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 June 30, 1995
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 JUNE 30, 1995
------------------------------------ -----------------------------------
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>
BAYOU STEEL CORPORATION
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION ------
Item 1. Financial Statements
Consolidated Balance Sheets --
June 30, 1995 and September 30, 1994 ...... 3
Consolidated Statements of Income (Loss) --
Three Months & Nine Months Ended
June 30, 1995 and 1994 .................... 5
Consolidated Statements of Cash Flows --
Nine Months Ended June 30, 1995 and 1994 .. 6
Consolidated Statements of Changes in Equity 7
Notes to Financial Statements .............. 8
Item 2. Management's Discussion and Analysis
Results of Operations ...................... 14
Liquidity and Capital Resources ............ 17
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K ........... 20
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BAYOU STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED) (AUDITED)
JUNE 30, SEPTEMBER 30,
1995 1994
------------- -------------
CURRENT ASSETS:
Cash and temporary cash investments ...... $ 11,110,540 $ 8,903,413
Trade receivables ........................ 19,513,707 18,781,222
Other receivables ........................ 3,408,500 375,185
Inventories .............................. 63,475,815 57,145,550
Prepaid expenses ......................... 740,818 188,452
------------- -------------
Total current assets ............... 98,249,380 85,393,822
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements .................... 6,019,528 4,333,542
Machinery and equipment .................. 88,624,926 75,855,608
Plant and office building ................ 16,365,589 13,125,589
Construction in progress ................. 11,060,291 2,462,312
Less-Accumulated depreciation ............ (32,198,589) (28,504,307)
------------- -------------
Net property, plant and equipment .. 89,871,745 67,272,744
------------- -------------
OTHER ASSETS ............................... 4,824,445 3,401,103
------------- -------------
Total assets ....................... $ 192,945,570 $ 156,067,669
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
Page 3
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(UNAUDITED) (AUDITED)
JUNE 30, SEPTEMBER 30,
1995 1994
------------ -------------
CURRENT LIABILITIES:
Accounts payable ........................... $ 16,726,037 $ 16,540,005
Accrued liabilities ........................ 5,187,083 3,327,480
Current maturities of long-term debt ....... 667,284 340,232
Dividends on preferred stock ............... 60,417 --
------------ ------------
Total current liabilities ............ 22,640,821 20,207,717
------------ ------------
LONG-TERM DEBT:
Senior secured notes ....................... 75,000,000 75,000,000
Term loan .................................. 10,000,000 --
Notes payable .............................. 173,851 735,924
------------ ------------
Total long-term debt ................. 85,173,851 75,735,924
------------ ------------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK ................... 12,137,838 --
------------ ------------
COMMON 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 ............................ 47,769,034 44,890,554
Retained earnings .......................... 25,095,180 15,104,628
------------ ------------
Total common stockholders' equity .... 72,993,060 60,124,028
------------ ------------
Total liabilities & stockholders'
equity ............................. $192,945,570 $156,067,669
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
Page 4
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------- ------------------------------------
1995 1994 1995 1994
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
NET SALES ................................ $ 47,386,163 $ 44,876,997 $ 140,759,898 $ 119,088,293
COST OF SALES ............................ 40,913,653 39,711,252 120,715,067 108,127,312
------------ ------------ ------------- -------------
GROSS PROFIT ............................. 6,472,510 5,165,745 20,044,831 10,960,981
SELLING, GENERAL & ADMINISTRATIVE ........ 1,501,044 963,370 3,811,624 2,842,346
NON-PRODUCTION STRIKE EXPENSES ........... 173,412 157,489 723,612 794,734
------------ ------------ ------------- -------------
OPERATING INCOME ......................... 4,798,054 4,044,886 15,509,595 7,323,901
------------ ------------ ------------- -------------
OTHER INCOME (EXPENSE)
Interest expense ........................ (2,046,913) (1,948,874) (5,817,791) (5,769,009)
Interest income ......................... 75,844 47,273 340,347 198,656
Miscellaneous ........................... 7,888 172,839 141,004 102,627
------------ ------------ ------------- -------------
(1,963,181) (1,728,762) (5,336,440) (5,467,726)
------------ ------------ ------------- -------------
INCOME BEFORE TAXES & EXTRAORDINARY ITEMS. 2,834,873 2,316,124 10,173,155 1,856,175
PROVISION FOR
INCOME TAXES ............................ 32,486 -- 105,868 --
------------ ------------ ------------- -------------
INCOME BEFORE EXTRAORDINARY ITEMS ........ 2,802,387 2,316,124 10,067,287 1,856,175
EXTRAORDINARY (LOSS), NET OF APPLICABLE
INCOME TAX .............................. -- -- -- (5,468,216)
------------ ------------ ------------- -------------
NET INCOME (LOSS) ........................ 2,802,387 2,316,124 10,067,287 (3,612,041)
ACCRETION & DIVIDENDS ACCRUED ON
PREFERRED STOCK ........................ (76,735) -- (76,735) --
------------ ------------ ------------- -------------
INCOME (LOSS) APPLICABLE TO COMMON
SHARES & COMMON EQUIVALENT SHARES ....... $ 2,725,652 $ 2,316,124 $ 9,990,552 $ (3,612,041)
============ ============ ============= =============
AVERAGE SHARES OUTSTANDING ............... 12,975,987 12,884,607 12,915,067 12,884,607
INCOME (LOSS) PER COMMON SHARE:
