-----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, mNK416i1M+9QGMYL8cTApw5t7VAKFbUf34DsbGq4LiFPx7nfilTrAdJIhlG/FhDU CejTsvGDPGbgFCa1umHLHg== 0000950134-95-000023.txt : 19950509 0000950134-95-000023.hdr.sgml : 19950508 ACCESSION NUMBER: 0000950134-95-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19941130 FILED AS OF DATE: 19950112 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHAPARRAL STEEL CO CENTRAL INDEX KEY: 0000833226 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 751424624 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09944 FILM NUMBER: 95501248 BUSINESS ADDRESS: STREET 1: 300 WARD RD CITY: MIDLOTHIAN STATE: TX ZIP: 76065 BUSINESS PHONE: 2147758241 MAIL ADDRESS: STREET 1: 300 WARD RD CITY: MIDLOTHIAN STATE: TX ZIP: 76065 10-Q 1 FORM 10-Q FOR PERIOD ENDED NOVEMBER 30, 1994 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED NOVEMBER 30, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NO. 1-9944 CHAPARRAL STEEL COMPANY Incorporated in STATE OF DELAWARE IRS Employer Identification NO. 75-1424624 300 WARD ROAD MIDLOTHIAN, TEXAS 76065 Telephone: (214) 775-8241 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- ---- 29,679,900 Shares of Common Stock, Par Value $.10 Outstanding at January 9, 1995. 1 of 13 2 INDEX CHAPARRAL STEEL COMPANY
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed consolidated balance sheets--November 30, 1994 and May 31, 1994 3 Condensed consolidated statements of income--three and six months ended November 30, 1994 and 1993 4 Condensed consolidated statements of cash flows --six months ended November 30, 1994 and 1993 5 Notes to condensed consolidated financial statements --November 30, 1994 6 Independent accountants' review report 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 11
2 3 CONDENSED CONSOLIDATED BALANCE SHEETS CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
(Unaudited) November 30, May 31, 1994 1994 ------------ ---------- (In thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 11,893 $ 3,203 Trade accounts receivable, net of allowance of $3.1 million and $3.8 million, respectively 43,552 41,734 Inventories 102,631 117,583 Prepaid expenses 11,537 8,914 -------- -------- TOTAL CURRENT ASSETS 169,613 171,434 PROPERTY, PLANT AND EQUIPMENT Buildings and improvements 47,974 47,217 Machinery and equipment 439,611 434,041 Land 1,288 1,288 -------- -------- 488,873 482,546 Less allowance for depreciation (261,811) (247,660) -------- -------- 227,062 234,886 OTHER ASSETS Goodwill, commissioning costs and other assets, net of accumulated amortization of $19.6 million and $16.9 million, respectively 78,948 81,987 -------- -------- $475,623 $488,307 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ - $ 15,000 Trade accounts payable 29,020 28,667 Accrued interest payable 2,394 2,435 Other accrued expenses 12,442 12,124 Current portion of long-term debt 16,717 17,983 -------- -------- TOTAL CURRENT LIABILITIES 60,573 76,209 LONG-TERM DEBT 94,633 96,219 DEFERRED INCOME TAXES AND OTHER CREDITS 51,040 50,256 STOCKHOLDERS' EQUITY Common stock, $.10 par value, 29,679,900 shares outstanding 2,994 2,994 Paid-in capital 188,037 188,037 Retained earnings 80,850 77,096 Cost of common stock in treasury (2,504) (2,504) -------- -------- 269,377 265,623 -------- -------- $475,623 $488,307 ======== ========
See notes to condensed consolidated financial statements. 3 4 (Unaudited) CONDENSED CONSOLIDATED STATEMENTS OF INCOME CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
Three months ended Six months ended November 30, November 30, 1994 1993 1994 1993 -------- -------- -------- -------- (In thousands except per share) Net sales $126,273 $117,325 $250,655 $219,121 Costs and expenses: Cost of sales 103,073 94,854 208,992 l80,20l Selling, general and administrative 4,673 3,795 8,608 8,374 Depreciation and amortization 8,410 8,410 16,818 16,816 Interest 3,134 3,379 6,414 6,787 Other income (888) (575) (1,017) (1,364) -------- -------- -------- -------- 118,402 109,863 239,815 210,814 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 7,871 7,362 10,840 8,307 Provision for income taxes: Current period provision 2,902 2,939 4,118 3,315 Change in statutory federal tax rate - - - 1,443 -------- -------- -------- -------- 2,902 2,939 4,118 4,758 NET INCOME $ 4,969 $ 4,423 $ 6,722 $ 3,549 ======== ======== ======== ======== Per common share: NET INCOME $ .17 $ .15 $ .23 $ .12 ======== ======== ======== ======== CASH DIVIDENDS $ .05 $ .05 $ .10 $ .10 ======== ======== ======== ======== Average shares outstanding - Note B 29,711 29,709 29,712 29,712 ======== ======== ======== ========
