<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 1997
Commission File Number -- 1-5210
AMERISTEEL CORPORATION
Florida 59-0792436
(State of Incorporation) (I.R.S. EIN)
5100 W. Lemon Street
Tampa, Florida 33609
Mailing Address:
P.O. Box 31328
Tampa, Florida 33631-3328
Telephone No. (813)286-8383
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $0.01 per share
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: $581,850.
Indicate the number of shares outstanding of each of the registrant's classes of
common equity, as of the latest practicable date:
Common Stock, par value $.01 per share -- 10,075,304 shares as of June 9, 1997.
Documents incorporated by reference: Parts of Information Statement to be
submitted to shareholders prior to July 29, 1997.
<PAGE> 2
PART I
ITEM 1. BUSINESS
AmeriSteel Corporation ("the Company"), formerly known as Florida Steel
Corporation, operates four union-free minimills located in the southeastern
United States that produce steel concrete reinforcing bar ("rebar"), merchant
bars, and rods, all of which are produced from 100% recycled ferrous scrap. The
Company also operates the largest rebar fabricating group in the United States
with 13 plants located in the Southeast. Rebar is used primarily for
strengthening concrete in highway and building construction and other
construction applications. Merchant bars and light structural shapes ("merchant
bars"), which include rounds, squares, flats, angles and channels, are used in a
wide variety of applications including floor and roof joists, transmission
towers, and farm equipment. Rods are used in a variety of applications,
including the manufacture of welded wire fabric and nails.
Approximately two-thirds of the Company's mill rebar production is sold directly
to distributors and independent fabricating companies in stock lengths and
sizes. The other one-third of the rebar produced is transferred to the Company's
13 fabricating plants where value is added by cutting and bending the rebar to
meet strict engineering, architectural and other end-product specifications.
Merchant bars and rods generally are sold by the mills to fabricators, steel
service centers and original equipment manufacturers in stock lengths and sizes.
The Company currently operates four minimills located in Jacksonville, Florida;
Charlotte, North Carolina; and Jackson and Knoxville, Tennessee. Minimills are
steel mills that use electric arc furnaces to melt scrap steel and cast the
resulting molten steel into long strands called billets in a continuous casting
process. The billets are typically transferred to a rolling mill where they are
reheated, passed through roughing mills for size reduction and then rolled into
rebar, merchant bars, or rods. These products emerge from the rolling mill and
are uniformly cooled on a cooling bed. Most merchant products then pass through
automated straightening and stacking equipment. Rebar and merchant products are
neatly bundled prior to shipment to customers by rail or truck. The Company
estimates that it currently has annual steel melting capacity of 2.0 million
tons and finished product rolling capacity of 1.7 million tons. The Company's
operating strategy is focused on improving its position as a low-cost producer
of quality rebar and merchant products.
As of April 1, 1996, the Company changed its name from Florida Steel
Corporation (which it had used since 1956) to AmeriSteel Corporation in order
to reflect that the Company's operations extend substantially beyond the
boundaries of the State of Florida, as they have for many years. The
predecessor of the Company was formed in 1937 as a rebar fabricator. In 1956,
it merged with five steel fabricators in Florida to form the Company, which
then commenced construction of its first minimill.
Approximately 89% of the Company's common stock is held by FLS Holdings, Inc.
("Holdings" or "FLS"), whose only business is to own Company common stock. In
turn, since a merger in December 1992 (the "Acquisition"), Holdings has been
100% owned by Kyoei Steel, Ltd. ("Kyoei"), one of Japan's leading manufacturers
of steel bars. The remaining 11% of the Company's common stock is owned by
executives and other employees.
After the Acquisition, the Company changed its fiscal year-end from September 30
to March 31 in order to have its year-end coincide with that of Kyoei.
Accordingly, all references to "fiscal year" since 1993 refer to a year ended
March 31.
1
<PAGE> 3
FINANCING
The Company's three largest financial obligations currently outstanding are
$100,000,000 11-1/2% First Mortgage Notes due December 15, 2000 (the "First
Mortgage Notes"), a $140,000,000 Revolving Credit Agreement (the "Revolving
Credit Agreement"), and a $50,000,000 Junior Subordinated Intercompany Note due
December 21, 2002 owing to Holdings.
The First Mortgage Notes are secured by the real property, equipment and other
collateral at the Company's minimills.
The Revolving Credit Agreement was entered into as of June 9, 1995 (and was
extended in fiscal 1997) and replaced a $100,000,000 facility of like kind. This
obligation is secured by the Company's inventory and receivables and expires on
June 9, 1998.
PRODUCTION AND FACILITIES
Steel Production. Steel can be produced at significantly lower costs by
minimills than by integrated steel operations. Integrated steel mills, which
typically process iron ore and other raw materials in blast furnaces to produce
steel, generally use costlier raw materials, consume more energy, consist of
older facilities that are more labor intensive and employ a larger and more
highly paid labor force. In general, minimills serve localized markets and
produce a limited line of commodity steel products.
The domestic minimill steel industry currently has excess production capacity.
This excess capacity has resulted in competitive product pricing and cyclical
pressures on industry profit margins. The high fixed costs of operating a
minimill encourage mill operators to maintain high levels of output even during
periods of reduced demand which exacerbates the pressures on profit margins. In
this environment, efficient production and cost controls are important to
domestic minimill steel producers.
The Company's minimills operate their melting facilities seven days per week and
have an annual aggregate melting capacity of approximately 2.0 million tons. The
Jackson, Tennessee, Charlotte, North Carolina and Jacksonville, Florida mills
operate their rolling facilities seven days per week. The Knoxville, Tennessee
minimill operates its rolling facility five days per week.
The following table sets forth the estimated annual production capacity and
actual production of the Company's four minimills in thousands of tons at March
31, 1997.
<TABLE>
<CAPTION>
Annual FY 1997 Capacity FY 1997 Capacity
Start-Up Melting Melting Utilization Rolling Rolling Utilization
Location Date Capacity Production Percentage Capacity Production Percentage
-------- ---- -------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Jackson, TN 1981 600 523 87% 480 364 76%
Jacksonville, FL 1976 600 465 78 500 443 89
Charlotte, NC 1961 450 415 92 400 220 55
Knoxville, TN 1987 (a) 330 297 90 360 340 94
----- ----- -- ----- ----- --
Total 1,980 1,700 86% 1.740 1,367 79%
===== ===== == ===== ===== ==
</TABLE>
(a) Purchase Date
2
<PAGE> 4
JACKSON MINIMILL. The Jackson, Tennessee minimill produces mostly merchant bars
and some larger size rebar. This minimill is the Company's largest single
producer of merchant bars. The merchant bars are marketed primarily in the
southeastern United States, as well as into southern Illinois, Indiana, and
Ohio.
The Jackson mill, constructed in 1981, is the newest of the Company's minimills.
Melting equipment includes a 135 ton electric arc furnace, a 4-strand continuous
billet caster, and material handling equipment. The rolling mill consists of a
100 tph reheat furnace, 16 new in-line quick-change mill stands, a cooling
bed, an in-line straightener, a cut-to-length product shear, an automatic
stacker, and associated shipping and material handling facilities. The new
quick-change mill stands, a combination of Danieli vertical and horizontal, will
decrease change time thereby increasing production and lowering conversion
costs.
The facility has approximately 301 employees.
JACKSONVILLE MINIMILL. The Jacksonville, Florida minimill produces rebar and
rods. The rebar is marketed primarily in Florida, the nearby Gulf Coast states
and Puerto Rico, with coiled rebar being shipped throughout the Company's
marketing area. The rod products are sold throughout the southeastern United
States.
Jacksonville's melting equipment consists of a 90 ton capacity electric arc
furnace and a 4-strand continuous caster. The rolling mill includes a 90 tph
reheat furnace, a 16-stand horizontal Danieli in-line mill, a 10-stand Danieli
rod block, a cooling bed for straight bars and a controlled cooling line for
coiled products, a cut-to-length product shear, and automatic bundling and tying
equipment for straight bars and coils.
The facility has approximately 266 employees.
CHARLOTTE MINIMILL. The Charlotte, North Carolina minimill produces rebar and
merchant bars. Rebar produced in Charlotte is marketed in the states from South
Carolina to Pennsylvania. Merchant bar produced in Charlotte is marketed along
the eastern seaboard states from Florida to Pennsylvania.
Charlotte's melting equipment includes a 75 ton electric arc furnace utilizing
the Consteel process, a continuous scrap feeding and preheating system, and a
ladle refining station, all of which were installed in 1989. The melting
facilities also include a 3-strand continuous caster, and material handling
equipment. Charlotte's rolling mill, which was upgraded in 1988, includes a
reheat furnace, 15 in-line mill stands, a 200 foot cooling bed, a cut-to-length
shear; and an automated material bundling unit. The rolling mill includes
recently installed upgraded finishing end equipment, including a product
straightener for merchant shapes and a French manufactured Empilam transfer
table, the first of its kind in the United States. These will improve merchant
bar quality, increase production and lower conversion costs.
The facility has approximately 274 employees.
KNOXVILLE MINIMILL. The Knoxville, Tennessee minimill, which the Company
acquired in 1987, produces almost exclusively rebar. The rebar is marketed
throughout the Ohio Valley, including all areas of Ohio and Kentucky and parts
of Illinois, Indiana, Virginia, West Virginia, Tennessee and in portions of
North and South Carolina, Georgia and Alabama.
Knoxville's melting equipment includes two 35 ton electric arc furnaces, a
3-strand continuous caster, and material handling equipment. The rolling mill,
which was installed in 1986, consists of a reheat furnace, 16 in-line mill
stands utilizing the Thermex in-line heat treating process, a cooling bed, a
cut-to-length shear line, and associated shipping and material handling
facilities.
