SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/x/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Steel of West Virginia
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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May 9, 1997
Dear Stockholder:
Don't be fooled. CPT Holdings, Inc. is acting in its own best interests, not
yours. The simple fact is that CPT's proxy solicitation is designed to try to
force the sale of your Company at the wrong time, for a grossly inadequate
price, in order to eliminate SWVA as a competitor of CPT. Vote AGAINST CPT's
proxy proposal, or simply discard CPT's blue proxy card. CPT's proxy proposal
will deny you the substantial value currently being created, and will benefit
only CPT.
We believe that stockholders should keep the following points in mind:
1. The CPT proposal is poorly timed and not in the best interests of current
stockholders. The benefit of all future earnings growth would go to CPT,
NOT current stockholders.
Your Company's historically cyclical markets are improving. Net
income for the most recent quarter was $1,545,000 ($.26 per share)
as compared to $14,000 ($.00 per share) for the previous year.
We are currently entering a significant new market, the manufactured
housing market, which we believe is over 300,000 tons per year.
Initial customer response has been very positive.
The Company's expansion and modernization program, scheduled to be
completed late this year, is expected to expand SWVA's range of
products, improve product quality, reduce operating costs and
increase the plant's rolling capacity approximately 60%, to over
420,000 tons per year.
As a result of the above, your Company will have the capacity to
generate substantially higher net income in 1998. To sell now, at
the grossly inadequate price suggested by CPT, would not be in your
best interests as a stockholder, since you would not benefit from
future earnings growth; the benefit of all future earnings growth
would go to CPT, not current stockholders.
2. CPT is highly leveraged and historically unprofitable. There are no
synergies to the proposed combination, only risks.
CPT states in its proxy material that "You should know that since its
acquisition by CPT in 1995, J&L has met its own debt obligations
without fail." Not true. As of December 31, 1996, J&L (CPT's
steel manufacturing subsidiary, with which CPT wants SWVA to
merge) was not in compliance with its operating cash flow and total
debt service covenants with its senior and subordinated lenders.
CPT states in its proxy material that "CPT knows how to structure a
balance sheet to support a healthy and growing company, and we have
done so many times." However, as of December 31, 1996, CPT's balance
sheet showed approximately $60 million of debt, and a shareholders'
deficit of almost $10 million. Since being purchased by CPT, J&L
continues to lose money.
CPT states in its proxy material that "...the companies would benefit
from a combination of J&L and SWVA. We would maximize production
efficiencies through improved asset utilization." In fact, there are
no synergies to the proposed combination. J&L has no melt shop and a
very old rolling mill. On the other hand, upon the completion of
SWVA's expansion and modernization program, scheduled for late this
year, your Company will operate a world-class facility capable of
making in one location all of the beams (in both quantity and type)
that SWVA and J&L currently produce at two sites. To date, your
Company has already spent, or committed, over $19,000,000 of the
$28,000,000 this program is projected to cost.
J&L operates an old, unprofitable mill, and will, in the opinion of
the Board, have great difficulty in remaining a viable competitor
after completion of SWVA's expansion and modernization program. We
agree with the analyst who surmised in American Metal Market that
CPT's offer may have been made "in a panicky attempt to prevent Steel
of West Virginia from usurping J&L Structural's market".
3. Your Board of Directors is committed to maximizing shareholder value.
Your Board believes that the Company's current strategy will result
in substantially enhanced shareholder value.
The proposed amendments to the Company's Certificate of Incorporation
are not intended to entrench anyone, but only to discourage
disruptive tactics and takeovers at unfair prices, such as that
proposed by CPT.
Your Board is fully aware of its fiduciary duty, and is always
willing to meet and listen to responsible proposals. To protect the
Company and its stockholders,
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however, we require that all parties interested in making such a
proposal, including CPT, execute a customary confidentiality and
standstill agreement. We continue to insist upon this reasonable and
customary protection.
Once again, don't be fooled. CPT is acting in its own best interests, not
yours. The simple fact is that CPT is trying to force the sale of your Company
at the wrong time, for a grossly inadequate price. The tactic is designed to
eliminate SWVA as a competitor of CPT, and would deny you, a stockholder, the
substantial value currently being created.
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| DO NOT SIGN OR RETURN CPT'S BLUE PROXY CARD - |
| SIMPLY THROW IT AWAY |
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The Board will continue to work in the best interests of the Company and its
stockholders. Thank you for your continued support.
ON BEHALF OF THE BOARD OF DIRECTORS
Any Forward Looking Statements contained herein are subject to the section on
Forward Looking Statements contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, including the following risk
factors set forth therein: the cyclical and capital intensive nature of the
industry; pressure resulting from foreign and domestic competition; reduction
in demand for the Company's products and industry pricing; volatility of raw
material costs, especially steel scrap, resulting in reduced profit margins;
excess industry capacity resulting in reduced profit margins; cost of
compliance with environmental regulations; and management's estimates of niche
market data. In addition, the Forward Looking Statements contained herein are
also subject to the timely completion of the modernization and expansion
program; the Company's ability to effectively integrate new equipment; the
Company's ability to penetrate new markets; and maintenance of margins.
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JUDGE FOR YOURSELF WHETHER CPT'S BALANCE SHEET
COULD SUPPORT A HEALTHY AND GROWING COMPANY
SUMMARY BALANCE SHEET COMPARISON
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(In thousands)
As of December 31, 1996
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Steel of West CPT
Virginia, Inc.* Holdings, Inc.**
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Total Current Assets $27,227 $16,151
Total Assets $79,299 $66,257
Total Current Liabilities $12,166 $15,621
Long-Term Debt $10,975 $57,594
Total Liabilities $30,292 $73,615
Retained Earnings (Accumulated Deficit) $33,792 ($15,677)
Total Stockholders' Equity (Deficit) $49,007 ($9,864)
RATIO ANALYSIS
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Current Ratio 2.24 1.03
Negative
Long Term Debt/Equity 22.4% Equity
Long Term Debt/Total Assets 13.8% 86.9%
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* Derived from the balance sheet contained in the financial statements of
Steel of West Virginia, Inc. in its Annual Report on Form 10-K for the
year ended December 31, 1996.
** Derived from the balance sheet contained in the financial statements of
CPT Holdings, Inc. in its Quarterly Report on Form 10-Q for the period
ended December 31, 1996.
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