UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-9887
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OREGON STEEL MILLS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-0506370
- ----------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1000 Broadway Building, Suite 2200, Portland, Oregon 97205
- ----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(503) 223-9228
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
Common Stock, $.01 Par Value 19,421,614
---------------------------- -----------------------------
Class Number of Shares Outstanding
(as of April 30, 1995)
OREGON STEEL MILLS, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1995 (unaudited)
and December 31, 1994 . . . . . . . . . 2
Consolidated Statements of Income
(unaudited)
Three months and nine months
ended September 30, 1995 and 1994 . . . 3
Consolidated Statements of Cash Flows
(unaudited)
Nine months ended September 30, 1995
and 1994 . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial
Statements (unaudited) . . . . . . . . . 5 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . 8 - 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 13<PAGE>
OREGON STEEL MILLS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30,
1995 December 31,
(Unaudited) 1994
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 9,604 $ 5,039
Trade accounts receivable, net 73,150 80,203
Inventories 144,058 160,788
Other current assets 8,126 7,661
Deferred tax asset 5,775 5,775
--------- ---------
Total current assets 240,713 259,466
--------- ---------
Property, plant and equipment:
Land and improvements 28,511 28,319
Buildings 37,240 36,943
Machinery and equipment 365,338 230,019
Construction in progress 122,415 139,842
--------- --------
553,504 435,123
Accumulated depreciation (111,943) (97,027)
--------- --------
441,561 338,096
--------- --------
Excess of cost over net assets acquired 41,895 42,569
Other assets 32,583 25,602
--------- --------
$756,752 $665,733
========= ========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 5,827 $ 5,302
Accounts payable 105,979 85,618
Accrued expenses 34,423 24,692
Other taxes payable 3,798 2,374
Total current liabilities 150,027 117,986
Long-term debt 239,596 187,935
Deferred employee benefits 16,862 17,661
Other deferred liabilities 36,120 36,609
Deferred income taxes 15,709 10,725
-------- --------
458,314 370,916
-------- --------
Minority interests 18,811 18,934
-------- --------
STOCKHOLDERS' EQUITY
Common stock 194 194
Additional paid-in capital 150,826 150,090
Retained earnings 131,616 130,145
-------- --------
282,636 280,429
Cumulative foreign currency translation
adjustment (3,009) (4,546)
-------- --------
279,627 275,883
-------- --------
$756,752 $665,733
======== ========
The accompanying notes are an integral part of the
consolidated financial statements.
2
<PAGE>
<TABLE>
OREGON STEEL MILLS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except tonnage and per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Sales $188,479 $193,053 $526,644 $646,721
Proceeds from insurance settlement - - 3,959 -
-------- -------- -------- --------
Total revenues 188,479 193,053 530,603 646,721
Costs and expenses:
Cost of sales 170,681 178,179 472,340 589,740
Provision for rolling mill closures - 22,134 - 22,134
Selling, general and
administrative expenses 11,401 12,185 32,652 38,094
Profit participation and ESOP
contribution 592 164 3,985 1,718
-------- -------- -------- --------
Operating income 5,805 (19,609) 21,626 (4,965)
Other income (expense):
Interest and dividend income 123 109 248 357
Interest expense (2,990) (663) (7,112) (3,106)
Other, net 53 334 661 586
Gain on sale of subsidiary's
common stock - 12,323 - 12,323
Minority interests 93 (843) 158 (2,050)
-------- -------- -------- --------
Income before income taxes 3,084 (8,349) 15,581 3,145
Income tax (expense) benefit (1,118) 7,855 (5,959) 3,487
-------- -------- -------- --------
Net income (loss) $ 1,966 $ (494) $ 9,622 $ 6,632
======== ======== ======== ========
Primary and fully diluted net income (loss)
per common and common
equivalent share $.10 ($.02) $.48 $.33
Dividends declared per common share $.14 $.14 $.42 $.42
Weighted average common shares
and common share equivalents
outstanding 20,020 19,976 20,015 19,972
Tonnage sold 372,900 391,100 1,045,200 1,280,100
The accompanying notes are an integral part of the consolidated financial statements.
3
/TABLE
<PAGE>
<TABLE>
OREGON STEEL MILLS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1995 1994
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,622 $ 6,632
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation 16,892 15,891
Amortization 1,042 1,010
Provision for rolling mill closures - 22,134
Deferred income tax provision 4,984 (7,438)
Gain on sale of subsidiary's common stock - (12,323)
Accrual for contribution of common stock
to employee stock ownership plan - 500
Minority interests (123) 1,056
Other, net (1,366) 1,224
Changes in current assets and
liabilities, net 49,533 (26,949)
--------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 80,584 1,737
--------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (119,553) (92,588)
Proceeds from disposal of property, plant and equipment 110 352
Other, net (550) (707)
--------- --------
NET CASH USED BY INVESTING ACTIVITIES (119,993) (92,943)
--------- --------
Cash flows from financing activities:
Net borrowings under loan agreements 55,607 79,293
Payments of other debt (3,579) (3,105)
Proceeds from sale of subsidiary's common stock - 16,800
Dividends paid (8,151) (8,134)
Other, net (74) 260
--------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 43,803 85,114
--------- --------
Effects of foreign currency exchange rate changes on cash 171 224
--------- --------
Net increase (decrease) in cash and cash equivalents 4,565 (5,868)
Cash and cash equivalents at beginning of period 5,039 9,623
--------- --------
Cash and cash equivalents at end of period $ 9,604 $ 3,755
========= ========
See Note 9 for additional supplemental disclosures of cash flow information:
Cash paid for:
Interest $10,902 $7,392
Income taxes $ 1,620 $3,954
The accompanying notes are an integral part of the consolidated financial statements.
4
/TABLE
<PAGE>
OREGON STEEL MILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The consolidated financial statements include the accounts of
Oregon Steel Mills, Inc. and its subsidiaries (the "Company").
All significant intercompany balances and transactions have been
eliminated upon consolidation. Certain previously reported
amounts have been reclassified to conform with current period
presentation.
The unaudited financial statements include all adjustments
(consisting of normal recurring accruals) which, in the opinion
of management, are necessary for a fair presentation of the
interim periods. Results for an interim period are not
necessarily indicative of results for a full year. Reference
should be made to the Company's 1994 Annual Report on Form 10-K
for additional disclosures including a summary of significant
accounting policies.