The facility has approximately 212 employees.
3
<PAGE> 5
FABRICATION. The Company operates the largest rebar fabricating group in the
U.S. comprised of a network of 13 strategically located reinforcing steel
fabricating plants throughout the southeastern United States with an annual
capacity of 334 thousand tons. The facilities are interconnected via satellite
for the immediate transfer of customer engineering and production information
utilized in its computer assisted design (CAD) detailing programs. The
fabricating plants purchase all rebar from the Company's minimills, primarily
Knoxville, Jacksonville and Charlotte. The Fabrication Division employs about
520 employees. The following table shows the plant locations and approximate
annual tonnage on a two-shift per day, five days per week operating basis.
<TABLE>
<CAPTION>
FABRICATING PLANT CAPACITY IN TONS
----------------------------------------------------------------------------------------------
<S> <C>
Ft. Lauderdale, FL.....................................................................30,000
Jacksonville, FL.......................................................................30,000
Orlando, FL............................................................................20,000
Plant City, FL (Tampa).................................................................40,000
Duluth, GA (Atlanta)...................................................................30,000
Louisville, KY.........................................................................20,000
Charlotte, NC..........................................................................30,000
Raleigh, NC............................................................................18,000
Aiken, SC..............................................................................16,000
Collierville, TN (Memphis).............................................................20,000
Knoxville, TN..........................................................................40,000
Nashville, TN..........................................................................20,000
St. Albans, WV.........................................................................20,000
Total.................................................................................334,000
</TABLE>
OTHER OPERATIONS. The Company's railroad spike operations, located in Lancaster,
South Carolina and Paragould, Arkansas, forge steel square bars produced at the
Charlotte mill into railroad spikes that are sold on an annual contract basis to
various railroad companies. The Company's facility in New Orleans, Louisiana,
produces wire from steel rod. The wire is then either manufactured into welded
wire fabric for concrete pavement or converted into collated nails for use in
high-speed nail machines.
CAPITAL EXPENDITURES
Over the years, the Company has expanded capacity by means of modernizing and
upgrading facilities together with selective acquisitions. Capital expenditures
were $34.4 million for the year ended March 31, 1997, $36.9 million for the year
ended March 31, 1996 and $25.8 million for the year ended March 31, 1995.
4
<PAGE> 6
RAW MATERIALS AND ENERGY COSTS
Scrap steel, which is the Company's primary raw material and comprises
approximately 48% of finished steel products cost, is presently supplied
primarily by one company, The David J. Joseph Company (DJJ). DJJ is a scrap
broker and scrap yard operator headquartered in Cincinnati, Ohio, with locations
throughout the United States. DJJ buys substantially all of the scrap required
by the Company for which it receives a fixed brokerage fee per ton and operates
shredders for the Company at the Jacksonville, Florida and Jackson, Tennessee
minimill sites for a fixed gross profit amount per ton. Although the Company
obtains its scrap steel from DJJ, the Company could readily obtain adequate
supplies of scrap, if necessary, from suppliers other than DJJ at competitive
prices. The Company consolidates the scrap purchasing activities under the Vice
President Material Procurement position which focuses on optimizing the
purchasing, logistics, and cost of scrap and other related items.
The Company's manufacturing processes consume large amounts of energy in the
form of electricity and natural gas. The Company purchases its electricity from
regulated utilities under interruptible service contracts. Under such contracts,
the utility provides service at discount rates in return for the right to
interrupt service during peak demand periods. These interruptions are generally
limited to several hours and have occurred on no more than five to ten days per
year. Since deregulation of the natural gas industry, natural gas requirements
generally have been provided through negotiated contract purchases of well-head
gas with supplemental transportation through local pipeline distribution
networks.
The other important raw or stock materials required for the Company's business,
such as refractories, ferro alloys, carbon electrodes, etc., are supplied by
various domestic and foreign firms. The Company has historically obtained
adequate quantities of scrap steel and other raw materials to permit efficient
mill operations.
PRODUCTS AND MARKETS
The following table shows the percentage of the Company's revenues derived from
each product category in the relevant time period:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Fabricated Rebar 24% 24% 23%
Stock Rebar 24 25 27
Merchant Bars 28 31 31
Rods 5 7 7
Other (includes billets) 19 13 12
-------------- -------------- --------------
100% 100% 100%
============== ============== ==============
</TABLE>
REBAR PRODUCTS. The Company produces rebar products at its minimills in
Knoxville, Jacksonville and Charlotte, and to a lesser degree in Jackson. The
Company's rebar either is sold directly to distributors and independent
fabricating companies in stock lengths and sizes or is transferred to the
Company's 13 fabricating plants where it is cut and bent to meet engineering,
architectural or other end product specifications. Rebar is used primarily for
strengthening concrete in highway and building construction and other
construction applications. Rebar is consumed in a wide variety of private sector
applications and public works projects. Private sector applications include
construction of commercial and industrial buildings, apartments and hotels,
utility construction, agricultural uses and various maintenance and repair
applications. Public works projects include construction of highways, streets
and bridges, public buildings, water treatment facilities and other projects.
Based on data reported by the Concrete Reinforcing Steel Institute (a rebar
fabricators' trade association), rebar consumption in the U.S. is approximately
5 million tons per year. The Company is the second largest rebar producer in the
U.S. with approximately 18% market share (including both stock and fabricated
rebar).
5
<PAGE> 7
MERCHANT BARS. The Company produces merchant bars at its minimills in Jackson,
Tennessee and Charlotte, North Carolina, and to a lesser degree in Knoxville,
Tennessee. Merchant bars consist of rounds, squares, flats, angles and channels.
Merchant bars are generally sold to fabricators, steel service centers, and
manufacturers who fabricate the steel to meet engineering or end product
specifications. Merchant bars are used to manufacture a wide variety of
products, including gratings, transmission towers, steel floor and roof joists,
safety walkways, ornamental furniture, stair railings, and farm equipment.
Merchant bar products typically require more specialized processing and handling
than rebar, including straightening, stacking, and specialized bundling. Because
of the greater variety of shapes and sizes, merchant bars typically are produced
in shorter production runs, necessitating more frequent changeovers in rolling
mill equipment. Merchant products generally command higher prices and produce
higher profit margins than rebar.
RODS. The Company produces steel rod at its Jacksonville, Florida minimill. Most
of this rod is sold directly to third-party customers, while the remainder,
depending on market conditions, is shipped to the Company's New Orleans,
Louisiana facility, where the rod is drawn down to wire for use in the
manufacture of welded wire fabric and nails.
MARKETING AND CUSTOMERS. The Company conducts its marketing operation through
its own sales personnel who specialize in either mill products or fabricated
rebar. Sales personnel for mill products including stock rebar and merchant bars
are located in close proximity to the Company's major markets and customers.
Metallurgical service representatives located at the Company's minimills provide
technical and sales support to the mill products sales force and fabricated
rebar sales force, where needed. The Company's inside sales force is located at
the Tampa headquarters where all order taking and shipping instructions are
centrally processed and coordinated. Fabricated rebar sales personnel are
located at the Company's 13 fabricating facilities where engineering service
representatives provide technical and sales support.
Principal customers of the Company include steel distributors, steel service
centers, rebar steel fabricators, other metal fabricators and manufacturers,
railroads, building material dealers, and contractors. Its fabricated rebar
products are sold to contractors performing work for residential and
nonresidential building, road, bridge, public works, utility and other
miscellaneous construction.
The Company's business is not dependent upon any particular, single customer.
The Company's customer base is fairly stable from year to year, and during
fiscal 1997 no one customer accounted for more than 2.8% of sales and the five
largest customers accounted for 9.4% of sales. The Company's business is
seasonal with orders in the second and third calendar quarters tending to be
strongest. Stock rebar and merchant bar are generally sold from inventory, with
merchant bar production schedules tied to customer orders. Fabricated rebar is
generally produced in response to specific customer orders. The amount of sales
order backlog pertaining to fabrication contracts was approximately 196,000 tons
at March 31, 1997 compared to 185,000 tons at March 31, 1996. Almost all of the
backlog at March 31, 1997 is expected to be filled during fiscal 1998. None of
the business for the 1997 fiscal year is subject to renegotiation or termination
of subcontract at the election of the government.
The Company's payment terms to customers are generally determined based on
market conditions given the cyclical nature of its sales. However, the Company
generally does not offer extended payment terms to customers.
Despite the commodity characteristics of the stock rebar and merchant bar
markets, the Company believes that it is able to distinguish itself from its
competitors to some extent due to its product quality, its consistent delivery
record, its capacity to service large orders and its ability to fill most orders
quickly from inventory. Moreover, while construction and infrastructure projects
are generally nonrecurring in nature, the steel fabricators, distributors and
service centers which supply many of these projects directly tend to be
long-time customers of the Company. The Company's reputation for quality and
service is among the highest in industry.
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<PAGE> 8
ENVIRONMENTAL
See "Compliance with Environmental Laws and Regulations", under Management's
Discussion and Analysis, for a discussion of the Company's cleanup liabilities
with state and federal regulators regarding the investigation and/or cleanup of
certain Superfund and non-Superfund sites.
COMPETITION
The Company experiences substantial competition in the sale of each of its
products from a large number of domestic companies in its geographic markets.
