UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File
No. 1-9820
BIRMINGHAM STEEL CORPORATION
DELAWARE 13-3213634
(State of Incorporation) (I.R.S. Employer Identification No.)
1000 Urban Center Parkway, Suite 300
Birmingham, Alabama 35242
(205) 970-1200
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days Yes x No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 29,735,036
Shares of Common Stock of the registrant were outstanding at November 9, 1999.
PART I - FINANCIAL INFORMATION
ITEM 1 . FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
September 30, June 30,
1999 1999
(Unaudited) (Audited)
-------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 978 $ 935
Accounts receivable, net of
allowance for doubtful accounts
$626 at September 30, 1999
and $586 at June 30, 1999 79,389 72,047
Inventories 111,630 100,330
Other current assets 46,708 52,019
Net current assets of discontinued
operations 73,155 45,558
--------------- ---------------
Total current assets 311,860 270,889
Property, plant and equipment 659,285 654,089
Less accumulated depreciation (224,524) (214,527)
--------------- ---------------
Net property, plant and 434,761 439,562
equipment
Other non-current assets 41,866 42,527
Net non-current assets of
discontinued operations 118,944 124,488
--------------- ---------------
Total assets $ 907,431 $ 877,466
=============== ===============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term debt $ 10,000 $ 10,000
Accounts payable 67,409 61,144
Accrued interest payable 8,464 1,375
Accrued payroll expenses 4,256 8,026
Accrued operating expenses 11,311 6,730
Other current liabilities 19,914 16,636
Allowance for operating losses of
discontinued operations 35,126 56,544
-------------- ---------------
Total current liabilities 156,480 160,455
Deferred liabilities 9,508 9,167
Long-term debt, less current portion 499,091 469,135
Minority interest in subsidiary 6,220 7,978
Stockholders' equity:
Common stock, par value $.01; authorized:
75,000 shares; issued: 29,865 at
September 30, 1999 and 29,536 at
June 30, 1999 299 298
Additional paid-in capital 329,202 329,056
Treasury stock, 132 and 150 shares at
September 30, 1999 and June 30, 1999,
respectively, at cost (693) (791)
Unearned compensation (585) (718)
Retained earnings (deficiency) (92,091) (97,114)
-------------- ---------------
Total stockholders' equity 236,132 230,731
-------------- ---------------
Total liabilities and
stockholders' equity $ 907,431 $ 877,466
============== ===============
See accompanying notes.
</TABLE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three months ended September 30,
----------------------------------------
1999 1998
(Unaudited) (Unaudited)
--------------- ---------------
Net sales $ 176,802 $ 207,502
Cost of sales:
Other than depreciation and
amortization 137,919 168,789
Depreciation and amortization 10,647 9,665
------------- -------------
Gross profit 28,236 29,048
Pre-operating/start-up costs 4,497 1,363
Selling, general and admin expense 10,339 9,707
------------- -------------
Operating income 13,400 17,978
Interest expense 6,278 5,235
Other income, net 884 5,932
Income/(Loss) from equity
investments 8 (1,679)
Minority interest in loss of
subsidiary 1,758 753
------------- -------------
Income from continuing operations
before income taxes 9,772 17,749
Provision for income taxes 4,006 6,823
------------- -------------
Income from continuing operations $ 5,766 $ 10,926
Loss from discontinued operations
net of tax benefit of $7,497 and
$6,082, in 1999 and 1998,
respectively - (9,901)
------------- -------------
Net Income $ 5,766 $ 1,025
============= =============
Basic and diluted per share amounts:
Income from continuing operations $ 0.19 $ 0.37
Loss on discontinued operations - (0.34)
------------- -------------
Net income per share $ 0.19 $ 0.03
============= =============
Cash dividends declared per share 0.025 0.10
See accompanying notes.
