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 March 31, 2000
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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 S.W. Broadway, Suite 2200, Portland, Oregon 97205
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(Address of principal executive office) (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 Section 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 25,776,804
---------------------------- -------------------------------
Class Number of Shares Outstanding
(as of April 27, 2000)
<PAGE>
OREGON STEEL MILLS, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 2000 (unaudited) and
December 31, 1999................................ 2
Consolidated Statements of Income (unaudited)
Three months ended March 31, 2000
and 1999........................................ . 3
Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31, 2000 and 1999...... . 4
Notes to Consolidated Financial Statements
(unaudited) ..................................... 5 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........8 - 11
Item 3. Quantitative and Qualitative Disclosures about
Market Risk..........................................11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .................................. 12
Item 4. Submission of Matters to a Vote of the Security
Holders..............................................12
Item 6. Exhibits and Reports on Form 8-K.....................12
<PAGE>
OREGON STEEL MILLS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2000 1999
----------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 5,832 $ 9,270
Trade accounts receivable, net 68,429 62,547
Inventories 108,633 122,683
Deferred tax asset 9,242 9,245
Other 3,965 4,460
--------- --------
Total current assets 196,101 208,205
--------- --------
Property, plant and equipment:
Land and improvements 29,800 29,383
Buildings 50,445 50,426
Machinery and equipment 756,679 756,897
Construction in progress 19,083 18,817
--------- --------
856,007 855,523
Accumulated depreciation (254,663) (247,528)
--------- --------
601,344 607,995
--------- --------
Costs in excess of net assets acquired, net 34,374 34,636
Other assets 25,984 26,418
--------- --------
$ 857,803 $877,254
========= ========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 8,234 $ 7,861
Accounts payable 54,943 58,451
Accrued expenses 40,073 35,348
--------- --------
Total current liabilities 103,250 101,660
Long-term debt 298,325 298,329
Deferred employee benefits 22,058 21,530
Environmental liability 32,645 32,645
Deferred income taxes 31,194 38,186
--------- --------
487,472 492,350
--------- --------
Minority interests 29,317 32,502
--------- --------
Contingencies (Note 6)
STOCKHOLDERS'
EQUITY
Common stock 258 258
Additional paid-in capital 227,584 227,584
Retained earnings 119,675 130,958
Accumulated other comprehensive income:
Cumulative foreign currency translation adjustment (6,503) (6,398)
--------- ---------
341,014 352,402
--------- --------
$ 857,803 $877,254
========= ========
The accompanying notes are an integral part of the consolidated
financial statements.
-2-
<PAGE>
OREGON STEEL MILLS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except tonnage and per share amounts)
(Unaudited)
Three Months Ended March 31,
----------------------------
2000 1999
---------- ---------
Sales $ 164,903 $ 239,655
--------- ---------
Costs and expenses:
Cost of sales 161,642 198,317
Selling, general and administrative
expenses 12,611 14,030
Profit participation and other incentive
compensation 165 3,044
--------- ---------
174,418 215,391
--------- ---------
Operating income (loss) (9,515) 24,264
Other income (expense):
Interest and dividend income 119 78
Interest expense, net (8,506) (9,613)
Minority interests 447 (1,093)
Other, net 62 207
--------- ---------
Income (loss) before income taxes (17,393) 13,843
Provision for income tax benefit (expense) 6,626 (5,432)
--------- ---------
Net income (loss) $ (10,767) $ 8,411
========= =========
Basic and diluted net income (loss) per
share $(.41) $.32
Dividends declared per common share $.02 $.14
Weighted average common shares and
common share equivalents outstanding 26,375 26,375
Tonnage sold 431,500 457,900
The accompanying notes are an integral part of the consolidated
financial statements.
-3-
<PAGE>
<TABLE>
OREGON STEEL MILLS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(10,767) $ 8,411
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 10,890 10,970
Deferred income tax provision (6,989) 3,105
Minority interests' share of income (447) 1,093
Other, net -- (55)
Changes in operating assets and liabilities 10,779 11,651
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,466 35,175
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (4,406) (3,696)
Other, net 492 (1,629)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (3,914) (5,325)
-------- --------
Cash flows from financing activities:
Net payments under Canadian bank
revolving loan facility (20) (3,883)
Proceeds from long-term bank debt 71,680 52,900
Payments on long-term debt (64,539) (71,399)
Repurchase of bonds (6,750) --
Dividends paid (516) (3,609)
Minority portion of subsidiary's distribution (2,739) (5,264)
-------- --------
NET CASH USED BY FINANCING ACTIVITIES (2,884) (31,255)
-------- --------
Effects of foreign currency exchange rate changes on cash (106) 575
-------- --------
Net decrease in cash and cash equivalents (3,438) (830)
Cash and cash equivalents at beginning of period 9,270 9,044
-------- --------
Cash and cash equivalents at end of period $ 5,832 $ 8,214
======== ========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 2,654 $ 4,100
Income taxes $ 1,829 $ 805
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
-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"), which include wholly-owned
Camrose Pipe Corporation ("CPC") which owns a 60 percent interest in
Camrose Pipe Company ("Camrose"), and 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"). The
Company also directly owns an additional 4.3 percent interest in CF&I. In
January 1998, CF&I assumed the trade name Rocky Mountain Steel Mills. 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 1999 Annual Report on Form 10-K
for additional disclosures including a summary of significant accounting
policies.
