<PAGE> 1
FORM 10-Q
---------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-5210
AMERISTEEL CORPORATION
Incorporated - Florida Employer Identification No. 59-0792436
5100 W. Lemon Street
Tampa, Florida 33609
Mailing Address:
P. O. Box 31328
Tampa, Florida 33631-3328
Telephone No. 286-8383 - Area Code 813
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of the date of this report, the registrant had 10,092,295 shares $.01 par
value common stock outstanding.
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AMERISTEEL CORPORATION
CONDENSED STATEMENTS OF FINANCIAL POSITION
($ IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1996
(UNAUDITED)
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,801 $ 6,193
Accounts receivable, less allowance for
estimated losses ($1,078 at June 30, 1996)
and $1,000 at March 31, 1996) 77,066 72,910
Inventories 97,811 112,753
Deferred tax assets 6,700 7,200
Other current assets 785 1,053
----------- ----------
TOTAL CURRENT ASSETS 188,163 200,109
ASSETS HELD FOR SALE 14,411 14,411
PROPERTY, PLANT AND EQUIPMENT
298,484 289,688
Less allowances for depreciation 46,123 42,679
----------- ----------
252,361 247,009
GOODWILL 88,870 89,903
DEFERRED FINANCING COSTS 3,223 3,457
OTHER ASSETS 7 7
----------- ----------
TOTAL ASSETS $ 547,035 $ 554,896
=========== ==========
</TABLE>
see notes to condensed financial statements
2
<PAGE> 3
AMERISTEEL CORPORATION
CONDENSED STATEMENTS OF FINANCIAL POSITION
($ IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1996
(UNAUDITED)
----------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 44,141 $40,234
Salaries, wages and employee benefits 13,927 14,336
Environmental remediation 4,649 6,079
Other current liabilities 5,843 5,057
Interest payable 1,930 4,940
Current maturities of long-term borrowings 10,444 14,942
-------- --------
TOTAL CURRENT LIABILITIES 80,934 85,588
LONG -TERM BORROWINGS,
(INCLUDING NOTE PAYABLE TO PARENT OF
$50,000 AT MARCH 31, AND JUNE 30, 1996, RESPECTIVELY)
247,648 252,525
OTHER LIABILITIES 19,826 20,336
DEFERRED INCOME TAXES 54,700 54,700
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 30,000,000 shares authorized
at March 31, and June 30, 1996. 10,095,741 and 10,092,295
shares outstanding at March 31, and June 30, 1996, respectively. 101 101
Capital in excess of par 156,982 157,026
Accumulated deficit (10,428) (12,380)
Deferred compensation (2,728) (3,000)
-------- ---------
TOTAL SHAREHOLDERS' EQUITY 143,927 141,747
-------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $547,035 $ 554,896
======== =========
See notes to condensed financial statements
</TABLE>
3
<PAGE> 4
AMERISTEEL CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
($ IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 1995
(UNAUDITED) (UNAUDITED)
---------- -----------
<S> <C> <C>
Net Sales $169,822 $165,211
Operating Expenses:
Cost of sales, excluding depreciation 148,912 136,914
Selling and administrative 6,933 7,017
Depreciation 3,995 3,634
Amortization of goodwill 1,033 1,032
Other operating expenses - 15,000
-------- --------
160,873 163,597
-------- --------
INCOME FROM OPERATIONS 8,949 1,614
Other Expenses:
Interest 4,855 6,304
Amortization of deferred financing costs 234 980
-------- --------
5,089 7,284
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES 3,860 (5,670)
Income tax (benefit) 1,908 (1,809)
-------- --------
NET INCOME (LOSS) $ 1,952 $ (3,861)
======== ========
Weighted average shares outstanding
(in thousands) 10,094 10,016
======== ========
Earnings (loss) per common share $ 0.19 $ (0.39)
======== ========
See notes to condensed financial statements
</TABLE>
4
<PAGE> 5
AMERISTEEL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
See notes to condensed financial statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 1995
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 1,952 $(3,861)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation 3,995 3,634
Amortization 1,267 2,012
Provision for uncollectable accounts 90 150
