-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KkpboIbeR3qn5Ds1AU2bGmfwoFVEVfN+BSquNVketpkqdgX4fqVdN84CAW3sXEaA Ge/WcW0+rNAa8qBImFVBFg== 0000830260-96-000034.txt : 19961118 0000830260-96-000034.hdr.sgml : 19961118 ACCESSION NUMBER: 0000830260-96-000034 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OREGON STEEL MILLS INC CENTRAL INDEX KEY: 0000830260 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 940506370 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09887 FILM NUMBER: 96663972 BUSINESS ADDRESS: STREET 1: 1000 BROADWAY BLDG STREET 2: 1000 S W BROADWAY, STE 2200 CITY: PORTLAND STATE: OR ZIP: 97205 BUSINESS PHONE: 5032239228 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON DC 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 -------------------------------------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------- --------------------- Commission File Number 1-9887 --------------------- OREGON STEEL MILLS, INC. (Exact name of registrant as specified in its charter) Delaware 94-0506370 - --------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1000 Broadway Building, Suite 2200, Portland, Oregon 97205 - --------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (503)223-9228 - --------------------------------------------------------------------------- (Registrant's telephone number, including area code) - --------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period 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 ------ ------ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 Par Value 25,693,471 ---------------------------- ------------------------------ Class Number of Shares Outstanding (as of October 31, 1996) 1 OREGON STEEL MILLS, INC. INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets September 30, 1996 (unaudited) and December 31, 1995....................................2 Consolidated Statements of Income (unaudited) Three months and nine months ended September 30, 1996 and 1995 ................................................3 Consolidated Statements of Cash Flows (unaudited) Nine months ended September 30, 1996 and 1995 ................................................4 Notes to Consolidated Financial Statements (unaudited)...............................5 - 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................7 - 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K...........................11 SIGNATURES ...........................................................11 2 OREGON STEEL MILLS, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
September 30, 1996 December 31, (Unaudited) 1995 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 2,229 $ 644 Trade accounts receivable, net 86,746 80,520 Inventories 134,895 141,310 Deferred tax asset 9,856 9,461 Other 9,369 4,845 --------- --------- Total current assets 243,095 236,780 --------- --------- Property, plant and equipment: Land and improvements 29,517 28,471 Buildings 37,362 37,126 Machinery and equipment 423,561 376,217 Construction in progress 224,151 171,487 --------- --------- 714,591 613,301 Accumulated depreciation (138,495) (118,147) --------- --------- 576,096 495,154 --------- --------- Excess of cost over net assets acquired 40,729 41,555 Other assets 37,358 31,777 --------- --------- $ 897,278 $ 805,266 ========= ========= LIABILITIES Current liabilities: Current portion of long-term debt $ 6,574 $ 4,576 Short-term debt 5,548 - Accounts payable 81,560 85,360 Accrued expenses 47,580 31,391 --------- --------- Total current liabilities 141,262 121,327 Long-term debt 294,216 312,679 Deferred employee benefits 17,894 17,044 Other deferred liabilities 35,130 36,331 Deferred income taxes 22,337 15,470 --------- --------- 510,839 502,851 --------- --------- Minority interests 36,354 35,625 --------- --------- Commitments and contingencies (Notes 4 and 5) STOCKHOLDERS' EQUITY Common stock 257 194 Additional paid-in capital 226,015 150,826 Retained earnings 127,265 119,302 Cumulative foreign currency translation adjustment (3,452) (3,532) --------- --------- 350,085 266,790 --------- --------- $ 897,278 $ 805,266 ========= ========= The accompanying notes are an integral part of the consolidated financial statements.
3 OREGON STEEL MILLS, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except tonnage and per share amounts) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------ ------------------------------- 1996 1995 1996 1995 ------------- ---------- ------------ ------------ Sales $ 187,671 $ 188,479 $ 567,217 $ 530,603 Costs and expenses: Cost of sales 161,600 170,681 489,796 472,340 Selling, general and administrative expenses 10,971 11,401 33,475 32,652 Profit Participation and ESOP contribution 2,255 592 5,854 3,985 ----------- ----------- ----------- ----------- Operating income 12,845 5,805 38,092 21,626 Other income (expense): Interest and dividend income 189 123 421 248 Interest expense (3,462) (2,990) (10,133) (7,112) Loss on termination of interest rate swap agreements (Note 7) - - (1,233) - Minority interests 203 93 (695) 158 Other, net 195 53 756 661 ----------- ----------- ----------- ----------- Income before income taxes 9,970 3,084 27,208 15,581 Income tax expense (3,614) (1,118) (10,211) (5,959) ----------- ----------- ----------- ----------- Net income $ 6,356 $ 1,966 $ 16,997 $ 9,622 =========== =========== =========== =========== Primary and fully diluted net income per common and common equivalent share $.24 $.10 $.76 $.48 Dividends declared per common share $.14 $.14 $.42 $.42 Weighted average common shares and common share equivalents outstanding 26,266 20,020 22,346 20,015 Tonnage sold 373,300 372,900 1,123,300 1,045,200 The accompanying notes are an integral part of the consolidated financial statements.