Rebar and merchant bars are commodity steel products, making price the primary
competitive factor. Due to the high cost of freight relative to the value of the
Company's steel products, competition from non-regional producers is limited;
and rebar deliveries are generally concentrated within a 350 mile radius of a
minimill while merchant bar deliveries are generally concentrated within a 500
mile radius of a minimill. Except in unusual circumstances, the customer's
delivery expense is limited to freight charges from the nearest competitive
minimill and any incremental freight charges must be absorbed by the supplier.
The level and degree of foreign competition faced by the Company within the
Florida rebar market have varied from time to time depending upon factors
including foreign government subsidies and currency exchange rates.
The Company's competitive environment varies by product. The following is a
discussion of the Company's competitive environment with respect to its five
major product categories: stock rebar, fabricated rebar, merchant bars, rods and
billets.
STOCK REBAR. The boundary of the current market area for the Company's rebar
products is roughly defined by a line running through New Orleans, Louisiana;
Little Rock, Arkansas; Kansas City, Kansas; St. Louis, Missouri; Indianapolis,
Indiana; Columbus, Ohio; and Baltimore, Maryland. The Company has found shipping
outside of this market area to be only marginally profitable because of freight
cost considerations.
MERCHANT BAR. The Company's primary marketing area for merchant bars encompasses
the southeastern and midwestern United States. The Company did not enter the
merchant bar market in a significant way until 1982 and does not have the same
market strength as it does in the rebar market. The Company's presence in the
southeastern and midwestern markets has grown steadily, and its merchant bar
sales now represent approximately 28% of the Company's total sales.
The market for merchant bars is very competitive, with price being the primary
competitive factor. In the last two years, the Company has upgraded its rolling
mill facilities at Charlotte, North Carolina to increase the Company's ability
to shift production from rebar to merchant bar as market conditions demand and
also at Jackson, Tennessee to increase production and improve merchant product
mix.
RODS. The Company produces rods at its Jacksonville minimill. The Company's
primary marketing area for rods includes Florida, South Carolina, Georgia,
Alabama and Louisiana. The Company does not intend to geographically expand its
marketing beyond these states due to the relatively low margins and prohibitive
freight cost inherent to rod products. While the market for rods can be heavily
influenced by foreign imports, rod sales by foreign competitors did not have a
material effect on the Company's rod sales in the last three years.
FABRICATED REBAR. With 13 fabricating plants located throughout the southeastern
United States, all within good support distance from one of the Company's four
minimills, the Company is a major factor in all markets it serves. In the sale
of fabricated rebar, the Company competes with other steel fabricators in its
marketing area some of whom purchase their stock rebar from the Company.
7
<PAGE> 9
BILLETS. The Company produces billets (semi-finished steel) for conversion to
rebar, merchant bar and rods. When the market for finished product is down, or
when rolling production is limited, as was the case in 1997 with the downtime
associated with capital improvements in the Charlotte, North Carolina and
Jackson, Tennessee mills, the Company sells the excess billet production.
EMPLOYEES
The Company has approximately 1,856 employees, none of whom is covered by a
collective bargaining agreement. The Company believes that its relations with
its employees are good and a participatory style of labor-management relations
is important to the efficiency of the Company's operations.
An incentive plan based on production tons is in effect at the mills. Each mill
has a melting and rolling target which provide a 1.5% increase in pay for each
1% increase in production over target production levels. The fabricating group,
the mill sales group and the corporate administrative group pay policies include
monthly incentives based on certain performance criteria. The senior management
group (approximately 50 executives and key employees) are covered by an
incentive plan that is based on return on capital employed.
ITEM 2. PROPERTIES
The Company's executive offices are located in Tampa, Florida and are comprised
of 28,000 square feet of leased office space.
The Company's buildings are of various ages and forms of construction and are
all properly maintained and adequately equipped for the purposes for which they
are used. The Company's four minimills are owned in fee simple and serve as the
collateral for the First Mortgage Notes together with the other collateral.
The following tables present information with respect to the buildings and
facilities:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FEET
OF BUILDING OWNED
LOCATION ACREAGE FLOOR SPACE OR LEASED
-------- ------- ----------- ---------
MILLS (A)
<S> <C> <C> <C>
Jacksonville, FL..........................................160.9 288,564 Owned
Charlotte, NC..............................................80.8 299,401 Owned
Jackson, TN...............................................300.1 424,878 Owned
Knoxville, TN(b)...........................................51.3 217,988 Owned
</TABLE>
(a) The First Mortgage Notes are secured by a first priority lien
on substantially all the real property, machinery, equipment,
and fixtures of each of the Company's four minimills.
(b) Includes a fabricating plant, which is not a part of the
collateral package.
8
<PAGE> 10
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FEET
OF BUILDING OWNED
LOCATION ACREAGE FLOOR SPACE OR LEASED
-------- ------- ----------- ---------
FABRICATING PLANTS (C)
<S> <C> <C> <C>
Ft. Lauderdale, FL.............................................7.3 55,254 Owned
Jacksonville, FL...............................................8.0 56,565 Owned
Orlando, FL....................................................2.8 22,929 Owned
Plant City, FL (Tampa).........................................9.2 63,892 Owned
Duluth, GA (Atlanta)...........................................6.5 48,500 Owned
Louisville, KY.................................................4.3 37,338 Owned
Charlotte, NC..................................................7.0 57,867 Owned
Raleigh, NC....................................................7.2 39,836 Owned
Aiken, SC......................................................7.5 32,340 Owned
Nashville, TN..................................................5.0 46,760 Owned
Collierville, TN (Memphis).....................................2.7 26,664 Owned
St. Albans, WV.................................................5.0 27,300 Leased
</TABLE>
(c) These properties do not constitute collateral for either the First
Mortgage Notes or the Revolving Credit Agreement.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FEET
OF BUILDING OWNED
LOCATION USE ACREAGE FLOOR SPACE OR LEASED
- ------------------- -------------------- ------------ ---------------- --------------
OTHER (D)
<S> <C> <C> <C> <C>
Tampa, FL Closed minimill 65.2 200,000 Owned
Tampa, FL Land held for sale 432.4 Owned
Indiantown, FL Closed minimill 151.5 130,340 Owned
New Orleans, LA Wire fabric and
nail facility 5.0 120,000 Leased
Lancaster, SC Rail spike facility 41.0 52,000 Owned
Paragould, AR Rail spike facility 7.7 23,000 Owned
</TABLE>
(d) The Tampa, FL minimill property represents collateral for the
First Mortgage Notes, otherwise these properties, along with the
leased Corporate office, do not constitute collateral for either
the First Mortgage Notes or the Revolving Credit Agreement.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in routine litigation arising in the normal course of
business. See "Compliance with Environmental Laws and Regulations", under
Management's Discussion and Analysis, for a discussion of the Company's cleanup
liabilities with state and federal regulators regarding the investigation and/or
cleanup of certain Superfund and non-Superfund sites. There are no other legal
matters which management believes will have a material impact on its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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<PAGE> 11
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The name, age, offices held and five-year employment history of each of the
executive officers of the Company are set forth below. All officers serve at the
pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AND AGE OFFICES HELD AND FIVE-YEAR EMPLOYMENT HISTORY
------------ ---------------------------------------------
<S> <C>
Phillip E. Casey (54) Chairman of the Board and Chief Executive Officer since June 1994. Prior to that date was an
officer with Birmingham Steel Corporation for more than five years. Director.
Takeshi Fujimura (72) Chairman, Executive Committee since December 1992. Director.
Donald Haney (61) Group Vice President, Fabricated Reinforcing Steel for more than five years. Director.
Shuzo Hikita (54) Vice President of Engineering since September 1996. Prior to that date held several senior
management positions with Kyoei for more than the past five years including Division Manager
of Kyoei's Hirakata and Osaka mills Director.
Thomas J. Landa (45) Vice President, Chief Financial Officer and Secretary since April 1995. Prior to that date
spent nearly 20 years in various financial management positions with Exxon Corporation and its
affiliates worldwide. Director.
James C. Hogue (64) Vice President, Human Resources for more than five years. Mr. Hogue recently announced his
retirement effective June 1, 1997 after a 32 year career of distinguished service to the
Company.
J. Neal McCullohs (40) Vice President, Mill Products Sales since August 1995. Prior to that date held several
management positions with AmeriSteel for more than five years.
Robert P. Muhlhan (47) Vice President, Material Procurement since February 1995. Prior to that date was Regional
Vice President of National Material Trading for two years and prior to that time was a manager
with LTV Steel Company for more than five years.
Hiroyoshi Tsuchiya (58) Vice President, Strategic Planning since May 1994. Prior to that date held management
positions at Mitsubishi Corporation in Japan and Canada for more than five years.
Dennie Andrew (56) Vice President, Jacksonville Steel Mill Division since September 1996. Prior to that date,
served as President of North American operations of Simac International since 1986.
Wilburn G. Manuel, Jr. (54) Vice President, West Tennessee Steel Mill Division since September 1984.
James F. Oliver (50) Vice President, Knoxville Steel Mill Division since December 1989.
John Turnblom (42) Vice President, Charlotte Steel Mill Division since October 1996. Prior to that date served
as Quality Program Manager for Intel Corporation since 1995. Prior to that date served in
various management positions with Oregon Steel Mills, Inc.
</TABLE>
10
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
No established public trading market exists for the Company's common stock, but
the Company sells and buys shares at a price established by independent
appraisal, which as of March 31, 1997 was $13.50 per share.
No dividends have been declared or paid on the Company's common stock during any
of the applicable reporting periods.
