SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
BIRMINGHAM STEEL CORPORATION 401 (k) PLAN
(Full Title of the Plan)
BIRMINGHAM STEEL CORPORATION
1000 URBAN CENTER DRIVE SUITE 300
BIRMINGHAM, AL 35242
Name of issuer of the securities held pursuant to the Plan
and the address of its principal executive office)
<PAGE>
Birmingham Steel Corporation
401(k) Plan
Financial Statements
and Supplemental Schedules
Years ended December 31, 1997 and 1996
with Report of Independent Auditors
<PAGE>
Birmingham Steel Corporation 401(k) Plan
Financial Statements
and Supplemental Schedules
Years ended December 31, 1997 and 1996
Contents
Report of Independent Auditors............................................F-1
Audited Financial Statements
Statements of Net Assets Available for Benefits...........................F-2
Statements of Changes in Net Assets Available for Benefits................F-3
Notes to Financial Statements................................... .........F-4
Supplemental Schedules
Line 27a - Schedule of Assets Held for Investment Purposes...............F-12
Line 27d - Schedule of Reportable Transactions...........................F-13
<PAGE>
F-1
Report of Independent Auditors
The Employee Benefits Committee
Birmingham Steel Corporation 401(k) Plan
We have audited the accompanying statements of net assets available for benefits
of the Birmingham Steel Corporation 401(k) Plan as of December 31, 1997 and
1996, and the related statements of changes in net assets available for benefits
for the years then ended. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1997 and 1996, and the changes in net assets available for benefits
for the years then ended in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1997, and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The supplemental
schedules have been subjected to the auditing procedures applied in our audit of
the 1997 basic financial statements and, in our opinion, are fairly stated in
all material respects in relation to the 1997 basic financial statements taken
as a whole.
/s/ Ernst & Young LLP
June 25, 1998
<PAGE>
Birmingham Steel Corporation 401(k) Plan
Statements of Net Assets Available for Benefits
F-2
December 31
1997 1996
---------------------------------------------
Assets
Cash and cash equivalents $ 161 $ -
Investments 56,996,490 46,788,921
Receivables:
Employer contributions 1,032,426 947,214
Employee contributions 463,510 426,732
Employee loans 4,299,285 3,468,650
Accrued interest 12,773 9,687
---------------------------------------------
5,807,994 4,852,283
=============================================
Net assets available for benefits $ 62,804,645 $ 51,641,204
=============================================
See accompanying notes.
<PAGE>
Birmingham Steel Corporation 401(k) Plan
Statements of Changes in Net Assets Available for Benefits
F-3
Year ended December 31
1997 1996
-------------------------------------------
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of
investments $ 1,905,128 $ 1,967,108
Interest 3,930,474 2,998,756
Dividends 111,396 108,493
-------------------------------------------
5,946,998 5,074,357
Contributions:
Employer 3,264,314 2,902,244
Employee 6,274,018 5,245,362
------------------------------------------
9,538,332 8,147,606
Deduction from net assets attributed to:
Payments to participants (4,321,889) (3,718,989)
-------------------------------------------
Net increase 11,163,441 9,502,974
Net assets available for benefits:
Beginning of year 51,641,204 42,138,230
-------------------------------------------
End of year $ 62,804,645 $ 51,641,204
===========================================
See accompanying notes.
<PAGE>
Birmingham Steel Corporation 401(k) Plan
Notes to Financial Statements
December 31, 1997 and 1996
F-4
1. Description of the Plan
General
The Birmingham Steel Corporation 401(k) Plan (the "Plan"), is a defined
contribution plan established effective as of August 15, 1984. The following
description of the Plan provides only general information. Participants should
refer to the Summary Plan Description for a more complete description of the
Plan's provisions.
Participation
The Plan covers substantially all employees of Birmingham Steel Corporation and
an affiliated company (collectively, the "Company"). Employees may begin
participation in the Plan at the earlier of the January 1, April 1, July 1 or
October 1 following employment.
Company Contributions
Company contributions to the Plan are accrued in the period in which they become
obligations of the Company. In 1997 and 1996, the Company contributed to each
participant's account an amount equal to the sum of (a) 5% of each participant's
compensation up to $10,000; plus (b) the lesser of: (i) the amount of each
active participant's employee contributions, or (ii) 3% of each participant's
eligible compensation. The Company may, from time to time, change the method of
determining its contribution.
Employee Contributions
Participants may make employee contributions to the Plan by electing to reduce
their gross pay in an amount which is not less than one percent or more than
fifteen percent of annual compensation, subject to certain limitations.
