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, 1996
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, 1996
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
PART I. FINANCIAL INFORMATION ..................... NUMBER
Item 1. Financial Statements
Consolidated Balance Sheets --
June 30, 1996 and
September 30, 1995 ...................... 3
Consolidated Statements of Income
(Loss) -- Three Months and Nine Months
Ended June 30, 1996 and 1995 ............ 5
Consolidated Statements of Cash
Flow -- Nine Months Ended June
30, 1996 and 1995 ....................... 6
Notes to Financial Statements ............ 7
Item 2. Management's Discussion and Analysis
Results of Operations .................... 13
Liquidity and Capital Resources .......... 16
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K .......... 19
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BAYOU STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED) (AUDITED)
JUNE 30, SEPTEMBER 30,
1996 1995
------------- -------------
CURRENT ASSETS:
Cash and temporary cash investments ... $ 1,246,860 $ 10,521,664
Receivables, net of allowance for
doubtful accounts of $613,164 in
1996 and $567,970 in 1995 .......... 24,736,463 21,921,347
Inventories ........................... 73,096,697 67,694,741
Prepaid expenses ...................... 633,121 257,405
------------- -------------
Total current assets ............ 99,713,141 100,395,157
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Land .................................. 3,790,398 3,790,398
Machinery and equipment ............... 103,931,744 102,582,968
Plant and office building ............. 20,823,945 18,929,288
------------- -------------
128,546,087 125,302,654
Less-Accumulated depreciation ......... (38,282,974) (33,652,607)
------------- -------------
Net property, plant and equipment 90,263,113 91,650,047
------------- -------------
OTHER ASSETS ............................. 4,211,345 5,030,961
------------- -------------
Total assets .................... $ 194,187,599 $ 197,076,165
============= =============
The accompanying notes are an integral part of these consolidated statements.
Page 3
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(UNAUDITED) (AUDITED)
JUNE 30, SEPTEMBER 30,
1996 1995
------------ ------------
CURRENT LIABILITIES:
Current maturities of long-term debt ...... $ 131,920 $ 613,483
Accounts payable ........................... 19,260,707 22,188,484
Accrued liabilities ........................ 5,563,941 3,675,716
Accrued dividends on redeemable
preferred stock ........................ 546,721 616,249
------------ ------------
Total current liabilities ........... 25,503,289 27,093,932
------------ ------------
LONG-TERM DEBT ............................... 85,048,666 85,137,665
------------ ------------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK ................... 12,557,861 12,239,173
------------ ------------
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 47,769,034
Retained earnings ......................... 23,179,903 24,707,515
------------ ------------
Total stockholders' equity .......... 71,077,783 72,605,395
------------ ------------
Total liabilities & common
stockholders' equity ............. $194,187,599 $197,076,165
============ ============
The accompanying notes are an integral part of these consolidated statements.
Page 4
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED STATEMENT OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED JUNE 30, NINE MONTHS ENDED JUNE 30,
---------------------------- ------------------------------
1996 1995 1996 1995
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
NET SALES ............ $ 58,874,583 $ 47,386,163 $ 152,182,577 $ 140,759,898
COST OF SALES ........ 54,661,033 40,913,653 140,266,780 120,715,067
------------ ------------ ------------- -------------
GROSS PROFIT ......... 4,213,550 6,472,510 11,915,797 20,044,831
SG&A ................. 1,519,007 1,501,044 4,610,091 3,811,624
NON-PRODUCTION
STRIKE EXPENSES ... 402,239 173,412 1,073,332 723,612
------------ ------------ ------------- -------------
OPERATING INCOME ..... 2,292,304 4,798,054 6,232,374 15,509,595
------------ ------------ ------------- -------------
OTHER INCOME (EXPENSE)
Interest expense .. (2,202,576) (2,046,913) (6,483,185) (5,817,791)
Interest income ... 8,788 75,844 138,605 340,347
Miscellaneous ..... 123,911 7,888 530,561 141,004
------------ ------------ ------------- -------------
(2,069,877) (1,963,181) (5,814,019) (5,336,440)
------------ ------------ ------------- -------------
INCOME BEFORE TAXES .. 222,427 2,834,873 418,355 10,173,155
PROVISION FOR
INCOME TAXES ...... -- 32,486 -- 105,868
------------ ------------ ------------- -------------
NET INCOME ........... 222,427 2,802,387 418,355 10,067,287
DIVIDENDS ACCRUED AND
ACCRETION ON
PREFERRED STOCK ... (649,980) (76,735) (1,945,967) (76,735)
------------ ------------ ------------- -------------
INCOME (LOSS)
APPLICABLE TO
COMMON AND COMMON
EQUIVALENT SHARES . $ (427,553) $ 2,725,652 $ (1,527,612) $ 9,990,552
============ ============ ============= =============
AVERAGE NUMBER
OF COMMON AND
COMMON EQUIVALENT
SHARES OUTSTANDING 13,707,030 12,975,987 13,707,030 12,915,067
============ ============ ============= =============
INCOME (LOSS)
APPLICABLE TO
COMMON AND COMMON
EQUIVALENT SHARE .. $ (0.03) $ 0.21 $ (0.11) $ 0.77
============ ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 5
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED JUNE 30,
----------------------------
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income ...................................... $ 418,355 $ 10,067,287
Depreciation ................................ 4,630,367 3,694,283
Amortization ................................ 844,616 667,951
Provision for losses on accounts