As of March 31, 1997, there were approximately 1,140 holders of record of the
Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
The summary financial information presented below should be read in conjunction
with the Financial Statements of AmeriSteel Corporation and the notes thereto ($
in thousands except per share data):
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
March 31, March 31, March 31, March 31,
1997 1996 1995 1994
---------- ---------- ---------- ----------
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C>
Net sales $ 617,289 $ 628,404 $ 639,908 $ 547,118
Income (loss) from operations 36,247 30,072 46,048 (9,217)
Earnings (loss) per share $ 0.80 $ 0.21 $ 1.05 $ (2.27)
Cash dividends declared per
common share $ - $ - $ - $ -
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended Year Ended
March 31, December 31, September 30,
1993 1992 1992
--------- ------------ -------------
SUMMARY OF OPERATIONS
<S> <C> <C> <C>
Net sales $ 122,736 $ 108,358 $ 465,233
Income (loss) from operations 2,885 (1,625) 8,772
Earnings (loss) per share $ (0.23)
Cash dividends declared per
common share $ -
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF AS OF AS OF
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1997 1996 1995 1994 1993
---------- --------- --------- --------- ---------
FINANCIAL POSITION
($ in thousands)
<S> <C> <C> <C> <C> <C>
Current assets $ 182,519 $ 200,109 $ 223,444 $ 187,672 $ 148,335
Current liabilities 73,792 85,588 102,080 76,006 59,530
Working capital 108,727 114,521 121,364 111,666 88,805
Current ratio 2.5 2.3 2.2 2.5 2.5
Property, plant and equipment, net 250,021 247,009 231,108 222,861 229,665
Goodwill 85,773 89,903 94,033 98,163 100,530
Deferred financing costs 2,523 3,457 4,504 7,367 9,725
Total assets 535,685 554,896 561,748 523,706 495,884
Long-term borrowings 237,474 252,525 243,030 247,128 212,002
Other liabilities 21,555 20,336 18,388 28,721 24,490
Deferred tax liabilities 52,300 54,700 60,500 46,852 52,151
Shareholders' equity 150,564 141,747 137,750 124,999 147,711
</TABLE>
11
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FACTORS THAT MAY AFFECT OPERATING RESULTS
The statements in this report that are not purely historical are forward looking
statements within the meaning of section 27A of the Securities Act of 1933 and
section 21E of the Securities Exchange Act of 1934, including statements
regarding the Company's expectations, hopes, intentions, or strategies regarding
the future. All forward looking statements made by the Company involve a number
of inherent risks and uncertainties which could cause actual results to differ
materially. These risks and uncertainties include economic and general business
conditions, most notably construction levels in the Company's market area;
competitive factors including pricing decisions; raw material availability and
price fluctuations; and other significant activities, to name a few.
RESULTS OF OPERATIONS
($ in thousands)
<TABLE>
<CAPTION>
APRIL 1, APRIL 1, APRIL 1, APRIL 1,
1996- 1995- 1994- 1993-
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1997 1996 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 617,289 $ 628,404 $ 639,908 $ 547,118
Cost of sales excluding
depreciation 531,190 533,965 545,725 498,692
Selling and administrative 29,068 29,605 29,959 22,993
Depreciation 16,654 14,619 14,046 15,369
Amortization of goodwill 4,130 4,130 4,130 4,061
Other operating expenses - 16,013 - 15,220
Interest 19,473 22,000 23,330 21,027
Amortization of deferred
financing costs 934 1,956 2,863 2,552
Extraordinary item net of
income tax benefit - - - (748)
Income tax (benefit) 7,788 3,996 9,354 (10,833)
Net income (loss) 8,052 2,120 10,501 (22,711)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $43.9 million in fiscal 1997
compared to $44.1 million in fiscal 1996. Capital expenditures were $34.4
million in fiscal 1997 compared with $36.9 million in fiscal 1996.
As of March 31, 1997, the Company's total outstanding long term borrowings were
$237.9 million of which $.4 million is due within fiscal 1998. Outstanding
borrowings under the Revolving Credit Agreement totaled $51.3 million
The First Mortgage Notes and the Revolving Credit Agreement contain certain
restrictions regarding the incurrence of additional indebtedness and other
covenants deemed appropriate. As of year end, the Company had $25.7 million of
available credit under the Revolving Credit Agreement and $1.6 million in cash.
The Company believes that the available borrowings and the cash flow generated
from operations will continue to be sufficient to fund the current operations
and the current capital expenditure program. The Company is currently in
compliance with all of the covenants of its loan agreements.
12
<PAGE> 14
COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS
The Company is subject to federal and state requirements governing the
remediation of environmental contamination associated with past releases of
hazardous substances (collectively, "Environmental Cleanup Laws") and to
extensive federal, state, and local laws and regulations governing discharges to
the air and water as well as the handling and disposal of solid and hazardous
wastes (collectively, "Environmental Regulatory Laws"). Governmental authorities
have the power to enforce compliance with these requirements, and violators may
be subject to civil or criminal penalties, injunctions or both. Third parties
also may have the right to sue to enforce compliance.
The Company has estimated its potential costs for further remediation under
Environmental Cleanup Laws at on-site and off-site locations through 2009 to be
approximately $12.3 million and has included this amount in the Company's
recorded liabilities as of March 31, 1997. 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 continue to 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.
The Company also incurs significant ongoing costs to comply with current and
anticipated future standards promulgated by Environmental Regulatory Laws.
SEASONALITY
The Company's business is seasonal with orders in the second and third calendar
quarters tending to be stronger than the rest of the year.
IMPACT OF INFLATION
The Company's primary costs include ferrous scrap, energy and labor which can be
affected by inflationary conditions. The Company has been able to pass on cost
increases through price adjustments, however the ability to pass on these
increases depends on market conditions driven primarily by the level of
construction activity. Another factor that may limit the Company's ability to
pass on cost increases in materials is the over-capacity in the industry.
13
<PAGE> 15
FISCAL 1997 VERSUS FISCAL 1996
<TABLE>
<CAPTION>
TONS SHIPPED (THOUSANDS) AVERAGE SELLING PRICES (PER TON)
FY 1997 FY 1996 FY 1997 FY 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Stock Rebar 472 508 $316 $310
Merchant Bar 512 544 352 362
Fabricated Rebar 326 315 451 460
Rods 105 133 322 336
Billets 281 175 227 233
--- ---
1,696 1,675
----- -----
</TABLE>
SALES. Net Sales in fiscal 1997 declined 1.8% from fiscal 1996 as both prices
and sales volumes of finished goods declined. Mill finished product prices were
down $5 per ton while fabricated rebar prices were $9 lower. Mill finished
production and shipment volumes were limited by the start-up of major capital
improvement projects at the Charlotte, North Carolina and Jackson, Tennessee
rolling mills. Product mix was more heavily weighted by lower priced
semi-finished billet products during the start-up. Fabricating revenues
improved modestly as volume increases offset the decline in price.
COST OF SALES. Cost of sales (excluding depreciation) were 86.1% of net sales in
fiscal 1997 versus 85.0% of net sales in fiscal 1996 due to the decline in
production tonnage at the Charlotte, North Carolina and Jackson, Tennessee mills
as a result of the capital projects associated with the rolling mills. Overall
scrap costs were down $1 per ton for the year due to a fourth quarter decline in
scrap prices.
SELLING AND ADMINISTRATION EXPENSES. Selling and administrative expenses
remained constant at 4.7% of sales.
DEPRECIATION. Depreciation increased to $16.7 million in fiscal 1997 from $14.6
million in fiscal 1996 due to the capitalization of projects at all four mills
during the last two years.
OTHER OPERATING EXPENSES. Other operating expenses in fiscal 1996 were primarily
the result of the shut-down of the Tampa rolling mill ($15 million) of which $12
million was a non-cash write down of fixed assets to market value and $3 million
for employee severance benefits and closing costs.
INTEREST EXPENSE. Interest expense declined from $22.0 million in fiscal 1996 to
$19.5 million in fiscal 1997 as cash generated from operations was used to lower
debt by $29.6 million and average interest rates declined from 9.3% to 8.7%.
Capitalized interest for fiscal 1997 was $2.0 million compared to $2.1 million
in fiscal 1996.
AMORTIZATION OF DEFERRED FINANCING COSTS. Amortization declined from $2.0
million in fiscal 1996 to $.9 million in fiscal 1997 due to refinancing of the
Revolving Credit Agreement in June 1995.
INCOME TAXES. The effective federal and state income tax rate for fiscal 1997
and 1996 was 39% excluding the effect of goodwill amortization which is not
deductible for income tax purposes.
14
<PAGE> 16
FISCAL 1996 VERSUS FISCAL 1995
<TABLE>
<CAPTION>
TONS SHIPPED (THOUSANDS) AVERAGE SELLING PRICES (PER TON)
FY 1996 FY 1995 FY 1996 FY 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Stock Rebar 508 535 $310 $326
Merchant Bar 544 549 362 359
Fabricated Rebar 315 347 460 421
Rods 133 129 336 338
Billets 175 141 233 228
----- -----
1,675 1,701
----- -----
</TABLE>
SALES. Net sales for fiscal 1996 were 1.8% lower than fiscal 1995 due to lower
volume and lower mill average selling prices. While billet shipments were 24.1%
higher than in fiscal 1995, finished product shipments were down 3.8%. Average
mill selling prices were down $5 per ton, however fabricated rebar prices were
up 9.3% or $39 per ton.
COST OF SALES. Cost of sales (excluding depreciation) were 85.0% of net sales in
fiscal 1996 versus 85.3% of net sales in the previous year. Mill conversion
costs were the same while scrap cost was $131 per ton or $1 per ton higher than
in fiscal 1995.
SELLING AND ADMINISTRATION EXPENSES. Selling and administrative expenses
remained constant at 4.7% of sales.
