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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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. 1-9820
BIRMINGHAM STEEL CORPORATION
DELAWARE 13-3213634
(State of Incorporation) (I.R.S. Employer
Identification No.)
1000 Urban Center Parkway, Suite 300
Birmingham, Alabama 35242
(205) 970-1200
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 .
----- -----
Indicate the number of shares outstanding of each
of the issuer's classes of common stock, as of the
latest practicable date: 28,611,665 shares of Common
Stock, Par Value $.01 Outstanding at May 10, 1996
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<PAGE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
ASSETS March 31, 1996 June 30, 1995
(Unaudited) (Audited)
---------------- ---------------
Current Assets:
Cash and cash equivalents $ 20,980 $ 4,311
Accounts receivable, net of
allowance for doubtful accounts
of $1,695 at March 31, 1996;
$1,368 at June 30, 1995 101,704 110,883
Inventories 206,930 173,053
Prepaid expenses 2,725 1,154
Other 17,570 13,595
------- -------
Total current assets 349,909 302,996
Property, plant and equipment
(including property and equip-
ment, net, held for disposition
of $18,294 and $27,655 at
March 31, 1996 and June 30,
1995, respectively):
Land and buildings 121,741 117,835
Machinery and equipment 366,637 350,275
Construction in progress 142,907 53,932
------- -------
631,285 522,042
Less accumulated depreciation (125,067) (110,385)
------- -------
Net property, plant and equipment 506,218 411,657
Excess of cost over net
assets acquired 41,180 32,338
Other assets 17,067 9,813
------- -------
Total assets $ 914,374 $ 756,804
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ - $ 8,020
Accounts payable 67,662 63,082
Accrued operating expenses 6,026 4,137
Accrued payroll expenses 5,834 8,791
Income taxes payable 204 583
Other accrued liabilities 24,526 11,482
------- -------
Total current liabilities 104,252 96,095
Deferred income taxes 49,745 53,265
Deferred compensation 5,633 5,225
Long-term debt less current portion 307,500 142,500
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, par value $.01;
authorized 5,000,000 shares - -
Common stock, par value $.01;
authorized: 75,000,000 shares;
issued and outstanding: 29,684,261
at March 31, 1996 and 29,594,286
at June 30, 1995 297 296
Additional paid-in capital 331,555 330,490
Treasury stock, 1,074,738 and
1,098,356 shares at March 31, 1996
and June 30, 1995, respectively,
at cost (21,233) (21,909)
Unearned compensation (2,627) (2,537)
Retained earnings 139,252 153,379
------- -------
Total stockholders' equity 447,244 459,719
------- -------
Total liabilities and stockholders'
equity $ 914,374 $ 756,804
========= =========
See accompanying notes.
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BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA; UNAUDITED)
Three months Nine months
ended March 31, ended March 31,
------------------------- ------------------------
1996 1995 1996 1995
----------- ---------- ---------- ----------
Net Sales $197,057 $236,900 $601,707 $660,739
Cost of sales:
Other than depreciation
and amortization 182,109 194,186 527,844 537,775
Depreciation and
amortization 8,766 8,205 25,068 24,186
-------- -------- -------- --------
Gross profit (loss) 6,182 34,509 48,795 98,778
Provision for loss on
mill modernization program
and unusual items 16,309 - 21,425 1,325
Selling, general and
administrative 9,634 10,857 29,300 29,309
Interest 3,673 2,342 9,037 6,872
-------- -------- -------- --------
(23,434) 21,310 (10,967) 61,272
Other income, net 291 1,270 2,925 3,134
-------- -------- -------- --------
Income (loss) before
income taxes (23,143) 22,580 (8,042) 64,406
Provision for (benefit from)
income taxes (8,746) 9,316 (2,479) 26,568
-------- -------- -------- --------
Net income (loss) $(14,397) $ 13,264 $ (5,563) $ 37,838
======== ======== ======== ========
Weighted average shares
outstanding 28,598 29,283 28,552 29,380
======== ======== ======== ========
Earnings (loss) per share $ (0.50) $ 0.45 $ (0.19) $ 1.29
======== ======== ======== ========
Dividends declared per
share $ 0.10 $ 0.10 $ 0.30 $ 0.30
======== ======== ======== ========
See accompanying notes.