receivable ............................... 56,610 142,902
Changes in working capital:
(Increase) in receivables ................ (2,871,726) (3,908,702)
(Increase) in inventories ................ (5,401,956) (6,330,265)
(Increase) in prepaid expenses ........... (375,716) (552,366)
(Decrease) increase in accounts
payable ............................... (2,927,777) 186,032
Increase in accrued liabilities ......... 1,888,225 1,859,603
------------ ------------
Net cash (used in) provided
by operations ...................... (3,739,002) 5,826,725
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Tennessee facility
net of current assets .................... -- (17,456,267)
Addition of property, plant
and equipment ............................ (3,243,433) (8,837,016)
------------ ------------
Net cash used by investing
activities ......................... (3,243,433) (26,293,283)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt .................. (570,562) (235,021)
(Increase) in other assets .................. (25,000) (2,091,294)
Proceeds from issuance of preferred stock ... -- 15,000,000
Proceeds from term loan ..................... -- 10,000,000
Payments of dividends on preferred stock .... (1,696,807) --
------------ ------------
Net cash (used in) provided by
financing activities ............... (2,292,369) 22,673,685
------------ ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS ............................ (9,274,804) 2,207,127
CASH AND CASH EQUIVALENTS,
beginning balance ........................... 10,521,664 8,903,413
------------ ------------
CASH AND CASH EQUIVALENTS,
ending balance .............................. $ 1,246,860 $ 11,110,540
============ ============
The accompanying notes are an integral part of these consolidated statements.
Page 6
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(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 consolidated financial statements be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's latest annual report, Form 10-K, filed with the SEC on
December 14, 1995 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, 1996 and September 30, 1995 and the results of its operations for the
three-month and nine-month periods ended June 30, 1996 and 1995 and the cash
flow statements for the nine-month periods ended June 30, 1996 and 1995.
The accompanying financial statements include the consolidated accounts
of Bayou Steel Corporation ("BSC") and Bayou Steel Corporation (Tennessee)
("BSCT") (collectively referred to herein as the "Company") after elimination of
all significant intercompany accounts and transactions.
The results of operations for the nine-month periods ended June 30,
1996 and 1995 are not necessarily indicative of the results for the full year.
2) INVENTORIES
Inventories as of June 30, 1996 and September 30, 1995 consisted of the
following:
(UNAUDITED) (AUDITED)
JUNE 30, SEPTEMBER 30,
1996 1995
------------ ------------
Scrap steel .................................. $ 4,495,011 $ 4,964,364
Billets ...................................... 7,012,667 6,357,640
Finished product ............................. 44,178,173 42,541,400
LIFO adjustments ............................. (2,876,622) (4,741,268)
------------ ------------
$ 52,809,229 $ 49,122,136
Mill rolls, operating supplies and other ..... 20,287,468 18,572,605
------------ ------------
$ 73,096,697 $ 67,694,741
============ ============
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 7
3) PROPERTY, PLANT AND EQUIPMENT
Capital expenditures for normal operations totaled $3.2 million and
$8.8 million during the nine-month periods ended June 30, 1996 and 1995,
respectively. As of June 30, 1996, the estimated costs to complete authorized
projects under construction or contract amounted to $1.6 million.
Betterments, improvements, and additions on property, plant and
equipment are capitalized at cost. Interest during construction of significant
additions is capitalized. There was no interest capitalized for the nine-month
period ended June 30, 1996. Interest of $238,000 was capitalized during the
nine-month period ended June 30, 1995. Interest of $394,000 was capitalized
during the fiscal year ended September 30, 1995.
4) OTHER ASSETS
Other assets consist of financing costs associated with the issuance of
long-term debt, redeemable preferred stock and warrants, and the Company's
revolving line of credit (see Notes 5, 6 and 8) which are being amortized over
the lives of the related transaction. Amortization expense was $845,000 and
$668,000 for the nine-month periods ended June 30, 1996 and 1995. Amortization
expense was $893,000 for the fiscal year ended September 30, 1995.
5) LONG-TERM DEBT
Long-term debt of the Company as of June 30, 1996 and September 30,
1995 included the following:
JUNE 30, SEPTEMBER 30,
1996 1995
----------- -----------
First Mortgage Notes (see below) ........... $75,000,000 $75,000,000
Term Loan (see below) ...................... 10,000,000 10,000,000
Other notes payables ....................... 180,586 751,148
----------- -----------
85,180,586 85,751,148
Less-current maturities .................... 131,920 613,483
----------- -----------
$85,048,666 $85,137,665
=========== ===========
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
term loan, partially secured by the Company's accounts receivable, bears
interest on a sliding scale based on the quarterly leverage ratio which is
defined indebtedness divided by earnings before interest, taxes, depreciation
and amortization ("EBITDA"). Based on the third quarter leverage ratio, BSCT
will accrue at LIBOR plus 2.50% or approximately 8% at current rates. As of June
30, 1996, BSCT accrued interest at a rate of 7.31%. Term loan interest is
payable quarterly. Principal payments are due quarterly beginning June 30, 1997.
