<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
Commission File No. 1-5210
AmeriSteel Corporation
(Exact name of registrant as specified in its charter)
FLORIDA 59-0792436
------- ----------
State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization
5100 W. LEMON STREET
TAMPA, FLORIDA 33609
(Address of principal executive offices)
Registrant's telephone number, including area code (813)286-8383
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
As of January 23, 1998 the registrant had 10,114,293 shares Class B common
stock outstanding.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AMERISTEEL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
------------ ---------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,026 $ 1,645
Accounts receivable 63,597 68,563
Inventories 119,362 106,173
Deferred tax assets 5,000 5,000
Other current assets 1,006 1,138
--------------- ------------
TOTAL CURRENT ASSETS 190,991 182,519
ASSETS HELD FOR SALE 13,689 14,838
PROPERTY, PLANT AND EQUIPMENT 321,178 308,159
Less accumulated depreciation 71,575 58,138
--------------- ------------
249,603 250,021
GOODWILL 82,676 85,773
DEFERRED FINANCING COSTS 2,116 2,523
OTHER ASSETS 6 11
--------------- ------------
TOTAL ASSETS $ 539,081 $ 535,685
=============== ============
</TABLE>
See notes to consolidated financial statements
2
<PAGE> 3
AMERISTEEL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION -- continued
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
-------------- ------------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 44,748 $ 44,666
Salaries, wages and employee benefits 15,903 14,598
Environmental remediation 4,976 5,079
Other current liabilities 5,000 4,355
Interest payable 1,974 4,659
Current maturities of long-term borrowings 5,626 435
--------------- -------------
TOTAL CURRENT LIABILITIES 78,227 73,792
LONG-TERM BORROWINGS, LESS CURRENT PORTION 214,875 237,474
OTHER LIABILITIES 23,895 21,555
DEFERRED TAX LIABILITIES 52,300 52,300
SHAREHOLDERS' EQUITY
Class A Common Stock, $0.01 par value,
100,000,000 and 0 shares authorized at December 31 and
March 31, 1997, respectively. 0 shares issued and outstanding at
December 31 and March 31, 1997. - -
Class B Common Stock, $0.01 par value,
22,000,000 and 30,000,000 shares authorized at December 31
and March 31, 1997, respectively. 10,114,372 and 10,079,028
shares issued and outstanding at December 31, and
March 31, 1997, respectively. 101 101
Capital in excess of par 157,293 156,816
Retained earnings (accumulated deficit) 14,207 (4,328)
Deferred compensation (1,817) (2,025)
--------------- -------------
TOTAL SHAREHOLDERS' EQUITY 169,784 150,564
--------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 539,081 $ 535,685
=============== =============
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
AMERISTEEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Sales $ 498,924 $ 467,856 $ 155,120 $ 139,948
Operating Expenses:
Cost of sales, excluding depreciation 403,006 404,777 125,755 119,602
Selling and administrative 20,609 21,441 7,775 7,184
Depreciation 14,552 12,284 4,909 4,193
Amortization of goodwill 3,097 3,098 1,033 1,032
----------- ------------ ------------- -----------
441,264 441,600 139,472 132,011
----------- ------------ ------------- -----------
INCOME FROM OPERATIONS 57,660 26,256 15,648 7,937
Other Expenses:
Interest 14,845 14,684 4,730 4,786
Amortization of deferred financing costs 501 701 148 233
----------- ------------ ------------- -----------
15,346 15,385 4,878 5,019
----------- ------------ ------------- -----------
INCOME BEFORE INCOME TAXES 42,314 10,871 10,770 2,918
Income tax 17,711 5,448 4,603 1,541
----------- ----------- ------------- -----------
NET INCOME $ 24,603 $ 5,423 $ 6,167 $ 1,377
=========== =========== ============= ===========
Earnings per share - Basic (Note F) $ 2.44 $ 0.54 $ 0.61 $ 0.14
=========== =========== ============= ===========
Earnings per share - Diluted (Note F) $ 2.43 $ 0.54 $ 0.61 $ 0.14
=========== =========== ============= ===========
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
AMERISTEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
----------------- -------------------
($ IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 24,603 $ 5,423
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 18,150 16,083
Deferred income taxes - 1,800
Other (loss on asset disposals and deferred compensation) 1,259 531
Changes in operating assets and liabilities:
Accounts receivable 4,966 13,345
Inventories (13,189) 14,856
Other assets 137 244
Accounts payable, income taxes and other liabilities 1,584 (10,449)
----------------- ------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 37,510 41,833
INVESTING ACTIVITIES
Additions to property, plant and equipment (14,303) (31,252)
Proceeds from sales of property, plant and equipment 184 614
Purchase of assets held for sale (129) (454)
Proceeds from disposition of assets held for sale 3,034 -
Restricted IRB funds (2,282) 11,123
----------------- ------------------
NET CASH USED IN INVESTING ACTIVITIES (13,496) (19,969)
FINANCING ACTIVITIES
Payments to short-term and long-term borrowings, net (22,408) (27,655)
Proceeds from IRB Bonds 5,000 -
Addition to deferred financing costs (94) -
Purchase of common stock (63) (202)
Dividends paid (6,068) -