2. Inventories
-----------
Inventories consist of:
March 31, December 31,
2000 1999
--------- ------------
(In thousands)
Raw materials $ 12,076 $ 14,383
Semifinished product 35,315 46,819
Finished product 34,932 35,536
Stores and operating supplies 26,310 25,945
-------- --------
Total inventory $108,633 $122,683
======== ========
3. Common Stock
------------
On April 27, 2000, the Board of Directors declared a quarterly cash
dividend of $.02 cents per share to be paid May 31, 2000, to stockholders
of record as of May 15, 2000.
4. Net Income (Loss) per Share
---------------------------
Basic and diluted net income (loss) per share was as follows:
Three Months Ended March 31,
----------------------------
2000 1999
--------- ---------
(In thousands,except
per share amounts)
Weighted average number of common shares
outstanding 25,777 25,777
Shares of common stock to be issued March 2003 598 598
-------- ------
26,375 26,375
======== ======
Net income (loss) $(10,767) $ 8,411
======== ========
Basic and diluted net income (loss) per share $ (.41) $ .32
======== ========
-5-
<PAGE>
5. Comprehensive Income (Loss)
---------------------------
Three Months Ended March 31,
----------------------------
2000 1999
---------- --------
(In thousands)
Net income (loss) $(10,767) $ 8,411
Foreign currency translation adjustment (106) 575
-------- --------
Comprehensive income (loss) $(10,873) $ 8,986
======== ========
6. Contingencies
-------------
ENVIRONMENTAL
All material environmental remediation liabilities, which are probable and
estimable, are recorded in the financial statements based on current
technologies and current environmental standards at the time of evaluation.
Adjustments are made when additional information is available that suggests
different remediation methods or periods may be required and affect the
total cost. The best estimate of the probable cost within a range is
recorded; however, if there is no best estimate, the low end of the range
is recorded and the range is disclosed.
PUEBLO MILL. In connection with the 1993 acquisition of CF&I, primarily
the steel mill at Pueblo, Colorado ("Pueblo Mill"), the Company
accrued a liability of $36.7 million for environmental remediation. The
Company believed this amount was the best estimate from a range of $23.1
million to $43.6 million. The Company's estimate of this liability was
based on two separate remediation investigations conducted by independent
environmental engineering consultants. The liability includes costs for the
Resource Conservation and Recovery Act facility investigation, a corrective
measures study, remedial action, and operation and maintenance associated
with the proposed remedial actions. In October 1995, CF&I and the Colorado
Department of Public Health and Environment ("CDPHE") finalized a
postclosure permit for hazardous waste units at the Pueblo Mill. As part of
the postclosure permit requirements, CF&I must conduct a corrective action
program for the 82 solid waste management units at the facility and
continue to address projects on a prioritized corrective action schedule
which is substantially reflective of a straight-line rate of expenditure
over 30 years. The State of Colorado mandated that the schedule for
corrective action could be accelerated if new data indicated a greater
threat existed to the environment than was presently believed to exist. At
March 31, 2000, the accrued liability was $33.3 million, of which $30.9
million was classified as non-current in the consolidated balance sheet.
The CDPHE has inspected the Pueblo Mill for possible environmental
violations, and in the fourth quarter of 1999, issued a Compliance Advisory
indicating that air quality regulations had been violated. The CDPHE has
now filed a judicial enforcement action, which could result in the levying
of significant fines and penalties, requirements to alter its operating
procedures, requirements to accelerate or expand the capital expenditure
program or a combination of any of the above. It is not presently possible
to estimate the ultimate liability as a result of the action.
