<PAGE>
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 Quarter Ended September 30, 2000
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File
No. 1-5210
AmeriSteel Corporation
Incorporated in
State of Florida
Employer Identification
No. 59-0792436
5100 W. Lemon Street
Tampa, Florida 33609
Mailing Address:
P. O. Box 31328
Tampa, Florida 33631-3328
Telephone No. (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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
As of October 31, 2000 the registrant had 10,378,066 shares, $.01 par value,
Class A Common Stock outstanding.
<PAGE>
PART I -- FINANCIAL INFORMATION
-------------------------------
ITEM I. FINANCIAL STATEMENTS
AMERISTEEL CORPORATION CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
($ in thousands)
<TABLE>
<CAPTION>
September 30, March 31,
2000 2000
(Unaudited)
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,903 $ 2,677
Accounts receivable, less allowance of $1,302
and $1,500 at September 30 and March 31, 2000
respectively, for estimated losses 85,563 82,577
Inventories 140,014 147,064
Deferred tax assets 5,600 5,600
Other current assets 3,411 3,189
--------- ---------
TOTAL CURRENT ASSETS 237,491 241,107
ASSETS HELD FOR SALE 7,080 7,434
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 18,484 18,396
Building and improvements 43,169 42,070
Machinery and equipment 291,647 284,886
Construction in progress 53,063 37,090
--------- ---------
406,363 382,442
Less allowances for depreciation (129,870) (117,066)
--------- ---------
NET PROPERTY, PLANT AND EQUIPMENT 276,493 265,376
GOODWILL 78,597 80,819
DEFERRED FINANCING COSTS 2,222 1,088
OTHER ASSETS 32 11
--------- ---------
TOTAL ASSETS $ 601,915 $ 595,835
========= =========
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
AMERISTEEL CORPORATION CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION -- continued
($ in thousands)
<TABLE>
<CAPTION>
September 30, March 31,
2000 2000
(Unaudited) -----------
----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 45,439 $ 54,180
Accrued salaries, wages and employee benefits 16,271 19,647
Environmental remediation 843 1,294
Other current liabilities 4,933 8,393
Interest payable 656 1,865
Current maturities of long-term borrowings 315 90,311
-------- --------
TOTAL CURRENT LIABILITIES 68,457 175,690
LONG-TERM BORROWINGS, LESS CURRENT PORTION 232,459 124,668
OTHER LIABILITIES 23,398 22,032
DEFERRED TAX LIABILITIES 47,507 47,507
SHAREHOLDERS' EQUITY
Class A Common Stock, $.01 par value; 100,000,000 shares authorized
at September 30, and March 31, 2000. 10,382,184 and 10,377,183
shares outstanding at September 30, and March 31, 2000, respectively. 104 104
Capital in excess of par 158,115 158,117
Retained earnings 71,985 67,882
Deferred compensation (110) (165)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 230,094 225,938
-------- --------
TOTAL LIABILITIES AND SHAREHODLERS' EQUITY $601,915 $595,835
======== ========
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
AMERISTEEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands except per share data)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 353,978 $ 370,170 $ 171,932 $ 182,930
Operating Expenses:
Cost of sales, excluding depreciation 302,398 292,885 150,698 144,881
Selling and administrative 17,448 21,050 8,835 10,498
Depreciation 13,018 11,351 6,526 5,714
Amortization of goodwill 2,222 2,194 1,111 1,110
Other operating expenses 2,987 2,780 2,987 2,791
--------- --------- --------- ---------
338,073 330,260 170,157 164,994
--------- --------- --------- ---------
INCOME FROM OPERATIONS 15,905 39,910 1,775 17,936
Other Expenses:
Interest 7,176 7,319 3,750 3,590
Amortization of deferred financing costs 439 222 288 111
--------- --------- --------- ---------
7,615 7,541 4,038 3,701
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 8,290 32,369 (2,263) 14,235
Income taxes 4,204 13,789 (461) 6,102
--------- --------- --------- ---------
NET INCOME (LOSS) $ 4,086 $ 18,580 $ (1,802) $ 8,133
========= ========= ======== =========
EARNINGS PER COMMON SHARE - BASIC $ .39 $ 1.76 $ (.17) $ .77
EARNINGS PER COMMON SHARE - DILUTED $ .39 $ 1.73 $ (.l7) $ .76
Weighted average number of common shares outstanding 10,381 10,547 10,382 10,545
Weighted average number of common and common
equivalent shares outstanding 10,452 10,717 10,382 10,714
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
AMERISTEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
<TABLE>
<CAPTION>
Six Months Ended
September 30, September 30,
2000 1999
(Unaudited) (Unaudited)
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,086 $ 18,580
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,680 13,767
Other (261) 894
Changes in operating assets and liabilities:
Accounts receivable (2,986) (24,646)
Inventories 7,050 13,556
Other assets (243) (509)
Current and other liabilities (15,871) 15,013
