-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ISS25Gyc4kbKld6VvAHhR4vZxJLGG97Rz6M2nAfp+WYRZeEMiVBX/hL2pZaGVXMo fCYbDhSA+B+ySCeETQMYpg== 0000950112-95-002117.txt : 19950814 0000950112-95-002117.hdr.sgml : 19950814 ACCESSION NUMBER: 0000950112-95-002117 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEEL OF WEST VIRGINIA INC CENTRAL INDEX KEY: 0000820960 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 550684304 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16254 FILM NUMBER: 95562027 BUSINESS ADDRESS: STREET 1: 17TH ST & 2ND AVE CITY: HUNTINGTON STATE: WV ZIP: 25703 BUSINESS PHONE: 3046968200 MAIL ADDRESS: STREET 1: 17TH STREET & 2ND AVENUE CITY: HUNTINGTON STATE: WV ZIP: 25703 10-Q 1 STEEL OF WEST VIRGINIA, INC. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 ----------------------------------- 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 0-16254 -------------- Steel of West Virginia, Inc. ----------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 55-0684304 - --------------------------------- -------------------- (State or other jurisdiction I.R.S. Employer of incorporation or organization) Identification No. 17th Street and 2nd Avenue, Huntington, West Virginia 25703 ------------------------------------------------------------- (Address of principal executive offices, Zip Code) (304) 696-8200 ------------------------------------------------------------ (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- The number of shares outstanding of each of the issuer's classes of common stock, as of July 31, 1995, is as follows: 6,630,260 shares of common stock, par value $.01 per share. STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES INDEX Page Number PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of 3 June 30, 1995 and December 31, 1994 Condensed Consolidated Statements of Income for 4 the Three-Month and Six Month Periods Ended June 30, 1995 and June 30, 1994 Condensed Consolidated Statements of Cash Flows 5 for the Three-Month and Six-Month Periods Ended June 30, 1995 and June 30, 1994 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of 9 Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 11 2 PART I. FINANCIAL INFORMATION Item 1. CONDENSED CONSOLIDATED BALANCE SHEETS STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES (In thousands, except per share amounts) June 30 December 31 1995 1994 ----------- ----------- ASSETS CURRENT ASSETS Cash $ 100 $ 1,400 Receivables, net of allowances of $389 and $379 12,658 11,097 Inventories 18,840 15,846 Deferred income taxes 2,143 2,143 Other current assets 167 241 -------- -------- TOTAL CURRENT ASSETS 33,908 30,727 Property, plant, and equipment 42,381 43,011 Goodwill 19,475 19,817 Other assets 681 619 -------- -------- TOTAL ASSETS $96,445 $94,174 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Overdraft $ 1,046 $ 757 Accounts payable 7,977 7,894 Accrued payroll and benefits payable 5,515 5,029 Income taxes payable 226 41 Other current liabilities 1,908 1,630 Current maturities of long-term debt 5,360 4,860 -------- -------- TOTAL CURRENT LIABILITIES 22,032 20,211 Long-term debt 12,517 11,542 Deferred income taxes 7,728 7,728 Other long-term liabilities 761 759 -------- -------- TOTAL LIABILITIES 43,038 40,240 STOCKHOLDERS' EQUITY Common stock, $.01 par value: 12,000,000 voting shares authorized, 6,865,360 issued and outstanding 71 71 Paid-in capital 26,597 26,597 Treasury stock (5,235) 0 Retained earnings 31,974 27,266 -------- -------- TOTAL STOCKHOLDERS' EQUITY 53,407 53,934 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $96,445 $94,174 ======== ======== NOTE: The balance sheet at December 31, 1994, has been derived from the audited financial statements at that date. See notes to condensed consolidated financial statements. 3 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES (In thousands, except per share amounts) Three Months Six Months Ended Ended June 30 June 30 1995 1994 1995 1994 ------------------ ---------------- Net sales $31,641 $31,410 $64,541 $59,772 Cost of sales 26,043 26,146 53,601 49,262 -------- -------- -------- -------- GROSS PROFIT 5,598 5,264 10,940 10,510 Selling and administrative expenses 1,295 1,284 2,693 2,579 Interest expense 412 144 798 354 Other (income) expense (192) (245) (233) (11) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 4,083 4,081 7,682 7,588 Income Taxes (1,570) (1,601) (2,974) (2,980) -------- -------- -------- -------- NET INCOME $ 2,513 $ 2,480 $ 4,708 $ 4,608 ======== ======== ======== ======== NET INCOME PER COMMON SHARE, based on 6,951,693 and 7,021,527 weighted average shares of common stockoutstanding during the three months and six months ended June 30, 1995 and 7,091,360 outstanding shares during 1994. $.36 $.35 $.67 $.65 ==== ==== ==== ==== See notes to condensed consolidated financial statements. 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES (In thousands)
