UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 33-22603
BAYOU STEEL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 72-1125783
(State of incorporation) (I.R.S. Employer
Identification No.)
River Road, P.O. Box 5000, LaPlace, Louisiana 70069
(Address of principal executive offices)
(Zip Code)
(504) 652-4900
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS SHARES OUTSTANDING AT DECEMBER 31, 1997
- ----------------------------------- ---------------------------------------
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 --
December 31, 1997 and
September 30, 1997 3
Consolidated Statements of
Operations -- Three Months Ended
December 31, 1997 and 1996 5
Consolidated Statements of Cash
Flows -- Three Months Ended
December 31, 1997 and 1996 6
Notes to Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition --
Results of Operations 12
Liquidity and Capital Resources 14
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 16
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BAYOU STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED) (AUDITED)
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ ------------
CURRENT ASSETS:
Cash and temporary cash investments $ 3,400,715 $ 971,477
Receivables, net of allowance for
doubtful accounts of $567,800 in 1998
and $500,459 in 1997 30,656,755 27,162,056
Inventories 70,243,822 75,022,554
Prepaid expenses 380,900 239,161
------------ ------------
Total current assets 104,682,192 103,395,248
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land 3,790,398 3,790,399
Machinery and equipment 111,102,661 110,028,977
Plant and office building 21,265,578 21,265,577
------------ ------------
136,158,637 135,084,953
Less-Accumulated depreciation (46,362,933) (44,946,654)
------------ ------------
Net property, plant and equipment 89,795,704 90,138,299
------------ ------------
OTHER ASSETS 2,715,393 2,931,507
------------ ------------
Total assets $197,193,289 $196,465,054
============ ============
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)
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ ------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,025,508 $ 3,040,257
Accounts payable 18,914,870 23,749,765
Accrued liabilities 6,938,605 4,574,144
------------ ------------
Total current liabilities 28,878,983 31,364,166
------------ ------------
LONG-TERM DEBT 79,750,000 80,500,073
------------ ------------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK 13,195,239 13,089,010
------------ ------------
COMMON STOCKHOLDERS' EQUITY:
Common stock, $.01 par value -
Class A: 24,271,127 authorized,
10,613,380 outstanding 106,134 106,134
Class B: 4,302,347 authorized,
2,271,127 outstanding 22,711 22,711
Class C 100 authorized &
outstanding 1 1
------------ ------------
Total common stock 128,846 128,846
Paid-in capital 47,769,034 47,769,034
Retained earnings 27,471,187 23,613,925
------------ ------------
Total common stockholders' equity 75,369,067 71,511,805
------------ ------------
Total liabilities & common
stockholders' equity $197,193,289 $196,465,054
============ ============
The accompanying notes are an integral part of these consolidated statements.
Page 4
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31,
-------------------------------
1997 1996
------------ ------------
NET SALES $ 66,347,841 $ 54,864,911
COST OF SALES 58,210,196 52,052,301
------------ ------------
GROSS PROFIT 8,137,645 2,812,610
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,491,083 1,616,083
NON-PRODUCTION STRIKE AND
CORPORATE CAMPAIGN EXPENSES 48,925 794,153
------------ ------------
OPERATING INCOME 6,597,637 402,374
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (2,088,314) (2,219,683)
Interest income 42,296 2,417
Miscellaneous 49,468 12,280
------------ ------------
(1,996,550) (2,204,986)
------------ ------------
INCOME (LOSS) BEFORE TAXES 4,601,087 (1,802,612)
PROVISION FOR INCOME TAXES 93,845 --
------------ ------------
NET INCOME (LOSS) 4,507,242 (1,802,612)
DIVIDENDS ACCRUED AND ACCRETION ON
PREFERRED STOCK (649,980) (649,980)
------------ ------------
INCOME (LOSS) APPLICABLE TO COMMON
AND COMMON EQUIVALENT SHARES $ 3,857,262 $ (2,452,592)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 13,707,029 13,707,029
BASIC EARNINGS PER SHARE $ .30 $ (.19)
============ ============
DILUTED EARNINGS PER SHARE $ .28 $ (.19)
============ ============
The accompanying notes are an integral part of these consolidated statements.