2. Inventories
-----------
Inventories consist of:
September 30, December 31,
1995 1994
------------- ------------
(In thousands)
Raw materials $ 21,914 $ 37,389
Semi-finished product 52,980 50,033
Finished product 45,613 50,320
Stores and operating supplies 23,551 23,046
-------- --------
$144,058 $160,788
======== ========
3. Common Stock
------------
In February 1995 the Company contributed approximately 44,300
shares of common stock of the Company ("Common Stock") to the
Employee Stock Ownership Plan (the "ESOP") in payment of a
$736,000 liability accrued in 1994. In February 1994 the Company
contributed approximately 29,600 shares of Common Stock to the
ESOP in payment of a $753,000 liability accrued in 1993.
On October 26, 1995, the Board of Directors declared a quarterly
cash dividend of 14 cents per share to be paid November 30, 1995,
to stockholders of record as of November 10, 1995.
4. Contingencies
-------------
ENVIRONMENTAL. The Company's Napa Pipe Corporation subsidiary
has a reserve of $2.7 million at September 30, 1995 for
environmental remediation relating to the Napa pipe mill. The
Company's 90 percent owned New CF&I, Inc. subsidiary owns a
95.2 percent interest in a Pueblo, Colorado steel mill, CF&I
Steel, L.P. ("CF&I"). In connection with CF&I's acquisition of
certain assets from CF&I Steel Corporation in 1993, CF&I
established a reserve of $36.7 million for environmental
remediation. The Colorado Department of Public Health and
Environment issued a 10 year post closure permit with two ten
year renewals to CF&I which became effective on October 30, 1995.
The permit contains a schedule for corrective actions to be
completed which is substantially reflective of a straight line
rate of expenditure over 30 years. At September 30, 1995, CF&I
has a reserve of $35.9 million, of which $33.9 million is
classified as non-current in other deferred liabilities in the
consolidated balance sheet.
STATE OF OREGON OCCUPATIONAL SAFETY AND HEALTH DIVISION ("OREGON
OSHA") CITATION. On July 25, 1995 Oregon OSHA cited the Company
$1.4 million in penalties for alleged violations of Oregon
occupational safety and health rules. Oregon OSHA claims that a
Material Safety Data Sheet ("MSDS") that the Company had prepared
for its glass frit product produced at its Portland steel mill
was incomplete in its description of certain metals present in
the product. Oregon OSHA also claims that certain administrative
and record-
5<PAGE>
OREGON STEEL MILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
keeping aspects of the glass plant's lead and cadmium protection
programs were not in complete compliance with applicable Oregon
OSHA regulations. Of the eighteen individual citations, ten were
alleged by Oregon OSHA to be willful. With the assistance of
counsel, the Company has conducted its own investigation of all
the alleged violations. Based on that investigation, it is the
Company's belief that no willful violation of the Oregon OSHA
rules occurred. The Company has appealed the citation, and
believes that the final outcome will not have a material adverse
effect on the Company's financial position.
5. Commitments
-----------
During 1994 the Company began construction of various capital
improvement projects at both its Portland, Oregon and Pueblo,
Colorado steel mills. Commitments for expenditures related to
the completion of these projects were $82.5 million at September
30, 1995.
6. Proceeds From Insurance Settlement
----------------------------------
During the second quarter of 1995, the Company received insurance
proceeds of approximately $4 million as reimbursement of lost
profits resulting from lost production and start-up delays of
CF&I's rod/bar mill caused by an explosion that occurred during
the third quarter of 1994.
7. Senior Credit Facilities Amendment
----------------------------------
The Company maintains a $100 million revolving credit facility
and a $200 million term loan facility (the "Senior Credit
Facilities"). Maximum borrowings available under the revolving
credit facility are based on the amount of the combined inventory
and accounts receivable of the Company. At September 30, 1995,
$185 million was outstanding under the Senior Credit Facilities.
The Senior Credit Facilities were amended as of September 30,
1995 to, among other things, modify the interest coverage ratio
covenant and certain other restrictive covenants, and to
facilitate the Company in pursuing other or additional financing
alternatives. The amendment to the interest coverage ratio was
needed in light of lower than anticipated earnings in 1995, and
higher than anticipated borrowings on the Senior Credit
Facilities. The amendments permit additional financing if
necessary to accomplish the Company's capital expansion projects
within the time currently projected.
8. Subsequent Event
----------------
During October 1995, the Company announced its intention to sell
three percent of its interest in its subsidiary, New CF&I, Inc.,
to the Nissho Iwai Group. In connection with that sale, the
Nissho Iwai Group will promote sales of steel products from the
Oregon Steel and CF&I Steel Divisions. The sale is expected to
occur prior to December 31, 1995.
6<PAGE>
OREGON STEEL MILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
9. Supplemental Cash Flow Information
----------------------------------
At September 30, 1995 and September 30, 1994, the Company had
financed property, plant and equipment with accounts payable of
$23.7 million and $16.2 million, respectively.
During the nine months ended September 30, 1994, the Company's
provision for rolling mill closures reduced the carrying value by
$22.1 million of various pieces of property, plant and equipment,
inventories, and other operating supplies relating to the closure
of the Fontana rolling mill and for those assets unlikely to be
used following the construction of the combination mill at the
Portland steel mill.
In February 1995 the Company contributed approximately 44,300
shares of Common Stock of the Company to the ESOP in payment of a
$736,000 liability accrued in 1994. In February 1994 the Company
contributed approximately 29,600 shares of Common Stock to the
ESOP in payment of a $753,000 liability accrued in 1993.
7<PAGE>
OREGON STEEL MILLS, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
- -------
The consolidated financial statements include the accounts of
Oregon Steel Mills, Inc. and its wholly-owned and majority-owned
subsidiaries (the "Company"), Napa Pipe Corporation ("Napa"), Oregon
Steel Mills - Fontana Division, Inc. ("Fontana"), Camrose Pipe
Corporation ("CPC") which owns a 60 percent interest in Camrose Pipe
Company ("Camrose"), and 90 percent owned New CF&I, Inc. which owns a
95.2 percent interest in CF&I Steel, L.P. ("CF&I"). Fontana ceased
production in the fourth quarter of 1994 and closed permanently in the
first quarter of 1995.
Results of Operations
- ---------------------
The following table sets forth tonnage sold, sales revenues and
average selling price per ton by division:
Three Months Ended, Nine Months Ended,
September 30, September 30,
------------------- -------------------
1995 1994 1995 1994
------- -------- -------- ---------
Total tonnage sold:
Oregon Steel Division (1):
Plate products 60,400 109,900 225,500 318,300
Welded pipe products 89,600 101,800 196,800 376,600
Semi-finished products 69,500 2,800 170,500 4,200
CF&I Steel Division 153,400 176,600 452,400 581,000
------- ------- --------- ---------
Total 372,900 391,100 1,045,200 1,280,100
======= ======= ========= =========
Sales revenues
(in thousands):
Oregon Steel Division $117,560 $115,130 $309,860 $389,285
CF&I Steel Division 70,919 77,923 216,784 257,436
-------- -------- -------- --------
Total $188,479 $193,053 $526,644 $646,721
======== ======== ======== ========
Average selling price
per ton:
Oregon Steel Division $536 $537 $523 $557
CF&I Steel Division $462 $441 $479 $443
Average $505 $494 $504 $505
- -----------------------
(1) The Oregon Steel Division consists primarily of the operations
of the Portland, Oregon steel mill, Napa, Fontana and Camrose.
