(X)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the fiscal year ended June 30, 1998
or
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
From the transition period from to
Commission file number
BIRMINGHAM STEEL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3213634
------------------------------- ------------------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification Number)
1000 Urban Center Drive, Suite 300
Birmingham, Alabama 35242-2516
---------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(205) 970-1200
Securities Registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- --------------------
Common Stock, par value New York Stock
$0.01 per share Exchange
Securities Registered pursuant to Section 12 (g) of the Act:
NONE
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 report), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
As of August 21, 1998, 29,542,040 shares of Common Stock of the
registrant were outstanding. On such date the aggregate market value of shares
(based upon the closing market price of the Company's Common Stock on the New
York Stock Exchange on August 21, 1998) held by non-affiliates was $198,312,028.
For purposes of this calculation only directors, officers and holders of more
than 5% of the Company's Common Stock are deemed to be affiliates.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement dated September 11, 1998
for the 1998 Annual Meeting of Stockholders are incorporated herein by reference
in response to items 10 through 13 in Part III of this report.
PART I
ITEM 1. BUSINESS
Birmingham Steel Corporation (the Company) operates in the mini-mill sector of
the steel industry and conducts operations at facilities located across the
United States. The Company melts ferrous scrap to produce semi-finished steel
billets at facilities located in Birmingham, Alabama; Kankakee, Illinois;
Memphis, Tennessee; and Seattle, Washington. Steel billets are also converted to
reinforcing bar and/or merchant products (rounds, flats, squares, strip, angles
and channels) at all of these facilities except Memphis. The Company also
produces rebar and merchant products at a rolling facility located in Joliet,
Illinois. Special bar quality (SBQ) steel rod, bar and wire products are
produced at the Company's facility located in Cleveland, Ohio. The Company,
through its wholly owned subsidiary, Birmingham East Coast Holdings, also owns
an 85% interest in Birmingham Southeast, LLC (Birmingham Southeast), a joint
venture with a subsidiary of IVACO, Inc. Birmingham Southeast operates a melt
shop in Cartersville, Georgia and a melt shop and rolling mill in Jackson,
Mississippi. The Company has regional warehouse and distribution facilities
which sell finished products manufactured by its other operations.
The Company owns equity interests in scrap collection and processing operations.
Through its Birmingham Recycling Investment Company wholly-owned subsidiary, the
Company is 50% owner of Richmond Steel Recycling, Inc., a scrap operation
located in Vancouver, British Columbia. The remaining 50% interest in Richmond
Steel Recycling, Inc., is owned by SIMSMETAL, Canada, Ltd. The Company also owns
a 50% interest in Pacific Coast Recycling, Inc., which has scrap operations in
southern California. The remaining 50% interest in Pacific Coast Recycling, Inc.
is held by a subsidiary of Mitsui & Co., USA. The Company also owns a 50%
interest in American Iron Reduction, L.L.C., which has a direct reduced iron
facility in Convent, Louisiana. The remaining 50% is held by Georgetown
Industries, Inc.
In December 1996, the Company contributed the assets of its Jackson, Mississippi
facility to Birmingham Southeast LLC (Birmingham Southeast), a joint venture
company owned 85% by Birmingham East Coast Holdings, a wholly owned subsidiary
of the Company, and 15% by a subsidiary of IVACO, Inc. Birmingham Southeast then
purchased certain steel making assets located in Cartersville, Georgia from
Atlantic Steel Industries, Inc. (Atlantic), a subsidiary of IVACO, Inc.
Birmingham Southeast has entered into a tolling agreement with Atlantic pursuant
to which Atlantic converts billets produced by Birmingham Southeast into
merchant product for a tolling fee. Birmingham Southeast also entered into a
take or pay agreement to supply billets to Atlantic. Under the terms of the take
or pay agreement, Atlantic is obligated to purchase a minimum of 250,000 tons of
billets annually. The tolling and take or pay agreements expire January 1, 1999.
Carbon steel rebar products produced by the Company are sold primarily to
independent fabricators for use in the construction industry. Merchant products
are sold to fabricators, steel service centers and original equipment
manufacturers for use in general industrial applications. SBQ bar and rod
products manufactured by the Company are sold primarily to customers in the
automotive, fastener, welding, appliance and aerospace industries. A portion of
the SBQ bar and rod produced in Cleveland is further processed into wire
products. Pursuant to an agreement with Raytheon Missile Systems Company., the
Company is also the sole manufacturer of ultra-high tensile strength specialty
wire utilized in the U.S. Government's TOW anti-tank missile guidance system.
Sales under this contract were $1.8 million in fiscal 1998. Unless renewed, this
contract will expire on December 31, 1999.
<PAGE>
The Company completed two major projects in fiscal 1998. In the fourth calendar
quarter of 1997, the Company began start-up operations of a new $220 million
high quality melt shop in Memphis, Tennessee. The Memphis melt shop provides
feedstock primarily to the Company's SBQ bar, rod and wire operations in
Cleveland, Ohio. In the first quarter of calendar 1998, start-up operations
began at American Iron Reduction, Inc., (AIR) a joint venture in Convent,
Louisiana formed for the purpose of producing direct reduced iron (DRI). The
Company owns a 50% interest in AIR. The Company has agreed to purchase a minimum
of 600,000 metric tons of DRI annually at prices which are equivalent to AIR's
total cash cost. The Company's portion of the joint venture's DRI production
will be used primarily as a feedstock for the Memphis melt shop.
The only major capital project underway at June 30, 1998 was a rolling mill at
the Cartersville facility. The new mill is expected to start-up operations in
the second half of fiscal 1999.
The Company's operating strategy is to (i) improve its position as a low-cost
producer through continued operating cost reductions; (ii) optimize capacity
utilization at each of its facilities; (iii) increase production and sales of
higher margin products; and (iv) expand operations through the acquisition of
steel producing assets and related operations and construction of new steel
facilities.
Steel Manufacturing
Steel can be produced at significantly lower costs by mini-mills than by
integrated steel operations, which typically process iron ore and other raw
materials in blast furnaces to produce steel. Integrated steel mills generally
(i) use more costly raw materials; (ii)consume more energy; (iii) consist of
older and less efficient facilities which are more labor-intensive; and (iv)
employ a larger labor force than the mini-mill industry. In general, mini-mills
service geographic markets and produce a limited line of rebar and merchant
products. The domestic mini-mill steel industry currently has excess production
capacity. This over-capacity, together with competition from foreign producers,
has resulted in competitive product pricing and cyclical pressures on industry
profit margins. In this environment, efficient production and cost controls are
critical to the viability of domestic mini-mill steel producers.
The Company operates mini-mills (electric arc furnace melt shops and finished
product rolling mills) in Birmingham, Alabama; Kankakee, Illinois; and Seattle,
Washington. The Company operates SBQ bar, rod and wire production facilities in
Cleveland, Ohio. The Company operates a state of the art SBQ melt shop in
Memphis, Tennessee. The Company also operates a rolling mill in Joliet,
Illinois, and has warehouse and distribution facilities in Fontana and
Livermore, California; Baltimore, Maryland; Dallas, Texas; and Ft. Lauderdale,
Florida. The Company, through its wholly owned subsidiary, Birmingham East Coast
Holdings, also owns 85% of Birmingham Southeast which operates a melt shop in
Cartersville, Georgia and a melt shop and rolling mill in Jackson, Mississippi.
Birmingham Southeast also sells finished product via a program with a third
party which converts billets produced at Cartersville into finished product.
The Company's mini-mills melt ferrous scrap to produce a limited range of rebar
and merchant steel products. Operations commence with the melting of ferrous
scrap in an electric arc furnace. The molten steel is then funneled through a
continuous caster from which it emerges as continuous rectangular strands of
steel which are cut into predetermined lengths. These semi-finished steel shapes
are referred to as billets. The billets are transferred to a rolling mill where
they are reheated, passed through a roughing mill for size reduction, and then
rolled into finished reinforcing bars or merchant products. Products emerge from
the rolling mill onto a cooling bed where they are cooled uniformly. Most
merchant products then pass through state-of-the-art straightening and stacking
equipment, with all products then passing through automated bundling equipment
for uniform packaging.
The Company's new SBQ melt shop in Memphis utilizes high quality scrap and DRI
as a melt source. Molten steel is poured through a continuous caster which forms
a bloom--which is a larger size than a billet. In a continuous process, blooms
are moved from the caster directly to stands which reduce the blooms to a normal
sized billet. The bloom cast is essential to achieving the necessary quality for
SBQ products
<PAGE>
The Company's SBQ rolling operations in Cleveland obtains high quality carbon
and alloy semi-finished billets from third parties and from the Memphis melt
shop, which are then converted into a variety of high quality bar, rod and wire
products. Billets received are inspected for surface defects and, when
necessary, conditioned before transfer into the rod and bar mills. Upon entering
the rolling mills, the billets pass through a computer controlled multi-zone
recuperative reheat furnace, where a closely controlled heating process imparts
more uniform metallurgical characteristics to the steel. The heated billets are
then fed into the rolling line, where they pass through roughing, intermediate
and no-twist finishing stands. After rolling, the rod and bar is coiled and
control cooled. Once the cooling process is complete, the coiled rod and bar
passes through inspection stations for metallurgical, surface and diameter
checks. Approved coils are compacted and banded and then either shipped to
customers or transferred to the Company's wire operation for conversion into
wire.
The Company's high quality production facilities have the capabilities to
produce virtually all qualities of rod, bar and wire. However, the Company has
chosen to concentrate on a select number of high quality products which include
cold heading, cold finishing, cold rolling, welding, bearing, industrial and
specialty high carbon steel grades. The Company's strategy has been to focus on
the U.S. high quality bar, rod and wire markets, which demand exacting
metallurgical and size tolerance specifications and defect-free surface
qualities. In fiscal 1998, approximately 6% of bar and rod production at
Cleveland was transferred to the wire production facility and converted into
smaller-diameter wire through a cold-drawing process. Finished steel bar and rod
are also transferred to the wire mill solely for surface or thermal treatment
applications and then shipped to rod and bar customers. The Company also
operates a facility in Cleveland which purchases specialty steel rod from a
third party. The specialty steel rod is extensively treated and converted in a
multiple drawing process into wire used in the TOW anti-tank missile guidance
system.
Raw Materials and Energy Costs
The principal raw material used in the Company's mini-mills is ferrous scrap
generally derived from automobile, industrial and railroad scrap. The market for
scrap steel is highly competitive and its price volatility is influenced by
periodic shortages, freight costs, speculation by scrap brokers and other
conditions largely beyond the control of the Company. The Company purchases its
outside scrap requirements from a number of dealers and is not dependent on any
single supplier. In fiscal 1998, scrap costs represented approximately 49% of
the Company's total manufacturing costs at its mini-mills.
Within the commodity product ranges dominated by the mini-mill industry,
fluctuations in scrap market conditions have an industry-wide impact on
manufacturing costs and selling prices of finished goods. During periods of
scrap price escalation, the mini-mill industry seeks to maintain profit margins
and the Company has generally been able to pass along increased raw material
costs to customers. However, temporary reductions in profit margin spreads
frequently occur because of a timing lag between the escalation of scrap prices
and the effective market acceptance of higher selling prices for finished steel
products. Following this delay in margin recovery, steel industry profitability
has historically escalated during periods of inflated scrap market pricing.
However, there can be no assurance that competitive conditions will permit the
Company to pass on scrap cost increases in the future.
The principal raw material for the Company's rod and bar operations is high
quality steel billets. Because of the metallurgical characteristics demanded in
the finished product, the Company obtains its billets only from those suppliers
whose billets can meet the required metallurgical specifications of its
customers. The Company manufactures its high quality bar and rod from
approximately 120 generic grades of billets. To obtain high quality billets
needed to provide the sophisticated products that the Company requires, a team
approach among the suppliers, customers and the Company is required. Typically,
the approval process for a particular billet supplier requires six to twelve
months. The Company currently purchases billets from eight approved billet
suppliers. The Company also produces certain grades of high quality rod and bar
from billets produced at the melt shop in Cartersville, Georgia, and the new
melt shop in Memphis, Tennessee. Once it reaches it's full potential, the
Memphis melt shop is expected to supply up to one million tons of high quality
billets annually to the Cleveland, Ohio operations. The melt shop in Memphis
utilizes high grade scrap and DRI, which is primarily obtained from the
Company's Louisiana DRI joint venture, as raw material feedstock.
<PAGE>
The Company's operations consume large amounts of energy in the form of
electricity and natural gas. The Company purchases its electrical energy from
regulated utilities pursuant to interruptible service contracts which provide
for economical electricity rates. These high volume industrial discount rates
are provided in return for the utility's right to periodically interrupt service
during peak demand periods. In the past, these interruptions have ordinarily
been limited to several hours and have occurred no more than ten days per year.
Due to the extremely hot weather in 1998, several plants: Cleveland, Kankakee,
Memphis, Jackson and Cartersville have had to cease operations on a number of
days because of the higher rate per kilowatt hour created by extremes in overall
demand for electricity. Since deregulation of the natural gas industry, natural
gas requirements generally have been provided through negotiated contract
purchases of well-head gas with supplemental transportation through local
pipeline distribution networks.
Production Capacity
The table below indicates the percentage of capacity at which the Company's
manufacturing facilities operated during the fiscal year ended June 30, 1998.
The capacities presented are management's estimates and are based upon a normal
168 hour weekly work schedule, an average product mix and include the effects of
existing melting or rolling capacity limitations within each operation.
Production capacities listed below are estimated year-end capacity levels.
Annual Annual
Melting Rolling
Capacity Capacity
---------- -------------
Birmingham 500 550
Joliet - 280
Kankakee 800 800
Seattle 750 750
Jackson 450 400
Cartersville 1,000 225 (1)
Cleveland - 1,100
Memphis 1,000 -
------- ------
4,500 4,105
====== ======
(1) Cartersville rolling production via tolling agreement with a third party.
The Company has the capability to produce both rebar and merchant products at
its Kankakee, Birmingham, Seattle and Joliet facilities and at the Birmingham
Southeast facility in Jackson. The conversion from production of rebar to
merchant products is a routine facet of operations at the Company's mini mill
facilities, and no major impediments exist which would preclude changing between
product mixes.
Production Facilities
Kankakee, Illinois
The Kankakee, Illinois facility is located approximately 50 miles south of
Chicago. Since its acquisition in 1981, the Company has renovated the operation
and installed a new melt shop, continuous caster, rolling mill, reheat furnace
and in-line straightening, stacking and bundling equipment. Kankakee enjoys a
favorable geographical proximity to key Midwest markets for merchant products.
This freight cost advantage and Kankakee's state-of-the-art equipment
capabilities are competitive advantages in the Company's strategy to expand
market share of merchant products.
<PAGE>
Birmingham, Alabama
The Birmingham, Alabama facility was the first mini-mill built in the United
States and was in need of major renovations when acquired by the Company in
1979. Since acquisition of the Birmingham facility, the Company has installed a
new electric arc furnace and sequence casting system in the melt shop; and a new
reheat furnace, finishing stands, cooling bed and product shear in the rolling
mill as well as a new finished goods storage area. In 1992, the Company
transferred an in-line rolling mill from its idled facility in Norfolk, Virginia
to Birmingham. In 1994, the Company installed finished goods bundling and
transfer equipment at its Birmingham facility. The Birmingham facility produces
primarily rebar.
Seattle, Washington
The Seattle, Washington facility is located adjacent to the Port of Seattle and
is the Company's largest mini-mill. The Company began operating in Seattle in
1986 upon the acquisition of a local steel company, which provided an entry to
the West Coast steel markets. In 1991, the Company purchased the assets of
Seattle Steel, Inc., in west Seattle, and consolidated all of its steel
operations to the west Seattle site.
Soon after the acquisition of the west Seattle operations, the Company began a
modernization program which included the installation of a new baghouse, new
ladle turret and billet runout table. In 1993, the Company completed
construction of a new state-of-the-art in-line rolling mill which includes
automated in-line straightening, stacking and bundling equipment designed to
facilitate Seattle's expansion in merchant product production. The Seattle
operation produces a variety of products including rebar, merchant rounds,
angles, channels, squares, flats and strip.
Joliet, Illinois
The Joliet, Illinois facility was acquired with the Company's purchase of
American Steel & Wire Corporation in November 1993. In fiscal 1996, concurrent
with the start-up of the new high quality bar mill in Cleveland (see "Cleveland,
Ohio" below), the Company transferred the operation of the Joliet facility from
the management in Cleveland, Ohio to the operational control of the Kankakee,
Illinois management group. The Company also invested approximately $30 million
to upgrade the rolling mill and enable Joliet to produce coiled and straight
length reinforcing bar, flats, rounds and squares. The Joliet operation consists
of a modernized 2-strand 19-stand Morgan mill, 3 zone top fired walking beam
furnace, no-twist finishing and a coil and cut length line. The Joliet operation
obtains its semi-finished steel billet requirements primarily from the Company's
Kankakee, Illinois facility.
Cleveland, Ohio
The Company's Cleveland, Ohio facilities include a rod mill, a bar mill and a
wire mill. The rod and wire mill assets were acquired with the Company's
purchase of American Steel & Wire Corporation (ASW) in 1993. Prior to ASW, the
rod and wire mills were owned by United States Steel Corporation.
The Cleveland facility produces a variety of high quality steel rod, bar and
wire products. In fiscal 1996, the Cleveland operation achieved QS9000
registration. QS9000 is a quality system requirement established by Chrysler,
Ford and General Motors and is based upon the internationally recognized ISO9000
series of standards. The Company believes that compliance with QS9000 will
strengthen its ability to access new markets, including the domestic and
transplant automotive producers.
<PAGE>
The Cleveland rod mill consists of a two strand, 25-stand rolling mill with
single-line pre-finishers and no-twist finishing. The mill utilizes a Stelmor
controlled slow cooling conveyor system, where precise cooling practices provide
a metallurgical structure normally imparted only through additional and more
costly thermal treatment. Management believes that this capability provides the
Company with an important, competitive advantage in producing certain of its
quality rods. The rod mill is capable of producing rod coils in sizes ranging
from 7/32" to 15/16".
In fiscal 1996, the Company completed construction of a new state-of-the-art bar
mill which expanded the product range and mix of the Cleveland operation. The
bar mill consists of a 28-stand horizontal/vertical no-twist mill. The bar mill
utilizes Stelmor cooling conveyors, laser sizing gauges and two
compactor/banders. The bar mill is capable of producing bar and rod products in
sizes ranging from 45/64" to 1 9/16" in diameter and in coils of 4,300 pounds
and 5,700 pounds.
The Cleveland wire mill is located adjacent to the rod mill and serves two
purposes. First, some finished rod is transferred from the rod (and bar) mills
and either converted into high quality wire for sale to customers or processed
and shipped to rod customers. The wire mill also processes materials for
customers. The ability to offer high quality processing of bar and rod to
customers' specifications is a service that distinguishes the Company from a
number of its competitors. Such processing includes surface treatment (cleaning
and coating), thermal treatment (annealing) and wire drawing. Wire is produced
in the wire mill through a cold drawing process which involves reducing the
diameter of the steel rod by pulling the rod through dies. Rod and bar that is
to be drawn into wire may be surface or thermal treated before or after drawing.
Depending upon the processing required, many wire orders require up to three
weeks to complete, while the typical rod/bar coil is manufactured in several
hours.
The Cleveland operation also includes a facility which produces ultra-high
tensile strength specialty wire for use in the U.S. Government's anti-tank
missile guidance systems. The Cleveland plant is the only producer of TOW
missile wire. The manufacture of TOW wire is a highly specialized process. The
principal raw material is specialty steel rod which is purchased from an outside
supplier. The rod is subjected to a series of surface and thermal treatments and
drawing operations which take approximately five weeks to complete and which
reduce the original .197" diameter rod to .0049" diameter wire. The wire must
pass seven U.S. Government-mandated final inspection tests, including a test
assuring tensile strength of 500,000 pounds per square inch. Upon completing
successful inspection, the wire is packaged and shipped to a single customer
which is the exclusive producer of the TOW missile. Sales of this product were
$1.8 million in fiscal 1998. Unless renewed this contract will expire December
31, 1999.
Jackson, Mississippi
The Company originally acquired the Jackson facility in August 1985. In December
1996, upon formation of Birmingham Southeast, the Company contributed the assets
of its Jackson facility to the newly-formed limited liability company.
Birmingham Southeast also owns the facility in Cartersville, Georgia which was
acquired in conjunction with the acquisition of certain assets of Atlantic Steel
Corporation. The Company, through its Birmingham East Coast Holdings subsidiary,
owns 85% of Birmingham Southeast.
Since acquiring the Jackson operation, the Company has totally renovated the
facilities and equipment. The Jackson facility includes a melt shop which was
completed in 1993 and a modern in-line rolling mill. Installation of automated
in-line straightening and stacking equipment were completed in fiscal 1994. The
Jackson facility produces primarily merchant products including rounds, squares,
flats, strip and angles. The Jackson facility also has the capability to produce
rebar.
<PAGE>
Cartersville, Georgia
Birmingham Southeast acquired the Cartersville, Georgia facility in December
1996. The facility has a melt shop with a 24 foot, 140 ton Demag AC electric arc
furnace and Demag 6 strand billet caster. Cartersville produces billets for
feedstock to the Cleveland operation and supplies billets to Atlantic pursuant
to a take or pay agreement. Atlantic also converts billets to finished product
at its bar mill for Birmingham Southeast under a tolling agreement.
Memphis, Tennessee
In November 1997, the Company began start-up operations of a new SBQ melt shop
in Memphis. The melt shop has an estimated annual production capacity of 1.0
million tons. The facility consists of an electric arc furnace, vacuum degassing
tank, a ladle metallurgy station, a continuous bloom caster, and a billet
rolling mill. The facility also includes inspection and conditioning equipment
used to analyze billets prior to shipment.
PESCO Facilities
In December 1994, the Company acquired substantially all of the assets of Port
Everglades Steel Corporation (PESCO), a Florida-based steel distributor which
operates facilities in Florida and Texas. PESCO obtains the majority of its
steel requirements from the Company's Birmingham and Kankakee mini-mills.
Products
Of the 3.3 million tons of steel products shipped from the Company's operations
in fiscal 1998, 51% were reinforcing bars or billets, 28% were merchant
products, 21% were high quality bars and rods. The following presents, for the
periods indicated, the percentage of the Company's net sales dollars by product
generated by the Company's facilities.
Fiscal Year
----------------------------------
1998 1997 1996
----- ----- -----
Rebar products 43% 39% 43%
Merchant products 28 25 21
Rod products 10 18 30
Bar products 9 12 -
Wire products 2 2 3
Semi-finished billets 8 4 3
----- ----- -----
100% 100% 100%
===== ===== =====
Rebar Products. The Company has the capability to produce rebar at five
locations. Rebar is generally sold to fabricators and manufacturers who cut,
bend, shape and fabricate the steel to meet engineering, architectural or end
product specifications. Rebar is used primarily for strengthening concrete in
highway construction, building construction and other construction applications.
Unlike some other manufacturers of rebar, the Company does not engage in the
rebar fabrication business which might put the Company into direct competition
with its major rebar customers. The Company instead focuses its marketing
efforts on independent rebar fabricators and steel service centers.
<PAGE>
Rebar is a commodity steel product, making price the primary competitive factor.
As a result, freight costs limit rebar competition from non-regional producers,
and rebar deliveries are generally concentrated within a 700 mile radius of the
mill. Except in unusual circumstances, the customer's delivery expense is
limited to freight from the nearest mini-mill and any incremental freight
charges from another source must be absorbed by the supplier.
Rebar is consumed in a wide variety of end uses, divided into roughly equal
portions between private sector applications and public works projects. Private
sector applications include commercial and industrial buildings, construction of
apartments and hotels, utility construction, agricultural uses and various
maintenance and repair applications. Public works projects include construction
of highways and streets, public buildings, water treatment facilities and other
projects.
The following data, reported by the American Iron and Steel Institute (a rebar
fabricators' trade association), depict apparent rebar consumption in the United
States from 1987 through 1997. The table also includes rebar shipments by the
Company and its approximate market share percentage for the periods indicated.
Rebar Company Approximate
Consumption Shipments Market
Calendar Year (in tons) (in tons) Share
----------------- --------------- ------------ ---------------
1987 5,301,000 558,000 10.5%
1988 5,416,000 808,000 14.9%
1989 5,213,000 972,000 18.6%
1990 5,386,000 972,000 18.0%
1991 4,779,000 945,000 19.8%
1992 4,764,000 1,060,000 22.3%
1993 5,051,000 1,181,000 23.4%
1994 5,151,000 1,185,000 23.0%
1995 5,454,000 1,108,000 20.3%
1996 6,071,000 1,288,000 21.2%
1997 6,188,000 1,432,000 23.1%
The Company's rebar operations are subject to a period of moderately reduced
sales from November to February, when winter weather and the holiday season
impact the construction market demand for rebar.
Merchant products. The Company has the capability to produce merchants at five
locations. Merchant products consist of rounds, squares, flats, strip, angles
and channels. Merchant products are generally sold to fabricators, steel service
centers and manufacturers who cut, bend, shape and fabricate the steel to meet
engineering or end product specifications. Merchant products are used to
manufacture a wide variety of products, including gratings, steel floor and roof
joists, safety walkways, ornamental furniture, stair railings and farm
equipment.
Merchant products typically require more specialized processing and handling,
including straightening, stacking and specialized bundling. Because of the
greater variety of shapes and sizes, merchant products are typically produced in
shorter production runs, necessitating more frequent changeovers in rolling mill
equipment. Merchant products command higher prices and produce higher profit
margins than rebar products. The Company has installed modern straightening,
stacking and bundling equipment at its mills to strengthen its competitiveness
in merchant markets.