Income before extraordinary items ...... $ .21 $ .18 $ .77 $ .14
Extraordinary (loss) ................... -- -- -- (.42)
------------ ------------ ------------- -------------
Income (loss) per common share and
common equivalent share ............... $ .21 $ .18 $ .77 $ (.28)
============ ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 5
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
JUNE 30,
----------------------------
1995 1994
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................ $ 10,067,287 $ (3,612,041)
Extraordinary loss ........................... -- 5,468,216
Depreciation and amortization ................ 4,362,234 3,922,753
Provision for losses on accounts receivable .. 142,902 183,793
Changes in working capital:
(Increase) in receivables .................. (3,908,702) (1,954,624)
(Increase) in inventories .................. (6,330,265) (12,070,383)
(Increase) in prepaid expenses ............. (552,366) (280,195)
Increase (decrease) in accounts payable .... 186,032 (4,433,576)
Increase in accrued liabilities ............ 1,859,603 2,748,204
------------ ------------
Net cash provided by operations ........ 5,826,725 (10,027,853)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Tennessee facility
net of current assets ...................... (17,456,267) --
Addition of property, plant and equipment .... (8,837,016) (1,646,217)
------------ ------------
Net cash used by investing activities .......... (26,293,283) (1,646,217)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments) under line of credit .............. -- (4,000,000)
(Payments) of long-term debt
and retirement costs ....................... (235,021) (54,125,540)
(Increase) in other assets ................... (2,091,294) (3,789,280)
Proceeds from issuance of long-term debt ..... -- 75,000,000
Proceeds from issuance of preferred stock .... 15,000,000 --
Proceeds from term loan ...................... 10,000,000 --
------------ ------------
Net cash provided by
financing activities .................. 22,673,685 13,085,180
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ...... 2,207,127 1,411,110
CASH AND CASH EQUIVALENTS, beginning balance ... 8,903,413 517,900
------------ ------------
CASH AND CASH EQUIVALENTS, ending balance ...... $ 11,110,540 $ 1,929,010
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
Page 6
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK COMMON
------------------------------ PAID-IN RETAINED STOCKHOLDERS' PREFERRED
CLASS A CLASS B CLASS C CAPITAL EARNINGS EQUITY STOCK
-------- ------- ------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE,
October 1, 1992 ............ $106,134 $22,711 $ 1 $44,890,554 $ 22,365,564 $ 67,384,964 --
Net loss .................. -- -- -- -- (6,153,735) (6,153,735) --
-------- ------- ---- ----------- ------------ ------------ -----------
ENDING BALANCE,
September 30, 1993 ......... 106,134 22,711 1 44,890,554 16,211,829 61,231,229 --
Net loss .................. -- -- -- -- (1,107,201) (1,107,201) --
-------- ------- ---- ----------- ------------ ------------ -----------
ENDING BALANCE,
September 30, 1994 ......... 106,134 22,711 1 44,890,554 15,104,628 60,124,028 --
Issuance of
preferred stock
net of
discount ................. -- -- -- -- -- -- 12,121,520
Discount from
issuance of
preferred
stock .................... -- -- -- 2,878,480 -- 2,878,480 --
Net income ................. -- -- -- -- 10,067,287 10,067,287 --
Dividends on
preferred stock .......... -- -- -- -- (60,417) (60,417) --
Accretion on
preferred stock .......... -- -- -- -- (16,318) (16,318) 16,318
ENDING BALANCE,
June 30, 1995 .............. $106,134 $22,711 $ 1 $47,769,034 $ 25,095,180 $ 72,993,060 $12,137,838
======== ======= ==== =========== ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
Page 7
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
1) BASIS OF PRESENTATION
The accompanying unaudited interim consolidated 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 6,
1994 under File Number 33-22603.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements present fairly the Company's financial position as of June
30, 1995 and September 30, 1994 and the results of its operations for the
three-month and nine-month periods ended June 30, 1995 and 1994 and the cash
flow statements for the nine-month periods ended June 30, 1995 and 1994.
Since the recent acquisition of assets of Tennessee Valley Steel
Corporation ("TVSC") did not constitute the acquisition of a business pursuant
to the rules and regulations of the SEC, proforma and historical financial
information was not presented as of June 30, 1995 and 1994.
The results of operations for the nine-month periods ended June 30, 1995
and 1994 are not necessarily indicative of the results for the full year.
2) ACQUISITION
On April 28, 1995, the Company completed the acquisition of the assets
of TVSC for $30.5 million, subject to post acquisition purchase price
adjustments. The Company has estimated that the adjusted purchase price will be
$27.2 million. The newly acquired assets has been named Bayou Steel Corporation
(Tennessee) ("BSCT") and is a wholly owned subsidiary of the Company. The
adjusted purchase price has been allocated to the assets based upon their
estimated fair values, as follows (in thousands):
Cash ............................. $8,000
Receivable ....................... 103
Inventory ........................ 2,547
Property,Plant & Equipment ....... 16,550
-------
$27,200
=======
In addition to the allocation of the adjusted purchase price, additional
acquisition costs of $906,000 for legal, consulting, and other expenditures were
capitalized to property, plant and equipment. The Company intends to sell some
of the acquired assets that cannot be utilized by the Company or BSCT; this will
require the carrying cost of the remaining assets to be adjusted. Actual
production began at BSCT's rolling mill in mid-July.
