving credit based on eligible accounts receivable and inventory similar to the previous Loan and Security Agreement. At September 30, 1999 the Company had approximately $61.9 million outstanding under the facility and approximately $8.1 million of unused available funds. In connection with an amendment to the DIP Facility approved in December 1999 the termination date was extended to June 30, 2000. - 35 - 36 Interest is payable monthly on postpetition revolving loans which bear interest, at the Company's option, at a floating rate (which is based on 2% plus the Bank of America reference rate ("Prime") or a Eurodollar rate at the Company's option) which was approximately 10% at September 30, 1999. As security for all postpetition obligations and prepetition liabilities, virtually all assets of the Company and subsidiaries have been granted as collateral to the Loan and Security Agreement, except for certain assets of Laclede Chain Manufacturing Company described below. In connection with the Loan and Security Agreement, as amended, the Company must maintain compliance with several restrictive financial covenants, including the maintenance of specified levels of operating cash flow and minimum operating contributions from the Alton Steel operations, as defined. UNSECURED AND UNDERSECURED DEBT - As part of the modifications to the Loan and Security Agreement in existence at September 30, 1998, the Company received in 1997 the approval of parties to the Solid Waste Revenue Bonds to eliminate certain negative financial covenants contained therein and to substitute therefore certain collateral. Subsequent to that substitution, the only remaining negative financial covenant with respect to the Solid Waste Revenue Bonds is that the Company may not without the prior written consent of the Issuer of the Bonds (i) borrow from its subsidiary, Laclede Chain Manufacturing Company, or (ii) take cash advances from Laclede Chain Manufacturing Company, except to the extent that the aggregate principal amount of all such borrowings and cash advances at any one time do not exceed $7,000,000. Collateral granted to the Trustee of the Solid Waste Revenue Bonds for the benefit of the bondholders consists of (i) all of the issued and outstanding shares of Laclede Chain Manufacturing Company and (ii) all of Laclede Chain Manufacturing Company's machinery and equipment now owned or thereafter acquired. Effective May 22, 1995 a subsidiary of the Company entered into a Note Agreement for $2,000,000 bearing interest of Citibank NY Prime rate plus 1%. Principal is due upon the original maturity date of May 22, 2001 and interest is payable monthly. At September 30, 1999 the interest rate was 9.5%. In connection with the Pollution Control Bonds, the Company is required to comply with various covenants relating to limits on liabilities as defined in the Bond Agreement dated October 1, 1976. At September 30, 1998, the Company was not in compliance with these covenants. Additionally, the Company failed to make the required payments and consequently, effective as of October 1, 1998, the Company was in default under the Agreement. The Company was party to a Paying Agent Agreement in which the Paying Agent assisted the Company in purchasing certain raw material. The terms of this agreement required the Company to pay a commission of 1.5% on all purchases plus a fee on the invoice amount. Amounts purchased under this agreement were included in accounts payable subject to compromise and amounted to $9,877,000 as of September 30, 1999 and 1998 and $5,984,000 as of December 31, 1997. As of September 30, 1998, the Paying Agent has terminated this agreement. In accordance with the Bankruptcy Code and AICPA Position 90-7 the Company has not accrued interest on Unsecured and Undersecured Debt since the bankruptcy filing on November 30, 1998. Pursuant to the bankruptcy proceedings, and giving consideration to the defaults on several of the agreements at September 30, 1998 all outstanding debt was classified as current. At September 30, 1999 all unsecured and undersecured outstanding debt of the Company is subject to compromise. - 36 - 37 7. EMPLOYEE BENEFITS DEFINED BENEFIT PENSION PLANS - The Company has several noncontributory defined benefit pension plans providing retirement benefits for substantially all employees. Benefits under the plans are primarily based on years of service and employee's compensation prior to retirement. Annual pension plan funding has been based on the range of deductible contributions permitted by ERISA regulations, taking into account the Company's income tax situation. As a result of its filing under Chapter 11 on November 30, 1998, the Company is not permitted by the Bankruptcy Court, to make contributions to the pension plans related to prepetition liabilities. Due to the size of the underfunding of the hourly and salaried pension plans, the Company expects the plans will be terminated and the pension obligations assumed by the PBGC. Accordingly, in accordance with SFAS No. 88, due to the probability of plan terminations the Company has recorded a curtailment loss of approximately $11.7 million in fiscal 1999, representing prior service costs and unamortized transition obligations (See Note 8). The Company continues to record the periodic pension costs as set forth in SFAS No. 87, of which $6.2 million is in excess of current service cost. Neither the amounts recorded as curtailment loss or periodic pension cost in excess of current service costs for the hourly and salaried plans will ever be funded because of the expected plan terminations. The components of net periodic pension cost are as follows (in thousands):
Fiscal Nine-Month Year Transition Period Year Ended Ended Ended September 30, 1999 September 30, 1998 December 31, 1997 ------------------ ------------------ ----------------- Service cost $ 1,462 $ 1,265 $ 1,742 Interest cost on projected benefit obligation 12,812 10,184 13,710 Expected return on plan assets (10,853) (8,778) (12,068) Net amortization of: Unrecognized transition obligation 62 1,398 1,584 Unrecognized net loss 3,906 2,456 3,419 Unrecognized prior service costs 239 1,255 1,307 --------- --------- --------- Net periodic pension cost 7,628 7,780 9,694 Settlement and curtailment losses recognized 11,738 5,813 -- --------- --------- --------- Total net periodic pension cost $ 19,366 $ 13,593 $ 9,694 ========= ========= =========
Included in total pension cost for the nine-month transition period ended September 30, 1998 is an expense of $5.8 million recognized in connection with the write-off of all remaining deferred costs of the Company's Key Employee Retirement Plan. As discussed in Note 8, several officers of the Company retired or terminated services during the period. In addition, any remaining deferred cost associated with the Plan was charged to expense as a result of the change in the actuarial calculation relating to estimated future service years for the two employees remaining in the Plan at September 30, 1998. - 37 - 38 The projected benefit obligations at September 30, 1999 and 1998 were determined using assumed discount rates of 7.75% and 6.75%, respectively. For all plans other than the Laclede Hourly Employees Pension Plan, the average assumed rate of increase in compensation levels was 2% for all years. Reflecting the Labor Agreement for Alton hourly employees, a 1% rate of increase in compensation was assumed for all years for such plan. The weighted average assumed long-term rate of return on the market-related value of plan assets was 10% for 1999 and 1998, and 9.9% for 1997. A summary of the funded status and changes in the funded status of the Plans, is as follows (in thousands):
Fiscal Nine-Month Year Transition Period Ended Ended September 30, September 30, 1999 1998 ------------- ------------- Change in benefit obligation: Benefit obligation at beginning of period $ 195,974 $ 200,760 Service cost 1,462 1,265 Interest cost 12,812 10,184 Actuarial losses (gains) (10,239) 14,871 Benefits paid (24,081) (31,106) ----------- ----------- Benefit obligation at end of period $ 175,928 $ 195,974 =========== =========== Change in plan assets: Fair value of plan assets at beginning of period $ 123,035 $ 148,706 Actual return (loss) on plan assets 34,858 (4,169) Employer contribution 600 9,604 Benefits paid (24,081) (31,106) ----------- ----------- Fair value of plan assets at end of period $ 134,412 $ 123,035 =========== =========== Funded status $ (41,515) $ (72,939) Unrecognized net transition obligation (asset) (525) 4,931 Unrecognized actuarial loss 26,806 64,951 Unrecognized prior service cost 5 6,589 ----------- ----------- Net amount recognized $ (15,229) $ 3,532 =========== =========== Amounts recognized in the consolidated balance sheet consist of: Prepaid pension cost (reflected in other non- current assets) $ 49 $ 83 Accrued benefit liability (40,341) (72,328) Intangible asset 5 12,271 Accumulated other comprehensive income 25,058 63,506 ----------- ----------- Net amount recognized $ (15,229) $ 3,532 =========== ===========