<PAGE>
The following data reported by the American Iron and Steel Institute depict
apparent consumption of merchant products in the United States from 1987 through
1997. The table also includes merchant product shipments by the Company and its
approximate market share percentage for the periods indicated.
Merchant
Product Company Approximate
Consumption Shipments Market
Calendar Year (in tons) (in tons) Share
------------- ------------ ---------- ------------
1987 7,911,000 147,000 1.9%
1988 8,546,000 264,000 3.1%
1989 8,398,000 272,000 3.2%
1990 8,379,000 306,000 3.7%
1991 7,045,000 287,000 4.1%
1992 7,504,000 330,000 4.4%
1993 8,445,000 395,000 4.6%
1994 10,113,000 484,000 4.8%
1995 10,618,000 524,000 4.9%
1996 10,341,000 520,000 5.0%
1997 10,534,000 925,000 8.8%
SBQ bar, rod and wire products. The Company's SBQ bar, rod and wire facilities
market high-quality bar, rod and wire (SBQ products) to customers in the
automotive, agricultural, industrial fastener, welding, appliance and aerospace
industries.Approximately 70% of the Company's SBQ shipments are to customers
serving the original equipment and after-market segments of the automotive
industry.
The Company's bar mill in Cleveland is capable of producing bar and rod sizes
ranging from 45/64" to 1 9/16" in diameter. The Company's rod mill, also located
in Cleveland, produces steel rods in sizes ranging from 7/32" to 15/16" in
diameter. The Company's wire mill in Cleveland produces wool wire and cold
heading quality products in a variety of carbon and alloy grades in sizes from
.120" through .820" in diameter.
End-uses of the Company's rod products, include the manufacture of electric
motor shafts, engine bolts, lock hasps, screws, pocket wrenches, seat belt
bolts, springs, cable wire, chain bearings, tire bead and welding wire. Steel
wire produced by the Company is used by customers to produce steel wool pads,
brake pads, golf spikes and fasteners such as bolts, rivets, screws studs and
nuts. The Company's TOW wire products are used exclusively in the defense
industry to produce guidance systems for the TOW anti-tank missile.
Because of the nature of the end-uses, the Company's SBQ products must meet
exacting metallurgical and size tolerance specifications and defect-free surface
characteristics. The Company's marketing and sales activities emphasize its
ability to meet or exceed customers' requirements for high quality steel rod and
wire manufactured to close tolerances and exacting surface characteristics.
The Company's pricing policy for SBQ products is market driven and dependent
upon the market served and the demand by customers. Typically, market pricing
prevails for most customers that rely on market competition to determine price.
The major exception to this has been automotive related model year pricing which
fixes a twelve month price (generally beginning August 1). This allows suppliers
to deal with automotive industry requirements for twelve months fixed pricing.
<PAGE>
The following data, reported by the WEFA Group and based upon data from the
American Iron and Steel Institute, depict apparent consumption of carbon and
alloy rod and wire products in the United States from 1987 through 1997 (in
tons).
Rod Wire Total
Calendar Year Consumption Consumption Consumption
------------- ----------- ----------- -----------
1987 5,300,000 2,100,000 7,400,000
1988 5,500,000 1,600,000 7,100,000
1989 5,200,000 1,500,000 6,700,000
1990 5,200,000 1,300,000 6,500,000
1991 5,000,000 1,200,000 6,200,000
1992 5,400,000 1,300,000 6,700,000
1993 6,100,000 1,200,000 7,300,000
1994 6,400,000 1,200,000 7,600,000
1995 6,500,000 1,100,000 7,600,000
1996 6,680,000 1,100,000 7,780,000
1997 6,720,000 1,000,000 7,720,000
Management estimates the high quality segment of the bar market to be
approximately 10,700,000 tons in calendar 1997. Management estimates that the
high quality segment of the rod and wire market represents approximately 48% of
the rod market demand in the U.S. The Company's strategy has been to serve this
approximately 3.7 million tons-per-year high quality rod and wire segment, which
has historically been dominated by foreign suppliers. Generally, domestic
mini-mills have historically focused on the less demanding quality markets.
Since the acquisition of the Cartersville melt shop, the Company has increased
its usage of industrial quality billets, and finished product shipments of
industrial quality rod and bar continued to increase during fiscal 1998. The
following is a summary of the principal rod and bar product qualities
manufactured by the Company:
Cold heading quality (CHQ) - The Company produces CHQ steel rod, bar and wire in
a wide range of carbon and alloy grades. CHQ is specified for the manufacture of
wire used for parts requiring severe deformation or upsetting. Examples of such
parts include seat belt bolts, lug nuts, engine bolts and lock nuts used in
automotive applications as well as slotted and Phillips head screws for the
appliance industry. CHQ products accounted for approximately 45% of the
Company's fiscal 1998 rod and bar shipments.
Cold finish quality (CFQ) - CFQ steel rod and bar is intended for the
manufacture of cold drawn bars and is often produced with additives such as lead
or selenium to enhance machinability. CFQ is specified for the manufacture of
parts such as shock absorber rods, electric motor shafts, bearings, socket
wrenches, screw driver shafts and drill bits.
Cold rolling quality (CRQ) - The Company produces CRQ steel rod and bar in a
wide range of carbon and alloy grades. CRQ is specified for the manufacture of
wire used for a variety of shaped wires including square, oval half-round and
half-oval. Intricately shaped parts, such as the center support section for
steering wheels and the regulator spring used to lower and raise automobile
power windows are typical examples of products incorporating wire made from CRQ.
Welding quality (WQ) - The Company's WQ rod and bar is produced in a wide
variety of specialized carbon and alloy chemistries in order to match the
characteristics of the material being joined. WQ is intended for the production
of wire for gas, electric arc, submerged arc and inert gas welding applications.
Specialty high carbon quality (SHCQ) - SHCQ steel rod and bar is produced in a
variety of carbon and alloy grades. SHCQ is specified for the manufacture of
wire used for parts requiring high-tensile strength of resiliency. Typical
examples of such parts are overhead garage door springs, lock washers,
upholstery springs, music spring wire, tire bead and wire rope.
<PAGE>
Industrial Quality (IQ) - IQ steel rod is produced in plain carbon steel grades.
It is specified for the manufacture of wire for bending and undemanding forming
applications. Typical examples of application include refrigerator shelving,
display racks, grocery carts, hangers, brackets and a variety of other end uses.
Bearing quality - The Company produces bearing quality steel to serve a range of
alloy grades into ball, needle and roller type bearings.
Wire Products - The Company produces cold heading quality wire and processed rod
and bar in a full range of carbon and a variety of alloy grades in sizes ranging
from .120" to .820" in diameter. This product is offered with specified thermal
treatments, coatings, and finishes. Cold heading wire is primarily supplied to
fastener manufacturers.
The Company produces wool quality wire utilizing special wire drawing practices
which ensure a consistent, high quality product. Customers shave the Company's
wire to manufacture steel wool. The steel wool is then used to produce items
such as soap pads, furniture finishing pads and steel fibers for automotive
brake linings.
TOW wire - Tow wire is an ultra-high tensile strength product utilized in the
TOW anti-tank missile system, a defense weapon which has been in use since 1967.
The Company is currently the only supplier of TOW wire, which is extremely
ductile, measures .0049" in diameter and has a tensile strength of 500,000
pounds per square inch. Each TOW missile carries two wire bobbins, each
containing nearly three miles of wire.
Competition
Price sensitivity in markets for the Company's products is driven by competitive
factors and the cost of steel production. The geographic marketing areas for the
Company's products are similar.
Because rebar and merchant products are commodity products, the major factors
governing the sale of rebar and merchant products are manufacturing cost,
competitive pricing, inventory availability, facility location and service. The
Company competes in the rebar and merchant markets primarily with numerous
regional domestic mini-mill companies.
The Company's primary competitors in bar and rod products are divisions of
domestic and foreign integrated steel companies and domestic mini-mill
companies. The Company competes primarily in the high quality end of the rod,
bar and wire markets, differentiating itself from many of its competitors.
Although price is an important competitive factor in the Company's SBQ business,
particularly during recessionary times, the Company believes that its sales are
principally dependent upon product quality, on-time delivery and customer
service. The Company's SBQ marketing and sales activities emphasize its ability
to meet or exceed customers' requirements for high quality steel rod, bar and
wire manufactured to close tolerances and exacting surface and internal
characteristics. These markets constitute a relatively small percentage of total
domestic steel consumption, and therefore some domestic integrated mills have
exited this business or given it a low priority. Additionally, these mini-mills
are generally unable to produce steel of sufficient quality and metallurgical
characteristics to produce rod, bar and wire comparable in quality to that
manufactured by the Company.
Foreign Competition. In recent years, a declining U.S. dollar and increased
efficiency in the U.S. steel industry have improved the competitive position of
U.S. steel producers. Foreign steel is a competitive factor on a sporadic basis.
Federal legislation currently prohibits the use of foreign steel in federally
funded highway construction.
<PAGE>
Employees
Production Facilities. At June 30, 1998 the Company employed 2,011 people at its
operations. The Company estimates that approximately 27% of its current employee
compensation in operations is earned on an incentive basis linked to production.
The percentage of incentive pay varies from mill to mill based upon operating
efficiencies. During fiscal 1998, hourly employee costs at these facilities were
approximately $30 per hour, including overtime and fringe benefits, which was
competitive with other mini-mills. The production and maintenance employees at
the Joliet facility have been represented by United Steelworkers of America
since 1986, and are parties to a collective bargaining contract which expires in
June 2000. During fiscal 1998, hourly employee costs at this facility was
approximately $27 per hour, including overtime and fringe benefits. The
Company's other facilities are not unionized. The Company has never experienced
a strike or other work stoppage at its steel mills and management believes that
employee relations remain good.
Sales and Administrative Personnel. At June 30, 1998, the Company employed 243
sales and administrative personnel, of which 113 were employed at the Company's
corporate office headquarters located in Birmingham.
Environmental and Regulatory Matters
The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, waste water effluent, air emissions
and furnace dust disposal. As these regulations increase in complexity and
scope, environmental considerations play an increasingly important role in
planning, daily operations and expenses.
The Company operates engineering/environmental services departments and has
environmental coordinators at its facilities to maintain compliance with
applicable laws and regulations. These personnel are responsible for the daily
management of environmental matters. The Company believes it is currently in
compliance with all known material and applicable environmental regulations,
other than as discussed below. Changes in federal or state regulations or a
discovery of unknown conditions could require additional substantial
expenditures by the Company.
The Company's mini-mills are classified as hazardous waste generators because
they produce and collect certain types of dust containing lead and cadmium. The
Company currently collects and disposes of such wastes at approved landfill
sites or recycling sites through contracts with approved waste disposal and
recycling firms.
By letter dated October 20, 1992, the Department of Toxic Substances Control of
the 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 in Emeryville, California and, on June 10, 1996, received
DTSC approval of its proposal for the remediation of the property. BCSC has
completed remediation of the property pursuant to the approved remedial action
plan and has received an approved remedial completion report from DTSC. On
October 1, 1997, the BCSC facility was sold to the IKEA Corporation.
The Company was previously advised by the Virginia Department of Waste
Management of certain conditions involving the disposal of hazardous materials
at the Company's Norfolk, Virginia property which existed prior to the Company's
acquisition of the facility. The site was accepted into Virginia's Voluntary
Remediation Program. This program allows regulatory closure upon certification
by the Virginia Department of Environmental Quality of the site remediation. On
December 23, 1997, the property was sold to a company specializing in
remediation and rehabilitation or brownfield properties. Environmental
liabilities and the obligation to perform the remediation site plan as approved
by the Virginia Department of Environmental Quality were transferred to or
assumed by the purchaser.
<PAGE>
The Cleveland facilities were acquired pursuant to an Asset Sales Agreement
dated May 19, 1986 (the "Agreement'), by and between ASW and USX Corporation
(formerly United States Steel Corporation) ("USX"). Pursuant to the Agreement,
ASW is indemnified by USX for certain claims, if any, which may be asserted
against ASW under the Resource Conservation and Recovery Act Of 1976, as
amended, 42 U.S.C. Subsection 6901, et seq., and the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Sub-section 9601, et. seq., or which may be asserted under similar federal or
state statutes or regulations, which arise out of USX's actions on or prior to
June 30, 1986, the date on which ASW acquired these facilities. To date, no such
claims have been asserted against ASW. Any potential environmental liabilities
identified by ASW to date have not materially affected, and, based on current
information, are not expected to materially affect, its operations and/or may be
subject to indemnification by USX as described above.
Executive Officers of the Registrant
Pursuant to General Instruction G(3) to Form 10-K, information regarding the
executive officers of the Company called for by Item 401(b) of Regulation S-K is
hereby included in Part I of this report.
The following table sets forth the name of each executive officer of the
Company, the offices held, and the ages (as of August 21st 1998) of such
officers.
Name Age Office Held
- -------------------- ---- ----------------------------------------
Robert A. Garvey 60 Chairman of the Board and
Chief Executive Officer
Kevin E. Walsh 53 Executive Vice President-
Chief Financial Officer
Joseph Alvarado 45 Executive Vice President- Commercial
William R. Lucas 42 Executive Vice President-
Administration and General Counsel
Frederick J. Rocchio 51 Executive Vice President-
Development and Technology
Jack R. Wheeler 62 Vice President-Plant Operations
Robert A. Garvey was elected Chairman of the Board and Chief Executive Officer
in January 1996. Prior to joining the Company, Mr. Garvey served as President of
North Star Steel Company from 1984 to 1996.
Kevin E. Walsh joined the Company in July 1998 and serves as Executive Vice
President-Chief Financial Officer. Prior to joining the Company, Mr. Walsh has
served in Executive Financial positions, most recently as Chief Financial
Officer for Remington Arms Company.
Joseph Alvarado joined the Company in March 1997 and serves as Executive Vice
President-Commercial. Prior to joining the Company, Mr. Alvarado held a variety
of positions of increasing responsibility with Inland Steel Company. Most
recently, he served as President of Inland Steel Bar Company, a division of
Inland Steel Company.
William R. Lucas, Jr. joined the Company in July 1995 and serves as Executive
Vice President and General Counsel. Prior to joining the Company, Mr. Lucas was
a founding partner of the Birmingham, Alabama based law firm Lightfoot,
Franklin, White & Lucas, where he served as managing partner from 1990 to 1995.
<PAGE>
Frederick J. Rocchio, Jr. joined the Company in October 1995 and serves as
Executive Vice President-Development and Technology. Prior to joining the
Company, Mr. Rocchio served as a Vice President of Inland Steel Company from
1988 to 1995.
Jack R. Wheeler joined the Company in November 1992 and serves as Vice
President-Plant Operations. Prior to joining the Company, Mr. Wheeler served as
Vice President and Works Manager at SMI Steel Inc. from 1986 to 1992.
ITEM 2. PROPERTIES
The following table lists the Company's real property and production facilities.
Management believes that these facilities are adequate to meet the Company's
current and future commitments.
Building
Square Owned or
Location Acreage Footage Leased
- ---------------------------- ---------- ---------- ------------
Corporate Headquarters:
Birmingham, Alabama - 38,396 Leased
Operating Facilities:
Birmingham, Alabama 26 260,900 Owned (1)
Kankakee, Illinois 222 400,000 Owned
Seattle, Washington 69 736,000 Owned
Jackson, Mississippi 99 323,000 Owned (1)
Cartersville, Georgia 283 367,000 Owned
Cleveland, Ohio 216 2,041,600 Owned
Memphis, Tennessee 500 184,800 Owned
Ft. Lauderdale, Florida - 29,500 Leased
(1) Portions of equipment that were financed by Industrial Revenue bonds and the
land upon which such equipment is located are leased pursuant to the terms of
such bonds.
ITEM 3. 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, subject to the payment of deductible amounts
by the Company. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, par value $.01 per share (the "Common Stock"), is
traded on the New York Stock Exchange under the symbol BIR.
<PAGE>
The table below sets forth for the two fiscal years ended June 30, 1998 and
1997, the high and low prices of the Company's Common Stock based upon the high
and low sales prices of the Common Stock as reported on the New York Stock
Exchange Composite Tape.
High Low
-------- --------
Fiscal Year Ended June 30, 1998
First Quarter $20.38 $15.63
Second Quarter 18.19 14.69
Third Quarter 17.75 15.50
Fourth Quarter 17.19 11.44
Fiscal Year Ended June 30, 1997
First Quarter $16.88 $14.88
Second Quarter 19.38 15.13
Third Quarter 22.00 14.75
Fourth Quarter 17.13 14.13
The last sale price of the Common Stock as reported on the New York Stock
Exchange on August 21, 1998 was $9.375. As of August 28, 1998, there were 1,477
holders of record of the Common Stock. The Company's registrar and transfer
agent is First Union National Bank of North Carolina.
The ability of the Company to pay dividends in the future will be dependent upon
general business conditions, earnings, capital requirements, funds legally
available for such dividends, contractual provisions of debt agreements and
other relevant factors (see "Selected Financial Data" for information concerning
dividends paid by the Company during the past five fiscal years).
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
<CAPTION>
For the Years Ended June 30,
----------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ----------- ----------- ----------- ---------
STATEMENT OF
OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Net sales $1,136,019 $978,948 $832,489 $885,553 $702,893
Cost of sales:
Other than
depreciation
and amortization 963,354 846,910 730,447 723,558 599,154
Depreciation and
amortization 55,266 45,843 34,701 32,310 27,671
--------- ---------- ---------- ---------- ---------
Gross profit 117,399 86,195 67,341 129,685 76,068
Provision for loss on
mill modernization
program, pre-
operating/start-up
costs,
unusual items 34,238 10,633 23,907 1,337 -
Selling, general and
administrative 48,645 36,670 37,731 43,149 33,847
Interest 29,008 20,195 12,036 8,889 11,061
--------- -------- -------- -------- -------
5,508 18,697 (6,333) 76,310 31,160
Other income, net 13,968 5,260 3,975 9,443 4,689
Loss from equity
investments (18,326) (1,566) - - -
Minority interest in
loss of subsidiary 1,643 2,347 - - -
-------- ------ ------ ------ ------
Income (loss) before
income taxes and
cumulative effect of
a change in accounting 2,793 24,738 (2,358) 85,753 35,849
principle
Provision for (benefit
from) income taxes 1,164 10,321 (181) 35,104 14,603
-------- -------- -------- ------- --------
Income (loss) before
cumulative effect of a
change in accounting 1,629 14,417 (2,177) 50,649 21,246
principle
Cumulative effect, as of
July 1, 1993, of a
change in the method of
accounting for income
taxes - - - - 380
--------- --------- -------- --------- -------
Net income (loss) $ 1,629 $ 14,417 $ (2,177) $ 50,649 $ 21,626
========= ========= ========= ========= ========
Earnings (loss) per share:
Income (loss) before
cumulative effect of a
change in accounting
principle $ 0.05 $ 0.50 $ (0.08) $ 1.74 $ 0.86
Cumulative effect, as of
July 1, 1993, of a
change in the method of
accounting for income
taxes - - - - 0.02
--------- --------- -------- -------- ---------
Basic and diluted earnings $ 0.05 $ 0.50 $ (0.08) $ 1.74 $ 0.88
(loss) per share
========= ========= ======== ======== =========
Dividends declared per share $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40
========= ========= ======== ======== =========
June 30,
-------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- -------- -------- --------
BALANCE SHEET DATA:
Working capital $ 237,674 $ 228,882 $211,595 $206,901 $ 213,075
Total assets 1,244,778 1,210,989 927,987 756,804 689,878
Long-term debt, less current
portion 558,820 526,056 307,500 142,500 142,500
Stockholders' equity 460,607 471,548 448,191 459,719 439,049
</TABLE>
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited; in thousands, except per share data)
1998 Quarters
----------------------------------------------------------
First Second Third Fourth
--------- --------- --------- ---------
Net sales $ 287,547 $ 267,453 $ 298,199 $ 282,820
Gross profit $ 30,760 $ 25,511 $ 28,528 $ 32,600
Net income
(loss) (1) (2) $ 7,245 $ 2,777 (3) $ (4,148) $ (4,245)(4)
Weighted average
shares outstanding 29,685 29,710 29,654 29,647
Basic and diluted
earnings (loss)
per share $ 0.24 $ 0.09 $ (0.14) $ (0.14)
Cash dividends
declared per share $ 0.10 $ 0.10 $ 0.10 $ 0.10
Price range of
common stock
High $ 20.38 $ 18.19 $ 17.75 $ 17.19
Low $ 15.63 $ 14.69 $ 15.50 $ 11.44
1997 Quarters
-------------------------------------------------------------
First Second Third Fourth
---------- -------- --------- ---------
Net sales $ 233,422 $ 210,140 $257,858 $277,528
Gross profit $ 24,006 $ 20,348 $ 22,028 $ 19,813
Net income (1) (2) $ 6,348 $ 5,920 $ 594 $ 1,555
Weighted average
shares outstanding 28,625 28,653 29,423 29,677
Basic and diluted
earnings per share $ 0.22 $ 0.21 $ 0.02 $ 0.05
Cash dividends
declared per share $ 0.10 $ 0.10 $ 0.10 $ 0.10
Price range of
common stock
High $ 16.88 $ 19.38 $ 22.00 $ 17.13
Low $ 14.88 $ 15.13 $ 14.75 $ 14.13
(1) Includes pre-operating/start-up costs of $2,502, $6,603, $14,648 and $10,485
in the first, second, third, and fourth quarters, respectively, of fiscal 1998;
and $1,422, $1,112, $6,557, and $1,542 in the comparable quarters of fiscal
1997.
(2) Includes income (loss) from equity investees of $(645), $(1,254), $(2,159),
and $(1,885) in the first, second, third and fourth quarters, respectively, of
fiscal 1998; and $0, $225, $(25) and $(1,766) in the comparable quarters of
fiscal 1997.
(3) Includes $3,368 of gains on sales of idle facilities and equipment in
Norfolk, Virginia; Emeryville, California, and Cartersville, Georgia.
(4) Includes the effects of (a) impairment loss on the investment in Laclede
Steel Company - $12,383; (b) gain on sale of idle facility in Ballard,
Washington - $1,857; and (c) settlements received from electrode suppliers -
$4,414.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The statements contained in this report that are not purely historical or which
might be considered an opinion or projection concerning the Company or its
business, whether express or implied, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements include the Company's expectations, beliefs, anticipations,
intentions, plans and strategies regarding the future. Forward-looking
statements include, but are not limited to: expectations regarding the costs of
new projects, expectations about the Company's efforts to address Year 2000
issues, expectations regarding future earnings, expectations concerning the
anticipated start-up costs and performance of new projects, expectations
regarding the date when facilities under construction will be operational and
the future performance and capabilities of those facilities, and assessments of
expected impact of litigation and adequacy of insurance coverage for litigation.
Moreover, when making forward-looking statements, management must make certain
assumptions that are based on management's collective opinion concerning future
events, and blend these assumptions with information available to management
when such assumptions are made. Whether these assumptions are valid will depend
not only on management's skill, but also on a variety of volatile and highly
unpredictable risk factors. Some, but not all, of these risk factors are
described below under the heading "Risk Factors That May Affect Future Operating
Results." Any forward-looking statements contained in this document speak only
as of the date hereof, and the Company disclaims any intent or obligation to
update such forward-looking statements. Comparisons of results for current and
prior periods are not necessarily indicative of future performance, and should
not be relied on for any purpose other than as historical data.
<PAGE>
In fiscal 1998, Birmingham Steel Corporation reported earnings of $1,629,000, or
$.05 per share, down from $14,417,000, or $.50 per share reported for the prior
fiscal year. The following table sets forth, for the years indicated, selected
items in the consolidated statements of operations as a percentage of net sales
and the amount of steel shipments in tons.
For the Years Ended June 30,
-------------------------------------
1998 1997 1996
-------- -------- --------
Steel shipments (000's tons) 3,329 2,836 2,402
Net sales 100% 100% 100%
Cost of sales:
Other than depreciation and
amortization 84.8 86.5 87.7
Depreciation and amortization 4.9 4.7 4.2
Provision for loss on mill
modernization program,
pre-operating/start-up
costs and unusual items 3.0 1.1 2.9
Selling, general & administrative 4.2 3.7 4.5
Interest 2.6 2.0 1.5
Other income, net (1.2) (0.5) (0.5)
Loss from equity investments 1.6 0.1 -
Minority interest in loss
of subsidiary (0.1) (0.2) -
Provision for income taxes 0.1 1.1 -
-------- ------- --------
Net income (loss) 0.1% 1.5% (0.3)%
======== ======= ========
RESULTS OF OPERATIONS
Net Sales
Fiscal 1998 compared to fiscal 1997
Net sales in fiscal 1998 were $1,136,019,000, an increase of 16.0 percent from
$978,948,000 reported in fiscal 1997. The increase was primarily the result of
increased shipment volumes and a favorable shift in product mix. The Company's
average selling price for steel products was $349 per ton in fiscal 1998,
compared with $345 per ton reported for fiscal 1997.
The Company achieved record steel shipments of 3,329,000 tons for fiscal 1998,
up 17.4 percent from 2,836,000 tons reported for fiscal 1997. In fiscal 1998,
rebar, merchant and SBQ products accounted for 40%, 29% and 21%, respectively,
of total shipments. In fiscal 1997, rebar, merchant and SBQ products accounted
for 46%, 25% and 23%, respectively, of total shipments. Shipments of
lower-margin semi-finished steel billets and other products accounted for 10
percent of total shipments in fiscal 1998 compared with 6 percent in fiscal
1997.