Page 8
The acquisition was initially financed with excess cash and borrowings
from the Company's $30 million revolving line of credit. Within two months, the
Company arranged permanent financing by placing a $10 million term loan (see
Note 6) and issuing of $15 million in redeemable preferred stock and warrants
(see Note 9). In addition, the Company amended and restated the existing
revolving line of credit which increased the available borrowings from $30
million to $45 million (see Note 7).
3) INVENTORIES
Inventories as of June 30, 1995 and September 30, 1994 consisted of the
following:
(UNAUDITED) (AUDITED)
JUNE 30, SEPTEMBER 30,
1995 1994
------------ ------------
Scrap steel ........................ $ 5,950,024 $ 3,811,616
Billets ............................ 3,769,485 1,854,211
Finished product ................... 37,545,741 35,651,158
LIFO adjustments ................... (3,136,582) (931,213)
------------ ------------
$ 44,128,668 $ 40,385,772
Mill rolls, operating
supplies and other ............... 19,347,147 16,759,778
------------ ------------
$ 63,475,815 $ 57,145,550
============ ============
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.
The Company has not determined the method of accounting for inventory of
the BSCT operation, however; this determination is expected prior to
commencement of inventory sales at BSCT.
Shapes, billets, scrap steel, and certain production supplies are
pledged as collateral against the Company's line of credit.
4) PROPERTY, PLANT AND EQUIPMENT
The property, plant and equipment of TVSC was acquired for $17.5 million
on April 28, 1995. Capital expenditures for normal operations totaled $8.8
million and $1.6 million during the nine-month periods ended June 30, 1995 and
1994, respectively. As of June 30, 1995, the estimated costs to complete
authorized projects under construction or contract amounted to $1.7 million.
Betterments, improvements, and additions on property, plant and
equipment are capitalized at cost. Interest during construction of significant
additions is capitalized. Interest of $238,000 and $46,000 was capitalized
during the nine-month periods ended June 30, 1995 and 1994, respectively.
Interest of $69,000 was capitalized during the fiscal year ended September 30,
1994. The depreciation method for the newly acquired property, plant and
equipment for BSCT has not yet been determined.
5) OTHER ASSETS
Other assets consist of financing costs associated with the issuance of
long-term debt, redeemable preferred stock, and the Company's revolving line of
credit (see Notes 6, 7 and 10) which are being amortized over the lives of the
related transaction. During the third quarter of fiscal 1995, the Company wrote
Page 9
off $165,000 of other assets related to the previously existing revolving line
of credit. The Company also capitalized $2,176,000 of deferred financing costs
related to the term loan, redeemable preferred stock, and the amended and
restated revolving line of credit in the third quarter of fiscal 1995. During
the second quarter of fiscal 1994, the Company wrote off $953,000 of other
assets related to the 14.75% Senior Secured Notes (the "14.75% Notes") and
capitalized $3,279,000 of deferred financing costs related to the 10.25% First
Mortgage Notes (the "10.25% Notes"). Amortization expense was $668,000 and
$389,000 for the nine-month periods ended June 30, 1995 and 1994. Amortization
expense was $553,000 for the fiscal year ended September 30, 1994.
6) LONG-TERM DEBT
On June 20, 1995, the Company entered into a five-year term loan
agreement of $10 million for the Company's wholly owned subsidiary, BSCT. The
proceeds received from the term loan were used to repay the loan outstanding
under the Company's revolving credit facility which had been incurred to acquire
substantially all of the assets of TVSC. The term loan is partially secured by
the Company's accounts receivable. The term loan agreement calls for quarterly
principal payments of $750,000 beginning June 30, 1997 through March 31, 1999
and $1,000,000 million beginning June 30, 1999 through December 31, 1999. The
remaining $1,000,000 million principal payment is due on the final maturity
date. The term loan shall bear interest on a sliding scale based on the
quarterly leverage ratio which is defined indebtedness divided by EBITDA. Based
on the third quarter leverage ratio, BSCT will accrue at LIBOR plus 2% or
approximately 8% at current rates. As of June 30, 1995, BSCT accrued interest at
a rate of 8.3125%. Term loan interest is payable quarterly.
On March 3, 1994, the Company issued $75 million of the 10.25% Notes due
in 2001. The proceeds were used to redeem and defease the 14.75% Notes and to
repay the borrowings under the new revolving line of credit. The remaining
proceeds are being used to implement a capital expenditure program directed
toward cost reduction and general working capital purposes.
7) SHORT-TERM DEBT
On June 20, 1995, the Company entered into an amendment and restatement
of its revolving line of credit agreement which will be used for general
corporate purposes. The terms of the amended and restated agreement call for
available borrowings up to $45 million, including outstanding letters of credit
using a borrowing base of receivables and inventory. Based on these criteria,
the amount available as of June 30, 1995 was $30 million. The agreement is
secured by inventory and accounts receivable at interest rates on a sliding
scale based on the quarterly leverage ratio which is defined indebtedness
divided by EBITDA. Based on the third quarter leverage ratio, the Company will
accrue at LIBOR plus 2% or approximately 8% at current rates. As of June 30,
1995, the interest rate was 8.3125%. The terms of the loan agreement impose
certain restrictions on the Company, the most significant of which require the
Company to maintain a minimum interest coverage ratio and limit the incurrence
of certain indebtedness. There were no outstanding borrowings under the line of
credit as of June 30, 1995. The line of credit was used for interim financing of
the assets of TVSC. As a result, the maximum amount outstanding during the
three-month and nine-month periods ended June 30, 1995 was $23.2 million. The
average borrowings were $8,800,000 and $2,955,000 for the three-month and
nine-month periods ended June 30, 1995, respectively. The weighted average
interest rate was 8.92% for the third fiscal quarter and nine-month period ended
June 30, 1995.