On March 3, 1994, the Company issued $75 million of the 10.25% Notes.
The principal is due on March 1, 2001. As of June 30, 1996 and 1995, the Company
accrued interest at a rate of 10.25%.
6) 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 net amount available as of June 30, 1996 was $33.7 million. The agreement is
secured
Page 8
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
2.50% or approximately 8% at current rates.
There were no outstanding borrowings under the line of credit as of
June 30, 1996. The maximum amount outstanding during the three-month and
nine-month periods ended June 30, 1996 was $6.4 million. The average borrowings
were $3.7 million and $1.6 million for the three-month and nine-month periods
ended June 30, 1996, respectively. The weighted average interest rate was 7.94%
and 8.08% for the third fiscal quarter and nine-month period ended June 30,
1996, respectively.
7) TAXES
As of September 30, 1995, for tax purposes, the Company had net
operating loss carryforwards ("NOLs") of approximately $316.1 million and $289.6
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 $200 million, expires
by fiscal 2000. In addition, the Company has $12.4 million of future tax
benefits attributable to its tax benefit lease which expires in 1997 and which
may, to the extent of taxable income in the year such tax benefit is produced,
be utilized prior to the NOLs.
8) 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 822,422 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. The Company intends to declare and pay
quarterly dividends on the preferred stock unless prohibited by covenants in the
revolving line-of-credit and the 10.25% Notes. 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 events take place.
The Company is planning to declare and pay the appropriate dividend payment
during the fourth fiscal quarter. Depending on the Company's future results, the
Company may not be able to declare and pay the dividend. As of June 30, 1996,
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.
Page 9
9) COMMON STOCKHOLDERS' EQUITY
Common stock and common stock equivalents as of June 30, 1996 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 .... 13,707,030 2,271,127 100
10) EARNINGS PER SHARE
Earnings per common and common equivalent share are calculated based
upon the weighted average number of common and common equivalent shares
outstanding during the three-month and the nine-month periods ended June 30,
1996 and 1995. In connection with the issuance of redeemable preferred stock on
June 20, 1995 as discussed in Note 8, the Company reserved 822,422 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, 1996. The actual shares, including
equivalents, outstanding for the quarter and nine-month periods ended June 30,
1996 were 13,707,030. The average common shares outstanding, including
equivalents, for the quarter and nine-month periods ended June 30, 1995 were
12,975,987 and 12,915,067, respectively.
11) MISCELLANEOUS
Miscellaneous for the nine-month periods ended June 30, 1996 and 1995
included the following:
JUNE 1996 JUNE 1995
--------- ---------
Discounts earned ......................... $ 51,377 $ 167,187
Provision for bad debts .................. (59,885) (142,902)
Other .................................... 132,419 116,719
--------- ---------
$ 123,911 $ 141,004
========= =========
12) COMMITMENTS AND CONTINGENCIES
STRIKE
On March 21, 1993, the United Steelworkers of America (the "USWA") and
its Local 9121 (the "Local") initiated a strike against the Company. The strike
is ongoing. The last formal negotiating session was in November of 1995. Over
the last 24 months, there has been one formal negotiating session in November of
1995. 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 USWA and its Local has filed charges with the National Labor
Relations Board (the "NLRB") alleging that the Company has violated the National
Labor Relations Act (the "NLRA") 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 USWA and
its Local. A hearing to review all outstanding unfair labor practice charges has
been scheduled with an administrative law judge on September 23, 1996. An
unfavorable decision by the NLRB, however, should not materially affect the
Company.
Page 10
In conjunction with the acquisition of the assets of Tennessee Valley
Steel Corporation ("TVSC"), the USWA filed a charge with the NLRB alleging that
the Company has violated the NLRA relating to its failure to hire certain
individuals, who were former employees of TVSC, at BSCT. The Regional Director
of the NLRB has issued a complaint and scheduled a hearing before an
administrative law judge on August 13, 1996. The complaint involves a potential
liability for back-pay wages. The Company believes it has meritorious defenses
to these charges and will ultimately prevail.
The USWA, its Local, and the Industrial Union Department of the AFL-CIO
(the "Union") continue to wage a corporate campaign against the Company. The
corporate campaign is designed to bring pressure on the Company from individuals
and institutions with direct financial or other interests in the Company. In the
past, the Union has induced various government agencies to put pressure on the
Company. The potential impact of such a campaign is difficult to assess. The
Company expects similar activities to continue.
The Company has filed a lawsuit in federal court in Delaware under the
Racketeer Influenced Corrupt Organizations Act (RICO) against the Union for its
conduct in connection with the corporate campaign. On July 26, 1996 the Union
filed another charge with the NLRB alleging that the filing of the RICO lawsuit
violated the NLRA and seeking injunctive relief and damages. The Company
believes it has meritorious defenses to these charges.
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 solid 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 at its Louisiana facility to address
previously contaminated sites. Also, the Company is not designated as a
Potential Responsible Party ("PRP") under the Superfund legislation. At June 30,
1996, the Company has accrued a loss contingency for environmental matters.