On April 27, 2000, the United Steel Workers of America ("Union") filed suit
in U.S. District Court in Denver asserting that the Company had violated
the Clean Air Act Amendments ("CAA") of 1990 at the Pueblo Mill for a
period extending over five years. The suit seeks to compel the Company to
incur significant capital improvements or alter its operating procedures so
that the Pueblo Mill would be in compliance with more stringent
environmental standards than the Company currently is operating under. The
Company does not believe as a matter of law that it has an obligation to
meet these standards. It is not presently possible to estimate the ultimate
liability as a result of such a finding, in the event of an adverse
finding.
PORTLAND MILL. In May 2000, the Company agreed to a request from the Oregon
Department of Environmental Quality to participate in an investigation
whether, and to what extent, past or present operations of the Company
might have affected sediment quality in the Willamette River. It is not
presently possible to estimate the costs associated with this
investigation.
-6-
<PAGE>
LABOR DISPUTE
The labor contract at CF&I expired on September 30, 1997. After a brief
contract extension intended to help facilitate a possible agreement, on
October 3, 1997 the Union initiated a strike at CF&I for approximately
1,000 bargaining unit employees. The parties failed to reach final
agreement on a new labor contract due to differences on economic issues. As
a result of contingency planning, the Company was able to avoid complete
suspension of operations at the Pueblo Mill by utilizing a combination of
permanent replacement workers, striking employees who returned to work and
salaried employees.
On December 30, 1997 the Union called off the strike and made an
unconditional offer to return to work. At the time of this offer, only a
few vacancies existed at the Pueblo Mill. As of the end of March 31, 2000,
161 former striking employees had returned to work as a result of their
unconditional offer. Approximately 640 former striking workers remain
unreinstated ("Unreinstated Employees").
On February 27, 1998 the Regional Director of the National Labor Relations
Board ("NLRB") Denver office issued a complaint against CF&I, alleging
violations of several provisions of the National Labor Relations Act
("NLRA"). The Company not only denies the allegations, but rather believes
that both the facts and the law fully support its contention that the
strike was economic in nature and that it was not obligated to displace the
properly hired permanent replacement employees. On August 17, 1998, a
hearing on these allegations commenced before an Administrative Law Judge
("Judge"). Testimony and other evidence were presented at various sessions
in the latter part of 1998 and early 1999, concluding on February 25, 1999.
The Judge will render a decision that is automatically subject to appeal by
either party to the NLRB in Washington, D.C. The ultimate determination of
the issues may require a ruling from the appropriate United States
appellate court.
Among the issues pending in the litigation is CF&I's motion asserting that
the Judge should consider the Union's alleged NLRA violations and that the
alleged misconduct should invalidate the Unreinstated Employees' right to
reinstatement. In the event there is an adverse determination of these
issues, Unreinstated Employees could be entitled to back pay, including
benefits, from the date of the Union's unconditional offer to return to
work through the date of the adverse determination. The number of
Unreinstated Employees entitled to back pay would probably be limited to
the number of past and present replacement workers; however, the Union
might assert that all Unreinstated Employees should be entitled to back
pay. Back pay is generally determined by the quarterly earnings of those
working less interim wages earned elsewhere by the Unreinstated Employees.
In addition to other considerations, each Unreinstated Employee has a duty
to take reasonable steps to mitigate the liability for back pay by seeking
employment elsewhere that has comparable demands and compensation. It is
not presently possible to estimate the ultimate liability in the event of
an adverse determination.
During the strike by the Union at CF&I, 39 bargaining unit employees of the
Colorado & Wyoming Railway Company ("C&W"), a wholly-owned subsidiary of
New CF&I, Inc. that provides rail service to the Pueblo Mill, refused to
report to work for an extended period of time. The bargaining unit
employees of C&W were not on strike. C&W considered these employees to have
quit their employment and, accordingly, C&W declined to allow those
individuals to return to work. The unions representing these individuals
have filed lawsuits in the U.S. District Court of Colorado against C&W
claiming their members had refused to cross the picket line because they
were honoring the picket line of another organization or because of safety
concerns stemming from those picket lines. The unions demand reinstatement
of the former employees, back pay, benefits and other damages. The Company
believes it has substantial defenses against these claims. However, it is
possible that one or more of them will proceed to arbitration before the
National Railroad Adjustment Board or otherwise initiate further judicial
proceedings. The outcome of such proceedings is inherently uncertain and it
is not possible to estimate any potential settlement amount that would
result from an adverse legal or arbitration decision.
-7-
<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, general business
and economic conditions; competitive products and pricing, as well as
fluctuations in demand; the supply of imported steel and subsidies provided by
foreign governments to support steel companies domiciled in their countries;
potential equipment malfunction; work stoppages, plant construction and repair
delays, and failure of the Company to accurately predict the impact of lost
revenues associated with interruption of the Company's, its customers' or
suppliers' operations.