Page 5
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31,
-------------------------------
1997 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,507,242 $ (1,802,612)
Depreciation 1,416,279 1,422,155
Amortization 216,114 288,280
Provision for losses on accounts
receivable 67,341 56,033
Changes in working capital:
(Increase) decrease in receivables (3,562,040) 2,949,811
Decrease in inventories 4,778,732 1,291,798
(Increase) in prepaid expenses (141,739) (548,281)
(Decrease) in accounts payable (4,834,895) (5,883,542)
Increase in accrued liabilities 2,364,461 1,146,438
------------ ------------
Net cash provided by (used in)
operations 4,811,495 (1,079,920)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant
and equipment (1,073,684) (762,680)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit -- 3,300,000
Payments of long-term debt (764,822) (26,409)
(Increase) in other assets -- (4,599)
Payments of dividends on preferred stock (543,751) (2,175,000)
------------ ------------
Net cash (used in) provided by
financing activities (1,308,573) 1,093,992
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
TEMPORARY CASH INVESTMENTS 2,429,238 (748,608)
CASH AND TEMPORARY CASH INVESTMENTS,
beginning balance 971,477 748,608
------------ ------------
CASH AND TEMPORARY CASH INVESTMENTS,
ending balance $ 3,400,715 $ --
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the period for:
Interest (net of amounts capitalized) $ 180,121 $ 297,448
Income taxes $ 40,394 $ --
The accompanying notes are an integral part of these consolidated statements.
Page 6
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(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 disclosure normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted pursuant to those
rules and regulations. However, all adjustments which, in the opinion of
management, are necessary for fair presentation have been included. 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 Annual Report on Form 10-K filed with the SEC as of and for the year
ended September 30, 1997.
The accompanying financial statements include the consolidated accounts of
Bayou Steel Corporation ("BSCL") and Bayou Steel Corporation (Tennessee)
("BSCT") (collectively referred to herein as the "Company") after elimination of
all significant intercompany accounts and transactions.
The results for the three months ended December 31, 1997 are not
necessarily indicative of the results to be expected for the fiscal year ending
September 30, 1998.
2) INVENTORIES
Inventories consisted of the following:
(UNAUDITED) (AUDITED)
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------- ------------
Scrap steel $ 3,508,488 $ 5,623,964
Billets 5,521,481 4,799,025
Finished product 44,161,476 46,717,869
LIFO adjustments (2,837,626) (2,497,697)
------------- ------------
50,353,819 54,643,161
Mill rolls, operating
supplies, and other 19,890,003 20,379,393
------------- ------------
$ 70,243,822 $ 75,022,554
============= ============
Inventory valuations are based on last-in, first-out ("LIFO") estimates of
year-end levels and prices. Actual LIFO inventories will not be known until
year-end quantities and indices are determined.
Page 7
<PAGE>
3) LONG-TERM DEBT
Long-term debt included the following:
(UNAUDITED) (AUDITED)
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------- ------------
First Mortgage Notes $ 75,000,000 $ 75,000,000
Term Loan 7,750,000 8,500,000
Other notes payables 25,508 40,330
------------- ------------
82,775,508 83,540,330
Less-current maturities 3,025,508 3,040,257
------------- ------------
$ 79,750,000 $ 80,500,073
============= ============
The Company entered into a five-year term loan agreement for $10 million
as a result of the purchase of BSCT. The term loan agreement calls for quarterly
principal payments of $750,000 through March 31, 1999 and $1.0 million beginning
June 30, 1999 through December 31, 1999. The remaining $1.0 million principal
payment is due on maturity of June 20, 2000. The term loan agreement bears
interest on a sliding scale based on a quarterly leverage ratio, as defined. As
of December 31, 1997, the interest rate was LIBOR plus 2% or approximately 8%.
The Company has a $75 million note bearing interest at 10.25%. The note
will be redeemable, in whole or in part, at any time on or after March 1, 1998
initially at 103.33% declining ratably to par on March 1, 2000. No principal
payments are due until maturity in 2001.
4) SHORT-TERM DEBT
The Company has a revolving line of credit agreement which will be used
for general corporate purposes. The terms of the agreement call for available
borrowings up to $45 million, including outstanding letters of credit, using a
borrowing base derived as a certain percentage of accounts receivable and
inventories. The amount available as of December 31, 1997 was $35 million, net
of $1.8 million outstanding letters of credit. There were no borrowings under
the line of credit as of December 31, 1997 and September 30, 1997.
5) TAXES
As of December 31, 1997, for tax purposes, the Company had net operating
loss carryforwards ("NOLs") of approximately $280 million and $262 million
available to offset against regular tax and alternative minimum tax,
respectively. The NOLs will expire in varying amounts through fiscal 2011. A
substantial portion of the available NOLs, approximately $151.2 million, expires
by fiscal 2000.
6) PREFERRED STOCK AND WARRANTS
The Company issued 15,000 shares of its redeemable preferred stock and
warrants to purchase six percent of its 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.
