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, 1997
-----------------------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------------- ---------------
Commission File Number 1-9887
------------------
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)
- ------------------------------------------------------------------------------
(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, 1997)
<PAGE>
OREGON STEEL MILLS, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1997 (unaudited)
and December 31, 1996.................................2
Consolidated Statements of Income (unaudited)
Three months and nine months ended
September 30, 1997 and 1996 ..........................3
Consolidated Statements of Cash Flows (unaudited)
Nine months ended September 30, 1997
and 1996 .............................................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
-1-
<PAGE>
OREGON STEEL MILLS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30,
1997 December 31,
(Unaudited) 1996
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,486 $ 739
Trade accounts receivable, net 67,907 91,480
Inventories 131,312 120,636
Deferred tax asset 13,627 17,084
Other 6,938 5,786
--------- ---------
Total current assets 221,270 235,725
--------- ---------
Property, plant and equipment:
Land and improvements 28,703 29,577
Buildings 46,990 37,617
Machinery and equipment 419,361 426,912
Construction in progress 317,557 255,558
--------- ---------
812,611 749,664
Accumulated depreciation (161,474) (145,096)
--------- ---------
651,137 604,568
--------- ---------
Excess of cost over net assets acquired 36,872 37,398
Other assets 29,668 35,664
--------- ---------
$ 938,947 $ 913,355
========= =========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 7,373 $ 6,574
Accounts payable 78,544 75,428
Accrued expenses 43,433 32,727
--------- ---------
Total current liabilities 129,350 114,729
Long-term debt 319,387 330,993
Deferred employee benefits 20,359 18,262
Environmental liability 34,801 35,103
Deferred income taxes 29,502 24,365
--------- ---------
533,399 523,452
--------- ---------
Minority interests 37,893 36,862
--------- ---------
Commitments and contingencies (Notes 4 and 5)
STOCKHOLDERS' EQUITY
Common stock 257 257
Additional paid-in capital 226,085 226,085
Retained earnings 145,412 130,417
Cumulative foreign currency translation adjustment (4,099) (3,718)
--------- ---------
367,655 353,041
--------- ---------
$ 938,947 $ 913,355
========= =========
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,
-------------------------- ---------------------------
1997 1996 1997 1996
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 213,597 $ 187,671 $ 624,679 $ 567,217
Costs and expenses:
Cost of sales 177,997 161,600 529,075 489,796
Selling, general and
administrative expenses 12,937 10,971 37,788 33,475
Profit participation and
ESOP contribution 2,649 2,255 5,457 5,854
----------- ----------- ----------- -----------
Operating income 20,014 12,845 52,359 38,092
Other income (expense):
Interest and dividend income 28 189 222 421
Interest expense (2,462) (3,462) (7,769) (10,133)
Loss on termination of interest
rate swap agreements -- -- -- (1,233)
Minority interests (3,526) 203 (6,533) (695)
Other, net 2,955 195 3,309 756
----------- ----------- ----------- -----------
Income before income taxes 17,009 9,970 41,588 27,208
Income tax expense (6,571) (3,614) (15,802) (10,211)
----------- ----------- ----------- -----------
Net income $ 10,438 $ 6,356 $ 25,786 $ 16,997
=========== =========== =========== ===========
Primary and fully diluted net income
per common and common
equivalent share $.40 $.24 $.98 $.76
Dividends declared per common share $.14 $.14 $.42 $.42
Weighted average common shares
and common share equivalents
outstanding 26,292 26,266 26,292 22,346
Tonnage sold 402,200 373,300 1,203,900 1,123,300
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,
1997 1996
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 25,786 $ 16,997
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 21,687 21,523
Deferred income tax provision 4,590 7,202
Minority interests' share of income 6,533 729
Other, net (1,978) 2,420
Changes in current assets and liabilities 22,740 25,689
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 79,358 74,560
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (66,138) (120,058)
Proceeds from sale of property, plant and equipment 14,424 666
Other, net 61 (822)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (51,653) (120,214)
--------- ---------
Cash flows from financing activities:
Net payments under Canadian bank
revolving loan facility (5,778) (1,165)
Proceeds from long-term bank debt 299,977 154,800
Payments on long-term debt (305,007) (399,552)
Net proceeds from issuance of 11% First Mortgage Notes - 226,995
Net proceeds from issuance of common stock - 75,252
Dividends paid (10,791) (9,035)
Minority portion of subsidiary's distribution (5,502) -
Other, net 235 (56)
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (26,866) 47,239
--------- ---------
Effects of foreign currency exchange rate changes on cash (92) -
--------- ---------
Net increase in cash and cash equivalents 747 1,585
Cash and cash equivalents at beginning of period 739 644
--------- ----------
Cash and cash equivalents at end of period $ 1,486 $ 2,229
========= ==========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 21,201 $ 19,138
Income taxes $ 7,224 $ 6,729
NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES:
At September 30, 1997 and 1996, the Company had financed property, plant and
equipment with accounts payable of $14.7 million and $9.7 million, respectively.