The consolidated average selling price increased $11 to $505 per
ton for the third quarter of 1995 and decreased $1 to $504 per ton for
the first nine months of 1995, compared to the corresponding 1994
periods. The changes in the consolidated average selling prices
relate to product mix variations in 1995 compared to 1994, primarily
the increased volume of sales of the generally lowest priced semi-
finished products and the decreased volume of sales of the higher
priced plate and welded pipe products sold by the Oregon Steel
Division. These negative product mix variances were offset positively
by a reduction in the sales volume of the CF&I Steel Division's lower
priced rod and bar products in 1995 versus 1994. In addition, selling
prices increased for most products in the 1995 periods compared to the
1994 periods due to generally favorable market conditions and improved
quality resulting from capital facility improvements. However,
selling prices for Oregon Steel Division's semi-finished products
dropped in the third quarter of 1995 due to increased international
competition. This resulted in the Company's decision to substantially
reduce the sale of semi-finished products at the Oregon Steel Division
in the fourth quarter of 1995. Also, Oregon Steel Division's Canadian
Camrose pipe mill was negatively impacted by a reduction in demand for
its pipe products in the 1995 periods compared to the 1994 periods.
8
<PAGE>
OREGON STEEL MILLS, INC.
Consolidated tonnage sold decreased 18,200 tons to 372,900 tons
for the third quarter of 1995 and decreased 234,900 tons to one
million tons for the first nine months of 1995, compared to the
corresponding 1994 periods. These tonnage decreases were primarily
the result of reduced welded pipe and plate product sales by the
Oregon Steel Division, reduced rod and bar sales by the CF&I Steel
Division, offset by increased semi-finished product sales by both
divisions.
The closure of the Company's Fontana plate mill in the first
quarter of 1995 reduced the Company's plate rolling capacity by
approximately 50 percent. The new combination mill under construction
at the Portland steel mill is scheduled to become operational in 1997.
The temporary reduction in rolling capacity has resulted in lower
plate sales to customers and reduced tonnage available for the Napa
pipe mill. The Company has been able to purchase plate for pipe
production to meet demand for its large diameter product at Napa.
CF&I Steel Division's rod and bar product costs net of revenues
were charged to the newly constructed, preoperational rod/bar mill
capital asset account through July of 1995. Thus, the Company's
income statement for the three and nine month periods ended September
30, 1995 did not include rod/bar mill product sales of 20,600 and
78,700 tons, respectively. The Company began recognizing all revenues
and costs associated with the rod/bar facility in its income statement
beginning in August of 1995.
As a result of the decreased sales volume and changes in average
selling prices, sales revenues for the three and nine month periods
ended September 30, 1995 were $188.5 million and $526.6 million,
respectively, compared to $193.1 million and $646.7 million for the
corresponding 1994 periods. The $4.6 million sales revenue decrease
was comprised of a $9 million volume decrease offset by a $4.4 million
increase resulting from higher average selling prices. Of the $120.1
million year-to-date sales revenue decrease, $119 million was the
result of a volume decrease, and $1.1 million resulted from lower
average selling prices.
Gross profits for the three and nine month periods ended September
30, 1995, increased $2.9 million and $1.3 million from the
corresponding periods to $17.8 million and $58.3 million,
respectively. Gross profit as a percentage of revenues for the three
and nine month periods ended September 30, 1995 increased 1.7 percent
and 2.2 percent, respectively, to 9.4 percent and 11 percent. The
$2.9 million quarterly increase resulted from a $3.6 million positive
average margin variance, offset by $700,000 negative volume variance.
The $1.3 million year-to-date increase resulted from a $7.8 million
positive average margin variance, a $4 million insurance settlement,
offset by a $10.5 million negative volume variance.
Gross profits in the third quarter and first nine months of 1995
improved compared to the corresponding 1994 periods due to higher
selling prices, as discussed above; the current periods did not
include higher manufacturing costs and sales allowances associated
with the Company's first large international pipe order from the Napa
pipe mill, as was the case in 1994; and CF&I Steel Division's low
margin rod and bar product sales were only 22 and 18 percent of total
CF&I Steel Division sales in the third quarter and first nine months
of 1995 compared to 29 percent of total sales in the corresponding
periods in 1994. Also, gross profits for the first nine months of
1995 were improved compared to the corresponding 1994 period due to
the $4 million proceeds received from the Company's business
interruption insurance carrier in the second quarter of 1995 for
reimbursements of lost profits at the CF&I Steel Division due to lost
production and the delay in start-up of the new rod/bar mill. This
delay was caused by an explosion that occurred during the third
quarter of 1994.
These gross profit improvements were offset by high operating
costs on the new rod/bar mill at the Company's CF&I Steel Division
resulting from production delays and because the Company's lowest
margin semi-finished product sales were 10 and 9 percent of
consolidated sales in the third quarter and the first nine months of
1995 compared to less than one percent in the corresponding periods in
1994. Gross profits in 1995 were also impacted negatively due to
decreased pipe sales from the Company's Camrose pipe mill and higher
scrap prices at CF&I and the Portland steel mill. Further, the first
quarter of 1995 included approximately $1.7 million in costs
associated with the closure of the Fontana plate mill.
9
<PAGE>
OREGON STEEL MILLS, INC.
Selling, general and administrative expenses ("SG&A") for the
three and nine month periods ended September 30, 1995 decreased
$784,000 and $5.4 million, respectively, from the corresponding
periods in 1994. These decreases were due primarily to reduced
shipping expenses by the Oregon Steel Division as a result of the
closure of the Fontana plate mill in the first quarter of 1995 and
reduced shipping volume from the Company's Napa and Camrose pipe
mills. Additionally, the closure of the Fontana plate mill decreased
SG&A costs $2.2 million for the first nine months of 1995 compared to
the same period in 1994. SG&A as a percent of revenues for the three
and nine month periods ended September 30, 1995 was 6 and 6.2 percent,
respectively, compared to 6.3 and 5.9 percent for the corresponding
periods in 1994.