See notes to condensed consolidated financial statements. 4 5 (Unaudited) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
Six months ended November 30, 1994 1993 -------- ------- (In thousands) OPERATING ACTIVITIES Net income $ 6,722 $ 3,549 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 16,818 16,816 Deferred income taxes 937 1,894 Other deferred credits (153) (612) Changes in operating assets and liabilities: Trade accounts receivable, net (1,458) (7,796) Inventories 14,952 (3,145) Prepaid expenses (2,623) (2,914) Trade accounts payable 353 752 Accrued interest payable (41) (225) Other accrued expenses 318 259 -------- ------- Net cash provided by operating activities 35,825 8,578 INVESTING ACTIVITIES Capital expenditures (6,327) (3,491) Other 12 41 -------- ------- Net cash used in investing activities (6,315) (3,450) FINANCING ACTIVITIES Short-term borrowings - 5,000 Repayments on short-term debt (15,000) (5,000) Long-term borrowings 63 260 Repayments on long-term debt (2,915) (4,338) Dividends paid (2,968) (2,968) -------- ------- Net cash used in financing activities (20,820) (7,046) -------- ------- Increase (decrease) in cash and cash equivalents 8,690 (1,918) Cash and cash equivalents at beginning of period 3,203 3,763 -------- ------- Cash and cash equivalents at end of period $ 11,893 $ 1,845 ======== =======
See notes to condensed consolidated financial statements. 5 6 (Unaudited) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CHAPARRAL STEEL COMPANY AND SUBSIDIARIES November 30, 1994 NOTE A - Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Chaparral Steel Company and Subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. 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 six month period ended November 30, 1994 are not necessarily indicative of the results that may be expected for the year ending May 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 May 31, 1994. NOTE B - Earnings Per Share Texas Industries, Inc. ("TXI") owned 100% of the Company from November 1985, when it acquired the remaining 50% of the outstanding securities of the Company from Co-Steel Inc. ("Co-Steel"), until July 1988, when approximately 19.8% of the outstanding securities were sold in an initial public offering of common stock by the Company. Under terms of the purchase agreement between TXI and Co-Steel, TXI made a $42 million initial cash payment and made a $73 million final payment in August 1990. The acquisition by TXI has been accounted for using the purchase method of accounting. The $115 million total purchase price exceeded the value of acquired assets by $83 million and the excess has been recorded as goodwill and additional paid-in-capital. This goodwill is being amortized over 40 years using the straight-line method and reduced earnings by $1.2 million in the six months ended November 30, 1994 and 1993, respectively. The amount of goodwill, net of accumulated amortization included in other assets was $71.8 million, $73 million and $75.3 million at November 30, 1994, May 31, 1994 and May 31, 1993, respectively. Net income per common share is calculated based upon a weighted average of shares outstanding (including common stock equivalents that are not antidilutive). 6 7 NOTE C - Inventories Inventories consist of the following:
November 30, May 31, 1994 1994 ---- ---- (In thousands) Finished goods $ 62,364 $ 72,946 Work in process 8,546 14,477 Raw materials: Scrap 10,859 10,407 Crushed cars 38 -- Rolls 16,357 15,602 Supplies 14,661 14,878 LIFO adjustment (10,194) (10, 727) -------- -------- $102,631 $117,583 ======== ========
Inventories are stated at the lower of cost (last-in, first-out) or market, except rolls which are stated at cost (specific identification) and supplies which are stated at average cost. NOTE D - Income Tax Provision The provision for income taxes has been included in the accompanying financial statements on the basis of an estimated annual rate. In August 1993, President Clinton signed into law the Omnibus Budget Reconciliation Act of 1993 that contained a provision raising the top effective rate for corporations to 35%. This rate increase, when applied to the Company's temporary differences, resulted in a charge of $1.4 million which is included in the income tax provision in the August 