<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
BIRMINGHAM STEEL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
THE UNITED COMPANY SHAREHOLDER GROUP
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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<PAGE> 2
THE UNITED COMPANY SHAREHOLDER GROUP
1005 GLENWAY AVENUE
BRISTOL, VIRGINIA 24201
November 21, 1999
To Institutional Shareholders
Re: Financial Projections of SBQ Operations
On page two of this letter is a table which was filed with the
Securities and Exchange Commission by Birmingham Steel Corporation ("BIR") as
part of a presentation given by Bob Garvey and several directors of BIR to
Institutional Shareholder Services ("ISS") last week. The table estimates
financial results of the SBQ operations under a full production scenario and a
scaled-back production scenario for the next seven months. We believe Mr. Garvey
is likely to discuss this table with you to try to influence your proxy vote.
It is interesting to note that the presence of the Directors at the
meeting with ISS is an acknowledgment of their approval of:
- 25 months of mismanaged start-up costs at Memphis.
- Three years of losses and a write-off of BIR's entire
investment in Pacific Coast Recycling.
- The effect of Bob Garvey's nine month control of Laclede Steel
- a write-off of BIR's entire investment.
- The electrical control contract that continues to extend the
losses at Cartersville in excess of three years.
- The decision to conceal BIR's default under its Credit
Agreement on July 27, 1999 from shareholders and the
investment community until September 29, 1999.
Consider the last 3 1/2 years under Garvey and then decide if you can
afford another year of broken promises, poor performance, and decreasing value
of your investment.
<PAGE> 3
November 21, 1999
- ------------------
By using the table below, we believe Mr. Garvey is trying to persuade
you that the United Company would operate the SBQ assets under Scenario 1, his
"full production" estimate. It is important to note that over the past two
years, Mr. Garvey has proven that he is not adept at making estimates by
repeatedly failing to meet earnings expectations and start up projections.
Scenario 1 (full production)
<TABLE>
<CAPTION>
DECEMBER JANUARY FEBRUARY MARCH APRIL MAY JUNE 7 MONTHS
-------- ------- -------- ----- ----- --- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Special Bar Quality Division
EBITDA $ (2,799) $ (2,863) $ (2,680) $ (2,399) $ (2,253) $ (2,421) $ (2,566) $(17,981)
Working capital (1,294) (1,471) (8,375) (6,797) (200) (396) 682 (17,852)
Capital expenditures (1,500) (2,000) (1,500) 0 0 0 0 (5,000)
--------- --------- --------- --------- --------- --------- --------- --------
Cash flow available for
debt repayment (5,593) (6,335) (12,554) (9,197) (2,453) (2,817) (1,884) (40,833)
Birmingham Steel (includes
SBQ)
Credit facility $ 270,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000
Estimated borrowing 259,672 268,168 289,717 310,833 313,175 315,792 321,386
--------- --------- --------- --------- --------- --------- ---------
Excess availability $ 10,328 $ 31,832 $ 10,283 $ (10,833) $ (13,175) $ (15,792) $ (21,386)
</TABLE>
Scenario 2 (production scale-back)
<TABLE>
<CAPTION>
DECEMBER JANUARY FEBRUARY MARCH APRIL MAY JUNE 7 MONTHS
-------- ------- -------- ----- ----- --- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Special Bar Quality Division
EBITDA $ (2,859) $ (3,780) $ (3,780) $ (3,780) $ (3,780) $ (3,780) $ (3,780) $(25,537)
Working capital 8,798 4,642 (1,289) 180 873 0 0 (13,205)
Capital expenditures (1,500) (2,000) (1,500) 0 0 0 0 (5,000
--------- --------- --------- --------- --------- --------- --------- --------
Cash flow available for
debt repayment 4,440 (1,137) (6,569) (3,599) (2,906) (3,780) (3,780) (17,331)
Birmingham Steel (includes
SBQ)
Credit facility $ 270,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000
Estimated borrowing 233,846 237,145 252,708 268,226 271,021 274,601 282,090
--------- --------- --------- --------- --------- --------- ---------
Excess availability $ 36,154 $ 62,855 $ 47,292 $ 31,774 $ 28,979 $ 25,399 $ 17,910
</TABLE>
While Scenario 1 on the above table is assumed to be Mr. Garvey's
estimate of the United Group's operation of the SBQ assets, Scenario 2 is
assumed to be the estimate of current management's operation of the SBQ assets.
