<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-22603
BAYOU STEEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 72-1125783
(State of incorporation) (I.R.S. Employer
Identification No.)
River Road, P.O. Box 5000, LaPlace, Louisiana 70069
(Address of principal executive offices)
(Zip Code)
(504) 652-4900
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares Outstanding at December 31, 1993
Class A Common Stock, $.01 par value 10,613,380
Class B Common Stock, $.01 par value 2,271,127
Class C Common Stock, $.01 par value 100
----------
12,884,607
==========<PAGE>
<PAGE> 2
BAYOU STEEL CORPORATION
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Financial Statements
Balance Sheets -- December 31, 1993
and September 30, 1993 3
Statements of Income (Loss) --
Three Months Ended
December 31, 1993 and 1992 5
Statements of Cash Flows -- Three
Months Ended December 31, 1993 and 1992 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
Results of Operations 11
Liquidity and Capital Resources 13
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 15<PAGE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BAYOU STEEL CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited) (Audited)
December 31, September 30,
1993 1993
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary cash
investments $ 3,073,937 $ 517,900
Trade receivables 14,096,150 18,350,338
Other receivables 451,635 326,569
Inventories 53,930,823 48,486,408
Prepaid expenses 802,908 222,277
------------ ------------
Total current assets 72,355,453 67,903,492
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements 4,124,002 4,124,002
Machinery and equipment 73,139,509 72,954,682
Plant and office building 12,663,242 12,663,242
Construction in progress 3,531,274 3,302,603
Less-Accumulated depreciation (24,949,331) (23,785,622)
------------ ------------
Net property, plant and
equipment 68,508,696 69,258,907
------------ ------------
OTHER ASSETS 1,546,357 1,117,788
------------ ------------
Total assets $142,410,506 $138,280,187
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
<PAGE> 4
BAYOU STEEL CORPORATION
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited) (Audited)
December 31, September 30,
1993 1993
------------ -------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 19,167,924 $ 17,671,923
Accrued liabilities 6,840,346 4,560,249
Current maturities of
long-term debt 9,249,068 9,282,156
Borrowings under line of credit 5,900,000 4,000,000
------------ ------------
Total current liabilities 41,157,338 35,514,328
------------ ------------
LONG-TERM DEBT:
Senior secured notes 39,900,000 39,900,000
Notes payable 1,094,865 1,634,625
------------ ------------
Total long-term debt 40,994,865 41,534,625
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value -
Class A 106,134 106,134
Class B 22,711 22,711
Class C 1 1
------------ ------------
Total common stock 128,846 128,846
Paid-in capital 44,890,554 44,890,554
Retained earnings 15,238,903 16,211,834
------------ ------------
Total stockholders' equity 60,258,303 61,231,234
------------ ------------
Total liabilities &
stockholders' equity $142,410,506 $138,280,187
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
<PAGE> 5
BAYOU STEEL CORPORATION
STATEMENTS OF INCOME (LOSS)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
December 31,
1993 1992
------------ ------------
<S> <C> <C>
NET SALES $ 36,778,489 $ 31,832,929
COST OF SALES 34,558,324 28,198,559
------------ ------------
GROSS PROFIT 2,220,165 3,634,370
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES 889,849 1,080,693
NON-PRODUCTION STRIKE EXPENSES 399,181 -
------------ ------------
OPERATING INCOME 931,135 2,553,677
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (1,884,614) (2,224,618)
Interest income 20,447 52,321
Miscellaneous (39,899) (34,679)
------------ ------------
(1,904,066) (2,206,976)
------------ ------------
INCOME (LOSS) BEFORE TAXES AND
EXTRAORDINARY GAIN (972,931) 346,701
PROVISION FOR INCOME TAXES - -
------------ ------------
INCOME (LOSS) BEFORE
EXTRAORDINARY GAIN (972,931) 346,701
EXTRAORDINARY GAIN, NET OF
APPLICABLE INCOME TAX - 755,788
------------ ------------
NET INCOME (LOSS) $ (972,931) $ 1,102,489
============ ============
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 12,884,607 12,884,607