----------------- ------------------
NET CASH USED IN FINANCING ACTIVITIES (23,633) (27,857)
----------------- ------------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 381 (5,993)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,645 6,193
----------------- ------------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 2,026 $ 200
================= ==================
</TABLE>
See notes to consolidated financial statements
5
<PAGE> 6
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- BASIS OF PRESENTATION
The consolidated financial statements include the accounts of AmeriSteel
Corporation, a Florida corporation and its wholly owned subsidiary (AmeriSteel
Finance Corporation, a Delaware corporation) (the "Company") after the
elimination of all significant intercompany balances and transactions. 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.
The accompanying unaudited consolidated financial statements do not include
all the information or footnotes necessary for a complete presentation of
financial condition, results of operations and cash flows in conformity
with generally accepted accounting principles. However all adjustments
which, in the opinion of management are necessary for a fair presentation,
have been included. Such adjustments consist only of normally recurring items.
It is suggested that these consolidated financial statements be read in
conjunction with the financial statements and the notes thereto included in
the Company's latest annual report on Form 10-K. The results of the nine
months ended December 31, 1997 are not necessarily indicative of the results to
be expected for the fiscal year ending March 31, 1998.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements: In June 1997, the Financial Accounting
Standards Board issued Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which establishes standards for
reporting information about operating segments of a business. The statement,
which is based on the management approach to segment reporting, includes
requirements to report selected segment information and entity-wide
disclosures about products and services, major customers, and the
countries in which the Company holds assets and reports revenues. This
statement becomes effective for the Company for reporting beginning in
fiscal 1999. Management has not yet evaluated the effects of this change on
the Company's financial statements.
Reclassifications: Certain amounts in the prior period financial statements
have been reclassified to conform to the current fiscal financial statement
presentation.
6
<PAGE> 7
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE C -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
------------ -------------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Finished goods $ 76,566 $ 59,299
Work in-process 11,053 14,175
Raw materials and operating supplies 31,743 32,699
-------------- ------------
$ 119,362 $ 106,173
============ ============
</TABLE>
NOTE D -- BORROWINGS
Long-term borrowings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
------------ ----------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Revolving Credit Agreement $ 29,000 $ 51,340
First Mortgage Notes 100,000 100,000
Subordinated Intercompany Note 50,000 50,000
Industrial Revenue Bonds 35,875 30,875
Trade Loan Agreement 5,259 5,259
Note to Parent 367 435
----------- ----------
220,501 237,909
Less Current Maturities 5,626 435
----------- ----------
$ 214,875 $ 237,474
=========== ==========
</TABLE>
NOTE E -- ENVIRONMENTAL MATTERS
As the Company is involved in the manufacture of steel, it produces and uses
certain substances that may pose environmental hazards. The principal hazardous
waste generated by current and past operations is emission control dust (EC
dust), a residual from the production of steel in electric arc furnaces.
Environmental legislation and regulation at both the federal and state level
over EC dust is subject to change, which may change the cost of compliance.
While EC dust is generated in current production processes, such EC dust is
being collected, handled and disposed of in a manner which management believes
meets all current federal and state environmental regulations. The costs of such
collection and disposal are being expensed and paid currently from operations.
In addition, the Company has handled and disposed of EC dust in other manners in
previous years, and is responsible for the remediation of certain sites where
such EC dust was generated and/or disposed. In general, the Company's estimate
of the remediation costs is based on its review of each site and the nature of
the anticipated remediation activities to be undertaken. The Company's process
for estimating such remediation costs includes determining for each site the
expected remediation methods, and the estimated cost for each step of the
remediation. In all such determinations, the Company employs outside
consultants, and providers of such remedial services where necessary, to assist
in making such determinations. Although the ultimate costs associated with the
remediation are not presently known, the Company has estimated the total
remaining costs to be approximately $13.4 million with these costs recorded as a
liability as of December 31, 1997, the majority of which is associated with four
sites.