Page 10
8) TAXES
As of September 30, 1994, for tax purposes, the Company had net
operating loss carryforwards ("NOLs") of approximately $319.0 million and $292.9
million available to offset against regular tax and alternative minimum tax,
respectively.
The NOLs will expire in varying amounts through fiscal 2009. A
substantial portion of the available NOLs, approximately $203 million, expires
by fiscal 2000. In addition, the Company has $22.0 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. The current provision for income taxes for the
nine-month period ended June 30, 1995 represents the alternative minimum tax
estimated to be due based on the current quarter's income.
9) PREFERRED STOCK AND WARRANTS
On June 20, 1995, the Company completed the issuance and sale of
preferred stock and warrants to purchase common stock for $15 million. The
Company issued 15,000 shares of its redeemable preferred stock and warrants to
purchase six percent of the Company's Common Stock (or 822,423 Class A shares)
at a nominal amount. The Company valued the 15,000 shares of preferred stock
sold at $12,121,520, after deducting $2,878,480 for the market value of the
warrants issued.
The holders of the preferred stock are entitled to receive quarterly
dividends at a rate of 14.5% per annum. If a quarterly dividend payment is not
made by the end of a quarter, the rate will increase by 3%. In addition, the
holders have a right to additional warrants in the event that any two
consecutive quarterly payments are missed or other defined issuance events
exist. As of June 30, 1995, the Company accrued dividends at a rate of 14.5%.
The carrying amount of the preferred stock will increase by periodic accretion
of the difference between the fair value of the stock at the date of issuance
and the redemption value from 1995 through the mandatory redemption date based
on the interest method. The terms of the stock purchase agreement impose certain
financial covenants which are generally related to covenants in the revolving
line of credit or the 10.25% Notes.
The preferred stock is mandatorily redeemable by the Company in seven
years after issuance; however, the Company can redeem at any time on and after
June 20, 1997, initially at 113.0% of the outstanding balance, plus accrued
dividends to the date of redemption, and declining ratably to par on June 20,
2002.
10) COMMON STOCKHOLDERS' EQUITY
Common stock and common stock equivalents as of June 30, 1995 consisted
of:
Class A Class B Class C
---------- --------- ---------
Authorized ....................... 24,271,127 4,302,347 100
Outstanding, at end of quarter ... 13,707,030 2,271,127 100
Average outstanding for quarter .. 12,975,987 2,271,127 100
11) EARNINGS PER SHARE
Earnings per common and common equivalent share are calculated based
upon the weighted average number of common shares and common stock equivalents
outstanding during the three-month periods and the nine-months period ended June
30, 1995 and 1994. In connection with the issuance of redeemable preferred stock
Page 11
on June 20, 1995 as discussed in note 9, the Company reserved 822,423 shares of
its Class A Common Stock for issuance upon exercise of the outstanding warrants
at a nominal exercise price. These warrants are considered common stock
equivalents in calculating earnings per common and common equivalent share for
the quarter and nine-month period ended June 30, 1995. The average shares,
including equivalents, outstanding for the quarter and nine-month period ended
June 30,1995 were 12,975,987 and 12,915,067, respectively. Actual common shares
outstanding for the quarter and nine-month period ended June 30, 1994 were
12,884,607.
12) MISCELLANEOUS
Miscellaneous for the nine-month periods ended June 30, 1995 and 1994
included the following:
JUNE 1995 JUNE 1994
--------- ---------
Discounts earned ................... $ 167,187 $ 199,697
Provision for bad debts ............ (142,902) (183,793)
Other .............................. 116,719 86,723
--------- ---------
$ 141,004 $ 102,627
========= =========
13) COMMITMENTS AND CONTINGENCIES
STRIKE
On March 21, 1993, the United Steelworkers of America Local 9121 (the
"Union") initiated a strike against the Company. The strike is ongoing. There
have been no formal negotiations on a new contract since March 1994. 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 negative material
effect on the Company's results.
The Union has filed charges with the National Labor Relations Board (the
"NLRB") 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, has responded timely to all charges, and believes
that it has negotiated in good faith with the Union. The General Counsel's
Office of Appeals of the NLRB has upheld the decision of the NLRB to dismiss
many of the allegations filed by the Union for unfair bargaining. The Union has
filed for reconsideration of the decision with the General Counsel's Office of
Appeals, which will continue to delay the NLRB's final decision on the charges.
The Company is still faced with other allegations of unfair bargaining initiated
by the USWA. The Company has proposed a settlement offer with the Regional
Office of the NLRB on the remaining outstanding charges. An unfavorable decision
by the NLRB, however, should not materially affect the Company.
The Union has initiated two inspections of the Company's facilities and
records by the Environmental Protection Agency (the "EPA"), which were completed
in June of 1994 and February of 1995. The EPA has recently issued its report to
the Louisiana Department of Environmental Quality which initially requested the
assistance of the EPA. The EPA did not find any evidence of buried hazardous
waste as the Union alleged.