Three Months Ended Six Months Ended June 30 June 30 1995 1994 1995 1994 --------------------------- ------------------------ CASH FROM OPERATIONS $ 915 $ (739) $ 1,627 $ 3,921 INVESTMENT ACTIVITIES Additions to property, plant, and equipment (1,313) (5,654) (2,004) (11,476) FINANCING ACTIVITIES Revolving credit loan 3,810 5,186 3,808 5,186 Long-term debt repayments (1,215) (1,000) (2,430) (2,000) Purchase of treasury stock (2,590) 0 (2,590) 0 ----------- ---------- ---------- ----------- 5 4,186 (1,212) 3,186 ----------- ---------- ---------- ----------- DECREASE IN CASH $ (393) $(2,207) $(1,589) $ (4,369) =========== ========== ========== =========== On June 30, 1995 the Company repurchased shares of its outstanding common stock for an aggregate purchase price of $2,645,000 and the actual settlement date was subsequent to the end of the quarter.
See notes to condensed consolidated financial statements. 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES June 30, 1995 NOTE A--BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements include the accounts of Steel of West Virginia, Inc. (the Company) and its wholly-owned subsidiaries SWVA, Inc. and Marshall Steel, Inc. Such condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- month and six-month periods ended June 30, 1995 are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1994. Net income per common share is calculated based on the 6,951,693 and 7,021,527 weighted average number of shares of common stock outstanding during the three months and six months ended June 30, 1995, respectively, and 7,091,360 shares outstanding during 1994. NOTE B--INVENTORIES Inventories consist of the following (in thousands): June 30 December 31 1995 1994 ------------ ----------- Raw materials $ 2,008 $ 1,908 Work-in-process 6,699 4,846 Finished goods 11,292 10,372 Manufacturing supplies 3,382 2,750 ------- ------- 23,381 19,876 Less LIFO reserve 4,541 4,030 ------- ------- $18,840 $15,846 ======= ======= Annually, at the end of each year, management determines inventory levels based on the taking of a physical inventory. The amount of inventories at June 30, 1995, has been determined based upon inventory levels indicated by perpetual inventory accounting records. In addition, an actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must necessarily be based on management's estimates of expected year-end inventory levels and costs. Since these are subject to many forces beyond management's control, interim results are subject to the final year-end LIFO inventory valuation. 6 NOTE C--CREDIT ARRANGEMENTS The Company entered into a senior financing agreement on December 30, 1986, as subsequently amended, that provides for revolving credit borrowings and term loans. During 1994, the Company amended its senior credit agreement to permit the Company to borrow $6 million in 1994 and provide for equivalent term borrowing availability in 1995 under a new "Capital Expenditure Line" of credit. The terms of the loan amendment also enabled the Company to reduce the interest rates on its existing revolving credit line and term loans outstanding from the greater of 7% or 3/4% over prime and the greater of 7% or 1% over prime, respectively, to the Chemical Bank prime rate or LIBOR plus 1-3/4%; reduce the annual revolving credit line commitment fee from 1/2% to 1/8% of the unused balance; and extend the term of the revolving credit line to January 1, 1998. In addition, the amendment permits the Company to convert up to $7 million of its indebtedness to a fixed interest rate. The senior credit agreement may be terminated by the Company or, on or after January 1, 1998 and upon 90 days written notice, by the lender. In the event the Company makes certain prepayments prior to October 1, 1995, prepayment fees of 1-3/4% of the amount prepaid could result. Amounts outstanding under the term loan portion of the senior financing agreement are scheduled to be repaid in quarterly principal installments totaling as follows: 1995--$4,000,000; 1996--$5,000,000; 1997--$1,547,050. The Capital Expenditure Line portion of the loan agreement is required to be repaid in 27 quarterly principal installments of $215,000, beginning January 1, 1995, with a final principal payment of $195,000. As of June 30, 1995, the revolving credit line loan balance was $3,808,000 and the unused borrowing availability approximated $6,192,000. In addition, the unused borrowing availability on the Capital Expenditure Line approximated $6,000,000. The