The profit participation and ESOP contribution expense for the
three and nine month periods ended September 30, 1995 increased
compared to the corresponding 1994 periods, reflecting the increased
profitability in 1995 versus 1994.
Other Income (Expense)
- ----------------------
Total interest costs for the three and nine month periods ended
September 30, 1995, were $5.6 million and $15.8 million, respectively,
compared to $2.9 million and $7.9 million for the corresponding 1994
periods. These increases were primarily the result of the debt
incurred to fund the Portland combination mill and the CF&I capital
expenditure programs. Capitalized interest cost for the three and
nine month periods ended September 30, 1995 was $2.6 million and $8.7
million, respectively, compared to $2.2 million and $4.8 million for
the corresponding 1994 periods.
The third quarter of 1994 included a $12.3 million gain from the
sale of a 10 percent equity interest in New CF&I, Inc. to a subsidiary
of Nippon Steel Corporation.
Income Taxes
- ------------
The Company's effective income tax rate was 36 and 38 percent for
the three and nine month periods ended September 30, 1995,
respectively. The benefit of income taxes was at a rate of 32.2
percent for the year ended December 31, 1994. Income before income
taxes in 1994 included a non-taxable $12.3 million gain on the sale of
a 10 percent equity interest in New CF&I, Inc. which occurred during
the third quarter of 1994.
10
<PAGE>
OREGON STEEL MILLS, INC.
Liquidity and Capital Resources
- -------------------------------
The Company's cash flow from operations for the nine month period
ended September 30, 1995 was a positive $80.6 million compared to a
positive cash flow of $1.7 million in the corresponding 1994 period.
During 1995, the other principal source of cash flow was borrowings
under the Senior Credit Facilities. Principal uses of cash was to
fund the Company's capital expansion projects and dividends.
Net working capital at September 30, 1995 decreased $50.8 million
from December 31, 1994 due to an $18.8 million decrease in current
assets, principally inventory and accounts receivable, and a $32
million increase in current liabilities, principally accounts payable
and accrued expenses.
The Company maintains a $100 million revolving credit facility and
a $200 million term loan facility (the "Senior Credit Facilities").
Maximum borrowings available under the revolving credit facility are
based on the amount of the combined inventory and accounts receivable
of the Company. At September 30, 1995, $185 million was outstanding
under the Senior Credit Facilities.
The Senior Credit Facilities were amended as of September 30, 1995
to, among other things, modify the interest coverage ratio covenant
and certain other restrictive covenants, and to facilitate the Company
in pursuing other or additional financing alternatives. The amendment
to the interest coverage ratio was needed in light of lower than
anticipated earnings in 1995, and higher than anticipated borrowings
on the Senior Credit Facilities. The amendments permit additional
financing if necessary to accomplish the Company's capital expansion
projects within the time currently projected.
The Company has a $14.5 million uncollateralized and uncommitted
revolving line of credit with a bank which matures May 31, 1996 and
may be used to support issuance of letters of credit, foreign exchange
contracts and interest rate hedges. At September 30, 1995, $9.8
million was restricted under outstanding letters of credit. In
addition, the Company has a $5 million uncollateralized and
uncommitted revolving credit line with a bank which is restricted to
use for letters of credit. At September 30, 1995, $3.6 million was
restricted under outstanding letters of credit.
Camrose maintains a Canadian $15 million revolving credit facility
with a bank, expiring on October 31, 1996. The facility is
collateralized by substantially all of the assets of Camrose.
Borrowings under this facility are limited to an amount equal to
specified percentages of Camrose's eligible trade accounts receivables
and inventories. As of September 30, 1995, Camrose had $3.9 million
outstanding under this facility.
CF&I incurred indebtedness in an original principal amount of
$67.5 million as part of the purchase price of the assets of CF&I
Steel Corporation on March 3, 1993. At September 30, 1995, the
outstanding balance was $56.5 million, of which $50.7 million was
classified as noncurrent.
CAPITAL EXPENDITURES. In the first nine months of 1995, the
Company expended approximately $39 million on the capital program at
CF&I and $76 million on the combination mill at the Portland steel
mill. During the balance of 1995 the Company expects to expend $37
million on the capital program at CF&I and $39 million on the
combination mill at the Portland steel mill. To complete the capital
program at CF&I and the combination mill in 1996 and beyond, the
Company expects to expend $15 million at CF&I and $73 million on the
combination mill.
11<PAGE>
OREGON STEEL MILLS, INC.
In addition, the Company has expended approximately $4 million for
capital improvements at its Oregon Steel Division manufacturing
facilities for recurring upgrade projects to the present facilities
and equipment during the first nine months of 1995. The Company
expects to expend approximately $5 million on these projects during
the remainder of 1995. The Company has also budgeted $16 million for
an approximate 13 percent equity interest in a planned Venezuelan hot
briquetted iron plant. Approximately $7 million is planned to be
expended in 1995.
The Company's total capitalization at September 30, 1995 of $520
million consists of $240 million in long-term debt and $280 million in
stockholder's equity, for a long-term debt-to-capitalization ratio of
.46 to 1. Net book value per share of common stock at September 30,
1995 was $14.40 per share versus $14.24 per share at December 31,
1994.
The Company believes that its anticipated needs for working
capital will be met from existing cash balances, funds generated from
operations, and borrowings pursuant to the Senior Credit Facilities.
The Company's capital expenditure program is expected to be funded
primarily by funds from operations, borrowings pursuant to the Senior
Credit Facilities and additional financing or other funding
alternatives which the Company believes will be available as needed.
12
<PAGE>
OREGON STEEL MILLS, INC.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
10.0 Amendment dated as of September 30, 1995 to
the Credit Agreement dated December 14, 1994
among Oregon Steel Mills, Inc., as the
Borrower, Certain Commercial Lending
Institutions, as the Lenders, First Interstate
Bank of Oregon, N.A., as the Administrative
Agent for the Lenders, The Bank of Nova
Scotia, as the Syndication Agent for the
Lenders, and First Interstate Bank of Oregon,
N.A. and The Bank of Nova Scotia, as the
Managing Agents for the Lenders.
11.0 Statement Regarding Computation of Per Share
Earnings
27.0 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended September 30, 1995, no
reports on Form 8-K were filed by the Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
OREGON STEEL MILLS, INC.