============ ============
INCOME (LOSS) PER COMMON SHARE:
Income (loss) before
extraordinary gain $ (.08) $ .03
Extraordinary gain - .06
------------ ------------
Income (loss) per common share $ (.08) $ .09
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
<PAGE> 6
BAYOU STEEL CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
December 31,
1993 1992
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (972,931) $ 1,102,489
Extraordinary gain - (755,788)
Depreciation and amortization 1,250,086 1,277,926
Provision for losses on accounts
receivable 112,369 90,080
Changes in working capital:
Decrease (increase) in
receivables 4,016,754 (2,297,836)
(Increase) decrease in
inventories (5,444,415) 1,151,286
(Increase) in prepaid expenses (580,631) (533,424)
Increase (decrease) in accounts
payable 1,496,001 (4,603,392)
Increase in accrued liabilities 2,280,097 1,093,228
------------ ------------
Net cash provided by (used in)
operations 2,157,330 (3,475,431)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Addition of property, plant
and equipment (413,498) (1,186,777)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing under line of credit 1,900,000 -
Payments of long-term debt (572,847) (3,786,725)
(Increase) in other assets (514,948) -
------------ ------------
Net cash provided by (used in)
financing activities 812,205 (3,786,725)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,556,037 (8,448,933)
CASH AND CASH EQUIVALENTS,
beginning balance 517,900 11,149,702
------------ ------------
CASH AND CASH EQUIVALENTS,
ending balance $ 3,073,937 $ 2,700,769
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
<PAGE> 7
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1993
(Unaudited)
1) BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC). Certain information and note disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and
regulations. Although Bayou Steel Corporation (the Company) believes that
disclosures made are adequate to ensure that information presented is not
misleading, it is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's latest annual report, Form 10-K, filed with the SEC on December 13,
1993 under File Number 33-22603.
In the opinion of the Company, the accompanying unaudited financial
statements present fairly the Company's financial position as of December 31,
1993 and September 30, 1993 and the results of its operations for the three-
month periods ended December 31, 1993 and 1992 and the cash flow statements for
the three-month periods ended December 31, 1993 and 1992.
The results of operations for the three-month periods ended December 31,
1993 and 1992 are not necessarily indicative of the results for the full year.
2) INVENTORIES
Inventories as of December 31, 1993 and September 30, 1993 consisted of the
following:
(Unaudited) (Audited)
December 31, September 30,
1993 1993
------------- --------------
Scrap steel $ 4,702,655 $ 3,187,963
Billets 3,229,014 3,918,223
Finished product 29,445,896 25,242,294
LIFO adjustments (545,106) (324,303)
------------ ------------
$ 36,832,459 $ 32,024,177
Mill rolls, operating
supplies and other 17,098,364 16,462,231
------------ ------------
$ 53,930,823 $ 48,486,408
============ ============
The inventory valuations are based on LIFO estimates of year-end levels and
prices. The actual LIFO inventories will not be known until year-end quantities
and indices are determined.
Shapes, billets, scrap steel, and certain production supplies are pledged
as collateral against the Company's line of credit.<PAGE>
<PAGE> 8
3) PROPERTY, PLANT AND EQUIPMENT
Betterments, improvements, and additions on property, plant and equipment
are capitalized at cost. Interest during construction of significant additions
is capitalized. Interest of $15,000 and $14,000 was capitalized during the
three-month periods ended December 31, 1993 and 1992, respectively. Interest of
$115,000 was capitalized during the fiscal year ended September 30, 1993.
4) OTHER ASSETS
Other assets consist of costs associated with the issuance of the Senior
Secured Notes (the 14.75% Notes) and the Company's lines of credit.
Amortization expense was $86,000 and $179,000 for the three-month periods ended
December 31, 1993 and 1992. Amortization expense was $458,000 for the fiscal
year ended September 30, 1993.