Page 12
The Union also initiated a wall-to-wall inspection of the Company's
facilities by the Occupational & Safety Health Administration (the "OSHA"),
which was completed in November of 1994. The OSHA report was recently received
and the Company received various citations and was fined $160,500; the Company
has contested the citations. OSHA officials have stated that none of what was
found "showed blatant disregard for safety" and that none of the violations were
deemed "willful". Pursuant to the Company contesting the OSHA citation, OSHA has
scheduled a hearing on this matter for September 14, 1995. The Company had
previously accrued a loss contingency for its estimate of the ultimate liability
arising from these inspections as of June 30, 1995.
The Union's corporate campaign against the Company continues on many
different fronts. The Union recently appealed to the states of Louisiana and
Tennessee to take away tax exemptions/grants from the Company; neither attempt
was successful. The Union also attempted to disrupt the Company's activities to
secure permanent financing for the acquisition of the assets of TVSC. The
Company expects activities of this sort to continue.
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 under current operations 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. Under a full two furnace operation, the Company may be required to
make an additional capital investment to upgrade the air pollution control
equipment in order to maintain compliance with current and future regulations.
The Company currently has no mandated expenditures at its Louisiana facility to
address previously contaminated sites. Prior to the Company's acquisition of the
Tennessee facility, TVSC entered into a Voluntary Consent Agreement and Order
(the "Voluntary Consent Order") under the Tennessee Department of Environment
and Conservation voluntary clean-up program. The Company plans to enter into a
similar voluntary order. The ultimate remedy and clean-up requirements, if any,
will be dictated by the results of human health and ecological risk assessments
which are part of a required Remedial Investigation/Feasibility Study. The
purchase agreement between the Company and TVSC provides for withholdings in
escrow to be applied to any costs incurred by the Company for remediation under
the Voluntary Consent Order. Also, the Company is not designated as a Potential
Responsible Party ("PRP") under the Superfund legislation. At June 30 1995, the
Company has accrued a loss contingency for environmental matters.
OTHER
The Company does not provide any post-employment or post-retirement
benefits to its employees.
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 effect its financial
position.
Page 13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATION
The Company earned $2.8 million before accretion and dividends on
preferred stock in the third quarter of fiscal 1995 compared to an income of
$2.3 million for the comparable period of fiscal 1994. During the first nine
months of fiscal 1995 the Company earned $10.1 million before accretion and
dividends on preferred stock compared to an income before extraordinary items of
$1.9 million for comparable periods of fiscal 1994. The improvements in the
Company's results were due to three significant factors. First, metal margin,
the difference between shape selling price and raw material ("scrap") cost,
increased. And second, shape shipments increased. Third, conversion costs (the
cost to convert raw material into finished product) were significantly lower.
Offsetting these improvements were the pre-start-up expenses of the acquired
Tennessee facility, increases in additive and alloy costs, and an unusual
adjustment in scrap inventories.
The extraordinary loss in 1994 was due to refinancing the previous 14
3/4% debt with 10 1/4% first mortgage notes. The refinancing allowed the Company
to repay the outstanding loans under the Company's revolving credit facility,
implement a cost savings program through capital expenditures, and provide
additional working capital. The accretion and dividends on the preferred stock
is the result of the Company issuing $15 million in preferred stock and warrants
as part of the financing of the acquisition of the assets of Tennessee Valley
Steel Corporation ("TVSC").
The Tennessee facility, since the acquisition on April 28, 1995, has
incurred expenses of $741,000 of which $228,000 was for interest. The Tennessee
facility began production in mid-July. (see "INVESTING ACTIVITIES- Acquisition
of Assets and Second Furnace").
The following table sets forth shipment and sales data for the periods
indicated.
THIRD QUARTER ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
Net Sales (in thousands) ........... $ 47,386 $ 44,877 $140,760 $119,088
Shape Shipment Tons ................ 129,194 120,715 381,312 328,605
Shape Selling Price Per Ton ........ $ 363 $ 342 $ 358 $ 335
Billet Shipment Tons ............... 70 13,543 10,989 32,800
Billet Selling Price Per Ton ....... $ 244 $ 226 $ 235 $ 225
A. SALES
Net sales in the third quarter and first nine months of fiscal 1995
increased, compared to the same periods of fiscal 1994, by 5.6%, or $2.5
million, and 18.2%, or $21.7 million, respectively. The increases were the
result of increased shape shipments and prices.
SHAPES - The shape shipment increases in the third quarter and first
nine months of fiscal 1995 compared to the same periods of fiscal 1994 are
attributable to a strong economy and to an improved product mix which enabled
the Company to respond to customer demand. Exports to Mexico and overseas
continue to be minimal, while exports to Canada were approximately 9% of
shipments for the third quarter and first nine months of fiscal 1995. This is an
improvement of 3% compared to the same periods of last year. The backlog of
orders at June 30, 1995 was 94% higher than a year earlier and was a record for
the Company. Shipments are expected to be strong for the remainder of the fiscal
year but not
Page 14
as strong as the previous two quarters due to seasonality and a slightly slowing
economy.
Shape prices increased by 6.1%, or $21 per ton, in the third quarter and
6.9%, or $23 per ton, for the first nine months of fiscal 1995 compared to the
same period of fiscal 1994. These higher prices were primarily in response to a
strong market demand. The selling price for the third quarter was the highest in
the history of the Company. There was another price increase of $10 per ton
announced early in the fourth quarter on standard and wide flange beams. The
selling price of shapes, towards the end of fiscal 1994 and into fiscal 1995,
began to be influenced more by the strong market and less by scrap cost as was
the case during the first half of fiscal 1994, resulting in an improvement in
metal margin. The metal margin for the third quarter was the highest in the
history of the Company. The metal margin for the first nine months of fiscal
1995 was the highest since the same periods of fiscal 1989.
