-----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, DSPp0WeBSSg0mc5eFESGgXiEw/4kU34DwGUvZXLuLqGexv/eJUJV8ojUBvurUThs qgyKQYlQ+y3w70gT9U835A== 0000950134-94-001180.txt : 19941017 0000950134-94-001180.hdr.sgml : 19941017 ACCESSION NUMBER: 0000950134-94-001180 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940831 FILED AS OF DATE: 19941012 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHAPARRAL STEEL CO CENTRAL INDEX KEY: 0000833226 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94552392 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 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 AUGUST 31, 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 October 7, 1994. 1 of 13 2 INDEX CHAPARRAL STEEL COMPANY
PART I. FINANCIAL INFORMATION Page - - ----------------------------- ---- Item 1. Financial Statements (Unaudited) Condensed consolidated balance sheets--August 31, 1994 and May 31, 1994 3 Condensed consolidated statements of income--three months ended August 31, 1994 and 1993 4 Condensed consolidated statements of cash flows --three months ended August 31, 1994 and 1993 5 Notes to condensed consolidated financial statements --August 31, 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 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 11 - - ----------
3 CONDENSED CONSOLIDATED BALANCE SHEETS CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
(Unaudited) August 31, May 31, 1994 1994 ----------- ---------- (In thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 7,812 $ 3,203 Trade accounts receivable, net of allowance of $4 million and $3.8 million, respectively 48,019 41,734 Inventories 100,141 117,583 Prepaid expenses 14,935 8,914 --------- --------- TOTAL CURRENT ASSETS 170,907 171,434 PROPERTY, PLANT AND EQUIPMENT Buildings and improvements 47,544 47,217 Machinery and equipment 437,602 434,041 Land 1,288 1,288 --------- --------- 486,434 482,546 Less allowance for depreciation (254,735) (247,660) --------- --------- 231,699 234,886 OTHER ASSETS Goodwill, commissioning costs and other assets, net of accumulated amortization of $18.3 million and $16.9 million, respectively 80,651 81,987 --------- --------- $ 483,257 $ 488,307 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 10,000 $ 15,000 Trade accounts payable 28,338 28,667 Accrued interest payable 3,429 2,435 Other accrued expenses 14,142 12,124 Current portion of long-term debt 16,720 17,983 --------- --------- TOTAL CURRENT LIABILITIES 72,629 76,209 LONG-TERM DEBT 94,609 96,219 DEFERRED INCOME TAXES AND OTHER CREDITS 50,127 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 77,365 77,096 Cost of common stock in treasury (2,504) (2,504) --------- --------- 265,892 265,623 --------- --------- $ 483,257 $ 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 August 31, 1994 1993 ---- ---- (In thousands except per share) Net sales $ 124,382 $ 101,896 Costs and expenses: Cost of sales 105,919 85,347 Selling, general and administrative 3,935 4,579 Depreciation and amortization 8,408 8,406 Interest 3,280 3,408 Other income (129) (789) ---------- --------- INCOME BEFORE INCOME TAXES 2,969 945 Provision for income taxes: Current period provision 1,216 376 Change in statutory federal tax rate - 1,443 ---------- ---------- 1,216 1,819 NET INCOME (LOSS) $ 1,753 $ (874) ========== ========== Per common share: NET INCOME (LOSS) $ .06 $ (.03) ========== ========== CASH DIVIDENDS $ .05 $ .05 ========== ========== Average shares outstanding - Note B 29,712 29,679 ========== ==========
See notes to condensed consolidated financial statements. 4 5 (Unaudited) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
Three months ended August 31, 1994 1993 ---- ---- (In thousands) OPERATING ACTIVITIES Net income (loss) $ 1,753 $ (874) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 8,408 8,406 Deferred income taxes (24) 1,474 Other deferred credits (105) (350) Changes in operating assets and liabilities: Trade accounts receivable, net (6,285) (4,108) Inventories 17,442 5,538 Prepaid expenses (6,021) (5,558) Trade accounts payable (329) (1,943) Accrued interest payable 994 546 Other accrued expenses 2,018 (753) --------- Net cash provided by operating activities 17,851 2,378 INVESTING ACTIVITIES Capital expenditures (3,887) (2,697) Other 2 (402) --------- --------- Net cash used in investing activities (3,885) (3,099) FINANCING ACTIVITIES Short-term borrowings - 5,000 Repayments on short-term debt (5,000) - Long-term borrowings - 196 Repayments on long-term debt (2,873) (4,285) Dividends paid (1,484) (1,484) --------- --------- Net cash used in financing activities (9,357) (573) --------- Increase (decrease) in cash and cash equivalents 4,609 (1,294) Cash and cash equivalents at beginning of period 3,203 3,763 --------- --------- Cash and cash equivalents at end of period $ 7,812 $ 2,469 ========= =========
