-----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, DIwDMm7rExJl9xTs+EVruZG7fcwOvZoV4JSBXtKOk6ud1AOG7Ywb2hNUqHQq9l29 qzHrQ0Hk0rwk0OwmM2fUnA== 0000950137-00-005246.txt : 20001218 0000950137-00-005246.hdr.sgml : 20001218 ACCESSION NUMBER: 0000950137-00-005246 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001215 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: 789880 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 c59103e10-k405.txt ANNUAL REPORT 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, 2000 ---------------------- 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 - 2650 - -------------------------------------------------------------------------------- (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 November 27, 2000 the aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $160,000. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- NONE 2 ITEM 1. BUSINESS (a) GENERAL DEVELOPMENT OF BUSINESS Laclede Steel Company and Subsidiaries ("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, 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 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 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. On October 18, 2000 the Company filed a Plan of Reorganization with the Bankruptcy Court and obtained the Court's approval to distribute the Plan, and the related Disclosure Statement, to Creditors, Equity Security Holders and other Parties in Interest. A hearing to consider confirmation of the Plan will be held on December 15, 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 its 97% owned subsidiary, Laclede Mid America, Inc., is an important North American producer of oil tempered wire, which is used for applications such as mechanical springs and overhead garage door springs. With the approval of the Bankruptcy Court the Company has entered into an agreement to sell all the assets of Laclede Mid America to Leggett & Platt Incorporated (See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.) The Company's wholly-owned subsidiary, Laclede Chain Manufacturing Co., manufactures and imports chain products which 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. 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. -2- 3 (b) FINANCIAL INFORMATION The following table sets forth certain financial information relating to the Company's operations:
Fiscal Fiscal Nine-Month Year Ended Year Ended Transition Period Ended September 30, 2000 September 30, 1999 September 30, 1998 ------------------ ------------------ ------------------ (Thousands of Dollars) ---------------------- Net Sales $ 214,615 $ 241,582 $ 232,289 =============== =============== =============== Net Loss $ (12,185) $ (21,353) $ (83,812) =============== =============== =============== Identifiable Assets $ 182,097 $ 190,071 $ 216,191 =============== =============== ===============
(c) DESCRIPTION OF BUSINESS The following table lists the Company's 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 - 10' Hardware Pipe - CW-42 Oil Country - CW-55 Oil Country - A501 Structural 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 Fiscal Transition Period Year Ended Year Ended Ended September 30, 2000 September 30, 1999 September 30, 1998 ------------------ ------------------ ------------------ Product ------- Pipe and Tube 37.2% 34.4% 35.5% Hot Rolled 38.4% 41.1% 44.0% Wire 12.6% 11.1% 11.8% Chain 11.8% 13.4% 8.7% ----- ----- ----- 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. The Company is one of only three full line producers of CBW pipe in the United States. Pipe products have been produced and finished at the Company's Alton, Illinois and Fairless Hills, Pennsylvania Plants, and finished at the Vandalia, Illinois Facility. The Alton Pipe Mill will be shut down by the end of December 2000 and in the future all pipe will be produced at the Fairless Facility. The agreement with the United Steelworkers of America (USWA) to the permanent shut down of the Alton Pipe and Skelp Mills is contingent upon the Company successfully implementing its Plan of Reorganization and exiting bankruptcy. 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 through its 97% owned subsidiary, Laclede Mid America, Inc.. These products include high and low carbon wire, oil-tempered wire, and annealed wire, which are manufactured and finished at the Company's Fremont, Indiana Facility. With the approval of the Bankruptcy Court the Company has entered into an agreement to sell all the assets of Laclede Mid America to Leggett & Platt Incorporated. Chain Products. Laclede Chain Manufacturing Company, the Company's wholly owned subsidiary, produces welded chain and also imports a significant amount of chain for resale. In a normal year, approximately 50% of its annual sales are attributable to sales of anti-skid devices for trucks and automobiles. The balance of the Company's chain products sales are in the hardware and industrial chain business. At September 30, 2000 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. -4- 5 Capital Improvements. The Company has specific future plans for important capital improvements to the steelmaking operations at the Alton Plant. The primary objective of these improvements is 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 presence of extensive sheet capacity in the industry has had and will continue to have a favorable impact on raw material costs of the Company's tubular product competitors. The Company also expects continued competition in its bar product business from low cost domestic producers. Foreign. The Company also faces competition from foreign steel producers. Foreign competition increased in 1998 and early 1999 to unprecedented levels, declining somewhat in 2000. 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. SUSPENSION OF STEEL MAKING OPERATIONS On March 31, 2000, a structural failure occurred at the Company's Melt Shop at its Alton Plant. While the operating furnace and related equipment were not damaged, extensive damage was done to the structure of the building and the surrounding area. In addition, furnace dust (K601), which is regulated as hazardous waste, escaped from collapsed ductwork, but was confined to the site. As a result of this accident, steel production at the Alton Plant was suspended until late July 2000. The suspension of operations only affected the steel production facilities at the Alton Plant. All other operations, including finishing operations at the Alton Plant continued while utilizing existing semi-finished and finished inventories. The Company also purchased semi-finished steel to support its bar and pipe operations. The Company has settled its insurance claim with respect to the accident for $27.5 million, which includes property damage, business interruption and environmental clean-up costs. The clean up has been completed, and the steel production facility recommenced operations July 27, 2000. SALE OF LACLEDE MID AMERICA, INC. The Company has entered into an agreement with Leggett & Platt Incorporated for the sale of the assets of Laclede Mid America for $24.5 million plus the assumption of certain post petition ordinary course of business liabilities. The net proceeds received from the sale of the assets of Laclede Mid America will be used for the benefit of Laclede's future liquidity needs. The purchase price is subject to adjustments in certain circumstances. The Company believes the sale to Leggett & Platt, Inc. will be consummated before December 31, 2000. Three hundred thousand of the purchase price will be held back for one year following closing to secure certain matters per the sale agreement. -5- 6 ALTON PIPE AND SKELP MILLS In August the Company's hourly work force at the Alton and Vandalia Plants approved modifications to the Labor Agreement previously negotiated with the United Steelworkers of America, which includes the shutdown of the Alton Pipe and Skelp Mills and permits the Company to consolidate its pipe-making operations at its Fairless Hills plant. This consolidation of operations, which will affect approximately 100 hourly employees at the Alton Plant, will be completed in December 2000. The agreement with the United Steelworkers of America (USWA) to the permanent shut down of the Alton Pipe and Skelp Mills is contingent upon the Company successfully implementing its Plan of Reorganization and exiting bankruptcy. 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 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 from the Illinois EPA, and has completed the closure of all piles in place. EMPLOYEES As of September 30, 2000, the Company employed approximately 1,150 employees, approximately 200 of whom are classified as management, administrative and sales personnel. Approximately 525 hourly employees at the Alton Plant and 50 employees at the Vandalia Plant are covered by a collective bargaining agreement that expires on October 1, 2003. None of the Company's other employees are covered by a collective bargaining agreement with the USWA. Although as part of its Plan of Reorganization, the Company has entered into a neutrality agreement with the USWA for all of its facilities. 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 and 8-inch bar mill. To improve productivity the Company is utilizing one electric furnace, which reduces production capacity to approximately 580,000 net tons per year. In the future, all pipe will be produced at the Fairless Facility, which is leased from USX Corporation under an agreement that expires September 30, 2001, with an option to renew until September 30, 2006. The Company also has a pipe finishing plant in Vandalia, Illinois and a chain manufacturing plant in Maryville, Missouri. The Company has entered into an agreement to sell its Wire Plant in Fremont, Indiana. (See item 1, Business - Sale of Laclede Mid America) -6- 7 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. 