Date: November 14, 1995 /s/ L. Ray Adams
-------------------------
L. Ray Adams
Vice President of Finance and
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 9604
<SECURITIES> 0
<RECEIVABLES> 75009
<ALLOWANCES> 1859
<INVENTORY> 144058
<CURRENT-ASSETS> 240713
<PP&E> 553504
<DEPRECIATION> 111943
<TOTAL-ASSETS> 756752
<CURRENT-LIABILITIES> 150027
<BONDS> 0
<COMMON> 194
0
0
<OTHER-SE> 279433
<TOTAL-LIABILITY-AND-EQUITY> 756752
<SALES> 526644
<TOTAL-REVENUES> 530603
<CGS> 472340
<TOTAL-COSTS> 472340
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7112
<INCOME-PRETAX> 15581
<INCOME-TAX> 5959
<INCOME-CONTINUING> 9622
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9622
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
<PAGE>
<TABLE>
OREGON STEEL MILLS, INC.
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ---------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 19,422 19,378 19,416 19,374
Common stock equivalents arising
from 598 shares of stock to be
issued March 2003 598 598 598 598
------ ------ ------ ------
20,020 19,976 20,015 19,972
====== ====== ====== ======
Net income (loss) $1,966 $ (494) $9,622 $6,632
====== ====== ====== ======
Primary and fully diluted
net income (loss) per common and
common equivalent share $.10 $(.02) $.48 $.33
==== ===== ==== ====
</TABLE>
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO THE CREDIT AGREEMENT (this
"Amendment No. 1"), dated as of September 30, 1995, among OREGON STEEL
---------------
MILLS, INC., a Delaware corporation (the "Borrower"), the various
--------
financial institutions as are or may become parties hereto
(collectively, the "Lenders"), FIRST INTERSTATE BANK OF OREGON,
-------
N.A. ("First Interstate"), as administrative agent (the
----------------
"Administrative Agent"), for the Lenders, THE BANK OF NOVA SCOTIA
--------------------
("Scotiabank"), as syndication agent for the Lenders (the "Syndication
---------- -----------
Agent") and the First Interstate and Scotiabank as managing agents
- -----
(the "Managing Agents"; the Managing Agents, the Administrative Agent
---------------
and the Syndication Agent are collectively referred to as the
"Agents") for the Lenders.
------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Lenders and the Agents are
parties to the Credit Agreement, dated as of December 14, 1994
(hereinafter referred to as the "Existing Credit Agreement"); and
-------------------------
WHEREAS, the Borrower has requested that certain amendments be
made to the Existing Credit Agreement; and
WHEREAS, the Lenders and Agents are willing to make certain
amendments to the Existing Credit Agreement on the terms and
conditions hereinafter provided;
NOW, THEREFORE, in consideration of the agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1. CERTAIN DEFINITIONS. The following terms (whether
-------------------
or not underscored) when used in this Amendment No. 1 shall have the
following meanings:
"Amended Credit Agreement" shall mean the Existing Credit
------------------------
Agreement as amended by this Amendment No. 1.
"Amendment No. 1 Effective Date" shall have the meaning provided
------------------------------
in Section 6.1.
-----------
-1-
<PAGE>
SECTION 1.2. OTHER DEFINITIONS. Unless otherwise defined or the
-----------------
context otherwise requires, terms used herein (including in the
preamble and recitals hereto) have the meanings provided for in the
Existing Credit Agreement.
ARTICLE II
AMENDMENTS TO
-------------
EXISTING CREDIT AGREEMENT
-------------------------
Effective on the Amendment No. 1 Effective Date, the Existing
Credit Agreement is amended in accordance with the terms of this
Article II; except as so amended, the Existing Credit Agreement shall
- ----------
continue to remain in all respects in full force and effect.
SECTION 2.1. AMENDMENTS TO SECTION 1.1.
--------------------------
2.1.1. The definition of "Change in Control" is hereby amended
to read in its entirety as follows:
"'Change in Control' means (i) the acquisition by
-----------------
any Person (other than the ESOP), or two or more
Persons acting in concert, of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act
of 1934) of 20% or more of the outstanding shares of
voting stock of the Borrower, or (ii) the occurrence of
any event or condition that would require the Borrower
to repurchase or redeem any Permitted Subordinated
Indebtedness as a result of any 'change in control,'
'change of control' or similar circumstance under the
definitive documentation for any Permitted Subordinated
Indebtedness."
2.1.2. Clause (iii) of clause (x) of the definition of "Interest
Coverage Ratio" is hereby amended to read in its entirety as follows:
"(iii) interest expense during such period plus" and clause (y) of the
----
definition of "Interest Coverage Ratio" is hereby amended to read in
its entirety as follows: "(y) the Borrower and its Subsidiaries'
total interest expense (including capitalized interest) paid in cash
during such period."
2.1.3. The second sentence of the definition of "Applicable
Margin" is hereby amended by inserting the following immediately
before the end thereof:
"; provided, further, that if on or before March 31,
-------- -------
1996 the Borrower shall not have received an aggregate of at
-2-<PAGE>
least $50,000,000 of Net Equity Proceeds and/or Net Permitted
Subordinated Indebtedness Proceeds, then as of such date each
Applicable Margin set forth above shall increase by .25%, and if
on or before May 31, 1996, the Borrower shall not have received
(in addition to the above-mentioned $50,000,000) an aggregate of
at least $50,000,000 of additional Net Equity Proceeds and/or Net
Permitted Subordinated Indebtedness Proceeds, each Applicable
Margin set forth above shall increase by an additional .25%;
provided, further, that if, after the Applicable Margins shall
-------- -------
have been increased by .25% as provided in the first clause of
the preceding proviso, the Borrower shall have thereafter
received an aggregate of at least $50,000,000 of Net Equity
Proceeds and/or Net Permitted Subordinated Indebtedness Proceeds,
the Applicable Margins shall thereupon be reduced by .25% and if
after the Applicable Margins shall have been increased by .25% as
provided in the second clause of the preceding proviso, the
Borrower shall have thereafter received (in addition to the
above-mentioned $50,000,000) an aggregate of at least $50,000,000
of additional Net Equity Proceeds and/or Net Permitted
Subordinated Indebtedness Proceeds, the Applicable Margins
shall thereupon be reduced by .25% (returning the Applicable
Margins to the levels set forth in the chart above).
2.1.4. There shall be added to Section 1.1 of the Existing
Credit Agreement new definitions, in appropriate alphabetical
sequence, reading in their entirety as follows:
"Net Permitted Subordinated Indebtedness Proceeds"
------------------------------------------------
means, with respect to any issuance by the Borrower of any
Permitted Subordinated Indebtedness, the gross consideration
received by or for the Borrower minus underwriting and
brokerage commissions, discounts and fees and other
professional fees and expenses relating to such issuance
that are payable by the Borrower.
"Permitted Subordinated Indebtedness" means unsecured
-----------------------------------
Indebtedness of the Borrower which is subordinated to the
monetary Obligations of the Borrower upon terms no less favorable
to the Lenders in any substantial respect than those set forth in
Exhibit M or upon such other terms as may be satisfactory to the
Managing Agents and the Required Lenders."