Fiscal 1997 compared to fiscal 1996
From fiscal 1996 to fiscal 1997, net sales increased 17.6 percent. The increase
was primarily the result of an increase in average steel selling prices and a
shift in product mix to higher margin products. The increase in average selling
prices was a result of increased market demand in several product lines.
Cost of Sales
Fiscal 1998 compared to fiscal 1997
As a percent of net sales, cost of sales (other than depreciation and
amortization) declined to 84.8 percent in fiscal 1998 from 86.5 percent in the
prior year. The decline resulted from increased production and shipment volumes
and lower conversion costs.
<PAGE>
At the Company's mini-mill facilities, the cost per ton to convert scrap to
finished steel products decreased to $123 per ton in fiscal 1998 compared with
$126 per ton in fiscal 1997. Scrap raw material costs remained steady throughout
the year and averaged $133 per ton for fiscal 1998. Conversion cost at the
Company's SBQ facility averaged $68 per ton in fiscal 1998 compared with $69 per
ton in fiscal 1997. Average billet cost per ton at the Company's SBQ facility
declined to $351 in fiscal 1998, down $8 from $359 in fiscal 1997. As previously
announced, the Company expects that upon completion of start-up operations, its
new melting facility in Memphis, Tennessee will reduce the cost of SBQ billets.
Depreciation and amortization expense increased in fiscal 1998 to $55,266,000
from $45,843,000 reported in fiscal 1997. The increase was primarily
attributable to the recognition of depreciation expense for the Memphis,
Tennessee melt shop which was placed into service in January, 1998, and a full
year of depreciation related to assets acquired in Cartersville, Georgia in the
prior fiscal year.
Fiscal 1997 compared to fiscal 1996
Cost of sales, (other than depreciation and amortization) as a percentage of net
sales, decreased in fiscal 1997 compared with fiscal 1996 essentially due to an
increase in average steel selling prices, a more favorable product mix and
increased efficiencies at the various mills.
Depreciation and amortization expense increased 32 percent in fiscal 1997
compared with fiscal 1996. The increase was primarily due to the recognition of
depreciation related to fixed assets purchased during late 1996 and fiscal 1997
as well as the acquisition of the Cartersville, Georgia facility.
Provision for Loss on Mill Modernization Program, Pre-operating/Start-up Costs
and Unusual Items
Fiscal 1998 compared to fiscal 1997
Provision for loss on mill modernization program, pre-operating/start-up costs
and unusual items were $34,238,000 in fiscal 1998 compared with $10,633,000 for
fiscal 1997. The current year charges relate primarily to pre-operating and
excess costs incurred during the start-up of the Company's Memphis, Tennessee
melt shop, which commenced start-up operations in November 1997, and the
Company's portion of start-up costs at the Company's joint venture DRI facility,
American Iron Reduction, which commenced start-up operations in January 1998.
The fiscal 1997 charges resulted from pre-operating costs at the Company's
Memphis, Tennessee melt shop, start-up costs associated with the Cleveland, Ohio
bar mill, the Joliet rolling mill, and the Cartersville, Georgia facility
acquired in December 1996.
Fiscal 1997 compared to fiscal 1996
For fiscal 1996, the provision for loss on mill modernization program,
pre-operating/start-up costs and unusual items amounted to $23,907,000 compared
with $10,633,000 in fiscal 1997. The fiscal 1996 charges resulted from a
write-off of equipment at the Company's idled Ballard, Washington facility;
start-up/pre-operating costs for the bar mill in Cleveland, the high quality
melt shop in Memphis and the melt shop in Seattle; the restructuring of the
information technology contract with Electronic Data Systems; charges related to
reorganization at both the corporate and plant levels, and reserves for legal
and property cleanup issues at the Company's idled facilities in (1) Emeryville,
California, (2) Norfolk, Virginia and (3) Prichard, Alabama.
Selling, General and Administrative Expenses ("SG&A")
Fiscal 1998 compared to fiscal 1997
SG&A expenses were $48,645,000 in fiscal 1998, an increase of 32.6 percent from
$36,670,000 in fiscal 1997. The increase in SG&A is primarily due to increased
costs associated with supporting higher sales and additional personnel and
expenses related to the Memphis and Cartersville facilities. In addition, fiscal
1998 SG&A expenses also include approximately $2.0 million in non-recurring
information technology costs related to a decision to change software vendors
for a major system upgrade. As a percentage of net sales, SG&A costs were 4.2
percent in fiscal 1998 compared with 3.7 percent in the prior year.
<PAGE>
Fiscal 1997 compared to fiscal 1996
SG&A declined 2.8 percent in fiscal 1997 to $36,670,000 from $37,731,000
reported in fiscal 1996. The favorable decline is due to decreased costs
associated primarily with the Company's information technology outsourcing
contract with Electronic Data Systems (EDS). As a percentage of net sales,
fiscal 1997 SG&A costs were 3.7 percent, compared with 4.5 percent for fiscal
1996.
Interest Expense
Fiscal 1998 compared to fiscal 1997
Interest expense increased to $29,008,000 in fiscal 1998 compared with
$20,195,000 in fiscal 1997. The increase in interest expense is primarily due to
increased borrowings on the Company's revolving credit line during the year
which were required to fund the Company's capital spending program. Also,
capitalized interest in fiscal 1998 decreased $2.4 million as a result of the
start-up of operations at Memphis.
Fiscal 1997 compared to fiscal 1996
Interest expense increased to $20,195,000 in fiscal 1997 from $12,036,000 in
fiscal 1996. The increase was primarily due to increased borrowings on the
Company's short-term credit lines during the year and the recognition of
interest on the new revolving credit facility completed in March 1997. The
increase in interest expense was partially offset by capitalized interest on
construction projects amounting to $8,848,000 in fiscal 1997.
Income Tax
The Company's effective tax rate in fiscal 1998 was essentially unchanged from
the 41.7 percent effective rate in fiscal 1997. The Company's effective income
tax benefit in fiscal 1996 was 7.7 percent, which was lower than the expected
rate because of non-deductible amortization of goodwill.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Net cash provided by operating activities in fiscal 1998 was $48.6 million,
compared with $28.6 million in fiscal 1997. Although net income was lower in
fiscal 1998, cash provided by operating activities increased principally because
of depreciation and other non-cash charges to income, including $18.3 million in
losses on equity investments. A favorable change in operating assets and
liabilities also contributed to improved operating cash flow.
Investing Activities
Net cash flow used in investing activities was $77.7 million in fiscal 1998,
compared with $260.7 million in the prior year. Expenditures related to capital
projects decreased 25 percent in fiscal 1998 while the sale of several idled
facilities and properties and proceeds from a lease on certain equipment at the
Memphis facility helped reduce cash outflows.
On November 15, 1996, the Company entered into a Contribution Agreement with
Atlantic Steel Industries, Inc. (Atlantic) and IVACO, Inc., the parent of
Atlantic, pursuant to which the Company and Atlantic formed Birmingham
Southeast, LLC (Birmingham Southeast), a limited liability company owned 85
percent by Birmingham East Coast Holdings, a wholly owned subsidiary of the
Company, and 15 percent by a subsidiary of IVACO, Inc. On December 2, 1996,
pursuant to the Contribution Agreement, the Company contributed the assets of
its Jackson, Mississippi facility to Birmingham Southeast and Birmingham
Southeast purchased the assets of Atlantic located in Cartersville, Georgia for
$43.3 million in cash and assumed approximately $44.3 million in liabilities
(see Note 2 to the Consolidated Financial Statements).
In 1997, the Company made a $9.3 million investment in Pacific Coast Recycling,
LLC (Pacific Coast), a joint venture established to operate in southern
California as a collector, processor and seller of scrap owned 50 percent by the
Company and 50 percent by Raw Materials Development Co., Ltd., an affiliate of
Mitsui & Co., Ltd. On December 27, 1996, Pacific Coast completed the purchase of
certain assets from the estate of Hiuka America Corporation and its affiliates
with an annual scrap processing capacity of approximately 600,000 tons. Pacific
Coast is utilizing the facility at the Port of Long Beach to export scrap (see
Note 3 to the Consolidated Financial Statements).
<PAGE>
In fiscal 1996, the Company acquired certain assets of Western Steel Limited and
in a related transaction, Birmingham Recycling Investment Company (BRIC), a
wholly-owned subsidiary of the Company, purchased the stock of Richmond Steel
Recycling Limited, a subsidiary of Western Steel Limited for a total purchase
price of approximately $16.9 million. On December 20, 1996, BRIC sold 50 percent
of the stock of Richmond Steel Recycling Limited to SIMSMETAL Canada, Ltd. and
recognized a pre-tax gain of approximately $1.7 million (see Note 3 to the
Consolidated Financial Statements).
On September 10, 1996, the Company and Georgetown Industries, Inc., completed
the financing arrangement for the construction of their previously announced
joint venture in Louisiana to produce direct reduced iron (DRI). The financing
was arranged through American Iron Reduction (AIR), the 50/50 joint venture
formed by the two partners to construct and operate the DRI facility. In
addition to the project funding, each partner was required to make initial
equity investments of $20 million each. Pursuant to the agreement, the Company
may be obligated to make additional equity investments of not more than $7.5
million. Each partner is required to purchase one-half of the output from the
facility each year. The Company's share of the DRI facility's output (estimated
to be at least 600,000 tons per year) will be used primarily at the Memphis melt
shop as a substitute for premium, low-residual scrap grades (see Note 3 to the
Consolidated Financial Statements).
Capital Expenditures
The Company invested approximately $146 million in capital projects during
fiscal 1998 pursuant to the Company's mill modernization program. Included in
the mill modernization program was the construction of a high quality melting
facility in Memphis, Tennessee to provide the majority of the billet needs for
the Company's SBQ facilities in Cleveland, Ohio. Start-up operations at the
Memphis facility began in November 1997. The Company also began construction of
a merchant rolling mill at the Cartersville, Georgia facility. The estimated
cost of the project is $85 million, and start-up operations are expected to
commence in the second half of fiscal 1999. The estimated cost to complete all
authorized projects as of June 30, 1998 is $68,975,000.
Funding for the above mentioned projects has been derived from available cash
reserves, net operating cash flow, $75 million proceeds from a lease of
equipment at Memphis and/or the Company's short-term and long-term financing
arrangements.
Financing Activities
Net cash provided by financing activities was $29.1 million in fiscal 1998
compared with $226.4 million in fiscal 1997. In fiscal 1997 the Company
completed a $26 million, 30 year tax-free bond financing at Memphis, the
proceeds of which have been used to finance certain portions of the Memphis melt
shop currently in a start-up mode. In March 1997, the Company entered into a
five year, $300 million unsecured revolving credit agreement which will be
utilized to fund the Company's working capital needs, capital expenditures and
for other general corporate purposes. Borrowings under the revolving credit
facility bear interest at variable market rates (weighted average rate of 6.15%
at June 30, 1998).
On January 23, 1997, the Company issued 1,000,000 additional shares of common
stock from treasury in a public offering registered with the Securities and
Exchange Commission. The proceeds of $19,188,000 from the offering were used to
partially fund the acquisition of the assets of Atlantic Steel Industries, Inc.
located in Cartersville, Georgia (see Note 2 to the Consolidated Financial
Statements).
In fiscal 1996, the Company completed a $15 million, 30 year tax-free bond
financing at its Cleveland, Ohio facility and issued $150 million senior debt
notes, using a portion of the proceeds to pay down the short-term lines of
credit.
<PAGE>
The Company is currently in compliance with its restrictive debt covenants.
However, should any of the factors described under "Risk Factors That May Affect
Future Results" adversely affect fiscal 1999 operating results, the Company
could violate one or more of its restrictive covenants within the next twelve
months. The Company is evaluating its alternatives in the event that it is
unable to comply with its restrictive covenants in the near term. The
alternatives include, but are not limited to, obtaining waivers for possible
future violations, amending the covenants or refinancing the Company's
outstanding obligations. If it becomes necessary to obtain waivers or
amendments, the Company does not expect that these alternatives would have a
significant impact on future results of operations. However, should it become
necessary to refinance one or more of the Company's long-term facilities, the
Company may incur increased interest costs and debt extinguishment losses, both
of which could be material to future results of operations.
In July, 1998, the Board authorized a stock repurchase program pursuant to which
the Company may purchase up to 1.0 million shares of its common stock in the
open market at prices not to exceed $20. As of August 6, 1998, the Company had
purchased 25,000 shares of its stock pursuant to this program.
Market Risk Sensitive Instruments
The market risk inherent in the Company's financial instruments represents the
potential loss arising from adverse changes in interest rates (principally U.S.
treasury and prime bank rates). In order to manage this risk, the Company
attempts to maintain certain ratios of fixed to variable rate debt. However, the
Company does not currently use derivative financial instruments. At June 30,
1998, the Company had fixed rate long-term debt with a carrying value of $281.5
million and variable rate borrowings of $277.4 million outstanding. Assuming a
hypothetical 10% adverse change in interest rates, the fair value of the
Company's fixed rate debt would decrease by $9.8 million and the Company would
incur an additional $1.6 million in interest expense on variable rate
borrowings. These amounts are determined by considering the impact of the
hypothetical change in interest rates on the Company's cost of borrowing. The
analysis does not consider the effects of the reduced level of overall economic
activity that could exist in such an environment. Further, in the event of a
change of such magnitude, management would likely take actions to further
mitigate its exposure to the change. However, due to the uncertainty of the
specific actions that would be taken and their possible effects, the sensitivity
analysis assumes no changes in the Company's financial structure.
Working Capital
Working capital in fiscal 1998 was $237.7 million, compared with $228.9 million
in fiscal 1997 and $211.6 million in fiscal 1996.
Outlook
From a long-term perspective, the Company's broad access to capital markets and
internal cash flows are expected to be sufficient to provide the capital
resources necessary to support increased operating needs and to finance
continued growth.
Risk Factors That May Affect Future Results
All forward-looking statements included in this document are based upon
information available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward-looking statements. It is important to
note that the Company's actual results could differ materially from those
described or implied in such forward-looking statements. Among the factors that
could cause actual results to differ materially are the factors detailed below.
In addition, readers should consider the risk factors described from time to
time in Company reports filed with the Securities and Exchange Commission.
The Company is in the steel industry, an industry that is vulnerable to
unpredictable economic cycles. A downturn in the economy or in the Company's
markets could have an adverse effect on the Company's performance. The Company
produces some products which are subject to competition from foreign imports.
Fluctuations in exchange rates or a decline in foreign economic conditions may
adversely affect the Company's performance.
In fiscal 1998, an economic downturn in Asia has led to an excess supply of
world steel products. Although demand for steel products in the United States is
strong, this situation has created precarious conditions in the U.S. steel
industry, particularly with respect to price and volumes. Continuation of the
economic crisis in Asia could negatively impact the Company's results.
<PAGE>
The Company has attempted to spread its sales across the reinforcing bar,
merchant product and special bar quality markets to reduce the Company's
vulnerability to an economic downturn in any one product market. The Company's
performance, however, can still be materially affected by changes in demand for
any one of its product lines and by changes in the economic condition of the
construction industry, manufacturing industry or automobile industry.
The cost of scrap is the largest element in the cost of the Company's finished
rebar and merchant products. The Company purchases most of its scrap on a
short-term basis. Changes in the price of scrap can significantly affect the
Company's profitability. Changes in other raw material prices can also influence
the Company's profitability.
Prices for some of the Company's products are positively affected by the
influence of trade sanctions or restrictions imposed on the Company's foreign
competitors. Changes in these sanctions or restrictions or their enforcement
could adversely affect the Company's results.
Energy costs are also a significant factor influencing the Company's results.
Current reforms in the electric utility industry at the state and federal level
are expected to lower energy costs in the long run. However, numerous utilities
and political groups are contesting these reforms and states are approaching the
reforms in different fashions. The possibility exists, therefore, that the
Company could be exposed to energy costs which are less favorable than those
available to its competitors. Such a situation could materially affect the
Company's performance. Further, the partial deregulation of certain energy
markets now in effect may lead to significant price increases that would
adversely affect the Company's performance.
The Company's new melt shop in Memphis, Tennessee continues to be in a start-up
mode and is not currently operating at a commercially viable production level.
Continued delays or other start-up issues in this project could materially
adversely affect the Company's future results. While in start-up operations, the
facility can experience "learning curve" problems which would prevent the
Company from realizing the timing of certain plans that it has made for the
future. In addition, a decrease in demand for SBQ products could result in
reduced production requirements and delay the planned ramp-up of production at
Memphis.
Until the Memphis melt shop begins producing at acceptable levels and costs, the
Company's SBQ division will continue to purchase some of its steel billets from
third parties. The cost of these steel billets is a significant portion of the
cost of the SBQ division's finished products. Thus, the performance of this
division, and in turn, the performance of the Company, can be materially
affected by changes in the price of the steel billets it buys from third
parties.
The Company is constantly engaged in the process of evaluating new opportunities
to strengthen its long-term business and financial prospects. From time to time,
this process may lead the Company to make strategic investments, such as
acquisitions and joint ventures, which have the potential to improve the
Company's position in the markets in which it currently competes, as well as new
markets it may choose to enter. In connection with these investments, the
Company may incur, either directly or indirectly, start-up expenses, losses and
other charges that may have a material affect on the Company's financial
performance.
The Company expects to begin start-up operations of a new mid section rolling
mill at its Cartersville facility in the second half of fiscal 1999. Results in
fiscal 1999 will reflect start-up losses associated with this project and
unexpected start-up losses could negatively impact the Company's financial
performance.
The Company's scrap joint venture in California was established to collect and
process scrap in the southern California region for export to the Pacific Rim
countries. The West Coast scrap venture is particularly susceptible to changes
to the economic situation in Asia. In fiscal 1998, the West Coast scrap venture
recorded a loss. Continuation of the present economic conditions in Asia would
have an adverse impact on the results of the operations for this joint venture.
The Company believes its labor relations are generally good. Almost the entire
work force is non-union and the Company has never suffered a strike or other
labor related work stoppage. If this situation changes, the Company's
performance could suffer material adverse effects.
<PAGE>
The Company operates in an industry subject to numerous environmental
regulations. Changes in environmental regulations or in the interpretation or
manner of enforcement of environmental regulations could materially affect the
Company's performance. The Company is not currently planning or performing any
environmental remediations. If, however, the need to perform an environmental
remediation should arise, costs could be substantial. Depending upon the nature
and location of the problem, insurance coverage may or may not cover some or all
of the costs associated with the remediation.
The Company's economic performance, like most manufacturing companies, is
vulnerable to a catastrophe that disables one or more of its manufacturing
facilities and to major equipment failure. Depending upon the nature of the
catastrophe or equipment failure, available insurance may or may not cover a
loss resulting from such a catastrophe or equipment failure and the loss
resulting from such a catastrophe or equipment failure could materially affect
the Company's earnings.
The Company's efforts to address Year 2000 issues are dependent in part upon the
ability of certain software vendors to deliver certain modifications to software
used by the Company timely and are dependent upon information received from
customers and vendors upon which the Company has reasonably relied. Should such
software vendors fail to deliver its modifications timely, the Company's efforts
to address its Year 2000 issues may be affected. Should any significant third
party representation be inaccurate, the Company may be negatively affected.
The Company anticipates that it will continue to borrow funds in the future.
Increases in interest rates or changes in the Company's ability to borrow funds
could materially affect the Company's performance. The Company's ability to
borrow funds and the interest rates at which it can borrow such funds can be
affected by the Company's financial performance and compliance with various
ratios and covenants employed by lenders.
COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS
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 management and disposal. Company management is highly
conscious of these regulations, and supports an ongoing program to maintain the
Company's strict adherence to required standards.
The Company was previously advised by the Virginia Department of Waste
Management of certain conditions involving the disposal of hazardous materials
at the Company's Norfolk, Virginia property which existed prior to the Company's
acquisition of the facility. The site was accepted into Virginia's Voluntary
Remediation Program. This program allows regulatory closure upon certification
by the Virginia Department of Environmental Quality of the site remediation. On
December 23, 1997, the property was sold to a company specializing in
remediation and rehabilitation or brownfield properties. Environmental
liabilities and the obligation to perform the remediation site plan as approved
by the Virginia Department of Environmental Quality were transferred to or
assumed by the purchaser.
The Company was notified by the Department of Toxic Substances Control (DTSC) of
the Environmental Protection Agency of the State of California of certain
environmental conditions regarding its property in Emeryville, California. The
Company performed complete environmental remediation of that property in
accordance with the remediation plan for the site which was approved by DTSC.
The Company received letters from DTSC confirming that the site has been
remediated in accordance with the approved remedial implementation plan and an
approved remedial completion report and thereafter sold the Emeryville property
in October 1997.
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. Based upon the Company's study of
the known conditions and its prior experience in investigating and correcting
environmental conditions, the Company believes that the costs associated with
these work plans will not be material.
Except as stated above, the Company believes that it is currently in compliance
with all known material and applicable environmental regulations.
<PAGE>
YEAR 2000
The following Year 2000 discussion is provided in response to the Securities and
Exchange Commission's recent interpretative statement expressing its view that
public companies should include detailed discussion of Year 2000 issues in their
MD&A.
The Company is pursuing an organized program to assure the Company's information
technology systems and related infrastructure will be Year 2000 compliant. The
Company has divided its Year 2000 issues into five areas including: (1) business
systems at corporate headquarters, (2) business systems at the Cleveland, Ohio
operation, (3) infrastructure systems at all locations, (4) manufacturing
systems at all locations, and (5) facility and support systems at all locations.
(The Company includes certain systems which might not be considered as IT
systems, such as phone switches and certain safety systems, in the facility and
support systems area of the Year 2000 project.) The Company's Year 2000 program
includes three phases: (1) an audit and assessment phase designed to identify
Year 2000 issues; (2) a modification phase designed to correct Year 2000 issues
(this phase includes testing of individual modifications as they are installed);
and (3) a testing phase to test entire systems for Year 2000 compliance after
individual modifications have been installed and tested. A dedicated Year 2000
project manager has been assigned to this project for over one year. Project
teams have been assembled for each area, specific responsibilities have been
identified and specific time lines have been prepared for the activities to take
place within each area of the project. Senior management receives monthly
updates on the progress against the time lines for each strategic area.
The Company has completed the audit and assessment phase for both the business
systems at the corporate headquarters and at the Cleveland, Ohio operation and
for infrastructure at all locations. The Company currently expects that the
audit and assessment phase will be completed for the remaining areas prior to
December 31, 1998.
The Company is currently performing the second phase of its program, involving
modifications and testing of the individual modifications, on its business
systems at both the corporate headquarters and the Cleveland, Ohio operation.
The Company expects to complete the second phase of its program for these
business systems by December 31, 1998. This schedule allows for six months of
contingency time prior to the July 1, 1999 deadline (the beginning of the
Company's 2000 fiscal year) for completion of these upgrades.
The Company expects to conduct the third phase test of its business systems in
the first calendar quarter of 1999.
The Company currently expects to complete the second phase of its program
(modifications and testing) for its infrastructure systems, manufacturing
systems, facility and support systems by June 30, 1999 leaving six months of
contingency time before the December 31, 1999 deadline for completion of Year
2000 modifications of these systems. Appropriate systems testing will be
conducted after June 30, 1999 and problems which are identified will then be
corrected.
Management has determined that the costs for correction of the Year 2000 issues,
including any software and hardware changes (but excluding any hardware systems
that would have been replaced in any event) and the cost of personnel involved
in working on this project, will be less than $3 million. The Company estimates
that 25% of the costs have been spent to date. The Year 2000 upgrades are being
funded out of the normal operating funds, and account for less than 25% of the
Company's IT budget.
The Year 2000 compliance effort is a priority project for the Company's IT
department. Other IT projects, however, including upgrades of certain existing
systems and design and installation of new systems, continue while the Year 2000
effort is being accomplished.
<PAGE>
The Company's Year 2000 program also includes investigation of major vendors'
and customers' Year 2000 readiness. The Company is using questionnaires, letters
and protocols to determine its vendors' and customers' Year 2000 readiness. The
Company is contacting, for example, energy and scrap vendors and its phone and
data line service vendors to determine their Year 2000 compliance status. If any
such vendors indicate that they will not be Year 2000 compliant, the Company
will develop contingency plans to address the issue, which may include changing
vendors. In addition, the Company is contacting significant customers to
determine their progress towards Year 2000 compliance and to identify issues, if
any, which might develop because of customers' failure to be prepared for Year
2000 issues. In the event issues are identified, the Company expects to try to
develop procedures to permit the Company to continue to supply the customer
involved despite the Year 2000 issues. The Company has been assured by its key
financial institutions that they are already Year 2000 compliant or will be Year
2000 compliant in early 1999.
At the present time, the Company does not have a contingency plan to operate in
the event that its business systems are not Year 2000 compliant. If testing
scheduled for the first calendar quarter of 1999 suggests that there is a
significant risk that the business systems might not be Year 2000 compliance, a
contingency plan will be developed.