Company's senior lending agreement contains various restrictive covenants, including that the Company must maintain specified levels of working capital and net worth (as defined in the agreement). In addition, capital expenditures and dividends are limited to the annual amounts set forth in the agreement. At June 30, 1995, the Company's retained earnings available for dividends in 1995 was $4,074,000. As a result of the lending agreement, substantially all of the Company's property, plant, and equipment, inventory and accounts receivable are subject to a third party's security interests. NOTE D--COMMITMENTS AND CONTINGENCIES The Company is principally self-insured for employees' medical care costs and workers' compensation claims up to certain specified dollar limits. Under the medical care program, the Company is insured by a private carrier for individual claims in excess of specified dollar limits. The Company also has excess coverage provided by the West Virginia Workers' Compensation Fund (a state agency) for certain work related injuries. In connection with the self- insured workers' compensation program, the Company has obtained an irrevocable standby letter of credit in the amount of $1,000,000 (through July 1995). A liability has been established for those illnesses and injuries occurring on or before June 30, 1995, for which an amount of expected loss could be reasonably estimated. 7 NOTE E--STOCKHOLDERS' EQUITY In December 1994 the Company announced that its Board of Directors had authorized management to buy back up to two hundred and fifty thousand shares of its common stock from time to time. In June 1995 the Board of Directors authorized management to increase such number of shares by an additional two hundred and fifty thousand shares. In June 1995 the Company's shareholders voted to approve the Steel of West Virginia, Inc. 1995 Employee Stock Option Plan and the 1995 Non-Employee Director Stock Option Plan. In addition, the shareholders approved the amendment of the Company's Certificate of Incorporation to authorize 4,000,000 additional shares of Common Stock and to eliminate all of the authorized non- voting common stock. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net Sales Net sales increased .7% in the second quarter of 1995 to $31,641,000 up $231,000 from $31,410,000 for the second quarter of 1994, primarily due to higher average selling prices caused by favorable product mix and selected price increases. Finished tonnage sales decreased to 45,485 tons in the second quarter of 1995 from 48,806 tons for the second quarter of 1994. Billet sales decreased to 2,607 tons for the second quarter of 1995 from 4,105 tons in the second quarter of 1994. Net sales for the six months ended June 30, 1995 increased 8.0% to $64,541,000 from $59,772,000 for the comparable period in 1994, primarily due to higher average selling prices caused by favorable product mix and selected price increases. Finished tonnage sales decreased to 90,472 tons for the six months ended June 30, 1995 from 92,699 tons for the comparable period in 1994. Billet sales increased to 13,014 tons for the same period in 1995, from 6,424 tons for the comparable period in 1994. Cost of Sales Cost of sales decreased to 82.3% of net sales or $26,043,000 for the second quarter of 1995 from 83.2% of net sales for the second quarter of 1994. The decrease in cost of goods sold was principally due to increased finished production which allocated fixed costs to inventory, and favorable product mix. Cost of sales for the six months ended June 30, 1995 increased to 83.0% of net sales from 82.4% of net sales for the comparable period in 1994. This increase was primarily due to increased low margin billet sales and higher mill roll and maintenance expense. Selling and Administrative Expenses Selling and administrative expenses for the second quarter of 1995 were $1,295,000 as compared to $1,284,000 for the second quarter of 1994. As a percentage of net sales, selling and administrative expense was 4.1% in the second quarter of 1995 and 1994. Selling and administrative expenses for the six month period ended June 30, 1995 were $2,693,000, compared to $2,579,000 for the comparable period in 1994. This increase was primarily due to recognition of $200,000 in costs in the first quarter 1995 upon discontinuing efforts to acquire another steel company. As a percentage of net sales, selling and administrative expense decreased to 4.2% in the six month period ended June 30, 1995, from 4.3% for the comparable period in 1994. Interest Expense and Other (Income) Expense Interest expense for the second quarter of 1995 was 1.3% of net sales or $412,000, as compared to .5% of net sales