<TABLE>
<CAPTION>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------------------
1999 1998
(Unaudited) (Unaudited)
--------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 5,766 $ 10,926
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 10,647 9,665
Minority interest in loss of subsidiary (1,758) (753)
Gain on sale of assets (11) (2,232)
(Income)/Loss from equity investments (8) 1,679
Other 420 1,612
Changes in operating assets and liabilities:
Accounts receivable (7,342) 5,703
Inventories (11,300) 6,210
Other current assets 5,311 1,763
Accounts payable 6,264 13,270
Other accrued liabilities 11,179 (1,695)
Deferred liabilities 341 150
--------------- ---------------
Net cash provided by operating
activities of continuing operations 19,509 46,298
Net cash (used in) operating
activities of discontinued operations (42,399) (33,564)
--------------- ---------------
Net cash (used in) provided by
operating activities (22,890) 12,734
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (5,232) (29,178)
Proceeds from sale of property 11 2,232
Additions to other non-current assets - (10,486)
Reductions in other non-current assets 47 11,747
--------------- ---------------
Net cash (used in) investing activities of
continuing operations (5,174) (25,685)
Net cash used in investing activities of
discontinued operations (1,109) (8,406)
--------------- ---------------
Net cash used in investing activities (6,283) (34,091)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings and repayments 31 (10,000)
Borrowings under revolving credit facility 372,267 610,700
Payments on revolving credit facility (342,342) (571,742)
Purchase of treasury stock - (2,734)
Cash dividends paid (742) (2,953)
--------------- ---------------
Net cash provided by financing
activities of continuing operations 29,214 23,271
Net cash provided by (used in) financing
activities of discontinued operations 2 (119)
--------------- ---------------
Net cash provided by financing activities 29,216 23,152
--------------- ---------------
Net increase (decrease) in cash and cash equivalents 43 1,795
Cash and cash equivalents at:
Beginning of period 935 902
--------------- ---------------
End of period $ 978 $ 2,697
=============== ===============
See accompanying notes.
</TABLE>
BIRMINGHAM STEEL COOPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS
Birmingham Steel Corporation (the Company) owns and operates facilities in
the mini-mill sector of the steel industry. In addition, the Company owns
equity interests in scrap collection and processing operations. From these
facilities, which are located across the United States and Canada, the
Company produces a variety of steel products including semi-finished steel
billets, reinforcing bars and merchant products such as rounds, flats,
squares, strips, angles and channels. These products are sold primarily to
customers in the steel fabrication, manufacturing and construction
business. The Company has regional warehouse and distribution facilities
which sell its finished products.
In addition, the Company's SBQ (special bar quality) line of business,
which is reported in discontinued operations (See Note 2), produces
high-quality rod, bar and wire that is sold primarily to customers in the
automotive, agricultural, industrial fastener, welding, appliance, and
aerospace industries in the United States and Canada.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of the Company
are prepared in accordance with generally accepted accounting principles
("GAAP") from interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the interim periods
reflected herein are not necessarily indicative of the results that may be
expected for full fiscal year periods.
The balance sheet at June 30, 1999 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by GAAP for complete financial
statements. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on
Form 10-K for the year ended June 30, 1999.
2. DISCONTINUED OPERATIONS
On August 18, 1999, the Board of Directors authorized management to sell
the Company's SBQ operations, which includes rod, bar and wire facilities
in Cleveland, Ohio; a high quality melt shop in Memphis, Tennessee; and the
Company's 50% interest in American Iron Reduction, L.L.C. (AIR). The
Company's decision to discontinue its SBQ operations was attributable to
continuing financial and operational challenges which have required a major
commitment of management and financial resources and have constrained the
Company's financial flexibility while significantly increasing its debt.
Immediately after the Board's authorization, the Company formalized its
plan of disposal and authorized an investment banking firm to coordinate
the efforts to effect the sale of the SBQ operations. The Company expects
that the sale will be completed by May 2000. Accordingly, as required by
APB Opinion 30, the operating results of the SBQ line of business for the
quarter ended September 30, 1999 are reported in discontinued operations in
the accompanying financial statements. In addition, the financial statements
for the quarter ended September 30, 1999 have been restated to similarly
reflect the SBQ operations as discontinued.
Operating results of the discontinued SBQ operations (before income taxes)
were as follows (in thousands):
Three months ended September 30,
--------------------------------
1999 1998
--------------------------------
Net sales $ 57,961 $ 63,454
Costs of sales 64,082 65,531
--------------------------------
Gross profit (loss) ( 6,121) (2,077)
Start-up costs 8,145 9,502
Selling, general and administrative
expenses 3,097 1,780
Interest expense 4,150 3,565
Other income (expense) 93 941
--------------------------------
Loss before income taxes (21,420) (15,983)
Assets and liabilities of the discontinued SBQ operations have been
reflected in the consolidated balance sheets as current or non-current
based on the original classification of the accounts, except that current
liabilities are netted against current assets and non-current liabilities
are netted against non-current assets. Net non-current assets also reflect
a valuation allowance of $184,403,000 and $195,342,000 at September 30, and
June 30, 1999, respectively, to recognize the estimated loss on disposal.