Notice: Various statements in this discussion of Year 2000 are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements include statements of the Company's expectations,
statements with regard to schedules and expected completion dates and statements
regarding expected Year 2000 compliance. These forward-looking statements are
subject to various risk factors which may materially affect the Company's
efforts to achieve Year 2000 compliance. These risk factors include the
inability of the Company to complete the plans and modifications that it has
identified, the failure of software vendors to deliver the upgrades and repairs
to which they have committed, the wide variety of information technology systems
and components, both hardware and software, that must be evaluated and the large
number of vendors and customers with which the Company interacts. The Company's
assessments of the effects of Year 2000 on the Company are based, in part, upon
information received from third parties and the Company's reasonable reliance on
that information. Therefore, the risk that inaccurate information is supplied by
third parties upon which the Company reasonably relied must be considered as a
risk factor that might affect the Company's Year 2000 efforts. The Company is
attempting to reduce the risks by utilizing an organized approach, extensive
testing, and allowance of ample contingency time to address issues identified by
tests.
IMPACT OF INFLATION
The Company has not experienced any material adverse effects on operations in
recent years because of inflation, though margins can be affected by
inflationary conditions. The Company's primary cost components are ferrous
scrap, high quality semi-finished steel billets, energy and labor, all of which
are susceptible to domestic inflationary pressures. Finished product prices,
however, are influenced by nationwide construction activity, automotive
production and manufacturing capacity within the steel industry and, to a lesser
extent, the availability of lower-priced foreign steel in the Company's market
channels. While the Company has generally been successful in passing on cost
increases through price adjustments, the effect of steel imports, severe market
price competition and under-utilized industry capacity has in the past, and
could in the future, limit the Company's ability to adjust pricing.
ITEM 7A. QUANTITATIVE AND QUATLITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to the information in Item 7 under the caption MARKET RISK SENSITIVE
INSTRUMENTS
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BIRMINGHAM STEEL CORPORATION
Consolidated Balance Sheets
(in thousands, except per share data)
June 30
-------------------------------------------
ASSETS 1998 1997
----------------- -----------------
Current assets:
Cash and cash equivalents $ 902 $ 959
Accounts receivable, net of
allowance for doubtful accounts
of $1,838 in 1998 and $1,797 in 1997 121,854 129,476
Inventories 243,275 208,595
Other 27,967 27,834
------------------ -----------------
Total current assets 393,998 366,864
Property, plant and equipment:
Land and buildings 258,905 199,363
Machinery and equipment 652,240 572,802
Construction in progress 67,401 162,957
------------------ -----------------
978,546 935,122
Less accumulated depreciation (221,051) (173,554)
------------------ -----------------
Net property, plant and equipment 757,495 761,568
Excess of cost over net assets acquired 44,420 50,089
Other assets 48,865 32,468
------------------ -----------------
Total assets $ 1,244,778 $ 1,210,989
================== =================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion
of long-term debt $ 10,119 $ -
Accounts payable 92,813 94,273
Accrued payroll expenses 12,015 7,387
Accrued operating expenses 12,901 7,503
Other current liabilities 28,476 28,819
------------------ -----------------
Total current liabilities 156,324 137,982
Deferred income taxes 47,922 54,352
Deferred liabilities 7,630 5,933
Long-term debt, less current portion 558,820 526,056
Minority interest in subsidiary 13,475 15,118
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, par value $.01;
authorized: 5,000 shares - -
Common stock, par value $.01;
authorized: 75,000 shares;
issued: 29,780 in 1998 and 29,736 in 1997 298 297
Additional paid-in capital 331,859 331,139
Treasury stock, 191 and 55 shares
in 1998 and 1997, respectively, at cost (2,929) (996)
Unearned compensation (912) (1,425)
Retained earnings 132,291 142,533
------------------ ---------------
Total stockholders' equity $ 460,607 $ 471,548
------------------ ---------------
Total liabilities and
stockholders' equity $ 1,244,778 $ 1,210,989
================== ===============
See accompanying notes.
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
For the Years Ended June 30
-----------------------------------------
1998 1997 1996
------------ ---------- ----------
Net sales $ 1,136,019 $ 978,948 $ 832,489
Cost of sales:
Other than depreciation
and amortization 963,354 846,910 730,447
Depreciation and amortization 55,266 45,843 34,701
------------ ---------- ----------
Gross profit 117,399 86,195 67,341
Provision for loss on mill
modernization program,
pre-operating/start-up costs
and unusual items 34,238 10,633 23,907
Selling, general and administrative 48,645 36,670 37,731
Interest 29,008 20,195 12,036
------------ ---------- ---------
5,508 18,697 (6,333)
Other income, net 13,968 5,260 3,975
Loss from equity investments (18,326) (1,566) -
Minority interest in loss of
subsidiary 1,643 2,347 -
------------- ---------- ---------
Income (loss) before income taxes 2,793 24,738 (2,358)
Provision for (benefit from) income
taxes 1,164 10,321 (181)
------------- ---------- ----------
Net income (loss) $ 1,629 $ 14,417 $ (2,177)
============= ========== ==========
Weighted average shares outstanding 29,674 29,091 28,566
============= ========== ==========
Basic and diluted earnings
(loss) per share $ 0.05 $ 0.50 $ (0.08)
============= ========== ===========
See accompanying notes.
<TABLE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except number of shares and per share data)
<CAPTION>
For the Years Ended June 30, 1998, 1997 and 1996
---------------------------------------------------------------------------------------------
Common Stock Treasury Stock
---------------------- ---------------------
Additional Unearned Total
Paid-in Compensa- Retained Stockholder's
Shares Amount Capital Shares Amount tion Earnings Equity
---------- ------- ---------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at 29,594,286 $ 296 $ 330,490 (1,098,356) $(21,909) $ (2,537) $153,379 $ 459,719
June 30, 1995
Options
exercised, net
of tax benefit 85,475 1 940 60,929 1,301 (1,413) - 829
Purchase of
treasury stock - - - (33,300) (540) - - (540)
Reduction of
unearned
compensation - - - - - 1,785 - 1,785
Net loss - - - - - - (2,177) (2,177)
Cash dividends
declared, $.40
per share - - - - - - (11,425) (11,425)
---------- ------ --------- --------- ------- ------ -------- --------
Balances at
June 30, 1996 29,679,761 297 331,430 (1,070,727) (21,148) (2,165) 139,777 448,191
Options
exercised, net
of tax benefit 56,054 - 359 15,385 314 (541) - 132
Public offering - - (650) 1,000,000 19,838 - - 19,188
Reduction of
unearned
compensation - - - - - 1,281 - 1,281
Net income - - - - - - 14,417 14,417
Cash dividends
declared, $.40
per share - - - - - - (11,661) (11,661)
---------- ------- ------- --------- -------- ------- -------- ------
Balances at
June 30, 1997 29,735,815 297 331,139 (55,342) (996) (1,425) 142,533 471,548
Options
exercised, net
of tax benefit 44,161 1 720 23,546 385 (261) - 845
Purchase of
treasury stock - - - (159,600) (2,318) - - (2,318)
Reduction of
unearned
compensation - - - - - 774 - 774
Net income - - - - - - 1,629 1,629
Cash dividends
declared, $.40
per share - - - - - - (11,871) (11,871)
--------- ------- -------- --------- -------- ------- -------- ---------
Balances at 29,779,976 $ 298 $331,859 (191,396) $ (2,929) $ (912) $ 132,291 $460,607
June 30, 1998
========== ======= ======== ========= ========= ======= ========= =========
See accompanying notes.
</TABLE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Years Ended June 30,
-----------------------------------------
1998 1997 1996
---------- ----------- --------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 1,629 $ 14,417 $ (2,177)
Adjustments to reconcile net
income (loss) to net
cash provided by operating
activities:
Depreciation and amortization 55,266 45,843 34,701
Provision for doubtful
accounts receivable 41 83 418
Deferred income taxes (6,253) 4,343 (4,150)
Minority interest in loss
of subsidiary (1,643) (2,347) -
Gain on sale of equity
interest in subsidiaries (129) (1,746) -
Gain on sale of idle
facilities and equipment (5,225) - -
Loss from equity investments 18,326 1,566 -
Write-down of equipment and
other assets - - 13,269
Other 4,036 2,451 3,829
Changes in operating assets
and liabilities, net of
effects from business
acquisitions:
Accounts receivable 7,581 (19,400) 847
Inventories (34,681) 15,366 (23,291)
Other current assets (572) (13,888) 2,142
Accounts payable (1,425) (4,375) 16,113
Other accrued liabilities 9,981 (14,033) 8,442
Deferred liabilities 1,697 327 381
---------- --------- --------
Net cash provided by
operating activities 48,629 28,607 50,524
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property,
plant and equipment
(including expenditures
reimburseable under lease
agreement (146,567) (196,980) (171,778)
under lease agreement)
Proceeds from lease
agreement 75,000 - -
Payment for business
acquisitions - (43,309) (16,916)
Proceeds from disposal
of property,
plant and equipment 2,910 195 219
Proceeds from sale of equity
investment in subsidiaries 65 5,372 -
Proceeds from sale idle
facilities and equipment 26,857 - -
Investment in scrap subsidiary - (9,300) -
Equity investment in Laclede
Steel Company (15,016) - -
Equity investment in American
Iron Reduction, LLC (20,000) - -
Additions to other non-current
assets (8,112) (19,154) (5,489)
Reductions in other non-current
assets 7,125 2,472 672
---------- --------- --------
Net cash used in investing
activities (77,738) (260,704) (193,292)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net short-term borrowings and
repayments 10,000 - (8,020)
Proceeds from issuance of
long-term debt 1,500 26,000 165,000
Borrowings under revolving
credit facility 2,056,773 771,785 -
Payments on revolving credit
facility (2,025,390) (579,229) -
Proceeds from issuance of
common stock 358 310 105
Purchase of treasury stock (2,318) - (540)
Issuance of treasury stock - 19,188 -
Cash dividends paid (11,871) (11,661) (11,425)
---------- --------- --------
Net cash provided by
financing activities 29,052 226,393 145,120
---------- --------- --------
Net increase (decrease) in cash
and cash equivalents (57) (5,704) 2,352
Cash and cash equivalents at:
Beginning of year 959 6,663 4,311
------- -------- -------
End of year $ 902 $ 959 $ 6,663
======== ======== ========
Supplemental cash flow
disclosures:
Cash paid during the period
for:
Interest (net of amounts
capitalized) $29,231 $19,383 $11,500
Income taxes 6,132 13,808 5,570
See accompanying notes.
<PAGE>
BIRMINGHAM STEEL COOPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, 1997, and 1996
1. DESCRIPTION OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
Birmingham Steel Corporation (the Company) operates steel mini-mills in the
United States producing steel reinforcing bar, merchant products and SBQ
(special bar quality) bar, rod and wire. The Company operates in one industry
segment and sells to third parties primarily in the construction and automotive
industries throughout the United States and Canada.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned and majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. When necessary, prior year
amounts have been reclassified to conform to the current year's presentation.
Cash equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The carrying amounts
reported in the accompanying consolidated balance sheets for cash and cash
equivalents approximate their fair values.
Inventories
Inventories are stated at the lower of cost or market value. The cost of
inventories is determined using the first-in, first-out method.
Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method for financial reporting
purposes and accelerated methods for income tax purposes. Estimated useful lives
range from ten to thirty years for buildings and from five to twenty-five years
for machinery and equipment.
Excess of cost over net assets acquired
The excess of cost over net assets acquired (goodwill) is amortized on a
straight-line basis over periods not exceeding twenty years. Accumulated
amortization was approximately $14,158,000 and $10,377,000 at June 30, 1998 and
1997, respectively. The carrying value of goodwill is reviewed if the facts and
circumstances suggest that it may be impaired. If such review indicates that
goodwill will not be recoverable based upon the undiscounted expected future
cash flows over the remaining amortization period, the Company's carrying value
of the goodwill is reduced by the excess of carrying value over the fair value
of the entity acquired.
Long-lived assets
Effective in the first quarter of fiscal 1997, the Company adopted the
provisions of Financial Accounting Standards Board (FASB) Statement No. 121
which requires impairment losses to be recorded on long-lived assets used in
operations, including allocated goodwill, 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 requires that
long-lived assets held for disposal be valued at the lower of carrying amount or
fair value less cost to sell. The adoption of Statement No. 121 had no material
effect on earnings or asset values.
Income taxes
Deferred income taxes are provided for temporary differences between taxable
income and financial reporting income.
<PAGE>
Earnings per share
In the second quarter of fiscal 1998, the Company adopted FASB Statement No.
128, "Earnings per Share". Basic earnings per share is computed using the
weighted average number of outstanding common shares for the period. Diluted
earnings per share is computed using the weighted average number of outstanding
common shares and any dilutive equivalents. Options to purchase 826,685, 544,100
and 102,500 shares of common stock at average prices of $17.21, $16.99 and
$17.78 per share were outstanding at June 30, 1998, 1997 and 1996, respectively,
but were not included in the computation of diluted earnings per share because
the options' exercise price was greater than the average market price of the
common shares. The adoption of Statement No. 128 had no effect on earnings per
share in the current or prior year periods reflected herein.
Pre-operating/start-up costs
The Company recognizes pre-operating and start-up costs as expense when
incurred. The Company considers a facility to be in "start-up" until it reaches
commercially viable production levels. During the start-up period, costs
incurred in excess of expected normal levels, including non-recurring operating
losses, are classified as pre-operating/start-up costs in the Consolidated
Statements of Operations. In April, 1998 AcSEC issued Statement of Position
(SOP) 98-5, "Reporting on the Costs of Start-Up Activities," which requires that
start-up costs be expensed as incurred. Because the Company already accounts for
start-up costs in accordance with SOP 98-5, the statement is not expected to
have a material impact on the Company's financial statements.
Credit risk
The Company extends credit, primarily on the basis of 30-day terms, to various
companies in a variety of industrial market sectors. The Company does not
believe it has a significant concentration of credit risk in any one geographic
area or market segment.
The Company performs periodic credit evaluations of its customers and generally
does not require collateral. Historically, credit losses have not been
significant.
Use of Estimates
The preparation of the 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.
Accounting Pronouncements
In June 1997, the FASB issued Statement No. 131 "Disclosures about Segments of
an Enterprise and Related Information" effective for fiscal years beginning
after December 15, 1997. The Company will adopt Statement No. 131 in fiscal
1999. The statement requires companies to report certain financial information
based on operating segments of the business. Management has not yet determined
whether Statement No. 131 will have any effect on the Company's single segment
reporting model.
In March 1998, the AcSEC issued SOP 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" effective for fiscal years
beginning after December 15, 1998. The Company will adopt SOP 98-1 in fiscal
2000. Upon adoption, the Company may be required to capitalize certain internal
costs of developing or obtaining internal-use software that is currently
expensed as incurred. SOP 98-1 is not expected to have a material impact on the
Company.
<PAGE>
2. BUSINESS ACQUISITION
On November 15, 1996, the Company and Atlantic Steel Industries, Inc. (Atlantic)
formed Birmingham Southeast, LLC (Birmingham Southeast), a limited liability
company owned 85 percent by the Company and 15 percent by an affiliate of
Atlantic. Upon formation of Birmingham Southeast on December 2, 1996 the Company
contributed the assets of its Jackson, Mississippi facility to Birmingham
Southeast, and Birmingham Southeast purchased the operating assets of Atlantic
located in Cartersville, Georgia for $43,309,000 in cash and assumed liabilities
approximating $44,257,000. The purchase price of the Cartersville, Georgia
assets was allocated based on the fair value of the assets acquired and
liabilities assumed as follows (in thousands):
Current assets $ 31,667
Property, plant and equipment 63,400
Other non-current assets, primarily goodwill 9,964
---------
Total assets acquired 105,031
Fair value of liabilities assumed (44,257)
Minority interest (17,465)
---------
Total purchase price $ 43,309
=========
The non-cash financing and investing activities related to the purchase of the
Cartersville, Georgia assets were excluded from the statement of cash flows.
3. INVESTMENT IN AFFILIATED COMPANIES
On September 24, 1997, the Company purchased approximately 25 percent of the
outstanding shares of Laclede Steel Company (LCLD), a public company, for
$14,953,000. The Company accounts for its investment in LCLD using the equity
method. For the period from September 24, 1997 through June 30, 1998, the
Company recognized $2,715,000 in losses on its investment in LCLD representing
its share of LCLD's reported net loss for the period and amortization of the
excess of the purchase price of the LCLD shares over the Company's proportionate
interest in the net assets of LCLD. In June 1998, the Company determined that
the remaining carrying amount of its investment in LCLD ($12,383,000) was
impaired because, among other things: the market price of LCLD common shares had
declined significantly since the Company made its investment; LCLD had continued
to incur operating losses; and LCLD announced a restructuring plan that would
have a material effect on its future results of operations and its financial
position. Accordingly, the Company recognized a $12,383,000 impairment loss in
the fourth quarter of fiscal 1998 to reduce the carrying amount of its
investment. The loss is included in loss from equity investments in the
Consolidated Statements of Operations.
On September 18, 1996, the Company and an affiliate of Mitsui & Co., Ltd. formed
Pacific Coast Recycling, LLC (Pacific Coast), a 50/50 joint venture established
to operate in southern California as a collector, processor and seller of scrap.
The Company made equity investments in Pacific Coast of approximately $9,250,000
in fiscal 1997. Pacific Coast is accounted for using the equity method. On
December 27, 1996, Pacific Coast purchased certain assets from the estate of
Hiuka America Corporation and its affiliates with a minimum annual scrap
processing capacity of approximately 600,000 tons. Pacific Coast is utilizing
the facility at the Port of Long Beach to export scrap. At June 30, 1998, the
Company had current and non-current loans to Pacific Coast of $9,400,000 and
$10,000,000, respectively.
<PAGE>
Through June 30, 1998, the Company had made equity investments of $20,000,000 in
American Iron Reduction, L.L.C. (AIR), a 50 percent owned subsidiary of the
Company, that operates a direct reduced iron (DRI) facility in Louisiana. Under
the Equity Contribution Agreement, the Company may be obligated to make
additional equity investments in AIR of not more than $7,500,000. The Company
has agreed to purchase a minimum of 600,000 metric tons of DRI annually at
prices which are equivalent to AIR's total cost excluding depreciation and
amortization, but including debt service payments. The DRI will be used
primarily at the Company's Memphis melt shop facility as a substitute for
premium, low-residual scrap. In fiscal 1998, the Company purchased approximately
$24,178,000 of DRI from AIR. For financial reporting purposes, AIR is accounted
for as an equity method investee. Because AIR is a captive supplier of raw
materials, the Company recognizes its share of operating profits or losses of
AIR as a component of cost of sales.
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 $11,206,000. On December 13, 1995, the Company
purchased the stock of Richmond Steel Recycling Limited (RSR), a scrap
processing facility and subsidiary of Western Steel Limited, located in
Richmond, British Columbia, Canada for a purchase price of approximately
$5,710,000. On December 20, 1996, the Company sold 50 percent of the stock of
RSR to SIMSMETAL Canada, Ltd. and recognized a pre-tax gain, included in other
income, of approximately $1,746,000. RSR has been accounted for under the equity
method since December 20, 1996. At June 30, 1998, the Company had current loans
to RSR of $1,691,000.
The Company records its share of income and losses in equity investees on a one
month lag. The Company's investments in, advances to and notes receivable from
equity investees are as follows (in thousands):
June 30,
---------------------------
1998 1997
-------- ---------
Pacific Coast Recycling, LLC $ 23,605 $ 24,648
Richmond Steel Recycling Limited 4,352 4,128
American Iron Reduction, LLC 17,998 -
Laclede Steel Company - -
-------- --------
$ 45,955 $ 28,776
======== ========
The following condensed financial information of Pacific Coast and AIR has been
derived from the financial statements of each investee and presented on a
combined basis. The condensed income statement data reflects the results of
operations of each investee from their respective formation dates (Pacific
Coast--September 18, 1996, AIR--August 30, 1996) as follows (in thousands):
June 30,
--------------------------
1998 1997
-------- --------
Current assets $ 42,876 $ 14,381
Current liabilities ( 43,450) (19,695)
-------- --------
Working capital (574) (5,314)
Property, plant and equipment, net 215,551 145,619
Other assets 30,695 38,842
Other liabilities (206,780) (162,854)
-------- --------
Equity $ 38,892 $ 16,293
======== ========
<PAGE>
Year ended June 30,
----------------------------
1998 1997
-------- --------
Net sales $ 114,376 $ 18,720
Cost of sales 99,387 13,166
Gross profit 14,989 5,554
Net loss (11,868) (3,707)
4. INVENTORIES
Inventories were valued at the lower of cost (first-in, first-out) or market as
summarized in the following table (in thousands):
June 30,
----------------------------
1998 1997
--------- ----------
Raw materials and mill supplies $ 60,960 $ 51,832
Work-in-progress 84,325 71,693
Finished goods 97,990 85,070
-------- -------
$ 243,275 $ 208,595
======== =======
5. PROPERTY, PLANT AND EQUIPMENT
Capital expenditures totaled $146,567,000, $196,980,000 and $171,823,000 in
fiscal 1998, 1997, and 1996, respectively, excluding amounts relating to
business acquisitions. At June 30, 1998, the estimated costs to complete
authorized projects under construction amounted to $68,975,000.
The Company capitalized interest of $6,486,000, $8,848,000 and $6,429,000 in
fiscal 1998, 1997 and 1996, respectively, related to qualifying assets under
construction. Total interest incurred, including amounts capitalized during
these same periods, was $35,494,000, $29,043,000 and $18,465,000, respectively.
6. SHORT-TERM BORROWING ARRANGEMENTS
The Company has a five year, unsecured revolving credit agreement which provides
for unsecured borrowings of up to $300,000,000 at variable market interest
rates. Approximately $76,061,000 was available under this credit facility at
June 30, 1998.
Under a line of credit arrangement for short-term borrowings, the Company may
borrow up to $20,000,000 with interest at market rates mutually agreed upon by
the Company and the lender. At June 30, 1998, $10,000,000 was available under
this facility.
The following information relates to the Company's borrowings under short-term
credit facilities (in thousands):
For the Years Ended June 30,
-------------------------------------------
1998 1997 1996
--------- ---------- ---------
Maximum amount outstanding $ 35,000 $ 180,374 $ 96,326
Average amount outstanding $ 9,951 $ 79,956 $ 45,490
Weighted average interest rate 6.0% 5.8% 6.3%
<PAGE>
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
June 30,
--------------------------
1998 1997
--------- ----------
Senior unsecured notes,
$130,000 and $150,000
face amount, interest at
7.28% and 7.05% respectively,
payable 2001 through December 2005 $ 280,000 $ 280,000
$300,000 Revolving line of credit,
weighted average interest at
6.15%, payable in 2002 223,939 192,556
Capital lease obligations,
interest rates principally
ranging from 43% to 45% of bank
prime, payable in 1999 and 2001 12,500 12,500
Industrial Revenue Bonds,
interest rates principally
ranging from 44% to 45% of bank
prime, payable in 2025 and 2026 41,000 41,000
Promissory Note, interest at 5.0%,
payable July 1998 through April 2008 1,500 -
--------- ---------
558,939 526,056
Less current portion (119) -
--------- ---------
$ 558,820 $ 526,056
========= =========
The aggregate fair value of the Company's long-term debt obligations is
approximately $543,249,000 compared to the carrying value of $558,939,000 at
June 30, 1998. The fair value of the Company's senior secured notes is estimated
using discounted cash flow analysis, based on the Company's incremental
borrowing rate (approximately 8.5%) for similar types of borrowings, and does
not consider prepayment penalties that would prevent realization of the implied
gain.
Future maturities of long-term debt are as follows (in thousands):
Capital Other
Fiscal Lease Long-term
Year Obligations Debt Total
------- ----------- --------- --------
1999 $ 539 $ 119 $ 658
2000 10,325 125 10,450
2001 107 131 238
2002 2,554 250,076 252,630
2003 - 105,645 105,645
Thereafter - 190,343 190,343
--------- --------- --------
13,525 546,439 559,964
Less amount
representing
interest (1,025) - (1,025)
--------- --------- --------
$ 12,500 $ 546,439 $ 558,939
========= ========= ========
<PAGE>
Property, plant and equipment with a net book value of $2,814,000 is pledged as
collateral on the capital lease obligations. The long-term debt obligations
contain restrictive covenants, including debt restrictions and requirements to
maintain working capital, interest coverage and debt to tangible net worth
ratios.
The Company is currently in compliance with its restrictive debt covenants.
However, should certain conditions occur, the Company could violate one or more
of its restrictive covenants within the next twelve months. The Company is
evaluating its alternatives in the event that it is unable to comply with its
restrictive covenants in the near term. The alternatives include, but are not
limited to, obtaining waivers for possible future violations, amending the
covenants or refinancing the Company's outstanding obligations. If it becomes
necessary to obtain waivers or amendments, the Company does not expect that
these alternatives would have a significant impact on future results of
operations. However, should it become necessary to refinance one or more of the
Company's long-term facilities, the Company may incur increased costs and debt
extinguishment losses, both of which could be material to future results of
operations.
8. COMMITMENTS
The Company leases office space and certain production equipment under operating
lease agreements. The following is a schedule by year of future minimum rental
payments, net of minimum rentals on subleases, required under operating leases
that have initial lease terms in excess of one year as of June 30, 1998 (in
thousands):
Fiscal Rental
Year Payments
------- ----------
1999 $ 7,287
2000 7,186
2001 7,070
2002 7,055
2003 7,195
Thereafter 76,322
-------
$ 112,115
=======
Rental expense under operating lease agreements was $3,986,000, $1,155,000 and
$1,082,000 in fiscal 1998, 1997 and 1996, respectively.
The Company has a fifteen year lease on certain equipment in the Memphis melt
shop. Under the provisions of the agreement, lease payments escalate through the
term of the lease. The Company is accounting for this lease on a straight line
basis so that the expense will be consistent throughout the life of the lease.