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Nine months ended
March 31,
-----------------------
1996 1995
(unaudited) (unaudited)
----------- -----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ (5,563) $ 37,838
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 25,068 24,186
Provision for doubtful
accounts receivable 403 1,023
Deferred income taxes (3,672) 5,770
Provision for loss on
mill modernization
program and unusual
items 21,425 1,325
Other 2,820 1,929
Changes in operating assets
and liabilities, net
of effects from business
acquisition:
Accounts receivable 8,711 (3,955)
Inventories (33,877) (34,874)
Prepaid expenses (1,571) (2,538)
Other current assets (4,077) (1)
Accounts payable 2,829 15,116
Income taxes payable (379) (435)
Other accrued liabilities 8,191 2,481
Deferred compensation 408 582
--------- ---------
Net cash provided by
operating activities 20,716 48,447
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property,
plant and equipment (129,522) (47,589)
Payments for business
acquisitions (10,532) (11,374)
Net proceeds from sale of
of mine roof bolt
business unit - 15,802
Proceeds from disposal
of property, plant
and equipment 191 90
Investment in scrap
subsidiary (5,089) -
Additions to other
non-current assets (16,552) (2,056)
Reductions in other
non-current assets 9,517 260
-------- ---------
Net cash used in
investing activities (151,987) (44,867)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net short-term borrowings
and repayments (8,020) -
Proceeds from issuance of
long-term debt 165,000 -
Proceeds from issuance of
common stock 64 214
Purchase of treasury
stock (540) (17,608)
Cash dividends paid (8,564) (8,834)
--------- ---------
Net cash provided by
(used in)
financing
activities 147,940 (26,228)
--------- ---------
Net increase (decrease)
in cash and cash
equivalents 16,669 (22,648)
Cash and cash equivalents
at:
Beginning of period 4,311 28,916
--------- ---------
End of period $ 20,980 $ 6,268
========= =========
Supplemental cash flow
disclosures:
Cash paid during the
period for:
Interest (net of
amounts
capitalized) $ 3,820 $ 4,321
Income taxes $ 5,545 $ 21,874
See accompanying notes.
BIRMINGHAM STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
1. Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the
accounts of Birmingham Steel Corporation (the Company)
and its subsidiaries, all of which are wholly owned. In
the opinion of management, all adjustments considered
necessary for a fair presentation have been included.
All significant intercompany accounts and transactions
have been eliminated. The Company operates in one
industry segment, production of steel and steel
products.
Inventories
Inventories are stated at the lower of cost or market
value. The cost of steel inventories is determined
using the first-in, first-out method.
Earnings per share
Earnings per share are computed using the weighted
average number of outstanding common shares and dilutive
equivalents (if any).
Recent Accounting Pronouncement
In March 1995, the Financial Accounting Standards
Board issued Statement No. 121 that requires long-lived
assets used in operations, including goodwill, to be
written down to their fair value when impairment
indicators are present and the undiscounted cash flows
estimated to be generated by those assets are less than
the assets' carrying amount. Statement No. 121 also
addresses the accounting for long-lived assets that are
expected to be disposed of in future periods. The
Company will adopt Statement No. 121 in the first
quarter of fiscal 1997 and, based on current
circumstances, does not believe the effect of adoption
will be material.
2. Business Acquisitions
On December 31, 1994, the Company purchased Port
Everglades Steel Corporation (PESCO), a steel
distribution company headquartered in Fort Lauderdale,
Florida for $11,400,000 in cash and assumption of
liabilities of $3,100,000. The purchase price has been
allocated to the assets and liabilities of PESCO based
upon their estimated fair values. Pro forma results for
the six months ended December 31, 1994 would not be
materially different from the amounts reported in the
Company's consolidated income statement if the
acquisition had occurred as of the beginning of fiscal
1995.
