Slater Steel Inc. reported a loss before unusual items, interest, income taxes and discontinued operations of $74.1 million. Included in this amount is a $40.6 million provision related to the write-down of inventory and accounts receivable to net realizable value at Atlas Specialty Steels, Fort Wayne Specialty Alloys and Lemont. Approximately $67.5 million of the $74.1 million loss relates to these operations. This performance compares to operating earnings of $1.7 million in the corresponding quarter in 2002.
Slater's stainless steel bar operations, Atlas Specialty Steels and Fort Wayne Specialty Alloys, are in the process of being temporarily idled as the company does not have sufficient liquidity to fund the magnitude of losses that they were experiencing.
In addition, Lemont has been idled as Slater does not have adequate liquidity to ramp up operations and fund working capital at the facility. The company has initiated a process to solicit qualified buyers and/or investors for Atlas Specialty Steels and has commenced a process under section 363 of the U.S. Bankruptcy Code to sell Lemont.
Slater expects to commence a similar process in the near term for the sale of Fort Wayne Specialty Alloys.
"Slater continues to operate Hamilton Specialty Bar, Atlas Stainless Steels and Sorel Forge in the normal course of business and is making significant progress in developing a business plan for the restructuring or going concern sale of these operations," said Paul Kelly, president and CEO, Slater Steel Inc. "Our current focus is on achieving significant labor savings at Hamilton Specialty Bar and Atlas Stainless Steels, which is critical to Slater's ability to complete the restructuring." Excluding unusual items and income tax, these operations recorded a loss of approximately $6.6 million in the third quarter.
Slater's net loss in the third quarter of 2003 was $247.5 million, versus net earnings from continuing operations of $3.5 million in the same quarter a year earlier. In addition to the $40.6 million provision described above, Slater's third quarter net loss includes $173.2 million in unusual items related to the write-down of equipment and recording of costs connected with the idling of Atlas Specialty Steels, Fort Wayne Specialty Alloys and Lemont.
For the nine months of 2003, Slater's loss before unusual items, interest, income tax and discontinued operations was $110.9 million.
Consolidated sales for the quarter were $145.0 million, versus $169.2 million in the corresponding period a year earlier. The year-over-year decline in sales is attributed to a combination of weak market conditions and the effect of exiting the stainless steel bar business operations.
For the quarter the stainless steel group reported a segmented loss of $66.1 million, before asset impairment charges.
For the quarter the specialty carbon steel group recorded a segmented loss of $5.8 million, before asset impairment charges related to Lemont.
The specialty carbon group's results were negatively impacted by lower volumes, the power blackout in August, as well as rising scrap costs. While the company has scrap adjustment surcharges on a significant portion of its business, these surcharges did not fully offset the increase in scrap costs during the quarter.