-----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, WH10UHNyhOFzG6btcHWf+ncsm2yW6DruCuuygyIzuk9kv50/qojBPGdEImbj09x5 IfgCzc4VY8UPBrmKAHVFOA== 0000949111-00-000053.txt : 20000516 0000949111-00-000053.hdr.sgml : 20000516 ACCESSION NUMBER: 0000949111-00-000053 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: SEC FILE NUMBER: 001-09887 FILM NUMBER: 634560 BUSINESS ADDRESS: STREET 1: 1000 BROADWAY BLDG STREET 2: 1000 S W BROADWAY, STE 2200 CITY: PORTLAND STATE: OR ZIP: 97205 BUSINESS PHONE: 5032239228 MAIL ADDRESS: STREET 1: 1000 SW BROADWAY STREET 2: PO BOX 5368 CITY: PORTLAND STATE: OR ZIP: 97205 10-Q 1 FORM 10-Q - OREGON STEEL MILLS, INC. 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 March 31, 2000 ------------------------------------------------ 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 S.W. Broadway, Suite 2200, Portland, Oregon 97205 - ------------------------------------------------------------------------------- (Address of principal executive office) (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 Section 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 25,776,804 ---------------------------- ------------------------------- Class Number of Shares Outstanding (as of April 27, 2000) OREGON STEEL MILLS, INC. INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets March 31, 2000 (unaudited) and December 31, 1999................................ 2 Consolidated Statements of Income (unaudited) Three months ended March 31, 2000 and 1999........................................ . 3 Consolidated Statements of Cash Flows (unaudited) Three months ended March 31, 2000 and 1999...... . 4 Notes to Consolidated Financial Statements (unaudited) ..................................... 5 - 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...........8 - 11 Item 3. Quantitative and Qualitative Disclosures about Market Risk..........................................11 PART II. OTHER INFORMATION Item 1. Legal Proceedings .................................. 12 Item 4. Submission of Matters to a Vote of the Security Holders..............................................12 Item 6. Exhibits and Reports on Form 8-K.....................12 OREGON STEEL MILLS, INC. CONSOLIDATED BALANCE SHEETS (In thousands) March 31, December 31, 2000 1999 ----------- ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents $ 5,832 $ 9,270 Trade accounts receivable, net 68,429 62,547 Inventories 108,633 122,683 Deferred tax asset 9,242 9,245 Other 3,965 4,460 --------- -------- Total current assets 196,101 208,205 --------- -------- Property, plant and equipment: Land and improvements 29,800 29,383 Buildings 50,445 50,426 Machinery and equipment 756,679 756,897 Construction in progress 19,083 18,817 --------- -------- 856,007 855,523 Accumulated depreciation (254,663) (247,528) --------- -------- 601,344 607,995 --------- -------- Costs in excess of net assets acquired, net 34,374 34,636 Other assets 25,984 26,418 --------- -------- $ 857,803 $877,254 ========= ======== LIABILITIES Current liabilities: Current portion of long-term debt $ 8,234 $ 7,861 Accounts payable 54,943 58,451 Accrued expenses 40,073 35,348 --------- -------- Total current liabilities 103,250 101,660 Long-term debt 298,325 298,329 Deferred employee benefits 22,058 21,530 Environmental liability 32,645 32,645 Deferred income taxes 31,194 38,186 --------- -------- 487,472 492,350 --------- -------- Minority interests 29,317 32,502 --------- -------- Contingencies (Note 6) STOCKHOLDERS' EQUITY Common stock 258 258 Additional paid-in capital 227,584 227,584 Retained earnings 119,675 130,958 Accumulated other comprehensive income: Cumulative foreign currency translation adjustment (6,503) (6,398) --------- --------- 341,014 352,402 --------- -------- $ 857,803 $877,254 ========= ======== The accompanying notes are an integral part of the consolidated financial statements. -2- OREGON STEEL MILLS, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except tonnage and per share amounts) (Unaudited) Three Months Ended March 31, ---------------------------- 2000 1999 ---------- --------- Sales $ 164,903 $ 239,655 --------- --------- Costs and expenses: Cost of sales 161,642 198,317 Selling, general and administrative expenses 12,611 14,030 Profit participation and other incentive compensation 165 3,044 --------- --------- 174,418 215,391 --------- --------- Operating income (loss) (9,515) 24,264 Other income (expense): Interest and dividend income 119 78 Interest expense, net (8,506) (9,613) Minority interests 447 (1,093) Other, net 62 207 --------- --------- Income (loss) before income taxes (17,393) 13,843 Provision for income tax benefit (expense) 6,626 (5,432) --------- --------- Net income (loss) $ (10,767) $ 8,411 ========= ========= Basic and diluted net income (loss) per share $(.41) $.32 Dividends declared per common share $.02 $.14 Weighted average common shares and common share equivalents outstanding 26,375 26,375 Tonnage sold 431,500 457,900 The accompanying notes are an integral part of the consolidated financial statements. -3- OREGON STEEL MILLS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended March 31, ---------------------------- 2000 1999 --------- --------- Cash flows from operating activities: Net income (loss) $(10,767) $ 8,411 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 10,890 