DEPRECIATION. Depreciation increased to $14.6 million in fiscal 1996 from $14.0
million in fiscal 1995 due to new capital additions that were placed in service.
OTHER OPERATING EXPENSES. Other operating expenses in fiscal 1996 were primarily
the result of the shut-down of the Tampa rolling mill ($15 million) of which $12
million was a non-cash write down of fixed assets to market value and $3 million
for employee severance benefits and closing costs. The Company charged off
approximately $752 thousand after vacating the former Washington, D.C.
fabricating plant. This write-off was the balance of a long-term lease.
INTEREST EXPENSE. Interest expense was lower in fiscal 1996 versus fiscal 1995
primarily because of lower average rates and higher capitalized interest.
Average borrowings were higher in fiscal 1996 than in fiscal 1995. Capitalized
interest for fiscal 1996 was $2.1 million versus $654 thousand in fiscal 1995.
AMORTIZATION OF DEFERRED FINANCING COSTS. Amortization of deferred financing
costs declined in fiscal 1996 as compared to fiscal 1995 because of financing
costs associated with the Revolving Credit Agreement.
INCOME TAXES. The effective federal and state income tax rate for fiscal 1996
was 39% compared to 38.8% for fiscal 1995 excluding the effect of goodwill
amortization which is not deductible for income tax purposes.
15
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AMERISTEEL CORPORATION
STATEMENTS OF FINANCIAL POSITION
($ IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,645 $ 6,193
Accounts receivable, less allowance of
$1,000 at March 31, 1997 and 1996
for doubtful accounts 68,563 72,910
Inventories 106,173 112,753
Deferred tax assets 5,000 7,200
Other current assets 1,138 1,053
-------- --------
TOTAL CURRENT ASSETS 182,519 200,109
ASSETS HELD FOR SALE 14,838 14,411
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 14,942 13,393
Building and improvements 35,116 31,906
Machinery and equipment 250,299 199,350
Construction in progress 7,802 45,039
-------- ---------
308,159 289,688
Less accumulated depreciation 58,138 42,679
-------- ---------
250,021 247,009
GOODWILL 85,773 89,903
DEFERRED FINANCING COSTS 2,523 3,457
OTHER ASSETS 11 7
-------- ---------
TOTAL ASSETS $535,685 $ 554,896
======== =========
</TABLE>
See notes to financial statements
16
<PAGE> 18
AMERISTEEL CORPORATION
STATEMENTS OF FINANCIAL POSITION -- continued
($ in thousands except share data)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
---- ----
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 44,666 $ 40,234
Salaries, wages and employee benefits 14,598 14,336
Environmental remediation 5,079 6,079
Other current liabilities 4,355 5,057
Interest payable 4,659 4,940
Current maturities of long-term borrowings
(including note payable to parent of $435 and
$444 at March 31, 1997 and 1996, respectively) 435 14,942
-------- --------
TOTAL CURRENT LIABILITIES 73,792 85,588
LONG-TERM BORROWINGS, LESS
CURRENT PORTION 237,474 252,525
OTHER LIABILITIES 21,555 20,336
DEFERRED TAX LIABILITIES 52,300 54,700
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 30,000,000 authorized,
10,079,028 and 10,095,741 shares outstanding,
at March 31, 1997 and 1996, respectively 101 101
Capital in excess of par 156,816 157,026
Accumulated deficit (4,328) (12,380)
Deferred compensation (2,025) (3,000)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 150,564 141,747
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $535,685 $554,896
======== ========
</TABLE>
See notes to financial statements
17
<PAGE> 19
AMERISTEEL CORPORATION
STATEMENTS OF INCOME
($ in thousands except earnings per common share)
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
NET SALES $617,289 $628,404 $639,908
Operating expenses:
Cost of sales, excluding depreciation 531,190 533,965 545,725
Selling and administrative 29,068 29,605 29,959
Depreciation 16,654 14,619 14,046
Amortization of goodwill 4,130 4,130 4,130
Other operating expenses - 16,013 -
-------- -------- --------
581,042 598,332 593,860
-------- -------- --------
INCOME FROM OPERATIONS 36,247 30,072 46,048
Other expenses:
Interest 19,473 22,000 23,330
Amortization of deferred financing costs 934 1,956 2,863
-------- -------- --------
20,407 23,956 26,193
-------- -------- --------
INCOME BEFORE INCOME TAXES 15,840 6,116 19,855
Income taxes 7,788 3,996 9,354
-------- -------- --------
NET INCOME $ 8,052 $ 2,120 $ 10,501
======== ======== ========
Weighted average common shares outstanding
(in thousands) 10,087 10,062 10,000
======== ======== ========
EARNINGS PER COMMON SHARE $ 0.80 $ 0.21 $ 1.05
======== ======== ========
</TABLE>
See notes to financial statements
18
<PAGE> 20
AMERISTEEL CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
($ in thousands except share data)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL
--------------------- IN EXCESS ACCUMULATED DEFERRED
SHARES AMOUNT OF PAR DEFICIT COMPENSATION TOTAL
------ ------ ------ ------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT MARCH 31, 1994 200 $ - $150,000 $(25,001) $ - $124,999
Repurchase of common stock (20) - - - - -
Common stock issuance 15 - 4,500 - (4,500) -
Exercise of stock options 5 - 1,500 - - 1,500
Net income - - - 10,501 - 10,501
Reduction in deferred compensation - - - - 750 750
49,999 for 1 stock dividend 9,999,800 100 (100) - - -
---------- ----- ------- -------- ------- --------
BALANCES AT MARCH 31, 1995 10,000,000 100 155,900 (14,500) (3,750) 137,750
Common stock issuance 95,741 1 1,126 - (150) 977
Net income - - 2,120 - 2,120
Reduction in deferred compensation - - - 900 900
---------- ----- ------- -------- ------- --------
BALANCES AT MARCH 31, 1996 10,095,741 101 157,026 (12,380) (3,000) 141,747
Common stock issuance 100 - 1 - - 1
Repurchase of common stock (16,813) - (211) - - (211)
Net income - - 8,052 - 8,052
Reduction in deferred compensation - - - 975 975
========== ===== ======== ======== ======= ========
BALANCES AT MARCH 31, 1997 10,079,028 $ 101 $156,816 $ (4,328) $(2,025) $150,564
========== ===== ======== ======== ======= ========
</TABLE>
See notes to financial statements
19
<PAGE> 21
AMERISTEEL CORPORATION
STATEMENTS OF CASH FLOWS
($ in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 8,052 $ 2,120 $ 10,501
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 16,654 14,619 14,046
Amortization 5,064 6,086 6,993
Deferred income taxes (200) (1,200) 1,849
Loss on disposition of property, plant and equipment 317 14,312 600
Deferred compensation 975 900 750
Changes in operating assets and liabilities:
Accounts receivable 4,347 7,450 (11,142)
Recoverable income taxes - - 300
Inventories 6,580 14,927 (12,470)
Other current assets (85) (303) 420
Other assets (4) 21 15
Trade accounts payable 4,432 (9,130) 3,315
Salaries, wages and employee benefits 262 (2,184) (868)
Other current liabilities (828) 769 290
Environmental remediation (1,400) (5,421) (7,995)
Interest payable (281) (318) 526
Income taxes payable 126 514 1,561
Other liabilities (81) 929 2,666
-------- -------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 43,930 44,091 11,357
INVESTING ACTIVITIES
Additions to property, plant and equipment (34,382) (36,894) (25,781)
Proceeds from sale of property, plant and equipment 876 788 1,857
Proceeds from sale (net of
purchases) of assets held for sale 1,096 794 -
Restricted IRB Funds 13,700 (13,700) -
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES $(18,710) $(49,012) $(23,924)
</TABLE>
See notes to financial statements
20
<PAGE> 22
AMERISTEEL CORPORATION
STATEMENTS OF CASH FLOWS -- continued
($ in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from (payments to) short and long-term borrowings, net $(29,558) $ 21,227 $12,147
Additions to deferred financing costs - (909) -
Repurchase of subordinated debentures - (13,035) -
Proceeds from exercise of stock options - - 1,500
Proceeds from sale of common stock - 977 -
Redemption of common stock (210) - -
-------- -------- -------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (29,768) 8,260 13,647
-------- -------- -------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (4,548) 3,339 1,080
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 6,193 2,854 1,774
-------- -------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,645 6,193 $ 2,854
======== ======== =======
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest (net of amount capitalized) $ 19,754 $ 22,318 $22,150
======== ======== =======
Cash paid for income taxes $ 7,862 $ 4,682 $ 5,645
======== ======== =======
</TABLE>
See notes to financial statements
21
<PAGE> 23
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE A -- BASIS OF PRESENTATION
The financial statements include the accounts of AmeriSteel, a Florida
corporation, (the "Company"). As of April 1, 1996, the Company changed its name
from Florida Steel Corporation (which it had used since 1956) to AmeriSteel
Corporation. The predecessor of the Company was formed in 1937. All significant
intercompany accounts and transactions have been eliminated.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 for the fiscal years 1997, 1996, and 1995 have
been $106,000, $184,000 and $559,000, respectively.
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. In the years ended March 31, 1997 and 1996,
export sales were less than 1% of total sales.
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 (first-in, first-out
method) or market.
Assets Held for Sale: The majority of the account consists of real estate and
machinery and equipment held for sale and is carried at the lower of cost or
estimated fair value. For the year ended March 31, 1996, the Company transferred
$5.0 million from property, plant and equipment to assets held for sale.
Property, Plant and Equipment: Property, plant and equipment are stated at cost.