TVSC had entered into a Consent Agreement and Order (the "Voluntary
Consent Order") under the Tennessee Department of Environment and Conservation's
voluntary clean-up program. The Company, in acquiring the assets of TVSC, has
entered into a similar Voluntary Consent Order. Estimates indicate that the cost
for remediating the affected areas range from $1.0 million to $2.0 million. The
purchase agreement between the Company and TVSC provided for $2.0 million of the
purchase price to be held in escrow and applied to costs incurred by the Company
for remediation under the Voluntary Consent Order (with an additional $1.0
million to be held in escrow for one year for such costs and other costs
resulting from a breach of TVSC's representation and warranties in the
agreement). If during the remedial investigation significantly more extensive or
more toxic contamination is found, then costs could be greater than those
estimated, and to the extent these costs exceeded funds escrowed by TVSC, the
Company would be liable.
Page 11
The U.S. Public Interest Research Group ("USPIRG") filed a lawsuit in
Louisiana against the Company for alleged violations of air quality regulations.
The Company believes it has meritorious defenses to these charges and has asked
the court to dismiss USPIRG's lawsuit on various grounds.
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 12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATION
The Company earned $0.2 million in the third quarter of fiscal 1996
compared to a net income of $2.8 million for the comparable period of fiscal
1995. During the first nine months of fiscal 1996, the Company earned $0.4
million compared to a net income of $10.1 million for the same period of last
year. The reduction in the Company's results was due to three significant
factors. First, due to its start-up, Bayou Steel Corporation (Tennessee)
("BSCT") had a loss of $1.3 million for the third quarter and $5.1 million for
the nine month period. During the third quarter of fiscal 1995, the Tennessee
facility incurred pre-start-up expenses of $0.7. Second, the metal margin (the
difference between the selling price and raw material ("scrap") cost) for the
products shipped from the Louisiana facility ("BSCL) ("Louisiana") decreased
5.4% for the third quarter and 2.8% for the first nine months of fiscal 1996
primarily due to declining sales prices; this reduced earnings by $1.7 million
in the third quarter and $2.3 million for the nine month period as compared to
the prior year periods. Third, the prices of certain supply items and energy
increased significantly at the Louisiana facility, resulting in additional
expenses of $1.1 million for the third quarter and $3.2 million for the nine
month period as compared to prior year.
The following table sets forth shipment and sales data for the periods
indicated.
THREE MONTHS ENDED JUNE 30,
---------------------------
1996 1995
-------- --------
Net Sales (in thousands) ..................... $ 58,875 $ 47,386
Shape Shipment Tons .......................... 165,390 129,194
Shape Selling Price Per Ton .................. $ 335 $ 363
Billet Shipment Tons ......................... 11,132 70
Billet Selling Price Per Ton ................. $ 228 $ 244
NINE MONTHS ENDED JUNE 30,
---------------------------
1996 1995
-------- --------
Net Sales (in thousands) ..................... $152,183 $140,760
Shape Shipment Tons .......................... 430,041 381,312
Shape Selling Price Per Ton .................. $ 341 $ 358
Billet Shipment Tons ......................... 13,040 10,989
Billet Selling Price Per Ton ................. $ 231 $ 235
A. SALES
Net sales increased in the third quarter of fiscal 1996 by 24.2% or
$11.5 million compared to the same period of fiscal 1995. Net sales increased in
the first nine months of fiscal 1996 by 8.1% or $11.4 million compared to the
same period of fiscal 1995. The increases were the result of increased shape
shipments from the Tennessee facility. This was partially offset by a $28 and
$17 per ton decrease in the shape selling price for the third quarter and first
nine months of fiscal 1996, respectively. Also contributing to the increase was
a one-time billet export shipment for $2.5 million.
Page 13
SHAPES - Shape shipments of 165,390 tons in the third quarter of fiscal
1996 increased by 28.0%. The 137,628 tons shipped out of the Louisiana facility
were a 6.5% increase for comparative periods. Shipments from the Tennessee
facility were 27,762 tons during this quarter. Shape shipments for the nine
month period of fiscal 1996 out of BSCL were approximately the same while
shipments from the Tennessee facility were 47,710 tons. The backlog of orders at
June 30, 1996 for the Company was 9% greater than a year earlier. The increase
in backlog is due to increases in demand and the additional orders for the
Tennessee facility's product line.
Shape prices decreased in the third quarter of fiscal 1996 compared to
the same period of fiscal 1995 by $28 per ton or 7.8%. Shape prices for the nine
month period decreased by $17 per ton or 4.8%. Prices decreased in fiscal 1996
as a result of additional capacity being shifted into the Company's product
line, excess inventories at certain minimills, and imports in the Southwest.
BILLETS - Shipments of billets, the Company's semi-finished product,
increased 11,062 tons in the third quarter of fiscal 1996 and 2,051 tons for the
nine month period compared to the same periods of fiscal 1995 due to an export
shipment. The Company began supplying billets to its newly acquired rolling mill
in Tennessee late in fiscal 1995. The Company also has been purchasing billets
on the open market at competitive prices for the remaining needs of the
Tennessee rolling mill. Since Tennessee used less billets than anticipated,
billet inventory increased. This export shipment relieved the excess billet
inventory on hand at the Louisiana facility and improved the Company's cash
position. The Company will continue to supply all of its Louisiana's rolling
mill billet requirements and some of the Tennessee's rolling mill requirements.