- 38 - 39 The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $174.9 million, $173.5 million and $133.2 million, respectively, as of September 30, 1999, and $200.6 million, $198.8 million and $119.0 million, respectively, as of September 30, 1998. In accordance with SFAS No. 87, the Company has recorded an additional minimum pension liability for underfunded plans of $25.1 million at September 30, 1999 and $75.8 million at September 30, 1998, representing the excess of unfunded accumulated benefit obligations over previously recorded pension cost liabilities. The reduction in minimum pension liability at September 30, 1999 from September 30, 1998 is primarily due to investment performance of plan assets, with the actual return on assets substantially exceeding the assumed rate of return. The increase in the assumed discount rate used to determine the accumulated benefit obligation from 6.75% to 7.75% also caused a substantial reduction in the minimum pension liability. The minimum pension liability is recognized as an intangible asset except to the extent that these additional liabilities exceed related unrecognized prior service cost and net transition obligation, in which case the increase in liabilities is charged directly to stockholders' equity (deficit). This charge amounted to $25.1 million at September 30, 1999. As of September 30, 1998, $63.5 million of the excess minimum pension liability resulted in a charge to equity. A valuation allowance for the corresponding deferred tax asset resulting from the additional minimum liability was recorded in 1999 and 1998 as it did not appear likely that the deferred tax assets will be realized under present circumstances (See Note 5). PROFIT SHARING PLAN - The Company maintains a defined contribution profit sharing thrift plan covering a majority of its salaried employees. In 1996 the Plan was amended to provide for a minimum Company matching contribution regardless of the level of Company profitability. Company contributions for the year ended September 30, 1999 amounted to $99,000, for the nine-month transition period ended September 30, 1998 amounted to $167,000, and for the year ended December 31, 1997 amounted to $259,000. POSTRETIREMENT MEDICAL BENEFIT PLANS - In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for active and retired employees. A significant portion of the Company's employees may become eligible for the retiree benefits if they reach retirement age while working for the Company. - 39 - 40 The components of net periodic postretirement medical benefit costs are as follows (in thousands):
Fiscal Nine-Month Year Transition Year Ended Period Ended Ended September 30, September 30, December 31, 1999 1998 1997 ------------ ------------ ----------- Service cost $ 473 $ 327 $ 452 Interest cost 3,712 2,872 3,731 Amortization of unrecognized prior service credits (960) (719) (960) Amortization of unrecognized net gain (699) (599) (1,420) -------- -------- -------- Net periodic costs $ 2,526 $ 1,881 $ 1,803 ======== ======== ========
A summary of the changes in the status of the plans is as follows (in thousands):
Fiscal Nine-Month Year Transition Ended Period Ended September 30, September 30, 1999 1998 ----------- ------------ Benefit obligations at beginning of period $ 57,607 $ 55,750 Service cost 473 327 Interest cost 3,712 2,872 Actuarial (gains) losses (35) 2,933 Benefits paid (5,353) (4,275) ---------- ---------- Benefit obligations at end of period $ 56,404 $ 57,607 ========== ========== Funded status $ (56,404) $ (57,607) Unrecognized actuarial gain (8,056) (8,737) Unrecognized prior service credit (6,166) (7,126) ---------- ---------- Accrued post-retirement benefit obligation $ (70,626) $ (73,470) ========== ==========
The assumed discount rates used to measure the accumulated postretirement benefit obligation were 7.75% at September 30, 1999 and 6.75% at September 30, 1998. The assumed future health care cost trend rates for the September 30, 1999 and 1998 calculations were 6.36% and 7.14%, gradually declining over a five-year period to 3.25%. In 2003 and later years, a one percentage point increase in the health care trend rates would have increased the aggregate of the service and interest cost components of the net periodic postretirement benefit cost by $517,000 for the year ended - 40 - 41 September 30, 1999, $444,000 for the nine-month transition period ended September 30, 1998 and $477,000 for the year ended December 31, 1997, and would have increased the accumulated postretirement benefit obligation by $5.5 million as of September 30, 1999 and $5.6 million as of September 30, 1998. A one percentage point decrease in the health care trend rates would have decreased the aggregate of the service and interest cost components of the net periodic postretirement benefit cost by $460,000 for the year ended September 30, 1999, $390,000 for the nine-month transition period ended September 30, 1998, and $428,000 for the year ended December 31, 1997, respectively, and would have decreased the accumulated postretirement benefit obligation by $5.0 million as of September 30, 1999 and by $5.1 million as of September 30, 1998. 8. ASSET IMPAIRMENT, OTHER CHARGES AND CREDITS (In Thousands)
Fiscal Nine-Month Year Transition Year Ended Period Ended Ended September 30, September 30, December 31, 1999 1998 1997 ---- ---- ---- Lawsuit Settlement $ (4,561) $ - $ - Curtailment Loss - Pension (See Note 7) 11,738 - - Impairment Loss - HTMR Facility - 15,362 - - Memphis Plant - 4,650 - Executive Retirements and Other - 7,634 - Gain on Sale of Tubing Operation - - (987) -------- -------- ------- $ 7,177 $ 27,646 $ (987) ======== ======== =======
Due to the probability that the hourly and salaried pension plans will be terminated by the PBGC, the Company has recorded an $11.7 million curtailment loss in the year ended September 30, 1999. (See Note 7). The Company recorded income of $4.6 million in fiscal 1999 from settlements in connection with class action lawsuits involving electrode manufacturers. In December 1997, the Company idled its High Temperature Metal Recovery ("HTMR") facility after the facility was damaged in an accident. This facility was previously used to dispose of the EAF dust generated in the Melt Shop at the Alton Plant. Subsequent to the accident, the Company disposed of the EAF dust through alternative methods. During 1998, management completed an evaluation of the HTMR facility to determine the economic feasibility of repairing and operating the unit, and determined that the HTMR facility currently could not function on an economically feasible basis. As there is a limited market for this type of facility, the entire carrying cost of $15.4 million was written off and recorded as an impairment loss. In June 1998, management implemented its program to consolidate the wire operations at its Fremont facility and to shut down the Memphis Wire Plant. In connection with the shut down, the Company recorded a charge of approximately $6.0 million of which $4.6 million is reflected in the accompanying consolidated statements of operations as asset impairments and other charges. The - 41 - 42 impairment loss on property, plant and equipment reflects the difference between the carrying value at the time of write-off of approximately $6.3 million and an estimated fair value less costs to sell of approximately $2.2 million. Operations have ceased and the majority of the assets have been sold. Net proceeds of approximately $2.0 million have been received in connection with such sales. Also included in the charge is $0.5 million relating to the write-off of goodwill associated with this operation. The remaining write-off associated with the closing of the Memphis Wire Plant of approximately $1.4 million relates to inventory losses and termination shutdown costs incurred which have been reflected in cost of products sold. Professional fees associated with the Company's potential restructuring were also recorded in the nine-month transition period ended September 30, 1998. The Company recorded charges of approximately $6.4 million in connection with the retirement severance of several officers of the Company during the nine-month transition period ended September 30, 1998. Included in this charge is approximately $5.8 million in primarily noncash settlement and curtailment expenses relating to the Company's Key Employee Retirement Plan. In February 1997, the Company sold the assets of its electric resistance weld structural and mechanical tubing operation, located in Benwood, West Virginia. Cash proceeds from the sale of these assets, which consist primarily of equipment and inventory, totaled approximately $11.0 million. This transaction resulted in a gain on sale of equipment of approximately $1.0 million. The Company used the funds from the sale to improve its working capital position. 9. COMMITMENTS AND CONTINGENCIES: The Company has operating leases for office space and certain equipment through 2007. Future minimum lease commitments required under these leases are as follows (in thousands):