5) LONG-TERM DEBT
The Company has accrued interest on the 14.75% Notes at the rate of 14.75%
and 15.29% for the three-month periods ended December 31, 1993 and 1992,
respectively. The Company is required to redeem $9.0 million in principal of
its 14.75% Notes on March 15, 1994. During the second fiscal quarter of 1994,
the Company filed Amendment No. 1 to Form S-1 with the Securities and Exchange
Commission to register for sale $75,000,000 in new debt. The net proceeds of
this new debt will be used for the repayment of outstanding indebtedness,
implementation of capital projects and general working capital purposes.
6) SHORT-TERM DEBT
On November 23, 1993, the Company entered into an amendment and restatement
of the line of credit agreement. The terms of the agreement call for available
borrowings up to $30 million including outstanding letters of credit. The
agreement is secured by inventory and accounts receivable at interest rates of
prime plus 1% or LIBOR plus 2%. The amount available under the line as of
December 31, 1993 was $22.6 million. There was $5.9 million borrowed under the
line as of December 31, 1993.
Maximum and average borrowings and weighted average interest rates on
short-term borrowings during the first quarter of fiscal 1994, follows:
Maximum borrowings outstanding. . . . . $5,900,000
Average borrowings outstanding. . . . . $4,485,000
Weighted average interest rate. . . . . 5.1%
7) TAXES
As of September 30, 1993, for tax purposes, the Company had net operating
loss carryforwards ("NOLs") of approximately $310.5 million and $284.5 million
available to offset against regular tax and alternative minimum tax
respectively. Due to the fact that book and tax losses were generated in 1993,
1992 and 1991, there was no provision for income taxes in any of these years.
The NOLs will expire in varying amounts through fiscal 2008. A substantial
portion of the available NOLs, approximately $200 million, expires by fiscal
2000. In addition, the Company has $30.2 million of future tax benefits
attributable to its tax benefit lease which expires in 1996 and which may, to
the extent of taxable income in the year such tax benefit is produced, be
utilized prior to the NOLs. Even though management believes the Company will<PAGE>
<PAGE> 9
be profitable in the future and will be able to utilize a portion of the NOLs,
management does not believe that it is likely that all of the NOLs will be
utilized. In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109"), which was adopted beginning October 1, 1993. FAS 109
requires, among other things, recognition of future tax benefits, subject to a
valuation allowance based on the likelihood of realizing such benefits.
Deferred tax assets of approximately $118 million (NOLs and other temporary
timing differences multiplied by the federal income tax rate) and deferred tax
liabilities of approximately $8 million were recorded upon adoption of FAS 109
in the first quarter of fiscal 1994. However, in recording these deferred
assets, FAS 109 requires the Company to determine whether it is "more likely
than not" that the Company will realize such benefits and that all negative and
positive evidence be considered (with more weight given to evidence that is
"objective and verifiable") in making the determination. FAS 109 indicates that
"forming a conclusion that a valuation allowance is not needed is difficult when
there is negative evidence such as cumulative losses in recent years";
therefore, the Company has determined that it is required by the provisions of
FAS 109 to establish a valuation allowance for all of the recorded net deferred
tax assets. In view of the fact that this determination is based primarily on
historical losses with no regard for the impact of proposed capital expenditures
and business plans, future favorable adjustments to the valuation allowance may
be required if and when circumstances change and the Company returns to
profitability. Adoption of FAS 109 will have no material adverse impact on
income for financial reporting or tax purposes.