Depending on market conditions, the Company may sell billets on an occasional
and selective basis to domestic and export customers while purchasing additional
billets for Tennessee.
B. COST OF GOODS SOLD
Cost of goods sold was 92.8% and 92.2% of sales for the third quarter
and first nine months of fiscal 1996 compared to 86.3% and 85.8% of sales for
the same periods of fiscal 1995, respectively. The increases in cost of goods
sold as a percent of sales were due to the high production cost associated with
beginning operations at Tennessee; price increases of alloys, certain supply
items, and energy which affected conversion costs (the cost to convert raw
materials into shapes); and selling prices of the finished product decreasing
more than the cost of scrap metal.
The major component of cost of goods sold is ferrous scrap. Scrap cost
in the third quarter and first nine months of fiscal 1996 decreased $10 and $7
per ton, respectively, compared to the same periods last year. The scrap cost
decreases were not as great as the shape price decrease of $28 and $17 per ton,
respectively, compared to the same periods last year. This resulted in
significantly lower metal margins. The availability of scrap remains good and
prices are stable.
Additives, alloys and flux ("AAF"), another component of cost of goods
sold, increased by 1% and 16% in the third quarter and first nine months of
fiscal 1996, respectively, compared to the same period of fiscal 1995 primarily
due to price increases. The price increase for the nine month period of fiscal
1996 was approximately $3 per billet ton produced. An anti-dumping suit against
foreign producers utilized by the Company and its competitors resulted in high
duties on imported AAF. Also contributing to the higher prices is the increase
in domestic demand due to high steel-making capacity utilization. Recently,
prices have stabilized. This general market condition affects the Company and
its competition and has existed since the third quarter of fiscal 1995.
Page 14
Another significant portion of cost of goods sold is conversion cost,
which includes labor, energy, maintenance materials and supplies used to convert
raw materials into billets and billets into shapes. Conversion cost per ton for
the Louisiana facility in the third quarter and the first nine months of fiscal
1996 compared to the same period of fiscal 1995 increased by 8.0% and 8.2% per
ton, respectively. The major increases in conversion cost were due to price
increases for electrodes, power and natural gas which accounted for
approximately $7 and $6 per rolled ton produced for the third quarter and first
nine months of fiscal 1996, respectively. Also, contributing to the higher
year-to-date cost was the running of the second furnace during the first
quarter. Due to the impact of the second furnace learning curve and the recent
favorable change in billet availability in the market place, the Company
returned to a one-furnace operation during the first fiscal quarter of 1996. The
other furnace serves as a back-up for major expected and unexpected outages. The
one-furnace operation and recently completed capital projects have led to
improved operating efficiencies. The third quarter electrode consumption was the
best in the history of the Company. In May and June, the melt shop maintenance
cost was the lowest in the history of the Company. Also the June power
consumption was the best in the history of the Company. In July 1996 the power
company which supplies electrical power to the Louisiana plant had operational
problems. As a consequence, the Company curtailed production by 5% during the
month and expects to pay a higher fuel rate in the fourth quarter.
In July 1995, Tennessee started operating its rolling mill. As
expected, the learning curve associated with new and refurbished equipment
combined with an inexperienced work force caused the production tons to be low
and the conversion cost per ton to be high. Also, the selling price for the
Tennessee facility's product has decreased significantly since the acquisition
in April 1995 due to a weakening market and market penetration which has
resulted in a higher break-even compared to last year. Consequently, the
Tennessee facility's loss amounted to $1.3 million and $5.1 million for the
third quarter and first nine months of fiscal 1996, respectively. During the
third quarter of fiscal 1995, the Tennessee facility incurred pre-start-up
expenses of $0.7 million. During the third quarter, the Tennessee rolling mill
productivity, tons produced, and conversion cost have improved significantly
compared to the second quarter. Tons produced for the first and second quarter
of fiscal 1996 averaged 16,194 per quarter and increased to 33,134 tons for the
third quarter of fiscal 1996. The Company expects Tennessee to report a loss in
the fourth quarter of fiscal 1996 as it continues to move toward a break-even
level for production and sales.
C. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expenses for the third quarter of
fiscal 1996 were approximately the same as the corresponding period of fiscal
1995. Selling, general and administrative expenses increased in the first nine
months of fiscal 1996 compared to the same periods of the last fiscal year by
$798,000, respectively, due to additional administrative and amortization of
financing expenses related to the acquisition of the Tennessee facility.
D. NON-PRODUCTION STRIKE EXPENSES
Strike-related expenses increased by $229,000 and $350,000 for the
third quarter and the first nine months of fiscal 1996, respectively, compared
to the same periods of fiscal 1995. Strike expenses were primarily for security
coverage and legal advice on both strike issues and the on-going corporate
campaign of the United Steelworkers of America (the "Union"). For the first nine
months of fiscal 1996, the Company's strike-related expenses averaged
approximately $119,000 per month mainly due to increases in legal services
related to the Racketeer Influenced Corrupt Organization Act suit which the
Company filed against the Union. Non-production strike expenses are expected to
be slightly higher in the next few quarters due to increased litigation related
to the strike and corporate campaign.
