1
NEWS NORTHWESTERN (TM)
RELEASE STEEL AND WIRE COMPANY
121 WALLACE STREET, STERLING, ILLINOIS 61081
FOR IMMEDIATE RELEASE CONTACT: Timothy J. Bondy
Vice President and CFO
815/625-2500
Ext. 2331
COMPANY ANNOUNCES IMPROVED THIRD QUARTER RESULTS
COMPARED TO MOST RECENT TWO QUARTERS AND STRATEGIC
INITIATIVES TO IMPROVE COMPETITIVE POSITION
Sterling, Illinois - June 5, 1997 -- Northwestern Steel and Wire Company
(Nasdaq:NWSW) announced today improved operating results for the third quarter
ended April 30, 1997, compared with results for the first two quarters of
fiscal 1997. The Company also announced that its Board of Directors approved
new strategic initiatives that will result in the upgrading and modernization
of its Sterling, Illinois operations and, most likely, the permanent closing of
its Houston, Texas structural mill.
Sales were $171.7 million in the third quarter compared to $173.2 million
in the prior year. The Company recorded a net loss for the period of $0.6
million, or $.02 per share, versus net income of $3.6 million, or $.14 per
share, in the year ago period. For the nine months, sales were $460.6 million
compared to $483.3 million in the prior year. The Company incurred a net loss
of $4.8 million, or $.19 per share, in the current year compared to net income
of $10.7 million, or $.43 per share, last year.
In commenting on the third quarter results, Mr. Gildehaus said, "Operating
performance improved from the significantly depressed levels experienced in the
first two quarters of fiscal 1997, when losses of $.08 and $.09 per share,
respectively, were recorded. During the third quarter, pricing began to
improve for small structural products and wire rod. Although overall volume
increased compared to year ago levels, with higher volumes in semi-finished
steel and rod offset by lower beam shipments, average selling prices were lower
for most products."
2
Mr. Thomas A. Gildehaus, Chairman and Chief Executive Officer, said, "The
Board has authorized the Company to proceed with engineering and marketing
analyses to upgrade and modernize steel operations at the Sterling, Illinois
location. Capital expenditures over the next two years are expected to focus
primarily on our 24" and 14" rolling mills. These expenditures are directed
toward improving the productivity and cost effectiveness of these mills and,
coupled with previous improvements made to our steelmaking capability, should
significantly reduce the costs of products from these mills. Ongoing cost
reduction programs, coupled with our aggressive new partnership program with
the United Steelworkers of America (USWA), should also generate additional
productivity improvements and cost reductions. The Company will concentrate
the bulk of its resources over the next two years on the Sterling operations to
assure its quality and cost competitiveness in the years ahead."
"Unfortunately, market conditions today -- and for the foreseeable future
- -- are such that the Houston plant is not, and is unlikely to become, a
profitable, competitive source for structural steel. This situation has been
intensified by recently announced significant structural steel capacity
additions to the marketplace. We regret this situation, but must face reality
and take the actions necessary for the long-term benefit of our Company.
Significant losses were incurred at Houston in the first nine months of fiscal
1997. The third quarter would have been slightly profitable, excluding Houston
losses. We do not believe that the operating costs of the Houston plant, nor
the future required investments in this plant, can be recovered."
"We have notified the Houston employees that the Houston mill will, in all
likelihood, be closed. We have suspended making semi-finished steel for
Houston. However, the Company expects to fulfill all customer orders on the
books and will assist customers in locating alternate sources, including
Sterling, for product no longer available from Houston."
"Pursuant to our partnership agreement with the USWA, we have shared all
relevant information that led to this decision. We have also agreed to
cooperate with the USWA in undertaking additional work and analysis to be
jointly conducted over the next 30 days by the Company and the USWA, supported
by outside consultants recommended by the USWA, to determine what, if any,
additional actions might be taken to continue operations in Houston. Should
these studies result in an acceptable plan which would allow Houston to be a
long-term viable and profitable operation with an acceptable return on
investment, the Company would reconsider its conditional decision."
3
"Should the Company permanently close the Houston plant, the Company would
incur a non-recurring, mostly non-cash, pretax exit charge in the fourth
quarter ending July 31, 1997, currently estimated at between $95 and $105
million. Liquidation of Houston assets, net of closure costs, is expected to
generate a modest amount of cash, which will be used for debt reduction. The
Company has discussed with its banks the effects of the Houston closing on the
covenants within its bank credit agreement, and expects to amend the covenants
to more appropriately reflect business operations on a going forward basis."
Mr. Gildehaus concluded by saying, "As we look ahead, change is evident in
both the near term and longer term. Recent price increases in rod and small
structurals reflect the continued strength of that portion of our business.
However, price decreases were announced near the end of the quarter for beam
products. Our conditional decision to close Houston, further invest in the
Sterling steel operations and the announcements by our competitors of capacity
additions in the structural steel business, all challenge us to improve our
competitive position in the marketplace. We intend to continue our position as
a major source of structural and merchant bar products."
Except for historical information, matters discussed above contain forward
looking information and describe the Company's belief concerning future
business conditions outlook based on currently available information. The
Company has identified these "forward looking" statements by words such as
"should", "expects" and similar expressions. Risks and uncertainties which
could cause actual results or performance to differ materially from those
expressed in these statements include the following: volumes of production and
product shipments; changes in product mix and pricing; costs of scrap steel and
other raw material inputs; changes in domestic manufacturing capacity; the
level of non-residential construction and overall economic growth in the United
States; changes in legislative or regulatory requirements; and the level of
imported products in the Company's markets. The Company assumes no obligation
to update the information contained herein.
Founded in 1879, the Company is a major mini-mill producer of structural
steel components which include wide flange beams, channels, angles and merchant
bar, as well as rod and wire products which include nails, fencing, concrete
reinforcing mesh and other fabricated wire products. Structural products are
used in a wide variety of commercial, industrial and residential construction
applications, while rod and wire products are marketed to the construction and
agricultural industries, retail "do-it-yourself" outlets, distributors and
other wire manufacturers.