4 OREGON STEEL MILLS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended September 30, --------------------------------- 1996 1995 ---- ---- Cash flows from operating activities: Net income $ 16,997 $ 9,622 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 21,523 17,934 Deferred income tax provision 7,202 4,984 Minority interests' share of income (loss) 729 (123) Other, net 2,420 (1,366) Changes in current assets and liabilities 25,689 49,533 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 74,560 80,584 --------- --------- Cash flows from investing activities: Additions to property, plant and equipment (120,058) (119,553) Other, net (156) (440) --------- --------- NET CASH USED BY INVESTING ACTIVITIES (120,214) (119,993) --------- --------- Cash flows from financing activities: Net borrowings (payments) under Canadian bank revolving loan facility (1,165) 766 Proceeds from long-term bank debt 154,800 210,600 Payments on long-term debt (399,552) (159,180) Net proceeds from issuance of 11% First Mortgage Notes 226,995 - Net proceeds from issuance of common stock 75,252 - Dividends paid (9,035) (8,151) Other, net (56) (232) --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 47,239 43,803 --------- --------- Effects of foreign currency exchange rate changes on cash - 171 --------- --------- Net increase (decrease) in cash and cash equivalents 1,585 4,565 Cash and cash equivalents at beginning of period 644 5,039 --------- --------- Cash and cash equivalents at end of period $ 2,229 $ 9,604 ========= ========= Supplemental disclosures of cash flow information: Cash paid for: Interest $ 19,138 $ 10,902 Income taxes $ 6,729 $ 1,620 NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES: At September 30, 1996 and September 30, 1995, the Company had financed property, plant and equipment with accounts payable of $9.7 million and $23.7 million, respectively. The accompanying notes are an integral part of the consolidated financial statements.
5 OREGON STEEL MILLS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation --------------------- The consolidated financial statements include the accounts of Oregon Steel Mills, Inc. and its subsidiaries (the "Company"). All significant intercompany balances and transactions have been eliminated. Certain previously reported amounts have been reclassified to conform with the current period presentation. The unaudited financial statements include all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of the interim periods. Results for an interim period are not necessarily indicative of results for a full year. Reference should be made to the Company's 1995 Annual Report on Form 10-K, as amended, for additional disclosures including a summary of significant accounting policies. 2. Inventories ----------- Inventories consist of: September 30, December 31, 1996 1995 ------------- ------------- (In thousands) Raw materials $ 35,239 $ 31,520 Semi-finished product 38,931 51,770 Finished product 37,386 38,111 Stores and operating supplies 23,339 19,909 -------- -------- Total inventory $134,895 $141,310 ======== ======== 3. Common Stock ------------ On October 31, 1996, the Board of Directors declared a quarterly cash dividend of 14 cents per share to be paid November 30, 1996, to stockholders of record as of November 15, 1996. See Note 6 for discussion of issuance of common stock. 4. Contingencies ------------- ENVIRONMENTAL. The Company's 87 percent owned New CF&I, Inc. subsidiary owns a 95.2 percent interest in CF&I Steel, L.P. ("CF&I") which owns the Pueblo, Colorado steel mill. In connection with CF&I's acquisition of certain assets from CF&I Steel Corporation in 1993, CF&I established a reserve of $36.7 million for environmental remediation. The Colorado Department of Public Health and Environment issued a 10-year, post-closure permit with two ten-year renewals to CF&I which became effective on October 30, 1995. The permit contains a schedule for corrective actions to be completed which is substantially reflective of a straight-line rate of expenditure over 30 years. At September 30, 1996, CF&I had a reserve of $35.2 million related to this remediation, of which $33.3 million is classified as non-current in other deferred liabilities in the consolidated balance sheet. 5. Commitments ----------- During 1994 the Company began construction of various capital improvement projects at both its Portland, Oregon and Pueblo, Colorado steel mills. Commitments for expenditures related to the completion of these projects were $30.3 million at September 30, 1996. 