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, 1996
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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
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(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 25,693,471
---------------------------- ------------------------------
Class Number of Shares Outstanding
(as of October 31, 1996)
<PAGE>
1
OREGON STEEL MILLS, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1996 (unaudited)
and December 31, 1995....................................2
Consolidated Statements of Income (unaudited)
Three months and nine months ended September 30, 1996
and 1995 ................................................3
Consolidated Statements of Cash Flows (unaudited)
Nine months ended September 30, 1996
and 1995 ................................................4
Notes to Consolidated Financial
Statements (unaudited)...............................5 - 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................7 - 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...........................11
SIGNATURES ...........................................................11
<PAGE>
<TABLE>
2
OREGON STEEL MILLS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
September 30,
1996 December 31,
(Unaudited) 1995
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,229 $ 644
Trade accounts receivable, net 86,746 80,520
Inventories 134,895 141,310
Deferred tax asset 9,856 9,461
Other 9,369 4,845
--------- ---------
Total current assets 243,095 236,780
--------- ---------
Property, plant and equipment:
Land and improvements 29,517 28,471
Buildings 37,362 37,126
Machinery and equipment 423,561 376,217
Construction in progress 224,151 171,487
--------- ---------
714,591 613,301
Accumulated depreciation (138,495) (118,147)
--------- ---------
576,096 495,154
--------- ---------
Excess of cost over net assets acquired 40,729 41,555
Other assets 37,358 31,777
--------- ---------
$ 897,278 $ 805,266
========= =========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 6,574 $ 4,576
Short-term debt 5,548 -
Accounts payable 81,560 85,360
Accrued expenses 47,580 31,391
--------- ---------
Total current liabilities 141,262 121,327
Long-term debt 294,216 312,679
Deferred employee benefits 17,894 17,044
Other deferred liabilities 35,130 36,331
Deferred income taxes 22,337 15,470
--------- ---------
510,839 502,851
--------- ---------
Minority interests 36,354 35,625
--------- ---------
Commitments and contingencies (Notes 4 and 5)
STOCKHOLDERS' EQUITY
Common stock 257 194
Additional paid-in capital 226,015 150,826
Retained earnings 127,265 119,302
Cumulative foreign currency translation adjustment (3,452) (3,532)
--------- ---------
350,085 266,790
--------- ---------
$ 897,278 $ 805,266
========= =========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
3
<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,
------------------------------ -------------------------------
1996 1995 1996 1995
------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 187,671 $ 188,479 $ 567,217 $ 530,603
Costs and expenses:
Cost of sales 161,600 170,681 489,796 472,340
Selling, general and
administrative expenses 10,971 11,401 33,475 32,652
Profit Participation and
ESOP contribution 2,255 592 5,854 3,985
----------- ----------- ----------- -----------
Operating income 12,845 5,805 38,092 21,626
Other income (expense):
Interest and dividend income 189 123 421 248
Interest expense (3,462) (2,990) (10,133) (7,112)
Loss on termination of interest
rate swap agreements (Note 7) - - (1,233) -
Minority interests 203 93 (695) 158
Other, net 195 53 756 661
----------- ----------- ----------- -----------
Income before income taxes 9,970 3,084 27,208 15,581
Income tax expense (3,614) (1,118) (10,211) (5,959)
----------- ----------- ----------- -----------
Net income $ 6,356 $ 1,966 $ 16,997 $ 9,622
=========== =========== =========== ===========
Primary and fully diluted net income
per common and common
equivalent share $.24 $.10 $.76 $.48
Dividends declared per common share $.14 $.14 $.42 $.42
Weighted average common shares
and common share equivalents
outstanding 26,266 20,020 22,346 20,015
Tonnage sold 373,300 372,900 1,123,300 1,045,200
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
4
<TABLE>
OREGON STEEL MILLS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
---------------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 16,997 $ 9,622
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 21,523 17,934
Deferred income tax provision 7,202 4,984
Minority interests' share of income (loss) 729 (123)
Other, net 2,420 (1,366)
Changes in current assets and liabilities 25,689 49,533
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 74,560 80,584
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (120,058) (119,553)
Other, net (156) (440)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (120,214) (119,993)
--------- ---------
Cash flows from financing activities:
Net borrowings (payments) under Canadian bank
revolving loan facility (1,165) 766
Proceeds from long-term bank debt 154,800 210,600
Payments on long-term debt (399,552) (159,180)
Net proceeds from issuance of 11% First Mortgage Notes 226,995 -
Net proceeds from issuance of common stock 75,252 -
Dividends paid (9,035) (8,151)
Other, net (56) (232)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 47,239 43,803
--------- ---------
Effects of foreign currency exchange rate changes on cash - 171
--------- ---------
Net increase (decrease) in cash and cash equivalents 1,585 4,565
Cash and cash equivalents at beginning of period 644 5,039
--------- ---------
Cash and cash equivalents at end of period $ 2,229 $ 9,604
========= =========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 19,138 $ 10,902
Income taxes $ 6,729 $ 1,620
NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES:
At September 30, 1996 and September 30, 1995, the Company had financed property,
plant and equipment with accounts payable of $9.7 million and $23.7 million,
respectively.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
5
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. Certain
previously reported amounts have been reclassified to conform with the
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 1995 Annual Report on Form 10-K,
as amended, for additional disclosures including a summary of significant
accounting policies.