The following is a summary of assets and liabilities of discontinued
operations (in thousands):
-------------------------
September 30, June 30,
1999 1999
-------------------------
Current assets:
Accounts receivable, net $ 30,511 $ 32,414
Inventories 77,436 61,471
Other 1,487 1,303
Current liabilities:
Accounts payable (26,032) (35,190)
Other accrued expenses (10,247) (14,440)
-------------------------
Net current assets of discontinued
operations $ 73,155 $ 45,558
=========================
Non-current assets:
Property, plant and equipment, net of
accumulated depreciation $ 322,362 $ 325,999
Goodwill and other non-current assets 23,176 23,580
Investment in American Iron Reduction, LLC - 13,889
Provision for estimated loss on disposal
of discontinued operations (184,403) (195,342)
Non-current liabilities:
Long-term debt (42,191) (42,224)
Other non-current liabilities - (1,414)
-------------------------
Net non-current assets of discontinued
operations $ 118,944 $ 124,488
=========================
An accrual for the estimated (pre-tax) losses to be incurred during the
expected disposal period of $35,126,000 and $56,544,000 at September 30,
and June 30, 1999, respectively, is presented separately in the
accompanying consolidated balance sheets for fiscal 1999. Such amount
excludes corporate overhead, but includes approximately $13,800,000 of
interest expense, which represents the amount allocable to the SBQ
operations up to the estimated reduction in consolidated interest expense
that is expected to occur upon receipt of the proceeds from the sale.
There are no material contingent liabilities related to discontinued
operations, such as product or environmental liabilities or litigation,
that are expected to remain with the Company after the disposal of the SBQ
business.
3. INVENTORIES
Inventories as of September 30 were valued at the lower of cost (first-in,
first-out) or market as summarized in the following table (in thousands):
<TABLE>
<CAPTION>
Continuing Operations Discontinued Operations
- -------------------------------------------------------------------------------------------
September 30, June 30, September 30, June 30,
1999 1999 1999 1999
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Raw materials and mill supplies $ 36,842 $ 33,652 $ 17,782 $ 19,006
Work-in-progress 13,890 13,986 40,810 26,942
Finished goods 60,898 52,692 18,844 15,523
----------------------------------------------------
$111,630 $100,330 $ 77,436 $ 61,471
</TABLE>
4. 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
DISCLOSURE REGARDING FORWARD - LOOKING STATEMENTS
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, hopes, anticipations,
intentions, plans and strategies regarding the future. Forward-looking
statements include, but are not limited to: expectations about
environmental remediation costs, assessments of expected impact of
litigation and adequacy of insurance coverage for litigation, expectations
regarding the costs of new projects, expectations regarding future
earnings, expectations concerning the anticipated performance of new
ventures, and expectations regarding the date when facilities under
construction will be operational and the future performance and
capabilities of those facilities. 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. The Company's actual results could differ
materially from those described or implied by any forward-looking
statements herein. 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.
RESULTS FROM CONTINUING OPERATIONS
The Company reported income from continuing operations of $5,766,000, or
$.19 per share, basic and diluted, for the first quarter of fiscal 2000
compared with earnings of $10,926,000, or $.37 per share in the first
quarter of fiscal 1999. Excluding $5,100,000 pre-tax gains from the sale of
property and settlements with electrode suppliers, earnings for the first
quarter of fiscal 1999 would be $7,968,000 or $.27 per share.
SALES
Sales for the first quarter were $176,802,000, down 17% from first quarter
1999's $207,502,000. The decrease was primarily attributable to the
increased demand of lower margin rebar products, offset by decreasing
higher margin merchant shipments. Also contributing to the declining
revenues are the continuing erosion of the company's average sales price of
rebar, down $35 per ton from last year, and the $49 per ton decrease of the
merchant products average sales price. Steel shipments declined to 642,000
tons from 656,000 tons reported in the first quarter of fiscal 1999.
COST OF SALES
As a percentage of net sales, cost of sales (other than depreciation and
amortization) improved 3.3 percentage points to 78.0% in the current period
compared with 81.3% in the first quarter last year. The decline resulted
primarily from a 19.7% decrease in the market purchase price of scrap,
which fell from $122 per ton in the first quarter of fiscal 1999 to $98 per
ton in the same quarter of fiscal 2000. However, the decline in scrap
prices was somewhat offset by higher operating costs, including employee
benefits, utilities, repairs and maintenance, and leased equipment costs.