Page 15
E. OTHER INCOME (EXPENSE)
Interest expense increased in the third quarter and first nine months
of fiscal 1996 compared to the same period of fiscal 1995 due to the $10 million
term loan for the financing of the Tennessee facility and borrowing under the
line-of-credit. Interest income decreased in the third quarter and first nine
months of fiscal 1996 compared to the same periods of last year due to lower
cash balances available to invest. Miscellaneous income increased for the third
quarter and first nine months of fiscal 1996 compared to the same periods of
fiscal 1995 due to the sale of scrapped materials during the second and third
quarter of fiscal 1996.
F. NET INCOME
The Company's results before dividends and accretion on preferred stock
were $2.6 million and $9.6 million less in the third quarter and first nine
months of fiscal 1996, respectively, compared to the same period of fiscal 1995.
The primary reasons for the reductions in earnings are start-up losses of the
Tennessee facility, reduced metal margins, and price increases for alloys,
certain supply items, and energy. Without the impact of Tennessee, earnings were
$1.5 million and $5.6 million for the third quarter and first nine months of
fiscal 1996, respectively, compared to $3.5 million and $10.8 million for the
same period of 1995.
LIQUIDITY AND CAPITAL RESOURCES
A. CASH AND WORKING CAPITAL
As of June 30, 1996, the Company had $1.2 million in cash and no
borrowings under its line-of-credit. The Company ended the third quarter with
current assets exceeding current liabilities by a ratio of 3.91 to 1.00. Working
capital increased by $0.9 million to $74.2 million during the nine months ended
June 30, 1996.
In the first nine months of fiscal 1996, cash used by operations was
$3.7 million. Accounts payable decreased by $2.9 million as capital project
spending decreased at the end of the third quarter. Accounts receivable
increased to support the increased sales activity towards the end of the third
quarter. Inventories also increased by $5.4 million. The increase in inventory
in Tennessee was $6.5 million as most of Tennessee's production went into
inventory, and as billet purchases increased for Tennessee. The Tennessee
facility now has adequate inventories to support production and sales.
B. CAPITAL EXPENDITURES
Capital expenditures amounted to $3.2 million in the first nine months
of fiscal 1996. The Company spent $1.4 million at the Tennessee facility related
to the start-up of that facility. The Company does not expect to make
substantial investments in capital during the fourth fiscal quarter of 1996.
C. FINANCING
On June 20, 1995, the Company completed the issuance and sale of 15,000
shares of 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 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 or $2.2 million per year. The
Page 16
Company intends to declare and pay quarterly dividends on the preferred stock
unless prohibited by covenants in the revolving line of credit and the 10.25%
Notes. The Company declared two and paid three quarterly dividends in fiscal
1996, one of which relates to the dividend declared in the fourth fiscal quarter
of 1995. If a quarterly dividend payment is not made by the end of a quarter,
the rate will increase by 3%. In addition, the holders of the preferred stock
have a right to additional warrants in the event that any two consecutive
quarterly payments are missed or other defined events take place. The Company is
planning to declare and pay the appropriate dividend payment during the fourth
fiscal quarter. Depending on the Company's future results, the Company may not
be able to declare and pay the dividend.
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
credit facility which had been incurred to acquire substantially all of the
assets of Tennessee Valley Steel Corporation ("TVSC"). The term loan is
partially secured by the Company's accounts receivable and inventory. The term
loan agreement calls for quarterly principal payments beginning on June 30,
1997. The term loan bears interest on a sliding scale based on the quarterly
leverage ratio which is defined as indebtedness divided by earnings before
interest, taxes, depreciation, and amortization ("EBITDA"). Based on the third
quarter leverage ratio, the Company will accrue at LIBOR plus 2.50% or
approximately 8% at current rates.
On June 20, 1995, the Company amended and restated its revolving
line-of-credit agreement which will be used for general corporate purposes. The
terms call for available borrowings up to $45 million, including outstanding
letters of credit using a borrowing base of BSCL's receivables and inventory.
Based on these criteria, the net amount available as of June 30, 1996, was $33.7
million. The five year revolving line-of-credit bears interest on a sliding
scale based on the quarterly leverage ratio which is defined as 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. The Company does not anticipate any difficulties in obtaining
another secured line-of-credit upon the expiration of the current line-of-credit
in fiscal 2000.
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 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 covenants which restrict the Company's ability to incur additional
indebtedness and to make dividend payments. Under the Indenture, the Company may
not incur additional indebtedness or pay dividends 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, 1996, the Interest
Expense Coverage Ratio was slightly above 2.0.
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.
Page 17
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 18
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.26 - Amendment No. 1 to the Preferred Stock and Warrant
Purchase Agreement, dated as of June 13, 1995, by and
between the Company and Rice Partners II, L.P.
(b) Reports on Form 8-K
None were filed during the third quarter of fiscal
year 1996.
