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SCHEDULE 14A INFORMATION
Consent Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Consent Statement [ ] Confidential, for Use of
the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ ] Definitive Consent Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Oregon Steel Mills, Inc.
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(Name of Registrant as Specified In Its Charter)
Committee to Restore Shareholder Value at Oregon Steel Mills, Inc.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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Phone Script
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Hello, my name is ___________ and I am calling from the Committee to Restore
Shareholder Value at Oregon Steel Mills. I am calling regarding the gold consent
card we sent you. Did you receive our materials?
[If no] Does your firm have voting authority with respect to any of these
shares?
[If yes] Could another person at your firm who does proxy voting have
received the materials?
[If yes] Will you be voting regarding this matter or will that person?
[If the other person, ask for that person's name and telephone number;
if this person, suggest that the materials be rerouted.]
[If no] You should contact your custodian or nominee, if you have
one, or if you do not, contact ADP.
[If no] The materials may have been passed through to the beneficial owners
already. Is it possible that this occurred?
The three corporate governance proposals on the gold consent card are the key to
unlocking shareholder value at Oregon Steel Mills. In 1998 Oregon Steel's stock
price fell 44% and is now trading below the Company's book value. By restoring
management accountability we believe we can recover this lost shareholder value.
Have you voted yet? Can you share with me how you plan to vote?
These three proposals are necessary to restore the accountability of management
to the shareholders. The proposals are basic corporate governance reforms which
we believe will enhance shareholder value. These types of reforms are
recognized by institutional investors and corporate governance experts as basic
elements of good corporate governance.
Proposal 1 calls for annual elections of all directors to help restore
dynamism and vitality to the leadership of the Company. Oregon Steel
currently has a classified board. A classified board of directors prevents
shareholders from selecting each year the majority of the Board. We believe
that the right to do this is particularly important because the average
Oregon Steel director has served on the Board for over a decade and two
individuals have occupied Board seats for over 20 years.
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Proposal 2 asks the Board to require shareholder approval of poison pills
that prevent changes in control of the Company without the approval of the
board of directors. Given Oregon Steel's depressed stock price, the Board
may attempt to insulate itself from the competitive pressures of the
marketplace and from its own shareholders. Oregon Steel's board has
recently shown that it is not receptive to shareholder input by amending
the Company's bylaws to make it more difficult for shareholders to raise
matters at the annual meeting. This proposal enables the shareholders, as
the owners of the Company, to have a say in the adoption of any poison pill
or similar device.
Proposal 3 urges the Board to establish confidential voting to ensure that
all Oregon Steel shareholders feel free to vote in whatever way they
believe will best enhance shareholder value. Company access to shareholder
voting may have chilling effects on the exercise of ownership rights by
exposing shareholders to possible retaliation.
The Company's stock is now trading below book value (compared to 160% of book
value for the S&P Iron and Steel Index), /1/ hardly a vote of confidence in
management or in the current direction of the company.
The Company has substantially underperformed its peer group. The Company's
stock fell 44% in 1998, compared to a decline of only 15% for the S&P Iron and
Steel Index. In addition, Oregon Steel's long term performance has suffered:
from 1993 to 1997 Company shareholders saw approximately a 2.6% decrease in the
value of their holdings while the S&P Steel Index appreciated approximately 7.5%
over the same period.
The Company has failed to meet analysts' expectations. In 1998, Oregon Steel
delivered negative earnings surprises in each quarter. In the most recent
quarter ending December 31, 1998, earnings trailed Wall Street analysts'
consensus earnings forecast by $8.8 million dollars, or $0.34 per share./2/
Oregon Steel has had a troubled year in the credit markets. From February 12,
1998 to November 6, 1998 Standard & Poor's placed the Company on CreditWatch
with negative implications. According to the Company's most recent filing on
Form 10-K, the Company has twice been forced to renegotiate a loan agreement
with its bank lenders, on December 11, 1997 and February
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/1/ Baseline Industry Profile as of 1/26/99, Iron & Steel, and Baseline
Investment Profile as of 1/26/99, Oregon Steel Mills.