10,970 Deferred income tax provision (6,989) 3,105 Minority interests' share of income (447) 1,093 Other, net -- (55) Changes in operating assets and liabilities 10,779 11,651 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 3,466 35,175 -------- -------- Cash flows from investing activities: Additions to property, plant and equipment (4,406) (3,696) Other, net 492 (1,629) -------- -------- NET CASH USED BY INVESTING ACTIVITIES (3,914) (5,325) -------- -------- Cash flows from financing activities: Net payments under Canadian bank revolving loan facility (20) (3,883) Proceeds from long-term bank debt 71,680 52,900 Payments on long-term debt (64,539) (71,399) Repurchase of bonds (6,750) -- Dividends paid (516) (3,609) Minority portion of subsidiary's distribution (2,739) (5,264) -------- -------- NET CASH USED BY FINANCING ACTIVITIES (2,884) (31,255) -------- -------- Effects of foreign currency exchange rate changes on cash (106) 575 -------- -------- Net decrease in cash and cash equivalents (3,438) (830) Cash and cash equivalents at beginning of period 9,270 9,044 -------- -------- Cash and cash equivalents at end of period $ 5,832 $ 8,214 ======== ======== Supplemental disclosures of cash flow information: Cash paid for: Interest $ 2,654 $ 4,100 Income taxes $ 1,829 $ 805
The accompanying notes are an integral part of the consolidated financial statements. -4- 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 ("Company"), which include wholly-owned Camrose Pipe Corporation ("CPC") which owns a 60 percent interest in Camrose Pipe Company ("Camrose"), and 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"). The Company also directly owns an additional 4.3 percent interest in CF&I. In January 1998, CF&I assumed the trade name Rocky Mountain Steel Mills. All significant intercompany balances and transactions have been eliminated. 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 1999 Annual Report on Form 10-K for additional disclosures including a summary of significant accounting policies. 2. Inventories ----------- Inventories consist of: March 31, December 31, 2000 1999 --------- ------------ (In thousands) Raw materials $ 12,076 $ 14,383 Semifinished product 35,315 46,819 Finished product 34,932 35,536 Stores and operating supplies 26,310 25,945 -------- -------- Total inventory $108,633 $122,683 ======== ======== 3. Common Stock ------------ On April 27, 2000, the Board of Directors declared a quarterly cash dividend of $.02 cents per share to be paid May 31, 2000, to stockholders of record as of May 15, 2000. 4. Net Income (Loss) per Share --------------------------- Basic and diluted net income (loss) per share was as follows: Three Months Ended March 31, ---------------------------- 2000 1999 --------- --------- (In thousands,except per share amounts) Weighted average number of common shares outstanding 25,777 25,777 Shares of common stock to be issued March 2003 598 598 -------- ------ 26,375 26,375 ======== ====== Net income (loss) $(10,767) $ 8,411 ======== ======== Basic and diluted net income (loss) per share $ (.41) $ .32 ======== ======== -5- 5. Comprehensive Income (Loss) --------------------------- Three Months Ended March 31, ---------------------------- 2000 1999 ---------- -------- (In thousands) Net income (loss) $(10,767) $ 8,411 Foreign currency translation adjustment (106) 575 -------- -------- Comprehensive income (loss) $(10,873) $ 8,986 ======== ======== 6. Contingencies ------------- ENVIRONMENTAL All material environmental remediation liabilities, which are probable and estimable, are recorded in the financial statements based on current technologies and current environmental standards at the time of evaluation. Adjustments are made when additional information is available that suggests different remediation methods or periods may be required and affect the total cost. The best estimate of the probable cost within a range is recorded; however, if there is no best estimate, the low end of the range is recorded and the range is disclosed. PUEBLO MILL. In connection with the 1993 acquisition of CF&I, primarily the steel mill at Pueblo, Colorado ("Pueblo Mill"), the Company accrued a liability of $36.7 million for environmental remediation. The Company believed this amount was the best estimate from a range of $23.1 million to $43.6 million. The Company's estimate of this liability was based on two separate remediation investigations conducted by independent environmental engineering consultants. The liability includes costs for the Resource Conservation and Recovery Act facility investigation, a corrective measures study, remedial action, and operation and maintenance associated with the proposed remedial actions. In October 1995, CF&I and the Colorado Department of Public Health and Environment ("CDPHE") finalized a postclosure permit for hazardous waste units at the Pueblo Mill. As part of the postclosure permit requirements, CF&I must conduct a corrective action program for the 82 solid waste management units at the facility and continue to address projects on a prioritized corrective action schedule which is substantially reflective of a straight-line rate of expenditure over 30 years. The State of Colorado mandated that the schedule for corrective action could be accelerated if new data indicated a greater threat existed to the