-------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,455 36,655
-------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment (23,891) (22,918)
Asset acquisition - (17,664)
Proceeds from sales of property, plant and equipment 72 380
Proceeds from sale of assets held for sale 354 7,119
Use of restricted IRB funds - 280
-------- ---------
NET CASH USED IN INVESTING ACTIVITIES (23,465) (32,803)
-------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of new debt - 1,500
Repayments of borrowings (90,000)
Proceeds from (payments of) borrowings under the Revolving Credit
Agreement 107,795 (1,498)
Additions to deferred financing costs (1,574) (552)
Proceeds from sale of common stock 136 729
Redemption of common stock (121) (290)
-------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 16,236 (111)
-------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 226 3,741
Cash and cash equivalents at beginning of period 2,677 3,219
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,903 $ 6,960
======== =========
</TABLE>
5
<PAGE>
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO 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) (together, the "Company") after
elimination of all significant intercompany balances and transactions.
AmeriSteel Finance Corporation was dissolved on September 7, 2000.
The Company is a majority owned subsidiary of FLS Holdings, Inc. (FLS), whose
only business is to own common stock of the Company. FLS was a wholly owned
subsidiary of Kyoei Steel, Ltd. (Kyoei), a private Japanese minimill company.
In September 1999, Kyoei sold 88% of its interest in FLS to Brazilian steel
manufacturer, Gerdau S.A. (Gerdau) through one of Gerdau's Canadian subsidiaries
(Change in Control). In September 2000, Kyoei sold its remaining 12% ownership
interest in FLS to Gerdau. As a result, Gerdau is the majority owner of the
Company, with an indirect controlling interest of approximately 87%. An
institutional investor owns approximately 4% of the common stock of the Company
while executives and other employees own the remaining 9% of the Company's
common stock. Push down accounting has not been applied to the financial
statements of the Company as a result of the Change of Control; therefore the
historical cost bases of the Company's assets have not been changed.
The accompanying unaudited condensed financial statements have been prepared in
accordance with the instructions for Form 10-Q and, therefore, do not include
all the information or footnotes necessary for a complete presentation of
financial condition, results of operations and cash flows in conformity with
generally accepted accounting principles. However all adjustments which, in the
opinion of management, are necessary for a fair presentation have been included.
Such adjustments consisted of only normally recurring items.
It is suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K. The results of the three months ended
September 30, 2000 are not necessarily indicative of the results to be expected
for future periods.
In March 2000, the Board of Directors approved changing the fiscal year end of
the Company from March 31 to December 31 effective for the period ending
December 31, 2000.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Earnings per Common Share: Basic earnings per common share is based upon the
-------------------------
weighted average number of common shares outstanding during the period and the
diluted earnings per common share is based upon the weighted average number of
common shares plus the dilutive common equivalent shares outstanding during the
period. During the three months ended September 30, 2000, the effect of the
common equivalent shares were anti-dilutive and were excluded from the
computation of diluted earnings per share. The following is a reconciliation of
the basic and diluted earnings per common share computations shown on the face
of the accompanying consolidated statements of income (in thousands, except per
share data):
6
<PAGE>
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
September 30, September 30,
2000 1999 2000 1999
(unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income (loss) $ 4,806 $18,580 $(1,802) $ 8,133
Weighted average number of common shares
outstanding (in thousands) 10,381 10,547 10,382 10,545
Dilutive effect of stock option plan (in thousands) 71 170 - 169
---------- ---------- ---------- ----------
Weighted average number of common and common
equivalent shares outstanding (in thousands) 10,452 10,717 10,382 10,714
Basic EPS:
Net income $ .39 $ 1.76 $ (.17) $ .77
---------- ---------- ---------- ----------
Diluted EPS:
Net income $ .39 $ 1.73 $ (.17) $ .76
========== ========== ========== ==========
</TABLE>
Reclassifications: Certain amounts in the prior period financial statements
------------------
have been reclassified to conform to the current financial statement
presentation.