7
<PAGE> 8
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE E -- ENVIRONMENTAL MATTERS (CONTINUED)
The Tampa mill site contains slag and soil that is contaminated with EC dust,
a principal hazardous waste generated by past operations. The volume and
mass estimates of the contamination is based on analytical data from
approximately 600 soil borings, 700 soil samples and 91
groundwater-monitoring wells. The remediation approach selected by the
Company, excavation and on-site treatment and disposal, was approved, and a
permit issued, by the U.S. Environmental Protection Agency during FY 1996 and
by the Florida Department of Environmental Protection during FY 1998. The
Company is currently awaiting a signed Consent Order to begin the
remediation process. The remediation cost estimates are based on the
Company's previous experience with comparable projects as well as
estimates provided by outside environmental consultants. The Company is
responsible for the total remediation costs and currently estimates those
costs to be approximately $8 million for this site. The Company expects
cleanup at this site to be substantially completed by 2001.
At the Jackson, Tennessee mill site, EC dust contaminated with Cesium
137, a man-made, radioactive material (incident-related material) has
been stored in containers awaiting remediation. The remediation volumes and
masses are based on actual measurements made by the outside contractor
during the now complete cleanup, consolidation and containerization phase
of the remediation. The approach for the remaining treatment, transport
and disposal phase is based on the final Nuclear Regulatory Commission
"Technical Position," dated March 20, 1997. The remediation cost estimate
is based on a signed contract for the treatment and transportation and on
a written price quotation for the disposal. The detailed workplan has been
submitted to the regulatory agencies for approval. The Company is responsible
for the total remediation cost and currently estimates those costs to be
approximately $3 million for this site. The Company expects cleanup at this
site to be substantially completed during 1998.
The Sogreen site, a third party site, contains EC dust from the Company that was
stored at this recycling location. The Company has been named as a potentially
responsible party (PRP) for this site, and thus its estimated share of the
remediation costs is approximately 43% (based on analytical data from soil
borings and samples) of the total estimated remediation cost of approximately
$4.3 million. The Company currently estimates its remaining obligation to be
approximately $1 million. The estimate includes the cost of soil remediation and
groundwater remediation based on an approach approved by the Georgia
Environmental Protection Division. If the other PRPs were not to fulfill their
obligations, the Company's management believes that the impact of additional
future costs attributable to the Sogreen site on the Company's results of
operations, financial condition and liquidity, would not be significant. The
Company expects cleanup at this site to be substantially completed during 1998.
The Stoller site, a third party site, contains metals from other PRPs and
EC dust from the Company that was stored at this recycling location. The
Company has been named as a PRP for this site. Outside contractors have
measured the remediation volumes and masses during the now complete cleanup
and consolidation phase of the remediation. The remainder of the remediation
approach, on-site treatment and disposal, is being completed by the State
of South Carolina and construction of the on-site vault is underway. The
Company's cost estimates are based on its previous experience with
comparable projects as well as estimates confirmed by the State of South
Carolina. An Allocation Agreement was published by the State of South
Carolina during 1997 that attributes approximately 2% of the remaining
estimated $10 million
8
<PAGE> 9
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE E -- ENVIRONMENTAL MATTERS (CONTINUED)
remediation cost to the Company, which the Company has already paid. The
non-participating PRPs have intervened in the proceedings for approval of
the agreement between the Company and the State of South Carolina in the
federal court in order to contest the agreement. The Company's management
believes that the finalized agreement will be approved by the court between
February and May 1998. If the Allocation Agreement is not approved under its
present terms, the Company's management believes that its overall obligation
could increase to approximately 50% of the total estimated remediation cost.
The Company expects cleanup at this site to be substantially completed during
1998.
The Company paid approximately $5.2 million in remediation costs in fiscal
1997, and $2.2 million during the first nine months of fiscal 1998. Of the
$13.4 million accrued at December 31, 1997, the Company expects to pay
approximately $5.0 million within one year. The timing of the remaining
future payments for each future year is uncertain due to the various
remediation alternatives being considered. However, the Company's
management has estimated that all significant remediation should be completed
by approximately 2002. The Company expensed approximately $3.3 million
during the nine months ended December 31, 1997, and approximately $2
million in each of the past two fiscal years 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 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 jointly 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.