1993 quarter. Goodwill amortization also contributed to the difference between provision amounts and amounts computed by applying the statutory federal income tax rates. NOTE E - Commissioning Costs The Company's policy for new facilities is to capitalize certain costs until the facility is substantially complete and ready for its intended use. The Large Beam Mill was substantially complete and ready for its intended use in the third quarter of fiscal 1992 with a total of $15.1 million of costs deferred, including $4.4 million of interest and $3.4 million of depreciation. Amortization of $1.5 million was recorded in the first six months of fiscal 1995 and 1994, respectively, based on a five year period. NOTE F - Severance Pay In an effort to stay competitive and reduce costs, the Company decreased its number of employees in the first quarter of fiscal 1994. As a result, a non-recurring charge of $1.6 million for severance pay is included in selling, general and administrative in fiscal 1994. 7 8 EXHIBIT A Independent Accountants' Review Report Board of Directors Chaparral Steel Company We have reviewed the accompanying condensed consolidated balance sheet of Chaparral Steel Company and subsidiaries as of November 30, 1994, and the related condensed consolidated statements of income for the three-month and six-month periods ended November 30, 1994 and 1993, and the condensed consolidated statements of cash flows for the six month periods ended November 30, 1994 and 1993. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Chaparral Steel Company as of May 31, 1994, and the related consolidated statements of income, stockholders' equity and cash flows for the year then ended (not presented herein), and in our report dated July 14, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, 1994, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Ernst and Young LLP Dallas, Texas December 16, 1994 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited) Comparison of operations and financial condition for the quarter and six months ended November 30, 1994 to the quarter and six months ended November 30, 1993. RESULTS OF OPERATIONS An increase in average selling price of $11 and an increase in shipments of 15,000 tons resulted in a $9 million increase in net sales in the three month period ended November 30, 1994 compared to the same quarter in fiscal 1994. The market for the Company's Special Bar Quality products remained strong as the average selling price for those products improved $20 from the prior year quarter. Net sales increased $31.5 million in the six month period ended November 30, 1994 due to a $14 increase in average selling price and an increase in shipments of 66,000 tons. The improved demand exhibited in the first quarter of 1995 continued in the current period as the Company announced price increases on most structural products effective in the third quarter of fiscal 1995. Demand from service centers, fabricators and the mobile home industry for structural mill products appears to have established a positive trend. However, continued growth in construction volume is dependent on the health of the economy and changes in interest rates. Cost of sales increased $8.2 million to $103.1 million for the three month period ended November 30, 1994 compared to the same period in the prior year. The increase was predominately caused by the increase in shipments of 15,000 tons and a $9 increase in cost of sales per ton which resulted from higher scrap prices. Scrap prices are expected to follow their seasonal pattern upward this winter before moderating in the spring. Combined rolling conversion costs increased slightly from the prior year quarter. Cost of sales for the six month period increased $28.8 million due to the increase in shipments of 66,000 tons and a $6 increase in scrap prices. Combined rolling conversion costs were virtually unchanged from the previous year periods. Higher additives costs were incurred in the current year periods as the Company produced more Special Bar Quality products. Selling, general and administrative expense increased $.9 million and $.2 million in the three and six month periods ended November 30, 1994 compared to the prior year periods primarily due to increases in employee incentive programs which are based on profitability. A $1.6 million charge for severance pay is included in selling, general and administrative expense in the six month period ended November 