environment than was presently believed to exist. At March 31, 2000, the accrued liability was $33.3 million, of which $30.9 million was classified as non-current in the consolidated balance sheet. The CDPHE has inspected the Pueblo Mill for possible environmental violations, and in the fourth quarter of 1999, issued a Compliance Advisory indicating that air quality regulations had been violated. The CDPHE has now filed a judicial enforcement action, which could result in the levying of significant fines and penalties, requirements to alter its operating procedures, requirements to accelerate or expand the capital expenditure program or a combination of any of the above. It is not presently possible to estimate the ultimate liability as a result of the action. On April 27, 2000, the United Steel Workers of America ("Union") filed suit in U.S. District Court in Denver asserting that the Company had violated the Clean Air Act Amendments ("CAA") of 1990 at the Pueblo Mill for a period extending over five years. The suit seeks to compel the Company to incur significant capital improvements or alter its operating procedures so that the Pueblo Mill would be in compliance with more stringent environmental standards than the Company currently is operating under. The Company does not believe as a matter of law that it has an obligation to meet these standards. It is not presently possible to estimate the ultimate liability as a result of such a finding, in the event of an adverse finding. PORTLAND MILL. In May 2000, the Company agreed to a request from the Oregon Department of Environmental Quality to participate in an investigation whether, and to what extent, past or present operations of the Company might have affected sediment quality in the Willamette River. It is not presently possible to estimate the costs associated with this investigation. -6- LABOR DISPUTE The labor contract at CF&I expired on September 30, 1997. After a brief contract extension intended to help facilitate a possible agreement, on October 3, 1997 the Union initiated a strike at CF&I for approximately 1,000 bargaining unit employees. The parties failed to reach final agreement on a new labor contract due to differences on economic issues. As a result of contingency planning, the Company was able to avoid complete suspension of operations at the Pueblo Mill by utilizing a combination of permanent replacement workers, striking employees who returned to work and salaried employees. On December 30, 1997 the Union called off the strike and made an unconditional offer to return to work. At the time of this offer, only a few vacancies existed at the Pueblo Mill. As of the end of March 31, 2000, 161 former striking employees had returned to work as a result of their unconditional offer. Approximately 640 former striking workers remain unreinstated ("Unreinstated Employees"). On February 27, 1998 the Regional Director of the National Labor Relations Board ("NLRB") Denver office issued a complaint against CF&I, alleging violations of several provisions of the National Labor Relations Act ("NLRA"). The Company not only denies the allegations, but rather believes that both the facts and the law fully support its contention that the strike was economic in nature and that it was not obligated to displace the properly hired permanent replacement employees. On August 17, 1998, a hearing on these allegations commenced before an Administrative Law Judge ("Judge"). Testimony and other evidence were presented at various sessions in the latter part of 1998 and early 1999, concluding on February 25, 1999. The Judge will render a decision that is automatically subject to appeal by either party to the NLRB in Washington, D.C. The ultimate determination of the issues may require a ruling from the appropriate United States appellate court. Among the issues pending in the litigation is CF&I's motion asserting that the Judge should consider the Union's alleged NLRA violations and that the alleged misconduct should invalidate the Unreinstated Employees' right to reinstatement. In the event there is an adverse determination of these issues, Unreinstated Employees could be entitled to back pay, including benefits, from the date of the Union's unconditional offer to return to work through the date of the adverse determination. The number of Unreinstated Employees entitled to back pay would probably be limited to the number of past and present replacement workers; however, the Union might assert that all Unreinstated Employees should be entitled to back pay. Back pay is generally determined by the quarterly earnings of those working less interim wages earned elsewhere by the Unreinstated Employees. In addition to other considerations, each Unreinstated Employee has a duty to take reasonable steps to mitigate the liability for back pay by seeking employment elsewhere that has comparable demands and compensation. It is not presently possible to estimate the ultimate liability in the event of an adverse determination. During the strike by the Union at CF&I, 39 bargaining unit employees of the Colorado & Wyoming Railway Company ("C&W"), a wholly-owned subsidiary of New CF&I, Inc. that provides rail service to the Pueblo Mill, refused to report to work for an extended period of time. The bargaining unit employees of C&W were not on strike. C&W considered