6 6. Public Offerings and Refinancing -------------------------------- On June 19, 1996, the Company completed public offerings of 6,000,000 shares of common stock at $12.75 per share and $235 million principal amount of 11% First Mortgage Notes (the "Notes") due 2003. On July 9, 1996, the Company issued an additional 271,857 shares of common stock at $12.75 per share pursuant to an underwriter's over-allotment option. The proceeds from these offerings were $302.2 million, net of expenses and underwriting discounts. The Notes are guaranteed by two subsidiaries of the Company, New CF&I, Inc. and CF&I ("Guarantors"). The Notes and the guarantees are secured by a lien on substantially all the property, plant and equipment and certain other assets of the Company and the Guarantors. The Notes contain potential restrictions on new indebtedness and various types of disbursements, including dividends, based on the Company's net income in relation to its fixed charges, as defined. The proceeds from the common stock and notes offerings were used to repay in full borrowing under the Company's bank credit agreement (the "Old Credit Agreement"). The remaining proceeds were used for capital expenditures and general corporate purposes. Concurrent with the public offerings, the Company amended and restated the Old Credit Agreement to establish a $125 million revolving credit facility (the "Amended Credit Agreement") collateralized by accounts receivable and inventory and guaranteed by the Guarantors. The Amended Credit Agreement contains various restrictive covenants including a minimum tangible net worth, minimum interest coverage ratio, and a maximum debt to total capitalization ratio. Borrowings are limited to an amount equal to specified percentages of accounts receivable and inventory. 7. Interest Rate Swap Agreements ----------------------------- During June 1996, the Company incurred a $1.2 million pre-tax loss for terminating certain interest rate swap agreements. The swap agreements were terminated in conjunction with the repayment of borrowings under the Old Credit Agreement. At September 30, 1996, the Company had two interest rate swap agreements outstanding with commercial banks, having a notional amount of $25 million. These interest rate swap agreements were kept in force to reduce the impact of unfavorable changes in interest rates on bank borrowings. 7 OREGON STEEL MILLS, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General - ------- The following information contains forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties and actual results could differ materially from those projected. Such risks and uncertainties include, but are not limited to, competitive products and pricing, as well as fluctuations in demand; potential equipment malfunction, plant construction and start-up difficulties, repair delays and general business and economic conditions. The consolidated financial statements include the accounts of Oregon Steel Mills, Inc. and its subsidiaries, wholly-owned Camrose Pipe Corporation ("CPC") which owns a 60 percent interest in Camrose Pipe Company ("Camrose"), 87 percent owned New CF&I, Inc. ("New CF&I") which owns a 95.2 percent interest in CF&I Steel, L.P. ("CF&I"), and certain other insignificant subsidiaries. The Company is organized into two business units known as the Oregon Steel Division and the CF&I Steel Division. The Oregon Steel Division is centered on the Company's steel plate minimill in Portland, Oregon. It includes the Company's large diameter pipe finishing facility in Napa, California, the large diameter and electric resistance welded pipe facility in Camrose, Alberta, and the steel plate rolling mill in Fontana, California until the first quarter of 1995 when it ceased shipments. The CF&I Steel Division consists of the steelmaking and finishing facilities of CF&I located in Pueblo, Colorado, as well as certain related operations. Results of Operations - --------------------- The following table sets forth, by division, tonnage sold, sales and average selling price per ton:
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ------------------------ 1996 1995 1996 1995 ------- -------- --------- ---------- Total tonnage sold: Oregon Steel Division: Plate 68,000 60,400 219,200 225,500 Welded pipe 80,000 89,600 209,500 196,800 Semi-finished 3,200 69,500 3,200 170,500 ---------- ---------- ---------- ---------- Sub-Total 151,200 219,500 431,900 592,800 ---------- ---------- ---------- ---------- CF&I Steel Division: Rail 43,400 47,500 200,200 190,300 Rod/Bar/Wire 107,700 64,900 324,600 166,300 Seamless Pipe 39,100 29,900 113,600 84,100 Semi-finished 31,900 11,100 53,000 11,700 ---------- ---------- ---------- ---------- Sub-Total 222,100 153,400 691,400 452,400 ---------- ---------- ---------- ---------- Total 373,300 372,900 1,123,300 1,045,200 ========== ========== ========== ========== Sales (in thousands): Oregon Steel Division $ 92,403 $ 117,560 $ 267,048 $ 309,860 CF&I Steel Division 95,268 70,919 300,169 220,743 ---------- ---------- ---------- ---------- Total $ 187,671 $ 188,479 $ 567,217 $ 530,603 ========== ========== ========== ========== Average selling price per ton: Oregon Steel Division $ 611 $ 536 $ 618 $ 523 CF&I Steel Division $ 429 $ 462 $ 434 $ 479(1) Average $ 503 $ 505 $ 505 $ 504(1) (1) Excludes insurance proceeds of approximately $4 million received in the second quarter of 1995 as reimbursement of lost profits resulting from lost production and startup delays at CF&I caused by an explosion that occurred during the third quarter of 1994.