On August 8, 1995, the Company purchased certain
assets of Western Steel Limited, a subsidiary of IPSCO
Inc. located in Calgary, Alberta, Canada for a purchase
price of approximately $10,532,000. On December 13,
1995, Birmingham Recycling Investment Company, LLC, a
wholly owned subsidiary of the Company, completed a
related transaction when it purchased the stock of
Richmond Steel Recycling Limited, a scrap processing
facility and subsidiary of Western Steel Limited,
located in Richmond, British Columbia, Canada. The
Company has signed a letter of intent to enter into a
joint venture with Simsmetal Ltd. (SIMS) whereby SIMS
would manage the operations of the Richmond facility.
3. Business Disposition
On March 12, 1995, the Company sold its mine roof
bolt business unit for $21,500,000, less costs
approximating $1,758,000. In connection with the sale,
the Company entered into a five-year supply agreement to
provide purchaser the majority of its steel
requirements.
4. Inventories
Inventories were valued as summarized in the
following table (in thousands):
March 31 June 30
1996 1995
----------- ---------
At lower of cost or market:
Raw materials and mill
supplies $ 38,927 $ 45,074
Work-in-progress 90,818 51,516
Finished goods 77,185 76,463
-------- --------
$206,930 $173,053
======== ========
5. Borrowing Arrangements
Under line of credit arrangements for short-term
borrowings with four banks, the Company may borrow up to
$185,000,000 with interest at market rates mutually
agreed upon by the Company and the banks. One of these
lines of credit supports a bankers' acceptance and
commercial paper program. The full line of credit was
available under these facilities at March 31, 1996.
On September 1, 1995, American Steel & Wire
Corporation (ASW), a wholly-owned subsidiary of the
Company, issued $15,000,000 in Solid Waste Disposal
Revenue Bonds under the authority of the Ohio Water
Development Authority. The bonds have a term of thirty
years at a variable market interest rate. The proceeds
of the bonds have been used to construct a waste water
treatment facility at the Company's new bar mill project
located in Cleveland, Ohio.
On September 29, 1995, the Company completed a
$150,000,000 private placement of senior notes. The
notes are unsecured and primarily consist of maturities
ranging from seven to ten years and a weighted average
interest rate of 7.05 percent. The proceeds of the debt
issue, which were drawn down on December 15, 1995, will
be utilized primarily to fund the current requirements
of the Company's multi-year capital expenditure program.
6. Contingencies
Environmental
The Company is subject to federal, state and local
environmental laws and regulations concerning, among
other matters, waste water effluents, air emissions and
furnace dust disposal.
The Company has been advised by the Virginia
Department of Waste Management of certain conditions
involving the disposal of hazardous materials at the
Company's idle Norfolk, Virginia facility which existed
prior to the Company's acquisition of the facility. The
Company has also been notified by the department of
Toxic Substances Control of the Environmental Protection
Agency of the State of California of certain
environmental conditions regarding its idle property in
Emeryville, California. The Company is performing
environmental assessments of these sites and developing
work plans for remediation of the properties for
approval by the applicable regulatory agencies.
As part of its ongoing environmental compliance and
monitoring programs, the Company is voluntarily
developing work plans for environmental conditions
involving certain of its operating facilities and other
properties which are held for sale. Based upon the
Company's study of the known conditions and its prior
experience in investigating and correcting environmental
conditions, the Company estimates that the potential
costs of these site restoration and remediation efforts
may range from $3,050,000 to $4,650,000. Approximately
$2,772,000 of these costs is recorded in accrued
liabilities at March 31, 1996. The remaining costs
principally consist of site restoration and
environmental exit costs to ready the idle facilities
for sale, and have been considered in determining
whether the carrying amounts of the properties exceed
their net realizable values. These expenditures are
expected to be made in the next one to two years, if the
necessary regulatory agency approvals of the Company's
work plans are obtained. Though the Company believes it
has adequately provided for the cost of all known
environmental conditions, the applicable regulatory
agencies could insist upon different and more costly
remediative measures than those the Company believes are
adequate or required by existing law. Otherwise, the
Company believes that it is currently in compliance with
all known material and applicable environmental
regulations.
Legal Proceedings
The Company is involved in litigation relating to
claims arising out of its operations in the normal
course of business. Such claims are generally covered
by various forms of insurance. In the opinion of
management, any uninsured or unindemnified liability
resulting from existing litigation would not have a
material effect on the Company's business, its financial
position, liquidity or results of operations.