these employees to have quit their employment and, accordingly, C&W declined to allow those individuals to return to work. The unions representing these individuals have filed lawsuits in the U.S. District Court of Colorado against C&W claiming their members had refused to cross the picket line because they were honoring the picket line of another organization or because of safety concerns stemming from those picket lines. The unions demand reinstatement of the former employees, back pay, benefits and other damages. The Company believes it has substantial defenses against these claims. However, it is possible that one or more of them will proceed to arbitration before the National Railroad Adjustment Board or otherwise initiate further judicial proceedings. The outcome of such proceedings is inherently uncertain and it is not possible to estimate any potential settlement amount that would result from an adverse legal or arbitration decision. -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, general business and economic conditions; competitive products and pricing, as well as fluctuations in demand; the supply of imported steel and subsidies provided by foreign governments to support steel companies domiciled in their countries; potential equipment malfunction; work stoppages, plant construction and repair delays, and failure of the Company to accurately predict the impact of lost revenues associated with interruption of the Company's, its customers' or suppliers' operations. The Company is organized into two business units known as the Oregon Steel Division and the Rocky Mountain Steel Mills ("RMSM") Division. The Oregon Steel Division is centered on the Company's steel plate minimill in Portland, Oregon ("Portland Mill"). In addition to the Portland Mill, the Oregon Steel Division includes the Company's large diameter pipe finishing facility in Napa, California and the large diameter and electric resistance welded pipe facility in Camrose, Alberta. The RMSM Division consists of the steelmaking and finishing facilities of CF&I Steel, L.P. ("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 March 31, ---------------------------- 2000 1999 ----------- ---------- Total tonnage sold: Oregon Steel Division: Plate and Coil 206,600 99,500 Welded pipe 38,800 159,700 ------- ------- Total Oregon Steel Division 245,400 259,200 ------- ------- RMSM Division: Rail 75,000 95,000 Rod/Bar 94,600 93,100 Seamless Pipe - 8,500 Semifinished 16,500 2,100 ------- ------- Total RMSM Division 186,100 198,700 ------- ------- Total Company 431,500 457,900 ======= ======= Sales (in thousands): Oregon Steel Division $ 99,207 $167,933 RMSM Division 65,696 71,722 -------- -------- Total Company $164,903 $239,655 ======== ======== Average selling price per ton: Oregon Steel Division $404 $648 RMSM Division $353 $361 Company Average $382 $523 Sales decreased 31.2 percent for the first quarter on a year over year basis, from $239.7 million in 1999 to $164.9 million in 2000 while shipments decreased 5.8 percent to 431,500 tons in the first quarter of 2000 from 457,900 tons in the first quarter of 1999. The decrease in sales and shipments was primarily the result of decreased shipments of welded pipe products by the Oregon Steel Division and a decrease in rail and seamless pipe shipments by the RMSM Division, offset partially by increased shipments of plate products by the Oregon Steel Division and rod and bar products by the RMSM Division. -8- OREGON STEEL MILLS, INC. The consolidated average selling price decreased to $382 per ton for the first quarter of 2000 from $523 per ton in the first quarter of 1999. The reduction in average selling price is primarily due to a shift in product mix from large diameter welded pipe to commodity plate products and lower average selling prices for the Company's plate and welded pipe products, partially offset by higher rod product selling prices. The Oregon Steel Division shipped 245,400 tons of plate, coil and welded pipe products at an average selling price of $404 per ton during the first quarter of 2000 as compared to 259,200 tons of product at an average selling price of $648 per ton for the first quarter of 1999. The decrease in the average selling price is due primarily to a shift in product mix from large diameter welded pipe to plate, as welded pipe generally has a higher average selling price than plate, and to a decrease in the average selling price for plate as compared to average selling price one year ago. Welded pipe shipments during the first quarter of 2000 were significantly less than in the comparable period in 1999, decreasing to 38,800 tons for 2000 from 159,700 tons in 1999. The level of shipments of pipe during 1999 was the result of production of the Alliance Pipeline project at the Napa pipe mill, which concluded in the fourth quarter of 1999. During the first quarter of 2000, the Oregon Steel Division plate mill produced 217,600 tons of plate and coil products compared to 206,100 tons in the first quarter of 1999. Shipments to plate and coil customers during the first quarter of 2000 were 206,600 tons compared to 99,500 tons during the corresponding 1999 period. The RMSM Division shipped 186,100 tons of rail, rod, and semifinished products at an average selling price of $353 per ton during the first quarter of 2000, compared to 198,700 tons of