Participant Accounts
The Plan provides for the establishment of an employee account and an employer
account for each participating employee. Each participant's account is credited
with the participant's contributions and an allocation of the Company's
contribution and plan earnings. Generally, employer contributions are allocated
to participants' accounts at the
<PAGE>
Birmingham Steel Corporation 401(k) Plan
Notes to Financial Statements (continued)
F-5
1. Description of the Plan (continued)
time of payment, rather than at the time such contributions are recorded in the
Plan's financial statements. Allocations of employer contributions are based on
eligible annual compensation as defined in the Plan agreement. Benefit payments
to participants are based upon vested balances in the employee and employer
accounts at the date of benefit determination.
Vesting
Participants are immediately vested in their employee account including
allocated earnings thereon. Vesting in their employer account is based on years
of continuous service. Service for vesting begins with the participant's
employment date, but not prior to July 1, 1980. Participants are fully vested at
the earlier of death, disability, reaching normal retirement age or in
accordance with the following schedule:
Years of Vested
Service Interest
- -----------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 or more 100%
Forfeitures
Forfeitures of participants' non-vested interest in Company contributions, and
allocated earnings thereon, may be used to offset the annual Company
contributions to the Plan. There were no forfeitures used to reduce the
Company's contributions in 1997 and 1996.
Payment of Benefits
Upon termination of service, participants may receive either (a) a single sum
payment, or (b) annual or more frequent periodic installments over a period of
the lesser of thirty years or the joint life expectancy of the participant and
his beneficiary (where applicable), as determined by the Employee Benefits
Committee (the Committee).
<PAGE>
F-6
1. Description of the Plan (continued)
Investment Programs
The Plan allows participants to direct the investment of their accounts by
selecting among seven investment alternatives:
o A fund comprised primarily of the common stock of the Company;
o A collective trust which invests in fixed income securities such as
guaranteed investment contracts (GIC);
o A basic value fund composed primarily of common stocks;
A capital fund composed of stocks and bonds;
o A special value fund composed of stocks and bonds;
A global allocation fund composed primarily of common stocks and fixed
income securities of both domestic and foreign companies; and
A collective trust which invests in equity securities listed in the
S&P 500 stock index.
Except for the Birmingham Steel Corporation Stock Fund, the investment funds and
trusts are managed by the trustee of the Plan, Merrill Lynch Trust Company, or
by an affiliate of the trustee (hereinafter referred to as the Trustee). All
assets held in the investment funds, including Birmingham Steel Corporation
common stock, were purchased in the open market and are held by the Trustee.
Loans
The Plan allows Participants to borrow up to one-half of their total vested
account balance up to a maximum of $50,000. Loans may be repaid over terms up to
five years (fifteen years for loans used to purchase residential property) and
include a reasonable rate of interest.
<PAGE>
Birmingham Steel Corporation 401(k) Plan
Notes to Financial Statements (continued)
F-7
2. Summary of Accounting Policies
Investments
Investments in common stock, mutual funds and trusts are stated at their quoted
market values. Other investments are stated at cost, which approximates market
values. Investment transactions are recorded as of the trade date. Cost of
common stock and mutual fund shares is determined by the specific identification
method.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Concentration of Credit Risk
At December 31, 1997, approximately 7% of the Plan's assets are invested in the
common stock of the Company and approximately 83% of the Plan's assets are
comprised of investments in mutual funds or trusts managed by the Trustee. The
seven investment options offered to participants are designed to provide each
participant the opportunity to diversify the investment of their accounts.
Although the Committee has no involvement in the investment transactions of the
mutual funds, the Committee periodically monitors the investment performance of
the funds and may, pursuant to the provisions of the Plan agreement, elect to
change the Plan's investment programs and/or the trustee at any time.
At December 31, 1997, approximately 4% of the Company's labor force is employed
under a collective bargaining agreement.