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
-4-
<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 ("Company"). All significant intercompany
balances and transactions have been eliminated.
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 1996 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,
1997 1996
-------------- ------------
(In thousands)
Raw materials $ 26,798 $ 24,916
Semifinished product 52,980 45,767
Finished product 22,055 25,046
Stores and operating supplies 29,479 24,907
-------- --------
Total inventory $131,312 $120,636
======== ========
3. Common Stock
------------
On October 30, 1997, the Board of Directors declared a quarterly cash
dividend of 14 cents per share to be paid November 28, 1997, to
stockholders of record as of November 14, 1997.
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, 1997, CF&I had a reserve of
$35.0 million related to this remediation, of which $32.9 million is
classified as non-current in the consolidated balance sheet.
CONSTRUCTION CLAIMS. There are a number of claims arising out of the
Company's contract with the former Prime Contractor ("Prime Contractor") on
the Steckel combination rolling mill ("Combination Mill") which is being
constructed at the Company's steel mill in Portland, Oregon. The Company's
position is that the Prime Contractor failed to perform. As a result, the
Company terminated the contract and made arrangements with other
contractors to complete the project. The Prime Contractor filed an
arbitration claim against the Company and the Company has counterclaimed.
While it is difficult to determine at this stage the amount claimed by the
Prime Contractor, the Prime Contractor initially filed a claim in the
approximate amount of $16.5 million against the Company. The Prime
Contractor has claimed certain other unspecified damages. However, the
Company believes that the claim amount includes amounts that were
subsequently paid by the Company to certain subcontractors and suppliers of
the Prime Contractor in the amount of approximately $8.0 million. As a
result, management believes that the net amount claimed by the Prime
Contractor in the arbitration would be approximately $8.5 million plus
unspecified damages.
-5-
<PAGE>
The Company has filed a counterclaim against the Prime Contractor in the
arbitration. The amount of this counterclaim cannot be finalized until the
Combination Mill project is complete and final costs analyzed. However, it
is expected that the amount of the counterclaim will exceed the amount of
the Prime Contractor's claim. On the same project, three liens have been
filed by subcontractors and/or suppliers of the Prime Contractor. These
liens total approximately $4.5 million. The Company believes these claims
are included in the amount of the claim filed by the Prime Contractor.
The Company denies liability on all of the claims of the Prime Contractor
and its subcontractors and suppliers and, as stated above, believes it is
entitled to recover from the Prime Contractor all damages incurred. To the
extent that the Company owes any amounts to the Prime Contractor or any of
its subcontractors or suppliers, the Company may have claims for
reimbursement against certain of its other engineers, vendors or
consultants on the project.
Management believes that the ultimate resolution of these claims will not
have a material effect on the financial position of the Company.
5. Commitments
-----------
At September 30, 1997, the Company had commitments for expenditures of
approximately $17.6 million for completion of the Combination Mill.
6. Proceeds from Insurance Settlement
----------------------------------
Sales for the first nine months of 1997 include approximately $2.5 million
of insurance proceeds as reimbursement of lost profits resulting from lost
production during the third and fourth quarters of 1996 related to the
failure of one of the power transformers servicing CF&I. In total, the
Company received $7 million in insurance proceeds from this claim of which
$4.5 million was recorded in the fourth quarter of 1996.
7. Gain from Sale of Property and Equipment
----------------------------------------
Other income for the three and nine month periods ended September 30, 1997,
includes a net pre-tax gain of approximately $3 million from the sale of
property and equipment.
8. Subsequent Event
----------------
The labor contract between the United Steelworkers of America ("USWA") and
CF&I expired on September 30, 1997. On October 3, 1997, the USWA called a
strike at CF&I's steel mill in Pueblo, Colorado. CF&I is in the process of
hiring replacement workers and has partially resumed operations at the
mill. Due to the strike in progress, the Company expects the results of
operations to be negatively impacted during the fourth quarter of 1997.