2. Inventories
-----------
Inventories consist of:
September 30, December 31,
1996 1995
------------- -------------
(In thousands)
Raw materials $ 35,239 $ 31,520
Semi-finished product 38,931 51,770
Finished product 37,386 38,111
Stores and operating supplies 23,339 19,909
-------- --------
Total inventory $134,895 $141,310
======== ========
3. Common Stock
------------
On October 31, 1996, the Board of Directors declared a quarterly cash
dividend of 14 cents per share to be paid November 30, 1996, to
stockholders of record as of November 15, 1996. See Note 6 for discussion
of issuance of common stock.
4. Contingencies
-------------
ENVIRONMENTAL. The Company's 87 percent owned New CF&I, Inc. subsidiary
owns a 95.2 percent interest in CF&I Steel, L.P. ("CF&I") which owns the
Pueblo, Colorado steel mill. 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, 1996, CF&I had a reserve of
$35.2 million related to this remediation, of which $33.3 million is
classified as non-current in other deferred liabilities in the consolidated
balance sheet.
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 $30.3 million at September 30, 1996.
<PAGE>
6
6. Public Offerings and Refinancing
--------------------------------
On June 19, 1996, the Company completed public offerings of 6,000,000
shares of common stock at $12.75 per share and $235 million principal
amount of 11% First Mortgage Notes (the "Notes") due 2003. On July 9, 1996,
the Company issued an additional 271,857 shares of common stock at $12.75
per share pursuant to an underwriter's over-allotment option. The proceeds
from these offerings were $302.2 million, net of expenses and underwriting
discounts. The Notes are guaranteed by two subsidiaries of the Company, New
CF&I, Inc. and CF&I ("Guarantors"). The Notes and the guarantees are
secured by a lien on substantially all the property, plant and equipment
and certain other assets of the Company and the Guarantors. The Notes
contain potential restrictions on new indebtedness and various types of
disbursements, including dividends, based on the Company's net income in
relation to its fixed charges, as defined.
The proceeds from the common stock and notes offerings were used to repay
in full borrowing under the Company's bank credit agreement (the "Old
Credit Agreement"). The remaining proceeds were used for capital
expenditures and general corporate purposes.
Concurrent with the public offerings, the Company amended and restated the
Old Credit Agreement to establish a $125 million revolving credit facility
(the "Amended Credit Agreement") collateralized by accounts receivable and
inventory and guaranteed by the Guarantors. The Amended Credit Agreement
contains various restrictive covenants including a minimum tangible net
worth, minimum interest coverage ratio, and a maximum debt to total
capitalization ratio. Borrowings are limited to an amount equal to
specified percentages of accounts receivable and inventory.
7. Interest Rate Swap Agreements
-----------------------------
During June 1996, the Company incurred a $1.2 million pre-tax loss for
terminating certain interest rate swap agreements. The swap agreements were
terminated in conjunction with the repayment of borrowings under the Old
Credit Agreement. At September 30, 1996, the Company had two interest rate
swap agreements outstanding with commercial banks, having a notional amount
of $25 million. These interest rate swap agreements were kept in force to
reduce the impact of unfavorable changes in interest rates on bank
borrowings.
