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 June 30, 1997
------------------------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------------- --------------------
NEW CF&I, INC.
(Exact name of registrant as specified in its charter)
Delaware 02-20781 93-1086900
- -------------------------------------------------------------------------------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification Number)
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)
CF&I STEEL, L.P.
(Exact name of registrant as specified in its charter)
Delaware 02-20779 93-1103440
- -------------------------------------------------------------------------------
(State or other
jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification Number)
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
----- -----
<PAGE>
NEW CF&I, INC.
CF&I STEEL, L.P.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements - New CF&I, Inc.
--------------
Consolidated Balance Sheets
June 30, 1997 (unaudited)
and December 31, 1996 ..................................2
Consolidated Statements of Income (unaudited)
Three months and six months ended June 30, 1997
and 1996 ...............................................3
Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30, 1997
and 1996 ...............................................4
Notes to Consolidated Financial
Statements (unaudited)................................5-6
Financial Statements - CF&I Steel, L.P.
----------------
Balance Sheets
June 30, 1997 (unaudited)
and December 31, 1996 ..................................7
Statements of Operations (unaudited)
Three months and six months ended June 30, 1997
and 1996 ...............................................8
Statements of Cash Flows (unaudited)
Six months ended June 30, 1997
and 1996 .............................................. 9
Notes to Financial
Statements (unaudited).................................10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................11-13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..........................14
SIGNATURES..........................................................14
1
<PAGE>
NEW CF&I, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
June30,
1997 December 31,
(Unaudited) 1996
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 7,328 $ 3
Trade accounts receivable, net 41,711 49,380
Inventories 42,597 50,577
Deferred tax asset 4,290 5,014
Other 3,203 2,045
--------- ---------
Total current assets 99,129 107,019
--------- ---------
Property, plant and equipment:
Land and improvements 3,491 3,530
Buildings 15,710 6,043
Machinery and equipment 228,093 236,566
Construction in progress 2,961 4,011
--------- ---------
250,255 250,150
Accumulated depreciation (28,341) (22,996)
--------- ---------
221,914 227,154
--------- ---------
Excess of cost over net assets acquired 36,452 36,962
Other assets 13,296 16,927
--------- ---------
$ 370,791 $ 388,062
========= =========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 6,964 $ 6,574
Accounts payable 42,786 33,892
Accrued expenses 21,694 17,343
--------- ---------
Total current liabilities 71,444 57,809
Long-term debt 41,527 44,716
Long-term debt - Oregon Steel Mills, Inc. 176,000 205,700
Environmental liability 32,941 33,243
Deferred employee benefits 6,400 6,069
--------- ---------
328,312 347,537
--------- ---------
Minority interests 107 (10)
--------- ---------
Redeemable common stock 21,840 21,840
--------- ---------
STOCKHOLDERS' EQUITY
Common stock 1 1
Additional paid-in capital 16,603 16,603
Retained earnings 3,928 2,091
--------- ---------
20,532 18,695
--------- ---------
$ 370,791 $ 388,062
========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
2
<PAGE>
<TABLE>
NEW CF&I, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended Six Month
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 119,549 $ 92,258 $ 230,769 $ 204,901
Costs and expenses:
Cost of sales 104,244 85,496 203,115 184,975
Selling, general and administrative
expenses 5,382 4,614 10,360 9,521
Profit participation 344 -- 344 275
--------- --------- --------- ---------
Operating income 9,579 2,148 16,950 10,130
Other income (expense):
Interest and dividend income 17 9 25 19
Interest expense (6,646) (4,612) (13,480) (9,194)
Minority interest (147) 173 (117) 56
Other, net 314 570 207 570
--------- --------- --------- ---------
Income (loss) before income taxes 3,117 (1,712) 3,585 1,581
Income tax benefit (expense) (1,345) 743 (1,748) (651)
--------- --------- --------- ---------
Net income (loss) $ 1,772 $ (969) $ 1,837 $ 930
========= ========= ========= =========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
NEW CF&I, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended June 30,
--------------------------
1997 1996
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,837 $ 930
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,586 6,325
Deferred income taxes 4,455 465
Minority interest 117 (64)
Other, net (1,976) (570)
Changes in current assets and liabilities, net 27,860 9,044
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 38,879 16,130
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (3,752) (21,385)
Proceeds from disposal of property, plant and equipment 4,861 594
Other, net (165) (905)
--------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 944 (21,696)
--------- ---------
Cash flows from financing activities:
Borrowings from Oregon Steel Mills, Inc. 87,400 102,750
Payments to Oregon Steel Mills, Inc. (117,100) (95,900)
Payment of long-term debt (2,798) (1,281)
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (32,498) 5,569
--------- ---------
Net increase in cash and cash equivalents 7,325 3
Cash and cash equivalents at beginning of period 3 --
--------- ---------
Cash and cash equivalents at end of period $ 7,328 $ 3
========= =========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 14,043 $ 9,154
Income taxes paid to parent company -- 338
NON-CASH INVESTING AND FINANCING ACTIVITIES:
At June 30, 1997 and 1996, the Company financed property, plant and equipment
with accounts payable of $1.2 million and $10.1 million, respectively.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
4
<PAGE>
NEW CF&I, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The consolidated financial statements include the accounts of New CF&I,
Inc. and its subsidiaries ("Company"). All significant intercompany
balances and transactions have been eliminated upon consolidation.