7. Disposition of Idle Facilities
In Fiscal 1995, the Company entered into an agreement
to sell the real property at its idle facility in
Ballard, Washington. In December, 1995, the Company
incurred a write-off of $2,055,000, which is included in
the provision for loss on mill modernization program,
related to the equipment at the Ballard facility after
termination of the sales contract on the equipment. In
August, 1995, the Company completed the exchange of the
idle Kent, Washington facility and other property at the
Seattle, Washington steel-making facility with the Port
of Seattle for property owned by the Port which will be
used in the Company's Seattle operations. No gain or
loss was recognized as a result of the land swap
transaction.
8. Provision for Loss on Mill Modernization Program
and Other Unusual Items
For the nine months ended March 31, 1996, the Company
incurred charges for (1) write-down of equipment which
will be removed from service as part of the Company's
modernization and capital development program, (2) pre-
operating/start-up expenses for the new melt shop in
Seattle, the new bar mill in Cleveland and the new
melting facility in Memphis, and (3) charges for other
unusual items. The amounts included in the provision
for loss on mill modernization program and unusual items
in the accompanying financial statements are as follows
(in thousands):
Three months Nine months
ended March 31 ended March 31
1996 1996
-------------- --------------
Equipment write-downs $ 4,525 $ 6,580
Pre-operating/startup
expenses 4,335 5,641
Restructuring of EDS
contract 4,522 4,522
Legal/property cleanup
reserves 2,350 2,350
Severance/reorganization
costs - 1,395
Other 577 937
------- -------
Total $16,309 $21,425
======= =======
The Company also incurred charges for other items
relating to adjustments for sales and use tax audits,
reserves for inventory adjustments, reserves for legal
issues and other items amounting to $5,580,000 and
$6,585,000 for the three months and nine months ended
March 31, 1996, respectively. These charges were
principally included in cost of sales or selling,
general and administrative expenses.
9. Subsequent Events
On April 16, 1996, the Company entered into a ten
year contract with Electronic Data Systems (EDS), an
information technology and consulting firm. Under the
agreement, EDS will provide information technology
services to the Company. The contract supercedes the
prior agreement between the Company and EDS.
Commitments under the contract will not have a material
impact on the Company's financial results.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the third quarter of fiscal 1996, the Company
reported a loss of $14,397,000 or $.50 per share,
compared with earnings of $13,264,000 or $.45 per share
in the third period of fiscal 1995. Third quarter
results reflected pre-tax charges for mill
modernization, unusual items and other charges of
approximately $21,889,000 or $.46 per share after tax.
Third quarter steel shipments were 589,000 tons,
compared with 596,000 tons shipped a year ago. Net
sales for the third quarter were $197,057,000, down 17
percent from $236,900,000 for the same period last year.
For the nine months ended March 31, 1996 the Company
reported a loss of $5,563,000 or $.19 per share,
compared with earnings of $37,838,000 or $1.29 per share
for the same period last year. Year-to-date earnings
reflected pre-tax charges for mill modernization,
unusual items and other charges of approximately
$28,010,000 or $.59 per share after tax. Steel
shipments for the nine month period were 1,720,000 tons,
a 2 percent decline from 1,755,000 tons for the same
period of 1995. Net sales were $601,707,000 for the
first nine months compared with $660,739,000 in the same
period a year ago.
Net Sales
Third quarter rebar/merchant shipments increased 8
percent from 413,000 tons last year to 445,000 tons.
Shipment of lower margin semi-finished steel billets
account for 8 percent of total rebar/merchant shipments
in the third quarter and 5 percent for the same period
a year ago. Average selling prices declined to $286 per
ton, a 3 percent drop from the immediately preceding
quarter and an 11 percent decline compared to the same
period last year. Net sales for the third quarter
declined approximately 17 percent from the prior year
primarily due to the decline in selling prices. The
Company believes that based upon current market
conditions steel rebar/merchant selling prices are
expected to increase moderately in the near term.
Third quarter shipments of the Company's rod & wire
products fell 21 percent from 182,000 tons in the prior
year to 144,000 tons. The decrease is primarily due to
reduced demand in the automotive sectors and a decline
in production levels due to production outages and a
reallocation of employees to the new bar mill. Average
rod selling prices remained essentially flat compared
with the immediately preceding quarter and the same
period a year ago.