<PAGE>
7
OREGON STEEL MILLS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
- -------
The following information contains forward-looking statements which are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are subject to risks and
uncertainties and actual results could differ materially from those
projected. Such risks and uncertainties include, but are not limited to,
competitive products and pricing, as well as fluctuations in demand;
potential equipment malfunction, plant construction and start-up difficulties,
repair delays and general business and economic conditions.
The consolidated financial statements include the accounts of Oregon Steel
Mills, Inc. and its subsidiaries, wholly-owned Camrose Pipe Corporation ("CPC")
which owns a 60 percent interest in Camrose Pipe Company ("Camrose"), 87 percent
owned New CF&I, Inc. ("New CF&I") which owns a 95.2 percent interest in CF&I
Steel, L.P. ("CF&I"), and certain other insignificant subsidiaries.
The Company is organized into two business units known as the Oregon Steel
Division and the CF&I Steel Division. The Oregon Steel Division is centered on
the Company's steel plate minimill in Portland, Oregon. It includes the
Company's large diameter pipe finishing facility in Napa, California, the large
diameter and electric resistance welded pipe facility in Camrose, Alberta, and
the steel plate rolling mill in Fontana, California until the first quarter of
1995 when it ceased shipments. The CF&I Steel Division consists of the
steelmaking and finishing facilities of CF&I located in Pueblo, Colorado, as
well as certain related operations.
Results of Operations
- ---------------------
<TABLE>
The following table sets forth, by division, tonnage sold, sales and average
selling price per ton:
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ------------------------
1996 1995 1996 1995
------- -------- --------- ----------
<S> <C> <C> <C> <C>
Total tonnage sold:
Oregon Steel Division:
Plate 68,000 60,400 219,200 225,500
Welded pipe 80,000 89,600 209,500 196,800
Semi-finished 3,200 69,500 3,200 170,500
---------- ---------- ---------- ----------
Sub-Total 151,200 219,500 431,900 592,800
---------- ---------- ---------- ----------
CF&I Steel Division:
Rail 43,400 47,500 200,200 190,300
Rod/Bar/Wire 107,700 64,900 324,600 166,300
Seamless Pipe 39,100 29,900 113,600 84,100
Semi-finished 31,900 11,100 53,000 11,700
---------- ---------- ---------- ----------
Sub-Total 222,100 153,400 691,400 452,400
---------- ---------- ---------- ----------
Total 373,300 372,900 1,123,300 1,045,200
========== ========== ========== ==========
Sales (in thousands):
Oregon Steel Division $ 92,403 $ 117,560 $ 267,048 $ 309,860
CF&I Steel Division 95,268 70,919 300,169 220,743
---------- ---------- ---------- ----------
Total $ 187,671 $ 188,479 $ 567,217 $ 530,603
========== ========== ========== ==========
Average selling price per ton:
Oregon Steel Division $ 611 $ 536 $ 618 $ 523
CF&I Steel Division $ 429 $ 462 $ 434 $ 479(1)
Average $ 503 $ 505 $ 505 $ 504(1)
<FN>
(1) Excludes insurance proceeds of approximately $4 million received in the
second quarter of 1995 as reimbursement of lost profits resulting from
lost production and startup delays at CF&I caused by an explosion that
occurred during the third quarter of 1994.
</FN>
</TABLE>
<PAGE>
8
OREGON STEEL MILLS, INC.
Sales decreased 0.4 percent to $187.7 million in the third quarter of 1996
and increased 6.9 percent to $567.2 million for the first nine months of 1996,
compared to the corresponding 1995 periods. Shipments increased 0.1 percent to
373,300 tons in the third quarter of 1996 and increased 7.5 percent to 1,123,300
tons in the first nine months of 1996, compared to the corresponding 1995
periods. The nine month period increase in sales and shipments was primarily due
to increased shipments of seamless pipe, rod, bar and semi-finished products
manufactured by the CF&I Steel Division, offset in part by the decrease of sales
of semi-finished products by the Oregon Steel Division. Rod and bar sales of
$6.7 million and $26.0 million and shipments of 20,600 and 78,700 tons were
capitalized during the three and nine month periods ended September 30, 1995
when the rod and bar mill was in its pre-operational phase which ended July 31,
1995.