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 property, plant and
equipment, the cost and related allowances for depreciation are removed from the
accounts and any resulting gain or loss is reflected in income.
Interest costs for property, plant and equipment construction expenditures of
approximately $2.0 million and $2.1 million were capitalized for the years ended
March 31, 1997 and 1996, respectively. For financial reporting purposes, the
Company provides for depreciation of property, 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 all other property, plant and
equipment.
Goodwill: Goodwill consists of the excess of purchase price over the fair value
of acquired assets and liabilities. Goodwill is stated at cost less accumulated
amortization of $17.5 million and $13.3 million at March 31, 1997 and 1996,
respectively. Goodwill is being amortized over a 25-year period.
Deferred Financing Costs: The deferred financing costs as of March 31, 1997 and
1996, are net of accumulated amortization of $9.0 million and $8.0 million,
respectively. These amounts will be amortized over the term of the respective
debt instruments, which range from 3 to 8 years.
22
<PAGE> 24
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Earnings per Common Share: Earnings per common share are computed using the
weighted average number of outstanding common shares. On May 22, 1995, the
Company's Board of Directors authorized a 49,999 for 1 stock dividend.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments: The carrying amount of long-term borrowings
approximates fair value due to market rates of interest and related maturities.
Delivery Expenses: The Company's policy is to include all delivery expenses in
cost of sales.
Self Insurance: As part of its risk management strategies, the Company is
self-insured, up to certain amounts, for risks such as workers' compensation,
employee health benefits, and long-term disability. Risk retention is determined
based on savings from insurance premium reductions, and, in the opinion of
management, does not result in unusual loss exposure relative to other companies
in the industry.
Recent Accounting Pronouncements: In October 1996, the American Institute of
Certified Public Accountants issued Statement of Position No. 96-1,
"Environmental Remediation Liabilities" (SOP 96-1). SOP 96-1 provides
authoritative guidance on the specific accounting issues for the recognition,
measurement, display, and disclosure of environmental remediation liabilities.
Specifically, SOP 96-1 requires (1) the recognition of an environmental
remediation liability when the criteria of Statement of Financial Accounting
Standards No. 5, "Accounting for Contingencies" are met, (2) the measurement of
the liability to include incremental direct costs of the remediation effort and
costs of compensation and benefits for those employees who are expected to
devote a significant amount of time directly to the remediation effort, (3) the
measurement of the liability to include the entity's allocable share of the
liability for a specific site and the entity's share of amounts related to the
site that will not be paid by other potentially responsible parties, (4) the
measurement of the liability be based on enacted laws, regulations and
technology, and (5) appropriate display of the liabilities in the financial
statements and disclosures in the footnotes to the financial statements. SOP
96-1 is effective for fiscal years beginning after December 15, 1996. Management
has determined that the adoption of SOP 96-1 will not have a material effect on
the accompanying financial statements.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share" which establishes standards for computing and
presenting earnings per share. The statement replaces the presentation of
primary earnings per share with a presentation of basic earnings per share. It
also requires dual presentation of basic and diluted earnings per share on the
income statement and provides for certain disclosures. The Company will adopt
Statement No. 128 in the third quarter of fiscal 1998 and does not believe the
effect of adoption will be material.
Reclassifications: Certain amounts in the fiscal 1995 and 1996 financial
statements have been reclassified to conform to the fiscal 1997 financial
statement presentation.
23
<PAGE> 25
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE C -- INVENTORIES
Inventories consist of the following:
($ in thousands)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Finished goods $ 59,299 73,196
Work in-process 14,175 16,291
Raw materials and operating supplies 32,699 23,266
-------- --------
$106,173 $112,753
======== ========
</TABLE>
NOTE D -- BORROWINGS
Long-term borrowings consist of the following:
($ in thousands)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Revolving Credit Agreement $ 51,340 $ 71,650
First Mortgage Notes 100,000 100,000
Subordinated Intercompany Note 50,000 50,000
Industrial Revenue Bonds 30,875 30,875
Note to Parent 435 444
Trade Loan Agreements 5,259 4,498
Bank of Tokyo Loan - 10,000
-------- --------
237,909 267,467
Less current maturities 435 14,942
-------- --------
$237,474 $252,525
======== ========
</TABLE>
On June 9, 1995, the Company entered into a revolving bank agreement (the
"Revolving Credit Agreement"), which 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 expires on June 9, 1998.
The Revolving Credit Agreement contains certain covenants including, among other
restrictions, financial ratios and limitations on indebtedness, liens,
investments and disposition of assets and dividends. It is collateralized by
first priority security interests in substantially all accounts receivable and
inventory of the Company. The Company was in compliance with these covenants
throughout fiscal 1997 and remains in compliance as of the date of this filing.
24
<PAGE> 26
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE D -- BORROWINGS -- continued
Loans under the Revolving Credit Agreement bear interest at a per annum rate
equal to one of several rate options (LIBOR, Fed Funds, or Cost of Funds) at the
discretion of the Company plus an applicable margin determined by tests of
performance from time to time. The effective interest rate at March 31, 1997 was
7.4%.
The First Mortgage Notes are collateralized senior obligations of the Company
limited in aggregate principal amount to $100 million and 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 (none were redeemed in fiscal 1997):
<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 was in compliance with these covenants,
or had received waivers of all events of non-compliance, throughout fiscal 1997.
The Company has issued to a related party 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 March 31, 1997 was 7.01%.
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 IRBs by $20 million in fiscal 1996 for a solid waste
recycling facility in Jackson, Tennessee. 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 Revolving Credit Agreement. As of March
31, 1997, the Company had approximately $37 million of outstanding letters of
credit, primarily for IRBs, insurance-related matters and surety bonds.
25
<PAGE> 27
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE D -- BORROWINGS -- continued
The Note to Parent is an unsecured non-interest bearing note with no stated
maturity. Accordingly, amounts due are classified as current in the accompanying
statements of financial position.
The Company has borrowed $5.3 million as of March 31, 1997, under the Trade Loan
Agreements. The loan bears interest at 7.3% and matures on June 30, 1998.
Proceeds were used for the purchase of steel mill equipment.
The maturities of long-term borrowings for the fiscal years subsequent to March
31, 1997 are as follows:
($ in thousands)
<TABLE>
<CAPTION>
FISCAL AMOUNT
------ ------
<S> <C>
1998 $ 435
1999 58,079
2000 -
2001 100,000
2002 -
Thereafter 79,395
========
$237,909
========
</TABLE>
NOTE E -- INCOME TAXES
The provision for income taxes is comprised of the following amounts:
($ in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Currently
Federal $7,391 $ 4,592 $3,572
State 597 604 -
------ ------- ------
7,988 5,196 3,572
------ ------- ------
Deferred (benefit) provision:
Federal (594) (1,301) 4,785
State 394 101 997
------ ------- ------
(200) (1,200) 5,782
------ ------- ------
$7,788 $ 3,996 $9,354
====== ======= ======
</TABLE>
26
<PAGE> 28
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE E -- INCOME TAXES -- continued
A reconciliation of the difference between the effective income tax rate for
each year and the statutory federal income tax rate follows:
($ in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Tax provision at statutory rates $5,544 $2,141 $6,949
State income taxes, net of federal income
tax effect 722 244 997
Goodwill amortization 1,446 1,611 1,611
Other items, net 76 - (203)
====== ====== ======
$7,788 $3,996 $9,354
====== ====== ======
</TABLE>
The components of the deferred tax assets and liabilities consisted of the
following at March 31:
($ in thousands)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
DEFERRED TAX ASSET
Allowance for doubtful accounts $ 390 $ 390
Worker's compensation accrual 1,413 1,648
Employee benefits and related accruals 2,351 2,229
Environmental remediation accrual 3,414 4,611
Federal loss carryforward 1,654 2,055
State loss carryforward 40 596
Alternative minimum tax credit carryforward - 468
Pension accrual 2,334 1,739
Post retirement benefits accrual 3,306 3,228
Other 856 1,136
-------- --------
15,758 18,100
-------- --------
DEFERRED TAX LIABILITY
Inventories (1,992) (2,988)
Property, plant and equipment (57,903) (58,260)
Assets held for sale (2,432) (3,240)
Deferred compensation (731) (1,112)
-------- --------
(63,058) (65,600)
-------- --------
NET DEFERRED TAX LIABILITY $(47,300) $(47,500)
======== ========
</TABLE>
The Company has a Federal net operating loss carryforward of approximately $4.7
million and a state net operating loss of approximately $1.0 million, both
expiring in 2009. As a result of a change in tax fiscal year, recognition of
Federal net operating loss carryforwards are limited to approximately $1.6
million each year.
27
<PAGE> 29
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE F -- BENEFIT PLANS
The Company maintains a defined benefit pension plan covering substantially all
employees. The benefits are based on years of service and compensation during
the period of employment. Annual contributions are made in conformity with
minimum funding requirements and maximum deductible limitations.
The plan's funded status and the amounts recognized in the accompanying
statements of financial position are as follows:
($ in thousands)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation including vested
benefits of $66,249 and $65,617, at March 31,
1997 and 1996, respectively $ 71,157 $ 69,221
======== ========
Projected benefit obligation for service rendered to date (84,646) $(84,950)
Plan assets at fair value 85,828 82,808
-------- --------
Projected benefit obligation less than
(in excess of) plan assets 1,182 (2,142)
Unrecognized net gain (6,549) (1,310)
Unrecognized prior service cost (390) (426)
-------- --------
Net accrued pension cost included in accrued salaries,
wages and employee benefits $ (5,757) $ (3,878)
======== ========
</TABLE>
The weighted average discount rates used in determining the actuarial present
value of the accumulated benefit obligation were 7.75% and 7.5%, for the years
ended March 31, 1997 and 1996, respectively. The rate of increase in future
compensation levels was 4.5% for both years. The expected rate of return on plan
assets was 9.5% for the years ended March 31, 1997 and 1996.