Lease Commitments ---------------------------------------- 2000 $ 4,816 2001 3,887 2002 1,636 2003 1,404 2004 817 Thereafter 938 ------- TOTAL $13,498 =======
Rent expense under all leases in 1999, 1998, and 1997 was $5.2 million, $4.9 million and $4.3 million, respectively. In connection with its reorganization under the Bankruptcy Code, the Company rejected its lease for space for corporate offices in the Metropolitan Square Building and now leases space at 440 North Fourth Street in downtown St. Louis under a lease expiring on November 30, 2001, with an option to extend to November 30, 2004. A decision with respect to the assumption, rejection or assignment of other leases in accordance with the Bankruptcy Code has not as yet been made by the Company. In 1996, the Company entered into a sale and leaseback transaction with a third party for the Ladle Metallurgy Facility at Alton. The third party agreed to purchase the equipment in 1996 for approximately $4.0 million cash and a note receivable for approximately $3.6 million which was - 42 - 43 paid in January 1998 to complete the lease transaction. The lease term is for five years starting August 1, 1996 and continuing until June 30, 2001 with an option to purchase the equipment at the expiration date. In August 1998, the Company made a late payment on the lease, allowing the lessor to draw upon a letter of credit in the amount of $1.5 million. Management expects to renegotiate the terms for acquiring the Ladle Metallurgy Facility in connection with the Bankruptcy proceedings. There are various claims pending involving the Company with respect to environmental, hazardous substances, product liability and other matters arising out of the routine conduct of the business. Such claims which arose prior to November 30, 1998 are subject to automatic stay of the Bankruptcy Code. The Company believes it has meritorious defenses and the ultimate disposition of such matters will not materially affect its financial position or results of operations. In August 1998, the Company announced that, in accordance with its Labor Agreement, it planned to discontinue operation of its 22" Mill at its Alton, Illinois Plant. Since the announcement, the Company has continued to operate the mill, primarily as a result of the decline in scrap prices, which has made the operation of the 22" Mill more economical. On January 14, 1999 the Company announced, in accordance with its Labor Agreement, it had given formal notice to the United Steelworkers of America of its intention to permanently discontinue the operations of its Alton, Illinois Tube Mill. Although the Company informed officials of the Union of its intention, at this date the Company is continuing to explore other alternatives with the Union. Shutdown of the Alton 22" Mill and Tube Mill could affect the employment of certain employees of the Alton Plant. Management is negotiating with the Union to reach a decision as to the future of these facilities during the bankruptcy proceedings. 10. PREFERRED STOCK In July 1996, the Company issued 416,667 shares of Series A 6% convertible preferred stock to Ivaco Inc. and the executive officers of the Company for $6,090,000, after expenses. This transaction resulted in an increase in capital in excess of par value of $6,007,000. On October 28, 1996, at a special meeting of the stockholders, an amendment was approved to the Company's Certificate of Incorporation which reduced the par value of each share of common stock from $13.33 per share to $.01 per share and increased the number of authorized common stock shares from 5,000,000 shares to 25,000,000 shares. The stockholders also approved the recapitalization of the Company's Series A 6% preferred stock. At such time each share of the preferred stock became convertible into common stock at the option of the holder at a conversion price of $3.20 into 4.69 shares of common stock. In the event of voluntary or involuntary liquidation of the Company, the holders of shares of Series A Preferred Stock are entitled to receive liquidating distributions in the amount of $15.00 per share plus accrued and unpaid dividends (which total $875,000 or $2.10 per share) before payment is made to holders of common stock. The Company has not accrued dividends on the preferred stock since the bankruptcy filing. As of September 30, 1999 and 1998, Birmingham Steel and Ivaco, Inc. each owned approximately 44% of the issued shares of convertible preferred stock. 11. RELATED PARTY TRANSACTIONS The Company has transactions in the normal course of business with Ivaco Inc. or affiliated companies. As of September 30, 1999 Ivaco Inc. owned approximately 25% of the Company's outstanding common stock. For the year ended September 30, 1999 and nine-month transition period ended September 30, 1998, the Company purchased rods at market prices totaling $2,979,000 and $1,024,000, respectively, from affiliates of Ivaco. Prior to January 1, 1998, the Company was self-insured for workers' compensation liabilities. Ivaco Inc. issued a $4.0 million guaranty bond covering such liabilities. - 43 - 44 The Company also has transactions in the normal course of business with Birmingham Steel or affiliated companies. As of September 30, 1999 Birmingham Steel beneficially owned approximately 25% of the Company's outstanding common stock. In 1998 the Company purchased rods and participated in rod conversion arrangements with affiliates of Birmingham Steel at market prices, which totaled $3,508,000. In 1999 such purchases totaled $6,346,000. Also in 1997, an affiliate of Birmingham Steel purchased semi-finished steel from the Company at market prices totaling $643,000. 12. INFORMATION BY PRODUCT LINE The Company operates in one business segment as a manufacturer of carbon and alloy steel products. Its primary product lines consist of pipe and tubular products, wire, hot rolled bars and welded chain. The following table presents, for the periods indicated, the Company's revenue by product class (in thousands):
Fiscal Nine-Month Transition Year Year Ended Period Ended Ended September 30, 1999 September 30, 1998 December 31, 1997 ------------------ ------------------ ----------------- Pipe And tubular $ 83,045 $ 82,463 $ 123,512 Hot Rolled 99,198 102,207 122,861 Wire 26,788 27,410 48,104 Chain 32,551 20,209 30,552 --------- --------- --------- Total $ 241,582 $ 232,289 $ 325,029 ========= ========= =========
- 44 - 45 13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) In its quarterly financial statements for the first three quarters of 1999, the Company only recognized the portion of pension expense under its defined benefit pension plans attributable to employee current service cost. Amounts in excess of current service costs will not be funded because of expected plan terminations. Subsequently, the Company determined that because of the probability of plan terminations a pension curtailment loss of $11.7 million should be recognized as a first quarter charge in 1999. It was also determined that the entire amount of net periodic pension cost calculated in accordance with Statement of Financial Accounting Standards No. 87 should be recognized in fiscal 1999, even though amounts in excess of current service costs will not be funded. As a result, the 1999 quarterly results of operations have been restated from amounts previously reported. The results of operations by quarter for 1999 and 1998 were as follows (in thousands, except per share data):
1999 AS PREVIOUSLY REPORTED 1999 AS RESTATED --------------------------------------- ----------------------------------------------------- DEC 31 MAR 31 JUN 30 DEC 31 MAR 31 JUN 30 SEP 30 ------ ------ ------ ------ ------ ------ ------ Net sales $ 68,108 $ 59,901 $ 56,354 $ 68,108 $ 59,901 $ 56,354 $ 57,219 Cost of products sold 62,501 53,079 50,762 62,953 54,434 52,117 55,449 -------- -------- -------- --------- --------- --------- --------- Net sales less cost of products sold $ 5,607 $ 6,822 $ 5,592 $ 5,155 $ 5,467 $ 4,237 $ 1,770 ======== ======== ======== ========= ========= ========= ========= Net loss $ (766) $ (1,073) $ (1,627) $ (12,956) $ (2,428) $ (2,982) $ (2,987) ======== ======== ======== ========= ========= ========= ========= Basic and fully diluted net loss per share $ (0.21) $ (0.29) $ (0.37) $ (3.21) $ (0.60) $ (0.73) $ (0.74) ======== ======== ======== ========= ========= ========= =========