or $144,000 for the second quarter of 1994. Interest expense increased as a result of higher average debt outstanding due to the modernization and expansion program and the Company's repurchase of shares of its Common Stock. Other (income) expense decreased to $192,000 of income in the second 9 quarter of 1995, compared to $245,000 of income for the second quarter of 1994, due primarily to lower reimbursement of mill roll expense. Interest expense for the six months ended June 30, 1995 increased to 1.2% of net sales or $798,000, as compared to .6% of net sales or $354,000 for the second quarter of 1994. Interest expense increased as a result of higher average debt outstanding due to the expansion and modernization program and the Company's repurchase of shares of its Common Stock. Other (income) expense changed to $233,000 of income for the six months ended June 30, 1995 from $11,000 of income for the comparable period in 1994, principally due to a reduction in losses from the disposal of fixed assets. Net Income As a result of the above, net income for the second quarter of 1995 increased by $33,000 (1.3%) to $2,513,000 from $2,480,000 for the second quarter of 1994. As a percentage of net sales, net income was 7.9% in the second quarter of 1995 and 1994. As a result of the above and a lower effective income tax rate caused by changes in state tax apportionments, net income for the six months ended June 30, 1995 increased by $100,000 (2.2%) from $4,608,000 for the comparable period in 1994. As a percentage of net sales, net income decreased to 7.3% for the six months ended June 30, 1995 from 7.7% for the comparable period in 1994. Liquidity and Sources of Capital The Company's primary ongoing cash needs are for working capital requirements, debt service and capital expenditures. The three present sources for the Company's liquidity needs are internally generated funds, a capital expenditure term loan line, and the Company's revolving credit facility, which the Company anticipates will be sufficient for its ongoing cash needs. Working capital at the end of the second quarter of 1995 was $11,876,000, compared to $10,516,000 at the end of the prior fiscal year. This increase in working capital was due primarily to working capital provided by operations. The Company's expenditures for required capital replacements are currently anticipated to average approximately $1,000,000 annually over the next several years. In addition, from time to time, the Company evaluates discretionary capital expenditures and acquisition opportunities. Any such expenditure would be subject to availability of funds and approval by the Company's Board of Directors. 10 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Stockholders held on June 29, 1995, for which proxies for the meeting were solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934, the stockholders elected five directors, each for a term of one year. The tabulation of the votes cast for each nominee for director was as follows: Name of Nominee Voted For Withheld Authority to Vote - --------------- --------- -------------------------- Stephen A. Albert 4,685,898 592,425 Robert L. Bunting, Jr. 4,936,323 342,000 Albert W. Eastburn 4,932,823 345,500 Daniel N. Pickens 4,932,823 345,500 Paul E. Thompson 4,919,098 359,225 At the Annual Meeting of Stockholders, the stockholders also approved the following: (i) the appointment of Ernst & Young as independent auditors, by a vote of 5,267,699 shares in favor, 2,274 shares against and 8,350 shares abstained; (ii) the Steel of West Virginia, Inc. 1995 Employee Stock Option Plan, by a vote of 3,419,158 shares in favor, 1,313,455 shares against and 545,710 shares abstained; (iii) the Steel of West Virginia, Inc. 1995 Non-Employee Director Stock Option Plan, by a vote of 3,613,075 shares in favor, 1,120,558 shares against and 544,690 shares abstained; and (iv) the amendment of the Company's Certificate of Incorporation to authorize 4,000,000 additional shares of Common Stock and to eliminate all of the authorized non-voting common stock, by a vote of 4,645,837 shares in favor, 511,026 shares against and 121,460 shares abstained. 11 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. DATED: August 11, 1995 STEEL OF WEST VIRGINIA, INC. ------------------------------- (Registrant) /s/ Timothy R. Duke -------------------------------- Timothy R. Duke, Vice President, Treasurer and Chief Financial Officer 12 EX-27 2
5 1,000 3-MOS DEC-31-1995 JUN-30-1995 100 0 12,658 389 18,840 33,908 67,003 (24,622) 96,445 22,032 12,517 71 0 0 53,336 96,445 31,641 31,641 26,043 26,043 0 3 412 4,083 1,570 2,513 0 0 0 2,513 0.36 0.36
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