product, including seamless pipe, at an average selling price of $361 per ton for the first quarter of 1999. The decrease in shipments is a result of reduced rail shipments and a lack of seamless pipe shipments, partially offset by increased rod and bar and semi-finished shipments. The decrease in average selling price is a result of the shift in product mix as rod and bar and semi-finished products have a significantly lower average selling price than that of rail and seamless pipe. However, increases in average rod and bar selling prices have partially offset the impact of this shift on overall average selling prices. Rod and bar product shipments during the first quarter of 2000 were 94,600 tons compared to 93,100 tons during the first quarter of 1999. The division shipped 75,000 tons of rail during the first quarter of 2000 compared to 95,000 tons in the first quarter of 1999. Gross profit for the first quarter of 2000 was $3.3 million or 2.0 percent compared to $41.3 million or 17.2 percent for the first quarter of 1999. Gross profit was unfavorably impacted by decreased sales of welded pipe and rail products, and a decrease in the average selling price of welded pipe and plate products. These decreases were partially offset by improvements in the profitability of rod and bar products, and the financial impact of shutting down the seamless mill, which had operated unprofitably in the first quarter of 1999, and was subsequently closed in May 1999. Selling, general and administrative expenses for the first quarter of 2000 decreased $1.4 million from the corresponding 1999 period and increased as a percentage of sales to 7.6 percent in the first quarter of 2000, from 5.9 percent for the corresponding 1999 period. The decrease in dollar cost is primarily due to decreased shipping costs. The percentage of sales increase was primarily due to the significant declines in sales volumes for the higher priced welded pipe products. Profit participation and other incentive compensation expense was $165,000 for the first quarter of 2000 compared to $3.0 million in the corresponding 1999 period reflecting the decreased profitability in 2000 versus 1999. Total interest expense for the first quarter of 2000 was $8.5 million compared to $9.6 million for the corresponding 1999 period. The decrease in expense was primarily due to a decrease in the average borrowing for the first quarter in 2000 as compared to the first quarter in 1999. The Company's effective income tax rates for state and federal taxes were a benefit of 38.1 percent and a provision of 39.2 percent for the three month period ended March 31, 2000 and 1999, respectively. -9- OREGON STEEL MILLS, INC. Liquidity and Capital Resources - ------------------------------- Cash flow from operations for the three month period ended March 31, 2000 was $3.5 million compared to $35.2 million in the first quarter of 1999. The major items affecting the $31.7 million decrease were the net loss in 2000 versus net income in 1999 and an increase in deferred taxes for 2000 compared to a decrease in 1999. Net working capital at March 31, 2000 decreased $13.7 million compared to December 31, 1999 reflecting a $12.1 million decrease in current assets and a $1.6 million increase in current liabilities. The decrease in current assets was primarily due to decreased inventories ($14.1 million) and cash and cash equivalents ($3.4 million), partially offset by increased trade accounts receivable ($5.9 million). The increase in current liabilities was due to increased accrued expenses ($4.7 million) related to the accrued interest for the 11% First Mortgage Notes ("Notes"), partially offset by reduced accounts payable ($3.5 million) related to the lower inventory. During the first three months of 2000, the Company expended (exclusive of capital interest) approximately $3.7 million and $651,000 on capital projects at the Oregon Steel Division and the RMSM Division, respectively. The Company has $228.3 million principal amount of Notes, due 2003, payable to outside parties. New CF&I, Inc. and CF&I (collectively, "Guarantors") guarantee the Notes. The Notes and the guarantees are secured by a lien on substantially all the domestic property, plant and equipment and certain other assets of the Company and the Guarantors. The collateral for the Notes and the guarantees does not include, among other things, inventory and accounts receivable. The indenture under which the Notes were issued contains 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. Under these restrictions, $5.0 million was available for cash dividends at March 31, 2000. The Company maintains a $125 million revolving bank credit facility, amended on March 30, 2000 ("Amended Credit Agreement"), and expires June 11, 2002. The Amended Credit Agreement is drawn upon based on the Company's domestic accounts receivable and inventory balances, which are collateral for any borrowings under the Amended Credit Agreement. At March 31, 2000, $51.0 million was outstanding under the Amended Credit Agreement. At the Company's election, interest on the Amended Credit Agreement is based either on the London Interbank Offering Rate ("LIBOR"), the prime rate, or the federal funds rate, plus a margin determined by the Company's leverage ratio. The annual commitment fees are .63 percent of the unused portion of the