8 OREGON STEEL MILLS, INC. Sales decreased 0.4 percent to $187.7 million in the third quarter of 1996 and increased 6.9 percent to $567.2 million for the first nine months of 1996, compared to the corresponding 1995 periods. Shipments increased 0.1 percent to 373,300 tons in the third quarter of 1996 and increased 7.5 percent to 1,123,300 tons in the first nine months of 1996, compared to the corresponding 1995 periods. The nine month period increase in sales and shipments was primarily due to increased shipments of seamless pipe, rod, bar and semi-finished products manufactured by the CF&I Steel Division, offset in part by the decrease of sales of semi-finished products by the Oregon Steel Division. Rod and bar sales of $6.7 million and $26.0 million and shipments of 20,600 and 78,700 tons were capitalized during the three and nine month periods ended September 30, 1995 when the rod and bar mill was in its pre-operational phase which ended July 31, 1995. Selling prices decreased $2 to $503 per ton for the third quarter of 1996 and increased $1 to $505 per ton for the first nine months of 1996, compared to the corresponding 1995 periods. The changes in average selling price were due to several offsetting factors, principally increased sales of rod and bar products in 1996 at the CF&I Steel Division, which have significantly lower selling prices than other finished products, and the decrease of sales of semi-finished products at the Oregon Steel Division which generally have the lowest selling price of any of the Company's products. Of the $800,000 sales decrease in the third quarter of 1996 compared to 1995, $1.0 million was the result of lower average selling prices offset by $200,000 resulting from volume increases. Of the $36.6 million sales increase for the first nine months of 1996 compared to 1995, $1.3 million was the result of higher average selling prices and $39.3 million was the result of volume increases, offset by the $4 million of 1995 insurance proceeds not recurring in 1996. The Oregon Steel Division shipped 151,200 and 431,900 tons of product at average selling prices of $611 and $618 per ton for the three month and nine month periods ended September 30, 1996, respectively, compared to 219,500 and 592,800 tons of product at average selling prices of $536 and $523 per ton, during the corresponding 1995 periods. The decline in shipments, as well as the increase in average selling prices, were primarily due to the decreased shipments of semi-finished products during 1996. The Oregon Steel Division shipped 3,200 tons of semi-finished products during the three and nine month periods ended September 30, 1996, compared to 69,500 and 170,500 tons during the corresponding 1995 periods. Also, the first quarter of 1995 included 15,400 tons of plate shipped from the now closed Fontana plate mill. The CF&I Steel Division shipped 222,100 and 691,400 tons of product at an average selling price of $429 and $434 per ton during the three month and nine month periods ended September 30, 1996, respectively, compared to 153,400 and 452,400 tons of product at an average selling price of $462 and $479 per ton during the corresponding 1995 periods. The increased shipment level and decrease in average selling prices were primarily due to increased shipments of rod, bar and semi-finished products in 1996 compared to 1995. Rod and bar shipments were 92,200 and 278,500 tons during the three and nine month periods ending September 30, 1996, respectively, compared to 48,900 and 118,900 tons in the corresponding 1995 periods. Rod and bar sales of $6.7 million and $26.0 million and shipments of 20,600 and 78,700 tons were capitalized during the three and nine month periods ended September 30, 1995 when the rod and bar mill was in its pre-operational phase which ended July 31, 1995. Semi-finished product shipments were 31,900 and 53,000 tons during the three and nine month periods ending September 30, 1996, respectively, compared to 11,100 and 11,700 tons for the corresponding 1995 periods. Gross profit percentages for the three month and nine month periods ended September 30, 1996 were 13.9 and 13.6 percent, respectively, compared to 9.4 and 11.0 percent for the corresponding 1995 periods. The gross profit improvement in 1996 compared to 1995 was due to improved product mix and lower manufacturing costs of producing plate and pipe at the Oregon Steel Division, and increased shipments of seamless pipe products and higher selling prices for semi-finished and seamless pipe products at the CF&I Steel Division. These gross profit improvements were partially offset by higher costs and reduced shipments due to an outage of the ladle refining furnace at the CF&I Steel Division during June 1996 as a result of a mechanical failure. 