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 14, 2000 there were 476 stockholders of record. . See Item 7 for discussion of the cancellation of equity ownership interests upon the effectiveness of the Plan of Reorganization. MARKET PRICE RANGE 2000 1999 ---- ---- BY QUARTER HIGH LOW HIGH LOW ---------- ---- --- ---- --- First $ 1-3/4 $ 5/16 $ 5/8 $ 5/32 Second 1-5/8 5/8 1/2 7/32 Third 1 3/8 11/16 3/8 Fourth 1/2 9/32 1-7/8 7/16 2000 1999 ---- ---- 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 Fiscal Transition Year Ended Year Ended Period Ended Years Ended December 31 September 30, September 30, September 30 ------------------------ 2000 1999 1998 1997 1996 ------------- ------------- ------------ --------- --------- Net Sales $ 214,615 $ 241,582 $ 232,289 $ 325,029 $ 335,381 Restructuring, Asset Impairment and other Charges (Credits) $ (4,450) $ 7,177 $ 27,646 $ (987) $ 1,559 Net Loss $ (12,185) $ (21,353) $ (83,812) $ (3,007) $ (9,985) Basic and Diluted Net Loss Per Common Share $ (3.00) $ (5.28) $ (20.73) $ (0.83) $ (2.50) Other Financial Data: Total Assets $ 182,097 $ 190,071 $ 216,191 $ 313,820 $ 331,110 Working Capital 14,504 20,476 (78,734) 55,899 62,001 Capital Expenditures 5,463 1,510 3,848 3,016 10,726 Long-Term Debt (Subject to Compromise in 2000 and 1999) 25,990 25,990 -- 109,157 107,889 Stockholders' Equity (Deficit) (89,259) (85,986) (103,019) 21,101 17,245 Stockholders' Equity (Deficit) Per Common Share $ (22.01) $ (21.20) $ (25.40) $ 5.20 $ 4.25 Cash Dividends Per Common Share $ -- $ -- $ -- $ -- $ --
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview 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 filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy 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 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. On October 18, 2000 the Company filed a Plan of Reorganization with the -8- 9 Bankruptcy Court and obtained the Court's approval to distribute the Plan, and the related Disclosure Statement, to Creditors, Equity Security Holders and other Parties in Interest. A hearing to consider confirmation of the Plan will be held on December 15, 2000. The Plan is the result of extensive negotiations among the Company, the Unsecured Creditors' Committee, the United Steelworkers of America, the Pension Benefit Guaranty Corporation ("PBGC"), and their advisors. In general, it provides for the cancellation of Company indebtedness in exchange for new equity interests; the discharge of other prepetition claims; the cancellation of all equity ownership interests existing immediately prior to the effectiveness of the Plan of Reorganization; and the assumption of certain executory contracts and unexpired leases to which the Company is a party. If the Plan is confirmed and consummated in accordance with its terms, substantially all of the common stock and other securities of the Company will initially be owned by prepetition creditors and employees. The Company expects the PBGC to assume its obligations under its defined benefit pension plans for its salaried and hourly employees. The termination of these plans is an integral part of the plan of reorganization, and on November 1, 2000 the Company provided participants in the hourly and salaried pension plans with a notice of its intent to terminate these plans. 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. Pursuant to the provisions of the Bankruptcy Code, the Company continues to incur the cost of the postretirement medical plans. Under the Plan of Reorganization the Company's postretirement medical obligations will continue on a modified basis, reflecting negotiations with the United Steelworkers of America. 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 and, to the extent unpaid, are liabilities not subject to compromise. 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 the banks (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. As of November 30, 2000 the Company had unused availability under the DIP Facility of approximately $4.1 million. The Company's DIP Facility is scheduled to terminate on December 31, 2000. The Company is seeking financing to replace the DIP Facility and provide additional liquidity upon exit from bankruptcy ("exit financing"). A non-binding commitment letter has been signed, but additional lenders must be secured before the loan can be agreed to. At this time there can be no assurance that such financing will be available. In the event such exit financing cannot be secured, the Company may not be able to successfully reorganize. 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 (SOP 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 -9- 10 accounting and business practices have been adopted that are applicable to companies that are operating under Chapter 11. The Company's continued existence is dependent on its ability to achieve future profitable operations, the assumption of the Company's obligations under its defined benefit plans by the PBGC, continued compliance with all debt covenants under the DIP Facility, and obtaining exit financing. 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 also depend upon obtaining adequate exit financing. OPERATING RESULTS 1998 TO 2000 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, 2000 the Company incurred a net loss of $12.2 million. Included in the net loss is $1.4 million for reorganization expenses (primarily professional fees incurred in connection with the bankruptcy proceedings), $4.9 million in non-cash periodic pension costs in excess of current service costs, and $4.5 million in other credits, primarily the insurance recovery recognized with respect to the structural failure at the Alton Melt Shop. 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 that existing pension liabilities will be assumed by the PBGC. In the twelve months ended September 30, 1999 the Company incurred a net loss of $21.4 million. Included in the net loss is accruals of $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. In fiscal 1999 the Company also recorded income of $4.6 million, recognizing settlements of class action lawsuits involving electrode manufacturers. 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. -10- 11 The change in net sales for the last three fiscal periods is analyzed as follows:
(In Thousands) -------------------------------------------------------- Nine-Month Transition Period Ended September 30, 1998 Vs. Twelve months ended September 30, Nine Months Ended -------------------------------- 2000 vs 1999 1999 vs 1998 September 30, 1997 ------------ ------------ ------------------ Decrease in net sales $(26,967) $(70,380) $(13,067) -------- -------- -------- Comprised of: Decrease in volume $(27,839) $(52,151) $ (5,562) Increase (Decrease) in price $ 872 $(18,229) $ (7,505)
In the twelve months ended September 30, 2000 total steel shipments declined by 12.8% compared to the twelve-month period ended September 30, 1999. This was partially related to the suspension of steel operations for approximately four months. Average selling prices for pipe and tubular products increased by 3.5%, while prices for hot rolled and semi-finished products declined by 1.6% and 0.5%, respectively. Shipments of chain products decreased by 14.6% in 2000 over the prior twelve-month period, reflecting lower sales of anti-skid devices as the result of an abnormally warm winter season. Cost of products sold decreased by $18.5 million, or 8.2%, in the year ended September 30, 2000, compared to the preceding twelve months, reflecting the reduction in steel shipments of 12.8%. The effects of lower shipment levels were partially offset by the increased costs for the Company's principal raw material, ferrous scrap, of approximately 21%. 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. Selling, general and administrative expenses decreased by $0.8 million in the year ended September 30, 2000 when compared to the proceeding twelve-month period. 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 continual reduction in -11- 12 salaried employees since early 1998. 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 decreased approximately $0.5 million in the year ended September 30, 2000 when compared to the previous same period for 1999. There was also a decrease in interest expense of approximately $4.1 million in the fiscal 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 97% owned 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 fiscal 2000 the Company completed the installation of an additional oil tempered line, which has increased overall plant capacity by approximately 15%. With the approval of the Bankruptcy Court the Company has entered into an agreement to sell all the assets of Laclede Mid America to Leggett & Platt Incorporated. 