The Company is organized into two business units known as the Oregon Steel
Division and the Rocky Mountain Steel Mills ("RMSM") Division. The Oregon Steel
Division is centered on the Company's steel plate minimill in Portland, Oregon
("Portland Mill"). In addition to the Portland Mill, the Oregon Steel Division
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 RMSM Division consists of the steelmaking and finishing
facilities of CF&I Steel, L.P. ("CF&I") located in Pueblo, Colorado, as well as
certain related operations.
Results of Operations
- ---------------------
The following table sets forth by division tonnage sold, sales and average
selling price per ton:
Three Months Ended March 31,
----------------------------
2000 1999
----------- ----------
Total tonnage sold:
Oregon Steel Division:
Plate and Coil 206,600 99,500
Welded pipe 38,800 159,700
------- -------
Total Oregon Steel Division 245,400 259,200
------- -------
RMSM Division:
Rail 75,000 95,000
Rod/Bar 94,600 93,100
Seamless Pipe - 8,500
Semifinished 16,500 2,100
------- -------
Total RMSM Division 186,100 198,700
------- -------
Total Company 431,500 457,900
======= =======
Sales (in thousands):
Oregon Steel Division $ 99,207 $167,933
RMSM Division 65,696 71,722
-------- --------
Total Company $164,903 $239,655
======== ========
Average selling price per ton:
Oregon Steel Division $404 $648
RMSM Division $353 $361
Company Average $382 $523
Sales decreased 31.2 percent for the first quarter on a year over year
basis, from $239.7 million in 1999 to $164.9 million in 2000 while shipments
decreased 5.8 percent to 431,500 tons in the first quarter of 2000 from 457,900
tons in the first quarter of 1999. The decrease in sales and shipments was
primarily the result of decreased shipments of welded pipe products by the
Oregon Steel Division and a decrease in rail and seamless pipe shipments by the
RMSM Division, offset partially by increased shipments of plate products by the
Oregon Steel Division and rod and bar products by the RMSM Division.
-8-
<PAGE>
OREGON STEEL MILLS, INC.
The consolidated average selling price decreased to $382 per ton for the
first quarter of 2000 from $523 per ton in the first quarter of 1999. The
reduction in average selling price is primarily due to a shift in product mix
from large diameter welded pipe to commodity plate products and lower average
selling prices for the Company's plate and welded pipe products, partially
offset by higher rod product selling prices.
The Oregon Steel Division shipped 245,400 tons of plate, coil and welded
pipe products at an average selling price of $404 per ton during the first
quarter of 2000 as compared to 259,200 tons of product at an average selling
price of $648 per ton for the first quarter of 1999. The decrease in the average
selling price is due primarily to a shift in product mix from large diameter
welded pipe to plate, as welded pipe generally has a higher average selling
price than plate, and to a decrease in the average selling price for plate as
compared to average selling price one year ago. Welded pipe shipments during
the first quarter of 2000 were significantly less than in the comparable period
in 1999, decreasing to 38,800 tons for 2000 from 159,700 tons in 1999. The level
of shipments of pipe during 1999 was the result of production of the Alliance
Pipeline project at the Napa pipe mill, which concluded in the fourth quarter of
1999. During the first quarter of 2000, the Oregon Steel Division plate mill
produced 217,600 tons of plate and coil products compared to 206,100 tons in the
first quarter of 1999. Shipments to plate and coil customers during the first
quarter of 2000 were 206,600 tons compared to 99,500 tons during the
corresponding 1999 period.
The RMSM Division shipped 186,100 tons of rail, rod, and semifinished
products at an average selling price of $353 per ton during the first quarter of
2000, compared to 198,700 tons of product, including seamless pipe, at an
average selling price of $361 per ton for the first quarter of 1999. The
decrease in shipments is a result of reduced rail shipments and a lack of
seamless pipe shipments, partially offset by increased rod and bar and
semi-finished shipments. The decrease in average selling price is a result of
the shift in product mix as rod and bar and semi-finished products have a
significantly lower average selling price than that of rail and seamless pipe.
However, increases in average rod and bar selling prices have partially offset
the impact of this shift on overall average selling prices. Rod and bar product
shipments during the first quarter of 2000 were 94,600 tons compared to 93,100
tons during the first quarter of 1999. The division shipped 75,000 tons of rail
during the first quarter of 2000 compared to 95,000 tons in the first quarter of
1999.
Gross profit for the first quarter of 2000 was $3.3 million or 2.0 percent
compared to $41.3 million or 17.2 percent for the first quarter of 1999. Gross
profit was unfavorably impacted by decreased sales of welded pipe and rail
products, and a decrease in the average selling price of welded pipe and plate
products. These decreases were partially offset by improvements in the
profitability of rod and bar products, and the financial impact of shutting down
the seamless mill, which had operated unprofitably in the first quarter of 1999,
and was subsequently closed in May 1999.