Deferred compensation 272 225
Deferred income taxes 500 (49)
Loss on disposition of property, plant and equipment 23 12,719
Changes in operating assets and liabilities:
Accounts receivable (4,246) 695
Inventories 14,942 626
Other current assets 268 258
Other assets - 14
Trade accounts payable 3,907 (9,546)
Salaries, wages and employee benefits (409) (1,738)
Environmental remediation (1,430) (2,323)
Other current liabilities 786 512
Interest payable (3,010) (3,322)
Other liabilities (510) 119
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 18,397 125
INVESTING ACTIVITIES
Additions to property, plant and equipment (13,514) (8,579)
Proceeds from sales of property, plant and equipment 127 174
Use of restricted IRB funds 4,017 -
------- -------
NET CASH USED IN INVESTING ACTIVITIES (9,370) (8,405)
FINANCING ACTIVITIES
Proceeds from (payments) short-term and long-term borrowings (9,375) 6,800
Addition to deferred financing costs - (600)
Proceeds from sale of (purchase) common stock (44) 610
------- -------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (9,419) 6,810
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (392) (1,470)
Cash and cash equivalents at beginning of period 6,193 2,854
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,801 $ 1,384
======= =======
</TABLE>
5
<PAGE> 6
AMERISTEEL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE A BASIS OF PRESENTATION
These financial statements include the accounts of AMERISTEEL CORPORATION (the
"Company").
The accompanying unaudited condensed financial statements have been prepared in
accordance with the instructions for Form 10-Q and, therefore, do not include
all the information or footnotes necessary for a complete presentation of
financial condition, results of operations and cash flows in conformity with
generally accepted accounting principles. However, all adjustments which, in
the opinion of management, are necessary for a fair presentation have been
included. Such adjustments consisted of only normally recurring items.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K. The results of the three months
ended June 30, 1996 are not necessarily indicative of the results to be
expected for the fiscal year ending March 31, 1997.
NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Segment: The Company is engaged in steel production and the
manufacture, fabrication and marketing of steel products, primarily for use in
construction and industrial markets.
Credit Risk: The Company extends credit, primarily on a basis of 30-day terms,
to various customers in the steel distribution, fabrication and construction
industries, primarily located in the southeastern United States. The Company
performs periodic credit evaluations of its customers and generally does not
require collateral. Credit losses, in the past, have not been significant.
Cash Equivalents: The Company considers all highly liquid investments, with a
maturity of three months or less when purchased, to be cash equivalents.
Inventories: Inventories are stated at the lower of cost (determined
principally by use of the first-in, first-out method) or market.
Assets Held for Sale: Assets held for sale are carried at the lower of cost or
estimated fair value.
Plant and Equipment: Major renewals and betterments are capitalized and
depreciated over their estimated useful lives. Maintenance and repairs are
charged against operations as incurred. Upon retirement or other disposition
of plant and equipment, the cost and related allowances for depreciation are
removed from the accounts and any resulting gain or loss is reflected in
operations.
Plant start-up and other pre-operating costs of new facilities are charged
against operations as incurred.
For financial reporting purposes, the Company provides for depreciation of
plant and equipment using the straight-line method over the estimated useful
lives of 20 to 30 years for buildings and improvements and 4 to 15 years for
machinery and equipment.