Since the Tennessee facility did not start production until mid-July,
there were no sales from that subsidiary. The Company does expect some shipments
from the Tennessee facility in the fourth quarter although most of the
production will be used to develop a marketable inventory mix.
BILLETS - Shipments of billets, the Company's semi-finished product,
decreased 13,473 tons and 21,811 tons in the third quarter and first nine months
of fiscal 1995 compared to the same periods of fiscal 1994, respectively, 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. Billet sales are expected to be minimal in the
fourth fiscal quarter due to the continued high productivity of the rolling mill
and the acquisition of the Tennessee facility's rolling mill (see "INVESTING
ACTIVITIES - Acquisition of Assets"), which will increase the Company's
requirements for billets.
B. COST OF SALES
Cost of sales was 86.3% of sales for the third quarter of fiscal 1995
compared to 88.5% of sales for the same period of fiscal 1994; cost of sales was
85.8% of sales for the first nine months of fiscal 1995 compared to 90.8% for
the same period of fiscal 1994. The improvements were due to shape selling
prices increasing more than the scrap prices. Also contributing to the
improvements were the reductions in conversion costs. Cost of sales had been
favorably impacted by approximately $0.25 million per quarter due to a contract
with the State of Louisiana to abate certain taxes; this agreement expired at
the end of the second fiscal quarter of 1995.
The major component of cost of sales is scrap. Scrap cost in the third
quarter and first nine months of fiscal 1995 increased by 5.1% and 2.6%,
respectively, compared to the same periods of last year. Demand for scrap
remains strong and supply has tightened during the third fiscal quarter. Scrap
mix may be affected in the fourth quarter due to mechanical problems in the
scrap yard. Another component of raw material cost is additive, alloys, and flux
("AA&F"). AA&F cost increased in the third quarter and first nine months of
fiscal 1995 by 22.4% and 3.5%, respectively, compared to the same periods of
fiscal 1994 mainly due to price. AA&F prices have recently increased
significantly due to reduced product availability which was caused by an
antidumping suit against foreign markets utilized by the Company. This caused
high duties on imported AA&F making it more costly to import AA&F. Also
contributing to the higher prices is the increase in domestic demand due to the
high steelmaking capacity utilization. Prices are expected to be firm for the
remainder of the fiscal year.
Page 15
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
third quarter and first nine months of fiscal 1995 improved 3.3% and 2.5%
compared to the same period of fiscal 1994 due to improvements in the price of
natural gas and power, reduced consumption of power and supplies, and increased
productivity. Late in the third fiscal quarter of 1995, the Company took a two
week planned shutdown for major maintenance and installation of capital
improvements. One of the projects completed in the melt shop was the Eccentric
Bottom Tapping ("E.B.T.") furnace which will increase production and reduce
conversion cost through reduced consumption of power and supplies. The start-up
of the E.B.T affected productivity due to the learning curve. In addition, costs
were impacted as the Company hired and trained the crew for the second furnace.
Minor start-up problems after shutdown in the rolling mill have resulted in some
production delays and higher production costs in June. Conversion costs in the
fourth quarter will be affected by the start-up of the Company's previously idle
second furnace, the continued learning process on the E.B.T, and the start-up of
the Tennessee rolling mill. Also, the fourth quarter conversion cost may be
affected by the start-up and learning curve associated with the shredder and the
remainder of the capital projects expected to be completed before fiscal year
end (see "INVESTING ACTIVITIES- Capital Expenditures").
There were also several variances that adversely affected the cost of
sales as a percentage of sales: First, shipping, dock, and stocking location
operating costs were higher than the comparable prior year periods due to the
higher shipment volume and extra freight expense caused by the lock closure in
Chicago. Second, the Tennessee facility incurred $379,000 in expenses in
anticipation of start-up in mid-July. And third, an unusual scrap fire and
inventory adjustment increased cost of goods sold by $0.5 million.
C. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expenses increased in the third
quarter and first nine months of fiscal 1995 compared to the same period of the
last fiscal year by $538,000 and $970,000, respectively, due to the increase in
amortization expense, the addition of the Tennessee facility, and franchise tax.
The amortization expense of deferred financing costs increased approximately
$114,000 for the current fiscal year due to the 10.25% Notes which were issued
late in the second quarter of last year. Also, deferred financing cost of
$165,000 of the previous line of credit were written off this quarter since the
line of credit was amended and restated. Selling, general and administrative
expenses for the Tennessee facility were $134,000.
D. NON-PRODUCTION STRIKE EXPENSES
Strike-related expenses for the third quarter and first nine months of
fiscal 1995 were approximately the same as comparable periods of last year. For
the first nine months of fiscal 1995, the Company's strike-related expenses,
primarily security and legal, averaged approximately $80,000 per month. Future
strike expenses should not exceed $100,000 per month.