Pension cost included in the accompanying statements of income is comprised of
the following:
($ in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost $ 2,802 $ 2,695 $ 2,574
Interest cost 6,223 5,756 5,357
Actual income from plan assets (7,395) (14,561) (6,783)
Net amortization and deferral 249 8,025 982
------- -------- -------
Net pension cost $ 1,879 $ 1,915 $ 2,130
======= ======== =======
</TABLE>
28
<PAGE> 30
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE F -- BENEFIT PLANS -- continued
The Company also has a voluntary savings plan available to substantially all of
its employees. Under this plan, the Company contributes amounts based upon a
percentage of the savings paid into the plan by employees. The Company matches
50% of the employees' contributions up to 4% of employees' salaries. Costs under
this plan were $1.1 million, $1.1 million, and $1.2 million for the years ended
March 31, 1997, 1996 and 1995, respectively.
The Company has an unfunded Supplemental Benefits Plan, which is a nonqualified
plan that provides certain officers defined pension benefits in excess of limits
imposed by federal tax laws. The charges to income under the Supplemental
Benefits Plan for the years ended March 31, 1997, 1996 and 1995 were $282
thousand, $0 and $159 thousand, respectively.
Post Retirement Benefits:
The Company currently provides specified health care benefits to retired
employees. Employees who retire after a certain age with specified years of
service become eligible for benefits under this unfunded plan. The Company has
the right to modify or terminate these benefits. The following table summarizes
the accumulated post retirement benefit obligations included in the Company's
statements of financial position:
<TABLE>
<CAPTION>
($ in thousands) MARCH 31, MARCH 31,
1997 1996
------------- -------------
<S> <C> <C>
Retirees $4,496 $4,176
Fully eligible active participants 232 238
Other active plan participants 3,015 3,178
------ ------
Total 7,743 7,592
Plan assets at fair value - -
Unrecognized net gain 1,319 1,303
------ ------
Accrued post retirement benefit
obligation $9,062 $8,895
====== ======
</TABLE>
The following table summarizes the net post retirement benefit costs:
<TABLE>
<CAPTION>
($ in thousands) MARCH 31, MARCH 31,
1997 1996
------------- -------------
<S> <C> <C>
Service cost $ 216 $ 203
Interest cost 558 543
Gain (23) (60)
------ ------
Net post retirement benefit cost $ 751 $ 686
====== ======
</TABLE>
29
<PAGE> 31
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE F -- BENEFIT PLANS -- continued
The weighted average discount rate used in determining the accrued post
retirement benefit obligation was 7.75% for fiscal 1997 and 7.50% for fiscal
1996. The gross medical trend rate was assumed to be 10.31% in 1996 and dropping
.346% per year to 6.0% in 2008 and beyond for pre-65 retirees that retired
before January 1, 1994 and 9.0% decreasing by .5% per year to 5.5% in 2003 and
beyond for post-65 retirees that retired before January 1, 1994. For retirees on
or after January 1, 1994, the trend rate is the same until the Company's
expected costs are double the 1992 costs. At that point, future increases in the
medical trend will be paid by the retirees. The health care cost trend rate
assumption has a significant effect on the amount of the obligation reported.
The incremental effect of a 1% increase in the medical trend rate would result
in an increase of approximately $230,448 and $16,699 to the accrued post
retirement benefit obligation and net post retirement benefit cost,
respectively, as of and for the year ended March 31, 1997.
NOTE G -- COMMON STOCK
In fiscal 1996, the Board of Directors approved a one time Stock Purchase/Option
Plan (the "Purchase Plan") available to essentially all employees. Employees who
purchased stock were awarded stock options equal to six times the number of
shares purchased. A total of 37,689 shares were sold under the Purchase Plan at
a purchase price of $10.63 per share, with 32,448 shares outstanding as of March
31, 1997. The options were granted at fair value at the date of the grants,
determined based on an independent appraisal as of the end of the previous
fiscal year-end. The options have a four-year vesting period. A total of 226,134
options were granted under the Purchase Plan. No options remain available for
future grant. The issued options and shares become one-third vested two years
from the grant date, another one-third vested three years from the grant date
and the remaining balance vested four years from the grant date. Options may be
exercised for 10 years from the grant date.
During fiscal 1996, the Board of Directors also approved the AmeriSteel
Corporation Equity Ownership Plan (the "Equity Ownership Plan") which provides
for grants of common stock, options to purchase common stock and stock
appreciation rights up to 438,852 shares. The Company has granted 91,350
incentive stock options and 12,100 shares of common stock under the Equity
Ownership Plan through March 31, 1997. As of March 31, 1997, there remain
348,452 shares available for future grants. The issued options and shares become
one-third vested two years from the grant date, another one-third vested three
years from the grant date and the remaining balance vested four years from the
grant date. All grants were at the fair market value of the common stock on the
grant date, determined based on an independent appraisal as of the end of the
previous fiscal year-end. Options may be exercised for 10 years from the grant
date.
The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25 (APB 25), under which no compensation expense
has been recognized for the instruments issued under the Purchase Plan or the
options issued under the Equity Ownership Plan. In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123), which was
effective for fiscal years beginning after December 15, 1995. SFAS No. 123
allows companies to continue following the accounting guidance of APB 25, but
requires pro forma disclosure of net income and earnings per share for the
effects on compensation expense had the accounting guidance of SFAS No. 123 been
adopted. The pro forma disclosures are required only for stock-based awards
granted subsequent to April 1, 1995.
30
<PAGE> 32
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE G -- COMMON STOCK -- continued
The Company adopted SFAS No. 123 for disclosure purposes in fiscal 1997. For
SFAS No. 123 purposes, the fair value of each option grant under the Purchase
Plan and the Equity Ownership Plan has been estimated as of the date of the
grant using a minimum value calculation with the following weighted average
assumptions: risk-free interest rate of 6.5% and 6.3% for the Equity Ownership
Plan and Purchase Plan, respectively; expected life of 7 years for both the
Equity Ownership Plan and Purchase Plan; and dividend rate of 0% for both the
Equity Ownership Plan and Purchase Plan. Using these assumptions, the fair value
of the stock options granted in fiscal 1997 and 1996 is $347,159 and $1,009,501,
respectively, which would be amortized as compensation expense over the vesting
period of the options.
The fair value of the stock issued under the Purchase Plan has been estimated at
the date of the grant using a minimum value calculation with the following
weighted average assumptions: risk-free interest rate of 5.3%, expected life of
7 years and dividend rate of zero percent. Using these assumptions, the fair
value of the issued stock in fiscal 1997 and fiscal 1996 is $0 and $75,755,
respectively. The fiscal 1996 fair value would be compensation expense for
fiscal 1996. Had compensation cost been determined consistent with SFAS No. 123,
utilizing the assumptions detailed above, the Company's net income and earnings
per share ("EPS") would have been changed to the following pro forma amounts:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C> <C>
Net Income: As Reported $8,052 $2,120
Pro Forma 7,858 2,003
EPS: As Reported $ .80 $ .21
Pro Forma .78 .20
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
stock-based compensation granted prior to April 1, 1995, the resulting pro
forma compensation cost may not be representative of that to be expected in
future years.
31
<PAGE> 33
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE G -- COMMON STOCK -- continued
The following table summarizes stock option activity for the years ended
March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Equity Ownership Plan
--------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------
Weighted- Weighted-
Number of Average Number of Average
Shares Exercise Shares Exercise
Price Price
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding,
beginning of year 12,000 $12.50 - $ -
Granted 79,350 12.50 12,000 12.50
Exercised - - - -
Forfeited (13,050) (12.50) - -
Outstanding,
end of year 78,300 12.50 12,000 12.50
Options vested
at year-end - - - -
Weighted-average
fair value of
options granted
during the year - $ 4.38 - $ 4.46
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Purchase Plan
-------------------------------------------------------------------
1997 1996
-------------------------------------------------------------------
Weighted- Weighted-
Number of Average Number of Average
Shares Exercise Shares Exercise
Price Price
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding,
beginning of year 221,094 $12.50 - $ -
Granted - - 226,134 12.50
Exercised - - - -
Forfeited (26,316) 12.50 (5,040) 12.50
Outstanding,
end of year 194,778 12.50 221,094 12.50
Options vested
at year-end - - - -
Weighted-average
fair value of
options granted
during the year - $ - - $ 4.45
-------------------------------------------------------------------
</TABLE>
No stock option activity occurred during fiscal 1995. The weighted-average
remaining contractual life of the options under the Purchase Plan and the Equity
Ownership Plan as of March 31, 1997 is 8.50 years and 9.15 years, respectively.
The weighted-average fair value of the shares sold under the Purchase Plan
during fiscal 1996 was $12.50.
Subsequent to year end, the Board of Directors granted options for an additional
63,550 shares with an exercise price of $13.50 per share.
32
<PAGE> 34
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE H -- INCENTIVE COMPENSATION PLAN
During 1989, the Board of Directors approved a short-term incentive plan to
reward key employees who are significant to the Company's long-term success. The
awards are based on the Company's actual operating results, as compared to
targeted results. The plan provides for annual distributions to participants
based on that relationship. The plan is amended annually by the Board of
Directors to reflect changes in expected operating results, and to adjust target
results accordingly. The fiscal 1996 and 1997 plans were based on actual return
on capital employed as compared to target return on capital employed. The prior
fiscal years' plans were based on actual operating results as compared to target
operating results. The award was $1.4 million for fiscal 1997, $1.2 million for
fiscal 1996, and $1.9 million for fiscal 1995, which amounts were included in
salaries, wages and employee benefits.