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. Due to mild weather in the Northwest during the 1999-2000 winter season, Laclede Chain experienced abnormally low sales of anti-skid devices. Typically, Laclede Chain makes a significant contribution to Company operating results as it did in the year ended September 1999, when traction chain sales in the winter of 1998-1999 were at more normal levels. Under an agreement with USX Corporation the Company leases the Pipe Mill Operations located at the Fairless Works in Bucks County, Pennsylvania. In the future, all pipe will be produced at the Fairless Facility. The Company also operates a tubular finishing plant in Vandalia, Illinois. The Alton Pipe Mill will be shut down by the end of December 2000 and in the future all pipe will be produced at the Fairless Facility. The agreement with the USWA to the permanent shut down of the Alton Pipe and Skelp Mills is contingent upon the Company successfully implementing its Plan of Reorganization and exiting bankruptcy. LIQUIDITY AND CAPITAL RESOURCES For the year ended September 30, 2000 operating activities provided approximately $10.4 million in cash. Cash flow from financing activities used $5.5 million in cash, primarily as the result of a reduction in borrowing under the Company's bank facility. Investing activities used $4.8 million in cash flow in the period, primarily reflecting capital expenditures. At September 30, 2000, $56.4 million in borrowings were outstanding under the Company's bank facility. 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 -12- 13 period. At September 30, 1999, $61.9 million in borrowings were outstanding under the Company's bank facility. 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 and its minimal planned capital expenditures until exit from bankruptcy, which is assumed to occur by December 31, 2000. The Company has filed claims for refunds for its tax years 1995, 1996 and 1998 with respect to the allowance of the carry-back of certain expenses over a period of ten (10) years. The Internal Revenue Service has informed the Company that it disputes such claims. The Company and the Internal Revenue Service have settled this dispute, subject to the entry of an order by the Bankruptcy Court confirming the Plan of Reorganization and acceptance of the settlement by the Joint Congressional Committee on Internal Revenue Taxation. If either of these subsequent events do not occur, then such settlement would be ineffective and the parties would have the rights available to them prior to the settlement. In such case, the Company may owe a material amount of taxes and interest to the Internal Revenue Service. The Company has prepared a plan of reorganization 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. At this time there can be no assurance that such financing will be available. In the event such exit financing cannot be secured, the Company may not be able to successfully reorganize. The Company is seeking financing to replace the DIP Facility and provide additional liquidity upon exit from bankruptcy ("exit financing"). A non-binding commitment letter has been signed, but additional lenders must be secured before the loan can be agreed to. At this time there can be no assurance that such financing will be available. In the event such exit financing cannot be secured, the Company may not be able to successfully reorganize. 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. 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 future pension funding requirements; and statements involving the Company's exit financing. 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 are 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 -13- 14 developments arising from the Chapter 11 proceedings and adverse developments in the timing or results from the Company's current business plan and adverse developments with respect to exit financing. 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 Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments". The Company had no holdings of derivative financial or commodity instruments at September 30, 2000. 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 $56.4 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 21 and 47, respectively. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NONE -14- 15 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 - --------------------------------------------------------- -------------- David A. Higbee, 57 .................................................................................... 2000 President and Chief Executive Officer, (July 2000 - date); President, Sawhill Tubular Division of Armco, (1995 - 2000) Michael H. Lane, 57 .................................................................................... 1997 Executive Vice President, Chief Financial Officer (January 1999 - date); Vice President - Finance, Treasurer and Secretary (1983 - 1999). Wayne P. E. Mang, 63 ................................................................................... 1997 President and Chief Operating Officer, Russel Metals (steel product processor and distributor) (1982 - 1997). Director of Wainbee Holdings, Inc. and Maverick Tube Corporation. Philip R. Morgan, 52 ................................................................................... 1997 President, Chief Executive Officer and Director, Morgan Construction Company (supplier of steel rolling mill technology and equipment) (1986 - date). Robert H. Quenon, 72 ................................................................................... 1992 Mining Consultant (1991 - date); Chairman of the Board, Federal Reserve Bank of St. Louis (1993 - 1995); Chairman (1990 - 1991) and President and Chief Executive Officer (1983 - 1990) of Peabody Holding Company, Inc. (coal mining and sales); Director of Ameren Corporation, and Director of Newmont Mining Corporation. George H. Walker III, 69 ............................................................................... 1990 Chairman of the Board, Stifel Financial Corp. (investment banking firm) and its principal subsidiary, Stifel, Nicolaus & Company, Incorporated (stock brokerage firm) (1979 - date); Director of Laidlaw Corp., Western & Southern Life Insurance Company and Macroeconomic Advisers.
The executive officers of the Company and their ages are as follows: NAME AGE POSITION ---- --- -------- David A. Higbee 57 President and Chief Executive Officer Michael H. Lane 57 Executive Vice President Chief Financial Officer Ralph M. Cassell 57 Vice President James T. Caporaletti 58 Vice President -15- 16 David A. Higbee was named President and Chief Executive Officer in July 2000. Previously he had served as the President of the Sawhill Tubular Division of Armco (currently AK Steel) since 1995. 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. 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, 2000 and the last three fiscal years by those persons who at September 30, 2000 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) - ------------------ ------ ----------- -------- ------------- ------------ David A. Higbee (5) 2000 $ 81,249 $ -- $ -- $ 2,031 President and Chief Executive Officer Thomas E. Brew (6) 2000 $ 530,599 $ -- $ -- $ -- President and Chief 1999 673,373 -- -- -- Executive Officer 1998 (1) 439,808 -- -- -- Michael H. Lane (7) 2000 $ 254,003 $ -- $ 13,319 $ 18,142 Executive Vice President, 1999 243,504 -- 13,188 18,157 Chief Financial Officer 1998 (1) 182,628 -- -- 17,252 1997 243,504 -- 13,101 19,773 James T. Caporaletti (7) 2000 $ 130,008 $30,000 $ -- $ 3,323 Vice President 1999 102,461 -- -- 2,570 1998 (1) 61,304 -- -- 1,463 1997 75,323 -- -- 1,800 Ralph M. Cassell (7) 2000 $ 150,000 $ -- $ -- $ 2,927 Vice President 1999 148,334 -- -- 3,008 1998 (1) 91,170 -- -- 3,332 1997 111,000 28,860 -- 3,733
-16- 17 (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. Mr. Caporaletti's 2000 bonus payment was related to his continuing employment during bankruptcy. (3) Amounts in this column relate to tax payments on permanent life insurance premiums and tax assistance. 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) David A. Higbee became President and Chief Executive Officer in July 2000. Mr. Higbee has entered into an employment agreement with the Company, see "Employment Contracts" below. (6) 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. Mr. Brew resigned in July 2000. (7) Mr. Lane has entered into an amendment to his employment agreement with the Company; and Mr. Cassell and Caporaletti have entered into retention agreements with the Company, see "Employment Contracts" below. 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 PBGC will 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 maintained 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 65% 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. 