At June 30, 1998 there is $675,000 in deferred rent as a result of the
difference in the cash payments required and the straight line expense. The
Company has options to purchase the equipment both prior to and at the end of
the lease for amounts that are expected to approximate fair market value at the
exercise date of the options.
Under a contract with Electronic Data Systems (EDS), an information management
and consulting firm, the Company is obligated to pay $2,600,000 per year through
2005 for information systems development, technical support and consulting
services.
<PAGE>
9. INCOME TAXES
Deferred income taxes reflect the tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets are as follows (in thousands):
June 30,
------------------------
1998 1997
-------- --------
Deferred tax liabilities:
Tax depreciation in excess
of book depreciation $ 70,092 $ 69,623
Deferred tax assets:
NOL carryforward - 3,938
AMT credit carryforwards 7,455 7,204
Deferred compensation 2,878 2,255
Worker's compensation 1,771 1,873
Inventory 2,118 237
Equity investments 4,168 -
Tax deductible goodwill 4,414 811
Other accrued liabilities 1,642 1,405
--------- ---------
Total deferred tax assets 24,446 17,723
--------- ---------
Net deferred tax liabilities $ 45,646 $ 51,900
========= =========
Deferred tax assets and liabilities are classified as follows in the
accompanying consolidated balance sheets (in thousands):
June 30,
------------------------
1998 1997
-------- --------
Included in other current assets $ (2,276) $ (2,452)
Non-current deferred tax liability 47,922 54,352
-------- --------
$ 45,646 $ 51,900
======== ========
<PAGE>
The provisions for income taxes consisted of the following (in thousands):
For the Years Ended June 30,
------------------------------------------
1998 1997 1996
-------- -------- --------
Current:
Federal $ 5,819 $ 5,944 $ 3,463
State 1,598 34 506
-------- -------- --------
7,417 5,978 3,969
Deferred:
Federal (4,785) 2,525 (3,596)
State (1,468) 1,818 (554)
-------- -------- --------
(6,253) 4,343 (4,150)
-------- -------- --------
$ 1,164 $ 10,321 $ (181)
======== ======== ========
The provisions for income taxes differ from the statutory tax amounts as follows
(in thousands):
For the Years Ended June 30,
------------------------------------------
1998 1997 1996
-------- -------- --------
Tax at statutory rates
during the year $ 950 $ 8,411 $ (761)
State income taxes-net 82 1,204 (31)
Amortization of non-
deductible goodwill 663 700 675
Other (531) 6 (64)
-------- -------- --------
$ 1,164 $ 10,321 $ (181)
======== ======== ========
10. STOCK COMPENSATION PLANS
In 1986, the Company established the Birmingham Steel Corporation 1986 Stock
Option Plan whereby key employees may be granted options to purchase up to
900,000 shares of the Company's common stock at a price not less than 100% of
the fair market value of the common stock on the date of grant. The options are
exercisable in three annual installments commencing no earlier than the first
anniversary of the date of grant of such options.
The Birmingham Steel Corporation 1990 Management Incentive Plan provides for
awards of incentive and non-qualified stock options, stock appreciation rights,
common stock of the Company and cash for certain performance achievements. The
options issued as part of the plan are exercisable in annual installments over
three to five years from the date of grant. The shares of restricted stock
issued vest in annual installments over three to four years from the dates of
the grant. No stock appreciation rights have been issued.
In August 1995, the Company established the Birmingham Steel Corporation 1995
Stock Accumulation Plan. The Plan provides for the purchase of restricted stock,
vesting in three years, to participants in lieu of a portion of their cash
compensation. The Company has reserved 500,000 shares of common stock for stock
grants under the Stock Accumulation Plan.
In June 1996, the Company established the 1996 Director Stock Option Plan to
provide stock based compensation to non-employee directors of the Company. The
Company has reserved 100,000 shares of common stock for issuance under the plan.
The options issued as part of this plan are exercisable one year from the date
of grant of the options.
<PAGE>
The Birmingham Steel Corporation 1997 Management Incentive Plan provides for
awards of incentive and non-qualified stock options, stock appreciation rights,
common stock of the Company, and cash for certain performance achievements. The
Company has reserved 900,000 shares of common stock for issuance under this
plan.
The Company records stock-based compensation under the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related Interpretations. An alternative method of accounting exists
under FASB Statement No. 123, "Accounting for Stock-Based Compensation," which
requires the use of option valuation models; however, these models were not
developed for use in valuing employee stock compensation awards. Under APB 25,
because the exercise price of the Company's employee stock options equals or
exceeds the market price of the underlying stock on the date of grant, no
compensation expense is recognized for stock options. The Company recognizes
compensation expense on grants of restricted stock and stock grants under the
Stock Accumulation Plan based on the fair market value of the stock on the date
of grant amortized over the vesting period. Total compensation expense
recognized in the income statement for stock-based employee compensation awards
was $721,000 and $747,000 in 1998 and 1997, respectively.
Pro forma information for 1998 and 1997 regarding net income and earnings per
share is required by Statement 123, and has been determined as if the Company
had accounted for its employee stock compensation awards described above under
the fair value method of that Statement. The fair value for these awards was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for 1998 and 1997, respectively: risk
free interest rate of 5.38% and 6.25%; dividend yield of 2.15% and 1.96%;
volatility factor of the expected market price of the Company's common stock of
.54 and .75. A weighted average expected life of five years for incentive and
non-qualified stock options, four years for restricted stock awards and three
years for stock purchases under the Stock Accumulation Plan was used for both
1998 and 1997.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock compensation awards have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock compensation awards.
For purposes of pro forma disclosures, the estimated fair value of the stock
compensation awards is amortized to expense over the appropriate vesting period.
The effect on results of operations and earnings per share is not expected to be
indicative of the effects on the results of operations and earnings per share in
future years. The pro forma calculations include stock compensation awards
granted beginning in fiscal 1996. The Company's pro forma information follows
(in thousands except for earnings per share information):
1998 1997
-------- --------
Pro forma net income $1,061 $ 13,375
Pro forma earnings per share .04 .46
<PAGE>
A summary of the Company's stock option activity, and related information for
the years ended June 30 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------- ----------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning
of year 851,876 $16.35 445,212 $15.42 435,270 $14.65
Granted 258,000 18.50 543,000 16.70 100,000 17.13
Exercised (51,111) 9.45 (35,054) 8.85 (73,635) 13.05
Canceled (49,600) 16.70 (101,282) 16.62 (16,423) 16.21
Outstanding-end
of year 1,009,165 16.89 851,876 16.35 445,212 15.42
Exercisable at end
of year 445,493 16.04 385,919 15.81 343,963 14.86
Weighted-average
fair value of options
granted during year $8.28 $9.71 $9.94
</TABLE>
Exercise prices for options outstanding as of June 30, 1998, ranged from $9.08
to $31.88. The weighted average remaining contractual life of those options is
approximately 7 years. At June 30, 1998, a total of 213,299 shares were reserved
for issuance under the 1986 Stock Option Plan, and there were no additional
shares available for future grants from this plan. A total of 540,201 shares
were reserved for issuance from options granted under the 1990 Management
Incentive Plan. A total of 24,000 shares were reserved for issuance under the
Director Stock Option Plan, and 76,000 were available for future grant. A total
of 50,000 shares were reserved for issuance under the 1997 Management Incentive
Plan and there were 850,000 available for future grants from this plan.
The Company granted 7,550 and 24,500 shares in 1998 and 1997, respectively, of
restricted stock under the 1990 Management Incentive Plan. The weighted average
fair value of these awards was $15.93 in 1998 and $16.41 in 1997. At June 30,
1998, 280,625 of these shares were vested. An additional 949 shares were
available for future grant under the 1990 Management Incentive Plan.
The Company issued 30,187 and 25,989 shares in 1998 and 1997, respectively,
under the Stock Accumulation Plan. The weighted average fair value of these
awards was $7.78 in 1998 and $9.17 in 1997. At June 30, 1998, 23,902 of these
shares were vested and 397,866 shares were available for future grant.
11. DEFERRED COMPENSATION AND EMPLOYEE BENEFITS
The Company recognized expenses of approximately $3,488,000, $2,934,000 and
$2,844,000 in fiscal 1998, 1997 and 1996, respectively, in connection with a
defined contribution plan to which non-union employees contribute and the
Company makes discretionary and matching contributions based on employee
compensation.
Certain officers and key employees have participated in a deferred compensation
plan ("Management Security Plan") which provided fixed benefits payable in equal
monthly installments upon retirement or death. The Management Security Plan
consisted of separate deferred compensation agreements with each covered
employee. The Company recognized compensation costs pursuant to each individual
agreement over the projected service life of each employee as deferred
compensation, following the vesting provisions of each individual agreement.
<PAGE>
Effective July 1, 1997, the Management Security Plan agreements were replaced
with new deferred compensation agreements under the Executive Retirement and
Compensation Deferral Plan (ERCDP), a non-qualified deferred compensation plan
which allows participants to defer specified percentages of base and bonus pay,
and provides for Company contributions. Each participant's previously accrued
benefit under the Management Security Plan was transferred to a new account
under the ERCDP. Under the new ERCDP agreements, the Company recognizes
compensation costs as contributions become vested. Investment performance gains
and losses on each participant's plan account result in additional compensation
costs to the Company. To fund its obligation under this Plan, the Company has
purchased life insurance policies on the covered employees.
Other than the plans referred to above, the Company provides no postretirement
or postemployment benefits to its employees that would be subject to the
provisions of FASB Statements No. 106 or No. 112.
12. 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 management and disposal. 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.
13. OTHER INCOME
In fiscal 1998, the Company sold idle properties located in Ballard, Washington;
Norfolk, Virginia and Emeryville, California. Proceeds from the sale of these
properties were approximately $25,307,000 and the aggregate pre-tax gain on
these properties amounted to approximately $3,986,000. On October 15, 1997, the
Company sold an idle rolling mill in Cartersville, Georgia, for $1,600,000 and
recognized a pre-tax gain of approximately $1,239,000. Gains on sales of
property, plant and equipment are included in "other income, net" in the
Consolidated Statements of Operations.
In fiscal 1998, the Company received settlements from electrode suppliers of
$4,414,000 which is included in "other income, net" in the Consolidated
Statements of Operations.
<PAGE>
14. PROVISION FOR LOSS ON MILL MODERNIZATION PROGRAM, PRE-OPERATING/START-UP
COSTS AND UNUSUAL ITEMS
The provision for loss on mill modernization program, pre-operating/start-up
costs and unusual items in the accompanying financial statements consists of the
following (in thousands):
For the Years Ended June 30,
---------------------------------------
1998 1997 1996
-------- -------- --------
Pre-operating/start-up expenses:
Memphis $ 30,515 $ 2,378 $ 871
Cleveland - 1,526 6,228
Cartersville 1,305 4,809 -
Other 2,418 1,920 1,310
Equipment write-downs - - 6,580
Property cleanup reserves - - 1,700
Restructuring of EDS contract - - 4,522
Severance/reorganization costs - - 1,064
Other - - 1,632
-------- -------- --------
$34,238 $10,633 $ 23,907
======== ======== ========
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Shareholders
Birmingham Steel Corporation
We have audited the accompanying consolidated balance sheets of Birmingham Steel
Corporation as of June 30, 1998 and 1997, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended June 30, 1998. Our audits also
included the financial statement schedule listed in the index at Item 14 (a) 2.
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. The 1998 financial statements of
Pacific Coast Recycling, LLC, (a corporation in which the Company has a 50%
interest), have been audited by other auditors whose report has been furnished
to us; insofar as our opinion on the 1998 consolidated financial statements and
schedule relates to data included for Pacific Coast Recycling, LLC, it is based
solely on their report. In the consolidated financial statements, the Company's
investment in Pacific Coast Recycling, LLC (excluding advances and notes
receivable) is stated at $4,205,000 at June 30, 1998, and the Company's equity
in the net loss of Pacific Coast Recycling, LLC is stated at $3,144,000, for the
year then ended.
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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Birmingham Steel
Corporation at June 30, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1998, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
/s/Ernst & Young LLP
- ----------------------------
Ernst & Young LLP
Birmingham, Alabama
August 5, 1998
Independent Auditors Report
The Members
Pacific Coast Recycling, LLC:
We have audited the accompanying balance sheets of Pacific Coast Recycling, LLC
as of June 30, 1998 and 1997 and the related statements of earnings, members'
capital and cash flows for the year ended June 30, 1998 and the period from
September 18, 1996 (inception) to June 30, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pacific Coast Recycling, LLC as
of June 30, 1998 and 1997 and the results of its operations and its cash flows
for the year ended June 30, 1998 and period from September 18, 1996 (inception)
to June 30, 1997 in conformity with generally accepted accounting principles.
/s/KPMG Peat Marwick LLP
Los Angeles, California
July 24, 1998
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained on pages 4, 5 and 6 of Birmingham Steel Corporation's
Proxy Statement dated September 11, 1998, with respect to directors and
executive officers of the Company, is incorporated herein by reference in
response to this item.
ITEM 11. EXECUTIVE COMPENSATION
The information contained on pages 6 through 17 of Birmingham Steel
Corporation's Proxy Statement dated September 11, 1998, with respect to
directors and executive officers of the Company, is incorporated herein by
reference in response to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained on pages 1, 2 and 3 of Birmingham Steel Corporation's
Proxy Statement dated September 11, 1998, with respect to directors and
executive officers of the Company is incorporated herein by reference in
response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no material transactions in Item 13.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
ITEM 14 (a) 1. INDEX TO CONSOLIDATED STATEMENTS COVERED BY REPORT OF INDEPENDENT
AUDITORS
The following consolidated financial statements of Birmingham Steel Corporation
are included in Item 8:
Consolidated Balance Sheets-June 30, 1998 and 1997
Consolidated Statements of Operations-Years ended June 30, 1998, 1997 and 1996
Consolidated Statements of Changes in Stockholders' Equity-Years ended June 30,
1998, 1997 and 1996
Consolidated Statements of Cash Flows-Years ended June 30, 1998, 1997 and 1996
Notes to Consolidated Financial Statements-June 30, 1998, 1997 and 1996
Report of Ernst & Young LLP, Independent Auditors
Independent Auditors Report (KPMG Peat Marwick LLP)
ITEM 14 (a) 2. INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedule is included in item 14
(d) of this report.
Form 10-K
Schedules Description
- ----------- -------------------------------------
II Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because they are not
required or are not applicable, or the required information is shown in the
Consolidated Financial Statements or notes thereto. Columns omitted from
schedules filed have been omitted because the information is not applicable.
ITEM 14 (a) 3. EXHIBITS
The exhibits listed on the Exhibit Index below are filed or incorporated by
reference as part of this report and such Exhibit Index is hereby incorporated
herein by reference.
Exhibit Description of Exhibits
3.1 Restated Certificate of Incorporation of the Registrant
(incororated by reference from Form 8-A,
Exhibit 2.2, filed November 16, 1986)
3.2.1 By-laws of the Registrant *
<PAGE>
4.1 Birmingham Steel Corporation $130,000,000 Senior Note Purchase
Agreement dated December 15, 1993 between the Registrant and the
following group of investors: The Equitable Life Assurance Society
of the U.S., The Guardian Life Insurance Company of America,
Principal Mutual Life Insurance Company, The Travelers Indemnity
Company, Jefferson-Pilot Life Insurance Company, Phoenix Home Life
Mutual Life Insurance Company, American United Life Insurance
Company, Canada Life Assurance Company, Canada Life Assurance
Company of America, Canada Life Assurance Company of New York,
Ameritas Life Insurance Corporation, Berkshire Life Insurance
Company, Provident Mutual Life Insurance Company-CALIC, Provident
Mutual Life Insurance Company of Philadelphia (incorporated by
reference from Form 10-Q for quarter ended December 31, 1993,
Exhibit 4.1).
4.2 Birmingham Steel Corporation $150,000,000 Senior Note Purchase
Agreement dated December 15, 1995 between the Registrant and the
following group of investors: Connecticut General Life Insurance
Company, Life Insurance Company of North America, CIGNA Property
and Casualty Insurance Company, Principal Mutual Life Insurance
Company, Nationwide Life Insurance Company, Employers Life
Insurance Company of Wausau, The Northwestern Mutual Life Insurance
Company, The Equitable Life Assurance Society of the United States,
Sun Life Assurance Company of Canada (U.S.), Sun Life Assurance
Company of Canada, Sun Life Insurance and Annuity Company of New
York, The Minnesota Mutual Life Insurance Company, Mutual Trust
Life Insurance Company, The Reliable Life Insurance Company,
Federated Mutual Insurance Company, Federated Life Insurance
Company, Minnesota Fire and Casualty Company, National Travelers
Life Company, First National Life Insurance Company of America,
Guarantee Reserve Life Insurance Company, First Colony Life
Insurance Company, American United Life Insurance Company, The
State Life Insurance Company, Ameritas Life Insurance Company
(incorporated by reference from Form 10-Q for quarter ended
December 31, 1995, Exhibit 4.1).
4.3 Shareholder Rights Plan of Registrant (incorporated by reference
from Form 8-K filed January 23, 1996).
4.4 Reimbursement Agreement, dated as of October 1, 1996, between
Birmingham Steel Corporation and PNC Bank, Kentucky, Inc.
(incorporated by reference from Form 10-Q for quarter ended
December 31, 1996, exhibit 4.1)
10.1 1986 Stock Option Plan of Registrant, as amended (incorporated by
reference from Registration Statement on Form S-8 (No. 33-16648),
filed August 20, 1987)**
10.2 Amended and Restated Management Security Plan, effective January 1,
1994 (incorporated by reference from Form 10-K for year ended June
30, 1994, Exhibit 10.2)**
10.3 Steel Billet Sale and Purchase Master Agreement between American
Steel & Wire Corporation and QIT-Fer et Titane, Inc. dated July 1,
1994 (incorporated by reference from Form10-K for year ended June
30, 1995, Exhibit 10.3)
10.4 Supply Agreement, dated as of August 2, 1985, among MC Acquisition
Corp., Birmingham Bolt Company, Inc., Magna Corporation,
Contractors Material Co., Inc., and Hackney Steel Co., Inc.
(incorporated by reference from Registrant Statement No. 33-945,
Exhibit 10.6.3, filed November 20, 1985)
<PAGE>
10.5 1989 Non-Union Employees' Stock Option Plan of the Registrant
(incorporated by reference from a Registration Statement on Form
S-8, Registration No. 33-30848, filed August 31, 1989, Exhibit
4.1)**
10.6 Restated Birmingham Steel Corporation 401(k) Plan restated as of
January 1, 1990 (incorporated by reference from Post-Effective
Amendment No. 1 to Form S-8, Registration No. 33-23563, filed July
12, 1990, Exhibit 4.1)**
10.7 Special Severance Benefits Plan of the Registrant(incorporated by
reference from the Annual Report on Form 10-K for the Year ended
June 30, 1989, Exhibit 10.12)**
10.8 Lease Agreement, as amended, dated July 13, 1993 between Torchmark
Development Corporation and Birmingham Steel Corporation
(incorporated by reference from Annual Report on Form 10-K for year
ended June 30, 1993, Exhibit 10.12)
10.8.1 Third Amendment to Lease Agreement, dated November 30,
1993, between Torchmark Development Corporation and
Birmingham Steel Corporation *
10.8.2 Fourth Amendment to Lease Agreement, dated June 13, 1994, between
Torchmark Development Corporation and Birmingham Steel Corporation
(incorporated by reference from Annual Report on Form 10-K for year
ended June 30, 1998, Exhibit 10.8.2)
10.8.3 Fifth Amendment to Lease Agreement, dated September 6, 1995,
between Torchmark Development Corporation and Birmingham Steel
Corporation (incorporated by reference from Annual Report on Form
10-K for year ended June 30, 1998, Exhibit 10.8.3)
10.8.4 Sixth Amendment to Lease Agreement, dated April 11, 1997, between
Torchmark Development Corporation and Birmingham Steel Corporation
(incorporated by reference from Annual Report on Form 10-K for year
ended June 30, 1998, Exhibit 10.8.4)
10.8.5 Seventh Amendment to Lease Agreement, dated April 11, 1997, between
Torchmark Development Corporation and Birmingham Steel Corporation
(incorporated by reference from Annual Report on Form 10-K for year
ended June 30, 1998, Exhibit 10.8.5)
10.8.6 Eighth Amendment to Lease Agreement, dated April 11, 1997, between
Torchmark Development Corporation and Birmingham Steel Corporation*
10.9 1990 Management Incentive Plan of the Registrant (incorporated by
reference from a Registration Statement on Form S-8, Registration
No. 33-41595, filed July 5, 1991, Exhibit 4.1)**
10.10 1992 Non-Union Employees' Stock Option Plan of the Registrant
(incorporated by reference from a Registration Statement on Form
S-8, Registration No. 33-51080, filed August 21, 1992, Exhibit
4.1)**
10.11 Employment Agreement, dated January 5, 1996 between Registrant and
Robert A. Garvey (incorporated by reference from Form 10-Q for
quarter ended December 31, 1995 exhibit 10.1).
10.11.1 Amendment to Employment Agreement, dated January 5, 1996 between
Registrant and Robert A. Garvey dated August 10, 1998.*
10.12 Stock Accumulation Plan of the Registrant (incorporated by
reference from a Registration Statement on Form S-8, Registration
No. 33-64069, filed November 8, 1995, Exhibit 4.1)**
10.13 Lease Agreement, dated January 7, 1997, between Torchmark
Development Corporation and Birmingham Southeast LLC (incorporated
by reference from Annual Report on Form 10-K for year ended June
30, 1998, Exhibit 10.13)
<PAGE>
10.14 Director Stock Option Plan of the Registrant (incorporated by
reference from Form 10-Q for quarter ended September 30, 1996,
exhibit 10.1)**
10.15 Chief Executive Officer Incentive Compensation Plan of the
Registrant (incorporated by reference from Form 10-Q for quarter
ended September 30, 1996, exhibit 10.2)**
10.16 Equity Contribution Agreement among American Iron Reduction,
L.L.C., GS Technologies Operating Co., Inc., Birmingham Steel
Corporation and Nationsbank, N.A., dated August 30, 1996
(incorporated by reference from Form 10-Q for quarter ended
September 30, 1996, exhibit 10.3)
10.17 DRI Purchase Agreement between Birmingham Steel Corporation and
American Iron Reduction, L.L.C., dated as of August 30, 1996
(incorporated by reference from Form 10-Q for quarter ended
September 30, 1996, exhibit 10.4)
10.18 Operating Agreement between Birmingham Steel Corporation and Raw
Material Development Co., Ltd., dated as of September 18, 1996
(incorporated by reference from Form 10-Q for quarter ended
September 30, 1996, exhibit 10.5)
10.19 Asset Purchase Agreement, dated as of October 31, 1996, among
Mitsui & Co., Ltd., R. Todd Neilson, as Chapter 11 Trustee for the
bankruptcy estate of Hiuka America Corporation, All-Ways Recycling
Company, B&D Auto & Truck Salvage, and Weiner Steel Corporation
(incorporated by reference from Form 10-Q for quarter ended
December 31, 1996, exhibit 10.1)
10.20 Contribution Agreement, dated as of November 15, 1996, among IVACO,
Inc., Atlantic Steel Industries, Inc., Birmingham Steel Corporation
and Birmingham Southeast, LLC (incorporated by reference from
Current report on Form 8-K filed December 12, 1996)
10.21 $300 million Credit Agreement, dated as of March 17, 1997 by and
among Birmingham Steel Corporation, as Borrower, the financial
institutions party hereto and their assignees under section
12.5.(d), as Lenders, PNC Bank, National Association and The Bank
of Nova Scotia, as Co-agents and Nationsbank, N.A. (South), as
Agent and as Arranger (incorporated by reference from Form 10-Q for
quarter ended March 31, 1997, exhibit 10.1)
10.22 Executive Retirement and Compensation Deferral Plan of the
Registrant*
10.23 1997 Management Incentive Plan of the Registrant (incorporated by
reference from a Registration Statement on Form S-8, Registration
No. 333-46771, filed February 24, 1998, Exhibit 4.6).**
22.1 Subsidiaries of the Registrant*
23.1 Consent of Ernst & Young LLP, Independent Auditors*
23.2 Accountants' Consent (KPMG Peat Marwick LLP)*
27 Financial Data Schedule*
* Being filed herewith
**Denotes a management contract or compensatory plan or arrangement required to
be filed as an exhibit to this report.
ITEM 14 (b). REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter ended June 30, 1998.
<PAGE>
ITEM 14 (c). EXHIBITS
Certain exhibits listed in response to Item 14(a)3 of this report are being
filed herewith.
EXHIBIT 3.2.1
BY-LAWS
OF
BIRMINGHAM STEEL CORPORATION
ARTICLE I
Stockholders
SECTION 1. Annual Meeting. The annual meeting of the stockholders of
the Corporation shall be held on such date, at such time and at such place
within or without the State of Delaware as may be designated by the Board of
Directors, for the purpose of electing Directors and for the transaction of such
other business as may be properly brought before the meeting.
SECTION 2. Special Meetings. A special meeting of the stockholders of
the Corporation may be called only by the Chairman of the Board or by the Board
of Directors pursuant to a resolution adopted by a majority of the total number
of directors which the Corporation would have if there were no vacancies. Any
special meeting of the stockholders shall be held on such date, at such time and
at such place within or without the State of Delaware as the Board of Directors
or the officer calling the meeting may designate. At a special meeting of the
stockholders, no business shall be transacted and no corporate action shall be
taken other than that stated in the notice of the meeting.