See Management's Discussion and Analysis of Financial Condition and Results
of Operations.
-6-
<PAGE>
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, work
stoppages, and general business and economic conditions.
The consolidated financial statements include the accounts of Oregon Steel
Mills, Inc. and its subsidiaries ("Company"), 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 and the
large diameter and electric resistance welded pipe facility in Camrose, Alberta.
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,
---------------------- --------------------------
1997 1996 1997 1996
--------- --------- ---------- ----------
Total tonnage sold:
Oregon Steel Division:
<S> <C> <C> <C> <C>
Plate 40,800 68,000 160,400 219,200
Welded pipe 100,300 80,000 259,600 209,500
Semifinished - 3,200 200 3,200
---------- ---------- ---------- ----------
Total Oregon Steel Division 141,100 151,200 420,200 431,900
---------- ---------- ---------- ----------
CF&I Steel Division:
Rail 100,900 43,400 299,900 200,200
Rod/Bar/Wire 119,200 107,700 355,200 324,600
Seamless Pipe 39,100 39,100 107,000 113,600
Semifinished 1,900 31,900 21,600 53,000
---------- ---------- ---------- ----------
Total CF&I Steel Division 261,100 222,100 783,700 691,400
---------- ---------- ---------- ----------
Total 402,200 373,300 1,203,900 1,123,300
========== ========== ========== ==========
Sales (in thousands):
Oregon Steel Division $ 95,498 $ 92,403 $ 275,812 $ 267,048
CF&I Steel Division 118,099 95,268 348,867 (F1) 300,169
---------- ---------- ---------- ----------
Total $ 213,597 $ 187,671 $ 624,679 $ 567,217
========== ========== ========== ==========
Average selling price per ton:
Oregon Steel Division $677 $611 $656 $618
CF&I Steel Division $452 $429 $442 (F2) $434
Average $531 $503 $517 (F2) $505
(F1) Includes insurance proceeds of approximately $2.5 million as reimbursement
of lost profits resulting from lost production during the third and fourth
quarters of 1996 related to the failure of one of the power transformers
servicing CF&I.
(F2) Excludes insurance proceeds referred to in Note (1) above.
</TABLE>
-7-
<PAGE>
OREGON STEEL MILLS, INC.
Sales increased 13.8 percent to $213.6 million in the third quarter of
1997 and increased 10.1 percent to $624.7 million for the first nine months of
1997, compared to the corresponding 1996 periods. Shipments increased 7.7
percent to 402,200 tons in the third quarter of 1997 and increased 7.2 percent
to 1,203,900 tons in the first nine months of 1997, compared to the
corresponding 1996 periods. The increase in sales and shipments was primarily
due to increased shipments of rail and rod and bar products by the CF&I Steel
Division and welded pipe products by the Oregon Steel Division, offset in part
by a decline in shipments of plate products by the Oregon Steel Division and
semifinished products by the CF&I Steel Division.
Average selling prices increased $28 to $531 per ton for the third quarter
of 1997 and increased $12 to $517 per ton for the first nine months of 1997,
compared to the corresponding 1996 periods. The increase in average selling
price was due to several factors including increased shipments of welded pipe
products which generally have the highest selling prices of any of Company's
products and higher seamless pipe product prices, offset by increased rod and
bar shipments which generally have the lowest selling prices of any of the
Company's finished products. Of the $25.9 million sales increase in the third
quarter of 1997, $14.5 million was the result of volume increases and $11.4
million was the result of higher average selling prices. Of the $57.5 million
sales increase for the first nine months of 1997, $40.7 million was the result
of volume increases, $14.3 million was the result of higher average selling
prices, and $2.5 million from the proceeds of an insurance settlement. (See Note
6 to the consolidated financial statements.)