SECTION 2.2. AMENDMENT OF SECTION 3.1.3
--------------------------
The final sentence of Section 3.1.3 of the Existing Credit
Agreement is hereby amended to read in its entirety as follows:
-3-
<PAGE>
"If less than $200,000,000 of Term Loans are outstanding on
the Term Facility Commitment Termination Date (other than
pursuant to mandatory prepayments or mandatory commitment
reductions required under this Agreement), then all
scheduled payments shall be reduced pro rata."
--------
SECTION 2.3 AMENDMENT OF SECTION 3.1.5.
--------------------------
Section 3.1.5 of the Existing Credit Agreement is hereby amended
to read in its entirety as follows:
"SECTION 3.1.5 Net Equity Proceeds. Within five Business
-------------------
Days of the receipt by the Borrower of any Net Equity Proceeds,
the Borrower shall make a mandatory prepayment of the Loans in an
amount equal to 100% of such Net Equity Proceeds to be applied as
set forth in Section 3.2.2 or, if such prepayment would cause the
-------------
Borrower to be liable for losses or expenses pursuant to the
terms of Section 4.4(a) hereof, the Borrower shall deliver such
--------------
Net Equity Proceeds to the Administrative Agent to be held as
cash collateral pursuant to the terms of the Security Agreement
and to be applied by the Administrative Agent as set forth in
Section 3.2.2 to the payments of the Loans on the earliest dates
-------------
such payment may be made without incurring losses or expenses
pursuant to Section 4.4(a). Notwithstanding the foregoing, no
--------------
mandatory prepayment of the Loans shall be required to be made
from the first $75,000,000 of Net Equity Proceeds received by the
Borrower."
SECTION 2.4. ADDITION OF SECTION 3.1.9.
-------------------------
There shall be added to the Existing Credit Agreement,
immediately after Section 3.1.8, a new Section reading in its entirety
as follows:
"SECTION 3.1.9. Net Permitted Subordinated Indebtedness
-------------------------------------------------------
Proceeds. Upon receipt by the Borrower of any Net Permitted
--------
Subordinated Indebtedness Proceeds, the Commitments shall
immediately be reduced and/or within five Business Days of the
receipt by the Borrower of such proceeds, the Borrower shall make
a mandatory prepayment of the Loans, in each case in the amounts
specified in the following sentence for application as set forth
in Section 3.2.3 or, if such a prepayment would cause the
-------------
Borrower to be liable for losses or expenses pursuant to the
terms of Section 4.4(a) hereof, the Borrower shall deliver such
--------------
Net Permitted Subordinated Indebtedness Proceeds to the
Administrative Agent to be held as cash collateral pursuant
to the terms of the Security Agreement and to be applied by
-4-
<PAGE>
the Administrative Agent as set forth in Section 3.2.3 to
-------------
the payments of the Loans on the earliest dates such payment
may be made without incurring losses or expenses pursuant to
Section 4.4(a). The mandatory Commitment reductions and/or
--------------
prepayment of the Loans described above shall be in an amount
equal to 40% of such Net Permitted Subordinated Indebtedness
Proceeds, so long as such proceeds do not exceed $75,000,000 in
the aggregate, and if such Net Permitted Subordinated
Indebtedness Proceeds exceed $75,000,000 in the aggregate, 100%
of all amounts in excess of $75,000,000 shall be applied to
reduce the Commitments and Loans; provided, however, if the
-------- -------
amount of Net Equity
Proceeds received by the Borrower prior to the issuance of
any Permitted Subordinated Indebtedness exceeds $50,000,000, then
the $75,000,000 threshold previously described shall be increased
by one dollar for each dollar of Net Equity Proceeds in excess of
$50,000,000 received by the Borrower."
SECTION 2.5. ADDITION OF SECTION 3.2.3.
-------------------------
There shall be added to the Existing Credit Agreement,
immediately after Section 3.2.2, a new Section reading in its entirety
-------------
as follows:
"SECTION 3.2.3. Further Mandatory Commitment Reductions and
-----------------------------------------------------------
Prepayments. Upon the Borrower's receipt of Net Permitted
-----------
Subordinated Indebtedness Proceeds as described in Section 3.1.9,
-------------
the Commitments shall be reduced and the Loans shall be repaid as
hereinafter provided. Such proceeds shall first reduce any
unused portion of the Term Loan Commitment and may, to the extent
thereof, be retained by the Borrower. After there exists no
unused Term Loan Commitment, all remaining proceeds shall be
applied to the scheduled repayments of Term Loans set forth in
Section 3.1.3 in inverse order of maturity. After all
-------------
outstanding Term Loans have been repaid in full, if any proceeds
remain, the Revolving Loan Commitment Amount shall be reduced by
the aggregate amount of such proceeds (and the Borrower shall
make a prepayment of Revolving Loans in an amount equal to the
excess, if any, of the then outstanding Revolving Loans over the
Revolving Loan Commitment amount, as so reduced)."
SECTION 2.6. AMENDMENTS TO SECTION 7.2.2.
---------------------------
Section 7.2.2 of the Existing Credit Agreement is hereby amended
(a) by adding the following clause immediately after clause (i)
thereof:
"(j) Permitted Subordinated Indebtedness;"
-5-
<PAGE>
and (b) by amending the proviso at the end of such Section to read in
its entirety as follows:
"provided, however, that no Indebtedness otherwise permitted by
-------- -------
clauses (d), (e), (f), (g), (h), (i) or (j) shall be permitted
----------- --- --- --- --- --- ---
if, after giving effect to the incurrence thereof, any Default
shall have occurred and be continuing."
SECTION 2.7. AMENDMENT TO SECTION 7.2.4(b).
-----------------------------
Section 7.2.4(b) of the Existing Credit Agreement is hereby
amended to read in its entirety as follows:
(b) Its Interest Coverage Ratio, tested on a rolling
four quarter basis, to be less than the specified ratio as of the end
of any of the following Fiscal Quarters:
Fiscal Quarter Minimum Interest Coverage Ratio
-------------- -------------------------------
September 30, 1995 1.25 to 1.0
December 31, 1995 1.20 to 1.0
March 31, 1996 1.45 to 1.0
June 30, 1996 1.50 to 1.0
September 30, 1996 1.75 to 1.0
December 31, 1996 2.00 to 1.0
March 31, 1997 2.25 to 1.0
June 30, 1997 2.50 to 1.0
September 30, 1997 2.75 to 1.0
December 31, 1997 3.00 to 1.0
March 31, 1998 3.00 to 1.0
June 30, 1998 3.25 to 1.0
September 30, 1998 3.25 to 1.0
December 31, 1998 3.50 to 1.0
March 31, 1999 3.50 to 1.0
June 30, 1999 3.75 to 1.0
September 30, 1999 3.75 to 1.0
December 31, 1999 4.00 to 1.0
SECTION 2.8. AMENDMENT TO SECTION 7.2.4(e).