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 1996 Form 10-K for additional
disclosures including a summary of significant accounting policies.
2. Inventories
-----------
Inventories consist of:
June 30, December 31,
1997 1996
--------- ------------
(In thousands)
Raw materials $17,152 $16,246
Semifinished product 12,541 16,488
Finished product 4,569 8,245
Stores and operating supplies 8,335 9,598
------- -------
$42,597 $50,577
======= =======
3. Contingencies
-------------
ENVIRONMENTAL. The Company 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 June 30, 1997,
CF&I has a reserve of $35.1 million related to this remediation, of which
$32.9 million is classified as non-current in the consolidated balance
sheet.
GUARANTEES. Oregon Steel Mills, Inc. ("Oregon Steel") has outstanding
$235 million principal amount of 11% First Mortgage Notes due 2003.
The Company has guaranteed the obligations of Oregon Steel under the
Notes, and those guarantees are secured by a lien on substantially all
of the property, plant and equipment and certain other assets of the
Company, excluding accounts receivable and inventory.
In addition, Oregon Steel maintains a $125 million credit agreement with a
group of banks which is collateralized, in part, by the accounts
receivable and inventory of the Company, and also guaranteed by the
Company.
5
<PAGE>
4. Proceeds from Insurance Settlement
----------------------------------
Sales for the first six months of 1997 include approximately $2.5 million
of insurance proceeds as reimbursement of lost profits resulting from lost
production during the third and fourth quarters of 1996 related to the
failure of one of the power transformers servicing the Company. In total,
the Company received $7 million in insurance proceeds from this claim of
which $4.5 million was recorded in the fourth quarter of 1996.
6
<PAGE>
CF&I STEEL, L.P.
BALANCE SHEETS
(In thousands)
June 30,
1997 December 31,
(Unaudited) 1996
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 7,326 $ --
Trade accounts receivable, net 41,100 48,918
Inventories 42,451 50,414
Other 3,071 1,610
--------- ---------
Total current assets 93,948 100,942
--------- ---------
Property, plant and equipment:
Land and improvements 3,486 3,525
Buildings 15,604 5,936
Machinery and equipment 225,937 234,441
Construction in progress 2,961 4,011
--------- ---------
247,988 247,913
Accumulated depreciation (27,460) (22,225)
--------- ---------
220,528 225,688
--------- ---------
Excess of cost over net assets acquired 36,452 36,963
Other assets 13,302 13,202
--------- ---------
$ 364,230 $ 376,795
========= =========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 6,964 $ 6,574
Accounts payable 46,751 37,193
Accrued expenses 20,304 16,647
--------- ---------
Total current liabilities 74,019 60,414
Long-term debt 41,527 44,716
Long-term debt - Oregon Steel Mills, Inc. 176,000 205,700
Long-term debt - New CF&I, Inc. 21,756 17,400
Environmental liability 32,941 33,243
Deferred employee benefits 6,400 6,069
--------- ---------
352,643 367,542
--------- ---------
PARTNERS' EQUITY
Limited partner 107 (10)
General partner 11,480 9,263
--------- ---------
11,587 9,253
--------- ---------
$ 364,230 $ 376,795
========= =========
The accompanying notes are an integral part of the
financial statements.