Selling, general and administrative expenses for the first quarter of
2000 decreased $1.4 million from the corresponding 1999 period and increased as
a percentage of sales to 7.6 percent in the first quarter of 2000, from 5.9
percent for the corresponding 1999 period. The decrease in dollar cost is
primarily due to decreased shipping costs. The percentage of sales increase was
primarily due to the significant declines in sales volumes for the higher priced
welded pipe products.
Profit participation and other incentive compensation expense was $165,000
for the first quarter of 2000 compared to $3.0 million in the corresponding 1999
period reflecting the decreased profitability in 2000 versus 1999.
Total interest expense for the first quarter of 2000 was $8.5 million
compared to $9.6 million for the corresponding 1999 period. The decrease in
expense was primarily due to a decrease in the average borrowing for the first
quarter in 2000 as compared to the first quarter in 1999.
The Company's effective income tax rates for state and federal taxes were
a benefit of 38.1 percent and a provision of 39.2 percent for the three month
period ended March 31, 2000 and 1999, respectively.
-9-
<PAGE>
OREGON STEEL MILLS, INC.
Liquidity and Capital Resources
- -------------------------------
Cash flow from operations for the three month period ended March 31, 2000
was $3.5 million compared to $35.2 million in the first quarter of 1999. The
major items affecting the $31.7 million decrease were the net loss in 2000
versus net income in 1999 and an increase in deferred taxes for 2000 compared to
a decrease in 1999.
Net working capital at March 31, 2000 decreased $13.7 million compared to
December 31, 1999 reflecting a $12.1 million decrease in current assets and a
$1.6 million increase in current liabilities. The decrease in current assets was
primarily due to decreased inventories ($14.1 million) and cash and cash
equivalents ($3.4 million), partially offset by increased trade accounts
receivable ($5.9 million). The increase in current liabilities was due to
increased accrued expenses ($4.7 million) related to the accrued interest for
the 11% First Mortgage Notes ("Notes"), partially offset by reduced accounts
payable ($3.5 million) related to the lower inventory.
During the first three months of 2000, the Company expended (exclusive of
capital interest) approximately $3.7 million and $651,000 on capital projects at
the Oregon Steel Division and the RMSM Division, respectively.
The Company has $228.3 million principal amount of Notes, due 2003, payable
to outside parties. New CF&I, Inc. and CF&I (collectively, "Guarantors")
guarantee the Notes. The Notes and the guarantees are secured by a lien on
substantially all the domestic property, plant and equipment and certain other
assets of the Company and the Guarantors. The collateral for the Notes and the
guarantees does 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. Under these restrictions, $5.0 million was available for cash
dividends at March 31, 2000.
The Company maintains a $125 million revolving bank credit facility,
amended on March 30, 2000 ("Amended Credit Agreement"), and expires June 11,
2002. The Amended Credit Agreement is drawn upon based on the Company's domestic
accounts receivable and inventory balances, which are collateral for any
borrowings under the Amended Credit Agreement. At March 31, 2000, $51.0 million
was outstanding under the Amended Credit Agreement. At the Company's election,
interest on the Amended Credit Agreement is based either on the London Interbank
Offering Rate ("LIBOR"), the prime rate, or the federal funds rate, plus a
margin determined by the Company's leverage ratio. The annual commitment fees
are .63 percent of the unused portion of the Amended Credit Agreement. The
Guarantors guarantee amounts outstanding under the Amended Credit Agreement. The
Amended Credit Agreement contains various restrictive covenants including
minimum tangible net worth, minimum interest coverage ratio, and a maximum debt
to total capitalization ratio.
CF&I incurred $67.5 million in term debt in 1993 as part of the purchase
price of the Pueblo Mill. This debt is without stated collateral and is payable
over ten years with interest at 9.5 percent. As of March 31, 2000, the
outstanding balance on the debt was $27.2 million, of which $18.9 million was
classified as long-term.
Camrose maintains a (CDN) $25 million revolving credit facility with a
Canadian 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 is drawn upon based on Camrose's eligible trade accounts
receivable and inventories. The facility is comprised of two credit lines, a
(CDN) $10.0 million line that expires September 12, 2000 and a (CDN) $15.0
million line that expires September 12, 2002. At the Company's election,
interest is payable based on either the bank's Canadian dollar prime rate, the
bank's U.S. dollar prime rate, or LIBOR. Annual commitment fees are .15 and .25
percent of the unused portion of the (CDN) $10.0 million and (CDN) $15.0 million
credit lines, respectively. As of March 31, 2000, Camrose had $126,000
outstanding under the facility.