See notes to condensed consolidated financial statements. 5 6 (Unaudited) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CHAPARRAL STEEL COMPANY AND SUBSIDIARIES August 31, 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 three month period ended August 31, 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 $.6 million in the three months ended August 31, 1994 and 1993, respectively. The amount of goodwill, net of accumulated amortization included in other assets was $72.4 million and $73 million at August 31, 1994 and May 31, 1994, respectively. Net income (loss) per common share is calculated based upon a weighted average of 29,712,000 and 29,679,000 shares outstanding at August 31, 1994 and 1993, respectively. 6 7 NOTE C - Inventories Inventories consist of the following:
August 31, May 31, 1994 1994 ---- ---- (In thousands) Finished goods $ 58,499 $ 72,946 Work in process 9,658 14,477 Raw materials: Scrap 12,087 10,407 Crushed cars 19 - Rolls 15,990 15,602 Supplies 14,615 14,878 LIFO adjustment (10,727) (10,727) -------- -------- $100,141 $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 for the three months ended August 31, 1993. 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 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 $.8 million was recorded in the first quarter 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 $1.5 million for severance pay is included in selling, general and administrative. 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 August 31, 1994, and the related condensed consolidated statements of income and cash flows for the three month periods ended August 31, 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 & Young LLP Dallas, Texas September 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 ended August 31, 1994 to the quarter ended August 31, 1993 RESULTS OF OPERATIONS An increase in average selling price of 5% coupled with an increase in shipments of 51,000 tons resulted in a $22.5 million increase in net sales in the three month period ended August 31, 1994 compared to the same quarter in the prior year. Shipments of 365,000 tons during the August 1994 quarter were the highest quarterly total in four years. It is anticipated that the strong demand for SBQ rounds and rebar will continue in the near-term. The market for structural products has improved slightly, but has not exhibited any encouraging long-term strength. The 5% improvement in average selling price reflects the general price increases put in place to offset the escalation in scrap costs in the prior year. Cost of sales increased $20.6 million to $105.9 million for the three month period ended August 31, 1994 compared to the same period in the prior year. The increase was caused by the 16% increase in shipments and an $18 increase in cost of sales per ton. Scrap prices stabilized during the summer of 1994, but were up 10% from the prior year quarter. Melt shop variable and conversion per ton costs increased slightly while combined rolling mill conversion costs were unchanged from the prior year quarter. Selling, general and administrative expense decreased $.6 million from the prior year quarter principally due to a one time $1.5 million charge for severance pay in the August 1993 quarter. The provisions for employee incentives increased $.4 million from the prior year due to increased profits. Other areas of administrative expense were slightly higher. Interest expense decreased slightly in the three month period ended August 31, 1994 compared to the same period 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. In August 1993, the Omnibus Budget Reconciliation Act of 1993 was signed into law and 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 was included in the income tax provision 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 positive movement in net income (loss) of $2.6 million was due principally to the increase in shipments and average selling price. The aforementioned $1.5 million adjustment for severance pay and the additional $1.4 million income tax provision in the prior year quarter, also contributed to the improvement in net income (loss). 