Although current management's estimate of their operations may be acceptable,
the estimate of the United Group's operation of the SBQ assets is pure wrong.
We believe the following events have negatively influenced Mr. Garvey's
estimates:
- BIR's DRI plant has been shut down since early October.
Memphis billet quality which was questionable is now even
worse.
- Cleveland facility's purchase of billets is erratic, we
believe, due to BIR not paying certain bills on time.
- Marginal quality billets are driving down quality of Cleveland
production.
2
<PAGE> 4
November 21, 1999
- ------------------
- Cleveland selling prices are eroding.
- Price concessions are being made to stimulate sales.
- Long term sales commitments at cut prices are being made.
Additionally, in reviewing the table the following should be obvious:
- The December production and shipment schedule should already
be established - thus, December estimates should be the same
in both Scenarios (effectively revising Scenario 1 cash
consumption by $26 million).
- Caster repairs are not completed under Mr. Garvey's estimates
until February and therefore production is hampered until
March.
Furthermore, current management recorded a $56 million reserve for
estimated operating losses on the SBQ assets during their expected disposal
period. Based on reported losses of $21 million for the quarter ending September
30, 1999 and estimated borrowings under Scenario 2 in the above table, total
operating losses on the SBQ assets would be $72 million through March 31, 2000.
It is highly unlikely that a sale will be completed and title will transfer on
the SBQ assets by March 31, 2000. Therefore, the original estimated reserve
would need to be increased, further reducing shareholders' equity.
A potentially profitable SBQ business has been lost by current
management's failure at Memphis to complete the caster upgrade of run out tables
and stainless piping included in the original scope of work. In sum, a
substantial steel company has been put in economic jeopardy by current
management's failure to complete necessary and planned repairs that have been
repeatedly recommended by Memphis middle management.
The United Group has received oral commitments for SBQ products from
several significant purchasers. If the United Group is successful in the proxy
contest these oral commitments will be formalized to reduce the losses from the
SBQ business so that a rational decision can be made on the disposition of the
SBQ assets.
The problems at the Memphis facility are graphically described by an
unsolicited letter to John Correnti from a former Memphis middle management
supervisor. This letter is attached hereto.
3
<PAGE> 5
November 21, 1999
- ------------------
Thank you for your time and consideration. If you have any questions
please do not hesitate to call us at 205-458-5357.
The United Company Shareholder Group
/S/ John D. Correnti
--------------------------------
John D. Correnti
Attachment
4
<PAGE> 6
Monday, November 8, 1999
John D. Correnti
6833 Aronomink Drive
Charlotte, North Carolina 28210
Mr. Correnti,
My name is _______________, and today I received my proxy card and signed
it for the United Group to vote my shares. While I agree with some of the
statements made about the SBQ division, I also disagree with some.
I have worked in the steel industry for 23 years and never failed doing my
job until I came to BSC Memphis. I've worked for Auburn Steel, Koppel Steel,
and Bar Technologies before coming to Memphis. There are and were good managers
at BSC Memphis. We could not get the support or money from upper management to
do our job. Spare parts were unheard of and to get anything needed the Plant
Manager's signature. The Caster was bought used as were the cranes and caster
electronics, while the rest of the facility was new.
In my career I have never worked in a plant that had two ex-plant managers
still working. (Makki and Holcomb). The current Manager (Olden) was probably a
great rebar or merchant bar melter but, has no clue on Greenfield sites or
managing intelligent people. We had a VP of Operations who I saw three times in
my six months at BSC, a CEO I never saw once, but, who was supposed to be
here one day a week. If Memphis was losing as much money as everyone says where
were those people?
I worked at Memphis for six months, fourteen to twenty hour days, six or
seven day weeks, with phone calls every hour while I was at home. I worked
under unsafe conditions because of manpower shortages and a dictatorship
management. I was forty-eight years old and didn't need the stress anymore. I
saw BSC Memphis lose a lot of good middle managers and supervisors that would
have made it work with the right support.
So when the statement is made that BSC Memphis had poor management. It
should say poor Upper Management.
Thank you for your time and I wish you great success in your new venture.