The Company is able to draw up to $25 million of the borrowings available
under the Amended Credit Agreement to support issuance of letters of credit and
similar agreements. The Company also maintains a uncollateralized and
uncommitted line of credit with another bank to support letters of credit,
foreign exchange contracts and interest rate hedges. At March 31, 2000, $3.7
million was restricted under outstanding letters of credit.
-10-
<PAGE>
OREGON STEEL MILLS, INC.
The Company believes that its anticipated needs for working capital and
capital expenditures through 2000 will be met from funds generated from
operations and borrowings pursuant to the Company's Amended Credit Agreement.
There is no assurance, however, that the amounts from these sources will be
sufficient for such purposes. In that event, or for other reasons, the Company
may be required to seek additional financing, which may include additional bank
financing. There is no assurance that such source of funding will be available
if required or, if available, will be on terms satisfactory to the Company. The
Company's level of indebtedness presents other risks to investors, including the
possibility that the Company and its subsidiaries may be unable to generate cash
sufficient to pay the principal of and interest on their indebtedness when due.
As discussed previously, the Company revised the Amended Credit Agreement
to remain in compliance with the terms of the agreement, and is currently in
compliance with the Amended Credit Agreement's restrictive debt covenants.
However, the Company anticipates the net income for 2000 will be substantially
below the net income realized in 1999, thereby increasing the likelihood that
the Company may not be in compliance with one or more of its covenants during
the remainder of 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes.
-11-
<PAGE>
OREGON STEEL MILLS, INC.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Part 1, "Consolidated Financial Statements - Note 6, Contingencies"
for discussion of litigation brought by the United Steel Workers of America
alleging violations of the Clean Air Act Amendments of 1990 and incorporated by
reference herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on April 27, 2000. The
stockholders elected Thomas B. Boklund as a director, to serve until April 2003,
by a vote of 21,952,800 shares for, 2,077,045 shares withheld authority to vote,
and 1,746,960 shares broker non-votes.
The stockholders also approved the Company's 2000 Nonqualified Stock
Option Plan by a vote of 15,590,169 shares for, 7,694,618 shares against,
745,057 shares abstained and 1,746,960 broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Form of First Amendment to Credit Agreement dated as
of March 30, 2000 between Oregon Steel Mills, Inc. as
borrower, and the Lender party thereto. Portions of
this exhibit have been omitted pursuant to a
confidential treatment request.
27.0 Financial Data Schedule
(b) Reports on Form 8-K
See Item 14(b) of the Company's Annual Report on Form 10-K
for the year ended December 31, 1999.
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: May 12, 2000 /s/ Jeff S. Stewart
--------------------------
Jeff S. Stewart
Corporate Controller
(Principal Accounting Officer)
-12-
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment"),
dated as of March __, 2000, between Oregon Steel Mills, Inc., a Delaware
corporation (the "Borrower"), and the lender party hereto ("Lender").
WITNESSETH:
WHEREAS, the Borrower and Lender are parties to a Credit Agreement,
dated as of June 11, 1999 (the "Existing Credit Agreement"); and
WHEREAS, the Borrower has requested that certain amendments be made to
the Existing Credit Agreement; and
WHEREAS, the Lender is willing to make certain amendments to the
Existing Credit Agreement on the terms and conditions hereinafter provided;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this First Amendment, the parties agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Certain Definitions. The following terms (whether or not
-------------------
underscored) when used in this First Amendment shall have the following
meanings:
"Amended Credit Agreement" shall mean the Existing Credit Agreement as
amended by this First Amendment.
"First Amendment Effective Date" shall have the meaning provided in
Section 4.1.
1.2 Other Definitions. Unless otherwise defined or the context
-----------------
otherwise requires, terms used in this First Amendment have the meanings
provided for in the Existing Credit Agreement.
ARTICLE 2
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on the First Amendment Effective Date, the Existing Credit
Agreement is amended in accordance with the terms of this Article 2; except as
so amended, the Existing Credit Agreement shall continue to remain in all
respects in full force and effect.