1998 ----------------------------------------- MAR 31 JUN 30 SEP 30 ------ ------ ------ Net sales $ 84,555 $ 76,840 $ 70,894 Cost of products sold 77,638 78,069 77,878 -------- -------- -------- Net sales less cost of products sold $ 6,917 $ (1,229) $ (6,984) ======== ======== ======== Net loss $ (2,038) $(65,468) $(16,306) ======== ======== ======== Basic and fully diluted net loss per share $ (0.53) $ (16.16) $ (4.04) ======== ======== ========
- 45 - 46 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Laclede Steel Company and Chapter 11 Trustee of Laclede Steel Company: We have audited the accompanying consolidated balance sheets of Laclede Steel Company and Subsidiaries (Debtors-in-Possession) as of September 30, 1999 and 1998, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity (deficit) and cash flows for the year ended September 30, 1999, the nine month transition period ended September 30, 1998 and year ended December 31, 1997. 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, such consolidated financial statements present fairly, in all material respects, the financial position of Laclede Steel Company and Subsidiaries at September 30, 1999 and 1998, and the results of their operations and their cash flows for the year ended September 30, 1999, the nine month transition period ended September 30, 1998 and year ended December 31, 1997, in conformity with generally accepted accounting principles. As discussed in Note 1, on November 30, 1998, the Company filed for reorganization under Chapter 11 of the Federal Bankruptcy Code. The accompanying consolidated financial statements do not purport to reflect or provide for the consequences of the bankruptcy proceedings. In particular, such consolidated financial statements do not purport to show (a) as to assets, their realizable value on a liquidation basis or their availability to satisfy liabilities; (b) as to prepetition liabilities, the amounts that may be allowed for claims or contingencies, or the status and priority thereof; (c) as to stockholder accounts, the effect of any changes that may be made in the capitalization of the Company; or (d) as to operations, the effect of any changes that may be made in its business. - 46 - 47 The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company's bankruptcy filing, recurring losses and capital deficiency raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also discussed in Note 1. The consolidated financial statements do not include adjustments that might result from the outcome of this uncertainty. Deloitte & Touche LLP St. Louis, Missouri December 27, 1999 - 47 - 48 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. January 6, 2000 /s/ Thomas E. Brew, Jr. _______________________ __________________________________________________ Date Thomas E. Brew, Jr. President Principal Executive Officer January 6, 2000 /s/ Michael H. Lane _______________________ __________________________________________________ Date Michael H. Lane Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Director Pursuant to the requirements of the Securities and Exchange Act of 1934, this amendment has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. January 3, 2000 /s/ Wayne P. E. Mang _______________________ __________________________________________________ Date Wayne P. E. Mang Chairman of the Board January 6, 2000 /s/ Philip R. Morgan _______________________ __________________________________________________ Date Philip R. Morgan Director December 30, 1999 /s/ Robert H. Quenon _______________________ __________________________________________________ Date Robert H. Quenon Director December 28, 1999 /s/ George H. Walker III _______________________ __________________________________________________ Date George H. Walker III Director - 48 - EX-4.(D) 2 THIRD ADMENDMENT TO LOAN AND SECURITY AGREEMENT 1 EXHIBIT (4) (d) AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT THIS AMENDMENT NO. 3 dated as of December 17, 1999 (this "Amendment") is entered into among BANK OF AMERICA, NATIONAL ASSOCIATION ("B of A"), as successor to BankAmerica Business Credit, Inc., Bank of America, National Trust and Savings Association and NationsBank, N.A., and GMAC COMMERCIAL CREDIT LLC, a New York limited liability company ("GMAC"), as successor to BNY Financial Corporation, formerly known as Bank of New York Commercial Corporation, (B of A and GMAC and their respective successors and assigns being sometimes hereinafter referred to collectively as the "Lenders" and each of B of A and GMAC and its successors and assigns being sometimes hereinafter referred to individually as a "Lender"), B of A (as successor to BankAmerica Business Credit, Inc. and Bank of America, National Trust and Savings Association), as agent for the Lenders (in such capacity as agent, the "Agent"), LACLEDE STEEL COMPANY, a Delaware corporation, as debtor and debtor-in-possession (the "Parent"), LACLEDE CHAIN MANUFACTURING COMPANY, a Delaware corporation, as debtor and debtor-in-possession ("Laclede Chain"), and LACLEDE MID AMERICA INC., an Indiana corporation, as debtor and debtor-in-possession ("Laclede Mid America") (the Parent, Laclede Chain and Laclede Mid America being sometimes hereinafter referred to collectively as the "Borrowers" and each of the Parent, Laclede Chain and Laclede Mid America being sometimes hereinafter referred to individually as a "Borrower"). W I T N E S S E T H: WHEREAS, the Borrowers, the Lenders and the Agent are parties to a certain Loan and Security Agreement dated as of December 1, 1998, as amended by Amendment No. 1 dated as of December 23, 1998 and Amendment No. 2 dated as of July 1, 1999 (such Loan and Security Agreement, as so amended, the "Loan Agreement," capitalized terms used herein without definition having the meanings given such terms in the Loan Agreement, as amended by this Amendment); and WHEREAS, the Borrowers, the Lenders and the Agent have agreed to amend the Loan Agreement on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises set forth above, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Agent hereby agree as follows: Section 1. Amendment of the Loan Agreement. Subject to the fulfillment of the conditions precedent set forth in Section 4 below, the Loan Agreement is amended as follows: (a) Section 1.1 is amended by deleting the definitions of "Agreed Pre-Petition Outstanding Balance" and "Inventory Sublimit Amount." (b) Section 1.1 is further amended by amending and restating the definition of "Bank of America" as follows: "Bank of America" means Bank of America, National Association, a national banking association, or any successor entity thereto. (c) Section 1.1 is further amended by amending and restating the definition of "Base Rate Loan" as follows: 2 "Base Rate Loan" means a Post-Petition Revolving Loan or Post-Petition Term Loan during any period in which it bears interest at the rate provided in Section 3.1(i). (d) Section 1.1 is further amended by amending and restating the definition of "LIBOR Loan" as follows: "LIBOR Loan" means a Post-Petition Revolving Loan or Post-Petition Term Loan during any period in which it bears interest at the rate provided in Section 3.1(ii). (e) Section 1.1 is further amended by amending and restating clause (a) of the definition of "Maximum Revolver Amount" as follows: (a) the lesser of (i) the Revolver Facility minus the amount of Term Loans outstanding at such time and the amount of any Pre-Petition Obligations outstanding at such time; or (ii) (A) eighty-five percent (85.0%) of the Net Amount of the Eligible Accounts; plus (B) the lesser of (1) sixty-five percent (65.0%) of the value of Net Eligible Inventory; and (2) $38,500,000; provided, that the amount of Revolving Loans based upon Eligible Inventory consisting of supplies shall be limited to the Supplies Inventory Sublimit Amount; plus (C) the amount of the Additional Facility at such time minus (D) the amount of Pre-Petition Revolving Loans outstanding at such time; (f) Section 1.1 is further amended by adding the following definitions in alphabetical order: "Post-Petition Term Loans" means Term Loans made pursuant to this Agreement. "Pre-Petition Term Loans" means Term Loans made pursuant to the Original Agreement. "Supplies Inventory Sublimit Amount" means the amount set forth below for the period indicated:
Period Amount ------ ------ Effective date of Amendment No. 3 hereto through December 31, 1999 $ 6,000,000 January 2000 6,000,000 February 2000 5,750,000 March 2000 5,500,000 April 2000 5,250,000 May 2000 5,000,000 June 2000 4,750,000