9 OREGON STEEL MILLS, INC. During September 1996, CF&I lost the use of one of the two main transformers that supply electricity to its melt shop. Full electrical power is expected to be restored by early December 1996. CF&I's steel production has been reduced to approximately 65 percent of normal production capability. CF&I will use its remaining steelmaking capabilities for its rail, seamless pipe and semi-finished products and will purchase billets for rod and bar products. As a result of the lack of feedstock, the rod and bar mill ceased operations on October 12 and is scheduled to resume production in mid-November when sufficient purchased billets are expected to be received. The Company expects that the reduced production levels at CF&I will adversely affect the results of operations of the Company for the fourth quarter of 1996. However, the affects of the outage will be partially mitigated by reimbursement of lost profits by the business interruption insurance carrier. Selling, general and administrative ("SG&A") expenses for the three and nine month periods ended September 30, 1996 decreased $430,000 and increased $823,000, respectively, from the corresponding 1995 periods. SG&A expenses decreased as a percentage of sales to 5.8 and 5.9 percent in the three and nine month periods ended September 30, 1996, from 6.0 and 6.2 percent for the corresponding 1995 periods. The percentage decreases are primarily due to cost controls and increased sales for the first nine months of 1996. The profit participation and ESOP contribution expense for the three and nine month periods ended September 30, 1996 increased compared to the corresponding 1995 periods, reflecting the increased profitability in 1996 versus 1995 at the Oregon Steel Division. Total interest costs for the three and nine month periods ended September 30, 1996 were $9.4 million and $24.2 million, respectively, compared to $5.6 million and $15.8 million for the corresponding 1995 periods. The higher interest cost is primarily the result of the issuance of $235 million principal amount First Mortgage Notes in June 1996 to provide funding for the Company's capital expenditure programs. Capitalized interest for the three and nine month periods ended September 30, 1996 was $5.9 million and $14.1 million, respectively, compared to $2.6 million and $8.7 million for the corresponding 1995 periods. The Company's effective income tax rates were 36 and 38 percent for the three and nine month periods ended September 30, 1996, respectively, compared to 36 and 38 percent for the corresponding 1995 periods. Liquidity and Capital Resources - ------------------------------- Cash flow from operations for the nine months ended September 30, 1996 was $74.6 million compared to $80.6 million in the corresponding 1995 period. The major items affecting this $6.0 million decrease were a higher increase in accounts receivable ($13.5 million) and a lower decrease in inventories ($10.6 million). These cash uses were partially offset by increased net income ($7.4 million), increased depreciation and amortization ($3.6 million), and an increase in accrued expenses ($5.1 million). Net working capital at September 30, 1996 decreased $13.6 million from December 31, 1995 due to a $19.9 million increase in current liabilities, principally accrued expenses and short-term debt, offset by a $6.3 million increase in current assets, principally accounts receivable and other current assets. On June 19, 1996, the Company completed public offerings of an additional 6,000,000 shares of common stock at $12.75 per share and $235 million principal amount of 11% First Mortgage Notes (the "Notes") due 2003. On July 9, 1996, the Company issued an additional 271,857 shares of common stock at $12.75 per share pursuant to an underwriter's over-allotment option. The proceeds from these offerings were $302.2 million, net of expenses and underwriting discounts. The Notes are guaranteed by two subsidiaries of the Company, New CF&I and CF&I ("Guarantors"). The Notes and the guarantees are secured by a lien on substantially all the property, plant and equipment and certain other assets of the Company and the Guarantors. The Notes contain potential restrictions on new indebtedness and various types of disbursements, including dividends, based on the Company's net income in relation to its fixed charges, as defined. 10 OREGON STEEL MILLS, INC. The proceeds from the common stock and notes offerings were used to repay in full borrowing under the Company's bank credit agreement (the "Old Credit Agreement"). The remaining proceeds were used for capital expenditures and general corporate purposes. Concurrent with the public offerings, the Company amended and restated the Old Credit Agreement to establish a $125 million revolving credit facility (the "Amended Credit Agreement") collateralized by accounts receivable and inventory and guaranteed by the Guarantors. The Amended Credit Agreement contains various restrictive covenants including a minimum tangible net worth, minimum interest coverage ratio, and a maximum debt to total capitalization ratio. Borrowings are limited to an amount equal to specified percentages of accounts receivable and inventory. As of September 30, 1996, $14.5 million was