9
<PAGE> 10
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE F -- EARNINGS PER SHARE
CALCULATION OF BASIC AND DILUTED EARNINGS PER SHARE (EPS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
-------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
NET INCOME ($000s) $ 24,603 $ 5,423 $ 6,167 $ 1,377
-------------- --------------- ------------- -------------
Weighted average shares outstanding (in thousands) 10,089 10,089 10,115 10,083
Dilutive effect of stock option plan (in thousands) 19 - 19 -
-------------- --------------- ------------- -------------
Weighted average shares outstanding plus
dilutive potential shares (in thousands) 10,108 10,089 10,134 10,083
-------------- --------------- ------------- -------------
Basic EPS $ 2.44 $ 0.54 $ 0.61 $ 0.14
============== =============== ============= =============
Diluted EPS $ 2.43 $ 0.54 $ 0.61 $ 0.14
============== =============== ============= =============
</TABLE>
Basic earnings per common share were computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
earnings per common share were determined by dividing net income by the weighted
average number of common shares outstanding plus dilutive potential shares. The
dilutive potential shares are calculated assuming the exercise of options at the
beginning of the period (or at time of issuance, if later) and common stock is
assumed to be issued as of that date. No established public trading market
exists for the Company's common stock, therefore the Company uses the latest
independently appraised value for this determination.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
FACTORS THAT MAY AFFECT OPERATING RESULTS
This report contains certain forward-looking statements that are based on
the beliefs of the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. Such
statements include, among others, (i) the highly cyclical nature and
seasonality of the steel industry, (ii) the fluctuations in the cost and
availability of raw materials, (iii) the possibility of excess
production capacity, (iv) the potential costs of environmental compliance,
(v) the risks associated with potential acquisitions, (vi) further
opportunities for industry consolidation, (vii) the impact of inflation and
(viii) the fluctuations in the cost of electricity. Because such
statements involve risks and uncertainties, actual actions and strategies and
the timing and expected results thereof may differ materially from those
expressed or implied by such forward-looking statements. The following
presentation of management's discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction
with the Company's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission.
GENERAL
The results of operations of the Company are largely dependent on the level of
construction and general economic activity in the U.S. The Company's sales
are seasonal with sales in the Company's fiscal first and second quarters
generally stronger than the rest of the year. The Company's cost of sales
includes the cost of its primary raw material, steel scrap, the cost of
converting scrap to finished steel products, the cost of warehousing and
handling finished steel products and freight costs. The following table sets
forth information regarding recent results of operations.
11
<PAGE> 12
AMERISTEEL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION - Continued
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS (UNAUDITED) NINE MONTHS ENDED QUARTER ENDED
DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------- -------------- ------------- --------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C>
Net sales $ 498,924 $ 467,856 $ 155,120 $ 139,948
Cost of sales 403,006 404,777 125,755 119,602
Cost of sales as percent of net sales 80.8% 86.5% 81.1% 85.5%
Selling and administrative 20,609 21,441 7,775 7,184
Depreciation 14,552 12,284 4,909 4,193
Amortization of goodwill 3,097 3,098 1,033 1,032
------------- ------------- ------------ --------------
Income from operations $ 57,660 $ 26,256 $ 15,648 $ 7,937
Interest expense 14,845 14,684 4,730 4,786
Amortization of deferred financing costs 501 701 148 233
Income taxes 17,711 5,448 4,603 1,541
------------- ------------- ------------ --------------
Net income $ 24,603 $ 5,423 $ 6,167 $ 1,377
============= ============= ============ ==============
TONS SHIPPED (THOUSANDS)
Mill Finished Goods
Stock Rebar 415 347 124 105
Merchant Bar 428 376 145 123
Rods 72 81 24 19
------------- ------------- ------------ --------------
915 804 293 247
Fabricated rebar 254 252 80 82
Billets 134 235 28 47
------------- ------------- ------------ --------------
Total 1,303 1,291 401 376
============= ============= ============ ==============
AVERAGE SELLING PRICES (PER TON)
Mill Finished Goods
Stock Rebar $ 333 $ 314 $ 331 $ 318
Merchant Bar 368 353 368 350
Rods 347 322 354 322
------------- ------------- ------------ --------------
350 332 351 334
Fabricated rebar 457 452 458 451
Billets 233 226 238 232
Average mill finished goods prices (per ton) $ 350 $ 332 $ 351 $ 334
Average scrap cost (per ton) 132 131 133 129
Average metal spread (per ton) 218 201 218 205
Average mill conversion costs (per ton) 129 139 132 137
</TABLE>
12
<PAGE> 13
AMERISTEEL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION - Continued
NET SALES. Net sales in the nine months ended December 31, 1997 increased
approximately 7% from the same period last year as both prices and volumes of
mill finished goods increased. Average mill finished goods sales prices
increased over 5% and shipments of higher margin mill finished goods
increased over 13%. Net sales in the quarter ended December 31, 1997
increased by approximately 11% from the same period last year as both
prices and volumes of mill finished goods increased. Average mill
finished goods sales prices increased over 5%. Overall tons shipped increased
approximately 7% while mill finished goods shipments increased over 18%.