7
<PAGE>
<TABLE>
CF&I STEEL, L.P.
STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June30,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 117,749 $ 91,041 $ 227,502 $ 202,520
Costs and expenses:
Cost of sales 102,733 84,601 200,384 183,251
Selling, general and administrative
expenses 5,247 4,476 10,093 9,252
Profit participation 344 -- 344 275
--------- --------- --------- ---------
Operating income 9,425 1,964 16,681 9,742
Other income (expense):
Interest and dividend income 17 9 25 19
Interest expense (7,139) (4,998) (14,580) (9,961)
Other, net 314 570 207 570
--------- --------- --------- ---------
Net income (loss) $ 2,617 $ (2,455) $ 2,333 $ 370
========= ========= ========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
8
<PAGE>
<TABLE>
CF&I STEEL, L.P.
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended June 30,
--------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,333 $ 370
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,476 6,217
Other, net (1,945) (570)
Changes in current assets and liabilities, net 27,536 9,650
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 34,400 15,667
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (3,628) (21,359)
Proceeds from disposal of property, plant and equipment 4,861 594
Other, net (164) (905)
--------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 1,069 (21,670)
--------- ---------
Cash flows from financing activities:
Borrowings from related parties 91,756 103,350
Payments to related parties (117,100) (95,900)
Payment of long-term debt (2,799) (1,281)
Partner distributions -- (166)
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (28,143) 6,003
--------- ---------
Net increase in cash and cash equivalents 7,326 --
Cash and cash equivalents at beginning of year -- --
--------- ---------
Cash and cash equivalents at end of year $ 7,326 $ --
========= =========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 14,043 $ 9,154
NON-CASH INVESTING AND FINANCING ACTIVITIES:
At June 30, 1997 and 1996, the Company financed property, plant and equipment
with accounts payable of $1.2 million and $10.1 million, respectively.
The accompanying notes are an integral part of the financial statements.
</TABLE>
9
<PAGE>
CF&I STEEL, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The financial statements include the accounts of CF&I Steel, L.P.
("Partnership"). 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
Partnership's 1996 Form 10-K for additional disclosures including a
summary of significant accounting policies.
2. Inventories
-----------
Inventories consist of:
June 30, December 31,
1997 1996
---------- --------------
(In thousands)
Raw materials $17,152 $16,246
Semifinished product 12,541 16,488
Finished product 4,569 8,245
Stores and operating supplies 8,189 9,435
------- -------
$42,451 $50,414
======= =======
3. Contingencies
-------------
ENVIRONMENTAL. The Partnership acquired certain assets from CF&I
Steel Corporation in 1993 and 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 the Partnership 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 June 30, 1997, the Partnership
has a reserve of $35.1 million related to this remediation, of which
$32.9 million is classified as non-current in the balance sheet.
GUARANTEES. Oregon Steel Mills, Inc. ("Oregon Steel") has outstanding
$235 million principal amount of 11% First Mortgage Notes due 2003.
The Partnership has guaranteed the obligations of Oregon Steel under the
Notes, and those guarantees are secured by a lien on substantially all
of the property, plant and equipment and certain other assets of the
Partnership, excluding accounts receivable and inventory.
4. Proceeds from Insurance Settlement
----------------------------------
Sales for the first six month of 1997 include approximately $2.5 million
of insurance proceeds as reimbursement of lost profits resulting from
lost production during the third and fourth quarters of 1996 related to
the failure of one of the power transformers servicing the Partnership.
In total, the Partnership received $7 million in insurance proceeds from
this claim of which $4.5 million was recorded in the fourth quarter of
1996.
10
<PAGE>
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 New CF&I, Inc. ("Company") consolidated financial statements include
the accounts of CF&I Steel, L.P. ("Partnership"), a 95.2 percent owned
subsidiary and the Colorado & Wyoming Railway Company, a wholly-owned short-line
railroad,serving principally the Pueblo mill. For the three months ended
June 30, 1997and 1996 and the six months ended June 30, 1997 and 1996, sales of
the Partnership were 98.5 percent, 98.7 percent, 98.6 percent and 98.8 percent,
respectively, of the consolidated sales of the Company. For the three months
ended June 30, 1997 and 1996 and the six months ended June 30, 1997 and 1996,
cost of sales of the Partnership were 98.6 percent, 99.0 percent, 98.6 percent,
and 99.1 percent, respectively, of the consolidated cost of sales of the
Company.