8) MISCELLANEOUS
Miscellaneous for the three-month period ended December 31, 1993 and 1992
included the following:
December 1993 December 1992
------------- -------------
Discounts earned $ 59,221 $ 24,561
Provision for bad debts (112,368) (90,080)
--------- ---------
Other 13,248 30,840
$ (39,899) $ (34,679)
========= =========
9) COMMON STOCKHOLDERS' EQUITY
Common stock as of December 31, 1993 and 1992 consisted of:
Class A Class B Class C
---------- --------- -------
Authorized 24,271,127 4,302,347 100
Outstanding, at end
of quarter 10,613,380 2,271,127 100
Average outstanding
for quarter 10,613,380 2,271,127 100<PAGE>
<PAGE> 10
10) COMMITMENTS AND CONTINGENCIES
Strike
On March 21, 1993, the United Steelworkers of America Local 9121 (the
"Union") initiated a strike against the Company. Negotiations on a new contract
have continued, but differences have thus far precluded an agreement. The
Company cannot predict the impact that a new collective bargaining contract will
have on the Company's results. However, the Company believes a new contract
will not have a material effect on the Company's results. Also, the Union has
filed charges with the National Labor Relations Board alleging that the Company
has violated the National Labor Relations Act relating to its bargaining
conduct. The Company believes it has meritorious defenses to these charges and
has responded timely to all of these allegations and believes that it has
negotiated in good faith with the Union. An unfavorable decision by the
National Labor Relations Board, however, should not materially affect the
Company.
Environmental
The Company is subject to various Federal, state and local laws and
regulations concerning the discharge of contaminants which may be emitted into
the air, discharged into waterways, and the disposal of solids and/or hazardous
wastes such as electric arc furnace dust. In addition, in the event of a
release of a hazardous substance generated by the Company, the Company could be
potentially responsible for the remediation of contamination associated with
such a release. In the past, the Company's operations in some respects have not
met all of the applicable standards promulgated pursuant to such laws and
regulations. At this time, the Company believes that it is in compliance in all
material respects with applicable environmental requirements and that the cost
of such continuing compliance will not have a material adverse effect on the
Company's competitive position, operations or financial condition, or cause a
material increase in currently anticipated capital expenditures. The Company
currently has no mandated expenditures to address previously contaminated sites
and does not anticipate any infrequent or non-recurring clean-up expenditures.
Also, the Company is not designated as a Potential Responsible Party ("PRP")
under the Superfund legislation.
Other
There are various claims and legal proceedings arising in the ordinary
course of business pending against or involving the Company wherein monetary
damages are sought. It is management's opinion that the Company's liability, if
any, under such claims or proceedings would not materially affect its financial
position.<PAGE>
<PAGE> 11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATION
The Company's net sales increased by 15.5% in the first quarter of fiscal
1994 as compared to the first quarter of fiscal 1993 due primarily to an 11.5%
increase in shape shipments. Nonetheless, the Company's results were affected
by a reduction in the metal margin for the period. Metal margin is the spread
between the selling price of the Company's products and the cost of scrap metal,
the Company's principal raw material. The average shape metal margin was $14
per ton lower in the first quarter of fiscal 1994 than the comparable prior year
quarter. Consequently, the Company reported a net loss of $1.0 million in the
first quarter of fiscal 1994 and $0.3 million net income before extraordinary
gain in the comparable prior year quarter. The $14 decline in metal margin
since the first quarter of fiscal 1994 is the result of rapid increases in the
price of scrap metal, which the Company was unable to completely offset with
price increases in its finished steel products. By the end of the first quarter
in fiscal 1994, however, the Company had implemented price increases to increase
the metal margin by $6 per ton over the first quarter average of fiscal 1994.
As a result of the price increases that occurred in the first fiscal quarter of
1994, the metal margin was close to the Company's ten-year historical average.
The Company's conversion costs - the cost of converting scrap metal into
finished products - decreases by $6 per ton in the first quarter of fiscal 1994
compared to the same period of fiscal 1993. Non-production strike expenses,
which related to extraordinary security and legal expenses associated with the
strike, amounted to $0.4 million in the first fiscal quarter in fiscal 1994.
The following table sets forth shipment and sales data for the periods
indicated.