Amended Credit Agreement. The Guarantors guarantee amounts outstanding under the Amended Credit Agreement. The Amended Credit Agreement contains various restrictive covenants including minimum tangible net worth, minimum interest coverage ratio, and a maximum debt to total capitalization ratio. CF&I incurred $67.5 million in term debt in 1993 as part of the purchase price of the Pueblo Mill. This debt is without stated collateral and is payable over ten years with interest at 9.5 percent. As of March 31, 2000, the outstanding balance on the debt was $27.2 million, of which $18.9 million was classified as long-term. Camrose maintains a (CDN) $25 million revolving credit facility with a Canadian 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 is drawn upon based on Camrose's eligible trade accounts receivable and inventories. The facility is comprised of two credit lines, a (CDN) $10.0 million line that expires September 12, 2000 and a (CDN) $15.0 million line that expires September 12, 2002. At the Company's election, interest is payable based on either the bank's Canadian dollar prime rate, the bank's U.S. dollar prime rate, or LIBOR. Annual commitment fees are .15 and .25 percent of the unused portion of the (CDN) $10.0 million and (CDN) $15.0 million credit lines, respectively. As of March 31, 2000, Camrose had $126,000 outstanding under the facility. The Company is able to draw up to $25 million of the borrowings available under the Amended Credit Agreement to support issuance of letters of credit and similar agreements. The Company also maintains a uncollateralized and uncommitted line of credit with another bank to support letters of credit, foreign exchange contracts and interest rate hedges. At March 31, 2000, $3.7 million was restricted under outstanding letters of credit. -10- OREGON STEEL MILLS, INC. The Company believes that its anticipated needs for working capital and capital expenditures through 2000 will be met from funds generated from operations and borrowings pursuant to the Company's Amended Credit Agreement. There is no assurance, however, that the amounts from these sources will be sufficient for such purposes. In that event, or for other reasons, the Company may be required to seek additional financing, which may include additional bank financing. There is no assurance that such source of funding will be available if required or, if available, will be on terms satisfactory to the Company. The Company's level of indebtedness presents other risks to investors, including the possibility that the Company and its subsidiaries may be unable to generate cash sufficient to pay the principal of and interest on their indebtedness when due. As discussed previously, the Company revised the Amended Credit Agreement to remain in compliance with the terms of the agreement, and is currently in compliance with the Amended Credit Agreement's restrictive debt covenants. However, the Company anticipates the net income for 2000 will be substantially below the net income realized in 1999, thereby increasing the likelihood that the Company may not be in compliance with one or more of its covenants during the remainder of 2000. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK No material changes. -11- OREGON STEEL MILLS, INC. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Part 1, "Consolidated Financial Statements - Note 6, Contingencies" for discussion of litigation brought by the United Steel Workers of America alleging violations of the Clean Air Act Amendments of 1990 and incorporated by reference herein. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Stockholders on April 27, 2000. The stockholders elected Thomas B. Boklund as a director, to serve until April 2003, by a vote of 21,952,800 shares for, 2,077,045 shares withheld authority to vote, and 1,746,960 shares broker non-votes. The stockholders also approved the Company's 2000 Nonqualified Stock Option Plan by a vote of 15,590,169 shares for, 7,694,618 shares against, 745,057 shares abstained and 1,746,960 broker non-votes. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.1 Form of First Amendment to Credit Agreement dated as of March 30, 2000 between Oregon Steel Mills, Inc. as borrower, and the Lender party thereto. Portions of this exhibit have been omitted pursuant to a confidential treatment request. 27.0 Financial Data Schedule (b) Reports on Form 8-K See Item 14(b) of the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 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: May 12, 2000 /s/ Jeff S. Stewart -------------------------- Jeff S. Stewart Corporate Controller (Principal Accounting Officer) -12- EX-10 2 EXHIBIT 10.1 - FIRST AMENDMENT TO CREDIT AGREEMENT FIRST AMENDMENT TO CREDIT AGREEMENT This FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment"), dated as of March __, 2000, between Oregon Steel Mills, Inc., a Delaware corporation (the "Borrower"), and the lender party hereto ("Lender"). WITNESSETH: WHEREAS, the Borrower and Lender are parties to a Credit Agreement, dated as of June 11, 1999 (the "Existing Credit Agreement"); and WHEREAS, the Borrower has requested that certain amendments be made to the Existing Credit Agreement; and WHEREAS, the Lender is willing to make certain amendments to the Existing Credit Agreement on the terms and conditions hereinafter provided; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this First Amendment, the parties agree as follows: ARTICLE 1. DEFINITIONS 1.1 Certain Definitions. The following terms (whether or not ------------------- underscored) when used in this First Amendment shall have the following meanings: "Amended Credit Agreement" shall mean the Existing Credit Agreement as amended by this First Amendment. "First Amendment Effective Date" shall have the meaning provided in Section 4.1. 