NOTE I -- 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 $12.3
million with these costs recorded in accrued liabilities as of March 31, 1997.
The Company paid approximately $5.2 million in remediation costs in fiscal 1997.
Of the amount accrued at March 31, 1997, the Company expects to pay
approximately $5.1 million in fiscal 1998. The timing of future payments are
uncertain due to the various remediation alternatives being considered. 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.
The Company expensed approximately $2 million in each of the past two fiscal
years, and $6 million in fiscal 1995 for environmental remediation costs.
Based on past use of certain technologies and remediation methods by third
parties, evaluation of those technologies and methods by the Company's
consultants and quotations and third-party estimates of costs of
remediation-related services provided to the Company or of which the Company and
its consultants are aware, the Company and its consultants believe that the
Company's cost estimates are reasonable. In light of the uncertainties inherent
in determining the costs associated with the clean-up of such contamination,
including the time periods over which such costs must be paid, the extent of
contribution by parties which are joint and severally liable, and the nature and
timing of payments to be made under cost sharing arrangements; there can be no
assurance the ultimate costs of remediation may not be greater or less than the
estimated remediation costs.
33
<PAGE> 35
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE J -- COMMITMENTS
Operating Leases
The Company leases certain equipment and real property under noncancelable
operating leases. Aggregate future minimum payments under these leases are as
follows:
<TABLE>
<CAPTION>
($ in thousands) YEAR ENDING
MARCH 31, AMOUNT
----------- --------
<S> <C>
1998 $ 1,644
1999 1,210
2000 1,134
2001 863
2002 735
Thereafter 1,345
-------
$ 6,931
=======
</TABLE>
Total rent expense was approximately $4.1 million, $4.2 million, and $5.0
million, for the years ended March 31, 1997, 1996 and 1995, respectively.
On April 1, 1995, the Company entered into two noncancelable operating lease
agreements with an initial lease term of five years to lease land and land
improvements to a third party. Aggregate future minimum gross rentals under
these leases is $100,000 per year. Cost of the land and land improvements was
$1.6 million.
Service Commitments
The Company entered into two noncancelable agreements to purchase transportation
services. The rates charged are based on a fixed dollar amount and number of
miles. These rates are subject to change each year based on inflation. The term
for each agreement is 5 years, beginning April 1, 1995, renewable for successive
one-year periods.
Employment Agreement
On June 1, 1994, the Company entered into a five-year employment agreement (the
"Employment Agreement") with a senior member of management. The Employment
Agreement provides for, among other benefits, a one-time bonus of $2,446,000,
base annual salary of $300,000 (subsequently revised to $255,000 plus incentives
based on performance), and equity interest of 7.5% of the outstanding common
stock of the Company to vest ratably over the next five years. Deferred
compensation of $4,500,000 was recorded related to the common stock granted, and
is being amortized on a straight-line basis over the term of the Employment
Agreement. The Employment Agreement also provides for certain additional
benefits in the event of termination.
Interest Rate Swap
The Company maintained an interest rate swap (the "Swap") agreement as a hedge
against fluctuations in interest rates on certain debt. The Swap had a notional
amount of $20 million and expired on February 24, 1997. Under the terms of the
Swap, the Company agreed to pay fixed interest at 9% and receive variable
interest at the LIBOR Rate plus 3.0%, computed on the notional amount. The
Company amortized the premium paid to acquire the Swap over its term as an
adjustment to interest expense.
34
<PAGE> 36
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1997, 1996 and 1995
NOTE J -- COMMITMENTS -- continued
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.
NOTE K -- OTHER OPERATING EXPENSES
In June 1995, the Company announced the closing of the Tampa rolling mill
resulting in a $15.0 million charge of which $12.0 million was used to reduce
fixed assets to realizable value while the balance was primarily benefit costs
for affected employees. The Company also wrote off $752 thousand in fiscal 1996,
for the remaining cost of the Woodbridge, Virginia lease which was closed in
fiscal 1995.
35
<PAGE> 37
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
AmeriSteel Corporation:
We have audited the accompanying statements of financial position of AmeriSteel
Corporation (a Florida corporation) as of March 31, 1997 and 1996, and the
related statements of income, shareholders' equity and cash flows for each of
the three years in the period ended March 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AmeriSteel Corporation as of
March 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 1997, in conformity
with generally accepted accounting principles.
Tampa, Florida,
April 25, 1997
36
<PAGE> 38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required with respect to Directors and Executive Officers is
included in the Information Statement which will be submitted to shareholders
prior to July 29, 1997, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required with respect to Executive Compensation is included in
the Information Statement which will be submitted to shareholders prior to July
29, 1997, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required with respect to Security Ownership of Certain
Beneficial Owners and Management is included in the Information Statement which
will be submitted to shareholders prior to July 29, 1997, and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required with respect to Certain Relationships and Related
Transactions is included in the Information Statement which will be submitted
to shareholders prior to July 29, 1997, and is incorporated herein by
reference.
37
<PAGE> 39
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following financial statements of AmeriSteel Corporation as
of the dates and for the periods indicated are filed as part of this
report:
<TABLE>
<S> <C>
Statements of Financial Position March 31, 1997 and March 31, 1996
Statements of Operations Years Ended March 31, 1997, March
31, 1996 and March 31, 1995
Statements of Shareholder's Equity Years Ended March 31, 1997, March
31, 1996 and March 31, 1995
Statements of Cash Flows Years Ended March 31, 1997, March
31, 1996 and March 31, 1995
</TABLE>
Report of Independent Certified Public Accountants - April 25, 1997
(2) The following financial statement schedules of AmeriSteel Corporation
are filed as part of this report: None
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and, therefore,
have been omitted.
(b) Reports on Form 8-K. None filed for the quarter ended March 31, 1997.
(c) The exhibits to this report are indexed below and are filed or
incorporated by reference as part of this report:
Exhibit 3(i) Amended and Restated Articles of Incorporation of
the Company as amended by amendments dated May 22,
1995 and March 27, 1996 (Filed as Exhibit 3(I) to
the Company's Annual Report on Form 10-K for the
year ended March 31, 1996.)
3(ii) By-Laws of the Company (Filed as Exhibit 3.2 to
the Company's Annual Report on Form 10-K for the
year ended September 30, 1992.)
Exhibit 10 AmeriSteel Equity Ownership Plan
AmeriSteel Strategic Value Added Executive
Short-Term Incentive Plan (Both filed as Exhibit 10
to the Company's Annual Report on Form 10-K for the
year ended March 31, 1996.)
Exhibit 23 Consent of Arthur Andersen LLP
Exhibit 27 Financial Data Schedule (for SEC use only)
38
<PAGE> 40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Phillip E. Casey June 24, 1997
----------------------------------------------------
Phillip E. Casey, Chairman of the Board Date
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE
- ---------------------------------------------------------- -------------------------------------------------
<S> <C> <C>
/s/ Phillip E. Casey June 24, 1997 Chief Executive Officer
- ---------------------------------------------------------- Chairman of the Board; Director
Phillip E. Casey Date
/s/ Koichi Takashima June 24, 1997 Director
- ----------------------------------------------------------
Koichi Takashima Date
/s/ Director
- ----------------------------------------------------------
Akihiko Takashima Date
/s/ Director
- ----------------------------------------------------------
Takeshi Fujimura Date
/s/ Director
- ----------------------------------------------------------
Hideichiro Takashima Date
/s/ Ryutaro Yoshioka June 24, 1997 Director
- ----------------------------------------------------------
Ryutaro Yoshioka Date
/s/ Shuzo Hikita June 24, 1997 Vice President, Engineering and Technology; Director
- ----------------------------------------------------------
Shuzo Hikita Date
/s/ J. Donald Haney June 24, 1997 Group Vice President, Fabricated Reinforcing Steel;
- ---------------------------------------------------------- Director
J. Donald Haney Date
/s/ Tom J. Landa June 24, 1997 Vice President, Chief Financial Officer and
- ---------------------------------------------------------- Secretary (Principal Financial Officer and
Tom J. Landa Date Principal Accounting Officer); Director
</TABLE>
39
<PAGE> 1
EXHIBIT 23
CONSENT TO USE OF REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report dated April 25, 1997, included in this Form 10-K,
into AmeriSteel Corporation's previously-filed Registration Statements (File
Nos. 33-60329 and 333-14547).
ARTHUR ANDERSEN LLP
Tampa, Florida,
June 24, 1997
40
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERISTEEL CORPORATION FOR THE YEAR ENDED MARCH 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,645
<SECURITIES> 0
<RECEIVABLES> 69,563
<ALLOWANCES> (1,000)
<INVENTORY> 106,173
<CURRENT-ASSETS> 182,519
<PP&E> 308,159
<DEPRECIATION> 58,138
<TOTAL-ASSETS> 535,685
<CURRENT-LIABILITIES> 73,792
<BONDS> 237,474
0
0
<COMMON> 101
<OTHER-SE> 150,463
<TOTAL-LIABILITY-AND-EQUITY> 535,685
<SALES> 617,289
<TOTAL-REVENUES> 617,289
<CGS> 531,190
<TOTAL-COSTS> 531,190
<OTHER-EXPENSES> 49,852
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,407
<INCOME-PRETAX> 15,840
<INCOME-TAX> 7,788
<INCOME-CONTINUING> 8,052
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,052
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