Three months ended
December 31,
1993 1992
-------- --------
Net Sales (in thousands) $ 36,778 $ 31,833
Shape Shipment Tons 103,168 92,487
Shape Selling Price Per Ton $ 321 $ 295
Billet Shipment Tons 13,375 18,488
Billet Selling Price Per Ton $ 224 $ 202
A. Sales
Net sales increased in the first quarter of fiscal 1994 by 15.5% compared
to the same period of fiscal 1993. The increases were the result of increasing
shape shipments and prices.
Shapes. The 11.5% increase in shape shipments in the first quarter of
fiscal 1994 compared to the same period of fiscal 1993 is attributable to an
improving economy and improved product mix and availability. Export shipments
accounted for 6.8% and 7.1% of shape sales in the first quarters of fiscal 1994
and 1993, respectively. The first quarter is normally the slowest shipping
period. Backlog of orders at December 31, 1993 is 42% higher than a year
earlier.<PAGE>
<PAGE> 12
Shape prices increased by 8.8% in the first quarter of fiscal 1994 compared
to the same period of fiscal 1993. These higher prices were primarily in
response to sharp increases in raw material costs; however, the price increases
only partially offset the raw material increases. While the Company was able to
increase shape prices several times during the most recent fiscal quarter, the
shape price increases lagged the increases in scrap prices. However, by
December 31, 1993 the increases in selling prices exceeded the scrap price
increases during the quarter by $2 per ton. The Company's efforts to replenish
the inventories used during the early stage of the strike had a positive impact
on price realization. The Company has announced another price increase
effective February 1, 1994 of $10 per ton. Although it is uncertain that this
increase will be accepted in the market, several competitors have supported the
proposed increase.
Billets. Shipments of billets, the Company's semi-finished product,
decreased 5,113 tons in the first quarter period of fiscal 1994 compared to the
same period of fiscal 1993 due to lack of availability of billets for sale.
More billets were used in the Company's Rolling Mill due to higher production
levels, resulting in fewer billets available for customers. The overall selling
price of billets increased in the first quarter of fiscal 1994 compared to the
same period of fiscal 1993 by 10.9%, or $22 per ton, due to increasing raw
material costs. However, the average billet metal margin was $18 per ton lower
in the first quarter of fiscal 1994 than the comparable prior year quarter.
Since billet prices for a major billet customer are related to prior month's
scrap prices, the Company expects margins to improve once scrap prices stabilize
or decrease.
B. Cost of Sales
The major component of cost of sales is scrap. In the first quarter of
fiscal 1994, average steel scrap cost was approximately $40 per ton higher than
the average steel scrap cost for the first quarter of fiscal 1993. Increases in
foreign and domestic demand, due to an improving economy and increased steel
mill utilization, caused the scrap prices to increase. The average shape metal
margin for the first quarter of fiscal 1994 was $14 per ton lower than the same
period of fiscal 1993.
Another significant portion of cost of sales is conversion costs, which
include labor, energy, maintenance materials and supplies used to convert raw
materials into billets and billets into shapes. Conversion cost per ton in the
first quarter of fiscal 1994 compared to the same period of fiscal 1993
decreased by $6 per ton. The primary decrease in conversion cost was due to the
reduced per ton fixed costs resulting from increased production. In the first
quarter of fiscal 1993, the Company's Melt Shop was operating six days per week.
In the first quarter of fiscal 1994, the Company's Melt Shop was operating seven
days per week. The Company's productivity in the first quarter of fiscal 1994
was 98% and 108% of the prior year comparable quarter in the Melt Shop and
Rolling Mill, respectively.
C. Selling, General and Administrative Expense
Selling, general and administrative expenses decreased by 17.6% or $191,000
in the first quarter of fiscal 1994 compared to the first period of fiscal 1993
due to reductions in collection expenses, travel, legal and consulting fees.<PAGE>
<PAGE> 13
D. Non-Production Strike Expenses
Strike related expenses were $399,000 for the first quarter of fiscal 1994.