outstanding under the Amended Credit Agreement. Term debt of $67.5 million was incurred by CF&I as part of the purchase price of the Pueblo steel mill on March 3, 1993. This debt is uncollateralized and is payable over ten years with interest at 9.5 percent. As of September 30, 1996, the outstanding balance on the debt was $51.3 million, of which $44.7 million was classified as long-term. The Company has an uncollateralized and uncommitted revolving line of credit with a bank which may be used to support issuance of letters of credit, foreign exchange contracts and interest rate hedges. At September 30, 1996, $13.7 million was restricted under outstanding letters of credit. In addition, the Company has a $4 million uncollateralized and uncommitted revolving credit line with a bank which is restricted to use for letters of credit. At September 30, 1996, $400,000 was restricted under outstanding letters of credit. Camrose maintains a $15 million (Canadian dollars) revolving credit facility with a bank, the proceeds of which may be used for working capital and general corporate purposes. The facility is collateralized by substantially all of the assets of Camrose and borrowings under this facility are limited to an amount equal to specified percentages of Camrose's eligible trade accounts receivable and inventories. The facility expires on January 3, 1997. As of September 30, 1996, Camrose had $5.5 million outstanding under the facility. The Company expects that anticipated needs for working capital and the capital expenditure program will be met from existing cash balances, funds generated from operations and available borrowings under its Amended Credit Facility. CAPITAL EXPENDITURES. During the first nine months of 1996 the Company expended approximately $16.1 million, excluding capitalized interest, on the capital program at CF&I and $68.3 million, excluding capitalized interest, on the Steckel combination rolling mill (the "Combination Mill") at the Portland steel mill. In addition to the Combination Mill, the Company has expended approximately $3.9 million during the first nine months of 1996 for capital projects at its Oregon Steel Division manufacturing facilities for recurring upgrade projects to the present facilities and equipment. The Company encountered delays in the completion of the Combination Mill, as well as a number of associated problems including significant claims and disputes concerning the construction of the Mill. As a result, the Company has terminated its contract with the general contractor and, in an effort to complete the work as soon as possible, has engaged other contractors to finish the project. The Company estimates the cost of the Combination Mill (excluding capitalized interest) will be approximately $230 million, $20 million more than the previous estimate. The Company expects to recover this additional cost together with other damages from the original contractor. The original contractor disputes the Company's claim and believes it may be owed additional amounts. The Combination Mill is now expected to begin startup operation in the first quarter of 1997 and is expected to reach full production capacity in the first quarter of 1998. 11 OREGON STEEL MILLS, INC. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K --------------------------------- (a) Exhibits 11.0 Statement Regarding Computation of Per Share Earnings 27.0 Financial Data Schedule (b) Reports on Form 8-K On July 26, 1996, the Company filed Form 8-K in which the Company dismissed its independent accountants, Coopers & Lybrand, LLP, as of July 25, 1996. On July 31, 1996, a Form 8-K/A was filed with the response letter of Coopers & Lybrand, LLP. On August 1, 1996, the Company filed Form 8-K in which the Company engaged Price Waterhouse LLP as independent accountants as of July 25, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OREGON STEEL MILLS, INC. Date: November 11, 1996 /s/ Christopher D. Cassard --------------------------------- Christopher D. Cassard Corporate Controller (Principal Accounting Officer) EX-11 2 OREGON STEEL MILLS, INC. EXHIBIT 11 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (In thousands, except per share data amounts)
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 1996 1995 1996 1995 ----- ---- ---- ---- Weighted average number of common shares outstanding 25,668 19,422 21,748 19,417 Common stock equivalents arising from 598 shares of stock to be issued March 2003 598 598 598 598 ------- ------- ------- ------- 26,266 20,020 22,346 20,015 ======= ======= ======= ======= Net income $ 6,356 $ 1,966 $16,997 $ 9,622 ======= ======= ======= ======= Primary and fully diluted net income per common and common equivalent share $.24 $.10 $.76 $.48 ==== ==== ==== ====
EX-27 3
5 1000 9-MOS DEC-31-1996 SEP-30-1996 2229 0 89345 2599 134895 243095 714591 138495 897278 141262 235000 0 0 257 349828 897278 567217 567217 489796 489796 0 0 10133 27208 10211 16997 0 0 0 16997 .76 .76
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