Cost of Sales
As a percentage of sales, cost of sales (other than
depreciation and amortization) rose to 92.4% of sales
compared with 82.0% in the third quarter last year. The
increase resulted from lower rebar/merchant average
selling prices, a $4,533,000 charge for inventory and
property cleanup reserves at the Company's operating
facilities, elevated cost of FIFO inventories charged to
cost of sales during the quarter due to continuing
production curtailments at the Company's rebar/merchant
facilities and an increase in the cost of purchased
billets at the Company's Rod and Wire facilities.
For the nine months ended March 31, 1996, cost of sales
as a percentage of net sales increased to 87.7% compared
with 81.4% in the third quarter last year primarily due
to the reasons stated above.
Rebar/merchant conversion costs were $126 per ton for
the three months ended March 31, 1996, a 5 percent
increase from the same period last year but essentially
unchanged from the immediately preceding quarter.
Increased conversion costs resulted primarily from
production outages for the installation of new
equipment, planned production curtailments to reduce
surplus inventory levels and utility interruptions due
to severe weather.
For the three months ended March 31, 1996, the Company's
scrap raw material cost was $137 per ton, down $5 per
ton for the same period last year and unchanged from the
second quarter. The Company believes that based upon
current market conditions scrap prices are expected to
remain relatively stable in the near term.
Raw material billet cost at the Company's American Steel
and Wire subsidiary (ASW) was $343 per ton in the third
quarter, up $17 per ton from $326 a year ago. The
Company broke ground in March 1996 on its high quality
steel melting facility in Memphis, Tennessee, which is
scheduled to provide approximately 1 million tons of
ASW's high quality billet needs. The capital cost of
this facility will be approximately $200 million.
Tentative start-up of the facility is scheduled for the
second half of calendar 1997.
Provision for Loss on Mill Modernization Program and
Unusual Items
For the three months and nine months ended March 31,
1996 the provision for loss on mill modernization
program and unusual items amounted to $16,309,000 and
$21,425,000, respectively. The charges result from the
write-down of equipment which will be removed from
service as a result of the Company's modernization and
capital development program; startup/pre-operating costs
for the new bar mill at the Company's Cleveland, Ohio
facility, the high quality melting facility in Memphis,
Tennessee, and the new melt shop in Seattle, Washington;
the restructuring of the information technology contract
with Electronic Data Systems; severance expenses related
to corporate and plant level reorganization; and
reserves for legal and property cleanup issues at the
Company's idled Emeryville, California, Norfolk,
Virginia and Prichard, Alabama facilities.
Other charges for the three months and nine months ended
March 31, 1996 included in other line items in the
consolidated statements of income (loss) amounted to
$5,580,000 and $6,585,000, respectively. These charges
primarily relate to the $4,533,000 charge discussed
under the caption "Cost of Sales" and charges arising
from sales and use tax audits.
Selling, General and Administrative Expenses ("SG&A")
SG&A decreased 11 percent in the third quarter to
$9,634,000 from $10,857,000 reported in the third
quarter last year. As a percentage of net sales, third
quarter SG&A were 4.9 percent, compared with 5 percent
last year. The change in SG&A resulted from decreased
costs associated primarily with salaries, benefits and
the provision for bad debts partially offset by
increased costs associated with the Company's previous
contract with Electronic Data Systems (see Note 9 to
Consolidated Financial Statements).
For the nine months ended March 31, 1996, SG&A were
$29,300,000, essentially unchanged from $29,309,000
reported in the same period last year. As a percentage
of net sales, year-to-date SG&A were 4.9 percent,
compared with 4.4 percent last year.
Interest Expense
Interest expense increased to $3,673,000 in the third
quarter compared with $2,342,000 reported for the same
period last year, primarily due to the funding in mid-
December of the Company's $150 million private placement
bearing an average interest rate of 7.05 percent. In the
third quarter, the Company capitalized approximately
$1,661,000 in interest related to construction projects,
compared with approximately $557,000 in the same period
last year.