<PAGE>
Birmingham Steel Corporation 401(k) Plan
Notes to Financial Statements (continued)
F-8
3. Investments
Investments that represent 5% or more of the Plan's net assets available for
benefits at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997
------------------------------------------------------------------
Name of Issuer and Title Shares Market Value Cost
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Birmingham Steel Corporation
common stock 296,385 $ 4,668,090 $ 5,460,111
Merrill Lynch Retirement
Preservation Trust 24,661,553 24,661,553 24,661,553
Merrill Lynch Basic Value Fund 359,381 13,325,831 10,150,715
Merrill Lynch Capital Fund 314,314 10,846,962 9,374,484
1996
------------------------------------------------------------------
Name of Issuer and Title Shares Market Value Cost
- ----------------------------------------------------------------------------------------------------------
Birmingham Steel Corporation
common stock 274,622 $ 5,217,825 $ 5,209,721
Merrill Lynch Retirement Preservation
Trust 22,296,663 22,296,663 22,296,663
Merrill Lynch Basic Value Fund 301,327 9,341,136 7,544,200
Merrill Lynch Capital Fund 278,174 8,637,295 7,903,005
</TABLE>
Net appreciation (depreciation) in fair value of investments for the years ended
December 31, 1997 and 1996, including securities sold during the year, was as
follows:
1997 1996
---------------------------------------------
Birmingham Steel Corporation
common stock $ (861,197) $ 1,080,167
Mutual funds 2,766,325 886,941
=============================================
$ 1,905,128 $ 1,967,108
=============================================
<PAGE>
Birmingham Steel Corporation 401(k) Plan
Notes to Financial Statements (continued)
F-9
4. Investment Programs
Net assets available for benefits at December 31, 1997 and 1996 for each of the
Plan's investment programs are as follows:
<TABLE>
<CAPTION>
Stock Preservation Basic Capital Special Global Equity Loan
Fund Trust Fund Fund Fund Fund Trust Fund Total
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997
Cash and cash equivalents $ - $ 161 $ - $ - $ - $ - $ - $ - $ 161
Investments 4,668,090 24,661,553 13,325,831 10,846,962 1,630,473 1,444,455 419,126 - 56,996,490
Receivables:
Employer contributions 71,134 523,594 171,717 154,405 48,064 46,886 16,626 - 1,032,426
Employee contributions 39,905 196,105 85,409 76,916 29,058 26,597 9,520 - 463,510
Employee loans - - - - - - - 4,299,285 4,299,285
Accrued interest - 12,773 - - - - - - 12,773
---------------------------------------------------------------------------------------------------------
111,039 732,472 257,126 231,321 79,122 73,483 26,146 4,299,285 5,807,994
=========================================================================================================
Net assets available for
benefits $4,779,129 $25,394,186 $13,582,957 $11,078,283 $1,707,595 $1,517,938 $445,272 $4,299,285 $62,804,645
==========================================================================================================
December 31, 1996
Investments $5,217,825 $22,296,663 $9,341,136 $8,637,295 $ 468,315 $ 827,687 $ - $ - $46,788,921
Receivables:
Employer contributions 55,887 557,684 147,288 139,587 19,302 27,466 - - 947,214
Employee contributions 28,539 225,737 77,371 72,890 9,345 12,850 - - 426,732
Employee loans - - - - - - - 3,468,650 3,468,650
Accrued interest - 9,687 - - - - - - 9,687
---------------------------------------------------------------------------------------------------------
84,426 793,108 224,659 212,477 28,647 40,316 - 3,468,650 4,852,283
=========================================================================================================
Net assets available for
benefits $5,302,251 $23,089,771 $9,565,795 $8,849,772 $ 496,962 $868,003 $ - $3,468,650 $51,641,204
=========================================================================================================
</TABLE>
<PAGE>
F-10
4. Investment Programs (continued)
Changes in net assets available for benefits for the years ended December 31,
1997 and 1996 for each of the Plan's investment programs are as follows:
<TABLE>
<CAPTION>
Stock Preservation Basic Capital Special Global Equity Loan
Fund Trust Fund Fund Fund Fund Trust Fund Total
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets available
for benefits
as of December 31,
1995 $3,845,991 $20,274,320 $7,013,245 $7,656,453 $153,392 $ 275,296 $ - $2,919,533 $42,138,230
Investment income 1,188,660 1,225,872 1,310,317 963,522 67,731 81,056 - 237,199 5,074,357
Contributions 621,276 4,307,295 1,421,818 1,382,554 143,246 271,417 - - 8,147,606
Fund transfers 119,427 (749,155) 177,722 (436,302) 136,895 247,298 - 504,115 -
Payments to participants (473,103) (1,968,561) (357,307) (716,455) (4,302) (7,064) - (192,197) (3,718,989)
-----------------------------------------------------------------------------------------------------------
Net assets available
for benefits
as of December 31,
1996 5,302,251 23,089,771 9,565,795 8,849,772 496,962 868,003 - 3,468,650 51,641,204
Investment income (749,801) 1,402,932 2,854,305 1,878,805 152,983 111,650 15,278 280,846 5,946,998
Contributions 792,782 4,256,671 1,762,041 1,540,382 522,014 579,452 84,990 - 9,538,332
Fund transfers (420,235) (1,607,580) 438,506 (286,506) 653,452 19,616 345,004 857,743 -
Payments to participants (145,868) (1,747,608) (1,037,690) (904,170) (117,816) (60,783) - (307,954) (4,321,889)
-------------------------------------------------------------------------------------------------------------
Net assets available
for benefits
as of December 31,
1997 $4,779,129 $25,394,186 $13,582,957 $11,078,283 $1,707,595 $1,517,938 $ 445,272 $4,299,285 $62,804,645
=============================================================================================================
</TABLE>
<PAGE>
F-11
5. Income Tax Status
The Internal Revenue Service has ruled on May 15, 1996 that the Plan qualified
under Section 401(a) of the Internal Revenue Code (IRC) and, therefore, the
related trust is exempt from tax pursuant to Section 501(a) of the IRC. The Plan
is required to operate in conformity with the IRC to maintain its qualification.