Increased depreciation and amortization expense was attributable to a
higher depreciable asset base, reflecting the start-up of the new caster
and mid-section mill equipment at the Cartersville, Georgia facility.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A")
For the first quarter, SG&A expenses increased from $9,707,000 to
$10,339,000, or 6.5% over first quarter fiscal 1999 and increased as a
percentage of sales from 4.7% to 5.8%. The increase was principally
attributable to higher lease costs for computer equipment and expenses
relating to proxy contest by a dissident shareholder group which began in
July, 1999. For further explanation of the proxy contest, refer to page 15
of the Company's most recently filed Form 10-K for the fiscal year ended
June 30, 1999.
PRE-OPERATING/START-UP
Pre-operating/start-up costs were $4,497,000 in the first quarter of fiscal
2000, compared with $1,363,000 last year. Substantially all of these costs
relate to start-up costs for the Company's Cartersville, Georgia
mid-section mill which began operations in March, 1999. The Company expects
to continue incurring start-up costs at Cartersville through the quarter
ended March 31, 2000, at which time management anticipates that the
facility will be operating at a near operating break-even level.
INTEREST EXPENSE
Interest expense increased to $6,278,000 in the first quarter of fiscal
2000 from $5,235,000 reported last year. The increase was the result of the
increase in the Company's average borrowing rate to 7.18% in the first
quarter of fiscal 2000 (as compared to 6.93% in the same period last year)
and decreased capitalized interest for the mid-section mill project at the
Cartersville, Georgia facility, which was placed in service in the first
quarter of last year.
OTHER INCOME AND EXPENSES
Other income (expense) consists primarily of non-operating gains and
charges. The Company had other income of $884,000 in the first quarter
compared to $5,932,000 reported in the same period last year. The change in
other income was primarily attributable to $5,100,000 pre-tax gains
recognized in the first quarter of fiscal 1999 from the sale of property
and settlements from electrode suppliers.
INCOME TAXES
The provision for income taxes was $4,006,000 in the first quarter of
fiscal 2000 compared to $6,823,000 for the same period last year. The
effective income tax rate applicable to continuing operations for the three
months ended September 30, 1999 was 41.0%, 3 points higher than in the
first quarter of last year.
RESULTS FROM DISCONTINUED OPERATIONS
The Company did not make any revisions in estimate used to the established
reserve for discontinued operations established in the previous fiscal year
during the first quarter of fiscal year 2000.
SALES
Although steel shipments from the SBQ rod, bar and wire products increased
to 144,800 tons in the first quarter of fiscal 2000 from 143,000 in fiscal
1999, net sales from discontinued operations decreased 8.7% to $57,961,000
versus $63,454,000 for the first quarter of fiscal 1999. The decrease was
primarily due to unfavorable product mix and decreasing average selling
prices. The average selling price for all special bar quality products was
$404 per ton in the first quarter of fiscal 2000, down $43 from $447 per
ton in the first quarter of fiscal 1999.
COST OF SALES
For the first quarter of fiscal 2000, cost of sales (other than
depreciation and amortization) decreased from $65,531,000 in fiscal 1999 to
$64,082,000, or 2.3%, but increased as a percentage of net sales from
103.3% to 110.6%. The increase in cost of sales as a percentage of total
sales was primarily attributable to lower average selling prices. The
decrease in selling prices was partially offset by a slight decrease in
conversion cost and raw material billet cost. Conversion cost at the SBQ
rolling mill averaged $76 per ton in the first quarter of fiscal 2000
compared to $78 per ton in the same period last year. Average billet cost
for the SBQ division also decreased in the first quarter from $355 per ton
in fiscal 1999 to $334 per ton in fiscal 2000.
Depreciation and amortization expense for the first quarter of fiscal 2000
was $5,146,000 or 8.9% of net sales compared to $5,295,000 or 8.3% of net
sales in fiscal 1999.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A")
For the first quarter of fiscal 2000, selling, general and administrative
costs increased from $1,780,000 to $3,097,000, or 74%, over the first
quarter of fiscal 1999.
PRE-OPERATING/START-UP
Pre-operating/start-up costs applicable to discontinued SBQ operations
decreased 14.3% to $8,145,000 in the first quarter of fiscal 2000 compared
with $9,502,000 for the same period last year. These costs represent
continuing excess production costs associated with the start-up of the
Memphis, Tennessee melt shop, which began operations in November 1997. The
Company has initiated a program to correct the equipment problems that are
currently preventing the Memphis facility from achieving its production
goals. The program will require capital expenditures of approximately $5
million, and should enable the Memphis facility to sustain a production
level of at least 75% of capacity by January, 2000.