In determining the Eligibility Inventory that is subject to the Supplies Inventory Sublimit Amount, zinc and pipe couplings will be treated as raw materials rather than supplies. (g) Section 1.1 is further amended by amending and restating the definition of "Stated Termination Date" as follows: 3 "Stated Termination Date" means June 30, 2000. (h) Section 1.1 is further amended by amending and restating the definition of "Term Loans" as follows: "Term Loans" means, collectively, Pre-Petition Term Loans and Post-Petition Term Loans. (i) Section 3.1 is amended and restated as follows: 3.1 Interest Rates. All outstanding Post-Petition Obligations shall bear interest on the unpaid principal amount thereof (including, to the extent permitted by law, on interest thereon not paid when due) from the date made until paid in full in cash at a rate determined by reference to the Base Rate or the LIBO Rate and Sections 3.1(i) or (ii), as applicable, but not to exceed the Maximum Rate described in Section 3.4. Subject to the provisions of Section 3.2, any of the Post-Petition Revolving Loans or Post-Petition Term Loans may be converted into, or continued as, Base Rate Loans or LIBOR Loans in the manner provided in Section 3.2. If at any time Post-Petition Revolving Loans or Post-Petition Term Loans are outstanding with respect to which notice has not been delivered to the Agent in accordance with the terms of this Agreement specifying the basis for determining the interest rate applicable thereto, then those Post-Petition Revolving Loans or Post-Petition Term Loans shall be Base Rate Loans and shall bear interest at a rate determined by reference to the Base Rate until notice to the contrary has been given to the Agent and such notice has become effective. Except as otherwise provided herein, the outstanding Post-Petition Obligations shall bear interest as follows: (i) For all Post-Petition Revolving Loans, Post-Petition Term Loans and other Post-Petition Obligations which are not LIBOR Loans, then at a fluctuating per annum rate to two percent (2.00%) plus the Base Rate; (ii) For all Post-Petition Revolving Loans and Post-Petition Term Loans which are LIBOR Loans, then at a per annum rate equal to four percent (4.00%) plus the LIBO Rate determined for the applicable Interest Period. Each change in the Base Rate shall be reflected in the interest rate described in (i) above as of the effective date of such change. All interest charges shall be computed on the basis of a year of 360 days and actual days elapsed. Except as otherwise provided herein, (a) interest accrued on each LIBOR Loan shall be payable in arrears on the first day of each month hereafter, and (b) interest accrued on the Base Rate Loans will be payable in arrears on the first day of each month hereafter. (j) Subsection (a) of Section 3.2 is amended and restated as follows: (a) Subject to the provisions of Section 3.3, (i) the Borrowers shall have the option to convert all or any part of the outstanding Post-Petition Revolving Loans or Post-Petition Term Loans, in a minimum amount of $5,000,000 and integral multiples of $5,000,000 in excess of that amount, from Base Rate Loans to LIBOR Loans at any time; (ii) the Borrowers shall have the option to convert all or any part of the outstanding Post-Petition Revolving Loans or Post-Petition Term Loans from LIBOR Loans to Base Rate Loans on the expiration of the Interest Period applicable thereto; and (iii) the Borrowers shall have the option, on the expiration of the Interest Period applicable to any outstanding LIBOR Loan, to continue all or any portion of such LIBOR Loan equal to $5,000,000 and integral multiples of $5,000,000 in excess of that amount, as a LIBOR Loan; provided, however, that no outstanding Loans may be converted into or continued as LIBOR Loans when any Default or Event of Default has occurred and is continuing. Any 4 conversion or continuation made with respect to less than the entire outstanding balance of the Post-Petition Revolving Loans or Post-Petition Term Loans must be applied pro rata to the Revolving Loans or Term Loans, as applicable, according to the outstanding principal balance of each Revolving Loan or each Term Loan. (k) Section 4.2 is amended and restated as follows: 4.2 Scheduled Payments and Mandatory Prepayments of the Term Loans. The Borrowers shall make monthly principal payments on the Post-Petition Term Loans in the aggregate amount of $70,000, due and payable on the first day of each calendar month, commencing on January 1, 2000, until the earlier of (a) the Stated Termination Date, or (b) the payment in full of the Post-Petition Term Loans. In addition, prepayments on the Term Loans shall be required to be made as provided in Sections 5.11(c), 8.5(c), 8.6(b) and 8.9(b). In addition, after the Additional Facility has been reduced to zero, (1) if any amounts are received with respect to items (a), (b), or (f) on Exhibit D, then 50% of such amounts shall be applied to the prepayment of the Term Loans, applying such amounts ratably to the installments of the Term Loans in the inverse order of maturity, and (2) if any Net Proceeds of the Electrode Settlement are received such that the amount of all Net Proceeds of the Electrode Settlement at such time is in excess of $2,500,000, then 100% of such excess Net Proceeds shall be applied to the prepayment of the Term Loans, applying such amounts ratably to the installments of the Term Loans in the inverse order of maturity. (l) Section 4.5 is amended by amending and restating clause "second" as follows: second, from and after the entry of the Final Order, through and including December 31, 1999, to make Adequate Protection Payments; (m) Section 4.5 is further amended by amending and restating clause "fourth" as follows: fourth, until the outstanding Pre-Petition Obligations have been paid in full, to pay the principal of the Pre-Petition Revolving Loans; (n) The last sentence of Section 8.9(b) is amended and restated as follows: Upon any such sale or other disposition, the entire amount of Net Proceeds shall be applied on the date of such sale or disposition to the repayment of the Term Loans, and if the Term Loans have been repaid in full, to any other Post-Petition Obligations then outstanding. (o) Section 8.24 is amended and restated as follows: 8.24 Cash Available for Fixed Charges. The Borrowers will maintain Cash Available for Fixed Charges, determined as of the end of each period listed below for the period indicated, of not less than the following:
Cash Available for Period Fixed Charges ------ ------------- Ten month period ending 9/30/99 $ (100,000) Thirteen month period ending 12/31/99 $ 1,400,000
5
Cash Available for Period Fixed Charges ------ ------------- Sixteen month period ending 3/31/00 $ 2,100,000 Nineteen month period ending 6/30/00 $ 2,900,000
In determining Cash Available for Fixed Charges, non-cash pension expense other than service costs will not be deducted from net earnings. (p) Section 8.25 is amended and restated as follows: 8.25 Direct Contribution. The Direct Contribution of the Alton Steel Operations will not be less than the following amounts for the following periods:
Period Amount ------ ------ Nine months ending 9/30/99 $ (1,500,000) Twelve months ending 12/31/99 $ (1,700,000) Fifteen months ending 3/31/00 $ 1,000,000 Eighteen months ending 6/30/00 $ 1,500,000
In determining Direct Contribution, non-cash pension expense other than service costs will not be deducted from net income. (q) Section 13.11 is amended to delete the wire transfer instructions for NB, and Section 14.7 is amended to delete the address provision for NB. Section 2. Bank of America Reorganization. As a result of the distribution of the assets of BankAmerica Business Credit, Inc. to Bank of America National Trust and Savings Association (the name of which was subsequently changed to Bank of America, National Association), and the merger of NationsBank, N.A. with and into Bank of America, National Association with the surviving entity in such merger being Bank of America, National Association, all references to BankAmerica Business Credit, Inc., BABC, Bank of America National Trust and Savings Association, Bank of America, NationsBank, N.A. and NB contained in the Loan Agreement shall hereafter be deemed to be references to Bank of America, National Association. Section 3. Pre-Petition Revolving Loans, Pre-Petition Term Loans and Adequate Protection Payments. The Agent, the Lenders and the Borrowers hereby agree that on the date upon which this Amendment shall become effective, the Borrowers shall borrow (a) Post-Petition Revolving Loans to repay in full the Pre-Petition Revolving Loans, and (b) Post-Petition Term Loans to repay in full the Pre-Petition Term Loans, so that as of such date, the balance of the Pre-Petition Obligations shall be zero, and the Borrowers hereby direct the Lenders to advance such Post-Petition Revolving Loans and Post-Petition Term Loans on such effective date. In addition, the Agent, the Lenders and the Borrowers agree that any Adequate Protection Payments received by the Agent or the Lenders pursuant to the Loan Agreement shall be applied first, to