Page 8
<PAGE>
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, approximately 77,000 shares, in the
event that any two consecutive quarterly payments are missed or other defined
events take place.
The carrying amount of the preferred stock will increase by periodic
accretion of the difference between the recorded value of the stock at the date
of issuance and the redemption value from 1995 through the mandatory redemption
date of June 20, 2002. The preferred stock is mandatorily redeemable by the
Company on June 20, 2002; however, the Company can redeem at any time after June
20, 1996, initially at 113.0% of the outstanding balance, plus accrued dividends
to the date of redemption, and declining ratably to par on June 20, 2000.
7) EARNINGS PER SHARE
In fiscal 1998, the Company adopted Financial Accounting Standards Board
Statement No. 128, "Earnings per Share" ("FAS 128"). As a result, reported
earnings per share for the first quarter of fiscal 1997 were restated. The
effect of this accounting change on previously reported earnings per share
("EPS") for the three months ended December 31, 1996 was as follows:
Primary earnings per share, as reported $ (.18)
Effect FAS 128 (.01)
Basic EPS, as restated (.19)
Fully diluted EPS, as reported $ (.18)
Effect FAS 128 (.01)
Diluted EPS, as restated (.19)
Basic earnings per share was computed by deducting dividends accrued and
accretion on preferred stock from net income then dividing this amount by the
weighted average number of outstanding common shares of 12,884,607 during the
three months ended December 31, 1997 and 1996. In connection with the issuance
of redeemable preferred stock discussed in Note 6, 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. Diluted earnings per share for the three
months ended December 31, 1997 and 1996 was determined on the assumption that
the outstanding warrants were exercised and are considered common stock
equivalents.
8) MISCELLANEOUS
Miscellaneous income and expense for the three months ended December 31,
1997 and 1996 included:
(UNAUDITED) (UNAUDITED)
1997 1996
--------- ---------
Discounts earned $ 50,198 $ 40,143
Provision for bad debts (67,341) (56,033)
Other 66,611 28,170
--------- ---------
$ 49,468 $ 12,280
========= =========
Page 9
<PAGE>
9) COMMITMENTS AND CONTINGENCIES
STRIKE AND CORPORATE CAMPAIGN
On March 21, 1993, the United Steelworkers of America Local 9121 (the
"Union") initiated a strike after the parties failed to reach agreement on a new
labor contract due to differences on economic issues. On September 23, 1996, the
Company and Union entered into a settlement agreement which, among other issues,
resulted in a new labor contract, ending the strike.
In August 1993, the Union announced a corporate campaign designed to bring
pressure on the Company from individuals and institutions with direct financial
or other interests in the Company. The Company 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 this campaign. Non-
production strike and corporate campaign expenses include legal and other
charges incurred by the Company in connection with its suit against the Union.
In the first quarter of fiscal 1998, the Company reached an agreement with the
Union the effect of which was not material to the financial position or results
of operations of the Company.
ENVIRONMENTAL
The Company is subject to various federal, state, and local laws and
regulations concerning the discharge of contaminants which may be emitted into
the air, discharged into waterways, and the disposal of solids and/or hazardous
wastes such as electric arc furnace dust. In addition, in the event of a release
of a hazardous substance generated by the Company, the Company could be
potentially responsible for the remediation of contamination associated with
such a release. In the past, the Company's operations in some respects have not
met all of the applicable standards promulgated pursuant to such laws and
regulations. During fiscal 1997, the United States Public Interest Research
Group ("USPIRG") filed a lawsuit in Louisiana against the Company for alleged
violations of air quality regulations. USPIRG is asking the courts to award them
their appropriate legal fees and assess appropriate penalties against the
Company. The Company believes it has meritorious defenses to these charges. The
Company believes that it is in compliance, in all material respects, with
applicable environmental requirements and that the cost of such continuing
compliance (including the ultimate resolution of the USPIRG matter discussed
above) 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 December 31, 1997
and 1996, the Company has accrued loss contingencies for environmental matters.
TVSC, the prior owners of the BSCT facility, 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 order. The
ultimate remedy and clean-up goals will be dictated by the results of human
health and ecological risk assessments which are components of a required,
structured investigative, remedial process. As of December 31, 1997,
investigative, remedial and risk assessment activities have resulted in expenses
of approximately $1.3 million. Estimates indicate that the future cost for
remediating the affected areas ranges from $400,000 for the lowest cost remedy
Page 10
<PAGE>
to $1.3 million for higher cost remedy.