NOTE C -- INVENTORIES
Inventories consist of the following:
($ in thousands)
<TABLE>
<CAPTION>
September 30, March 31,
2000 2000
(Unaudited)
------------------ ---------------
<S> <C> <C>
Finished goods $ 88,566 $ 96,165
Work-in-process 15,590 14,818
Raw materials and operating supplies 35,858 36,081
------------------ ---------------
$140,014 $147,064
------------------ ---------------
</TABLE>
7
<PAGE>
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE D -- BORROWINGS
Long-term borrowings consist of the following:
($ in thousands)
<TABLE>
<CAPTION>
September 30, March 31,
2000 2000
(Unaudited)
------------------ ------------
<S> <C> <C>
Term Loan $100,000 $ -
Revolving Credit Agreement 97,070 89,130
Industrial Revenue Bonds 33,195 33,195
364-Day Facility - 90,000
Senior Notes 1,000 1,000
TVA Loan 1,260 1,357
Capital Lease 249 297
----------- -----------
Total Borrowings 232,774 214,979
Less Current Maturities 315 90,311
----------- -----------
Total long-term borrowings $232,459 $124,668
=========== ===========
</TABLE>
In September 2000, the Company amended its Revolving Credit Agreement. The new
$285 million, five-year agreement was used to retire the $90 million 364-Day
Facility and provides up to $45 million additional capacity. This Second
Amended and Restated Credit Agreement consists of a $185 million revolver and
$100 million term loan that amortizes at the rate of 25% per year after the
first year. The agreement contains certain covenants including, among other
restrictions, financial ratios and limitations on indebtedness, liens,
investments, disposition of assets, and payment of dividends. It is
collateralized by first priority security interests in substantially all
accounts receivable and inventory of the Company. Additionally, the loans are
secured by a mortgage on the Company's Charlotte mill. Loans under the
agreement bear interest at a per annum rate based on one of several rates
(LIBOR, Fed Funds, or the Prime Rate) chosen at the time of borrowing, plus a
margin determined by the debt to EBITDA ratio at the end of each quarter. The
effective interest rate at September 30, 2000 was approximately 8.2%.
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 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 collection and disposal of EC dust
are being expensed as operating costs when incurred. 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 to
assist in making such determinations. Although the ultimate costs associated
with the remediation are not known precisely, the Company has estimated the
total remaining costs to
8
<PAGE>
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
be approximately $2.1 million with these costs recorded as a liability as of
September 30, 2000. Of this amount, the Company expects to pay approximately
$843 thousand within one year.
The Tampa mill site contained slag and soil that was contaminated with EC dust
and polychlorinated biphenyl ("PCBs") generated by past operations. The volume
and mass estimates of the contamination was based on analytical data from soil
borings, soil samples and 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 fiscal 1996 and by the Florida Department of Environmental Protection
(EPA) during fiscal 1998 and the Company received a signed Consent Order in
fiscal 1998. The soil remediation work is completed. The remaining costs for the
groundwater remediation is estimated to be $500 thousand and the Company expects
cleanup at this site to be substantially completed during 2001.
The Sogreen site, a third party site, contained EC dust from the Company that
was shipped to the site for recycling. The Company has been named as a
potentially responsible party (PRP) for this site, and thus its estimated share
of the remediation costs was approximately 36% of the total estimated
remediation cost of approximately $4.3 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 cleanup at this site was substantially completed during fiscal
1999.
The Stoller site, a third party site, contained EC dust and other wastes from
other PRPs and EC dust from the Company that was sent for recycling. The
Company was named as a PRP for this site. Outside contractors measured the
remediation volumes and masses during the cleanup process. On-site treatment,
disposal and construction of a vault cap were completed by the PRPs under a
consent order with the State of South Carolina. The soil cleanup at this site
was completed during fiscal 1999. A Settlement Agreement was lodged by the
State of South Carolina with the Federal Court in 1997. The Settlement
Agreement contains an allocation which attributes approximately 2% of the
remaining estimated $10 million groundwater remediation cost to the Company. The
non-participating PRPs have intervened in the pending court proceedings to
contest approval of the Agreement. In August 1999, the Federal Court ruled the
Administrative Record was not sufficient to make a ruling on the Settlement
Agreement and the litigation was stayed in Federal Court. The State of South
Carolina and all interested PRPs concluded mediation with a mediator provided by
the EPA and did not reach a global settlement of all financial responsibilities
of the site. The Federal Court litigation is currently awaiting a status
conference after the expiration of the stay on October 16, 2000.