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 -17- 18 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. Mr. Lane is the only remaining key employee participating in the Supplement Plan. He has accumulated 28 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) LACLEDE's Key Employee Incentive Retention Plan; (b) the assumption of the Consulting Agreement with Argus Management Corporation and Thomas E. Brew, Jr., then President of the Company; and (c) the assumption of the Amended and Restated Employment Agreements between LACLEDE, Michael H. Lane and Larry J. Schnurbusch. Mr. Schnurbusch retired from LACLEDE during 1999 and, as a result his Restated Employment Agreement terminated. Present participants in the Key Employee Incentive Retention Plan are Michael H. Lane, Executive Vice President of LACLEDE and Vice President of each of LACLEDE CHAIN AND LACLEDE MID-AMERICA and Ralph M. Cassell, Vice President of LACLEDE and President of each of LACLEDE CHAIN AND LACLEDE MID-AMERICA. This plan calls for the payment of one year's salary as a retention bonus to each of the covered individuals upon successful confirmation of a Plan of Reorganization by the Bankruptcy Court. Payment is due upon confirmation. There are no interim payments and no payment is made to a participant (i) unless he remains in the employ of LACLEDE, or in Mr. Cassell's case, at least one of its subsidiaries, on the date of confirmation or (ii) if the employee is terminated with cause prior to that time. If LACLEDE, or in Mr. Cassell's case, LACLEDE CHAIN and LACLEDE MID-AMERICA, 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 LACLEDE currently would be $275,000. Mr. Cassell's bonus upon a successful reorganization of LACLEDE CHAIN or LACLEDE MID-AMERICA would currently be $150,000. On June 27, 2000 the Bankruptcy Court approved an Employment Agreement for David A. Higbee, who succeeded Mr. Brew as President and Chief Executive Officer, an Amended Employment for Mr. Lane, and Retention Agreements for Mr. Cassell and James T. Caporaletti, Vice President and General Manager-Tubular Products. -18- 19 Mr. Higbee's agreement is for a period of one year, which on confirmation increases to three years. Mr. Higbee's annual salary is $325,000 under the agreement together with a performance bonus of 25% to 30% of that compensation on his first anniversary of employment based on objectives and goals to be set by the Board of Directors. Thereafter, the agreement includes a bonus opportunity of 30% to 40% of base compensation based upon a strategic plan setting specific goals and objectives, which is approved by the Board of Directors. In addition, Mr. Higbee's agreement calls for certain other benefits, including a stock purchase opportunity. Mr. Higbee's agreement is subject to certain non-competition and non-solicitation covenants. Mr. Lane's agreement with LACLEDE was amended to include LACLEDE CHAIN and LACLEDE MID-AMERICA in recognition of the fact that he serves as Chief Financial Officer as well as holds a number of other responsibilities for each of those companies. The agreement is for the period ending December 31, 2000 and upon confirmation of a Plan of Reorganization is automatically extended through December 31, 2001. Thereafter, it continues until any party gives ninety days written notice of termination. Under the amended agreement Mr. Lane's annual salary is $275,000 together with a bonus opportunity commencing with the fiscal year beginning October 1, 2000 of 20% to 30% of that compensation based upon a strategic plan setting specific goals and objectives, which is approved by the Board of Directors. In addition, Mr. Lane's agreement calls for certain other benefits and for a severance payment if Mr. Lane remains with any of LACLEDE, LACLEDE CHAIN or LACLEDE MID-AMERICA for at least ninety days subsequent to emergence from bankruptcy. Mr. Lane's agreement is subject to certain non-competition and non-solicitation covenants. Mr. Cassell's Retention Agreement with LACLEDE CHAIN and LACLEDE MID-AMERICA entitles him to a Retention bonus equal to one year's salary, currently $150,000, if Mr. Cassell is terminated, other than for cause, within one year following confirmation of a Plan of Reorganization or conversion of the Bankruptcy to a Chapter 7 Liquidation. In addition, the payment would be due Mr. Cassell under certain other circumstances, such as reduction in his base salary, benefits, responsibilities or relocation without his consent. Mr. Caporaletti's Retention Agreement with LACLEDE entitles him to a Retention bonus equal to one year's salary, currently $130,000, if Mr. Caporaletti is terminated, other than for cause, within one year following confirmation of a Plan of Reorganization or conversion of the Bankruptcy to a Chapter 7 Liquidation. In addition, the payment would be due Mr. Caporaletti under certain other circumstances, such as reduction in his base salary, benefits or responsibilities. 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 November 10, 2000. See Item 7 for discussion of the cancellation of equity ownership interests upon the effectiveness of the Plan of Reorganization. -19- 20
Shares of Series Shares of A Preferred Common Stock 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 * -- David A. Higbee 4,000 * -- Philip R. Morgan 1,000 * -- Robert H. Quenon 300 * -- George H. Walker III(3) 1,000 * -- All Directors and Executive 17,050 * 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. (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. -20- 21 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, 2000 and 1999 ................................................... 24-25 Consolidated Statements of Operations for the fiscal years ended September 30, 2000 and 1999, and the nine-month transition period ended September 30, 1998 ............................... 26 Consolidated Statements of Stockholders' Deficit for the fiscal years ended September 30, 2000 and 1999, and the nine-month transition period ended September 30, 1998 .................................... 27 Consolidated Statements of Cash Flows for the years ended September 30, 2000 and 1999, and the nine-month transition period ended September 30, 1998 ...................................................... 28 Notes to Consolidated Financial Statements ................................................................. 29-46 Independent Auditors' Report ............................................................................... 47-48
(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.) -21- 22 (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. (Incorporated by reference to Exhibit (4)(d) in Registrant's Quarterly Report on Form 10-K for the period ended September 30, 1999.) (4) (e) Fourth Amendment to Postpetition Loan and Security Agreement dated June 27, 2000. (Incorporated by reference to Exhibit (4)(e) in Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000.) (4) (f) Fifth Amendment to Postpetition Loan and Security Agreement dated October 3, 2000. (4) (g) 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) 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.) (10) (d) 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) (e) 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.) (10) (f) Restated Employment Agreement dated June 1, 2000 between the Company and Michael H. Lane. (Incorporated by reference to Exhibit (10)(a) of Registrant's Quarterly Report on Form 10-Q dated June 30, 2000.) (10) (g) Employment Agreement dated July 1, 2000 between the Company and David A. Higbee. (Incorporated by reference to Exhibit (10)(b) of Registrant's Quarterly Report on Form 10-Q dated June 30, 2000.) -22- 23 (10) (h) Executive Retention Agreements dated July 1, 2000 between the Company and Ralph M. Cassell and James Caporaletti. (Incorporated by reference to Exhibit (10)(c) of Registrant's Quarterly Report on Form 10-Q dated June 30, 2000.) (22) Subsidiaries of Registrant. (27) Financial Data Schedule. 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 No reports on Form 8-K were filed by the Registrant during the three months ended September 30, 2000. -23- 24 LACLEDE STEEL COMPANY AND SUBSIDIARIES (DEBTORS-IN-POSSESSION) CONSOLIDATED BALANCE SHEETS At September 30, 2000 and September 30, 1999 (In Thousands, Except Share Amounts) - --------------------------------------------------------------------------------
ASSETS 2000 1999 -------- --------- CURRENT ASSETS: Cash $ 205 $ 205 Accounts receivable - less allowances of $2,191 in 2000 and $2,849 in 1999 28,739 37,956 Prepaid expenses 4,559 4,130 Inventories: Finished 35,385 34,298 Semi-finished 9,407 7,082 Raw materials 3,931 4,627 Supplies 11,150 11,593 -------- -------- Total inventories 59,873 57,600 -------- -------- Total current assets 93,376 99,891 -------- -------- OTHER NON-CURRENT ASSETS 6,539 6,353 -------- -------- PLANT AND EQUIPMENT - At cost: Land 1,168 1,253 Buildings 24,928 26,418 Machinery and equipment 195,137 190,656 -------- -------- 221,233 218,327 Less accumulated depreciation 139,051 134,500 -------- -------- Total plant and equipment 82,182 83,827 -------- -------- TOTAL $182,097 $190,071 ======== ========
See notes to consolidated financial statements. -24- 25
LIABILITIES AND STOCKHOLDERS' DEFICIT 2000 1999 --------- --------- CURRENT LIABILITIES: Accounts payable $ 14,149 $ 10,421 Accrued compensation 4,310 4,162 Current portion of long-term debt 56,354 61,877 Other 4,059 2,955 --------- --------- Total current liabilities 78,872 79,415 --------- --------- NON-CURRENT LIABILITIES: Income tax contingency 7,061 5,759 Other 710 633 --------- --------- Total non-current liabilities 7,771 6,392 --------- --------- LIABILITIES SUBJECT TO COMPROMISE: Accounts payable and accrued expenses 50,220 50,294 Accrued costs of pension plans 37,496 40,341 Accrued postretirement medical benefits 68,113 70,626 Long-term debt 25,990 25,990 Other 2,894 2,999 --------- --------- Total liabilities subject to compromise 184,713 190,250 --------- --------- 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 59,420 Accumulated deficit (132,657) (120,472) Accumulated other comprehensive loss (16,146) (25,058) --------- --------- Total stockholders' deficit (89,259) (85,986) --------- --------- TOTAL $ 182,097 $ 190,071 ========= =========