6
<PAGE> 7
AMERISTEEL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE C--INVENTORIES
Inventories consist of the following:
($ in thousands)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1996
-------- --------
<S> <C> <C>
Finished goods $52,687 $ 73,196
Work in-process 14,831 16,291
Raw materials and operating supplies 30,293 23,266
------- --------
$97,811 $112,753
======= ========
</TABLE>
NOTE D--BORROWINGS
Long-term borrowings consist of the following:
($ in thousands)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1996
-------- ---------
<S> <C> <C>
Revolving Credit Agreement $ 65,660 $ 71,650
First Mortgage Notes 100,000 100,000
Subordinated Intercompany Note 50,000 50,000
Industrial Revenue Bonds 30,875 30,875
Bank of Tokyo Loan 10,000 10,000
Trade Loan Agreement 1,113 4,498
Note to Parent 444 444
-------- --------
258,092 267,467
Less Current Maturities 10,444 14,942
-------- --------
$247,648 $252,525
======== ========
</TABLE>
Effective June 9, 1995, the Company entered into a two-year revolving bank
agreement (the "Revolving Credit Agreement"), that provides up to $140 million
borrowings subject to a "borrowing base" amount. The borrowing base amount
will not exceed the sum of 85% of eligible accounts receivable plus 65% of
eligible inventory. Letters of credit are subject to an aggregate sublimit of
$50 million. The Revolving Credit Agreement contains certain covenants
including financial ratios and limitations on indebtedness, liens, investments
and disposition of assets and dividends and is collateralized by first priority
security interests in substantially all accounts receivable and inventory of
the Company. In June 1996 the Revolving Credit Agreement was extended an
additional year and will expire June 8, 1998.
Revolving Loans under the Revolving Credit Agreement bear interest at a per
annum rate equal to one of several rate options at the discretion of the
Company plus an applicable margin determined by tests of performance from time
to time. The borrowing rate under the Revolving Credit Agreement, at June 30,
1996 was 6.9%.
7
<PAGE> 8
AMERISTEEL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE D--BORROWINGS - Continued
The First Mortgage Notes are collateralized senior obligations of the Company
limited in aggregate principal amount to $100 million and will mature on
December 15, 2000. Interest on the First Mortgage Notes accrues at the rate of
11.5% per annum and is payable semiannually on each June 15 and December 15.
The Company has assigned and pledged a security interest in substantially all
the real and personal property of the four mills.
The First Mortgage Notes will be redeemable, at the option of the Company, in
whole or in part from time to time, on or after December 15, 1996 at redemption
prices (expressed as percentages of the outstanding principal amount) if
redeemed during the twelve-month period commencing on December 15 of the year
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1996 103.833%
1997 101.916%
1998 and thereafter 100.000%
</TABLE>
The First Mortgage Notes rank pari passu with respect to the payment in full of
the principal and interest on all existing and future senior indebtedness of
the Company and rank senior to all subordinated indebtedness of the Company.
The First Mortgage Notes contain covenants that include, without limitation,
maintenance of sufficient consolidated net worth and limitations on additional
indebtedness, transactions with affiliates, dispositions of assets, liens,
dividends and distributions. The Company is in compliance with these covenants
at June 30, 1996.
The Company has issued to Holdings a $50 million note (the "Subordinated
Intercompany Note") which matures December 21, 2002. The Subordinated
Intercompany Note bears interest at variable rates. The weighted average
interest rate at June 30, 1996 was 7.2%.
The Company also has outstanding borrowings obtained through industrial revenue
bonds ("IRBs") issued to construct facilities in Jackson, Tennessee; Charlotte,
North Carolina; Jacksonville, Florida; and Plant City, Florida. The interest
rates on these bonds range from 50% to 75% of the prime rate. The Company
increased its outstanding IRB's by $20.0 million in fiscal 1996 for a solid
waste disposal project in Jackson, Tennessee. Approximately $9.7 million of
these proceeds had not been spent as of June 30, 1996. These unspent proceeds
are legally restricted for use on the solid waste disposal project and
accordingly, have been classified as construction in progress in the
accompanying statements of financial position. The IRBs mature in fiscal 2004
except for the new IRBs which mature in fiscal 2018. The IRBs are backed by
irrevocable letters of credit issued pursuant to the New Revolving Credit
Agreement. As of June 30, 1996, the Company had approximately $37.1 million of
outstanding letters of credit, primarily for IRBs, insurance-related matters
and surety bonds.
The Note to Parent is an unsecured non-interest bearing note with no stated
maturity. Accordingly, amounts due are classified as current as of June 30,
1996, in the accompanying statements of financial position.
The Company has borrowed $1.1 million as of June 30, 1996, under the Trade Loan
Agreement. The loan bears interest at 7.3% and matures on June 30, 1998. The
proceeds are to be used for the purchase of steel mill equipment which shall
collateralize the loans.