9 10 CAPITAL RESOURCES AND LIQUIDITY Working capital increased $3.1 million to $98.3 million at August 31, 1994 from the previous fiscal year-end. Accounts receivable increased $6.3 million as August 1994 sales were improved over May 1994 levels. Inventories decreased $17.4 million as the Company's planned reduction resulted in finished goods inventory decreasing by 20%. Prepaid expenses increased $6 million from May 31, 1994 as a result of summer shutdown spending that will be amortized over the remainder of the fiscal year. During the first quarter of fiscal 1995, the Company reduced the outstanding amount of its short-term credit facilities by $5 million to a level of $10 million at August 31, 1994. The other components of current liabilities were virtually unchanged from the previous fiscal year- end. Cash provided by operations in the first quarter of fiscal 1995 increased by $15.5 million primarily due to the increase in net income (loss) of $2.6 million and the change in net cash provided by inventory of $11.9 million. As a result, cash and cash equivalents increased $4.6 million after the Company acquired $3.9 million of capital additions, repaid $2.9 million of long-term debt and paid cash dividends of $1.5 million. Capital expenditures for the quarter ended August 31, 1994 totaled $3.9 million and are estimated to be approximately $17 million in fiscal 1995; which represents normal replacement and technological 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 $360.5 million at August 31, 1994, consisted of $94.6 million of long-term debt and $265.9 million of stockholders' equity. The current portion of long-term debt totaled $16.7 million at August 31, 1994. The Company's average interest rate on long-term debt is 11%. The Company's total debt service is expected to be $28.6 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 if not renewed by the banks or the Company. The Company had maximum borrowings of $15 million at any one time under these arrangements during the first quarter of fiscal 1995. At August 31, 1994, the Company had $10 million of outstanding borrowings under these facilities. The Company anticipates that it will repay the outstanding amount of the short-term credit facility during the November 1994 quarter. The Company believes that it will be able to renew these credit facilities or negotiate similar arrangements with other financial institutions if they are deemed necessary. 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 its average selling price and cost per ton levels to remain virtually unchanged from fiscal 1994. Significant changes in average selling price 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 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 August 31, 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 October 7, 1994 /s/ Richard M. Fowler Richard M. Fowler Senior Vice-President & Chief Financial Officer October 7, 1994 /s/ Larry L. Clark Larry L. Clark Vice President - Controller 11 12 EXHIBIT INDEX EXHIBIT 11 -- Statement re: Computation of earnings per share EXHIBIT 15 -- Letter re: Unaudited interim financial information EXHIBIT 27 -- Financial Data Schedule EX-11 2 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE CHAPARRAL STEEL COMPANY AND SUBSIDIARIES
Three months ended August 31, 1994 1993 ---- ---- (In thousands except per share) AVERAGE SHARES OUTSTANDING Primary: Average shares outstanding 29,680 29,679 Stock options - treasury stock method using average market prices 32 A) - -------- --------- TOTALS 29,712 29,679 ======== ========= Fully diluted: Average shares outstanding 29,680 29,679 Stock options - treasury stock method using end of quarter market price if higher than average 32 A) - -------- --------- TOTALS 29,712 29,679 ======== ========= INCOME (LOSS) APPLICABLE TO COMMON STOCK Primary and fully diluted: Net income (loss) $ 1,753 $ (874) Add: Pre-September 1990 contingent price amortization 58 58 -------- --------- $ 1,811 $ (816) ======== ========= PER SHARE Net income (loss) per common share: Primary $ .06 $ (.03) ======== ========= Fully diluted $ .06 $ (.03) ======== =========
A) - Shares have been excluded as they are antidilutive. 12 EX-15 3 LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION 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 September 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 August 31, 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 & Young LLP Dallas, Texas October 5, 1994 13 EX-27 4 FINANCIAL DATA SCHEDULE
5 0000833226 CHAPARRAL STEEL COMPANY 1,000 3-MOS MAY-31-1995 AUG-31-1994 7,812 0 51,988 3,969 100,141 170,907 486,434 254,735 483,257 72,629 111,329 2,994 0 0 262,898 483,257 124,382 124,382 105,919 105,919 0 120 3,280 2,969 1,216 1,753 0 0 0 1,753 .06 .06
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