The volume shift towards higher margin finished goods and away from
semi-finished billets is a direct result of higher production levels resulting
from completion of mill modernization projects at the Charlotte and Jackson
rolling mills.
COST OF SALES. Increased production levels, lower average unit costs and the
shift of shipment mix towards higher margin finished steel products resulted
in higher margins. Cost of sales declined from 87% to 81% of net sales in
the nine months ended December 31, 1997 and from 86% to 81% of net sales in the
quarter ended December 31, 1997.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses for the quarter
ended December 31, 1997 include a $1.8 million net gain on disposition of
certain assets held for sale, and a non-recurring charge of $1.2 million for
expenses associated with the canceled IPO and debt restructuring. Also included
in the nine months ended December 31, 1997 was a $3.0 million charge for the
disposition of environmental waste and a $1.4 million charge related to startup
expenses associated with its EC dust recycling facility at the Jackson mill,
both recorded in the second quarter. These charges were offset by $6.8 million
received in connection with an insurance settlement related to cleanup of the
1995 melting of radioactive scrap at the Jackson mill.
DEPRECIATION. Depreciation expense of $14.6 million for the nine months
ended December 31, 1997 increased 18% over the same period last year due to
capital improvement spending of $17.4 million since December 31, 1996.
The same capital spending resulted in a 17% increase in depreciation expense
for the quarter ended December 31, 1997 over the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the nine months ended December 31,
1997 was $37.5 million compared with $41.8 million for the same period last
year. For the nine months ended December 31, 1997 cash flow from net income
increased by $19.2 million compared to the same period last year. The increase
was offset by (1) an increase in inventories because finished product
inventories during the nine months ended December 31, 1996 were drawn down to
minimum operating levels during production disruptions caused by mill
modernization projects at the Charlotte and Jackson mills, and (2) other
changes in operating assets and liabilities. For the nine months ended December
31, 1997 the Company used $22.4 million in cash to repay debt and $14.3 million
to invest in capital projects, mostly for mill modernization.
13
<PAGE> 14
AMERISTEEL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION - Continued
On December 5, 1997 the Company paid a special dividend of $.60 per
share on 10,114,322 shares outstanding to stockholders of record as of
December 1, 1997. The total dividend amounted to $6.1 million.
Due to turbulent conditions in the equity marketplace, the Company canceled its
proposed initial public offering of common stock and concurrent bond refinancing
and therefore withdrew its Registration Statement on Form S-1, as amended, which
was initially filed with the Securities and Exchange Commission on October 10,
1997.
The Company believes that the amounts available from operating cash flows
and funds available through its Revolving Credit Agreement will be sufficient
to meet its expected operational cash needs and planned capital expenditures
for the foreseeable future. Funds available through its Revolving Credit
Agreement amounted to $49.4 million at December 31, 1997.
The Company is aware of the year 2000 issue and the effects it may have on
its business systems. In response, the Company has developed a detailed
plan to address this issue. This plan includes a two-year campaign, which
began in April 1997 and includes approved spending of approximately $2.6
million for upgrading hardware and software, including training, prior to
2000. The Company believes that it will be Year 2000 compliant without a
material impact on its operations or financial results.