For the nine months ended March 31, 1996, interest
expense increased to $9,037,000, compared with
$6,872,000 in the prior year primarily due to the
funding of the $150 million private placement funding as
stated above and increased debt levels on the Company's
short term lines of credit during the first half of the
year. The increase was partially offset by the increased
level of capitalized interest on construction projects
in the amount of approximately $3,794,000 for the nine
month period, compared with approximately $1,329,000 in
the same period last year.
Income Taxes
The effective income tax rate for the nine months ended
March 31, 1996 was 30.8% compared to 41.3% for the prior
year period. The decline in the effective income tax
rate is due to a decline in earnings of the Company.
Liquidity and Capital Resources
Operating Activities:
For the first nine months of fiscal 1996, cash provided
by operating activities was $20.7 million, compared with
$48.4 million reported last year. The reduction in cash
flow was essentially due to a decrease in net income
partially offset by a decline in accounts receivable and
the provision for loss on mill modernization program and
unusual items referred to above. The decline in accounts
receivable resulted primarily from lower sales, caused
by lower selling prices, during the year compared to the
prior period.
Investing Activities:
Net cash used in investing activities was $152.0
million, compared with $44.9 million last year. Capital
spending increased significantly during fiscal 1996, as
the Company proceeds with its multi-year capital
development program. Current major projects include the
melt shop furnace at the Seattle mill which was
completed in the first quarter and the $112 million bar
mill at the Company's Cleveland, Ohio facility which is
scheduled for start-up in the fourth quarter. In the
second quarter, the Company completed the purchase of
certain assets of Western Steel Limited located in
Calgary, Alberta, Canada and the stock of Richmond Steel
Recycling Limited (a subsidiary of Western Steel
Limited) located in Richmond, British Columbia, Canada
(see Note 2 to Consolidated Financial Statements).
Financing Activities:
Net cash provided by financing activities was $147.9
million in the first nine months, compared with net cash
used in financing activities of $26.2 million last year.
During the period the Company completed a $15 million,
30 year tax-free bond financing at ASW and issued $150
million senior debt notes, using a portion of the
proceeds to pay down the short-term lines of credit.
Also, the Company purchased approximately 33,000 shares
of its stock in the open market during the first nine
months of the year.
Working Capital:
Working capital at the end of the third quarter
increased to $245.7 million, compared with $206.9
million at the end of fiscal 1995. The increase in
working capital was essentially due to an increase in
inventory levels compared to the prior period and the
excess of proceeds from long-term debt received during
fiscal 1996 over the net cash used in investing
activities for the acquisition of long-term assets.
Other Comments
On April 16, 1996, the Company declared a regular
quarterly cash dividend of $.10 (ten cents) per share
which will be paid May 7, 1996 to shareholders of record
on April 26, 1996.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in litigation relating to claims
arising out of its operations in the normal course of
business. Some of these claims against the Company are
covered by insurance, although the insurance policies do
include deductible amounts. It is the opinion of
management that any uninsured or unindemnified liability
resulting from existing litigation would not have a
material adverse effect on the Company's business or
financial position. There can be no assurance that
insurance, including product liability insurance, will
be available in the future at reasonable rates.
By letter dated October 20, 1992, the Department of
Toxic Substances Control of the Environmental Protection
Agency of the State of California ("DTSC") submitted to
Barbary Coast Steel Corporation ("BCSC"), a wholly owned
subsidiary of the Company, for its review and comment a
proposed Consent Order relating to BCSC's closed steel
facility at Emeryville, California. BCSC and DTSC
executed the terms of a Consent Order on March 22, 1993.
Pursuant to that Consent Order, BCSC has completed an
environmental assessment of the site and has received
approval of its proposal for the remediation of the
property, subject to any response by DTSC to recent
public comment on BCSC's proposed remedial action plan.
The Company believes that the net realizable values of
the property less the remediation costs will exceed the
carrying amount for the property.
On March 26, 1993, an action entitled IMACC Corporation
v. Warburton, et al. was filed in the U.S. District
Court for the Northern District of California, Case No.
C93-1114-CW, against BCSC and numerous other defendants.