See notes to consolidated financial statements. -25- 26 LACLEDE STEEL COMPANY AND SUBSIDIARIES (DEBTORS-IN-POSSESSION) CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FISCAL YEAR ENDED SEPTEMBER 30, 2000 AND 1999, AND THE NINE-MONTH TRANSITION PERIOD ENDED SEPTEMBER 30, 1998 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 1999 1998 (nine months) --------- --------- ------------ NET SALES $ 214,615 $ 241,582 $ 232,289 --------- --------- --------- COSTS AND EXPENSES: Cost of products sold 206,430 224,953 233,585 --------- --------- --------- Selling, general and administrative expenses 10,648 11,482 10,466 --------- --------- --------- Depreciation 6,166 6,251 5,081 --------- --------- --------- Interest expense (contractual interest - $7,816 in 2000 and $8,365 in 1999 ) 6,361 6,910 8,183 --------- --------- Asset impairments and other charges (credits) (4,450) 7,177 27,646 --------- --------- --------- Total costs and expenses 225,155 256,773 284,961 --------- --------- --------- Reorganization costs 1,420 6,052 -- --------- --------- --------- LOSS BEFORE INCOME TAXES (11,960) (21,243) (52,672) PROVISION FOR INCOME TAXES 225 110 31,140 --------- --------- --------- NET LOSS (12,185) (21,353) (83,812) PREFERRED STOCK DIVIDEND REQUIREMENT -- (62) (281) --------- --------- --------- (contractual dividends - $375 in 2000 and 1999) NET LOSS AVAILABLE TO COMMON STOCKHOLDERS (12,185) (21,415) (84,093) OTHER COMPREHENSIVE INCOME (LOSS) NET OF INCOME TAXES: Minimum pension liability adjustment 8,912 38,448 (40,027) --------- --------- --------- COMPREHENSIVE INCOME (LOSS) $ (3,273) $ 17,033 $(124,120) ========= ========= ========= BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (3.00) $ (5.28) $ (20.73) ========= ========= =========
See notes to consolidated financial statements. -26- 27 LACLEDE STEEL COMPANY AND SUBSIDIARIES (DEBTORS-IN-POSSESSION) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT FISCAL YEAR ENDED SEPTEMBER 30, 2000 AND 1999, AND THE NINE-MONTH TRANSITION PERIOD ENDED SEPTEMBER 30, 1998 (IN THOUSANDS, EXCEPT SHARE DATA) - --------------------------------------------------------------------------------
2000 1999 1998 --------- --------- --------- 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 59,420 59,482 59,763 Dividend requirement on convertible preferred stock -- (62) (281) --------- --------- --------- Ending balance 59,420 59,420 59,482 --------- --------- --------- ACCUMULATED DEFICIT: Beginning balance (120,472) (99,119) (15,307) Net loss (12,185) (21,353) (83,812) --------- --------- --------- Ending balance (132,657) (120,472) (99,119) --------- --------- --------- ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Beginning balance (25,058) (63,506) (23,479) Other comprehensive income (loss) 8,912 38,448 (40,027) --------- --------- --------- Ending balance (16,146) (25,058) (63,506) --------- --------- --------- TOTAL STOCKHOLDERS' DEFICIT $ (89,259) $ (85,986) $(103,019) ========= ========= =========
See notes to consolidated financial statements. -27- 28 LACLEDE STEEL COMPANY AND SUBSIDIARIES (DEBTORS-IN-POSSESSION) CONSOLIDATED STATEMENTS OF CASH FLOWS FISCAL YEAR ENDED SEPTEMBER 30, 2000 AND 1999, AND THE NINE-MONTH TRANSITION PERIOD ENDED SEPTEMBER 30, 1998 (IN THOUSANDS)
2000 1999 1998 (nine months) -------- -------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(12,185) $(21,353) $(83,812) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 6,166 6,251 5,081 Reorganization items 1,420 6,052 -- Asset impairments and other charges (credits) (627) 11,738 25,260 Change in deferred income taxes -- -- 31,010 Changes in assets and liabilities that provided (used) cash: Accounts receivable 9,216 1,805 521 Inventories (2,273) 8,266 16,940 Accounts payable, accrued expenses and other assets 6,909 4,366 12,961 Pension cost greater than (less than) funding 6,121 7,031 (1,066) Accrued postretirement medical benefits (2,513) (2,844) (2,394) -------- -------- -------- Net cash provided by operating activities before Reorganization Items 12,234 21,312 4,501 Operating Cash Flow from Reorganization Items - Bankruptcy related professional fees paid (2,623) (2,342) -- -------- -------- -------- Net cash provided by operating activities 10,365 18,970 4,501 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (5,463) (1,510) (3,848) Proceeds from sale of assets 1,375 834 4,818 -------- -------- -------- Net cash provided by (used in) investing activities (4,088) (676) 970 -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net repayments under revolving credit loan (5,523) (18,181) (4,087) Payments on long-term debt -- -- (1,378) Payment of financing costs -- (100) -- -------- -------- -------- Net cash used in financing activities (5,523) (18,281) (5,465) -------- -------- -------- CASH: Net increase during the year -- 13 6 At beginning of year 205 192 186 -------- -------- -------- At end of year $ 205 $ 205 $ 192 ======== ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 6,408 $ 7,198 $ 8,309 Income tax payments (refunds) - net (1,045) (6,800) 130 See notes to consolidated financial statements.
-28- 29 LACLEDE STEEL COMPANY AND SUBSIDIARIES (DEBTORS-IN-POSSESSION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000 AND 1999, AND THE NINE-MONTH TRANSITION PERIOD ENDED SEPTEMBER 30,1998 - -------------------------------------------------------------------------------- 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 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 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. On October 18, 2000 the Company filed a Plan of Reorganization with the Bankruptcy Court and obtained the Court's approval to distribute the Plan, and the related Disclosure Statement, to Creditors, Equity Security Holders and other Parties in Interest. A hearing to consider confirmation of the Plan is scheduled to be held on December 15, 2000. The Plan is the result of extensive negotiations among the Company, the Unsecured Creditors' Committee, the United Steelworkers of America, the Pension Benefit Guaranty Corporation ("PBGC"), and their advisors. In general, it provides for the cancellation of Company indebtedness in exchange for new equity interests; the discharge of other prepetition claims; the cancellation of all prepetition equity ownership interests existing immediately prior to the effectiveness of the Plan of Reorganization; and the assumption of any executory contracts and unexpired leases to which the Company is a party. If the Plan is confirmed and consummated in accordance with its terms, substantially all of the common stock and other securities of the Company will initially be owned by prepetition creditors, and employees. The Company expects the Pension Benefit Guaranty Corporation 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 is an integral part of the plan of reorganization, and on November 1, 2000 the Company provided participants in the hourly and salaried pension plans with a notice of its intent to terminate these plans. 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. Pursuant to the provisions of the Bankruptcy Code, the Company continues to incur the cost of the postretirement medical plans. Under the Plan of Reorganization the Company's postretirement medical obligations will continue on a modified basis, reflecting negotiations with the United Steelworkers of America. 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 and, to the extent unpaid, are liabilities not subject to compromise. -29- 30 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 the banks (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. As of November 30, 2000 the Company had unused availability under the DIP Facility of approximately $4.1 million. The Company's DIP Facility is scheduled to terminate on December 31, 2000. The Company is seeking financing to replace the DIP Facility and provide additional liquidity upon exit from bankruptcy ("exit financing"). A non-binding commitment letter has been signed, but additional lenders must be secured before the loan can be agreed to. At this time there can be no assurance that such financing will be available. In the event such exit financing cannot be secured, the Company may not be able to successfully reorganize. 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 (SOP 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 continued existence is dependent on its ability to achieve future profitable operations, the assumption of the Company's obligations under its defined benefit plans by the PBGC, continued compliance with all debt covenants under the DIP Facility, and obtaining exit financing. The uncertainty related to these matters and the Company's bankruptcy status raise substantial doubt about its ability to continue as a going concern. 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. 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. -30- 31 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. The Company has entered into an agreement for the sale of the assets of its wire products subsidiary, Laclede Mid America, Inc., to Leggett & Platt Incorporated. (See NOTE 13.) 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, 2000 and 1999 and the nine-month transition period ended September 30, 1998. 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, 2000 and 1999 and the nine-month transition period ended September 30, 1998 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 $62,000 in 1999 and $281,000 in 1998 by the weighted average shares outstanding. -31- 32 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 accounting principles generally accepted in the United States of America 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. 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. 