Page 19
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 8, 1996
Page 20
EXHIBIT 10.26
AMENDMENT NO. 1
TO
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
This Amendment No. 1 (the "Amendment") to the Preferred Stock and Warrant
Purchase Agreement, dated as of June 13, 1995 (the "Agreement") by and between
Bayou Steel Corporation (the "Company") and Rice Partners II, L.P. (the
"Purchaser"), is entered into as of April 30 , 1996.
WHEREAS, the Company and the Purchaser are parties to the Agreement
pursuant to which, among other things, Purchaser has been granted the right, for
as long as Purchaser owns any Preferred Shares or not less than 25,000 shares of
Registrable Securities, to designate one member to the Company's board of
directors, and upon the occurrence of certain events specified in the Agreement,
to appoint up to two additional members to the Company's board of directors for
a maximum of three directors;
WHEREAS, the Company and the Purchaser agreed pursuant to that certain
letter agreement dated as of January 20, 1996, subject to the approval by the
stockholders of the Company of an amendment to the Company's Certificate of
Incorporation in the form attached as Appendix A to this Amendment (the "Charter
Amendment"), to amend the Agreement as herein provided; and
WHEREAS, the Company's stockholders have approved the Charter Amendment;
NOW, THEREFORE, in consideration of the premises herein contained and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS. All capitalized terms used but not otherwise defined
in this Amendment shall have the meanings ascribed to them in the Agreement.
Unless otherwise specified, all section references herein refer to sections of
the Agreement.
2. AMENDMENT. Effective as of the date hereof, Section 4.16 of the
Agreement is hereby deleted in its entirety and the following substituted in
lieu thereof:
4.16 BOARD OBSERVATION AND MEMBERSHIP. The Company will
deliver to the Purchaser a certified copy of the minutes of and all
materials distributed at or prior to all meetings of the board of
directors of the Company, certified as true and accurate by the
Secretary of the Company, promptly following each such meeting. The
Company will (a) permit the Purchaser, so long as the Purchaser owns
any Preferred Shares or not less than 25,000 shares of Registrable
Securities in the Company, to designate one person to attend all
meetings of the Company's board of directors, (b) provide such designee
notice of all meetings of the Company's board of directors
contemporaneously with notice being given to all directors, (c) permit
such designee to attend such meetings as an observer, and (d) provide
to such designee a copy of all materials distributed at such meetings.
Regular board of director meetings will be held (i) at least four (4)
times during each calendar year, with at least two of such meetings to
be held in person, and (ii) at intervals of not less than one hundred
twenty (120) days between any two (2) such regular board meetings. The
Company will reimburse each such observer for all reasonable expenses
incurred in traveling to and from such meetings and attending such
meetings. In addition, for so long as the Purchaser owns any Preferred
Shares or not less than 25,000 shares of Registrable Securities, at all
times the board of directors will consist of no more than thirteen (13)
members, including (i) one (1) individual designated by the Purchaser,
and
Page 1
(ii) one (1) additional individual designated by the Purchaser if
either (A) the quarterly dividends required by the Series B Preferred
Stock are not paid by the Company for two (2) consecutive calendar
quarters or (B) an Issuance Event exists hereunder; PROVIDED, HOWEVER,
that the Purchaser will not have any obligation to designate or cause
such individuals to serve on the board of directors of the Company; and
PROVIDE FURTHER, that upon the occurrence of any of (x) the payment in
full of the dividends owing as a result of the occurrence of the
nonpayment event referred to in SUBSECTION (II) above or (y) the cure
of the occurrence of an Issuance Event referred to in SUBSECTION (II)
above, so long as all other dividends have been paid and no other
Issuance Event has occurred, the individual designated by the Purchaser
pursuant to such SUBSECTION (II) above will cease to serve on the board
of directors of the Company upon written notice by the Company provided
within ten (10) business days following such cure or payment in full.
Any failure by the Purchaser to designate such individuals will not
constitute failure to comply with this Agreement or result in any
liability to the Purchaser. The Company agrees to compensate such
individuals referred to in SUBSECTION (I) and (II) in the same manner
as each of the other members of the board of directors is compensated
and agrees to reimburse such individuals and the Purchaser for all
reasonable expenses incurred by such individuals and the Purchaser in
connection with the meetings and activities of the board of directors.
The Company agrees to take all necessary action to effectuate this
provision. Notwithstanding anything to the contrary in this SECTION
4.16, the Purchaser agrees that any Person designated by the Purchaser
pursuant to this SECTION 4.16 will not be a Person or an Affiliate of a
Person that is engaged in the manufacture of steel or steel products.
3. CHARTER AMENDMENT. Purchaser acknowledges and reaffirms its prior
consent to the submission of the Charter Amendment to a vote of the Company's
stockholders and to the implementation of the Charter Amendment, and agrees and
confirms that such actions have not and will not be deemed to violate Section
4.20(e) of the Agreement.
4. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by the Purchaser:
4.1 The Purchaser shall have received (a) this Amendment, duly executed
by the Company, and (b) a true, correct and complete copy of the resolutions of
the Company's board of directors authorizing the execution, delivery and
performance of this Amendment, certified by the Secretary of the Company.
4.2 No Issuance Event under the Agreement shall have occurred and be
continuing, unless such Issuance Event has been specifically waived in writing
by the Purchaser.