/2/ Multex Professional Investment Review, 1/3/99 and Oregon Steel Mills Press
Release, 1/26/99.
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17, 1998./3/
Oregon Steel management has consistently overestimated its ability to ramp-up
production at the new combination mill in Portland, OR, or return to full
production at its Pueblo Division, which suffered a 3 month strike in 1997.
Despite management's confidence, Standard and Poor's considers Oregon Steel to
have a "below average position in the highly competitive minimill segment" [of
the steel industry].
Combination Mill. Although management forecast that production at the Portland
combination mill would "steadily increase" in 1998, actual production declined
in the 2nd quarter. As a result, earnings fell and were below "stock market
expectations."/4/ 3rd quarter production at the combination mill was less than
63% of capacity, and shipments were below analysts' estimates./5/
Although Oregon Steel management expected "full production for all products at
the Rocky Mountain Steel Division in the first half of 1998", /6/ shipments have
remained below previous-year levels, even though the strike ended December 30,
1998. In addition, product mix has suffered at the Pueblo facility resulting in
a decrease in average selling price below previous-year levels.
(Note: This isn't only due to cyclical weaknesses in the steel industry: the
Company also attributes its lower shipments for the first 3 quarters of 1998 to
the impact of the previous-year's strike, a rail mill outage in April and a
power outage in May.)
Although Oregon Steel management listed the need to "reduce debt"/7/ as a key
financial strategy for 1998, it still carries $235 million in long- term debt at
11% interest and it still has $84 million outstanding under its credit facility,
as of 9/98. Standard and Poor's considers the Company's debt leverage "fairly
aggressive."/8/ This relatively high level of debt, by reducing free cash flow,
hampers management's ability to deal with the current volatility in the steel
industry. Oregon Steel's long term debt to capitalization at year-end was 51%,
compared to 20% for the S&P Iron
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/3/ Oregon Steel Mills 10-K, as filed with the Securities and Exchange
Commission, 3/25/98.
/4/ Oregon Steel Mills press release, 6/29/98.
/5/ Estimates of Donaldson Lufkin Jenrette Securities, Company Report, Oregon
Steel Mills, 5/19/98.
/6/ Oregon Steel Mills, 1997 Annual Report to Shareholders.
/7/ Ibid.
/8/ "S&P affirms Oregon Steel double-B," Standard and Poor's press release,
11/6/98
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and Steel Index./9/
Oregon Steel management has exposed shareholders to a growing back pay
contingent liability since 12/31/97, when it refused the Steelworkers'
unconditional return-to-work offer. Salomon Smith Barney estimates that the
Company's back pay liability could potentially be as high as $30 - $38 million
per year, or $1.16 - $1.47 per share, plus accrued interest./10/
* * * *
The members of the Committee to Restore Shareholder Value at Oregon Steel Mills,
Inc. (the "Committee") are The Crabbe Huson Group, Inc. (beneficially owns
1,281,700 shares of common stock of Oregon Steel Mills, Inc. ("Shares")) or
4.97%), the Amalgamated Bank of New York LongView MidCap 400 Index Fund (730
Shares or .003%) and the American Federation of Labor and Congress of Industrial
Organizations (the "AFL-CIO") (0 Shares). Each Committee member is a participant
in the consent solicitation (the "Solicitation"). Additional participants in the
Solicitation (whose Share ownership, if any, is in parentheses) are: William
Patterson (265 Shares), Damon Silvers, Chris Bohner, Beth Young, Susan Dundon,
Chris Wallace, Brandon Rees, Dianne Wood, Dieter Waizenegger, Marc Bayard, Shawn
Wooden, Ed Keyser and Joshua Mason, all of whom are employees of the AFL-CIO.
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/9/ Baseline Investment Profile, Oregon Steel Mills.
/10/ "Notes from the Rust Bowl: Steel," Salomon Smith Barney Industry Report,
10/28/98.