1.2 Other Definitions. Unless otherwise defined or the context ----------------- otherwise requires, terms used in this First Amendment have the meanings provided for in the Existing Credit Agreement. ARTICLE 2 AMENDMENTS TO EXISTING CREDIT AGREEMENT Effective on the First Amendment Effective Date, the Existing Credit Agreement is amended in accordance with the terms of this Article 2; except as so amended, the Existing Credit Agreement shall continue to remain in all respects in full force and effect. 1 - FIRST AMENDMENT 2.1 Amendments to Section 1.1. ------------------------- 2.1.1 The definitions of the terms "Applicable Margin" and "Commitment Fee Rate" appearing in Section 1.1 of the Existing Credit Agreement are amended and restated in their entirety to read as follows: "Applicable Margin" and "Commitment Fee Rate" means, in the ----------------- ------------------- case of any Loan or commitment fee, a rate per annum determined by reference to the Leverage Ratio as of the last day of the most recently ended Fiscal Quarter, as follows:
Reserve Adjusted LIBO Leverage Ratio Margin Base Rate Margin Commitment Fee -------------- -------- ---------------- -------------- less than or equal to 1.75 to 1.00 1.25% 0% .30% greater than 1.75 to 1.00 but less than or 1.50% 0% .375% equal to 2.25 to 1.00 greater than 2.25 to 1.00 but less than or 1.75% .25% .375% equal to 3.00 to 1.00 greater than 3.00 to 1.00 but less than or 2.00% .50% .50% equal to 3.50 to 1.00 greater than 3.50 to 1.00 but less than or 2.50% 1.00% .50% equal to 4.00 to 1.00 greater than 4.0 to 1.00 but less than or 2.75% 1.25% .50% equal to 4.5 to 1.00 greater than 4.5 to 1.00 but less than or 3.00% 1.50% .50% equal to 5.00 to 1.00 greater than 5.00 to 1.00 3.25% 1.75% .50%
The Applicable Margin shall be based on the Leverage Ratio as set forth in the most recent Compliance Certificate, and shall be effective from and including the date the Lender receives such Compliance Certificate to but excluding the date on which the Lender receives the next Compliance Certificate; provided, however, that if Lender does not receive a Compliance Certificate by - -------- ------- the date required by Section 7.1.1(c), the Applicable Margin shall, effective as --------------- of such date, increase by one level to but excluding the date Lender receives such Compliance Certificate. Subject to the foregoing proviso, from the First Amendment Effective Date until the date on which Lender has received a Compliance Certificate for the quarter ended September 30, 2 - FIRST AMENDMENT 2000, the Borrower's Reserve Adjusted LIBO Margin, Base Rate Margin and Commitment Fee will be 3.00%, 1.50% and .625%, respectively. 2.2 Amendments to Section 4.9. ------------------------- Section 4.9 of the Existing Credit Agreement is amended by deleting the following words from the first sentence: "; provided, that the Borrower may use proceeds of Borrowings under this Agreement and of borrowings under Loans permitted by Section 7.2.2(b) to pay, refinance or refund no more than $25,000,000 of other senior Indebtedness; provided, further, however, that so long as the Borrower's Leverage Ratio, tested on a rolling four quarter basis, shall be equal to or less than 2.50 to 1.00, the Borrower may use such proceeds to pay, refinance or refund up to an additional $10,000,000 of other senior Indebtedness (i.e. $35,000,000 in the aggregate)". 2.3 Amendments to Section 7.1.1(j). ------------------------------ Section 7.1.1(j) of the Existing Credit Agreement is amended and restated in its entirety to read as follows: (j) (1) as soon as available and in any event within 30 days after the commencement of each Fiscal Quarter and 60 days after the commencement of each Fiscal Year, a consolidated financial forecast for the Borrower and its Subsidiaries for the twelve month period commencing with such Fiscal Quarter or for such Fiscal Year; and (2) within five (5) Business Days of the Borrower's delivery of the financial forecasts to the Lender, the Borrower will hold a Lender conference call to discuss the prior Fiscal Quarter results and the latest 12-month forecast. 2.4 Amendments to Section 7.1.9. ---------------------------- A new Section 7.1.9 is added to the Existing Credit Agreement to read as follows: Section 7.1.9 Collateral Audit. As soon as can be reasonably ---------------- arranged and in any event no later than May 15, 2000, the Borrower will arrange for a Collateral audit, the scope of such audit and the independent accounting firm to perform the audit to be to the satisfaction of the Lender and the written report of such audit shall be delivered to the Lender and other Section 7.2.2(b) Lenders no later than 30 days after the completion of the written report. 