pay any interest due on the Pre-Petition Obligations, including interest accrued after the Petition Date at the rates set forth under the Loan Agreement and second, to reduce the principal amount due on the Term Loans. The Borrowers shall make the final Adequate Protection Payment on December 31, 1999, after which date the Borrowers shall not be required to make any further Adequate Protection Payments; provided, that the right of the Borrowers to cease making Adequate Protection Payments is without prejudice to, and does not constitute a waiver of, expressly or implicitly, 6 the right of the Lenders hereafter to request additional adequate protection of their interests in the Collateral or relief from or modification of the automatic stay under Section 362 of the Bankruptcy Code. The Borrowers shall make monthly principal payments on the Post-Petition Term Loans in the aggregate amount of $70,000, due and payable on the first day of each calendar month, commencing on January 1, 2000, until the earlier of (a) the Stated Termination Date, or (b) the payment in full of the Post-Petition Term Loans. Section 4. Conditions to Amendment. This Amendment shall become effective upon (a) the receipt by the Agent by facsimile transmission of a counterpart of this Amendment executed by each Borrower and each Lender, and execution of this Amendment by the Agent (provided, that each Borrower and each Lender shall promptly execute six applicable signature pages hereof and deliver such pages to the Agent), and (b) entry by the Bankruptcy Court of a final order acceptable to the Agent approving the terms hereof, and such order being in full force and effect and (unless waived by the Agent) not subject to reversal, stay, modification, amendment or appeal. Section 5. Representations and Warranties. Each Borrower hereby represents and warrants that (i) this Amendment constitutes a legal, valid and binding obligation of such Borrower, enforceable against such Borrower in accordance with its terms, (ii) the representations and warranties contained in the Loan Agreement are correct in all material respects as though made on and as of the date of this Amendment, and (iii) no Event of Default has occurred and is continuing. Section 6. Reference to and Effect on the Loan Agreement. (a) Upon the effectiveness of this Amendment, each reference in the Loan Agreement to "this Agreement", "hereunder", "hereof", "herein", or words of like import shall mean and be a reference to the Loan Agreement, as amended hereby, and each reference to the Loan Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Loan Agreement shall mean and be a reference to the Loan Agreement, as amended hereby. (b) Except as specifically amended above, the Loan Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent or the Lenders under the Loan Agreement, nor constitute a waiver of any provision of the Loan Agreement, except as specifically set forth herein. Section 7. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. Section 8. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws (as opposed to the conflicts of laws provisions) of the State of Illinois. Section 9. Section Titles. The section titles contained in this Amendment are and shall be without substance, meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 7 Section 10. Parties, Successors and Assigns. This Amendment shall be binding upon and shall inure to the benefit of the Borrowers, the Agent, each Lender, and their respective successors and assigns. Section 11. Severability. To the extent any provision of this Amendment is not enforceable under applicable law, such provision shall be deemed null and void and shall have no effect on the remaining portions of the Amendment. Section 12. Construction of Amendment. Each party hereto has cooperated in the drafting and preparation of this Amendment and, as a result, this Amendment shall not be construed against any party. This Amendment may be amended or modified only by a written agreement signed by the parties hereto. This Amendment may be executed in counterparts, each of which when so executed and delivered shall be deemed an original but all such counterparts together shall constitute one and the same instrument. 8 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of December 17, 1999. LACLEDE STEEL COMPANY, as Debtor and Debtor-in-Possession By:_______________________________ Vice President LACLEDE CHAIN MANUFACTURING COMPANY, as Debtor and Debtor-in-Possession By:________________________________ Vice President LACLEDE MID AMERICA INC., as Debtor and Debtor-in-Possession 9 By:________________________________ Vice President BANK OF AMERICA, NATIONAL ASSOCIATION, (as successor to BankAmerica Business Credit, Inc. and Bank of America National Trust and Savings Association), as the Agent By:________________________________ Vice President BANK OF AMERICA, NATIONAL ASSOCIATION, (as successor to BankAmerica Business Credit, Inc., Bank of America National Trust and Savings Association and NationsBank, N.A.), as a Lender By:________________________________ Vice President GMAC COMMERCIAL CREDIT LLC, (as successor to BNY Financial Corporation, formerly known as The Bank of New York Commercial Corporation), as a Lender By:________________________________ Vice President EX-10.(C) 3 RESTATED EMPLOYMENT AGREEMENT 1 EXHIBIT (10)(c) AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and entered into as of the 13th day of January, 1999, by and between LACLEDE STEEL COMPANY, debtor in possession, a Delaware corporation ("Employer"), and MICHAEL H. LANE ("Employee"). WHEREAS, Employee and Employer previously entered into an employment agreement as of the 30th day of July, 1996 which was further amended on March 24, 1998 and July 29, 1998 (the "Original Employment Agreement"); and WHEREAS, Employee and Employer desire to amend and restate the Original Employment Agreement in its entirety, pursuant to this Amended and Restated Employment Agreement; and WHEREAS, Employee desires to be employed by Employer and Employer desires to employ Employee under the terms and conditions set forth in this Amended and Restated Employment Agreement; and WHEREAS, it is Employer's intention to employ Employee upon the terms and conditions herein, which recognize and compensate Employee for the obligations of Employee undertaken hereunder, including specifically, but not by way of limitation, the agreement of Employee not to compete with the business of Employer, as provided in paragraph 9(b) (see page 8), for the period provided in paragraph 9(a) upon the termination of Employee's employment by Employer for any reason; it being understood and agreed that Employee is employed by Employer to protect and expand the business of Employer; NOW, THEREFORE, in consideration of the foregoing and the promises and agreements herein contained, the parties agree as follows: 1. Employment. Employer hereby employs Employee, and Employee hereby accepts such employment from Employer upon the terms and conditions hereinafter set forth. This Amended and Restated Employment Agreement supersedes the Original Employment Agreement. 2 2. Term of Employment. The term of Employee's employment under this Agreement shall be for the period commencing January 13, 1999, and continuing through December 31, 2000. Subsequent to such term this Agreement shall continue in full force and effect until either party shall give ninety (90) days written notice of termination, in which case this Agreement shall terminate on the ninetieth (90th) day following the giving of such notice to the other party. In addition, this Agreement shall terminate on the occurrence of any of the following events: (a) Whenever Employer and Employee shall mutually agree in writing to terminate Employee's employment by Employer; (b) Upon the death of Employee; (c) For "cause," which shall mean Employee's dishonesty or unlawful acts committed in connection with the business of Employer, and which results in substantial gain or profit to Employee. (d) At Employer's option and by action of Employer's Board of Directors on thirty (30) days' written notice in the event of Employee's Disability (defined as the failure substantially to discharge Employee's duties as defined under this Agreement for ninety (90) consecutive days or one hundred twenty (120) days (whether or not consecutive) in any twelve (12) month period, as a result of an injury, disease, sickness or other physical or mental incapacity). A determination of Employee's Disability shall be made by a qualified medical doctor licensed to practice in the State of Missouri chosen by Employer subject to Employee's approval, which approval shall not be unreasonably withheld. Employee shall consent to be examined by Employer's medical doctor and shall consent to allow Employee's medical doctor to discuss Employee's medical condition with Employer. Notwithstanding anything to the contrary contained herein, Employee's Disability shall not be deemed to have commenced until full coverage with respect to such Disability shall have been approved by Employer's disability insurance carrier and payment under Employer's group disability policy for such Disability shall have commenced. 