E. OTHER INCOME (EXPENSE)
Interest expense increased slightly in the third quarter and first nine
months of fiscal 1995 compared to the same period of fiscal 1994 mainly due to
$228,000 of additional interest expense in the third quarter for the acquired
Tennessee facility. Capitalized interest increased in the third quarter and
first nine months of fiscal 1994 by $109,000 and $192,000, respectively,
compared to the same periods of last year due to the major capital projects
currently under construction at the Louisiana plant. The Company accrued
interest on $48.9 million of the now redeemed 14.75% Notes in the first quarter
of fiscal 1994 at
Page 16
a rate of 14.75%. The Company accrued interest on $75 million 10.25% First
Mortgage Notes due 2001 at a rate of 10.25% during the first nine months of 1995
and the last nine months of fiscal 1994. Interest income improved in the third
fiscal quarter and first nine months of fiscal 1995 compared to the same period
last year due to increased overall cash to invest and improved short-term
interest rates. Miscellaneous income decreased in the third quarter of fiscal
1995 compared to the same period of the last fiscal year by $165,000 mainly due
to a favorable adjustment in the provision for bad debts in fiscal 1994 due to
improving market conditions, resulting in fewer bad debts. The improving market
conditions carried into fiscal 1995.
F. NET INCOME
The Company's results improved by $0.5 million and $8.3 million in the
third fiscal quarter and first nine months of 1995 compared to the same periods
of fiscal 1994, respectively. The primary reasons for the improvement are
increased shipments, improved margins, and reduced conversion costs.
LIQUIDITY AND CAPITAL RESOURCES
A. CASH AND WORKING CAPITAL
The Company ended the third fiscal quarter with $11.1 million in cash
and with current assets exceeding current liabilities by a ratio of 4.35 to
1.00. Working capital increased by $10.4 million to $75.6 million during the
nine months ended June 30, 1995. The increase in working capital was due to
increases in inventory, receivables, and cash.
In the first nine months of fiscal 1995, cash provided by operations was
$5.8 million which was the result of net income and an increase in accrued
liabilities. This was partially offset by the increase in inventories and
accounts receivables (due to increased sales). Inventory of $2.5 million was
purchased with the acquisition of the Tennessee facility. Shape inventory
decreased by approximately $5.0 million in June due to the planned shutdown for
major maintenance and capital improvements but remained relatively unchanged
compared to September 30, 1994. Scrap increased by approximately $3 million
compared to September 30, 1994 due to the continued receiving of scrap during
the June shutdown in anticipation of increased production of billets to use in
the Tennessee facility. Inventories are expected to increase with the increased
production at the Tennessee facility.
B. INVESTING ACTIVITIES
ACQUISITION OF ASSETS AND SECOND FURNACE
On April 28, 1995, the Company purchased substantially all of the assets
of TVSC for a purchase price of $27.2 million, after deducting estimated
postacquisition adjustments and capitalizing some acquisition costs. The
purchase price included land, buildings, equipment, inventory, receivables, and
$8 million in cash. The assets are owned by a new wholly owned subsidiary named
"Bayou Steel Corporation (Tennessee)" ("BSCT"). BSCT's rolling mill will produce
both rebar and merchant bar shapes. The merchant bar product mix of BSCT extends
and complements the Company's product line.
The acquisition was temporarily financed with a combination of
existing cash and the line of credit. The permanent financing consisted of a $10
million term loan and an issuance of $15 million in preferred stock and
warrants. Additionally, the current line was amended and restated to provide a
$45 million line of credit.
Page 17
Since the acquisition of the rolling mill in Tennessee on April, 28
1995, the plant remained substantially idle awaiting permanent financing. On
June 20, 1995, permanent financing was completed. Hiring and training of new
employees commenced. A one-shift operation began in mid-July and full operating
mode is expected in October. The Company expects to spend approximately $6
million on various capital projects in the first 18 months of its operations to
reduce costs and increase productivity. The Company expects several quarters of
start-up losses at BSCT, thereby reducing the consolidated earnings of the
Company.
The Company intends to supply billets to the technologically advanced
Tennessee rolling mill. In mid-June, the Company began hiring and training a
crew in anticipation of starting the idled second furnace in Louisiana. The
Company spent approximately $1 million in capital expenditures on the second
furnace and began production in mid-July. The two furnaces have operated at the
expected productivity levels. The Company intends to spend up to $3 million in
additional capital over the next 18 months on the second furnace so that it will
have the same cost efficiencies as the first furnace.
CAPITAL EXPENDITURES
Capital expenditures, excluding the acquisition of BSCT, amounted to
approximately $9 million in the first nine months of fiscal 1995. The $9.2
million capital program directed toward cost reduction is expected to be
completed by fiscal year end. Of the $9.2 million commitment for five capital
projects, $7.5 million has been spent cumulative through June 30, 1995. The
shredder and E.B.T. were completed late in the third quarter. The off-line
sawing system / conveyor, the shipping bay rail spur / plant layout, and the
rolling mill straightener in the rolling mill are expected to be completed by
the end of the fourth quarter of fiscal 1995.
C. FINANCING
On June 20, 1995, the Company completed the issuance and sale of 15,000
shares of its redeemable preferred stock, par value $0.01 per share ("Preferred
Stock"), and warrants to purchase, at a nominal exercise price, six percent of
the Company's Common Stock to an investor for $15 million.
The Preferred Stock is mandatorily redeemable by the Company seven years
after issuance and requires the payment of quarterly dividends, at a rate of
14.5% per annum. The Company intends to declare and pay quarterly dividends on
the Preferred Stock unless prohibited by some condition in its loan agreements.