The definitive asset 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 activities pursuant to the Voluntary
Consent Order (with an additional $1.0 million to be held for such costs and
other costs resulting from a breach of TVSC's representations and warranties in
the agreement). At this time, the Company does not expect the costs of
resolution of the Voluntary Consent Order to exceed funds provided by the escrow
fund. 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 the escrow funds, the Company would be
liable to cover such amounts, if any.
OTHER
There are various claims and legal proceedings arising in the ordinary
course of business pending against or involving the Company wherein monetary
damages are sought. It is management's opinion that the Company's liability, if
any, under such claims or proceedings would not materially affect its financial
position.
Page 11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion and analysis should be read in conjunction with
the Management's Discussion and Analysis of Financial Condition and Results of
Operation included as part of the Company's Annual Report on Form 10-K as of and
for the year ended September 30, 1997.
RESULTS OF OPERATION
The Company reported net income of $4.5 million before dividends accrued
and accretion on preferred stock in the first quarter of fiscal 1998 (ended
December 31, 1997) compared to a net loss of $1.8 million for the comparable
period of fiscal 1997. The $6.3 million improvement was primarily the result of
a strong market for the Company's products and to a lesser extent, reduced
production costs. Comparing the first quarter of fiscal 1998 to the same period
in the prior year, shape shipment tons increased 14%, average selling price per
ton increased 6% and conversion costs at BSCL decreased by 4%. BSCL was
adversely affected in the first quarter of last fiscal year by an outage at the
facility and the costs of returning striking employees. BSCT recorded its second
consecutive quarterly profit, despite a fire at the facility, during the first
quarter of fiscal 1998 compared to a loss of $1.3 million during the first
quarter of the prior year.
The following table sets forth shipment and sales data:
THREE MONTHS ENDED
DECEMBER 31,
------------------------
1997 1996
-------- --------
Net Sales (in thousands) $ 66,348 $ 54,865
Shape Shipment Tons 183,261 160,474
Shape Selling Price Per Ton $ 356 $ 336
A. SALES
Net sales increased in the first quarter of fiscal 1998 by 21% or $11.5
million compared to the same period of fiscal 1997. The increase was the result
of an increase in shape shipments and selling prices. Shipments increased 14% or
22,787 tons to a record best quarter in the history of the Company. Shape
selling price increased 6% or $20 per ton.
SHAPES - The 14% increase in shape shipments in the first quarter of
fiscal 1998 over the same period of fiscal 1997 is attributable to a strong
economy and a good product mix. The total increase in tons shipped was comprised
of 15,996 tons from the Louisiana facility and 6,791 from the Tennessee
facility. The backlog of orders at BSCL at December 31, 1997 was $109 million or
71% higher than at December 31, 1996. The Tennessee facility backlog at December
31, 1997 was $24 million or 88% greater than at December 31, 1996.
Overall selling prices increased by $20 per ton or 6% from the first
quarter of fiscal 1997 to the first quarter of fiscal 1998. The selling price of
shipments out of the Louisiana facility increased during this period by $16 per
ton with the Tennessee facility experiencing an increase in selling price of $30
per ton over the first quarter of fiscal 1997. These increases are a result of
favorable economic conditions and demand for the Company's products. In
addition, BSCT's price increase was influenced by a better mix of products sold
and
Page 12
<PAGE>
increased acceptance of its products.
BILLETS - Due to the high productivity of the Company's rolling mills, no
billets were sold on the open market during the first fiscal quarter of 1998 and
1997. BSCT's demand for billets has been primarily satisfied by the purchase of
billets on the open market at competitive prices while the Company supplied all
of BSCL's rolling mill requirements. Depending on market conditions and its own
rolling mill requirements, the Company may sell billets on an occasional and
selective basis to domestic and export customers while purchasing additional
billets for BSCT.
B. COST OF GOODS SOLD
Cost of goods sold was 88% of sales for the first quarter of fiscal 1998
compared to 95% of sales for the same period of fiscal 1997. This positive
variance is primarily the result of the increase in both sales volume and price
as well as conversion cost improvements.
The major component of cost of goods sold is the raw material scrap. Scrap
cost in the first quarter of fiscal 1998 increased $2 per ton compared to the
same period last year. As with the demand for the Company's finished goods,
scrap demand has also risen, to a lesser degree, thereby causing this increase.
The Company has been able to control the availability and the cost of scrap to
some degree by producing its own shredded scrap through Mississippi River
Recycling, a division of BSCL. When compared with the same period in the prior
year, the cost of scrap produced by this automobile shredding operation remained
unchanged.
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 first quarter of fiscal 1998 compared to the same
period of fiscal 1997 decreased by 4%. This is due to record productivity which
resulted in increased production along with reduced spending. Also during the
same period in the prior year, the Company experienced certain one time
expenditures that were not repeated in the current period.