3. Title and Duties of Employee. Employee's title shall be Executive Vice President and Chief Financial Officer. During Employee's employment by Employer, Employee shall serve Employer to the best of Employee's ability and shall perform such duties as are typically performed by the Chief 3 Financial Officer of Employer. Employee agrees to devote Employee's time and efforts to the business of Employer (except for usual vacations and reasonable time for attention to personal affairs so long as Employee's performance hereunder is not adversely affected thereby), and to be loyal and faithful at all times, constantly endeavoring to improve Employee's ability and knowledge of the business of Employer in an effort to increase the value of Employee's services for the mutual benefit of Employee and Employer. 4. Compensation and Benefits Other than Life Insurance. (a) Employer agrees to pay Employee for Employee's services during the term of Employee's employment hereunder. Employee's base salary shall be the greater of (i) an annual rate of Two Hundred Forty-Three Thousand Five Hundred Dollars ($243,500.00) or (ii) the highest annual base salary authorized by the Board of Directors after the date hereof. Employee's base salary shall be due and payable in twelve (12) equal monthly installments. Additionally, during the term of Employee's employment by Employer hereunder, Employee's compensation shall be reviewed and may be increased and/or Employee may be paid additional or special compensation including without limitation stock options, stock appreciation rights and other incentive compensation, or bonuses (based on the earnings of Employer, the performance of Employee or otherwise) from time to time by the mutual agreement of Employee and Employer, as determined by the Board of Directors of Employer. In addition, during the term of this Agreement, Employee shall receive such fringe benefits as are made available by Employer from time to time to other employees of Employer at Employee's level of employment; provided however, that benefits paid to Employee in all events shall include Employee's leased automobile, Employee's tax assistance program and Employee's health and disability insurance benefits. (b) In the event of the termination of Employee's employment either (i) by Employee for any reason including death or Disability, or (ii) by Employer without "cause" (as defined in paragraph 2 herein), Employee shall be paid incentive compensation for the fiscal year in which such termination occurred in an amount equal to the product of (a) the amount of incentive compensation to which he would have been entitled for such fiscal year had there been no termination of employment and 4 (b) a fraction, the numerator of which is the number of days of such fiscal year in which Employee remained in the employment of Employer and the denominator of which is 365. (c) After Employee's termination of employment Employee shall participate in the Laclede Retired Salaried Employee Medical Plan, as such plan may be amended by Employer or any replacement plan as may exist from time to time. (d) After Employee's termination of employment medical benefits now payable for the benefit of Employee's dependent daughter, Kelly Lane, under the Laclede Salaried Employee Medical Plan, as referenced in the attached letter from General American Life Insurance Company, shall be provided under the Laclede Retired Salaried Employee Medical Plan, as such plan may be amended by Employer or any replacement plan as may exist from time to time. (e) Notwithstanding anything contained in Employee's Key Employee Retirement Agreement with Employer (Employee's "KERP") or this Agreement, Employer and Employee agree that on the first business day after Employee ceases for any reason to be a full time employee of Employer (Employee's "KERP Payment Date") Employer shall authorize in writing the Trustee of Employee's KERP to pay to Employee in a lump sum in kind all amounts owed to Employee pursuant to Employee's KERP. Until Employee's KERP Payment Date, Employee shall be considered an active employee of Employer. 5. Severance Payment. If (i) Employee remains in the employ of Employer through December 31, 2000, (ii) Employer terminates Employee's employment without cause (as defined in paragraph 2(c) herein), or (iii) Employer, without Employee's written consent, reduces Employee's responsibility or changes Employee's title, then in addition to all other amounts due Employee, whether under this Agreement or otherwise, Employer shall pay to Employee as severance in a lump sum an amount equal to Employee's annual base salary as defined in paragraph 4(a) herein. Such amount shall be paid on Employee's last day of employment with Employer. 6. Life Insurance Benefits. (a) During the term of this Agreement, Employer shall be obligated to keep in force life insurance on the life of Employee in the amount of Six Hundred Thousand Dollars 5 ($600,000.00) which will consist of permanent insurance on the life of Employee owned by Employee or his designee. (b) In the event of the termination of Employee's employment either (i) by Employee for any reason, or (ii) by Employer without "cause" (as defined in paragraph 2(c) herein), Employer agrees to keep in force such permanent life insurance set forth in subparagraph (a) of this paragraph 6 for the duration of Employee's life. Employer may fulfill this obligation by satisfying the premium requirement so that such permanent insurance is fully paid under the terms of such permanent insurance policy. Employer's obligation to pay permanent life insurance premiums under this subparagraph (b) will survive the term of this Agreement. (c) In the event of the termination of Employee's employment by Employer for "cause" (as defined in paragraph 2(c) herein), then Employer's obligation to pay premiums under this paragraph 6 will cease. (d) Employer agrees to reimburse Employee for any tax due on the annual permanent insurance premium paid by Employer. (e) The amount of insurance described in subparagraph (a) may be increased by the Board of Directors. 7. Termination. In the event of the termination of Employee's employment by Employer, without "cause" (as defined in paragraph 2(c) herein), then, in lieu of any further salary payment pursuant to paragraph 4(a) herein, Employer agrees to pay Employee for the remaining term of this Agreement at an annual rate equal to the average of Employee's "compensation" for the three fiscal years preceding the year of such termination. For this purpose the term "compensation" means Employee's base salary in effect for a particular year plus the incentive compensation received by Employee with respect to services rendered in such year whether or not such incentive compensation is actually paid in such year. Amounts described above due Employee under this paragraph 7 shall be due and payable for the duration of the remaining term in equal monthly installments. In addition to the foregoing, Employer shall continue, for the duration of the remaining term, to provide Employee with such additional fringe benefits to which Employee was entitled as of the day immediately prior to the date of such termination. Nothing in this 6 paragraph 7 shall reduce or otherwise effect Employee's right to the benefits set forth in paragraph 4(c), (d) and (e) herein and Employee's severance payment set forth in paragraph 5 herein. 8. Extent of Services. Employee shall devote Employee's time, attention and energy to the business of Employer, and shall not during the term of this Agreement, or any extension hereof, without Employer's consent, be engaged in any other business activity whether or not such business activity is pursued for gain, profit or other pecuniary advantage; but nothing contained herein shall be construed as preventing Employee from investing his assets in such form or manner as will not require any service on the part of Employee in the operation of the affairs of the corporations or other entities in which Employee may invest his assets. 