The Oregon Steel Division shipped 141,100 and 420,200 tons of product at
an average selling price of $677 and $656 per ton for the three and nine
month periods ended September 30, 1997, respectively, compared to 151,200 and
431,900 tons of product at an average selling price of $611 and $618 per ton
during the corresponding 1996 periods. The decrease in shipments was primarily
due to decreased plate shipments from the Portland steel mill. Plate shipments
from the Portland steel mill were 40,800 and 160,400 tons for the three and nine
month periods ended September 30, 1997, respectively, compared to 68,000 and
219,200 tons for the corresponding 1996 periods. The increase in average
selling price was primarily due to the increase in welded pipe shipments from
the Camrose pipe mill during 1997. Welded pipe shipments from the Camrose pipe
mill were 56,900 and 131,000 tons in the three month and nine month periods
ended September 30, 1997, respectively, compared to 17,600 and 61,600 tons in
the corresponding 1996 periods.
The CF&I Steel Division shipped 261,100 and 783,900 tons of product at an
average selling price of $452 and $442 per ton during the three and nine
month periods ended September 30, 1997, respectively, compared to 222,100 and
691,400 tons of product at an average selling price of $429 and $434 per ton
during the corresponding 1996 periods. The increased shipment level was due to
increased shipments of rail and rod and bar during 1997. Rail shipments were
100,900 and 299,900 tons in the three and nine month periods ended September 30,
1997, respectively, compared to 43,400 and 200,200 tons in the corresponding
1996 periods. Rod and bar shipments were 119,200 and 331,400 tons for the three
and nine month periods ended September 30, 1997, respectively, compared to
92,200 and 278,500 tons for the corresponding 1996 periods. Selling prices
increased in the three and nine month periods ended September 30, 1997 due to
increased rail shipments, decreased shipments of semifinished products and
higher seamless pipe, and rod and bar product prices.
Gross profit margin for the three and nine month periods ended
September 30, 1997 was 16.7 and 14.9 percent (excluding insurance proceeds),
respectively, compared to 13.9 and 13.6 percent for the corresponding 1996
periods. The gross profit improvement in 1997 compared to 1996 was due to
increased rail shipments, and higher seamless pipe, and rod and bar product
prices at the CF&I Steel Division. Gross profit was also positively impacted by
lower costs at the CF&I Steel Division due to increased steel production and
improved operating efficiencies. In addition, 1996 gross profit was negatively
impacted by approximately $1.6 million due to higher costs and reduced shipments
as a result of the June 1996 outage of a ladle refining furnace at the CF&I
Steel Division.
The labor contract between the United Steelworkers of America ("USWA")
and CF&I expired on September 30, 1997. On October 3, 1997, the USWA called a
strike at CF&I's steel mill. CF&I is in the process of hiring replacement
workers and has partially resumed operations at the mill.
-8-
<PAGE>
OREGON STEEL MILLS, INC.
Due to the strike in progress, the Company expects results to be
negatively impacted at CF&I by reduced operations which are currently
anticipated to result in operating losses at CF&I during the fourth quarter of
1997. In addition, the ramp up of the Combination Mill at the Portland steel
mill is expected to temporarily increase production costs which would negatively
impact fourth quarter operating results.
Selling, general and administrative expenses for the three and nine month
periods ended September 30, 1997 increased $2.0 million and $4.3 million,
respectively, from the corresponding 1996 periods, and increased as a percentage
of sales to 6.1 and 6.0 percent in the three and nine month periods ended
September 30, 1997, respectively, from 5.8 and 5.9 percent for the corresponding
1996 periods. The dollar amount increases were primarily due to increased
shipping expense as a result of increased tons shipped in the three and nine
month periods ended September 30, 1997 compared to the corresponding 1996
periods.
Profit participation was $1.5 million and $4.3 million for the three and
nine month periods ended September 30, 1997, respectively, compared to $2.3
million and $5.9 million for the corresponding 1996 periods. The decrease in
1997 was due to decreased profitability in 1997 versus 1996 at the Oregon Steel
Division. The ESOP contribution was $1.1 million for the three and nine month
periods ended September 30, 1997, compared to none for the corresponding 1996
periods.
Total interest costs for the three and nine month periods ended September
30, 1997 were $9.5 million and $28.3 million, respectively, compared to $9.4
million and $24.2 million for the corresponding 1996 periods. The higher
interest cost is primarily the result of additional debt incurred to fund the
capital improvement program, combined with increased interest rates. Capitalized
interest for the three and nine month periods ended September 30, 1997 was $7.0
million and $20.5 million, respectively, compared to $5.9 million and $14.1
million for the corresponding 1996 periods.
Other income for the three and nine month periods ended September 30, 1997
increased $2.8 million and $2.6 million, respectively, compared to the
corresponding 1996 periods due to a net pre-tax gain of approximately $3.0
million from the sale of property and equipment.