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 debt approximates fair market value due to the interest rates approximating 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. NEW ACCOUNTING PRONOUNCEMENTS - The Securities and Exchange Commission has recently issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements. The Company has adopted SAB 101 and the effect on the financial statements is not material. In June 1998, The FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement establishes accounting and reporting standards for derivative instruments including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and hedging activities. The Statement requires an entity to recognize all derivatives as either assets of liabilities in the statement of financial position and measure those instruments at fair value. The Statement is effective for the Company's financial statements for the fiscal year ending September 30, 2001 in accordance with SFAS No. 137 which delayed the effective date of SFAS No. 133 by one year. The adoption of this statement is not expected to have a material impact on the Company's consolidated financial statements. 5. INCOME TAXES 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 an increase of stockholder's deficit. -32- 33 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 Fiscal Nine-Month Year Year Transition Period Ended Ended Ended September 30, September 30, September 30, 2000 1999 1998 ------------- ------------- ----------------- STATEMENT OF OPERATIONS: Current and deferred tax benefit $ (4,255) $ (7,186) $(17,205) Valuation allowance 4,480 7,296 48,345 -------- -------- -------- Total $ 225 $ 110 $ 31,140 -------- -------- -------- OTHER COMPREHENSIVE INCOME (LOSS): Current and deferred tax benefit 3,387 14,610 (9,742) Valuation allowance (3,387) (14,610) 24,132) -------- -------- -------- Total -- -- 14,390 -------- -------- -------- TOTAL $ 225 $ 110 $ 45,530 ======== ======== ========
The provision for income taxes consists of the following (in thousands):
Fiscal Fiscal Nine-Month Year Year Transition Period Ended Ended Ended September 30, September 30, September 30, 2000 1999 1998 ------------- ------------ ----------------- Current state income tax provision $ 225 $ 110 $ 130 -------- -------- -------- Deferred income tax benefit (exclusive of the effect of the valuation allowance) (4,480) (7,296) (17,335) Increase in valuation allowance for deferred tax 4,480 7,296 48,345 -------- -------- -------- Provision for income taxes $ 225 $ 110 $ 31,140 ======== ======== ========
-33- 34 Deferred tax assets and liabilities are comprised of the following (in thousands):
Fiscal Fiscal Year Year Ended Ended September 30, September 30, 2000 1999 ------------- ------------- Deferred tax assets: Pension liabilities $ 14,249 $ 15,311 Postretirement medical benefits 25,883 26,838 Net operating loss and alternative minimum tax carryovers 43,469 38,709 Allowances on receivables 883 1,083 Other 2,959 4,791 -------- -------- Total deferred tax assets 87,443 86,732 -------- -------- Deferred tax liabilities: Depreciation (21,187) (21,569) -------- -------- Net deferred tax asset 66,256 65,163 Valuation allowance (66,256) (65,163) -------- -------- 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, 2000, NOL carryforwards of approximately $107.8 million. These NOL carryforwards expire in various amounts from 2008 through 2020. During 1998 and 1999, the Company filed federal and state refund claims based upon the carryback of $27.6 million of specified liability losses under Section 172(f) of the Internal Revenue Code ("Code") 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, plus interest. In addition, if the carryback claims are fully recovered, the Company's regular tax NOL carryforwards would be reduced to approximately $80.2 million and additional deferred tax assets would be recharacterized from tax loss carryforwards to alternative minimum tax credit carryforwards. The Internal Revenue Service is currently examining the refund claims for the tax years ended December 31, 1995 through September 30, 1998. The Company and the Internal Revenue Service have reached a tentative resolution regarding the refund claims, subject to the Company's emergence from bankruptcy under Chapter 11, where the Company will be able to retain a significant portion of the cash refunds that the Company has received. The Company has not yet recognized any of the potential tax benefit because of the contingencies, principally the Company's emergence from bankruptcy under Chapter 11, inherent in the tentative resolution. There exists the potential that part or all of the refunds received by the Company (plus applicable interest) may be subject to recapture by the Internal Revenue Service. During the year ended September 30, 2000, the Company received refunds of $1.3 million in connection with the carryback claims. The applicable statutory federal income tax rate of 34% for the fiscal years ended September 30, 2000 and 1999, and the nine-month transition period ended September 30, 1998 is reconciled to the effective income tax rate as follows (in thousands): -34- 35
Fiscal Fiscal Nine-Month Year Year Transition Ended Ended Period Ended September 30, September 30, September 30, 2000 1999 1998 ------------- ------------ ------------- Federal income tax benefit computed at statutory tax rate $ (4,066) $ (7,223) $(17,908) Change in valuation allowance 4,480 7,296 48,345 State income taxes net 225 110 -- Other (414) (73) 703 -------- -------- -------- Provision (benefit) for income taxes $ 225 $ 110 $ 31,140 ======== ======== ========
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. -35- 36 6. DEBT The components of the Company's debt are as follows (in thousands):
September 30 ------------------ 2000 1999 ------- -------- SECURED DEBT: Bank Loan and Security Agreement: Revolving Loan $52,267 $55,221 Term Loan 4,087 6,656 ------- ------- 56,354 61,877 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 82,344 87,867 Less: Debt Classified as Current 56,354 61,877 ------ ------ Unsecured and Undersecured Debt Classified as Subject to Compromise $25,990 $25,990 ======= =======
SECURED DEBT - Prior to 1999, 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. 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 and 2000 the Company had approximately $61.9 million and $56.4 million, respectively, outstanding under the facility. In connection with an amendment to the DIP Facility the termination date has been extended to December 31, 2000. As of September 30, 2000 the Company had unused availability under the DIP Facility of approximately $3.5 million. The Company is seeking financing to replace the DIP Facility and provide additional liquidity upon exit from bankruptcy. However, at this time there can be no assurance that such financing will be available. In the event such exit financing cannot be secured, the Company may not be able to successfully reorganize. -36- 37 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 11% at September 30, 2000. 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 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. 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, 2000 and 1999. 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. At September 30, 2000 and 1999 all unsecured and undersecured outstanding debt of the Company is subject to compromise. In accordance with the Plan of Reorganization outstanding debt secured by assets of the Company will be unaffected. Unsecured debt holders will receive their pro rata share of new common stock of the reorganized Company. -37- 38 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 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 $4.9 million in 2000 and $6.2 million in 1999 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 be funded because of the expected plan terminations. The components of net periodic pension cost are as follows (in thousands):
Fiscal Fiscal Nine-Month Transition Year Year Period Ended Ended Ended September 30, 2000 September 30, 1999 September 30, 1998 ------------------ ------------------ --------------------- Service cost $ 1,206 $ 1,462 $ 1,265 Interest cost on projected benefit obligation 13,208 12,812 10,184 Expected return on plan assets (10,417) (10,853) (8,778) Net amortization of: Unrecognized transition net (asset) or obligation (229) 62 1,398 Unrecognized net loss 2,351 3,906 2,456 Unrecognized prior service costs 2 239 1,255 -------- -------- -------- Net periodic pension cost 6,121 7,628 7,780 Settlement and curtailment losses recognized -- 11,738 5,813 -------- -------- -------- Total net periodic pension cost $ 6,121 $ 19,366 $ 13,593 ======== ======== ========
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. -38- 39 The projected benefit obligations at September 30, 2000 and 1999 were determined using assumed discount rates of 8.0% and 7.75%, 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 all years. A summary of the funded status and changes in the funded status of the Plans, is as follows (in thousands):
Fiscal Fiscal Year Year Ended Ended September 30, September 30, 2000 1999 ------------- ------------- Change in benefit obligation: Benefit obligation at beginning of period $ 175,928 $ 195,974 Service cost 1,206 1,462 Interest cost 13,208 12,812 Actuarial losses (gains) 2,153 (10,239) Benefits paid (22,621) (24,081) --------- --------- Benefit obligation at end of period $ 169,874 $ 175,928 ========= ========= Change in plan assets: Fair value of plan assets at beginning of period $ 134,412 $ 123,035 Actual return (loss) on plan assets 34,350 34,858 Employer contribution -- 600 Benefits paid (22,621) (24,081) --------- --------- Fair value of plan assets at end of period $ 146,141 $ 134,412 ========= ========= Funded status $ (23,734) $ (41,515) Unrecognized net transition obligation (asset) (295) (525) Unrecognized actuarial loss 2,675 26,806 Unrecognized prior service cost 4 5 --------- --------- Net amount recognized $ (21,350) $ (15,229) ========= ========= Amounts recognized in the consolidated balance sheet consist of: Prepaid pension cost (reflected in other non- current assets) $ -- $ 49 Accrued benefit liability (37,496) (40,341) Intangible asset -- 5 Accumulated other comprehensive income 16,146 25,058 --------- --------- Net amount recognized $ (21,350) $ (15,229) ========= =========