Selling prices decreased $2 to $503 per ton for the third quarter of 1996
and increased $1 to $505 per ton for the first nine months of 1996, compared to
the corresponding 1995 periods. The changes in average selling price were due to
several offsetting factors, principally increased sales of rod and bar products
in 1996 at the CF&I Steel Division, which have significantly lower selling
prices than other finished products, and the decrease of sales of semi-finished
products at the Oregon Steel Division which generally have the lowest selling
price of any of the Company's products. Of the $800,000 sales decrease in the
third quarter of 1996 compared to 1995, $1.0 million was the result of lower
average selling prices offset by $200,000 resulting from volume increases. Of
the $36.6 million sales increase for the first nine months of 1996 compared to
1995, $1.3 million was the result of higher average selling prices and $39.3
million was the result of volume increases, offset by the $4 million of 1995
insurance proceeds not recurring in 1996.
The Oregon Steel Division shipped 151,200 and 431,900 tons of product at
average selling prices of $611 and $618 per ton for the three month and nine
month periods ended September 30, 1996, respectively, compared to 219,500 and
592,800 tons of product at average selling prices of $536 and $523 per ton,
during the corresponding 1995 periods. The decline in shipments, as well as the
increase in average selling prices, were primarily due to the decreased
shipments of semi-finished products during 1996. The Oregon Steel Division
shipped 3,200 tons of semi-finished products during the three and nine month
periods ended September 30, 1996, compared to 69,500 and 170,500 tons during the
corresponding 1995 periods. Also, the first quarter of 1995 included 15,400 tons
of plate shipped from the now closed Fontana plate mill.
The CF&I Steel Division shipped 222,100 and 691,400 tons of product at an
average selling price of $429 and $434 per ton during the three month and nine
month periods ended September 30, 1996, respectively, compared to 153,400 and
452,400 tons of product at an average selling price of $462 and $479 per ton
during the corresponding 1995 periods. The increased shipment level and decrease
in average selling prices were primarily due to increased shipments of rod, bar
and semi-finished products in 1996 compared to 1995. Rod and bar shipments were
92,200 and 278,500 tons during the three and nine month periods ending September
30, 1996, respectively, compared to 48,900 and 118,900 tons in the corresponding
1995 periods. Rod and bar sales of $6.7 million and $26.0 million and shipments
of 20,600 and 78,700 tons were capitalized during the three and nine month
periods ended September 30, 1995 when the rod and bar mill was in its
pre-operational phase which ended July 31, 1995. Semi-finished product shipments
were 31,900 and 53,000 tons during the three and nine month periods ending
September 30, 1996, respectively, compared to 11,100 and 11,700 tons for the
corresponding 1995 periods.
Gross profit percentages for the three month and nine month periods ended
September 30, 1996 were 13.9 and 13.6 percent, respectively, compared to 9.4 and
11.0 percent for the corresponding 1995 periods. The gross profit improvement in
1996 compared to 1995 was due to improved product mix and lower manufacturing
costs of producing plate and pipe at the Oregon Steel Division, and increased
shipments of seamless pipe products and higher selling prices for semi-finished
and seamless pipe products at the CF&I Steel Division. These gross profit
improvements were partially offset by higher costs and reduced shipments due to
an outage of the ladle refining furnace at the CF&I Steel Division during June
1996 as a result of a mechanical failure.
<PAGE>
9
OREGON STEEL MILLS, INC.
During September 1996, CF&I lost the use of one of the two main
transformers that supply electricity to its melt shop. Full electrical power is
expected to be restored by early December 1996. CF&I's steel production has been
reduced to approximately 65 percent of normal production capability. CF&I will
use its remaining steelmaking capabilities for its rail, seamless pipe and
semi-finished products and will purchase billets for rod and bar products. As a
result of the lack of feedstock, the rod and bar mill ceased operations on
October 12 and is scheduled to resume production in mid-November when sufficient
purchased billets are expected to be received. The Company expects that the
reduced production levels at CF&I will adversely affect the results of
operations of the Company for the fourth quarter of 1996. However, the affects
of the outage will be partially mitigated by reimbursement of lost profits by
the business interruption insurance carrier.