December strike expenses were $79,000. Given the same level of strike related
activity, the Company expects that future strike-related costs will not exceed
$100,000 per month in subsequent periods. Most of these expenses are directed
towards legal and security costs.
E. Other Income (Expense)
Interest expense decreased in the first quarter of fiscal 1994 compared to
the same periods of fiscal 1993 due to the Company purchasing $11.1 million of
its 14.75% Notes in fiscal 1993. The Company accrued interest on the remainder
of the 14.75% Notes in the first quarter of fiscal 1994 at a rate of 14.75%. In
the first quarter of fiscal 1993, interest was accrued at a rate of 15.29% which
was subsequently adjusted down to an annual rate of 14.75%. Interest income
decreased in the first quarter of fiscal 1994 compared to the same period of
fiscal 1993 due to less cash to invest and lower interest rates on investments.
Miscellaneous expenses were approximately the same in both quarters.
F. Net Loss
The net loss of $1.0 million for the first quarter of fiscal 1994 was
primarily due to the increases in shape selling prices lagging behind the
increases in scrap cost, and, to a lesser extent, the non-production strike
expenses. By the end of the first quarter, increases in shape prices exceeded
the increases in scrap prices which occurred during the quarter; however, the
metal margin is still lower than the prior year comparable quarter.
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased by $1.2 million to $31.2 million in the first
quarter of fiscal 1994.
In the first three months of fiscal 1994, cash flow from operations
increased by $2.2 million. The increase was due to the decrease in accounts
receivable due to collection of sales from September 1993 which were higher than
December 1993 (normally the slowest shipment month in the year). Accounts
payable increased by $1.5 million due to extending payment terms of selected
vendors. This was partially offset by an increase in inventories. The Company
has been rebuilding its inventories, which were depleted due to lower production
in the early phases of the strike, to normal operating levels. In addition, the
Company expects inventories to increase in the second fiscal quarter of 1994. A
two-week planned shutdown of the production facilities late in the third quarter
will reduce inventories by $4 to $5 million.
Capital expenditures amounted to $0.4 million in the first quarter of
fiscal 1994. These expenditures were used for minor upgrades to the plant and
major maintenance projects.
Cash from financing activities of $0.8 million in the first three months of
fiscal 1994 was due to short-term borrowings from the line of credit of $1.9
million. This was partially offset by principal payments on a mortgage and
increase in other assets due to expenses for the amended and restated line of
credit and the First Mortgage Notes as described below.<PAGE>
<PAGE> 14
On November 23, 1993, the Company entered into an amendment and restate
of the Credit Facility, which is a three-year line of credit that permits loans
to be made to the Company thereunder, on a secured basis, of up to $30 million.
As of December 31, 1993, there was $5.9 million borrowed under the Credit
Facility. Interest rates under the Credit Facility are prime plus 1% or LIBOR
plus 2% at the Company's option. The Company's Credit Facility contains certain
covenants, such as the Interest Expense Coverage ratio, which become more
restrictive over time. Under the Credit Facility, the Interest Expense Coverage
Ratio for the quarter ending September 30, 1994 is 1.25 to 1.00 and becomes
increasingly more restrictive for the quarters thereafter. For the quarter
ended December 31, 1993, the Company's Interest Expense Coverage Ratio is 1.15
to 1.00. In the event of a default under the Credit Facility, the Company would
not be permitted to borrow under the Credit Facility and the lenders thereunder
may accelerate payment of all amounts then outstanding and terminate their
commitments. A default under the Credit Facility may cause a default under the
Indenture to the 14.75% Notes or to the First Mortgage Notes described below.