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 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. Considering 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.
NOTE F - SUBSEQUENT EVENTS
On October 16, 2000 the last of the Senior Notes outstanding amounting to $1
million was repaid to the holder of the notes.
9
<PAGE>
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 June and September 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.
10
<PAGE>
AMERISTEEL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
Results of Operations (unaudited)
-------------------------------- Six Months Ended Three Months Ended
(in thousands, except per share data) September 30, September 30,
2000 1999 2000 1999
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales $ 353,978 $ 370,170 $ 171,932 $ 182,930
Cost of sales 302,398 292,885 150,698 144,881
Cost of sales as percent of net sales 85.4% 79.1% 87.6% 79.2%
Selling and administrative 17,448 21,050 8,835 10,498
Depreciation 13,018 11,351 6,526 5,714
Amortization of goodwill 2,222 2,194 1,111 1,110
Other operating expenses 2,987 2,780 2,987 2,791
---------- ----------- ---------- -----------
338,073 330,260 170,157 164,994
---------- ----------- ---------- -----------
Income from operations 15,905 39,910 1,775 17,936
Interest expense 7,176 7,319 3,750 3,590
Amortization of deferred finance costs 439 222 288 111
---------- ----------- ---------- -----------
Income (loss) before income taxes 8,290 32,369 (2,263) 14,235
Income taxes 4,204 13,789 (461) 6,102
---------- ----------- ---------- -----------
Net income (loss) $ 4,086 $ 18,580 $ (1,802) $ 8,133
---------- ----------- ---------- -----------
EPS - Basic $ .39 $ 1.76 $ (.17) $ .77
EPS Diluted $ .39 $ 1.73 $ .(.17) $ .76
EBITDA - adjusted $ 33,881 $ 54,308 $ 12,073 $ 25,434
EBITDA margin 9.6% 14.7% 7.0% 13.9%
Capital expenditures 23,891 22,918 12,620 13,111
Ratio of EBITDA to interest expense 4.7x 7.4x 3.2x 7.1x
EBITDA - adjusted (ttm) $ 78,886 $ 99,229
Ratio of total debt to EBITDA (ttm) 2.97x 1.97x
Shipped Tons
------------
Mill finished goods
Stock rebar 350 356 174 164
Merchant bar 303 351 144 174
Rods 43 38 24 13
---------- ----------- ---------- -----------
Subtotal mill finished goods 696 745 342 351
Fabricated rebar 254 243 128 128
Billets 31 66 17 36
---------- ----------- ---------- -----------
Total shipped tons 981 1,054 487 515
========== =========== ========== ===========
Average Selling Prices ($ Per Ton)
---------------------------------
Mill finished goods
Stock rebar $ 276 $ 282 $ 271 $ 292
Merchant bar 328 328 308 331
Rods 289 287 293 301
---------- ----------- ---------- -----------
Average mill finished goods 298 304 287 312
Fabricated rebar 437 451 437 447
Billets 220 204 221 205
Average mill finished goods prices (per ton) $ 298 $ 304 $ 287 $ 312
Average yielded scrap cost (per ton) 108 100 101 103
---------- ----------- ---------- -----------
Average metal spread (per ton) $ 190 $ 204 $ 186 $ 218
========== =========== ========== ===========
Average mill conversion costs (per ton) $ 129 $ 125 $ 131 $ 128
========== =========== ========== ===========
</TABLE>
11
<PAGE>
Net Sales: Average prices for both rebar and merchant products declined further
---------
in the quarter ended September 30, 2000 and reached levels not seen since the
early 1990s due primarily to cheaply priced foreign imports and more intense
domestic competition. The unstable pricing situation has resulted in increased
customer inventory levels thereby limiting sales activity. For the quarter and
six-month periods ended September 30, 2000, reduced selling prices combined with
reduced shipments have resulted in revenue declines of 6.0% and 4.4%,
respectively, from the same prior year periods.