8
<PAGE> 9
AMERISTEEL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE E--ENVIRONMENTAL MATTERS
Environmental legislation and regulation at both the federal and state level is
subject to change, which may change the cost of compliance. Various possible
methods of remediation are presently being studied for approval; however, it is
expected that the investigation and remediation process will take a number of
years. Although the ultimate costs associated with the remediation are not
presently known, the Company has estimated the cost to be approximately $13.3
million. Approximately $11.6 million of these costs is recorded in accrued
liabilities as of June 30, 1996. The remaining amounts consist of site
restoration and environmental exit costs to ready idle facilities for sale, and
have been considered in determining whether the carrying amounts of the
properties exceed their net realizable values. The Company's estimate of the
remediation costs is based on its review of each site and the nature of such
problems. The Company then determines for each site the expected remediation
methods, and the estimated cost for each step of remediation. In all such
determinations, the Company employs outside consultants, and providers of such
remedial services where necessary, to assist in making such determinations.
Based on past use of certain technologies and remediation methods by third
parties, evaluation of those technologies and methods by the Company's
consultants and quotations and third-party estimates of costs of
remediation-related services provided to the Company or of which the Company
and its consultants are aware, the Company and its consultants believe that the
Company's cost estimates are reasonable. In light of the uncertainties
inherent in determining the costs associated with the clean-up of such
contamination, including the time periods over which such costs must be paid,
the extent of contribution by parties which are joint and severally liable, and
the nature and timing of payments to be made under cost sharing arrangements;
there can be no assurance the ultimate costs of remediation may not be greater
or less than the estimated remediation costs.
Other Operating Expenses
In July 1995, the Company announced the closing of the Tampa, Florida rolling
mill, resulting in a $15.0 million charge of which $12.0 million was to reduce
fixed assets to realizable value and $3.0 million for severance and benefit
costs for affected employees and other costs associated with the closure of the
facility.
Litigation
The Company is defending various claims and legal actions which are common to
its operations. While it is not feasible to predict or determine the ultimate
outcome of these matters, none of them, in the opinion of management, will have
a material effect on the Company's financial position or results of operations.
9
<PAGE> 10
AMERISTEEL CORPORATION
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
The Revolving Credit agreement effective June 9, 1995, provides up to $140
million borrowings subject to a "borrowing base" amount which substantially
improves the Company's liquidity and lowers the effective interest rate. The
unused borrowing at June 30, 1996 was $25.2 million.
Net cash provided by operating activities totaled $18.4 million for the quarter
ended June 30, 1996 of which approximately 44% was operating results and 56%
due to changes in working capital. Inventories were reduced $14.9 million
primarily due to lower finished production. The start-up of major capital
projects at the Charlotte, North Carolina and Jackson, Tennessee rolling mills
adversely effected the production in the June 1996 quarter and will continue
into the September 1996 quarter.
The closure of the Tampa rolling mill, effective September 1995, resulted in a
$15 million charge for the June 1995 quarter. Of that amount $12 million was a
non-cash write down of fixed assets and the balance was for severance pay.
The Company expects to spend an additional $20 million for capital expenditures
and approximately $4.5 million for environmental remediation during the balance
of fiscal 1997. However, the cash flow generated from operations, available
financing and $9.7 million cash balance remaining from IRB proceeds should be
sufficient to fund the contemplated expenditures, and maintain adequate
available borrowing capacity under the Revolving Credit Agreement. The Company
continues to comply with all of the covenants of its loan agreements.