3 - FIRST AMENDMENT 2.5 Amendments to Section 7.2.4(b). ------------------------------ Section 7.2.4(b) of the Existing Credit Agreement is amended and restated in its entirety to read as follows: Its Interest Coverage Ratio, tested on a rolling four quarter basis, to be less than the specified ratio as of the end of any of the following Fiscal Quarters: Fiscal Quarter Minimum Interest Coverage Ratio -------------- ------------------------------- March 31, 2000 2.10 to 1.00 June 30, 2000 1.87 to 1.00 September 30, 2000 1.67 to 1.00 December 31, 2000 1.94 to 1.00 March 31, 2001 and thereafter 2.50 to 1.00 2.6 Amendments to Section 7.2.4(d). ------------------------------ Section 7.2.4(d) of the Existing Credit Agreement is amended and restated in its entirety to read as follows: Its Leverage Ratio, tested on a rolling four quarter basis, to be greater than the specified ratio as of the end of any of the following Fiscal Quarters: Fiscal Quarter Maximum Leverage Ratio -------------- ---------------------- March 31, 2000 4.00 to 1.00 June 30, 2000 4.75 to 1.00 September 30, 2000 5.50 to 1.00 December 31, 2000 4.50 to 1.00 March 31, 2001 and thereafter 3.00 to 1.00 4 - FIRST AMENDMENT ARTICLE 3 REPRESENTATIONS AND WARRANTIES In order to induce the Lender to make the amendments provided for in Article 2, the Borrower (a) represents and warrants, that, immediately after giving effect to the provisions of this First Amendment, each of the representations and warranties contained in the Existing Credit Agreement and the other Loan Documents is true and correct as of the date hereof as if made on the date hereof (except, if any such representation or warranty relates to an earlier date, such representation and warranty shall be true and correct in all material respects as of such earlier date) and no Default has occurred and is continuing and (b) agrees that the incorrectness in any material respect of any representation and warranty contained in the preceding clause (a) shall constitute an immediate Event of Default. ARTICLE 4 CONDITIONS TO EFFECTIVENESS 4.1 Effective Date. This First Amendment shall become effective on the -------------- date (the "First Amendment Effective Date") when the conditions set forth in this Section 4.1 have been satisfied. 4.1.1 Execution of Counterparts. The Lender shall have received ------------------------- (a) counterparts of this First Amendment duly executed and delivered on behalf of the Borrower and the Lender; and (b) identical counterparts of the First Amendment duly executed and delivered on behalf of the Borrower and each Section 7.2.2(b) Lender. 4.1.2 Amendment Fee. The Borrower shall have made payment to Lender ------------- of an amendment fee in an amount equal to .30% of the Lender's Revolving Loan Commitment Amount. 4.1.3 Legal Details, etc. All documents executed or submitted pursuant ------------------- to this First Amendment, and all matters incident thereto, shall be satisfactory in form and substance to the Lender and its counsel. 4.2 Expiration. If all of the conditions set forth in Section 4.1 hereof ---------- shall not have been satisfied on or prior to March 31, 2000, the agreements of the parties contained in this First Amendment shall, unless otherwise agreed by the Lender, terminate effective immediately on such date and without further action. ARTICLE 5 MISCELLANEOUS 5.1 Loan Document Pursuant to Existing Credit Agreement. This First --------------------------------------------------- Amendment is a Loan Document executed pursuant to the Existing Credit Agreement. Except as expressly 5 - FIRST AMENDMENT amended or waived in the First Amendment, all of the representations, warranties, terms, covenants and conditions contained in the Existing Credit Agreement and each other Loan Documents shall remain unamended and in full force and effect. The amendments set forth in the First Amendment shall be limited precisely as provided for in this First Amendment and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provisions of the Existing Credit Agreement or of any term or provision of any other Loan Document or of any transaction or further or future consent on the part of the Borrower or any of its Subsidiaries or which would require the consent of the Lender under the Existing Credit Agreement or any other Loan Document. 5.2 Counterparts, etc. This First Amendment may be executed by the parties ------------------ hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. 5.3 Governing Law. This First Amendment shall be deemed to be a contract ------------- made under and governed by the internal laws of the State of New York. 6 - FIRST AMENDMENT IN WITNESS WHEREOF, the parties have caused this First Amendment to be executed by their respective officers hereunto duly authorized as of the day and year first above written. OREGON STEEL MILLS, INC. By: /s/ Jeff S. Stewart ------------------------- Name: Jeff S. Stewart Title: Corporate Controller LENDER: By: * --------------------------------------- Name: * ------------------------------------- Title: * ------------------------------------ * CONFIDENTIAL TREATMENT REQUESTED 7 - FIRST AMENDMENT EX-27.0 3 FDS --
5 0000830260 Oregon Steel Mills, Inc. 1000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 5832 0 70463 (2034) 108633 196101 856007 (254663) 857803 103250 228250 0 0 258 340756 857803 164903 164903 161642 161642 12776 0 8506 (17393) (6626) (10767) 0 0 0 (10767) (0.41) (0.41)
-----END PRIVACY-ENHANCED MESSAGE-----