OTHER INCOME AND EXPENSES
Other non-operating income reported from discontinued operations were
$93,000 in the first quarter of fiscal 2000, down from $941,000 in fiscal
1999.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
Net cash provided by operating activities of continuing operations was
$19.5 million in the first quarter of fiscal 2000, compared to $46.3
million in fiscal 1999. The change of $26.8 million was primarily caused by
reduced income of $5.2 million, and increases in accounts receivable of
$7.3 million and inventories of $11.3 million. Days sales outstanding in
accounts receivable increased to 43 days in the first quarter and inventory
levels increased because of changing market conditions and preparation for
higher shipment that are expected levels in the spring. During the quarter,
approximately $42 million was used to support discontinued operations in
connection with equipment modifications and inventory levels necessary to
support the Company's near-term operational goals for the SBQ operations.
Based upon the Company's current plans for the SBQ operations and the
implementation of operational and financial measures to support such plans,
the Company does not expect the SBQ operations in the near term will
require cash to the same extent as in the first quarter.
INVESTING ACTIVITIES
Net cash used in investing activities of continuing operations was $5.2
million in the first quarter of fiscal 2000, compared to $25.7 million in
fiscal 1999. The change was attributable to the level of capital
expenditures decreasing on such major projects as the Memphis melt shop and
the Cartersville mid-section mill.
FINANCING ACTIVITIES
Net cash provided by financing activities of continuing operations was
$29.2 million in the first three months of fiscal 2000, compared with $23.3
million in the same three month period last year. On October 12, 1999, the
Company and its lenders executed amendments to the debt and letter of
credit agreements. For further explanation, please refer to page 21 in
the Company's most recently filed Form 10-K for the fiscal year ended June
30, 1999.
WORKING CAPITAL
Working capital at the end of the first quarter was $155.4 million,
compared to $110.4 million at the June 30, 1999. The $44.9 million increase
in working capital was primarily attributable to significant increases in
accounts receivable and inventories for both continuing and discontinued
operations.
YEAR 2000 ISSUES
The following Year 2000 discussion is provided in response to the
Securities and Exchange Commission's interpretive statement expressing its
view that public companies should include detailed discussion of Year 2000
issues in their 10Q submission of the MD&A.
The Company estimates that 95% of the cost has been spent to date in
addressing the Year 2000 issue. For further explanation, refer to page 23 of
the Company's most recently filed Form 10-K for the fiscal year ended June
30, 1999.
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 September 30, 1999, the Company had fixed rate long-term
debt with a carrying value of $281.5 million and variable rate borrowings
of $270.1 million outstanding. Assuming a hypothetical 10% adverse change
in interest rates, the fair value of the Company's fixed rate debt would
decrease by $15.8 million and the Company would incur an additional $558
thousand of quarterly 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Refer to the information in MANAGEMENT'S DICUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS under the caption MARKET RISK
SENSITIVE INSTRUMENTS
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this report:
(27) Financial Data Schedule
(b) Reports on Form 8-K - During the quarter ended September 30, 1999, the
Company filed the following reports on Form 8-K:
o Report dated August 3, 1999 (Items 5 and 7), with respect to the
Amended By-laws of the Company
o Report dated September 29, 1999 (Items 5 and 7), with respect to
current developments regarding the Company's financing and SEC
filings
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Birmingham Steel Corporation
November 15, 1999
/s/ Kevin E. Walsh
-------------------------------
Kevin E. Walsh
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1999 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> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1998
<PERIOD-END> SEP-30-1999 SEP-30-1998
<CASH> 978 902
<SECURITIES> 0 0
<RECEIVABLES> 79,389 93,023
<ALLOWANCES> 626 1,259
<INVENTORY> 111,630 142,246
<CURRENT-ASSETS> 311,860 350,290
<PP&E> 434,761 431,002
<DEPRECIATION> 10,647 9,665
<TOTAL-ASSETS> 907,431 1,158,014
<CURRENT-LIABILITIES> 156,480 112,617
<BONDS> 12,500 12,500
0 0
0 0
<COMMON> 299 298
<OTHER-SE> 235,833 460,309
<TOTAL-LIABILITY-AND-EQUITY> 907,431 1,158,014
<SALES> 176,802 207,502
<TOTAL-REVENUES> 176,802 207,502
<CGS> 148,566 178,454
<TOTAL-COSTS> 148,566 178,484
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 4,497 1,363
<INTEREST-EXPENSE> 6,278 5,235
<INCOME-PRETAX> 9,772 17,749
<INCOME-TAX> 4,006 6,823
<INCOME-CONTINUING> 5,766 10,926
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,766 10,926
<EPS-BASIC> .19 0.03
<EPS-DILUTED> .19 0.03
</TABLE>