In addition, upon certain adverse events encountered by the Company, such
holders will have the right to additional warrants.
Simultaneously with the sale of the Preferred Stock and warrants, the
Company entered into a five-year term loan agreement of $10 million for the
Company's wholly owned subsidiary, BSCT. The proceeds received from the term
loan were used to repay the loan outstanding under the Company's revolving
facility which had been incurred to acquire substantially all of the assets of
TVS. The term loan is partially secured by Bayou Steel Corporation's ("BSC")
accounts receivable. The term loan agreement calls for quarterly principal
payments of $750,000 to begin on June 30, 1997 through March 31, 1999 and
quarterly payments of $1,000,000 beginning June 30, 1999 through the maturity
date. The term loan shall bears interest on a sliding scale based on the
quarterly leverage ratio which is defined indebtedness divided by EBITDA. Based
on the third quarter leverage ratio, the Company will accrue at LIBOR plus 2% or
approximately 8% at current rates.
On June 20, 1995, the Company entered into an amended and restatement of
its revolving line of credit agreement which will be used for general corporate
purposes. The terms of the amended and restated agreement call for available
Page 18
borrowings up to $45 million, including outstanding letters of credit using a
borrowing base of BSC's receivables and inventory. Based on these criteria, the
amount available as of June 30, 1995 was $30 million. The five year revolving
line of credit bears interest on a sliding scale based on the quarterly leverage
ratio which is defined indebtedness divided by EBITDA. The terms of the loan
agreement impose certain restrictions on the Company, the most significant of
which require the Company to maintain a minimum interest coverage ratio and
limit the incurrence of certain indebtedness. There were no outstanding
borrowings under the line of credit as of June 30, 1995.
All of the $75 million 10.25% Notes are classified as long-term debt.
There are no principal payments due on the 10.25% Notes until maturity in 2001.
The Company currently intends to refinance the 10.25% Notes on or before the
maturity date in 2001. The Indenture under which the Notes are issued ("the
Indenture") contains a covenant which restricts the Company's ability to incur
additional indebtedness. Under the Indenture, the Company may not incur
additional indebtedness unless its Interest Expense Coverage Ratio for the
trailing 12 months would be greater than 2.00 to 1.00 after giving effect to
such incurrence. As of June 30, 1995, the Interest Expense Coverage Ratio was
3.44 to 1.00.
The Company believes that current cash balances, internally generated
funds, the credit facility, and additional purchase money mortgages are adequate
to meet the foreseeable short-term and long-term liquidity needs. If additional
funds are required to accomplish long-term expansion of its production facility
or significant acquisitions, the Company believes funding can be obtained from a
secondary equity offering or additional indebtedness.
There are no financial obligations with respect to post-employment or
post-retirement benefits.
OTHER COMMENTS
STRIKE
See "Notes to the Financial Statements" for a description of the Strike.
ENVIRONMENTAL AND SAFETY
See "Notes to the Financial Statements" for a description of the
Company's environmental and safety issues.
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.
INFLATION
The Company is subject to increases in the cost of energy, supplies,
salaries and benefits, additives, alloy and scrap due to inflation. Shape prices
are influenced by supply, which varies with steel mill capacity and utilization,
and market demand.
Page 19
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 - Calculation of Primary Earnings Per Share.
99 - Financing for the Purchase of Tennessee Valley Steel
Corporation. (Incorporated herein by reference to 8-K filed
June 20 1995.)
(b) Reports on Form 8-K
Item 5 OTHER EVENTS
- Financing for the Purchase of Tennessee Valley Steel
Corporation. (Dated June 20, 1995.)
Page 20
<PAGE>
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, Chief Financial Officer,
Treasurer, and Secretary
Date: August 10, 1995
Page 21
<PAGE>
EXHIBIT 11
BAYOU STEEL CORPORATION
CALCULATION OF PRIMARY EARNINGS PER SHARE*
(IN THOUSANDS EXCEPT PER SHARE DATA)
THIRD QUARTER ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- ------------
Net earnings ......... $ 2,725,652 $ 2,316,124 $ 9,990,552 $ (3,612,041)
Weighted average
number of shares
outstanding ........ 12,975,987 12,884,607 12,915,067 12,884,607
Earnings per share ... $ .21 $ .18 $ .77 $ (.28)
=========== =========== =========== ============
*Fully diluted earnings per share are identical to primary earnings per share.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM [Identify specific financial statements] AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 11,110,540
<SECURITIES> 0
<RECEIVABLES> 22,922,207
<ALLOWANCES> 763,995
<INVENTORY> 63,475,815
<CURRENT-ASSETS> 98,249,380
<PP&E> 122,070,334
<DEPRECIATION> 32,198,589
<TOTAL-ASSETS> 192,945,570
<CURRENT-LIABILITIES> 22,640,821
<BONDS> 85,173,851
<COMMON> 128,846
12,137,838
0
<OTHER-SE> 72,864,214
<TOTAL-LIABILITY-AND-EQUITY> 192,945,570
<SALES> 47,386,163
<TOTAL-REVENUES> 47,386,163
<CGS> 40,913,653
<TOTAL-COSTS> 40,913,653
<OTHER-EXPENSES> 1,447,822
<LOSS-PROVISION> 142,902
<INTEREST-EXPENSE> 2,046,913
<INCOME-PRETAX> 2,758,138
<INCOME-TAX> 32,486
<INCOME-CONTINUING> 2,725,652
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,725,652
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