1 - FIRST AMENDMENT
<PAGE>
2.1 Amendments to Section 1.1.
-------------------------
2.1.1 The definitions of the terms "Applicable Margin" and
"Commitment Fee Rate" appearing in Section 1.1 of the Existing Credit Agreement
are amended and restated in their entirety to read as follows:
"Applicable Margin" and "Commitment Fee Rate" means, in the
----------------- -------------------
case of any Loan or commitment fee, a rate per annum determined by reference to
the Leverage Ratio as of the last day of the most recently ended Fiscal Quarter,
as follows:
<TABLE>
<CAPTION>
Reserve
Adjusted
LIBO
Leverage Ratio Margin Base Rate Margin Commitment Fee
-------------- -------- ---------------- --------------
<S> <C> <C> <C>
less than or equal to 1.75 to 1.00 1.25% 0% .30%
greater than 1.75 to 1.00 but less than or 1.50% 0% .375%
equal to 2.25 to 1.00
greater than 2.25 to 1.00 but less than or 1.75% .25% .375%
equal to 3.00 to 1.00
greater than 3.00 to 1.00 but less than or 2.00% .50% .50%
equal to 3.50 to 1.00
greater than 3.50 to 1.00 but less than or 2.50% 1.00% .50%
equal to 4.00 to 1.00
greater than 4.0 to 1.00 but less than or 2.75% 1.25% .50%
equal to 4.5 to 1.00
greater than 4.5 to 1.00 but less than or 3.00% 1.50% .50%
equal to 5.00 to 1.00
greater than 5.00 to 1.00 3.25% 1.75% .50%
</TABLE>
The Applicable Margin shall be based on the Leverage Ratio as set forth
in the most recent Compliance Certificate, and shall be effective from and
including the date the Lender receives such Compliance Certificate to but
excluding the date on which the Lender receives the next Compliance Certificate;
provided, however, that if Lender does not receive a Compliance Certificate by
- -------- -------
the date required by Section 7.1.1(c), the Applicable Margin shall, effective as
---------------
of such date, increase by one level to but excluding the date Lender receives
such Compliance Certificate. Subject to the foregoing proviso, from the First
Amendment Effective Date until the date on which Lender has received a
Compliance Certificate for the quarter ended September 30,
2 - FIRST AMENDMENT
<PAGE>
2000, the Borrower's Reserve Adjusted LIBO Margin, Base Rate Margin and
Commitment Fee will be 3.00%, 1.50% and .625%, respectively.
2.2 Amendments to Section 4.9.
-------------------------
Section 4.9 of the Existing Credit Agreement is amended by deleting the
following words from the first sentence:
"; provided, that the Borrower may use proceeds of Borrowings under
this Agreement and of borrowings under Loans permitted by Section 7.2.2(b) to
pay, refinance or refund no more than $25,000,000 of other senior Indebtedness;
provided, further, however, that so long as the Borrower's Leverage Ratio,
tested on a rolling four quarter basis, shall be equal to or less than 2.50 to
1.00, the Borrower may use such proceeds to pay, refinance or refund up to an
additional $10,000,000 of other senior Indebtedness (i.e. $35,000,000 in the
aggregate)".
2.3 Amendments to Section 7.1.1(j).
------------------------------
Section 7.1.1(j) of the Existing Credit Agreement is amended and
restated in its entirety to read as follows:
(j) (1) as soon as available and in any event within 30 days
after the commencement of each Fiscal Quarter and 60 days after the
commencement of each Fiscal Year, a consolidated financial forecast for
the Borrower and its Subsidiaries for the twelve month period commencing
with such Fiscal Quarter or for such Fiscal Year; and (2) within five
(5) Business Days of the Borrower's delivery of the financial forecasts to
the Lender, the Borrower will hold a Lender conference call to discuss the
prior Fiscal Quarter results and the latest 12-month forecast.
2.4 Amendments to Section 7.1.9.
----------------------------
A new Section 7.1.9 is added to the Existing Credit Agreement to read
as follows:
Section 7.1.9 Collateral Audit. As soon as can be reasonably
----------------
arranged and in any event no later than May 15, 2000, the Borrower will
arrange for a Collateral audit, the scope of such audit and the
independent accounting firm to perform the audit to be to the satisfaction
of the Lender and the written report of such audit shall be delivered to
the Lender and other Section 7.2.2(b) Lenders no later than 30 days after
the completion of the written report.