SECTION 3. Notice of Meetings. Except as otherwise provided in these
By-Laws or by law, a written notice of each meeting of the stockholders shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of the Corporation entitled to vote at such
meeting at his address as it appears on the records of the Corporation. The
notice shall state the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
SECTION 4. Quorum. At any meeting of the stockholders, the holders of a
majority in number of the total outstanding shares of stock of the Corporation
entitled to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number of shares shall be required by law, by the
Certificate of Incorporation or by these By-Laws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting of the stockholders at which the holders of any
class of stock of the Corporation shall be entitled to vote separately as a
class, the holders of a majority in number of the total outstanding shares of
such class, present in person or represented by proxy, shall constitute a quorum
for purposes of such class vote unless the representation of a larger number of
shares of such class shall be required by law, by the Certificate of
Incorporation or by these By-Laws.
SECTION 5. Adjourned Meetings. Whether or not a quorum shall be present
in person or represented at any meeting of the stockholders, the holders of a
majority in number of the shares of stock of the Corporation present in person
or represented by proxy and entitled to vote at such meeting may adjourn from
time to time; provided, however, that if the holders of any class of stock of
the Corporation are entitled to vote separately as a class upon any matter at
such meeting, any adjournment of the meeting in respect of action by such class
upon such matter shall be determined by the holders of a majority of the shares
of such class present in person or represented by proxy and entitled to vote at
such meeting. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the stockholders, or the holders of any class of stock entitled to vote
separately as a class, as the case may be, may transact any business which might
have been transacted by them at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the adjourned meeting.
SECTION 6. Organization. The President or, in his absence, a Vice
President shall call all meetings of the stockholders to order, and shall act as
Chairman of such meetings. In the absence of the President and all of the Vice
Presidents, the holders of a majority in number of the shares of stock of the
Corporation present in person or represented by proxy and entitled to vote at
such meeting shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all meetings
of the stockholders; but in the absence of the Secretary, the Chairman may
appoint any person to act as Secretary of the meeting. It shall be the duty of
the Secretary to prepare and make, at least ten days before every meeting of
stockholders, a complete list of stockholders entitled to vote at such meeting,
arranged in alphabetical order and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list shall
be open, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held, for the ten days next
preceding the meeting, to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, and shall be produced
and kept at the time and place of the meeting during the whole time thereof and
subject to the inspection of any stockholder who may be present.
SECTION 7. Voting. Except as otherwise provided in the Certificate of
Incorporation or by law, each stockholder shall be entitled to one vote for each
share of the capital stock of the Corporation registered in the name of such
stockholder upon the books of the Corporation. Each stockholder entitled to vote
at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. When
directed by the presiding officer or upon the demand of any stockholder, the
vote upon any matter before a meeting of stockholders shall be by ballot. Except
as otherwise provided by law, by the Certificate of Incorporation, or by any
other provision of these By-Laws, Directors shall be elected by a plurality of
the votes cast at a meeting of stockholders by the stockholders entitled to vote
in the election and, whenever any corporate action other than the election of
Directors is to be taken, it shall be authorized by a majority of the votes cast
at a meeting of stockholders by the stockholders entitled to vote thereon.
Shares of the capital stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes.
SECTION 8. Inspectors. When required by law or directed by the
presiding officer or upon the demand of any stockholder entitled to vote, but
not otherwise, the polls shall be opened and closed, the proxies and ballots
shall be received and taken in charge, and all questions touching the
qualifications of voters, the validity of proxies and the acceptance or
rejection of votes shall be decided at any meeting of the stockholders by one or
more Inspectors who may be appointed by the Board of Directors before the
meeting, or if not so appointed, shall be appointed by the presiding officer at
the meeting. If any person so appointed fails to appear or act, the vacancy may
be filled by appointment in like manner.
SECTION 9. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required to be taken or
which may be taken at any annual or special meeting of the stockholders of the
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of any such corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
SECTION 10. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (a) pursuant to the
Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of notice provided for in these By-Laws, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in these By-Laws.
(2) For nominations or other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (c) of paragraph (A) (1) of these
By-Laws, the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation and such other business must otherwise be a proper
matter for stockholder action. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not later than the close of business on the 60th day nor earlier than the close
of business on the 90th day prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is more than 30 days before or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the 90th day prior to such annual
meeting and not later than the close of business on the later of the 60th day
prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the Corporation. In no
event shall the public announcement of an adjournment of an annual meeting
commence a new time period for the giving of a stockholder's notice as described
above. Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of these
By-Laws to the contrary, in the event that the number of directors to be elected
to the Board of Directors of the Corporation is increased and there is no public
announcement by the Corporation naming all of the nominees for director or
specifying the size of the increased Board of Directors at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by these By-Laws shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following the
day on which the public announcement of the date of such meeting is first made
by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be conducted at a
special meeting of stockholders as shall have been brought before the meeting
pursuant to the Corporation's notice of meeting. Nominations of persons for
election to the Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the Corporation's
notice of meeting (a) by or at the direction of the Board of Directors or (b)
provided that the Board of Directors has determined that directors shall be
elected at such meeting, by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in these
By-Laws, who shall be entitled to vote at the meeting and who complies with the
notice procedures set forth in these By-Laws. In the event the Corporation calls
a special meeting of stockholders for the purpose of electing one or more
directors to the Board of Directors, any such stockholder may nominate a person
or persons (as the case may be), for election to such position(s) as specified
in the Corporation's notice of meeting, if the stockholder's notice required by
paragraph (A) (2) of these By-Laws shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than the close of
business on the 90th day prior to such special meeting and not later than the
close of business on the later of the 60th day prior to such special meeting or
the 10th day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a stockholder's notice as described above.
(C) General
(1) Only such persons who are nominated in accordance with the procedures set
forth in these By-Laws shall be eligible to serve as directors and only such
business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in these
By-Laws. Except as otherwise provided by law, the Certificate of Incorporation
or these By-Laws, the Chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in these By-Laws and, if any proposed nomination or
business is not in compliance with these By-Laws, to declare that such defective
proposal or nomination shall be disregarded.
(2) For purposes of these By-Laws, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of these By-Laws, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in these
By-Laws. Nothing in these By-Laws shall be deemed to affect any rights (i) of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock to elect directors under specified
circumstances.
ARTICLE II
Board of Directors
SECTION 1. Number and Term of Office. The business and affairs of the
Corporation shall be managed by or under direction of a Board of Directors which
shall consist of not less than three nor more than fifteen members, who need not
be stockholders of the Corporation, the precise number to be fixed by resolution
of the Board of Directors from time to time. The Directors shall, except as
hereinafter otherwise provided for filling vacancies, be elected at the annual
meeting of stockholders, and shall hold office until their respective successors
are elected and qualified or until their earlier resignation or removal. The
number of Directors may be altered from time to time by amendment of these
By-Laws.
SECTION 2. Removal, Vacancies and Additional Directors. The stockholders
may, at any special meeting the notice of which shall state that it is called
for that purpose, remove, with or without cause, any Director and fill the
vacancy; provided that whenever any Director shall have been elected by the
holders of any class of stock of the Corporation voting separately as a class
under the provisions of the Certificate of Incorporation, such Director may be
removed and the vacancy filled only by the holders of that class of stock voting
separately as a class. Vacancies caused by any such removal and not filled by
the stockholders at the meeting at which such removal shall have been made, or
any vacancy caused by the death or resignation of any Director or for any other
reason, and any newly created directorship resulting from any increase in the
authorized number of Directors, may be filled by the affirmative vote of a
majority of the Directors then in office, although less than a quorum, and any
Director so elected to fill any such vacancy or newly created directorship shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal.
When one or more Directors shall resign effective at a future date, a majority
of the Directors than in office, including those who have so resigned, shall
have power to fill such vacancy or vacancies, the vote thereon to take effect
when such resignation or resignations shall become effective, and each Director
so chosen shall hold office as herein provided in connection with the filling of
other vacancies.
SECTION 3. Place of Meeting. The Board of Directors may hold its meetings
in such place or places in the State of Delaware or outside the State of
Delaware as the Board from time to time shall determine.
SECTION 4. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as the Board from time to time by
resolution shall determine. No notice shall be required for any regular meeting
of the Board of Directors; but a copy of every resolution fixing or changing the
time or place of regular meetings shall be mailed to every Director at least
five days before the meeting held in pursuance thereof.
SECTION 5. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by direction of the President, or by any two of
the Directors then in office. Notice of the day, hour and place of holding of
each special meeting shall be given by mailing the same at least two days before
the meeting or by causing the same to be transmitted by telegraph, cable or
wireless at least one day before the meeting to each Director. Unless otherwise
indicated in the notice thereof, any and all business other than an amendment of
these By-Laws may be transacted at any special meeting, and an amendment of
these By-Laws may be acted upon if the notice of the meeting shall have stated
that the amendment of these By-Laws is one of the purposes of the meeting. At
any meeting at which every Director shall be present, even though without any
notice, any business may be transacted, including the amendment of these
By-Laws.
SECTION 6. Quorum. Subject to the provisions of Section 2 of this Article
II, a majority of the members of the Board of Directors in office (but in no
case less than one-third of the total number of Directors nor less than two
Directors) shall constitute a quorum for the transaction of business and the
vote of the majority of the Directors present at any meeting of the Board of
Directors at which a quorum is present shall be the act of the Board of
Directors. If at any meeting of the Board there is less than a quorum present, a
majority of those present may adjourn the meeting from time to time.
SECTION 7. Organization. The President shall preside at all meetings of the
Board of Directors. In the absence of the President, a Chairman shall be elected
from the Directors present. The Secretary of the Corporation shall act as
Secretary of all meetings of the Directors; but in the absence of the Secretary,
the Chairman may appoint any person to act as Secretary of the meeting.
SECTION 8. Committees. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the Directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided by resolution
passed by a majority of the whole Board, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and the affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending these By-Laws; and unless such resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
SECTION 9. Conference Telephone Meetings. Unless otherwise restricted by
the Certificate of Incorporation or by these By-Laws, the members of the Board
of Directors or any committee designated by the Board, may participate in a
meeting of the Board or such committee, as the case may be, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting.
SECTION 10. Consent of Directors or Committee in Lieu of Meeting. Unless
otherwise restricted by the Certificate of Incorporation or by these By-Laws,
any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board or committee, as the case may be.
<PAGE>
ARTICLE III
Officers
SECTION 1. Officers. The officers of the Corporation shall be a Chairman,
one or more Vice Chairmen, a Chief Executive Officer, a Chief Operating Officer,
a Chief Financial Officer, a President, one or more Vice Presidents, a Secretary
and a Treasurer, and such additional officers, if any, as shall be elected by
the Board of Directors pursuant to the provisions of Section 11 of this Article
III. The Chairman, one or more Vice Chairmen, the Chief Executive Officer, the
Chief Operating Officer, the Chief Financial Officer, the President, one or more
Vice Presidents, the Secretary and the Treasurer, shall be elected by the Board
of Directors at its first meeting after each annual meeting of the stockholders.
The failure to hold such election shall not of itself terminate the term of
office of any officer. Any number of offices may be held simultaneously by the
same person, except that the person serving as Chief Financial Officer may not
serve simultaneously as the Chief Executive Officer. The Chairman and any Vice
Chairman shall be Directors of the Corporation. All other officers may, but need
not, be Directors. Any officer may resign at any time upon written notice to the
Corporation. All officers, agents and employees shall be subject to removal,
with or without cause, at any time by the Board of Directors. The removal of an
officer without cause shall be without prejudice to his contract rights, if any.
The election or appointment of an officer shall not of itself create contract
rights. All agents and employees other than officers elected by the Board of
Directors shall also be subject to removal, with or without cause, at any time
by the officers appointing them. Any vacancy caused by the death of any officer,
his resignation, his removal, or otherwise, may be filled by the Board of
Directors, and any officer so elected shall hold office at the pleasure of the
Board of Directors. In addition to the powers and duties of the officers of the
Corporation as set forth in these By-Laws, the officers shall have such
authority and shall perform such duties as from time to time may be determined
by the Board of Directors.
SECTION 2. Powers and Duties of the Chairman. The Chairman shall
preside at all meetings of the stockholders and of the Board of Directors at
which he shall be present and shall have such other duties as may from time to
time be assigned by these By-Laws or by the Board of Directors.
SECTION 3. Powers and Duties of the Vice Chairman. The Vice Chairman or
Chairmen shall have such powers and perform such duties as may from time to time
be assigned by the Board of Directors or the Chairman. In the absence of the
Chairman, the Vice Chairman (or if more than one, one of the Vice Chairman as
designated by the Board of Directors) shall preside at all meetings of the
stockholders and the Board of Directors at which he shall be present.
SECTION 4. Powers and Duties of the Chief Executive Officer. The Chief
Executive Officer shall be the chief executive officer of the Corporation and,
subject to the control of the Board of Directors, shall have general charge and
control of all its business and affairs and shall perform all duties incident to
the office of Chief Executive Officer; he may sign and execute, in the name of
the Corporation, all authorized deeds, mortgages, bonds, notes and other
evidence of indebtedness, contracts or other instruments, except in cases in
which the signing and execution thereof shall have been expressly excluded from
the Chief Executive Officer and delegated to some other officer or agent of the
Corporation by the Board of Directors. In the absence or disability of the
Chairman and all Vice-Chairmen, the Chief Executive Officer shall preside at all
meetings of the stockholders and shall have such other powers and perform such
other duties as may from time to time be assigned to him by these By-Laws or by
the Board of Directors.
SECTION 5. Powers and Duties of the Chief Operating Officer. The Chief
Operating Officer shall be the principal operating officer of the Corporation
with authority as such, and at the request of the Chief Executive Officer or in
his absence or disability to act, shall perform the duties and exercise the
functions of the Chief Executive Officer, and when so acting shall have such
other powers and perform such other duties as may from time to time be assigned
to him by the Board of Directors or Chief Executive Officer.
SECTION 6. Powers and Duties of Chief Financial Officer. The Chief
Financial Officer shall be the chief accounting officer of the Corporation; he
shall see that the books of account and other accounting records of the
Corporation are kept in proper form and accurately; and, in general, he shall
perform all the duties incident to the office of Chief Financial Officer of the
Corporation and such other duties as may be from time to time assigned to him by
the Board of Directors or the Chief Executive Officer.
SECTION 7. Powers and Duties of the President. The President shall act
as a general executive officer of the Corporation and shall have such other
powers and perform such other duties as may from time to time be assigned to him
by these By-Laws or by the Board of Directors or by the Chief Executive Officer.
SECTION 8. Powers and Duties of the Vice Presidents. Each Vice
President shall perform all duties incident to the office of Vice President and
shall have such other powers and perform such other duties as may from time to
time be assigned to him by these By-Laws or by the Board of Directors or the
Chief Executive Officer.
SECTION 9. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of any meetings of the Board of Directors and the minutes of all
meetings of the stockholders in books provided for that purpose; he shall attend
to the giving or serving of all notices of the Corporation; he shall have
custody of the corporate seal of the Corporation and shall affix the same to
such documents and other papers as the Board of Directors or the Chief Executive
Officer shall authorize and direct; he shall have charge of the stock
certificate books, transfer books and stock ledgers and such other books and
papers as the Board of Directors or the Chief Executive Officer shall direct,
all of which shall at all reasonable times be open to the examination of any
Director, upon application, at the office of the Corporation during business
hours; and he shall perform all duties incident to the office of Secretary and
shall also have such other powers and shall perform such other duties as may
from time to time be assigned to him by these By-Laws or the Board of Directors
or the Chief Executive Officer.
SECTION 10. Powers and Duties of the Treasurer. The Treasurer shall
have custody of, and when proper shall pay out, disburse or otherwise dispose
of, all funds and securities of the Corporation which may have come into his
hands; he may endorse on behalf of the Corporation for collection checks, notes
and other obligations and shall deposit the same to the credit of the
Corporation in such bank or banks or depositary or depositaries as the Board of
Directors may designate; he shall sign all receipts and vouchers for payments
made to the Corporation; he shall enter or cause to be entered regularly in the
books of the Corporation kept for the purpose full and accurate accounts of all
moneys received or paid or otherwise disposed of by him and whenever required by
the Board of Directors or the Chief Executive Officer shall render statements of
such accounts; and he shall perform all duties incident to the office of
Treasurer and shall also have such other powers and shall perform such other
duties as may from time to time be assigned to him by these By-Laws or by the
Board of Directors or the Chief Executive Officer.
SECTION 11. Additional Officers. The Board of Directors may from time
to time elect such other officers (who may but need not be Directors), including
Controllers, Assistant Treasurers, Assistant Secretaries and Assistant Financial
Officers, as the Board may deem advisable and such officers shall have such
authority and shall perform such duties as may from time to time be assigned to
them by the Board of Directors or the Chief Executive Officer.
The Board of Directors may from time to time by resolution delegate to
any Assistant Treasurer or Assistant Treasurers any of the powers or duties
herein assigned to the Treasurer; and may similarly delegate to any Assistant
Secretary or Assistant Secretaries any of the powers or duties herein assigned
to the Secretary.
SECTION 12. Giving of Bond by Officers. All officers of the
Corporation, if required to do so by the Board of Directors, shall furnish bonds
to the Corporation for the faithful performance of their duties, in such amounts
and with such conditions and security as the Board shall require.
SECTION 13. Voting Upon Stocks. Unless otherwise ordered by the Board
of Directors, the Chief Executive Officer, the Chief Operating Officer, the
Chief Financial Officer, the President or any Vice President shall have full
power and authority on behalf of the Corporation to attend and to act and to
vote, or in the name of the Corporation to execute proxies to vote, at any
meetings of stockholders of any corporation in which the Corporation may hold
stock, and at any such meetings shall possess and may exercise, in person or by
proxy, any and all rights, powers and privileges incident to the ownership of
such stock. The Board of Directors may from time to time, by resolution, confer
like powers upon any other person or persons.
SECTION 14. Compensation of Officers. The officers of the Corporation shall
be entitled to receive such compensation for their services as shall from time
to time be determined by the Board of Directors.
<PAGE>
ARTICLE IV
Stock-Seal-Fiscal Year
SECTION 1. Certificates for Shares of Stock. The certificates for
shares of stock of the Corporation shall be in such form, not inconsistent with
the Certificate of Incorporation, as shall be approved by the Board of
Directors. All certificates shall be signed by the President or a Vice President
and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, and shall not be valid unless so signed.
In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates had not ceased
to be such officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered as the
same are issued. The name of the person owning the shares represented thereby
with the number of such shares and the date of issue thereof shall be entered on
the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be cancelled, and no new certificates shall be
issued until former certificates for the same number of shares have been
surrendered and cancelled.
SECTION 2. Lost, Stolen or Destroyed Certificates. Whenever a person
owning a certificate for shares of stock of the Corporation alleges that it has
been lost, stolen or destroyed, he shall file in the office of the Corporation
an affidavit setting forth, to the best of his knowledge and belief, the time,
place and circumstances of the loss, theft or destruction, and, if required by
the Board of Directors, a bond of indemnity or other indemnification sufficient
in the opinion of the Board of Directors to indemnify the Corporation and its
agents against any claim that may be made against it or them on account of the
alleged loss, theft or destruction of any such certificate or the issuance of a
new certificate in replacement therefor. Thereupon the Corporation may cause to
be issued to such person a new certificate in replacement for the certificate
alleged to have been lost, stolen or destroyed. Upon the stub of every new
certificate so issued shall be noted the fact of such issue and the number, date
and the name of the registered owner of the lost, stolen or destroyed
certificate in lieu of which the new certificate is issued.
SECTION 3. Transfer of Shares. Shares of stock of the Corporation shall
be transferred on the books of the Corporation by the holder thereof, in person
or by his attorney duly authorized in writing, upon surrender and cancellation
of certificates for the number of shares of stock to be transferred, except as
provided in the preceding section.
SECTION 4. Regulations. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates for shares of stock of the
Corporation.
SECTION 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, as the case may be, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is expressed; and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 6. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law.
Subject to the provisions of the Certificate of Incorporation, any
dividends declared upon the stock of the Corporation shall be payable on such
date or dates as the Board of Directors shall determine. If the date fixed for
the payment of any dividend shall in any year fall upon a legal holiday, then
the dividend payable on such date shall be paid on the next day not a legal
holiday.
SECTION 7. Corporate Seal. The Board of Directors shall provide a
suitable seal, containing the name of the Corporation, which seal shall be kept
in the custody of the Secretary. A duplicate of the seal may be kept and be used
by any officer of the Corporation designated by the Board or the President.
SECTION 8. Fiscal Year. The fiscal year of the Corporation shall be such
fiscal year as the Board of Directors from time to time by resolution shall
determine.
<PAGE>
ARTICLE V
Miscellaneous Provisions
SECTION 1. Checks, Notes, Etc. All checks, drafts, bills of exchange,
acceptances, notes or other obligations or orders for the payment of money shall
be signed and, if so required by the Board of Directors, countersigned by such
officers of the Corporation and/or other persons as shall from time to time be
designated by the Board of Directors or pursuant to authority delegated by the
Board.
Checks, drafts, bills of exchange, acceptances, notes, obligations and
orders for the payment of money made payable to the Corporation may be endorsed
for deposit to the credit of the Corporation with a duly authorized depositary
by the Treasurer and/or such other officers or persons as shall from time to
time be designated by the Treasurer.
SECTION 2. Loans. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized so to do, any officer or agent of the Corporation may
effect loans and advances for the Corporation from any bank, trust company or
other institution or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory notes, bonds or
other evidences of indebtedness of the Corporation. When authorized so to do,
any officer or agent of the Corporation may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or confined
to specific instances.
SECTION 3. Waivers of Notice. Whenever any notice whatever is required
to be given by law, by the Certificate of Incorporation or by these By-Laws to
any person or persons, a waiver thereof in writing, signed by the person or
persons entitled to the notice, whether before or after the time stated therein,
shall be deemed equivalent thereto.
SECTION 4. Offices Outside of Delaware. Except as otherwise required by
the laws of the State of Delaware, the Corporation may have an office or offices
and keep its books, documents and papers outside of the State of Delaware at
such place or places as from time to time may be determined by the Board of
Directors or the President.
SECTION 5. Indemnification and Insurance.
(A) Each current or former director or officer of the Corporation who
was or is made a party or is threatened to be made a party to or is involved in
any action, suit, or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans maintained or sponsored
by the Corporation, whether the basis of such proceeding is an alleged action or
omission in an official capacity as a director, officer, employee or agent or in
any other capacity arising from service as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the General Corporation Law of the State of Delaware as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, excise taxes imposed by the
Employee Retirement Income Security Act of 1974, as amended, or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith and such indemnification shall continue as
to a director or officer who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that except as provided in paragraph (C) of
Section 5 of this Article V, the Corporation shall indemnify any such current or
former director or officer seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors. The right to
indemnification conferred in Section 5 of this Article V shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition,
such advances to be paid by the Corporation within 20 days after the receipt by
the Corporation of a statement or statements from the claimant requesting such
advance or advances from time to time; provided, however, that if the General
Corporation Law of the State of Delaware requires, the payment of such expenses
incurred by a current or former director or officer in his or her capacity as a
current or former director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking by or on behalf of such current or former
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such current or former director or officer is not entitled to be
indemnified under Section 5 of this Article V or otherwise.
(B) To obtain indemnification under Section 5 of this Article
V, a claimant shall submit to the Corporation a written request, including
therein or therewith such documentation and information as is reasonably
available to the claimant and is reasonably necessary to determine whether and
to what extent the claimant is entitled to indemnification. Upon written request
by a claimant for indemnification pursuant to the first sentence of this
paragraph (B), a determination, if required by applicable law, with respect to
the claimant's entitlement thereto shall be made as follows: (1) if requested by
the claimant, by Independent Counsel (as hereinafter defined), or (2) if no
request is made by the claimant for a determination by Independent Counsel, (i)
by the Board of Directors by a majority vote of a quorum consisting of
Disinterested Directors (as hereinafter defined), or (ii) if a quorum of the
Board of Directors consisting of Disinterested Directors is not obtainable or,
even if obtainable, such quorum of Disinterested Directors so directs, by
Independent Counsel in a written opinion to the Board of Directors, a copy of
which shall be delivered to the claimant, or (iii) if a quorum of Disinterested
Directors so directs, by the stockholders of the Corporation. In the event the
determination of entitlement to indemnification is to be made by Independent
Counsel at the request of the claimant, the Independent Counsel shall be
selected by the Board of Directors unless there shall have occurred within two
years prior to the date of the commencement of the action, suit or proceeding
for which indemnification is claimed a Change of Control (as hereinafter
defined), in which case the Independent Counsel shall be selected by the
claimant unless the claimant shall request that such selection be made by the
Board of Directors. If it is so determined that the claimant is entitled to
indemnification, payment to the claimant shall be made within 10 days after such
determination.
(C) If a claim under paragraph (A) of Section 5 of this
Article V is not paid in full by the Corporation within 30 days after a written
claim pursuant to paragraph (B) of Section 5 of this Article V has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standard of conduct which makes it permissible under the General
Corporation Law of the State of Delaware for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, Independent Counsel or stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the Corporation (including its Board of Directors,
Independent Counsel or stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
(D) If a determination shall have been made pursuant to
paragraph (B) of Section 5 of this Article V that the claimant is entitled to
indemnification, the Corporation shall be bound by such determination in any
judicial proceeding commenced pursuant to paragraph (C) of Section 5 of this
Article V.