This lawsuit was brought by IMACC Corporation ("IMACC"),
the parent of Myers Container Corporation, the lessee of
property in Emeryville, California on which an
industrial drum and barrel reconditioning facility
operated from the 1940's until 1991 (hereinafter, the
"IMACC property"). BCSC owns the property immediately
south of the IMACC property. IMACC has sued BCSC,
Judson Steel Corporation (from whom BCSC purchased the
adjacent property in October 1987), the current owners
of the IMACC property and other persons and entities
alleged to have previously operated the drum recondition
facility, under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980
("CERCLA"), 42 U.S.C. SS 9601 -9675 and various state
law causes of action, alleging that the defendants
contributed to environmental contamination on and under
the IMACC property. IMACC has since amended its
complaint several times, which now includes a citizen's
suit claim for injunctive and other equitable relief
under the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. SS 6972.
BCSC has interposed numerous affirmative defenses to
IMACC's claims. In addition, BCSC has counterclaimed
and cross-claimed against IMACC and its predecessors,
including Kaiser Steel and Myers Drum Company, alleging
that their drum reconditioning operations resulted in
contamination of the BCSC property. BCSC has also
cross-claimed against Judson Steel Corporation and its
corporate parent, alleging that they must indemnify BCSC
for any response costs and damages allegedly owed to
IMACC. Other parties in the case have brought additional
counterclaims and cross-claims against each other, BCSC,
and other third parties, including senior executives and
shareholders of IMACC and Kaiser Steel Resources.
The parties have exchanged voluminous documents and
lists of potential witnesses pursuant to the Court's
Case Management Program. Numerous depositions have been
taken in the case, which at present has a June 1, 1996
discovery cut-off date. On February 2, 1996, BCSC and
other parties filed motions for summary judgment and/or
summary adjudication seeking dismissal of some or all of
IMACC's claims. A hearing on those motions was held on
March 29, 1996, and it is expected that the Court will
soon issue a ruling on the motions. A final pretrial
conference is presently set for August 20, 1996, with
trial presently set to commence on October 7, 1996.
IMACC alleges that it has sustained current and
prospective damages, excluding attorneys' fees, of
approximately $4.3 million in connection with the
environmental remediation of the IMACC property. Based
upon discovery taken to date and laboratory analyses of
soil samples, BCSC believes that IMACC's contention that
BCSC is responsible for contamination of the IMACC
property is without merit.
Item 4. Submission of Matters to a Vote of Security
Holders
None.
Item 5. Other Information
On January 5, 1996, James A. Todd, Jr. retired from the
position of Chairman of the Board and Chief Executive
Officer of the Company. The Board of Directors elected
Robert A. Garvey to succeed Mr. Todd effective
immediately. Mr. Todd will remain with the Company as
a consultant for a minimum of six months and will
continue to serve as a Director on the Board.
Item 6. Exhibits and Reports on Form 8-K
There are no exhibits required to be filed with this
report.
No reports on Form 8-K are required to be filed with
this report.
<PAGE>
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.
Birmingham Steel
Corporation
May 14, 1996 Robert A. Garvey
----------------
Robert A. Garvey
Chairman, Chief
Executive Officer
May 14, 1996 John M. Casey
------------------
John M. Casey
Vice President,
Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
March 31, 1996 Consolidated Balance Sheets and Consolidated Statements
of Income of Birmingham Steel Corporation and is qualified in its entirety
by reference to such.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 20,980
<SECURITIES> 0
<RECEIVABLES> 101,704
<ALLOWANCES> 1,695
<INVENTORY> 206,930
<CURRENT-ASSETS> 349,909
<PP&E> 631,285
<DEPRECIATION> 125,067
<TOTAL-ASSETS> 914,374
<CURRENT-LIABILITIES> 104,252
<BONDS> 307,500
<COMMON> 297
0
0
<OTHER-SE> 446,947
<TOTAL-LIABILITY-AND-EQUITY> 914,374
<SALES> 601,707
<TOTAL-REVENUES> 601,707
<CGS> 552,912
<TOTAL-COSTS> 552,912
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21,425
<INTEREST-EXPENSE> 9,037
<INCOME-PRETAX> (8,042)
<INCOME-TAX> (2,479)
<INCOME-CONTINUING> (5,563)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,563)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