Selling, general and administrative ("SG&A") expenses for the three and
nine month periods ended September 30, 1996 decreased $430,000 and increased
$823,000, respectively, from the corresponding 1995 periods. SG&A expenses
decreased as a percentage of sales to 5.8 and 5.9 percent in the three and nine
month periods ended September 30, 1996, from 6.0 and 6.2 percent for the
corresponding 1995 periods. The percentage decreases are primarily due to cost
controls and increased sales for the first nine months of 1996.
The profit participation and ESOP contribution expense for the three and
nine month periods ended September 30, 1996 increased compared to the
corresponding 1995 periods, reflecting the increased profitability in 1996
versus 1995 at the Oregon Steel Division.
Total interest costs for the three and nine month periods ended September
30, 1996 were $9.4 million and $24.2 million, respectively, compared to $5.6
million and $15.8 million for the corresponding 1995 periods. The higher
interest cost is primarily the result of the issuance of $235 million principal
amount First Mortgage Notes in June 1996 to provide funding for the Company's
capital expenditure programs. Capitalized interest for the three and nine month
periods ended September 30, 1996 was $5.9 million and $14.1 million,
respectively, compared to $2.6 million and $8.7 million for the corresponding
1995 periods.
The Company's effective income tax rates were 36 and 38 percent for the
three and nine month periods ended September 30, 1996, respectively, compared to
36 and 38 percent for the corresponding 1995 periods.
Liquidity and Capital Resources
- -------------------------------
Cash flow from operations for the nine months ended September 30, 1996 was
$74.6 million compared to $80.6 million in the corresponding 1995 period. The
major items affecting this $6.0 million decrease were a higher increase in
accounts receivable ($13.5 million) and a lower decrease in inventories ($10.6
million). These cash uses were partially offset by increased net income ($7.4
million), increased depreciation and amortization ($3.6 million), and an
increase in accrued expenses ($5.1 million).
Net working capital at September 30, 1996 decreased $13.6 million from
December 31, 1995 due to a $19.9 million increase in current liabilities,
principally accrued expenses and short-term debt, offset by a $6.3 million
increase in current assets, principally accounts receivable and other current
assets.
On June 19, 1996, the Company completed public offerings of an additional
6,000,000 shares of common stock at $12.75 per share and $235 million principal
amount of 11% First Mortgage Notes (the "Notes") due 2003. On July 9, 1996, the
Company issued an additional 271,857 shares of common stock at $12.75 per share
pursuant to an underwriter's over-allotment option. The proceeds from these
offerings were $302.2 million, net of expenses and underwriting discounts. The
Notes are guaranteed by two subsidiaries of the Company, New CF&I and CF&I
("Guarantors"). The Notes and the guarantees are secured by a lien on
substantially all the property, plant and equipment and certain other assets of
the Company and the Guarantors. The Notes contain potential restrictions on new
indebtedness and various types of disbursements, including dividends, based on
the Company's net income in relation to its fixed charges, as defined.
<PAGE>
10
OREGON STEEL MILLS, INC.
The proceeds from the common stock and notes offerings were used to repay
in full borrowing under the Company's bank credit agreement (the "Old Credit
Agreement"). The remaining proceeds were used for capital expenditures and
general corporate purposes.
Concurrent with the public offerings, the Company amended and restated the
Old Credit Agreement to establish a $125 million revolving credit facility (the
"Amended Credit Agreement") collateralized by accounts receivable and inventory
and guaranteed by the Guarantors. The Amended Credit Agreement contains various
restrictive covenants including a minimum tangible net worth, minimum interest
coverage ratio, and a maximum debt to total capitalization ratio. Borrowings are
limited to an amount equal to specified percentages of accounts receivable and
inventory. As of September 30, 1996, $14.5 million was outstanding under the
Amended Credit Agreement.
Term debt of $67.5 million was incurred by CF&I as part of the purchase
price of the Pueblo steel mill on March 3, 1993. This debt is uncollateralized
and is payable over ten years with interest at 9.5 percent. As of September 30,
1996, the outstanding balance on the debt was $51.3 million, of which $44.7
million was classified as long-term.