(E) The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to paragraph (C) of Section 5 of this Article V
that the procedures and presumptions of Section 5 of this Article V are not
valid, binding and enforceable and shall stipulate in such proceeding that the
Corporation is bound by all of the provisions of Section 5 of this Article V.
(F) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in Section 5 of this Article V shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, By-Laws, agreement, vote of stockholders or
Disinterested Directors or otherwise. No repeal or modification of Section 5 of
this Article V shall in any way diminish or adversely affect the rights of any
current or former director, officer, employee or agent of the Corporation
hereunder in respect of any occurrence or matter arising prior to any such
repeal or modification.
(G) The Corporation may maintain insurance, at its expense, to
protect itself and any current or former director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State of Delaware. To
the extent that the Corporation maintains any policy or policies providing such
insurance, each such current or former director or officer, and each such agent
or employee to which rights to indemnification have been granted as provided in
paragraph (H) of Section 5 of this Article V, shall be covered by such policy or
policies in accordance with its or their terms to the maximum extent of the
coverage thereunder for any such current or former director, officer, employee
or agent.
(H) The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, and rights to be paid
by the Corporation the expense incurred in defending any proceeding in advance
of its final disposition, to any current or former employee or agent of the
Corporation to the fullest extent of the provisions of Section 5 of this Article
V with respect to the indemnification and advancement of expenses of current or
former directors and officers of the Corporation.
(I) If any provision or provisions of Section 5 of this Article V
shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (1) the validity, legality and enforceability of the remaining
provisions of Section 5 of this Article V (including, without limitation, each
portion of any paragraph of Section 5 of this Article V containing any such
provision held to be invalid, illegal or unenforceable, that is not itself
held to be invalid, illegal or unenforceable) shall not in any way be affected
or impaired thereby; and (2) to the fullest extent possible, the provisions of
Section 5 of this Article V (including, without limitation, each such portion
of any paragraph of Section 5 of this Article V containing any such provision
held to be invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
(J) For purposes of Section 5 of this Article V:
(1) "Change in Control" means the acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 15 % or more of either (i) the then outstanding shares of
common stock of the Corporation or (ii) the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote generally in
the election of directors.
(2) "Disinterested Director" means a director of the
Corporation who is not and was not a party to the matter in respect of which
indemnification is sought by the claimant.
(3) "Independent Counsel" means a law firm, a member of a law
firm, or an independent practitioner, that is experienced in matters of Delaware
corporation law and shall include any person who, under the applicable standards
of professional conduct then prevailing, would not have a conflict of interest
in representing either the Corporation or the claimant in an action to determine
the claimant's rights under Section 5 of this Article V.
(K) Any notice, request or other communication required or permitted to
be given to the Corporation under Section 5 of this Article V shall be in
writing and either delivered in person or sent by telecopy, telex, telegram,
overnight mail or courier service, or certified or registered mail, postage
prepaid, return receipt requested, to the Secretary of the Corporation and shall
be effective only upon receipt by the Secretary.
ARTICLE VI
Amendments
These By-Laws and any amendment thereof may be altered, amended or repealed, or
new By- Laws may be adopted, by the Board of Directors at any regular or special
meeting by the affirmative vote of a majority of all of the members of the Board
of Directors, provided in the case of any special meeting at which all of the
members of the Board of Directors are not present, that the notice of such
meeting shall have stated that the amendment of these By-Laws was one of the
purposes of the meeting; but these By-Laws and any amendment thereof, including
the By-Laws adopted by the Board of Directors, may be altered, amended or
repealed and other By-Laws may be adopted by the holders of two-thirds of the
total outstanding stock of the Corporation entitled to vote at any annual
meeting or at any special meeting, provided, in the case of any special meeting,
that notice of such proposed alteration, amendment, repeal or adoption is
included in the notice of the meeting.
<PAGE>
Exhibit 10.8.6
Eighth Amendment to Office Lease
EIGHTH AMENDMENT TO OFFICE LEASE
THIS EIGHTH AMENDMENT TO OFFICE LEASE is made effective May 1, 1998, by
and between TMK INCOME PROPERTIES, L.P., a Delaware limited partnership, having
an office at 1950 Stonegate Drive, Suite 300, Birmingham, Alabama 35242 (the
"Landlord") , and BIRMINGHAM STEEL CORPORATION, a Delaware corporation (the
"Tenant").
W I T N E S S E T H:
WHEREAS, Torchmark Development Corporation, an Alabama corporation
("Torchmark"), and the Tenant executed that certain Office Lease (the "Original
Lease") dated April 8, 1993, covering a portion of the office space in The Urban
Center at Liberty Park Office Building Number One Thousand; as amended by: the
First Amendment to Office Lease dated July 13, 1993; the Second Amendment to
Office Lease dated September 20, 1993; the Third Amendment to Office Lease dated
November 30, 1993; the Fourth Amendment to Office Lease dated June 13, 1994; the
Fifth Amendment to Office Lease dated September 6, 1995; the Sixth Amendment to
Office Lease (the "Sixth Amendment") dated effective April 11, 1997 ; and the
Seventh Amendment to Office Lease (the "Seventh Amendment") dated effective
April 11, 1997 (collectively hereinafter called the "Lease");
WHEREAS, effective January 1, 1997, Torchmark transferred its interest
in the Building to the Landlord and, in accordance with Paragraph 22 of the
Lease, from and after January 1, 1997, Torchmark was released from its
obligations under the Lease and the Landlord, as transferee, assumed the
obligations of Torchmark under the Lease;
WHEREAS, the Landlord and the Tenant desire to further amend the Lease,
and to the extent the provisions of this Eighth Amendment are inconsistent with
the Lease, the terms of this Eighth Amendment shall control; and
WHEREAS, unless specifically defined herein, the capitalized terms used
in this Eighth Amendment will have the meanings defined in the Lease.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Landlord and the Tenant agree as follows:
1. Amendment Negation. Notwithstanding anything in the Lease to the
contrary, effective as of the Commencement Date for the Eighth Amendment
Expansion Space (hereinafter defined), the Seventh Amendment will be cancelled
and terminated in its entirety, and thereafter the Landlord and Tenant each,
respectively, cancels and releases the other from all duties and obligations
thereafter arising under the Seventh Amendment. Accordingly, this Lease (then
consisting of the Original Lease as amended through and including the Sixth
Amendment and subject to the terms and conditions of this Eighth Amendment) will
on and after such date remain in full force and effect without any further
amendment by, or effectiveness of, the Seventh Amendment.
2. Expansion Amendment. The Tenant desires to expand into approximately
2,437 square feet of Net Rentable Area located on the second (2nd) floor of
Building (the "Eighth Amendment Expansion Space") as identified on Schedule A
attached hereto and as more particularly described in the approved Final Working
Drawings. By execution of this Eighth Amendment, the Landlord and Tenant hereby
agree that the Eighth Amendment Expansion Space shall be added to and shall
hereafter comprise a part of the Leased Premises, subject to all of the terms
and conditions of the Lease, except as specified below:
A. Term. The Commencement Date for the Eighth Amendment Expansion Space
shall be the earlier of (i) June 15, 1998, or (ii) the date of Substantial
Completion of the Leasehold Improvements to the Eighth Amendment Expansion
Space; and the Expiration Date shall be the Expiration Date provided in the
Lease, unless postponed, accelerated or extended as provided in Paragraphs 2.1
and 2.2 of the Lease.
B. Rent. The monthly Base Rent for the Eighth Amendment Expansion
Space shall be as follows:
(1) Beginning on the Commencement Date for the Eighth Amendment
Expansion Space and continuing through October 31, 1998, a sum
equal to one-twelfth (1/12) of the product of (a) the Net Rentable
Area in the Eighth Amendment Expansion Space; times (b) the rate
of Sixteen and No/100 Dollars ($16.00) per square foot of Net
Rentable Area per year; which sum is presently computed to equal
Three Thousand Two Hundred Forty-Nine and 34/100 Dollars
($3,249.34) per month, payable in advance and without demand
beginning on the Commencement Date for the Eighth Amendment
Expansion Space and continuing on the first day of each month
thereafter; and
(2) Beginning on November 1, 1998, and continuing through the
remainder of the Lease Term, a sum equal to one-twelfth (1/12) of
the product of (a) the Net Rentable Area in the Eighth Amendment
Expansion Space; times (b) the rate of Eighteen and 50/100 Dollars
($18.50) per square foot of Net Rentable Area per year; which sum
is presently computed to equal Three Thousand Seven Hundred
Fifty-Seven and 05/100 Dollars ($3,757.05) per month, payable in
advance and without demand beginning on November 1, 1998, and
continuing on the first day of each month thereafter.
C. Extended Term. Provided the Lease is in effect on the Expiration
Date and an Event of Default by the Tenant is not continuing, the Tenant shall
be entitled to extend the Lease Term on the Eighth Amendment Expansion Space
under the same terms and conditions as are set forth in the Lease.
<PAGE>
3. Leased Premises. Effective as of the Commencement Date for the
Eighth Amendment Expansion Space, the Leased Premises, including the Eighth
Amendment Expansion Space, will consist of 37,678 square feet of Net Rentable
Area.
4. Tenant's Share. Effective as of the Commencement Date for the Eighth
Amendment Expansion Space, the definition of "Tenant's Share" set forth in the
Lease will be calculated to be 37,678/162,998 (23.12%).
5. Leasehold Improvements. The Tenant has caused to be prepared at the
Tenant's expense Final Working Drawings for the construction of the Leasehold
Improvements within the Eighth Amendment Expansion Space, prepared by the
architectural firm of Williams Blackstock Architects. Such Final Working
Drawings, which are dated April 10, 1998, and which bear a project number of
97-003, have been mutually approved in final form by both Landlord and Tenant.
It is expressly agreed that Tenant accepts the Eighth Amendment Expansion Space
in its "AS-IS" condition, subject only to the modifications set forth in the
Final Working Drawings. All such modifications and additional Leasehold
Improvements to be installed in the Eighth Amendment Expansion Space in
accordance with the approved Final Working Drawings will be at the Tenant's
expense (the "Eighth Amendment Work"), except that Landlord agrees to provide
Tenant with an allowance in an amount equal to the sum of (a) the product of
Five and 50/100 Dollars ($5.50) times the number of square feet of Net Rentable
Area in the Eighth Amendment Expansion Space, plus (b) the cost of ceiling and
HVAC work in the Eighth Amendment Expansion Space pursuant to the approved Final
Working Drawings in an amount not to exceed Six Thousand One Hundred Forty-One
and 24/100 Dollars ($6,141.24) for such ceiling and HVAC work (the "Tenant
Allowance"). The Tenant Allowance shall be utilized to fund the cost of the
Leasehold Improvements in the Eighth Amendment Expansion Space; provided,
however, that any unused portion of the Tenant Allowance may be applied against
the first amounts of Base Rent due under the terms of this Eighth Amendment. All
Eighth Amendment Work shall be constructed in accordance with the Final Working
Drawings approved by Landlord, by Tenant's contractor, Hallmark Builders
Incorporated, in compliance with the requirements of Schedule "B" attached
hereto.
6. Brokerage. The Landlord and the Tenant represent to each other that
neither party has engaged a broker to represent their respective interests in
the negotiation of this Eighth Amendment and, consequently, that no brokerage
commission will be due as a result of the actions of either the Landlord or the
Tenant upon the execution of this Eighth Amendment.
7. Binding Effect. Except as modified by the terms of this Eighth
Amendment, the Lease shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, this Eighth Amendment has been executed and
delivered by the duly authorized officers of the parties on the date first above
written.
TMK INCOME PROPERTIES, L. P.,
a Delaware limited partnership
By Stonegate Realty Corporation,
a Delaware corporation,
as General Partner
By /s/ Robert C. McLean
Robert C. McLean, Vice President
(the "Landlord")
BIRMINGHAM STEEL CORPORATION
a Delaware corporation
By /s/ Catherine W. Pecher
Name: Catherine W. Pecher
Title: Vice President-Corporate Secretary
(the "Tenant")
SCHEDULE "A"
Expansion Space
TO BE ATTACHED
<PAGE>
SCHEDULE "B"
Additional Construction Compliance Requirements
Tenant's Obligations. In the event Tenant in any instance is permitted
under the Lease to separately construct or contract for the construction of all
or any portion of the Leasehold Improvements (including any fixtures or
equipment to be installed by Tenant and attached to the walls, floors or
ceiling) or to make alterations thereto, Tenant will cause such installation,
construction or alteration ("Tenant Installations") to be performed on the
following basis: (a) Tenant will have previously furnished the identify of
Tenant's proposed general contractor to Landlord for approval, which approval by
Landlord will not be unreasonably withheld; (b) such Tenant Installation shall
not weaken, impair or in any other way have a detrimental impact on the
structural integrity of the Leased Premises, the Building or the leasehold
improvements of other tenants of the Building or in any way adversely affect the
mechanical or electrical systems of the Building; (c) Tenant shall obtain all
necessary licenses, permits and similar authorizations from governmental
authorities in a timely manner and shall further cause all such Tenant
Installations to comply with all applicable laws and other legal requirements;
(d) all Tenant Installations shall be completed with due diligence, in a good
and workmanlike manner and in compliance with the Final Working Drawings
(approved by Landlord); (e) prior to commencing construction and at all times
during construction, Tenant shall cause Tenant's contractor to obtain and
maintain builder's risk insurance in form, amounts and from carriers reasonably
acceptable to Landlord, naming such contractor, Tenant, Landlord, and any Holder
as additional insureds, as their interests appear; (f) Tenant shall obtain and
furnish lien waivers from all mechanics, materialmen and laborers involved in
the Tenant Installations and Tenant hereby further agrees to indemnify and hold
Landlord harmless from and against any and all mechanics', materialmen's and
laborers' liens which may be filed on the basis of any work performed or
materials supplied in connection with such Tenant Installations; (g) with
respect to such Tenant Installations, Tenant agrees to protect, indemnify,
defend and hold Landlord and its agents, employees, invitees and licensees
(including all other tenants of the Building and their respective agents,
employees, licensees and invitees) free and harmless from and against any and
all claims, liens, demands, and causes of action of every kind and character,
including, without limitation, the amounts of judgments, penalties, interest,
court costs and legal fees incurred by Landlord in defense of same, arising in
favor of any third person (including employees of any contractor or any
subcontractor) or governmental authority on account of taxes, claims, liens,
debts, personal injuries, death or damage occurring or in any wise instant to,
whether direct or indirect, or in connection with or arising out of such Tenant
Installations; and (h) Tenant shall cause the construction to be, performed in a
manner that will (i) occur either at times other than the Building Hours for the
Building as established in accordance with the Building Regulations or at times
as otherwise approved in writing by Landlord; and (ii) not interfere with other
tenants' use and occupancy of the Building and the Park, as determined by
Landlord in Landlord's sole discretion.
<PAGE>
EXHIBIT 10.11.1
AMENDMENT TO EMPLOYMENT AGREEMENT
This agreement, dated as of August 10, 1998, is by and between Birmingham Steel
Corporation, a Delaware Corporation (the "Company"), and Robert A. Garvey (the
"Executive") and amends the agreement (the "Employment Agreement") dated January
5, 1996, between the Executive and the Company.
WHEREAS, the Executive Severance Plan adopted by Birmingham Steel Corporation on
August 29, 1997, provides certain benefits in the event of a "Change in Control"
as that term is defined in the Executive Severance Plan;
WHEREAS, the Employment Agreement also provides certain benefits in the event of
a "Change in Control" as defined in that agreement;
WHEREAS, the Company and the Executive wish to clarify that it is their intent
and agreement that in the event of a "Change in Control" as defined under either
the Employment Agreement or the Executive Severance Plan, the Executive shall
receive the greater of the benefit provided by the Employment Agreement or the
benefit provided by the Executive Severance Plan, but shall not receive benefits
provided under both the Executive Severance Plan and the Employment Agreement;
NOW, THEREFORE, it is agreed as follows:
1. In the event a "Change in Control" as defined under either the Executive
Severance Plan or the Employment Agreement occurs while the Executive is an
employee of the Company, then the Executive shall be entitled to receive either
the benefit provided by the Employment Agreement or the benefit provided by the
Executive Severance Plan, whichever is greater, but shall only receive one
benefit under either the Executive Severance Plan or the Employment Agreement
and not under both.
2. Except as expressly modified by this amendment, the Employment Agreement is
unchanged and remains in full force and effect.
In witness whereof, the Company has caused this Agreement to be executed by its
duly authorized Director and the Executive has hereunto set his hand as of the
date in year first above written.
BIRMINGHAM STEEL CORPORATION
Witness: /s/ Philip Oakes By: /s/ E. Bradley Jones
----------------- By: /s/ Reginald H. Jones
By: /s/ E. Mandell de Windt
Its: ________________________________
Witness: /s/ Catherine W. Pecher Executive: /s/ Robert A. Garvey
-----------------------
<PAGE>
Exhibit 10.22
Executive Retirement and Compensation Deferral Plan
BIRMINGHAM STEEL CORPORATION
EXECUTIVE RETIREMENT AND COMPENSATION DEFERRAL PLAN
ARTICLE I
Purpose and Adoption of Plan
1.1 Adoption: Birmingham Steel Corporation (the "Company") established
the Birmingham Steel Corporation Management Security Plan (the "MSP") effective
as of June 1, 1986. The Company reserved the right in Section 13.1 to amend the
MSP. The Company hereby amends and restates the MSP, effective as of July 1,
1997, to constitute the Birmingham Steel Corporation Executive Retirement and
Compensation Deferral Plan (the "Plan").
1.2 Purpose: The Plan is designed to permit a select group of
management or highly compensated employees who contribute materially to the
continued growth, development and future business success of the Company and the
Subsidiaries to elect to defer a portion of their Compensation until their
death, disability, retirement, or termination of employment with the Company and
to provide additional benefits to certain employees and in such amounts as the
Company shall determine in its sole discretion. Employees who previously
participated in the MSP shall be credited with an initial benefit under this
Plan equal to the present value of their benefit under the MSP as of July 1,
1997.
ARTICLE II
Definitions
For purposes of the Plan the following terms shall have the following
meanings unless a different meaning is plainly required by the context:
2.1 "Accounts" shall mean the accounts established and maintained by
the Company for bookkeeping purposes to reflect the interest of a Participant in
the Plan and shall consist of the Participant's ERP Account and CDP Account. The
Accounts shall be bookkeeping entries only and shall be utilized solely as
devices for the measurement and determination of the amounts to be paid to a
Participant or his Beneficiary under the Plan.
2.2 "Administrative Committee" shall mean the Compensation and Stock
Option Committee of the Board of Directors.
2.3 "Annual Base Pay Rate" shall mean twenty-six (26) times the
bi-weekly rate of pay of a Participant as of the measurement date.
<PAGE>
2.4 "Beneficiary" shall mean any person, estate, trust, or organization
entitled to receive any payment under the Plan upon the death of a Participant.
The Participant shall designate his Beneficiary on a form provided by the
Administrative Committee.
2.5 "Board of Directors" shall mean the Board of Directors of the
Company.
2.6 "CDP Account" shall mean the Account of a Participant that is
maintained to reflect his deferred compensation and earnings thereon and bonus
interest and earnings thereon.
2.7 "Change in Control" means the happening of any of the
following:
(a) when any "person", as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Company or a Subsidiary or any
Company employee benefit plan (including its trustee)), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly of securities of the Company representing 15 percent or more of
the combined voting power of the Company's then outstanding securities;
(b) when, during any period of two consecutive years during
the existence of the Plan, individuals who, at the beginning of such period,
constituted the Board of Directors cease, for any reason other than death, to
constitute at least a majority thereof, unless each director who was not a
director at the beginning of such period was elected or nominated by at least
two-thirds of the individuals who were directors at the beginning of such
period; or
(c) the occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company
or a Subsidiary through purchase of assets, or by merger, or otherwise.
2.8 "Code" shall mean the Internal Revenue Code of 1986, as
amended, including any successor statute.
2.9 "Company" shall mean Birmingham Steel Corporation, a Delaware
corporation, and a successor to substantially all of its business and/or assets
which becomes bound by the terms and provisions of this Plan by agreement or
operation of law. If a Participant is employed by a Subsidiary of the Company,
references to the Company with respect to the Participant shall include such
Subsidiary unless the context otherwise requires.
2.10 "Company ERP Contributions" shall mean the amounts credited to a
Participant's Account under Article VII of the Plan.
2.11 "Compensation" shall mean the Employee's taxable base wages and
bonuses, plus amounts contributed by the Company as salary deferral
contributions pursuant to the Employee's exercise of his deferral option made in
accordance with Section 401(k) of the Code, amounts contributed by the Company
to a cafeteria plan on behalf of the Employee pursuant to his salary
2
<PAGE>
reduction election under such plan, and in accordance with Section 125 of the
Code, amounts contributed by the Employee pursuant to his Deferral Election
under this Plan to his CDP Account and any other amounts contributed by the
Employee on a pre-tax basis to any other employee retirement plan or arrangement
whether qualified or non-qualified.
2.12 "Deferral Election" shall mean the Participant's written election
to defer a portion of his Compensation pursuant to Article VI.
2.13 "Effective Date" shall mean the January 1 or July I next following
or coinciding with the date on which the Administrative Committee shall permit a
Participant to defer Compensation under the Plan and such other dates as may be
determined from time to time by the Administrative Committee.
2.14 "Employee" shall mean any person who is currently employed by
the Company.
2.15 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
2.16 "Enrollment Date" shall mean the Effective Date, January 1 of each
Plan Year, except it shall mean July 1, 1997 of the first Plan Year.
2.17 "ERP Account" shall mean the Account of a Participant that is
maintained to reflect the MSP Opening Balance and earnings thereon, Special
Opening Balance and earnings thereon, and Company ERP Contributions and earnings
thereon.
2.18 "Exchange Act" means The Securities Exchange Act of 1934, as it
may from time to time be amended or supplemented.
2.19 "Group 1 Participants" shall mean the Participants who are
eligible to receive Company ERP Contributions and to make Deferral Elections.
The Group I Participants shall be determined by the Administrative Committee in
its sole discretion.
2.20 "Group 2 Participants" shall mean the Participants who are
eligible to make Deferral Elections but who are ineligible to receive Company
ERP Contributions. The Group 2 Participants shall be determined by the
Administrative Committee in its sole discretion.
2.21 "Investment Request" shall mean the Participant's written request
to have his Account invested pursuant to Section 8.1 or Section 8.2.
2.22 "Leave of Absence" shall mean a Participant's leave of absence
from his employment on account of military service, disability or any other
reason and which is authorized in writing by the Company.
<PAGE>
2.23 "MSP Opening Balance" shall mean the value of the Prior Plan
benefit determined according to Section 8.2 of the Prior Plan.
2.24 "Participant" shall mean an Employee or former Employee of the
Company who is eligible to receive benefits under the Plan.
2.25 "Plan" shall mean the Birmingham Steel Corporation Executive
Retirement and Compensation Deferral Plan as amended from time to time.
2.26 "Plan Year" shall mean the twelve (12) month period commencing
January 1st and ending on the last day of December next following, except the
first Plan Year shall be July 1, 1997 through December 31, 1997.
2.27 "Prior Plan" shall mean the Birmingham Steel Corporation
Management Security Plan, as it existed prior to its amendment and restatement
as of July 1, 1997, to constitute this Plan.
2.28 "Special Opening Balance" shall mean such additional amounts, if
any, credited to the ERP Account for an Employee at the time he begins to
participate in the Plan. The granting of such amounts and the amount thereof
shall be determined in the sole discretion of the Administrative Committee.
2.29 "Subsidiary" shall mean any corporation, the majority of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company.
2.30 "Year of Service" shall mean each one-year period of time
commencing on the later of June 1, 1980 and the date on which the Participant
was first employed by the Company and each anniversary thereof during which he
was actively employed by the Company or on a Leave of Absence for the entire
year.
2.31 "Year of Participation Service" shall mean each one-year period of
time commencing on the date on which the Participant first became a Participant
in the Plan and each anniversary thereof during which he remained a Participant
in the Plan.
The words in the masculine gender shall include the feminine and neuter
genders and words in the singular shall include the plural and words in the
plural shall include the singular.
ARTICLE III
Administration of Plan
3.1 The Administrative Committee shall be responsible for the general
administration of the Plan. The Administrative Committee may select a chairman
and may select a secretary
<PAGE>
(who may, but need not, be a member of the Administrative Committee) to keep its
records or to assist it in the discharge of its duties. A majority of the
members of the Administrative Committee shall constitute a quorum for the
transaction of business at any meeting. Any determination or action of the
Administrative Committee may be made or taken by a majority of the members
present at any meeting thereof, or without a meeting by resolution or written
memorandum concurred in by a majority of the members.
3.2 No member of the Administrative Committee shall receive
any compensation from the Plan for his service.
3.3 The Administrative Committee shall administer the Plan in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Plan more particularly set forth herein. It shall interpret
the Plan and shall determine all questions arising in the administration,
interpretation and application of the Plan. Any such determination by it shall
be conclusive and binding on all persons. It may adopt such regulations as it
deems desirable for the conduct of its affairs. It may appoint such accountants,
counsel, actuaries, specialists and other persons as it deems necessary or
desirable in connection with the administration of this Plan, and shall be the
agent for the service of process.
3.4 The Administrative Committee shall be reimbursed by the Company for
all reasonable expenses incurred by it in the fulfillment of its duties. Such
expenses shall include any expenses incident to its functioning, including, but
not limited to, fees of accountants, counsel, actuaries, and other specialists,
and other costs of administering the Plan.