-----------------------------
Section 7.2.4(e) of the Existing Credit Agreement is hereby
amended to read in its entirety as follows:
(e) Its Funded Debt to Capitalization Ratio at any time
to exceed the specified ratio in any of the following Fiscal
Quarters:
-6-
<PAGE>
Maximum Funded Debt to
Quarter Ending Capitalization Ratio
-------------- ----------------------
September 30, 1995 .55 to 1.0
December 31, 1995 .58 to 1.0
March 31, 1996 .58 to 1.0
June 30, 1996 .50 to 1.0
September 30, 1996 .50 to 1.0
December 31, 1996 .50 to 1.0
March 31, 1997 .50 to 1.0
June 30, 1997 .50 to 1.0
September 30, 1997 .50 to 1.0
December 31, 1997 .50 to 1.0
March 31, 1998 .40 to 1.0
June 30, 1998 .40 to 1.0
September 30, 1998 .40 to 1.0
December 31, 1998 .40 to 1.0
March 31, 1999 .35 to 1.0
June 30, 1999 .35 to 1.0
September 30, 1999 .35 to 1.0
December 31, 1999 .35 to 1.0
SECTION 2.9. AMENDMENT TO SECTION 7.2.7.
--------------------------
Section 7.2.7 of the Existing Credit Agreement is hereby amended
to read in its entirety as follows:
SECTION 7.2.7 Capital Expenditures, etc. The Borrower will
--------------------------
not, and will not permit any of its Subsidiaries to, make or
commit to make Capital Expenditures in any Fiscal Year, except
Capital Expenditures substantially as contemplated by the
Borrower's revised financial plan dated as of October 27, 1995
and which do not aggregate in excess of the amount set forth
below opposite such Fiscal Year:
Year Maximum Capital Expenditures
---- ----------------------------
1995 $187,500,000
1996 $ 86,250,000
1997 $ 65,000,000
1998 $ 30,000,000
1999 $ 25,000,000
provided, however, that
-------- -------
(i) if a duly executed and delivered Compliance
Certificate demonstrates that the Funded Debt to
Capitalization Ratio is .50 to 1.0 or less as of the last
day of any Fiscal Quarter ending on or after December 31,
1995, then the maximum Capital Expenditures for the 1996
Fiscal Year shall be increased to $115,000,0000 and the
-7-
<PAGE>
maximum Capital Expenditures for the 1997 and 1999 Fiscal
Years shall be reduced to $40,000,000 and $20,000,000,
respectively;
(ii) to the extent Capital Expenditures are made or
committed to be made in any Fiscal year in an amount less
than the maximum amount permitted for such Fiscal year as
provided above, the Capital Expenditures which the Borrower
or its Subsidiaries may make or commit to make in the next
following Fiscal Year shall be increased by 100% of the
amount of the permitted Capital Expenditures not so made or
committed to be made in the immediately preceding Fiscal
Year (the "Carry-Forward Amount");
--------------------
(iii) if all or part of the Carry-Forward Amount is not
used in full in the immediately succeeding Fiscal Year, up
to 50% of such original Carry-Forward Amount may be
carried forward to the second immediately succeeding Fiscal
Year, but no further carry forward of such Carry-Forward
Amount to any other succeeding Fiscal Year shall be
permitted; and
(iv) no portion of any Carry-Forward Amount shall be
used in any Fiscal Year until the entire amount of the
Capital Expenditures permitted to be made or committed to be
made in such Fiscal Year as provided in the preceding
clauses (ii) and (iii) shall have been used.
------------ -----
SECTION 2.10. ADDITION OF SECTION 7.2.14.
--------------------------
There shall be added to the Credit Agreement a new Section 7.2.14
reading in its entirety as follows:
"SECTION 7.2.14. Permitted Subordinated Indebtedness.
-----------------------------------
The Borrower will not, and will not permit any of its
Subsidiaries to, (i) make any cash payments of interest on any
Permitted Subordinated Indebtedness or (ii) make any payment or
prepayment of, or redemption or acquisition for value of, any
Permitted Subordinated Indebtedness."
SECTION 2.11. AMENDMENT OF EXHIBIT L.
----------------------
Exhibit L to the Existing Credit Agreement is hereby amended and
restated in its entirety to read as set forth in Exhibit L to this
Amendment No. 1.
SECTION 2.12. ADDITION OF NEW EXHIBIT.
-----------------------
-8-
<PAGE>
There shall be added to the Existing Credit Agreement,
immediately after Exhibit L, a new Exhibit M in the form of
Exhibit M to this Amendment No. 1.
ARTICLE III
OTHER AGREEMENTS CONCERNING
---------------------------
EXISTING CREDIT AGREEMENT
-------------------------
SECTION 3.1. EXTENSION OF REVOLVING LOAN COMMITMENT
--------------------------------------
TERMINATION DATE. The Borrower has requested the Lenders to extend
- ----------------
the Revolving Loan Commitment Termination Date by one year. Subject
to the terms and conditions hereinafter set forth, the Lenders have
agreed to extend the date specified in clause (b) of the definition of
the term "Revolving Loan Commitment Termination Date" from December
31, 1997 to December 31, 1998; provided, however, such extension shall
-------- -------
not be effective unless and until the Borrower has duly executed and
delivered a Compliance Certificate that demonstrates that the Funded
Debt to Capitalization Ratio is .50 to 1.00 or less as of the last day
of any Fiscal Quarter ending on December 31, 1995, March 31, 1996 or
June 30, 1996.