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 $169.7 million, $169.5 million, and $146.0 million, respectively, as of September 30, 2000 and $174.9 million, $173.5 million and $133.2 million, respectively, as of September 30, 1999. -39- 40 In accordance with SFAS No. 87, the Company has recorded an additional minimum pension liability for underfunded plans of $16.1 million at September 30, 2000 and $25.1 million at September 30, 1999, representing the excess of unfunded accumulated benefit obligations over previously recorded pension cost liabilities. The reduction in minimum pension liability at September 30, 2000 from September 30, 1999 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 7.75% to 8.0% also caused a 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 $16.1 million at September 30, 2000. As of September 30, 1999, $25.1 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 is recorded as it does not appear likely that the deferred tax assets will be realized under present circumstances (See Note 5). PROFIT SHARING PLAN - The Company maintains defined contribution profit sharing 401(k) plans 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 years ended September 30, 2000 and 1999 amounted to $331,000 and $209,000, respectively and for the nine-month transition period ended September 30, 1998 amounted to $326,000. There is also a plan covering the collective bargaining agreement employees, which does not have a match. 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. The components of net periodic postretirement medical benefit costs are as follows (in thousands):
Fiscal Fiscal Nine-Month Year Year Transition Ended Ended Period Ended September 30, September 30, September 30, 2000 1999 1998 ------------- ------------- -------------- Service cost $ 356 $ 473 $ 327 Interest cost 3,875 3,712 2,872 Amortization of unrecognized prior service credits (1,721) (960) (719) Amortization of unrecognized net gain (404) (699) (599) ------- ------- ------- Net periodic costs $ 2,106 $ 2,526 $ 1,881 ======= ======= =======
-40- 41 A summary of the changes in the status of the plans is as follows (in thousands):
Fiscal Fiscal Year Year Ended Ended September 30, September 30, 2000 1999 ------------- ------------- Benefit obligations at beginning of period $ 56,404 $ 57,607 Service cost 356 473 Interest cost 3,875 3,712 Actuarial (gains) losses 5,239 (35) New prior service credit base due to a negative plan amendment (9,592) -- Benefits paid (4,619) (5,353) -------- -------- Benefit obligations at end of period $ 51,663 $ 56,404 ======== ======== Funded status $(51,663) $(56,404) Unrecognized actuarial gain (2,413) (8,056) Unrecognized prior service credit (14,037) (6,166) -------- -------- Accrued post-retirement benefit obligation $(68,113) $(70,626) ======== ========
The assumed discount rates used to measure the accumulated postretirement benefit obligation were 8.0% at September 30, 2000 and 7.75% at September 30, 1999. The assumed future health care cost trend rate for the September 30, 2000 calculation was 6.58% gradually declining over a four-year period to 4.25% and for the September 30, 1999 calculation was 6.36% gradually declining over a five-year period to 3.25%. 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 $423,000 for the year ended September 30, 2000, $517,000 for the year ended September 30, 1999 and $444,000 for the nine-month transition period ended September 30, 1998, and would have increased the accumulated postretirement benefit obligation by $5.5 million as of September 30, 2000 and 1999. The new prior service credit base reflects the effect of changes in the hourly and salaried retiree healthcare benefits premium structure, a negative plan amendment, which was implemented on May 1, 2000. 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 $355,000 in 2000, $460,000 for 1999 and $390,000 for the nine-month transition period ended September 30, 1998, and would have decreased the accumulated postretirement benefit obligation by $4.7 million as of September 30, 2000 and by $5.0 million as of September 30, 1999. -41- 42 8. ASSET IMPAIRMENT, OTHER CHARGES AND CREDITS (In Thousands)
Fiscal Fiscal Nine-Month Year Year Transition Ended Ended Period Ended September 30, September 30, September 30, 2000 1999 1998 ------------- ------------- ------------ Gain on Involuntary Conversion $ (3,823) $ -- $ -- Sale of Memphis, Tennessee Facility (254) -- -- Sale of Madison, Illinois Facility (373) -- -- 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 -------- -------- -------- $ (4,450) $ 7,177 $ 27,646 ======== ======== ========
On March 31, 2000, a structural failure occurred at the Company's Melt Shop at its Alton Plant. While the operating furnace and most of the related equipment were not damaged, a small portion of the building and ductwork were damaged. In addition, furnace dust, which is regulated as hazardous waste, escaped from collapsed ductwork, but was confined to the site. As a result of this accident, steel production at the Alton Plant was suspended until July 23, 2000 when furnace operations resumed. The suspension of operations affected only the steel production facilities at the Alton Plant. All other operations, including finishing operations at the Alton Plant, utilized existing semi-finished and finished inventories. In addition, the Company purchased semi-finished steel to support its bar and pipe operations. The Company has settled its insurance claim with respect to the accident for $27.5 million. The insurance recovery includes reimbursement for property damage, business interruption, and environmental clean-up costs. The Company recognized a gain of $700 thousand as a result of the property loss portion of the claims. The company also recognized a gain of approximately $3.1 million related to business interruption. -42- 43 In July 2000, the Company sold the remaining portion of its Memphis, Tennessee facility for $754,000 which resulted in a gain of $254,000. In December 1999, the Company sold its Madison, Illinois facility for $621,000 which resulted in a gain of $373,000. 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 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 were sold. Net proceeds of approximately $2.0 million were 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. -43- 44 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 ------------------------------ 2001 $ 3,285 2002 1,017 2003 782 2004 765 2005 361 Thereafter 577 -------- TOTAL $ 6,787 ======== Rent expense under all leases in 2000, 1999, and 1998 was $4.6 million, $5.2 million, and $4.9 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. 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. The Company believes the ultimate disposition of such matters will not materially affect its financial position or results of operations. Such claims which arose prior to November 30, 1998 are subject to automatic stay of Bankruptcy Code and, if applicable, will be settled in accordance with the terms of the Plan of Reorganization. In August 2000 the Company's hourly work force at the Alton and Vandalia Plants ratified a modification to the Labor Agreement previously negotiated with the United Steelworkers of America, which includes the shutdown of the Alton Pipe and Skelp Mills and permits the Company to consolidate its pipe-making operations at its Fairless Hills plant. This consolidation of operations, which will affect approximately 100 hourly employees at the Alton Plant, will be completed in December 2000. The agreement of the United Steelworkers of America (USWA) to the permanent shut down of the Alton Pipe and Skelp Mills is contingent upon the Company successfully implementing its Plan of Reorganization and exiting bankruptcy. The Company has filed claims for refunds for its tax years 1995, 1996 and 1998 with respect to the allowance of the carry-back of certain expenses over a period of ten (10) years. The Internal Revenue Service has informed the Company that it disputes such claims. The Company and the Internal Revenue Service have settled this dispute, subject to the entry of an order by the Bankruptcy Court confirming the Plan of Reorganization and acceptance of the settlement by the Joint Congressional Committee on Internal Revenue Taxation. If either of these events do not occur, then such settlement would be ineffective and the parties would have the rights available to them prior to the settlement. In such case, the Company would owe a material amount of taxes and interest to the Internal Revenue Service. -44- 45 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, 2000 and 1999, 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, 2000 Ivaco Inc. owned approximately 25% of the Company's outstanding common stock. For the year ended September 30, 2000 and 1999 the Company purchased rods at market prices totaling $1,995,200 and $2,979,000 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. The Company also has transactions in the normal course of business with Birmingham Steel or affiliated companies. As of September 30, 2000 Birmingham Steel beneficially owned approximately 25% of the Company's outstanding common stock. In 1999 the Company purchased rods and participated in rod conversion arrangements with affiliates of Birmingham Steel at market prices, which totaled $6,346,000. In 2000 such purchases totaled $3,039,445. 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 sold predominantly in the United States. The following table presents, for the periods indicated, the Company's revenue by product class (in thousands):