3.5 (a) The Administrative Committee is responsible for the daily
administration of the Plan. It may appoint other persons or entities to perform
any of its fiduciary functions. The Administrative Committee and any such
appointee may employ advisors and other persons necessary or convenient to help
it carry out its duties, including its fiduciary duties. The Administrative
Committee shall review the work and performance of each such appointee, and
shall have the right to remove any such appointee from his position. Any person,
group of persons or entity may serve in more than one fiduciary capacity.
(b) The Administrative Committee shall maintain accurate and
detailed records and accounts of Participants and of their rights under the Plan
and of all receipts, disbursements, transfers and other transactions concerning
the Plan. Such accounts, books and records relating thereto shall be open at all
reasonable times to inspection and audit by the Board of Directors and by
persons designated thereby.
(c) The Administrative Committee shall take all steps
necessary to ensure that the Plan complies with the law at all times. These
steps shall include such items as the preparation and filing of all documents
and forms required by any governmental agency; maintaining of adequate
Participants' records; withholding of applicable taxes and filing of all
required tax forms and returns; recording and transmission of all notices
required to be given to
<PAGE>
Participants and their Beneficiaries; the receipt and dissemination, if
required, of all reports and information received from the Company; and doing
such other acts necessary for the proper administration of the Plan. The
Administrative Committee shall keep a record of all of its proceedings and acts,
and shall keep all such books of account, records and other data as may be
necessary for proper administration of the Plan. The Administrative Committee
shall notify the Company upon its request of any action taken by it, and when
required, shall notify any other interested person or persons.
3.6 In the event that the claim of any person to all or any part of any
payment or benefit under this Plan shall be denied, the Administrative Committee
shall notify the applicant in writing of such decision with respect to his claim
within ninety (90) days after the applicant's submission of such claim. The
notice shall be written in a manner calculated to be understood by the applicant
and shall include:
(a) The specific reasons for the denial;
(b) Specific references to the pertinent Plan provisions on which
the denial is based;
(c) A description of any additional material or information
necessary for the applicant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) An explanation of the Plan's claim review procedures.
If specific circumstances require an extension of time for
processing the initial claim, a written notice of the extension and the reason
therefor shall be furnished to the claimant before the end of the ninety
(90)-day period. In no event shall such extension exceed ninety (90) days.
In the event a claim for benefits is denied or if the applicant has
received no response to such claim within ninety (90) days of its submission (in
which case the claim for benefits shall be deemed to have been denied), the
applicant or his duly authorized representative, at the applicant's sole
expense, may appeal the denial to the Administrative Committee within sixty (60)
days of the receipt of written notice of the denial or sixty (60) days from the
date such claim is deemed to be denied. In pursuing such appeal the applicant or
his duly authorized representative:
(a) may request in writing that the Administrative Committee review the denial;
(b) may review pertinent documents; or
(c) may submit issues and comments in writing.
<PAGE>
The decision on review shall be made within sixty (60) days of receipt
of the request to review, unless special circumstances require an extension of
time for processing, in which case a decision shall be rendered as soon as
possible, but not later than one hundred twenty (120) days after receipt of the
request for review. If such an extension of time is required, written notice of
the extension shall be furnished to the claimant before the end of the original
sixty (60) day period. The decision on review shall be made in writing, shall be
written in a manner calculated to be understood by the claimant, and shall
include specific references to the provisions of the Plan on which the denial is
based. If the decision on review is not furnished within the time specified
above, the claim shall be deemed denied on review.
ARTICLE IV
Arbitration
4.1 Any controversy relating to a claim arising out of or relating to
this Plan, including, but not limited to claims for benefits due under this
Plan, claims for the enforcement of ERISA, claims based on the federal common
law of ERISA, claims alleging discriminatory discharge under ERISA, claims based
on state law, and assigned claims relating to this Plan shall be settled by
arbitration in accordance with the then current Employee Benefit Claims
Arbitration Rules of the American Arbitration Association (the "AAA") or any
successor rules which are hereby incorporated into the Plan by this reference;
provided, however, both the Company and the Participant shall have the right at
any time to seek equitable relief in court without submitting the issue to
arbitration.
4.2 Neither the Participant (or his beneficiary) nor the Plan may be
required to submit any such claim or controversy to arbitration until the
Participant (or his beneficiary) has first exhausted the Plan's internal appeals
procedures set forth in Section 3.6. However, if the Participant (or his
beneficiary) and the Company agree to do so, they may submit the claim or
controversy to arbitration at any point during the processing of the dispute.
4.3 The Company will bear all costs of an arbitration, except that the
Participant will pay the filing fee set by the AAA and the arbitrator shall have
the power to apportion among the parties expenses such as pre-hearing discovery,
travel, experts' fees, accountants' fees, and attorney's fees except as
otherwise provided herein. The decision of the arbitrator shall be final and
binding on all parties, and judgment on the arbitrator's award may be entered in
any court of competent jurisdiction.
4.4 If there is a dispute as to whether a claim is subject to
arbitration, the arbitrator shall decide that issue. The claim must be filed
with the AAA within the applicable statute of limitations period. The arbitrator
shall issue a written determination sufficient to ensure consistent application
of the Plan in the future.
<PAGE>
4.5 Any arbitration will be conducted in accordance with the following
provisions, not withstanding the Rules of the AAA. The arbitration will take
place in a neutral location within the metropolitan area in which the
Participant was or is employed by the Company. The arbitrator will be selected
from the attorney members of the Commercial Panel of the AAA who reside in the
metropolitan area where the arbitration will take place and have at least 5
years of ERISA experience. If an arbitrator meeting such qualifications is
unavailable, the arbitrator will be selected from the attorney members of the
National Panel of Employee Benefit Claims Arbitrators established by the AAA.
4.6 In any such arbitration, each party shall be entitled to discovery
of any other party as provided by the Federal Rules of Civil Procedure then in
effect; provided, however, that discovery shall be limited to a period of 60
days. The arbitrator may make orders and issue subpoenas as necessary. The
arbitrator shall apply ERISA, as construed in the federal Circuit in which the
arbitration takes place, to the interpretation of the Plan and the Federal
Arbitration Act to the interpretation of this arbitration provision.
4.7 Any party has the right to arrange for a stenographic record to be
made of the proceedings, which stenographic record shall be the official record.
Either party may make an offer of judgment at any time in accordance with the
procedures of Rule 68 (or its successor) of the Federal Rules of Civil
Procedure. The existence of such an offer is not admissible in any proceeding.
If the monetary award of the arbitrator to a party is less than any monetary
offer to that party plus 20 percent of such offer, then that party receiving
such award shall pay the other party his reasonable attorneys' fees, experts'
fees, accountants' fees and other costs incurred with respect to the arbitration
following the date of the offer of judgment. Such amount is to be deducted from
the award prior to payment. Arbitration is the exclusive remedy for any dispute
between the parties other than equitable relief which either party may seek
through the court system.
ARTICLE V
Eligibility
5.1 Any Employee who is a member of a select group of management or
highly compensated Employees and who is selected for participation in the Plan
by the Administrative Committee in its sole discretion, shall be eligible to
participate in the Plan. An Employee who is selected to participate shall be
designated on Exhibit A hereto by the Administrative Committee from time to time
as either a Group I Participant or a Group 2 Participant. An Employee who is
selected for participation may elect to be a Participant by executing a
participation agreement by which he agrees to be bound by the terms of the Plan.
5.2 Notwithstanding the above, the Administrative Committee shall be
authorized to modify the eligibility requirements and rescind the eligibility of
any Participant if necessary to
<PAGE>
insure that the Plan is maintained primarily for the purpose of providing
deferred compensation to a select group of management or highly compensated
employees under ERISA.
ARTICLE VI
Election for Deferral of Payment
6.1 A Participant may elect to defer from the Compensation otherwise
payable to him during each payroll period after his Effective Date any whole
percentage from 2% to 20% of his bi-weekly base pay and any percentage from 5%
to 50% of his bonus pay that is a multiple of 5%, such amount to be credited to
his CDP Account under the Plan.
6.2 A CDP Account shall be established for each Participant by the
Company as of the effective date of such Participant's initial Deferral
Election. The Participant's CDP Account shall be credited monthly with the
Compensation he has deferred under the Plan.
6.3 The Deferral Election shall be made in writing on a form prescribed
by the Company and said Deferral Election shall state:
(a) That the Participant wishes to make an election
to defer the receipt of a portion of his base pay and/or bonus pay, and
(b) The percentage of such base pay and/or bonus pay
to be deferred.
6.4 The initial Deferral Election of a new Participant shall be made by
written notice signed by the Participant and delivered to the Company not later
than thirty ('30) days after the later of July 1, 1997 or the Employee's
Effective Date. Any modification or revocation of the most recent Deferral
Election shall be made by written notice signed by the Participant and delivered
to the Company not later than the first (1st) day of the month prior to the next
succeeding Plan Year (or such later date as the Administrative Committee may
determine) and shall be effective on the first day of such succeeding Plan Year.
A Deferral Election with respect to the deferral of future Compensation shall be
an annual election for each Plan Year. The termination of participation in the
Plan shall not affect Compensation previously deferred by a Participant under
the Plan. At the time of the initial Deferral Election, the Participant shall
elect the form of payment to be received upon his retirement, such form to be
either a lump sum or monthly installments over a period of five (5), ten (10) or
twenty (20) years. The initial Deferral Election with respect to the form of
payments and the time for the commencement of payments shall govern the
distribution of an account, except as provided in Section 6.5.
6.5 With the approval of the Administrative Committee, a Participant
may amend a prior Deferral Election on a form provided by the Administrative
Committee not prior to the 390th day nor later than the 360th day prior to his
retirement or termination of employment in order to change the form of the
distribution of his Account in accordance with the terms of the
<PAGE>
Plan. Any such amendment to a prior Deferral Election, as described in this
Section 6.5, shall be contingent upon the Participant's completion of a one year
term of employment, except in the event of the Participant's death or total and
permanent disability as determined by the Social Security Administration or by
the Company's insurance carrier under its long term disability plan.
ARTICLE VII
Employer Contributions and Vesting
7.1 The Company shall credit as a contribution to the ERP Account of
each Group 1 Participant an amount equal to 10% of the Compensation earned by
such Group 1 Participant during the prior calendar quarter. The Participant must
be employed on the last day of a calendar quarter to be eligible for the Company
ERP Contribution.
7.2 All the Participants who participated in the Prior Plan shall be
credited with an MSP Opening Balance and such amount shall thereafter be
reflected in the Participant's ERP Account. Participants, who at the time they
begin participation in the Plan are credited by the Administrative Committee
with a Special Opening Balance, shall have such amount reflected in their ERP
Account.
7.3 Contributions to the Plan by Participants pursuant to Deferral
Elections shall be fully vested at all times. Amounts which are attributable to
Company contributions shall be vested as follows:
(a) The MSP Opening Balance. along with earnings thereon,
shall vest after the Participant has completed at least five (5) Years of
Service and at least one (1) Year of Participation Service.
(b) The Special Opening Balance, along with earnings thereon,
shall vest in a percentage equal to complete Years of Participation Service
divided by the lesser of-
(1) five (5), or
(2) complete years of potential service in the Plan if the
Participant retires on his or her 65th birthday, but not more that 100%.
(c) Bonus interest credited under Section 8.3 of the Plan,
along with total interest thereon, shall vest five (5) years following the end
of the Plan Year in which the bonus interest was credited.
<PAGE>
(d) Company ERP Contributions credited under Section 7.1
shall be fully vested at all times.
(e) The Administrative Committee shall have the discretion to
accelerate the vesting of Company contributions and bonus interest.
7.4 Each Participant who terminates his employment with the Company
because of total and permanent disability as determined by the Social Security
Administration or by the Company's insurance carrier under its long term
disability benefit plan, shall become fully vested as to all of his Accounts
under the Plan.
7.5 Each Participant who attains age sixty (60) while in the employ of
the Company and who completes fifteen (15) or more Years of Service or who
attains age sixty-five (65) while in the employ of the Company, shall become
fully vested as to all of his Accounts under the Plan.
7.6 If a Participant dies while employed by the Company, all of his
Accounts under the Plan shall become fully vested. An additional death benefit
equal to two (2) times his Annual Base Pay Rate shall be paid to his
Beneficiary.
7.7 In the event of a Change of Control, all Accounts of all
Participants shall become fully vested.
ARTICLE VIII
Investment of Accounts
8.1 The Accounts of each Participant shall be credited as of the last
day of each calendar quarter with investment earnings based upon the balances in
the Accounts or on such more frequent basis as determined by the Administrative
Committee. A Participant may request how his Accounts are deemed to be invested.
The Investment Request shall be made in writing on a form prescribed by the
Company and shall be delivered to the Company prior to the Enrollment Date of
the next succeeding Plan Year and shall be effective on such Enrollment Date or
the first day of such succeeding Plan Year. The Investment Request made in
accordance with this Article VIII shall continue unless the Participant changes
the Investment Request in accordance with procedures designated by the
Administrative Committee. Any such change shall become effective for the months
subsequent to the request. The Administrative Committee shall be authorized to
permit more frequent changes in investment options to be effective on such dates
as it shall specify. The Administrative Committee shall consider an Investment
Request, but is not obligated to follow such a request.
8.2 Participants shall be permitted to request such investment options
as the Administrative Committee may permit and can allocate their Accounts among
such options for
<PAGE>
the Plan Year. Dividends, interest and other distributions credited with respect
to any Investment Request shall be deemed to be invested in the same investment
option.
8.3 The CDP Accounts shall be credited with bonus interest in an amount
equal to 4% per year provided a Participant is employed on the last day of the
Plan Year. The bonus interest shall be allocated based upon the value of the CDP
Account at the beginning of the Plan Year plus one-half of the Compensation
contributed to such Account during the Plan Year.
8.4 At the end of each Plan Year (or on a more frequent basis as
determined by the Administrative Committee), a report shall be issued to each
Participant who has an Account and said report will set forth the value of such
Account.
ARTICLE IX
Distribution of Accounts
9.1 After a Participant has attained age sixty (60) while in the employ
of the Company and completed fifteen (15) or more Years of Service or attains
age sixty-five (65), he shall be entitled to receive the balance of his Accounts
in cash in a lump sum or in monthly installments over a five (5), ten (10) or
twenty (20) year period as specified on the Participant's initial Deferral
Election form. If a Participant fails to specify a form of payment, his Accounts
shall be distributed in a lump sum. If a Participant terminates employment prior
to attaining age sixty (60) and completing fifteen (15) or more Years of
Service, his Accounts shall be distributed in a lump sum. Payment shall be made
or commence as soon as reasonably feasible following retirement or termination
of employment. The transfer by a Participant between the Company and a
Subsidiary shall not be deemed to be a termination of employment with the
Company.
9.2 Upon the death of Participant or former Participant prior to the
payment of his Accounts, the balance of his Accounts plus an amount equal to two
(2) times his Annual Base Pay Rate shall be paid in lump sum to his Beneficiary
within sixty (60) days following the close of the calendar quarter in which the
Administrative Committee is provided evidence of the Participant's death (or as
soon as reasonably practicable thereafter). In the event a beneficiary
designation is not on file or the Beneficiary is deceased or cannot be located,
payment will be made to the estate of the Participant or former Participant. In
the event of the death of a Participant subsequent to the commencement of
installment payments but prior to the completion of the payments, the
installments shall continue and shall be paid to the Beneficiary as if the
Participant had not died; provided, however, if the Beneficiary is a trust or
estate, the remaining benefit shall be paid in a lump sum.
9.3 The beneficiary designation may be changed by the Participant or
former Participant at any time without the consent of the prior Beneficiary.
<PAGE>
9.4 Upon the total disability of a Participant or former Participant,
as determined by the Social Security Administration or by the Company's
insurance carrier under its long term disability benefit plan, his Accounts
shall be paid in a lump sum to the Participant, or former Participant, or his
legal representative within sixty (60) days following the close of the calendar
quarter in which the Administrative Committee receives notification of the
determination of disability by the Social Security Administration (or as soon as
reasonably practicable thereafter) or by Company's insurance carrier under its
long term disability benefit plan.
ARTICLE X
Nature of Employer Obligation and Participant Interest
10.1 A Participant, his beneficiary, and any other person or persons
having or claiming a right to payments under this Plan shall rely solely on the
unsecured promise of the Company set forth herein, and nothing in this Plan
shall be construed to give a Participant, beneficiary, or any other person or
persons any right, title, interest, or claim in or to any specific assets, fund,
reserve, account, or property of any kind whatsoever owned by the Company or in
which it may have any right, title, or interest now or in the future; but a
Participant shall have the right to enforce his or her claim against the Company
in the same manner as any unsecured creditor.
10.2 All amounts paid under this Plan shall be paid in cash from the
general assets of the Company. Benefits shall be reflected on the accounting
records of the Company but shall not be construed to create, or require the
creation of, a trust, custodial or escrow account. Nothing contained in this
Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust or a fiduciary relationship of any kind between the
Company and an Employee or any other person. Neither the Employee or a
beneficiary of an Employee shall acquire any interest greater than that of an
unsecured creditor.
10.3 Any Benefits payable under this Plan shall be independent of, and
in addition to, any other benefits or compensation of any sort, payable to or on
behalf of the Participant under or pursuant to any other employee benefit
program sponsored by the Company for its employees generally.
ARTICLE XI
Miscellaneous Provisions
11.1 Neither the Participant, his beneficiary, nor his legal
representative shall have any rights to commute, sell, assign, transfer or
otherwise convey the right to receive any payments hereunder, which payments and
the rights thereto are expressly declared to be nonassignable and
nontransferable. Any attempt to assign or transfer the right to payments of this
Plan shall be void and have no effect.
<PAGE>
11.2 The assets from which Participant's benefits shall be paid shall
at all times be subject to the claims of the creditors of the Company and a
Participant shall have no right claim or interest in any assets as to which
account is deemed to be invested or credited under the Plan.
11.3 The Plan may be amended, modified, or terminated by the Board of
Directors of the Company in its sole discretion at any time and from time to
time; provided, however, that no such amendment, modification, or termination
shall impair any rights to benefits under the Plan prior to such amendment,
modification, or termination. The Plan may also be amended or modified by the
Administrative Committee if such amendment or modification does not involve a
substantial increase in cost to the Company.
11.4 It is expressly understood and agreed that the payments made in
accordance with the Plan are in addition to any other benefits or compensation
to which a Participant may be entitled or for which he may be eligible, whether
funded or unfunded, by reason of his employment by the Company.
11.5 The Company shall deduct from each payment under the Plan the
amount of any tax (whether federal, state or local income taxes, Social Security
taxes or Medicare taxes) required by any governmental authority to be withheld
and paid over by the Company to such governmental authority for the account of
the person entitled to such distribution.
11.6 Any Compensation deferred by a Participant while employed by the
Company shall not be considered Compensation earned currently for purposes of
the Company's qualified retirement plans. Distributions from a Participant's
Account shall not be considered wages, salaries or compensation under any other
employee benefit plan.
11.7 No provision of this Plan shall be construed to affect in any
manner the existing rights of the Company to suspend, terminate, alter, modify,
whether or not for cause, the employment relationship of the Participant and the
Company.
11.8 To the extent state law is not preempted by ERISA, this Plan, and
all its rights under it, shall be governed by and construed in accordance with
the laws of the State of Delaware.
11.9 This Plan shall be binding upon the Company, its assigns, and any
successor which shall succeed to substantially all of its assets and business
through merger, consolidation or acquisition.
<PAGE>
IN WITNESS WHEREOF, the Plan has been executed as of this the lst day of
June, 1997.
ATTEST: BIRMINGHAM STEEL CORPORATION
/s/ Catherine W. Pecher By: /s/ Philip L Oakes
By: Vice President-Corporate Secretary Its: Vice President-Human Resources
<PAGE>
Item 14(d). CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
BIRMINGHAM STEEL CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance Provision Balance
at for Accounts at
Beginning Doubtful Written End of
of Year Accounts Off Year
-------- -------- -------- -------
Year ended June 30, 1998 $1,797 $1,250 $1,209 $1,838
Year ended June 30, 1997 1,554 543 300 1,797
Year ended June 30, 1996 1,368 418 232 1,554
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the Undersigned, thereunto duly authorized.
BIRMINGHAM STEEL CORPORATION
/s/ Robert A. Garvey 9/28/98
- ----------------------- ----------
Robert A. Garvey Date
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ E. Mandell de Windt 9/28/98 /s/ Robert A. Garvey 9/28/98
- -------------------------------------- --------------------------------
E. Mandell de Windt Date Robert A. Garvey Date
Chairman - Executive Committee Chairman of the Board, Chief
Director Executive Officer, Director
/s/ Harry Holiday, Jr. 9/28/98 /s/ C. Stephen Clegg 9/28/98
- -------------------------------------- ---------------------------------
Harry Holiday, Jr. Date C. Stephen Clegg Date
Director Director
<PAGE>
/s/ George A. Stinson 9/28/98 /s/ E. Bradley Jones 9/28/98
- ------------------------------------- ----------------------------------
George A. Stinson Date E. Bradley Jones Date
Director Director
/s/ Reginald H. Jones 9/28/98 /s/ T. Evans Wyckoff 9/28/98
- -------------------------------------- ----------------------------------
Reginald H. Jones Date T. Evans Wyckoff Date
Director Director
/s/ William J. Cabaniss, Jr. 9/28/98 /s/ Richard de J. Osborne 9/28/98
- ------------------------------------- ----------------------------------
William J. Cabaniss, Jr. Date Richard de J. Osborne Date
Director Director
/s/ Alfred C. DeCrane, Jr. 9/28/98 /s/ Kevin E. Walsh 9/28/98
- ------------------------------------ ----------------------------------
Alfred C. DeCrane, Jr. Date Kevin E. Walsh Date
Director Executive Vice President - Finance
Chief Financial Officer
Exhibit 22.1
BIRMINGHAM STEEL CORPORATION
SUBSIDIARIES OF THE REGISTRANT
AS OF JUNE 30, 1998
American Steel & Wire Corporation, a Delaware corporation
Norfolk Steel Corporation, a Virginia corporation
Barbary Coast Steel Corporation, a Delaware corporation
Birmingham Steel Overseas, Ltd, a Barbados corporation
Port Everglades Steel Corporation, a Delaware corporation
Birmingham Recycling Investment Company, a Delaware corporation
Birmingham East Coast Holdings, a Delaware corporation
Birmingham Southeast, LLC, a Delaware corporation
Midwest Holdings, Inc., a Delaware corporation
Cumberland Recyclers, LLC, a Delaware corporation
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference (i) in the Registration Statement
(Form S-8 No. 33-16648) pertaining to the Birmingham Steel Corporation 1986
Stock Option Plan; (ii) in the Registration Statement (Form S-8 No. 33-23563)
pertaining to the Birmingham Steel Corporation 401(k) Plan; (iii) in the
Registration Statement (Form S-8 No. 33-30848) pertaining to the Birmingham
Steel Corporation 1989 Non-Union Stock Option Plan; (iv) in the Registration
Statement (Form S-8 No. 33-41595) pertaining to the Birmingham Steel Corporation
1990 Management Incentive Plan; (v) in the Registration Statement (Form S-8 No.
33-51080) pertaining to the Birmingham Steel Corporation 1992 Non-Union
Employee's Stock Option Plan; (vi) in the Registration Statement (Form S-8 No.
333-34291) pertaining to the Birmingham Steel Corporation 1996 Director Stock
Option Plan; and (vii) in the Registration Statement (Form S-8 No. 333-46771)
pertaining to the Birmingham Steel Corporation 1997 Management Incentive Plan of
our report dated August 5, 1998 with respect to the consolidated financial
statements and schedule of Birmingham Steel Corporation included in the Annual
Report (Form 10-K) for the year ended June 30,1998.
/s/Ernst & Young LLP
- ---------------------------
Ernst & Young LLP
Birmingham, Alabama
September 25, 1998
Exhibit 23.2
Accountants' Consent
The Board of Directors
Birmingham Steel Corporation
We consent to the incorporation by reference in the registration statements
(Nos. 33-16648, 33-23563, 33-30848, 33-41595, 33-51080, 333-34291 and 333-46771)
on Forms S-8 of Birmingham Steel Corporation of our report dated July 24, 1998,
with respect to the balance sheets of Pacific Coast Recycling, LLC as of June
30, 1998 and 1997 and the related statements of earnings, members' capital and
cash flows for the years then ended, which report appears in the Annual report
on Form 10-K of Birmingham Steel Corporation for the year ended June 30, 1998.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Los Angeles, California
September 24, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the June 30,
1998 Consolidated Balance Sheets and Consolidated Statements of Operations of
Birmingham Steel Corporation and is qualified in its entirety by reference to
such.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-END> Jun-30-1998
<CASH> 902
<SECURITIES> 0
<RECEIVABLES> 121,854
<ALLOWANCES> 1,837
<INVENTORY> 243,275
<CURRENT-ASSETS> 393,998
<PP&E> 978,546
<DEPRECIATION> 221,051
<TOTAL-ASSETS> 1,244,778
<CURRENT-LIABILITIES> 156,324
<BONDS> 53,500
0
0
<COMMON> 298
<OTHER-SE> 460,309
<TOTAL-LIABILITY-AND-EQUITY> 1,244,778
<SALES> 1,136,019
<TOTAL-REVENUES> 1,136,019
<CGS> 1,018,620
<TOTAL-COSTS> 1,018,620
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 34,238
<INTEREST-EXPENSE> 29,008
<INCOME-PRETAX> 2,793
<INCOME-TAX> 1,164
<INCOME-CONTINUING> 1,629
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,629
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