BSCT conversion costs remained relatively constant in both periods
indicating that the operations have stabilized since start-up in late fiscal
1995. In the first quarter of fiscal 1998, a fire broke out at the facility
which suspended operations for two weeks. Except for incurring insurance
deductibles of approximately $250,000, operations were not adversely affected.
The incident may have a short-term impact on future sales as the mill builds
finished goods inventories to pre-incident levels. The Company is pursuing
reimbursement from its insurers for losses incurred related to property damage
and business interruption resulting from the fire.
C. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expenses in the first quarter of
fiscal 1998 compared to the comparable period of the prior fiscal year were
approximately the same.
D. NON-PRODUCTION STRIKE AND CORPORATE CAMPAIGN EXPENSES
Non-production strike-related expenses have decreased significantly since
the settlement of the RICO lawsuit and post-strike issues at the end of fiscal
Page 13
<PAGE>
1997. Costs are $.7 million less in the first quarter of fiscal 1998 when
compared to the first quarter of fiscal 1997.
E. NET INCOME
Net income before dividends accrued and accretion on preferred stock was
$6.3 million better in the first fiscal quarter of 1998 compared to the same
period of fiscal 1997. The primary reasons for the increase in earnings were
increased revenue from higher sales prices and volume increases, increased metal
margins and decreased non-production strike and corporate campaign expenses.
BSCT reported its first quarterly profit of $0.2 million in the fourth quarter
of fiscal 1997 while the first quarter of fiscal 1998 results were slightly
better than break-even due to the aforementioned fire. Management continues to
monitor the viability of this operation closely.
LIQUIDITY AND CAPITAL RESOURCES
A. CASH AND WORKING CAPITAL
The Company ended the first fiscal quarter with $3.4 million in cash and
no short-term borrowings. At December 31, 1997 current assets exceeded current
liabilities by a ratio of 3.62 to 1.00. Working capital increased by $3.8
million to $75.8 million during the three months ended December 31, 1997.
In the first three months of fiscal 1998, cash provided by operations was
$4.8 million. Contributing to this increase was a decrease in inventories of
$4.8 million caused by strong product demand. Cash from operations was offset by
an increase in receivables of $3.6 million and a decrease in accounts payable of
$4.8 million.
B. CAPITAL EXPENDITURES
Capital expenditures amounted to $1.1 million in the first quarter of
fiscal 1998. These capital projects were for cost reduction, productivity
enhancements, plant maintenance and safety and environmental programs. Depending
on market conditions, the Company may spend approximately $15 million on various
capital projects to reduce cost and increase productivity, enhance safety and
environmental programs and maintain the plants.
OTHER COMMENTS
FORWARD-LOOKING INFORMATION
This document contains various "forward-looking" statements which
represent the Company's expectation or belief concerning future events. The
Company cautions that a number of important factors could, individually or in
the aggregate, cause actual results to differ materially from those included in
the forward-looking statements including, without limitation, the following:
changes in the price of supplies, power, natural gas, purchased billets; changes
in the selling price of the Company's finished products or the purchase price of
steel scrap; weather conditions in the market area of the finished product
distribution; unplanned equipment outages; and changing laws affecting labor,
employee benefits cost and or environmental regulations.
Page 14
<PAGE>
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 15
<PAGE>
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None were filed during the first quarter of fiscal year 1998.
(b) Reports on Form 8-K
None were filed during the first quarter of fiscal year 1998.
Page 16
<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: February 2, 1998
Page 17
<TABLE> <S> <C>
<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>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 3,400,715
<SECURITIES> 0
<RECEIVABLES> 31,224,555
<ALLOWANCES> 567,800
<INVENTORY> 70,243,822
<CURRENT-ASSETS> 104,682,192
<PP&E> 136,158,637
<DEPRECIATION> 46,362,933
<TOTAL-ASSETS> 197,193,289
<CURRENT-LIABILITIES> 28,878,983
<BONDS> 79,750,000
13,195,239
0
<COMMON> 128,846
<OTHER-SE> 75,240,221
<TOTAL-LIABILITY-AND-EQUITY> 197,193,289
<SALES> 66,347,841
<TOTAL-REVENUES> 66,439,605
<CGS> 58,210,196
<TOTAL-COSTS> 59,750,204
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,088,314
<INCOME-PRETAX> 4,601,087
<INCOME-TAX> 93,845
<INCOME-CONTINUING> 4,507,242
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,507,242
<EPS-PRIMARY> .30
<EPS-DILUTED> .28
</TABLE>