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On December 8, 1997, Articles of Amendment to the Articles of Incorporation
(the "Articles of Amendment") of the Company were filed with the Department of
State of the State of Florida. The Articles of Amendment (i) converted all
outstanding shares of common stock into a new class of stock, Class B Common
Stock, which has two (2) votes per share on all matters, and (ii) authorized
a new class of stock, Class A Common Stock, which has one (1) vote per share
on all matters. Shares of Class A Common Stock and shares of Class B
Common Stock generally carry the same rights, powers, preferences,
privileges and limitations except for voting rights. Shares of Class B Common
Stock are convertible into Class A Common Stock. The Articles of Amendment
restrict the additional issuance (including, without limitation, the
issuance of any rights, options, warrants or other securities convertible
into shares of Class B Common Stock) and the transfer of shares of Class B
Common Stock to existing holders of Class B Common Stock, Kyoei Steel
Ltd. and Kyoei's wholly owned subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 18, 1997, the Company mailed to its stockholders an
Information Statement to inform the Company's stockholders of the
following actions that were approved by the Board of Directors of the Company
and which the majority stockholders of the Company had indicated their
intention to approve by written consent in lieu of a special meeting of
stockholders: (i) an amendment to the Company's Articles of Incorporation to
create two classes of Common Stock - Class A and Class B and (ii) an amendment
to the Company's Equity Ownership Plan to provide that, except for
options then outstanding, all additional shares of common stock issued
under the plan after the amendment to the Articles of Incorporation would
be Class A Common Stock. For additional information regarding the
amendment to the Articles of Incorporation, see "Item 2. Changes in
Securities and Use of Proceeds."
14
<PAGE> 15
On December 8, 1997, stockholders holding approximately 99% of the
outstanding shares of common stock signed written consents authorizing and
adopting the amendments to the Articles of Incorporation and the Equity
Ownership Plan, all as described in the Information Statement discussed
above. The Articles of Amendment to the Articles of Incorporation adopted
by the stockholders of the Company were filed with the Department of State of
the State of Florida on December 8, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as exhibits to this
Quarterly Report on Form 10-Q:
Exhibit 11 Statement re: computation of per share earnings
Exhibit 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERISTEEL CORPORATION
Date: January 30, 1998 /s/ Phillip E. Casey
-----------------------------------
Phillip E. Casey, Chairman of the Board
and Chief Executive Officer
Date: January 30, 1998 /s/ Tom J. Landa
------------------------------------
Tom J. Landa, Vice President, Chief
Financial Officer and Secretary
(Principal Financial Officer and
Principal Accounting Officer)
15
<PAGE> 1
AMERISTEEL CORPORATION
Exhibit 11 - Statement re: computation of per share earnings
CALCULATION OF BASIC AND DILUTED EARNINGS PER SHARE (EPS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C>
NET INCOME ($000s) $ 24,603 $ 5,423 $ 6,167 $ 1,377
--------------- ------------ ---------------- ------------
Weighted average shares outstanding (in thousands) 10,089 10,089 10,115 10,083
Dilutive effect of stock option plan (in thousands) 19 - 19 -
--------------- -------------- ----------------- ------------
Weighted average shares outstanding plus
dilutive potential shares (in thousands) 10,108 10,089 10,134 10,083
--------------- -------------- ----------------- ------------
Basic EPS $ 2.44 $ 0.54 $ 0.61 $ 0.14
=============== ============== ================= ===== ======
Diluted EPS $ 2.43 $ 0.54 $ 0.61 $ 0.14
=============== ============== ================= ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERISTEEL CORPORATION FOR THE NINE MONTHS ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,026
<SECURITIES> 0
<RECEIVABLES> 63,597
<ALLOWANCES> 0
<INVENTORY> 119,362
<CURRENT-ASSETS> 190,991
<PP&E> 321,178
<DEPRECIATION> 71,575
<TOTAL-ASSETS> 539,081
<CURRENT-LIABILITIES> 78,227
<BONDS> 214,875
0
0
<COMMON> 101
<OTHER-SE> 169,683
<TOTAL-LIABILITY-AND-EQUITY> 539,081
<SALES> 498,924
<TOTAL-REVENUES> 498,924
<CGS> 403,006
<TOTAL-COSTS> 403,006
<OTHER-EXPENSES> 38,258
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,346
<INCOME-PRETAX> 42,314
<INCOME-TAX> 17,711
<INCOME-CONTINUING> 24,603
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,603
<EPS-PRIMARY> 2.44
<EPS-DILUTED> 2.43
</TABLE>