The Company has an uncollateralized and uncommitted revolving line of
credit with a bank which may be used to support issuance of letters of credit,
foreign exchange contracts and interest rate hedges. At September 30, 1996,
$13.7 million was restricted under outstanding letters of credit. In addition,
the Company has a $4 million uncollateralized and uncommitted revolving credit
line with a bank which is restricted to use for letters of credit. At September
30, 1996, $400,000 was restricted under outstanding letters of credit.
Camrose maintains a $15 million (Canadian dollars) revolving credit
facility with a bank, the proceeds of which may be used for working capital and
general corporate purposes. The facility is collateralized by substantially all
of the assets of Camrose and borrowings under this facility are limited to an
amount equal to specified percentages of Camrose's eligible trade accounts
receivable and inventories. The facility expires on January 3, 1997. As of
September 30, 1996, Camrose had $5.5 million outstanding under the facility.
The Company expects that anticipated needs for working capital and the
capital expenditure program will be met from existing cash balances, funds
generated from operations and available borrowings under its Amended Credit
Facility.
CAPITAL EXPENDITURES. During the first nine months of 1996 the Company
expended approximately $16.1 million, excluding capitalized interest, on the
capital program at CF&I and $68.3 million, excluding capitalized interest, on
the Steckel combination rolling mill (the "Combination Mill") at the Portland
steel mill. In addition to the Combination Mill, the Company has expended
approximately $3.9 million during the first nine months of 1996 for capital
projects at its Oregon Steel Division manufacturing facilities for recurring
upgrade projects to the present facilities and equipment.
The Company encountered delays in the completion of the Combination Mill,
as well as a number of associated problems including significant claims and
disputes concerning the construction of the Mill. As a result, the Company has
terminated its contract with the general contractor and, in an effort to
complete the work as soon as possible, has engaged other contractors to finish
the project. The Company estimates the cost of the Combination Mill (excluding
capitalized interest) will be approximately $230 million, $20 million more than
the previous estimate. The Company expects to recover this additional
cost together with other damages from the original contractor. The original
contractor disputes the Company's claim and believes it may be owed additional
amounts. The Combination Mill is now expected to begin startup operation in
the first quarter of 1997 and is expected to reach full production capacity in
the first quarter of 1998.
<PAGE>
11
OREGON STEEL MILLS, INC.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
(a) Exhibits
11.0 Statement Regarding Computation of Per Share Earnings
27.0 Financial Data Schedule
(b) Reports on Form 8-K
On July 26, 1996, the Company filed Form 8-K in which the
Company dismissed its independent accountants, Coopers &
Lybrand, LLP, as of July 25, 1996. On July 31, 1996, a Form
8-K/A was filed with the response letter of Coopers &
Lybrand, LLP.
On August 1, 1996, the Company filed Form 8-K in which the
Company engaged Price Waterhouse LLP as independent
accountants as of July 25, 1996.
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 11, 1996 /s/ Christopher D. Cassard
---------------------------------
Christopher D. Cassard
Corporate Controller
(Principal Accounting Officer)
<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,
---------------------- ----------------------
1996 1995 1996 1995
----- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 25,668 19,422 21,748 19,417
Common stock equivalents arising
from 598 shares of stock to be
issued March 2003 598 598 598 598
------- ------- ------- -------
26,266 20,020 22,346 20,015
======= ======= ======= =======
Net income $ 6,356 $ 1,966 $16,997 $ 9,622
======= ======= ======= =======
Primary and fully diluted
net income per common and
common equivalent share $.24 $.10 $.76 $.48
==== ==== ==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2229
<SECURITIES> 0
<RECEIVABLES> 89345
<ALLOWANCES> 2599
<INVENTORY> 134895
<CURRENT-ASSETS> 243095
<PP&E> 714591
<DEPRECIATION> 138495
<TOTAL-ASSETS> 897278
<CURRENT-LIABILITIES> 141262
<BONDS> 235000
0
0
<COMMON> 257
<OTHER-SE> 349828
<TOTAL-LIABILITY-AND-EQUITY> 897278
<SALES> 567217
<TOTAL-REVENUES> 567217
<CGS> 489796
<TOTAL-COSTS> 489796
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10133
<INCOME-PRETAX> 27208
<INCOME-TAX> 10211
<INCOME-CONTINUING> 16997
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16997
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
</TABLE>