10
<PAGE> 11
AMERISTEEL CORPORATION
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION - Continued
RESULTS OF OPERATIONS
- ---------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED:
----------------------
JUNE 30, JUNE 30,
1996 1995
-------- -------
<S> <C> <C>
Shipments (Tons)
-------------------------------
Stock Rebar 134,635 125,344
Merchant Bar 120,784 141,592
Rods 35,398 29,950
------- -------
Mill Finished Products 290,817 296,886
Fabricated Rebar 84,019 88,984
Billets 108,564 20,654
------- -------
Total Shipments 483,400 406,524
======= =======
Selling Price ($ Per Ton)
-------------------------------
Stock Rebar 308 331
Merchant Bar 357 375
Rods 319 359
------- -------
Mill Finished Products 329 355
Fabricated Rebar (plain) 453 461
Billets 222 242
Metal Margin Spread ($ Per Ton)
-------------------------------
Mill Selling Price 329 355
Ferrous Scrap Price 131 133
------- -------
Metal Margin Spread 198 222
</TABLE>
11
<PAGE> 12
AMERISTEEL CORPORATION
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION - Continued
Revenue for the current quarter was up slightly as higher shipments of less
profitable semi-finished mill products offset the revenue erosion of lower
finished product prices and volumes. Compared to the prior year period,
average mill selling prices of finished steel products were down $25 per ton or
7%, and volumes were down about 3%. Also, mill conversion costs were higher in
the current quarter due to lower finished steel production as major capital
projects were started up at the Charlotte, North Carolina and Jackson,
Tennessee rolling mills. The Company's downstream rebar fabrication business
continued to benefit from firm demand, attractive contract pricing on backlog
volume and relatively low raw material rebar prices.
Cost of Sales: Cost of sales, excluding depreciation was 87.7% of sales for
the period ended June 30,1996 as compared to 82.9% for the quarter a year ago.
Scrap costs were $131 per ton for the current quarter versus $133 per ton a
year ago.
The primary reason for the increase in the cost of goods sold, excluding
depreciation, as a % of sales, was the lower selling prices. The average
ferrous metal margin, selling prices less scrap, decreased 11%.
Selling and Administrative Expenses: Selling and administrative expenses were
4.1% of net sales in the quarter ended June 30, 1996 versus 4.2% for the
quarter ended June 30, 1995.
Depreciation: Depreciation for the quarter ended June 30, 1996 was higher than
the quarter ended June 30, 1995 because of the additional capital expenditure
projects completed in the last year.
Interest Expense: Interest expense for the first quarter of fiscal 1997 was
lower than in the first quarter of fiscal 1996 because of lower average debt
and lower interest rates. Capitalized interest in the quarter ended June 30,
1996 was $658 thousand compared with $381 thousand for the quarter ended June
30, 1995.
Income Taxes: The effective federal and state income tax rate for the quarters
ended June 30, 1996 and 1995 was 39%, excluding the effect of the amortization
of goodwill, which is not deductible for income tax purposes.
12
<PAGE> 13
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is defending various claims and legal actions which are common to
its operations. While it is not feasible to predict or determine the outcome
of these matters, none of them, in the opinion of management, will have a
material effect on the Company's financial position or results of operation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following document is filed as an exhibit to this Quarterly
Report on Form 10-Q:
27 Financial Data Schedule (for SEC use only)
(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.
AMERISTEEL CORPORATION
Date: August 8, 1996 /s/ T. G. Creed
---------------------------------------
T. G. Creed, President and Chief
Operating Officer
Date: August 8, 1996 /s/ T. J. Landa
---------------------------------------
T. J.. Landa, Vice President and Chief
Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERISTEEL CORPORATION FOR THE THREE MONTHS ENDED JUNE
30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,801
<SECURITIES> 0
<RECEIVABLES> 78,144
<ALLOWANCES> (1,078)
<INVENTORY> 97,811
<CURRENT-ASSETS> 188,163
<PP&E> 298,484
<DEPRECIATION> 46,123
<TOTAL-ASSETS> 547,035
<CURRENT-LIABILITIES> 80,934
<BONDS> 247,648
0
0
<COMMON> 101
<OTHER-SE> 143,826
<TOTAL-LIABILITY-AND-EQUITY> 547,035
<SALES> 169,822
<TOTAL-REVENUES> 169,822
<CGS> 148,912
<TOTAL-COSTS> 148,912
<OTHER-EXPENSES> 11,871
<LOSS-PROVISION> 90
<INTEREST-EXPENSE> 5,089
<INCOME-PRETAX> 3,860
<INCOME-TAX> 1,908
<INCOME-CONTINUING> 1,952
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,952
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