However, the Company believes that its normal operations, coupled with
continuing operating improvements, will be sufficient to satisfy these
covenants. The Company filed a registration statement on Form S-1, subsequently
amended in the second fiscal quarter with the Securities and Exchange Commission
for issuance of $75 million of First Mortgage Notes (the "Offering"). The
Company will use the proceeds of the Offering to defease and redeem the $48.9
million of outstanding 14.75% Notes and repay the then outstanding loans under
the Credit Facility, for capital expenditures and working capital. If the
Offering is unsuccessful, the Credit Facility allows for borrowings of $12
million for payment of the outstanding 14.75% Notes. The $11.1 million of
previously acquired 14.7% Notes can be applied to any mandatory redemptions.
The Company believes that current cash balances, internally generated funds, the
Credit Facility and additional purchase money mortgages will provide adequate
funds for the Company's operating requirements.
There are no financial obligations with respect to post-employment or post-
retirement benefits.<PAGE>
<PAGE> 15
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following is an index of the exhibits included in this
report on Form 10-Q.
13.10 - Quarterly Report for the third quarter ended June
30, 1993.
(b) Reports on Form 8-K
None were filed during the first quarter of fiscal year 1994.<PAGE>
<PAGE> 16
SIGNATURE
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.
BAYOU STEEL CORPORATION
By /s/ Richard J. Gonzalez
Richard J. Gonzalez
Vice President, Treasurer and
Chief Financial Officer
Date: January 31, 1994<PAGE>
<PAGE> 1
BAYOU STEEL CORPORATION
To Our Stockholders:
Net losses of $4,078,000 in the third quarter and $4,672,000 for the first nine
months of fiscal 1993 were due to strike-related costs and to increases in scrap
cost, which were partially offset by increases in shape prices. Your Company
continues to be affected by a strike with the United Steelworkers of America,
Local 9121, which began on March 21, 1993.
BUSINESS REVIEW
Steel structural shape shipments increased by approximately 8% in the third
quarter and 9% in the nine-month period of fiscal 1993 compared to the same
periods of fiscal 1992. The increases are mainly attributable to improving
export sales.
Shape margins were temporarily squeezed during the third quarter of fiscal 1993
due to a rapid increase in steel scrap cost which was only partially offset with
an increase in shape selling prices. Scrap costs increased by 18.2% during the
third quarter of 1993 compared to the same quarter of fiscal 1992.
Strike-related costs were extensive and the decline in production, early in the
strike, increased our unit production costs. In addition, reduced shape
inventory levels have resulted in some missed shipment opportunities.
FINANCIAL CONDITION
Bayou Steel's financial position continues to be strong. Stockholders' equity
is $62.7 million. Net working capital is a healthy $40.3 million with a current
ratio of 2.4 to 1.0, including $6.1 million in invested cash. The Company's
unused $40 million working capital facility is also available, subject to
continued maintenance of the tangible net worth covenant or waiver or
modification thereof, if necessary, by the lenders.
OUTLOOK
Negotiations on a new collective bargaining contract have continued with the
United Steelworkers of America, but economic differences have, to date,
precluded an agreement. The Union has recently announced a corporate campaign
which is designed to bring pressure on the Company from individuals and
institutions with direct financial or other interests in the Company.<PAGE>
<PAGE> 2
Competition will remain intense as little improvement in the overall market is
expected. In the fourth quarter, strike costs should decrease substantially
since the Company is currently operating and producing at normal levels,
although reduced shape inventory levels could result in some lost sales. I am
pleased to report that our various constituencies have remained loyal,
supportive, and understanding during the strike. We appreciate their efforts
and the efforts of the many employees who continue steel-making operations.