Results of Operations
- ---------------------
The following table sets forth for the Company tonnage sold, sales and average
selling price per ton:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
Tonnage sold:
Rail 104,300 61,600 199,000 156,800
Rod/Bar/Wire 123,500 104,100 236,000 216,800
Seamless Pipe 34,700 34,000 67,900 74,600
Semifinished 12,100 14,000 19,600 21,100
-------- -------- -------- --------
Total 274,600 213,700 522,500 469,300
======== ======== ======== ========
Sales (in thousands): $119,549 $ 92,258 $230,769(FN1) $204,901
Average selling price per ton: $ 435 $ 432 $ 437(FN2) $ 437
(FN1)Includes insurance proceeds of approximately $2.5 million as reimbursement
of lost profits resulting from lost production during the third and fourth
quarters of 1996 related to the failure of one of the power transformers
servicing the Company.
(FN2)Excludes insurance proceeds referred to in Note (1) above.
- ------------------------
The Company's sales increased 29.6 percent to $119.5 million in the second
quarter of 1997 and increased 12.6 percent to $230.8 million for the first six
months of 1997, compared to the corresponding 1996 periods. Shipments increased
28.5 percent to 274,600 tons in the second quarter of 1997 and increased 11.3
percent to 522,500 tons in the first six months of 1997, compared to the
corresponding 1996 periods. The increase in sales and shipments was primarily
due to increased shipments of rail and rod and bar products in 1997. Rail
shipments were 104,300 and 199,000 tons during the three and six month periods
ended June 30, 1997, compared to 61,600 and 156,800 tons in the corresponding
1996 periods. Rod and bar shipments were 112,100 and 212,300 tons during the
11
<PAGE>
three and six month periods ended June 30, 1997 compared to 89,200 and 186,300
tons in the corresponding 1996 periods.
The Company's average selling prices increased $3 to $435 per ton for the
second quarter of 1997 and remained unchanged at $437 per ton for the first six
months of 1997, compared to the corresponding 1996 periods. Selling prices
increased in the three and six month periods ended June 30, 1997 due to
increased rail shipments and higher seamless pipe product prices. These
increases were offset by increased shipments of the lower priced rod and bar
products in the first six months of 1997 and lower shipments of seamless pipe
products in the second quarter of 1997. Of the $27.3 million sales increase in
the second quarter of 1997, $26.5 million was the result of volume increases and
$800,000 the result of the higher average selling prices. Of the $25.9 million
sales increase for the first six months of 1997, $23.4 million was the result of
volume increases and $2.5 million from the 1997 insurance settlement.
The Company's gross profit for the three and six month periods ended June
30, 1997 was 12.8 and 12.0 percent, respectively, compared to 7.3 and 9.7
percent for the corresponding 1996 periods. The gross profit improvement in 1997
compared to 1996 was due to increased rail shipments, products on which the
Company generally realizes a higher gross margin per ton, higher seamless pipe
product prices and reduced costs due to increased steel production and improved
operating efficiencies. In addition, second quarter 1996 gross profit was
negatively impacted by approximately $1.6 million due to higher costs and
reduced shipments as a result of the outage of the ladle refining furnace.
The Company's selling, general and administrative expenses for the three
and six month periods ended June 30, 1997 increased $768,000 and $839,000,
respectively, from the corresponding periods in 1996. The increase was
primarily due to increased shipping expenses resulting from increased tons
shipped in 1997.
The Company's profit participation expense was $344,000 for the three and
six month periods ended June 30, 1997, compared to none and $275,000 for the
corresponding 1996 periods.
The Company's total interest cost for the three and six month periods
ended June 30, 1997 was $6.7 million and $13.6 million, respectively, compared
to $4.6 million and $9.2 million for the corresponding periods in 1996. The
higher interest cost primarily is the result of additional debt incurred to fund
the capital expenditure program, combined with increased interest rates.
Capitalized interest for the three and six month periods ended June 30, 1997 was
$79,000 and $139,000, respectively, compared to $784,000 and $1.4 million for
the corresponding 1996 periods.