The Plan administrator is not aware of any course of action or series of events
that have occurred that might adversely affect the Plan's qualified status.
6. Transactions with Parties-In-Interest
During the years ended December 31, 1997 and 1996, the Plan received $111,396
and $108,493, respectively, in cash dividends on common stock of the Company
held by the Plan. The Trustee executed all investment transactions for the years
ended December 31, 1997 and 1996. The Company has paid all administrative
expenses of the Plan, including legal, accounting and trustee fees.
7. Plan Termination
Although management has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of the Employee Retirement Income
Securities Act of 1974. In the event of Plan termination, participants will
become 100% vested in their accounts in accordance with the provisions of the
Plan.
8. Accounts of Terminated Employees
Under the provisions of the Plan, the individual accounts of terminated
employees may remain in the Plan until a break in service, as defined, occurs.
The accounts of such employees share in the allocation of investment income but
are not allocated a share of annual Company contributions. Once such employees
experience a break in service, the vested portion of their accounts will be paid
in accordance with the provisions of the Plan. At December 31, 1997 and 1996,
approximately $2,350,000 and $2,653,000, respectively, of the net assets of the
Plan were allocated to terminated employees. Of these amounts, $160 and $494,660
related to terminated employees who had requested distribution but are included
in net assets available for benefits in the accompanying financial statements as
of December 31, 1997 and 1996, respectively. This amount has been reported as a
liability in the Plan's Form 5500.
<PAGE>
Birmingham Steel Corporation 401(k) Plan
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1997
EIN 13-3213634
Plan No. 001
<TABLE>
F-12
<CAPTION>
Number of Shares or
Name of Issuer and Title Principal Amount Cost Current Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investments:
Birmingham Steel Corporation
common stock* 296,385 $ 5,460,111 $ 4,668,090
Merrill Lynch Retirement Preservation
Trust* 24,661,553 24,661,553 24,661,553
Merrill Lynch Basic Value
Fund* 359,381 10,150,715 13,325,831
Merrill Lynch Capital Fund* 314,314 9,374,484 10,846,962
Merrill Lynch Special Value Fund * 83,486 1,647,761 1,630,473
Merrill Lynch Equity Index Trust * 6,411 402,500 419,126
Merrill Lynch Global Allocation Fund * 102,154 1,513,615 1,444,455
Employee loans to be repaid over terms up to five years
(fifteen years for loans used to purchase residential
property) and include a reasonable rate of
interest *
4,299,285 4,299,285
--------------------------------------------
$ 57,510,024 $ 61,295,775
============================================
<FN>
* Indicates party-in-interest to the Plan.
</FN>
</TABLE>
<PAGE>
<TABLE>
F-13
Birmingham Steel Corporation 401(k) Plan
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1997
EIN 13-3213634
Plan No. 001
<CAPTION>
Number of Current Value of
Number of Shares or Purchase Selling Cost Asset on
Name of Issuer and Title Transactions Face Value Price Price of Asset Transaction Date Net Gain
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Merrill Lynch Retirement
Preservation Trust
Purchases 657 7,782,498 $7,782,498 $ - $ 7,782,498 $ 7,782,498 $ -
Sales 502 5,417,608 - 5,417,608 5,417,608 5,417,608 -
Merrill Lynch Basic Value Fund
Purchases 361 122,835 4,423,770 - 4,423,770 4,423,770 -
Sales 317 56,785 - 2,011,143 1,627,718 2,011,143 383,425
Merrill Lynch Capital Fund
Purchases 347 91,752 3,102,191 - 3,102,191 3,102,191 -
Sales 360 52,710 - 1,775,227 1,543,937 1,775,227 231,290
</TABLE>
<PAGE>
EXHIBIT 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-23563) pertaining to the Birmingham Steel Corporation 401(k) Plan of
our report dated June 25, 1998, with respect to the financial statements and
schedules of the Birmingham Steel Corporation 401(k) Plan included in this
Annual Report (Form 11-K) for the year ended December 31, 1997.
/s/Ernst & Young LLP
--------------------
Ernst & Young LLP
Birmingham, Alabama
June 25, 1998
<PAGE>
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1923,
the trustee (or other persons who administer the Plan) have duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
Date: June 29, 1998
BIRMINGHAM STEEL CORPORATION
401(k) PLAN
by: Birmingham Steel Corporation
Philip L. Oakes
--------------------------------------------------
Philip L. Oakes - Member of the
Employee Benefits Committee of
the Plan and Vice President -
Human Resources