30, 1993. Interest expense decreased $.2 million and $.4 million in the three and six month periods ended November 30, 1994 compared to the same periods in the prior year. Interest expense in the current period was reduced by repayments of long-term debt which is principally at fixed rates. The provision for income taxes has been calculated on the basis of an estimated annual rate. The rate was affected by legislation passed in August 1993, which when applied to the Company's temporary differences, resulted in an increase of $1.4 million in the amount of deferred tax expense recorded in the August 1993 quarter. Goodwill amortization also contributed to the difference between provision amounts and income tax amounts computed by applying the statutory federal income tax rates. The increase in net income in the current periods was due to higher average selling prices, increased volume and a shift in product mix to higher margin products. Over the near term, shipment levels are expected to continue to exceed those of last year at prices that continue to move upward. Higher scrap prices will somewhat offset increasing selling prices, but positive earnings comparisons to the prior year should result. 9 10 CAPITAL RESOURCES AND LIQUIDITY Working capital increased $13.8 million to $109 million at November 30, 1994 from the previous fiscal year-end. The increase in profitability provided additional working capital in the first six months of fiscal 1995. Inventories decreased $15 million as the Company's planned reduction resulted in finished goods inventory decreasing by 20%. The Company also repaid $15 million of short-term borrowings in fiscal 1995. The other components of working capital were virtually unchanged from the previous fiscal year-end. As a result, cash and cash equivalents increased $8.7 million after the Company bought $6.3 million of capital additions, repaid $2.9 million of long-term debt and paid cash dividends of $3 million. Cash provided by operations in the first six months of fiscal 1995 increased by $27.2 million primarily due to the increase in net cash provided by accounts receivable of $6.3 million and by inventory of $18.1 million. Capital expenditures for the six months ended November 30, 1994 totaled $6.3 million and are estimated to be approximately $15 million in fiscal 1995 which represents normal replacement and upgrades of existing equipment. The Company currently does not plan any major capital expenditures requiring significant capital resources within the next two years. The Company's capitalization of $364 million at November 30, 1994, consisted of $94.6 million of long-term debt and $269.4 million of stockholders' equity. The current portion of long-term debt totaled $16.7 million at November 30, 1994. The Company's average interest rate on long-term debt is 11%. The Company's payments of principal and interest are expected to be $27.5 million during the next twelve months. The Company is subject to federal, state and local environmental laws and regulations concerning, among other matters, waste water effluent, air emissions and electric arc furnace ("EAF") dust disposal. From time to time, the Company is involved in litigation relating to claims arising in the ordinary course of business operations. No litigation (based on the opinion of counsel) is pending against or currently affects the Company, the ultimate liability of which, if any, would have a material effect on the Company's financial position or results of operations. The Company maintains a hazardous waste liability policy against certain third party claims, which insurance the Company believes to be adequate in relation to the Company's business. The Company has short-term credit facilities with two banks totaling $20 million which will expire January 31, 1995. The Company expects to renew the short-term facilities with substantially the same terms and conditions. The Company had maximum borrowings of $15 million at any one time under these arrangements during the first six months of fiscal 1995. At November 30, 1994, the Company had no outstanding borrowings under these facilities. The Company expects that current financial resources and anticipated cash provided from operations in fiscal 1995 will be sufficient to provide funds for capital expenditures, meet scheduled debt payments and satisfy other known working capital needs for fiscal 1995. If additional funds are required to accomplish long-term expansion of its productive capabilities, the Company believes that funding can be obtained to meet such requirements. Based on the current outlook for steel consumption levels and its impact on prices, in fiscal 1995, the Company expects further increases in shipments and average selling price and cost per ton levels to increase slightly from fiscal 1994. Significant changes in average selling prices without a corresponding change in the scrap raw material costs could have a substantial effect on the Company's operating results and liquidity. 