Sincerely,
HOWARD M. MEYERS
Chairman of the Board,
President and Chief Executive Officer
August 10, 1993<PAGE>
<PAGE> 3
BAYOU STEEL CORPORATION
Balance Sheets (in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, September 30,
1993 1992
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary cash investments $ 6,056 $ 11,150
Trade receivables 14,781 11,900
Other receivables 299 439
Inventories 47,468 53,752
Prepaid expenses 537 257
----------- -----------
Total current assets 69,141 77,498
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements 3,528 3,517
Machinery and equipment 71,893 71,120
Plant and office building 12,001 11,289
Construction in progress 4,713 3,935
Less-Accumulated depreciation (22,710) (19,625)
----------- -----------
Net property, plant
and equipment 69,425 70,236
----------- -----------
OTHER ASSETS: 1,240 1,647
----------- -----------
Total assets $ 139,806 $ 149,381
=========== ===========
<PAGE>
<CAPTION>
(Unaudited) (Audited)
June 30, September 30,
1993 1992
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 12,552 $ 14,838
Accrued liabilities 6,934 5,101
Current maturities of long-term debt 9,318 392
----------- -----------
Total current liabilities 28,804 20,331
----------- -----------
LONG-TERM DEBT:
Senior secured notes 46,600 60,000
Notes payable 1,689 1,665
----------- -----------
Total long-term debt 48,289 61,665
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value -
Class A 106 106
Class B 23 23
Class C - -
----------- -----------
Total common stock 129 129
Paid-in capital 44,891 44,891
Retained earnings 17,693 22,365
----------- -----------
Total stockholders' equity 62,713 67,385
----------- -----------
Total liabilities &
stockholders' equity $ 139,806 $ 149,381
=========== ===========<PAGE>
Statements of Income (Loss) (Unaudited; in thousands, except per share data)
<CAPTION>
Third Quarter Ended June 30, Nine Months Ended June 30,
1993 1992 1993 1992
<S> <C> <C> <C> <C>
NET SALES $ 34,485 $ 31,050 $ 99,726 $ 89,297
COST OF SALES 33,740 28,432 93,306 81,534
--------- --------- --------- ---------
GROSS PROFIT 745 2,618 61,420 7,763
SG&A EXPENSES 963 1,103 3,073 3,240
--------- --------- --------- ---------
OPERATING INCOME
(LOSS) (218) 1,515 3,347 4,523
--------- --------- --------- ---------
OTHER EXPENSES (3,860) (2,019) (8,775) (6,077)
--------- --------- --------- ---------
INCOME(LOSS)BEFORE
EXTRAORDINARY
GAIN (4,078) (504) (5,428) (1,554)
EXTRAORDINARY GAIN - - 756 -
--------- --------- --------- ---------
NET INCOME (LOSS) $ (4,078) $ (504) $ (4,672) $ (1,554)
========= ========= ========= =========
INCOME (LOSS) PER
COMMON SHARE:
Income (loss)
before
extraordinary
gain $ (.32) $ (.04) $ (.42) $ (.12)
Extraordinary
gain - - .06 -
--------- --------- --------- ---------
Income (loss) per
common share $ (.32) $ (.04) $ (.36) $ (.12)
========= ========= ========= =========
SHAPE SHIPMENT
TONS 105,541 97,318 302,780 277,749
========= ========= ========= =========
BILLET SHIPMENT
TONS 13,132 9,386 39,114 24,830
========= ========= ========= =========
The quarterly cost of goods sold calculations are based on LIFO estimates.
The actual cost will not be known until year-end inventory quantities and
indices are determined.<PAGE>
Statements of Cash Flows (Unaudited; in thousands)
<CAPTION>
Nine Months Ended June 30,
1993 1992
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (4,672) $ (1,554)
Extraordinary gain (756) -
Depreciation and amortization 3,492 3,128
Provision for losses on accounts receivable 283 (35)
Changes in working capital 2,529 (138)
--------- ---------
Net cash provided by operations 876 1,401
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES (2,275) (3,030)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES (3,695) (128)
--------- ---------
NET (DECREASE) IN CASH (5,094) (1,757)
CASH, beginning balance 11,150 11,024
--------- ---------
CASH, ending balance $ 6,056 $ 9,267
========= =========
For additional information contact: Vice President, Treasurer and Chief
Financial Officer, Bayou Steel Corporation, P.O. Box 5000, LaPlace,
Louisiana 70069, 1-504-652-4900<PAGE>
</TABLE>