Cost of Sales: For the quarter and six-month periods ended September 30, 2000,
-------------
increased scrap costs and higher mill conversion costs resulted in increases of
4.2% and 4.6%, respectively, over the same prior year periods. Conversion costs
have increased due to higher spending related to raw materials, electricity,
fuels and depreciation. These were somewhat offset by lower shipment volumes.
Selling and Administrative: Selling and administrative expenses for the quarter
--------------------------
and six months ended September 30, 2000 decreased 15.8% and 17.1%, respectively,
over the same periods last year due primarily to lower spending related to
environmental matters and payroll relating to incentives.
Other Operating Expenses: Other Operating Expenses of $3.0 million in the
------------------------
quarter and six months ended September 30, 2000 were incurred as a result of the
startup of meltshop operations in the Knoxville mill after the successful
installation of the equipment. For the prior year quarter and six-months ended
September 30, 1999, other operating expenses of $2.8 million included $8.3
million in charges associated with the change of control partially offset by
$5.5 million of income received from settlements with electrode suppliers for
price fixing violations.
Interest Expense: Interest expense increased from $3.6 million for the quarter
----------------
ending September 30, 1999 to $3.8 million for the quarter ending September 30,
2000 due to higher interest rates more than offsetting increased capitalized
interest. For the six-months ended September 30, 2000, interest expense was $7.2
million compared to $7.3 million for the same period last year due primarily to
higher capitalized interest.
Liquidity and Capital Resources
-------------------------------
Net cash provided by operating activities for the six months ended September 30,
2000 was $7.5 million compared to $36.7 million for the same period last year,
due to lower net income, higher inventories and other changes in working
capital. The Company spent $23.9 million related to capital projects, most
notably towards the completion of the melt shop modernization in Knoxville,
Tennessee.
The Company recently completed the installation of its new melt shop in
Knoxville, Tennessee including a new continuous feed scrap system and 90-ton
furnace. Completing the two year project on-time and on-budget, the new melt
shop began operations July 18, 2000 and has completed the startup phase of
operations.
In September 2000, the Company amended its Revolving Credit Agreement. The new
$285 million, five-year agreement was used to retire the $90 million 364-Day
Facility and provides up to $45 million additional capacity. This Second Amended
and Restated Credit Agreement consists of a $185 million revolver and $100
million term loan that amortizes at the rate of 25% per year after the first
year. The agreement contains certain covenants including, among other
restrictions, financial ratios and limitations on indebtedness, liens,
investments, disposition of assets, and payment of dividends. It is
collateralized by first priority security interests in substantially all
accounts receivable and inventory of the Company. Additionally, the loans are
secured by a mortgage on the Company's Charlotte mill. Loans under the agreement
bear interest at a per annum rate based on one of several rates (LIBOR, Fed
Funds, or the Prime Rate) chosen at the time of borrowing, plus a margin
determined by the debt to EBITDA ratio at the end of each quarter. The effective
interest rate at September 30, 2000 was approximately 8.2%.
12
<PAGE>
The Company believes that amounts available from operating cash flows and funds
available through its Revolving Credit Agreement will be sufficient to meet its
expected cash needs and planned capital expenditures for the foreseeable future.
The Company continues to comply with all of the covenants of its loan
agreements.
ITEM 3. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The interest rates charged on the Company's debt are predominantly variable, the
majority of which is based on LIBOR (London Interbank Offered Rate). 1.1% of the
Company's debt is at a fixed interest rate. Therefore the Company is subject to
changes in interest expense due to fluctuations of interest rates in the
markets.
PART II -- OTHER INFORMATION
----------------------------
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 10.1 Second Amended and Restated Credit Agreement dated as
of September13, 2000, by and among the Company, Bank
of America, National Association, The Bank of Tokyo-
Mitsubishi, Ltd., and certain other lenders
(incorporated by reference to Exhibit 2.5 to the
Company's Registration Statement on Form 8-A filed
with the Securities and Exchange Commission on
October 20, 2000 (Commission File No. 000-21095)).
Exhibit 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
None
13
<PAGE>
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: November 10, 2000 /s/ Phillip E. Casey
-------------------------------------
Phillip E. Casey, President and
Chief Executive Officer
Date: November 10, 2000 /s/ Tom J. Landa
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Tom J. Landa, Vice President,
Chief Financial Officer and Secretary
(Principal Financial Officer and
Principal Accounting Officer);
Director
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