9. Covenants of Employee. (a) During the term of Employee's employment with Employer, and for a period of one (1) year after the termination of such employment, for whatever reason, except for the termination of Employee's employment under circumstances which constitute a violation by Employer of the provisions of this Agreement, Employee covenants and agrees that Employee will not (except as required in Employee's duties to Employer), in any manner directly or indirectly: (i) Disclose or divulge to any person, entity, firm or company whatsoever, or use for Employee's own benefit or the benefit of any other person, entity, firm or company directly or indirectly, in competition with the business of Employer, as the same may exist at the date of such cessation, any proprietary business methods, customer lists, supplier lists, business plans or other information or data of Employer, without regard to whether all of the foregoing matters will otherwise be deemed confidential, material or important, the parties hereto stipulating that as between them, the same are important, material and confidential and greatly affect the effective and successful conduct of the business and the goodwill of Employer, and that any breach of the terms of this subparagraph (i) shall be a material breach of this Agreement; (ii) Solicit, divert, take away or interfere with any of the customers, trade, business, patronage, employees or agents of Employer; 7 (iii) Engage, directly or indirectly, either personally or as an employee, partner, associate, officer, manager, agent, advisor, consultant or otherwise, or by means of any corporate or other entity or device, in any business competitive with the business of Employer. (b) For purposes hereof, a business will be deemed competitive if (i) such business involves the manufacture and sale of steel, or any other business which is competitive, during or as of the date of cessation of Employee's employment, with any business then being conducted by Employer or as to which Employer has at such time formulated definitive plans to enter; and (ii) such business makes substantial sales of products competitive with those of Employer in any of the States of Missouri, Illinois, Indiana, Iowa, Michigan and Ohio. (c) All of the covenants on behalf of Employee contained in this paragraph 0 shall be construed as agreements independent of any other provision of this Agreement, and the existence of any claim or cause of action against Employer, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Employer of these covenants. (d) It is the intention of the parties to restrict the activities of Employee under this paragraph 9 only to the extent necessary for the protection of legitimate business interests of Employer, and the parties specifically covenant and agree that should any of the clauses or provisions set forth herein, under any set of circumstances not now foreseen by the parties, be held by a court of competent jurisdiction to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, then and in that event, it is the intention of the parties hereto that, in lieu of each such clause or provision of this paragraph 9, there shall be substituted or added, and there is hereby substituted or added, terms to such illegal, invalid or unenforceable clause or provision as may be legal, valid and enforceable. 10. Expenses. In addition to compensation paid to Employee under paragraph 4 hereof, during the period of Employee's employment, Employer will pay directly or reimburse Employee for reasonable and necessary expenses incurred by Employee in the interest of the business of Employer. All such expenses paid by Employee will be reimbursed by Employer upon presentation by Employee, from time to time, of an itemized account of such expenditures, accompanied by appropriate receipts or other 8 evidence of payment to the extent necessary to permit the deductibility thereof for Federal income tax purposes. 11. Documents. Employee agrees that all documents, instruments, drawings, plans, contracts, proposals, records, notebooks, invoices, statements and correspondence, including all copies thereof, relating to the business of Employer, other than purely personal documents, shall be the property of Employer; and upon the cessation of Employee's employment with Employer, for whatever reason, all of the same then in Employee's possession, whether prepared by Employee or others, will be left with or immediately delivered to Employer. 12. Remedies. It is agreed that any material breach or evasion of any of the terms of this Agreement by Employee will result in immediate and irreparable injury to Employer and will authorize recourse to injunction and/or specific performance as well as to all other legal or equitable remedies to which Employer may be entitled. No remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy whether given hereunder or not or whether hereafter existing at law or in equity, by statute or otherwise. The election of any one or more remedies by Employer or Employee shall not constitute a waiver of the right to pursue other available remedies at any time or cumulatively from time-to-time. 13. Severability. All agreements and covenants herein contained are severable, and in the event any of them shall be held to be invalid or unenforceable by any court of competent jurisdiction, this Agreement shall continue in full force and effect and, subject to paragraph 9(d) hereof, shall be interpreted as if such invalid agreement or covenant were not contained herein. 14. Waiver or Modification. No amendment, waiver or modification of this Agreement or of any covenant, condition or limitation herein contained shall be valid unless in writing and duly executed by the party to be charged therewith, and no evidence of any amendment, waiver or modification shall be offered or received in evidence in any proceeding, arbitration or litigation between the parties hereto arising out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such amendment, waiver or modification is in writing, duly executed as aforesaid, and the parties further agree that the provisions of this paragraph may not be waived or modified except as 9 herein set forth. Failure of Employee or Employer to exercise or otherwise act with respect to any rights granted hereunder in the event of a breach of any of the terms or conditions hereof by the other party, shall not be construed as a waiver of such breach, nor prevent Employee or Employer from thereafter enforcing strict compliance with any and all of the terms and conditions hereof. 15. Fees and Expenses. If Employee is the prevailing party, Employer shall pay all of Employee's reasonable legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by Employee as a result of (i) Employee's termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment) or (ii) Employee's seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by Employer under which Employee is or may be entitled to receive benefits. 16. Notices. All notices, requests, demands or other communications hereunder ("Notice") shall be in writing and shall be given by registered or certified mail, return receipt requested: if to Employer to: Laclede Steel Company Attn: Thomas E. Brew, Jr. President 15th Floor One Metropolitan Square St. Louis, Missouri 63102 and, if to Employee, to: Michael H. Lane 3708 Sunset Chase St. Louis, Missouri 63127 or to such other addresses as to which the parties hereto give Notice in accordance with this paragraph 16. 16. Construction. This Agreement shall be governed by and construed and interpreted according to the laws of the State of Missouri, notwithstanding the place of execution hereof, nor the performance of any acts in connection herewith or hereunder in any other jurisdiction. For all purposes hereof, reference to Employer shall include each and every subsidiary and affiliated company of Employer. 10 17. Assignability. The services to be performed by Employee hereunder are personal in nature and therefore Employee shall not assign his rights or delegate his obligations under this Agreement, and any attempted or purported assignment or delegation not herein permitted shall be null and void. 18. Successors. Subject to the provisions of paragraph 9, this Agreement shall be binding upon and shall inure to the benefit of Employer and Employee and their respective heirs, executors, administrators, legal representatives, successors and assigns. 19. Prior Employment Agreements. Any prior Employment Agreement between Employer and Employee is hereby terminated by mutual agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ------------------------------ MICHAEL H. LANE "Employee" LACLEDE STEEL COMPANY By____________________________ Thomas E. Brew, Jr, President "Employer" EX-22 4 SUBSIDIARIES OF REGISTRANT 1 EXHIBIT (22) SUBSIDIARIES OF REGISTRANT -------------------------- Laclede Chain Manufacturing Company - wholly-owned. Laclede Mid-America Inc. - 96.66% owned. EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS SEP-30-1999 OCT-01-1998 SEP-30-1999 205 0 40,805 2,849 57,600 99,891 218,327 134,500 190,071 79,415 87,867 0 83 41 (86,110) 190,071 241,582 241,582 224,953 244,433 11,482 150 6,910 (21,243) 110 (21,353) 0 0 0 (21,353) (5.28) (5.28)
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