Fiscal Fiscal Nine-Month Transition Year Ended Year Ended Period Ended September 30, 2000 September 30, 1999 September 30, 1998 ------------------ ------------------ --------------------- Pipe And tubular $ 82,306 $ 83,045 $ 82,463 Hot Rolled 79,861 99,198 102,207 Wire 26,953 26,788 27,410 Chain 25,495 32,551 20,209 -------- -------- -------- Total $214,615 $241,582 $232,289 ======== ======== ========
-45- 46 13. SALE OF LACLEDE MID AMERICA, INC. The Company has entered into an agreement with Leggett & Platt Incorporated for the sale of the assets of Laclede Mid America for $24.5 million plus the assumption of certain post petition ordinary course of business liabilities. The net proceeds received from the sale of the assets of Laclede Mid America will be used for the benefit of Laclede's future liquidity needs. As a result of the proposed sale, the Company expects to record a gain in the period in which the purchase is consummated. The purchase price is subject to adjustments in certain circumstances. The Company believes the sale to Leggett & Platt, Inc. will be consummated before December 31, 2000. Of the purchase price, $300 thousand will be held back for one year following closing pending resolution of the final purchase price. 14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The results of operations by quarter for 2000 and 1999 were as follows (in thousands, except per share data):
2000 -------------------------------------------- DEC 31 MAR 31 JUN 30 SEP 30 -------- -------- -------- -------- Net sales $ 59,409 $ 58,040 $ 49,729 $ 47,437 Cost of products sold 56,554 55,258 49,923 44,695 -------- -------- -------- -------- Net sales less cost of products sold $ 2,856 $ 2,782 $ (193) $ 2,743 ======== ======== ======== ======== Net loss $ (4,217) $ (3,996) $ (1,784) $ (2,188) ======== ======== ======== ======== Basic and fully diluted net loss per share $ (1.04) $ (0.98) $ (.44) $ (0.54) ======== ======== ======== ========
1999 -------------------------------------------- DEC 31 MAR 31 JUN 30 SEP 30 -------- -------- -------- -------- Net sales $ 68,108 $ 59,901 $ 56,354 $ 57,219 Cost of products sold 62,953 54,434 52,117 55,449 -------- -------- -------- -------- Net sales less cost of products sold $ 5,155 $ 5,467 $ 4,237 $ 1,770 ======== ======== ======== ======== Net loss $(12,956) $ (2,428) $ (2,982) $ (2,987) ======== ======== ======== ======== Basic and fully diluted net loss per share $ (3.21) $ (0.60) $ (0.73) $ (0.74) ======== ======== ======== ========
-46- 47 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, 2000 and 1999, and the related consolidated statements of operations and comprehensive income (loss), stockholders' deficit and cash flows for the years ended September 30, 2000 and 1999 and the nine month transition period ended September 30, 1998. 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 auditing standards generally accepted in the United States of America. 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, 2000 and 1999, and the results of their operations and their cash flows for the years ended September 30, 2000 and 1999 and the nine month transition period ended September 30, 1998, in conformity accounting principles generally accepted in the United States of America. 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. -47- 48 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 12, 2000 -48- 49 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. December 14, 2000 /s/ David A. Higbee - --------------------------------- --------------------------------- Date David A. Higbee President Principal Executive Officer December 12, 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. December 14, 2000 /s/ Wayne P. E. Mang - --------------------------------- --------------------------------- Date Wayne P. E. Mang Chairman of the Board December 14, 2000 /s/ Philip R. Morgan - --------------------------------- --------------------------------- Date Philip R. Morgan Director December 14, 2000 /s/ Robert H. Quenon - --------------------------------- --------------------------------- Date Robert H. Quenon Director December 14, 2000 /s/ George H. Walker III - --------------------------------- --------------------------------- Date George H. Walker III Director -49- EX-4.(F) 2 c59103ex4-f.txt 5TH AMEND. TO POSTPETITION LOAN & SECURITY AGMT 1 EXHIBIT 4(f) AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT THIS AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT dated as of October 3, 2000 (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, Amendment No. 2 dated as of July 1, 1999, Amendment No. 3 dated as of December 17, 1999 and Amendment No. 4 dated as of June 27, 2000 (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 3 below, the Loan Agreement is amended as follows: (a) Section 1.1 is hereby amended by deleting the existing definition of "Supplies Inventory Sublimit Amount" and replacing it with the following: "Supplies Inventory Sublimit Amount" means the amount set forth below for the period indicated: Period Amount ------ ------ Effective date of Amendment No. 5 hereto through December 31, 2000 $4,000,000 1 2 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. (b) Section 1.1 is further amended by amending and restating the definition of "Stated Termination Date" as follows: "Stated Termination Date" means December 31, 2000. (c) Section 8.22 is amended and restated as follows: 8.22 Capital Expenditures. Neither the Parent nor any of its Subsidiaries shall make or incur any Capital Expenditure, if, after giving effect thereto, the aggregate amount of all Capital Expenditures by the Parent and its Subsidiaries on a consolidated basis, determined as of the end of each period listed below, would exceed the following: Period Capital Expenditures ------ -------------------- Twenty-one month period ending 09/30/00 $10,500,000 Twenty-four month period ending 12/31/00 $10,500,000 (d) 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 ------ ------------- Twenty-two month period ending 09/30/00 $3,000,000 Twenty-five month period ending 12/31/00 $3,000,000 In determining Cash Available for Fixed Charges, non-cash pension expense other than service costs will not be deducted from net earnings. (e) 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 ------ ------ Twenty-one months ending 09/30/00 $2,200,000 Twenty-four months ending 12/31/00 $2,200,000 In determining Direct Contribution, non-cash pension expense other than service costs will not be deducted from net income. Section 2. Fees. The Parent hereby covenants and agrees to pay to the Agent, for the benefit of the Lenders, in consideration for the Agent and the Lenders entering into this Amendment, the following fees: (a) An extension fee in the principal amount of $250,000 which shall be due and payable by the Parent on the earliest to occur of: (i) the sale of substantially all of the assets or capital 2 3 stock of Laclede Mid America (the "Sale Transaction"), (ii) the repayment in full by the Parent of all principal, interest, fees and premiums, if any, on all Loans outstanding under the Loan Agreement and the termination thereof by the parties and (iii) December 31, 2000. (b) In the event that the Parent does not consummate the Sale Transaction on or prior to December 31, 2000, a fee in the amount of $250,000 which shall be due and payable by the Parent on December 31, 2000 in addition to all Obligations then outstanding (including, without limitation, the extension fee described in subsection 2(a) above). Section 3. 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 4. Representations and Warranties. Each Borrower hereby represents and warrants that (a) this Amendment constitutes a legal, valid and binding obligation of such Borrower, enforceable against such Borrower in accordance with its terms, (b) 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 (c) no Event of Default has occurred and is continuing. Section 5. 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 6. 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 7. 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 8. 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. Section 9. 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. 3 4 Section 10. 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 11. 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. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of October [___], 2000. 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 By:________________________________ Vice President 4 5 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 5 EX-22 3 c59103ex22.txt SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT (22) SUBSIDIARIES OF REGISTRANT Laclede Chain Manufacturing Company - wholly-owned. Laclede Mid-America Inc. - 96.66% owned. EX-27 4 c59103ex27.txt FINANCIAL DATA SCHEDULE
5 1,000 12-MOS SEP-30-2000 OCT-01-1999 SEP-30-2000 205 0 30,930 2,191 59,873 93,376 221,233 139,051 182,097 78,872 82,344 0 83 41 (89,383) 182,097 214,615 214,615 206,430 209,566 10,648 200 6,361 (11,960) 225 (12,185) 0 0 0 (12,185) (3.00) (3.00)
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