The Company's effective income tax rate was 39 and 38 percent for
the three and nine month periods ended September 30, 1997, respectively,
compared to 36 and 38 percent for the corresponding 1996 periods.
Liquidity and Capital Resources
- -------------------------------
Cash flow from operations for the nine months ended September 30, 1997 was
$79.4 million compared to $74.6 million in the corresponding 1996 period. The
major items affecting this $4.8 million increase were an increase in net income
($8.8 million) and a decrease in accounts receivable versus an increase in 1996
($29.7 million). These cash increases were partially offset by an increase in
inventories versus a decrease in 1996 ($17.3 million) and a decrease in accounts
payable versus an increase in 1996 ($15.6 million).
Net working capital at September 30, 1997 decreased $29.1 million from
December 31, 1996 due to a $14.6 million increase in current liabilities,
principally accrued expenses and a $14.5 million decrease in current assets,
principally accounts receivable. The increase in accrued expenses was primarily
due to accrued interest on the Company's 11% First Mortgage Notes. The decrease
in accounts receivable resulted primarily from lower sales at the Oregon Steel
Division in the third quarter of 1997 compared to the fourth quarter of 1996.
The Company has outstanding $235 million principal amount 11% First
Mortgage Notes ("Notes") due 2003. The Notes are guaranteed by 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 collateral for the Notes and the guarantees
do not include, among other things, inventory and accounts receivable. The
indenture under which the Notes were issued contains 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.
-9-
<PAGE>
OREGON STEEL MILLS, INC.
The Company maintains a $125 million revolving credit facility ("Amended
Credit Agreement") which expires June 11, 1999, and may be drawn upon based on
the Company's accounts receivable and inventory balances. The Amended Credit
Agreement is collateralized by substantially all of the Company's consolidated
inventory and accounts receivable, except those of Camrose. Amounts outstanding
under the Amended Credit Agreement are 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. As of September 30, 1997, $46.2 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,
1997, the outstanding balance on the debt was $45.6 million, of which $38.2
million was classified as long-term.
The Company has uncollateralized and uncommitted revolving lines of credit
with two banks which may be used to support issuance of letters of credit,
foreign exchange contracts and interest rate hedges. At September 30, 1997, $7.4
million 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 December 30, 1999. As of
September 30, 1997, Camrose had no outstanding amounts 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 1997 the Company
expended approximately $8.1 million (excluding capitalized interest) for capital
equipment at CF&I and $37.5 million (excluding capitalized interest) on the
Combination Mill project and recurring upgrade projects to the present
facilities at the Oregon Steel Division.
-10-
<PAGE>
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
None
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 12, 1997 /s/ Christopher D. Cassard
---------------------------------
Christopher D. Cassard
Corporate Controller
(Principal Accounting Officer)
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1486
<SECURITIES> 0
<RECEIVABLES> 71485
<ALLOWANCES> 3578
<INVENTORY> 131312
<CURRENT-ASSETS> 221270
<PP&E> 812611
<DEPRECIATION> 161474
<TOTAL-ASSETS> 938947
<CURRENT-LIABILITIES> 129350
<BONDS> 235000
0
0
<COMMON> 257
<OTHER-SE> 367398
<TOTAL-LIABILITY-AND-EQUITY> 938947
<SALES> 624679
<TOTAL-REVENUES> 624679
<CGS> 529075
<TOTAL-COSTS> 529075
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7769
<INCOME-PRETAX> 41588
<INCOME-TAX> 15802
<INCOME-CONTINUING> 25786
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25786
<EPS-PRIMARY> .98
<EPS-DILUTED> .98
</TABLE>
OREGON STEEL MILLS, INC.
EXHIBIT 11
STATEMENT REGARDING COMPUTATION
OF PER SHARE EARNINGS
(In thousands, except per share data amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- -------
Weighted average number of common
shares outstanding 25,694 25,668 25,694 21,748
Common stock equivalents arising
from 598 shares of stock to be
issued March 2003 598 598 598 598
------- ------ ------- --------
26,292 26,266 26,292 22,346
======= ======= ======= =======
Net income $10,438 $ 6,356 $25,786 $16,997
======= ======= ======= =======
Primary and fully diluted
net income per common and
common equivalent share $.40 $.24 $.98 $.76
===== ===== ===== ====