5. RATIFICATIONS, REPRESENTATIONS AND WARRANTIES.
5.1 The terms and provisions set forth in this Amendment shall modify
and supersede all inconsistent terms and provisions set forth in the Agreement,
and, except as expressly modified and superseded by this Amendment, the terms
and provisions of the Agreement and the Other Agreements are ratified and
confirmed and shall continue in full force and effect. The Company and the
Purchaser agree that the Agreement and the Other Agreements, as amended hereby
shall continue to be legal, valid, binding and enforceable in accordance with
their respective terms.
5.2 The Company hereby represents and warrants to the Purchaser that
(a) the execution, delivery and performance of this Amendment and any and all
other agreements executed and/or delivered in connection herewith have been
authorized by all requisite corporate action on the part of the Company and will
not violate the Certificate of Incorporation or Bylaws of the Company; (b) no
Issuance Event under the Agreement has occurred and is continuing, unless such
Issuance Event
Page 2
has been specifically waived in writing by the Purchaser; (c) the Company is in
full compliance with all covenants and agreements contained in the Agreement and
the Other Agreements; and (d) the Company has not amended its Certificate of
Incorporation or its Bylaws since June 13, 1995, except for the Charter
Amendment and amendments to the Bylaws (i) to make conforming changes
necessitated by the Charter Amendment and (ii) to correct the address of the
Company set forth in Section 5.1 thereof.
6. WAIVER.
Except as otherwise provided in this Amendment, nothing contained in
this Amendment shall be construed as a waiver by the Purchaser of any covenant
or provision of the Agreement, the Other Agreements, this Amendment, or of any
other contract or instrument between the Company and the Purchaser, and the
failure of the Purchaser at any time or times hereafter to require strict
performance by Company of any provision thereof shall not waive, affect or
diminish any right of the Purchaser to thereafter demand strict compliance
therewith. The Purchaser hereby reserves all rights granted under the Agreement,
the Other Agreements, this Amendment and any other contract or instrument
between Company and the Purchaser.
7. MISCELLANEOUS.
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in the Agreement or Other Agreements, including without
limitation, any document furnished in connection with this Amendment, shall
survive the execution and delivery of this Amendment and the Other Agreements,
and no investigation by the Purchaser or any closing shall affect the
representations and warranties or the right of the Purchaser to rely upon them.
7.2 REFERENCE TO AGREEMENT. Each of the Agreement and the Other
Agreements, and any and all other agreements, documents or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of the Agreement, as amended hereby, are hereby amended so that any
reference in the Agreement and such Other Agreements to the Agreement shall mean
the Agreement as amended hereby.
7.3 EXPENSES OF THE PURCHASER. As provided in the Agreement, the
Company agrees to pay on demand all costs and expenses incurred by the Purchaser
in connection with the preparation, negotiation and execution of this Amendment
and any other agreements executed pursuant hereto, including, without
limitation, the reasonable costs and fees of the Purchaser's legal counsel.
7.4 SEVERABILITY. Any provisions of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
7.5 SUCCESSORS AND ASSIGNS. This Amendment will inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns.
7.6 COUNTERPARTS. This Amendment may be executed in any number of
counterparts, which shall collectively constitute one agreement.
7.7 LAW GOVERNING. THIS AMENDMENT SHALL BE DEEMED TO HAVE BEEN
SUBSTANTIALLY NEGOTIATED AND MADE IN THE STATE OF LOUISIANA AND SHALL BE
INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS
OF THE UNITED STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF
LOUISIANA APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN,
WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW, RULES THEREOF OR ANY OTHER PRINCIPLE
THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER
JURISDICTION.
Page 3
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
as of the date first above written.
COMPANY:
BAYOU STEEL CORPORATION
By: /S/ JERRY M. PITTS
Jerry M. Pitts
President
PURCHASER:
RICE PARTNERS II, L.P.
By: Rice Capital Group IV, L.P.
Its: General Partner
By: RMC Fund Management, L.P.
Its: General Partner
By: Rice Mezzanine Corporation
Its: General Partner
By: S/S JEFFREY P. SANGALIS
Jeffrey P. Sangalis
Managing Director
Page 4
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<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM BAYOU STEEL CORPORATION CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED
STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,246,860
<SECURITIES> 0
<RECEIVABLES> 24,736,463
<ALLOWANCES> 613,164
<INVENTORY> 73,096,697
<CURRENT-ASSETS> 99,713,141
<PP&E> 128,546,087
<DEPRECIATION> 38,282,974
<TOTAL-ASSETS> 194,187,599
<CURRENT-LIABILITIES> 25,503,289
<BONDS> 85,048,666
12,557,861
0
<COMMON> 128,846
<OTHER-SE> 70,948,937
<TOTAL-LIABILITY-AND-EQUITY> 194,187,599
<SALES> 152,182,577
<TOTAL-REVENUES> 152,182,577
<CGS> 140,266,780
<TOTAL-COSTS> 140,266,780
<OTHER-EXPENSES> 4,957,647
<LOSS-PROVISION> 56,610
<INTEREST-EXPENSE> 6,483,185
<INCOME-PRETAX> (1,527,612)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,527,612)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,527,612)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
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