SECTION 3.2. RELEASE OF COLLATERAL. The Borrower has agreed to
---------------------
sell 3% of the shares of the common stock of New CF&I to a third party
for considerations identified in the Borrower's revised financial plan
dated as of October 27, 1995. Pursuant to the terms of the Pledge
Agreement and Section 10.1 of the Existing Credit Agreement, the
consent of the Required Lenders is required before such a sale may be
completed. By their execution of this Amendment No. 1, each of the
undersigned Lenders have evidenced their consent to the sale of 3% of
the common stock of New CF&I by the Borrower, substantially on the
terms described above; provided, that (i) such sale shall be completed
--------
on or before December 31, 1995 and (ii) the Term Loan Commitment shall
immediately be reduced upon the Borrower's receipt of the net proceeds
from such sale by $3,100,000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Lenders to make the amendments provided
for in Article II and to extend the Revolving Loan Commitment
Termination Date as provided for in Article III, the Borrower hereby
(a) represents and warrants, that each of the representations and
warranties contained in the Existing Credit Agreement and in the other
Loan Documents is true and correct as of the date hereof as if made on
the date hereof (except, if any such representation and warranty
relates to an earlier date, such
-9-
representation and warranty shall be true and correct in all material
respects as of such earlier date) and immediately after giving effect
to the provisions of this Amendment No. 1 no Default has occurred and
is continuing and (b) agrees that the incorrectness in any material
respect of any representation and warranty contained in the preceding
clause (a) shall constitute an immediate Event of Default. By its
- ----------
execution hereof, each Lender acknowledges receipt of the Borrower's
revised financial plan dated as of October 27, 1995, together with the
Borrower's monthly projections through December 31, 1996.
ARTICLE V
ACKNOWLEDGEMENT OF GUARANTORS
-----------------------------
By executing the acknowledgement to this Amendment No. 1, each
Guarantor of the Borrower hereby confirms and agrees that the Guaranty
and each Security Agreement to which it is a party is, and shall
continue to be, in full force and effect and is hereby ratified and
confirmed in all respects, except that, on and after the Amendment No.
1 Effective Date, each reference therein to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to the
Existing Credit Agreement, shall mean and refer to the Existing Credit
Agreement after giving effect to this Amendment No. 1.
ARTICLE VI
CONDITIONS TO EFFECTIVENESS
---------------------------
SECTION 6.1. EFFECTIVE DATE. This Amendment No. 1 shall become
--------------
effective on the date (herein called the "Amendment No. 1 Effective
-------------------------
Date") when the conditions set forth in this Section 6.1 have been
- ---- -----------
satisfied, such effectiveness to be retroactive to September 30, 1995.
SECTION 6.1.1. EXECUTION OF COUNTERPARTS. The Administrative
-------------------------
Agent shall have received counterparts of this Amendment No. 1 duly
executed and delivered on behalf of the Borrower, the Guarantors, the
Lenders and the Agents.
SECTION 6.1.2. RESOLUTIONS AND LEGAL OPINION. The
-----------------------------
Administrative Agent shall have received (a) resolutions of the Board
of Directors of the Borrower authorizing the execution, delivery and
performance of Amendment No. 1 and (b) a satisfactory legal opinion
from Schwabe Williamson & Wyatt (or other counsel satisfactory to the
Agents) as to the due authorization, execution, and delivery of this
Amendment No. 1 by, and good standing of, the Borrower and the
Guarantors and the
-10-
<PAGE>
enforceability of this Amendment No. 1 against the Borrower and the
Guarantors.
SECTION 6.1.3. Fees. The Agents shall have received, for and on
----
behalf of the Lenders, payment in full of the fees provided for in the
fee letter, dated October 30, 1995, between the Borrower and the
Agents.
SECTION 6.1.4. LEGAL DETAILS, ETC. All documents executed or
-------------------
submitted pursuant hereto, and all legal matters incident thereto,
shall be satisfactory in form and substance to the Managing Agents and
their counsel.
SECTION 6.2. EXPIRATION. If all of the conditions set forth in
-----------
Section 6.1 hereof shall not have been satisfied on or prior to
- -----------
November 15, 1995, the agreements of the parties contained in this
Amendment No. 1 shall, unless otherwise agreed by the Lenders,
terminate effective immediately on such date and without further
action.
ARTICLE VII
MISCELLANEOUS
-------------
SECTION 7.1. LOAN DOCUMENT PURSUANT TO EXISTING CREDIT
-----------------------------------------
AGREEMENT. This Amendment No. 1 is a Loan Document executed pursuant
- ---------
to the Existing Credit Agreement. Except as expressly amended or
waived hereby, all of the representations, warranties, terms,
covenants and conditions contained in the Existing Credit Agreement
and each other Loan Document shall remain unamended and in full force
and effect. The amendments set forth herein shall be limited
precisely as provided for herein and shall not be deemed to be a
waiver of, amendment of, consent to or modification of any other term
or provision of the Existing Credit Agreement or of any term or
provision of any other Loan Document or of any transaction or further
or future action on the part of the Borrower or any of its
Subsidiaries or which would require the consent of any of the Lenders
under the Existing Credit Agreement or any other Loan Document.
SECTION 7.2. COUNTERPARTS, ETC. This Amendment No. 1 may be
-----------------
executed by the parties hereto in several counterparts, each of which
shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SECTION 7.3. GOVERNING LAW; ENTIRE AGREEMENT. THIS
-------------------------------
AMENDMENT NO. 1 SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to be executed by their respective officers hereunto duly
authorized as of the day and year first above
written.
OREGON STEEL MILLS, INC.
By:
-----------------------------------
Title:
-----------------------------
FIRST INTERSTATE BANK OF OREGON,
N.A., as Administrative Agent and
Managing Agent
By:
-----------------------------------
Title:
-----------------------------
-11-
THE BANK OF NOVA SCOTIA, as
Syndication Agent and Managing
Agent
By:
-----------------------------------
Title:
-----------------------------
LENDERS
-------
FIRST INTERSTATE BANK OF OREGON,
N.A.
By:
----------------------------------
Title:
----------------------------
THE BANK OF NOVA SCOTIA
By:
----------------------------------
Title:
----------------------------
-12-
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By:
----------------------------------
Title:
----------------------------
UNITED STATES NATIONAL BANK OF
OREGON
By:
----------------------------------
Title:
----------------------------
KEY BANK OF WASHINGTON
By:
----------------------------------
Title:
----------------------------
-12-
NBD BANK, N.A.
By:
----------------------------------
Title:
----------------------------
THE BANK OF TOKYO, LTD., PORTLAND
BRANCH
By:
----------------------------------
Title:
----------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
----------------------------------
Title:
----------------------------
THE BANK OF CALIFORNIA, N.A.
By:
----------------------------------
Title:
----------------------------
-13-
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By:
----------------------------------
Title:
----------------------------
FUJI BANK, LIMITED
By:
----------------------------------
Title:
----------------------------
BANK OF AMERICA NT & SA
By:
----------------------------------
Title:
----------------------------
Acknowledged and Accepted:
NAPA PIPE CORPORATION
By:
---------------------------
Name:
Title:
OREGON STEEL MILLS - FONTANA DIVISION, INC.
By:
---------------------------
Name:
Title:
CAMROSE PIPE CORPORATION
By:
---------------------------
Name:
Title:
NEW CF & I, INC.
By:
---------------------------
Name:
Title:
Exhibits available upon request.
-14-