3 - FIRST AMENDMENT
<PAGE>
2.5 Amendments to Section 7.2.4(b).
------------------------------
Section 7.2.4(b) of the Existing Credit Agreement is amended and
restated in its entirety to read as follows:
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
-------------- -------------------------------
March 31, 2000 2.10 to 1.00
June 30, 2000 1.87 to 1.00
September 30, 2000 1.67 to 1.00
December 31, 2000 1.94 to 1.00
March 31, 2001 and thereafter 2.50 to 1.00
2.6 Amendments to Section 7.2.4(d).
------------------------------
Section 7.2.4(d) of the Existing Credit Agreement is amended and
restated in its entirety to read as follows:
Its Leverage Ratio, tested on a rolling four quarter basis, to
be greater than the specified ratio as of the end of any of the
following Fiscal Quarters:
Fiscal Quarter Maximum Leverage Ratio
-------------- ----------------------
March 31, 2000 4.00 to 1.00
June 30, 2000 4.75 to 1.00
September 30, 2000 5.50 to 1.00
December 31, 2000 4.50 to 1.00
March 31, 2001 and thereafter 3.00 to 1.00
4 - FIRST AMENDMENT
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to make the amendments provided
for in Article 2, the Borrower (a) represents and warrants, that, immediately
after giving effect to the provisions of this First Amendment, each of the
representations and warranties contained in the Existing Credit Agreement and
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 or warranty relates to an
earlier date, such representation and warranty shall be true and correct in all
material respects as of such earlier date) and 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.
ARTICLE 4
CONDITIONS TO EFFECTIVENESS
4.1 Effective Date. This First Amendment shall become effective on the
--------------
date (the "First Amendment Effective Date") when the conditions set forth in
this Section 4.1 have been satisfied.
4.1.1 Execution of Counterparts. The Lender shall have received
-------------------------
(a) counterparts of this First Amendment duly executed and delivered on behalf
of the Borrower and the Lender; and (b) identical counterparts of the First
Amendment duly executed and delivered on behalf of the Borrower and each
Section 7.2.2(b) Lender.
4.1.2 Amendment Fee. The Borrower shall have made payment to Lender
-------------
of an amendment fee in an amount equal to .30% of the Lender's Revolving Loan
Commitment Amount.
4.1.3 Legal Details, etc. All documents executed or submitted pursuant
-------------------
to this First Amendment, and all matters incident thereto, shall be satisfactory
in form and substance to the Lender and its counsel.
4.2 Expiration. If all of the conditions set forth in Section 4.1 hereof
----------
shall not have been satisfied on or prior to March 31, 2000, the agreements of
the parties contained in this First Amendment shall, unless otherwise agreed by
the Lender, terminate effective immediately on such date and without further
action.
ARTICLE 5
MISCELLANEOUS
5.1 Loan Document Pursuant to Existing Credit Agreement. This First
---------------------------------------------------
Amendment is a Loan Document executed pursuant to the Existing Credit Agreement.
Except as expressly
5 - FIRST AMENDMENT
<PAGE>
amended or waived in the First Amendment, all of the representations,
warranties, terms, covenants and conditions contained in the Existing Credit
Agreement and each other Loan Documents shall remain unamended and in full force
and effect. The amendments set forth in the First Amendment shall be limited
precisely as provided for in this First Amendment and shall not be deemed to be
a waiver of, amendment of, consent to or modification of any other term or
provisions of the Existing Credit Agreement or of any term or provision of any
other Loan Document or of any transaction or further or future consent on the
part of the Borrower or any of its Subsidiaries or which would require the
consent of the Lender under the Existing Credit Agreement or any other Loan
Document.
5.2 Counterparts, etc. This First Amendment 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.
5.3 Governing Law. This First Amendment shall be deemed to be a contract
-------------
made under and governed by the internal laws of the State of New York.
6 - FIRST AMENDMENT
<PAGE>
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
executed by their respective officers hereunto duly authorized as of the day and
year first above written.
OREGON STEEL MILLS, INC.
By: /s/ Jeff S. Stewart
-------------------------
Name: Jeff S. Stewart
Title: Corporate Controller
LENDER:
By: *
---------------------------------------
Name: *
-------------------------------------
Title: *
------------------------------------
* CONFIDENTIAL TREATMENT REQUESTED
7 - FIRST AMENDMENT
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<ARTICLE> 5
<CIK> 0000830260
<NAME> Oregon Steel Mills, Inc.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 5832
<SECURITIES> 0
<RECEIVABLES> 70463
<ALLOWANCES> (2034)
<INVENTORY> 108633
<CURRENT-ASSETS> 196101
<PP&E> 856007
<DEPRECIATION> (254663)
<TOTAL-ASSETS> 857803
<CURRENT-LIABILITIES> 103250
<BONDS> 228250
0
0
<COMMON> 258
<OTHER-SE> 340756
<TOTAL-LIABILITY-AND-EQUITY> 857803
<SALES> 164903
<TOTAL-REVENUES> 164903
<CGS> 161642
<TOTAL-COSTS> 161642
<OTHER-EXPENSES> 12776
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8506
<INCOME-PRETAX> (17393)
<INCOME-TAX> (6626)
<INCOME-CONTINUING> (10767)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10767)
<EPS-BASIC> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