10 11 PART II. OTHER INFORMATION Item 4. Submission of Matter to a Vote of Security Holders At the Annual Meeting of the Stockholders held October 19, 1994, stockholders elected as Directors of the Company, Robert Alpert, John M. Belk, Gordon E. Forward, Eugenio Clariond Reyes, Robert D. Rogers, Gerald R. Heffernan and Gerhard Liener, to terms expiring in 1995. Votes cast to elect the Directors were as follows:
Shares withheld Shares for and against ---------- --------------- Robert Alpert 29,425,296 27,270 John M. Belk 29,384,346 68,220 Gordon E. Forward 29,423,989 28,577 Gerald R. Heffernan 29,380,146 72,720 Gerhard Liener 29,421,596 30,970 Eugenio Clariond Reyes 29,425,096 27,470 Robert D. Rogers 29,423,146 29,420
The stockholders also approved an amendment to the Company's Stock Option Plan. Votes cast were 29,352,306 affirmative, 100,260 withheld and against. Item 6. Exhibits and Reports on Form 8-K. The following exhibits are included herein: (11) Statement re: Computation of earnings per share (15) Letter re: Unaudited interim financial information The Registrant did not file any reports on Form 8-K during the three months ended November 30, 1994. SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CHAPARRAL STEEL COMPANY January 10, 1995 Richard M. Fowler ___________________________ Richard M. Fowler Senior Vice-President & Chief Financial Officer January 10, 1995 Larry L. Clark ___________________________ Larry L. Clark Vice President - Controller 11 12 INDEX TO EXHIBITS Exhibit Description - ------- ----------- 11 Statement re: Computation of earnings per share 15 Letter re: Unaudited interim financial information 27 Financial Data Schedule EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
Three months ended Six months ended November 30, November 30, 1994 1993 1994 1993 ------- ------- ------- ------- (In thousands except per share) AVERAGE SHARES OUTSTANDING Primary: Average shares outstanding 29,680 29,680 29,680 29,680 Stock options - treasury stock method using average market prices 31 29 32 32 ------- ------- ------- ------- TOTALS 29,711 29,709 29,712 29,712 ======= ======= ======= ======= Fully diluted: Average shares outstanding 29,680 29,680 29,680 29,680 Stock options - treasury stock method using end of quarter market price if higher than average 32 31 32 35 ------- ------- ------- ------- TOTALS 29,712 29,711 29,712 21,715 ======= ======= ======= ======= INCOME APPLICABLE TO COMMON STOCK Primary and fully diluted: Net income $ 4,969 $ 4,423 $ 6,722 $ 3,549 Add: Pre-September 1990 contingent price amortization 58 58 116 116 ------- ------- ------- ------- $ 5,027 $ 4,481 $ 6,838 $ 3,665 ======= ======= ======= ======= PER SHARE Net income per common share: Primary $ .17 $ .15 $ .23 $ .12 ======= ======= ======= ======= Fully diluted $ .17 $ .15 $ .23 $ .12 ======= ======= ======= =======
12 EX-15 3 LETTER REGARDING INTERIM FINANCIAL STATEMENTS 1 EXHIBIT 15 Board of Directors Chaparral Steel Company We are aware of the incorporation by reference in the Registration Statement (Form S-8 No. 33-39626) pertaining to the Chaparral Steel Company Stock Option Plan of our report dated December 16, 1994, relating to the unaudited condensed consolidated interim financial statements of Chaparral Steel Company and subsidiaries which are included in its Form 10-Q for the quarter ended November 30, 1994. Pursuant to Rule 436(c) of Securities Act of 1933 our report is not a part of the Registration Statement prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. Ernst and Young LLP Dallas, Texas January 9, 1995 13 EX-27 4 FINANCIAL DATA SCHEDULE
5 0000833226 CHAPARRAL STEEL COMPANY 1,000 6-MOS MAY-31-1995 NOV-30-1994 11,893 0 46,678 3,126 102,631 169,613 488,873 261,811 475,623 60,573 111,350 2,994 0 0 266,383 475,623 250,655 250,655 208,992 208,992 0 525 6,414 10,840 4,118 6,722 0 0 0 6,722 .23 .23
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