The Company's effective tax rate was 43 percent and 49 percent for the three
and six month periods ended June 30, 1997, respectively, compared to a 43
percent benefit and 41 percent for the corresponding 1996 periods. The effective
tax rate for the first six months of 1997 varied from the combined state and
federal statutory rates due to miscellaneous adjustments to the Company's tax
accounts.
Liquidity and Capital Resources
- -------------------------------
The Company's cash flow from operations for the six months ended June 30,
1997 was $38.9 million compared to $16.1 million in the corresponding 1996
period. The major items affecting this $22.8 million increase were a larger
decrease in deferred tax assets ($4.0 million), a larger decrease in accounts
receivable ($5.5 million), and an increase in accounts payable versus a decrease
in 1996 ($14.4 million). These increases were partially offset by a smaller
increase in accrual expenses ($2.3 million) and a larger gain on sale of fixed
assets ($1.4 million).
12
<PAGE>
Since its acquisition by Oregon Steel Mills, Inc. ("Oregon Steel") in March
1993, the Partnership has required substantial amounts of cash to fund its
operations and capital expenditures. Borrowing requirements for capital
expenditures and other cash needs, both short-term and long-term, are provided
through a loan from Oregon Steel. As of June 30, 1997, $176.0 million of
aggregate principal amount of the loan was outstanding, all of which was
classified as long-term. The principal is due on demand or, if no demand is
made, December 31, 2002. Interest on the principal amount of the loan is payable
monthly. Because the loan from Oregon Steel is due on demand, the applicable
interest rate is effectively subject to renegotiation at any time, and there is
no assurance the interest rate will not be materially increased in the future.
In addition, Oregon Steel is not required to provide financing to the
Partnership and, although demand for repayment is not expected in 1997, it may
in any event demand repayment of the loan at any time. If Oregon Steel were to
demand repayment of the loan, it is unlikely that the Partnership would be able
to obtain from external sources financing necessary to repay the loan or to fund
its capital expenditures and other cash needs. Failure to obtain alternative
financing would have a material adverse effect on the Company and the
Partnership. If the Partnership were able to obtain the necessary financing, it
is likely that such financing would be at interest rates and on terms
substantially less favorable to the Partnership than those provided by Oregon
Steel.
Term debt of $67.5 million was incurred by the Partnership as part of the
purchase price of the Pueblo Mill on March 3, 1993. This debt is
uncollateralized and is payable over 10 years with interest at 9.5 percent. As
of June 30, 1997, the outstanding balance on the debt was $48.4 million, of
which $41.5 million was classified as long-term debt.
Oregon Steel has outstanding $235 million principal amount of 11% First
Mortgage Notes due 2003. The Company and the Partnership have guaranteed the
obligations of Oregon Steel under the Notes, and those guarantees are secured by
a lien on substantially all of the property, plant and equipment and certain
other assets of the Company and the Partnership, excluding accounts receivable
and inventory.
In addition, Oregon Steel maintains a $125 million credit agreement with a
group of banks which is collateralized, in part, by the accounts receivable and
inventory of the Company and the Partnership, and also guaranteed by the Company
and the Partnership.
The Company expects that anticipated needs for working capital and the
capital expenditure program will be met from funds generated from operations and
available borrowings from Oregon Steel.
CAPITAL EXPENDITURES. During the first six months of 1997, the Company
expended approximately $3.5 million, excluding capitalized interest, on capital
projects.
13
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27.1 Financial Data Schedule - New CF&I, Inc.
27.2 Financial Data Schedule - CF&I Steel, L.P.
(b) Reports on Form 8-K
None
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.
NEW CF&I, INC.
Date: August 8, 1997 /s/ Christopher D. Cassard
------------------------------
Christopher D. Cassard
Corporate Controller
CF&I STEEL, L.P.
By: New CF&I, Inc.
General Partner
Date: August 8, 1997 /s/ Christopher D. Cassard
-----------------------------
Christopher D. Cassard
Corporate Controller
New CF&I, Inc.
14
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7328
<SECURITIES> 0
<RECEIVABLES> 42522
<ALLOWANCES> 811
<INVENTORY> 42597
<CURRENT-ASSETS> 99129
<PP&E> 250255
<DEPRECIATION> 28341
<TOTAL-ASSETS> 370791
<CURRENT-LIABILITIES> 71444
<BONDS> 0
0
0
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