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SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[x] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BIRMINGHAM STEEL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as specified in its charter)
- --------------------------------------------------------------------------------
(Name of person(s) filing proxy statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transactions:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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Birmingham Steel Corporation logo
September 17, 1999
Dear Birmingham Steel Corporation Shareholder:
We are pleased to report that Birmingham Steel Corporation's core mini-mill
and scrap operations achieved strong results for both the 1999 fourth quarter
and full year.
As discussed in the attached press release, your Company's core operations
were solidly profitable despite record imports and intense pressure on steel
prices and margins -- some of the worst steel industry conditions I have seen in
my 43 years in this business.
Although the Company reported a net loss for the quarter and year, that
loss was mainly associated with our SBQ operations, including restructuring
charges. As you may know, on August 18 we announced our intention to divest this
and other unprofitable non-core operations. This restructuring process is
already well under way and, with the restructuring charges behind us, we fully
expect Birmingham Steel to return to net profitability in the current quarter.
Birmingham Steel is moving forward as a highly focused, efficient and
profitable producer of merchant and rebar products serving a broad range of
industrial customers. We are confident, moreover, that upon completion of our
strategic restructuring, Birmingham Steel will be solidly positioned to:
- achieve strong operational and financial results;
- continue to reduce debt; and
- increase both our strategic and financial flexibility.
These are the drivers behind enhanced profitability, the key to our
overriding objective of building shareholder value.
On behalf of the Board of Directors, management team and all of our
dedicated employees, we thank you for your continued support of Birmingham
Steel.
Sincerely,
[/s/ Robert A. Garvey]
Robert A. Garvey
Chairman and Chief Executive Officer
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BIRMINGHAM STEEL REPORTS STRONG FOURTH-QUARTER AND FISCAL 1999
RESULTS FOR ITS CORE MINI-MILL AND SCRAP OPERATIONS
NET LOSS FOR QUARTER AND YEAR REFLECTS $191.3 MILLION CHARGE FOR
DISCONTINUED OPERATIONS
AND WRITE-OFF OF WEST COAST SCRAP BUSINESS
-- "OUR CORE MINI-MILL AND SCRAP OPERATIONS ARE HIGHLY EFFICIENT
AND SOLIDLY PROFITABLE, DESPITE RECORD IMPORTS AND REDUCTIONS
IN STEEL PRICES AND MARGINS," SAYS CEO ROBERT A. GARVEY --
BIRMINGHAM, Ala., Sept. 15, 1999 -- Birmingham Steel Corporation (NYSE:
BIR) today announced that its core mini-mill and scrap operations achieved
strong financial results for the fourth quarter and fiscal year ended June 30,
1999. The Company also reported a consolidated net loss for the fiscal fourth
quarter and year, which was primarily attributable to its decision to divest its
SBQ (special bar quality) operations and to write-off the Company's 50% stake in
its unprofitable Pacific Coast Recycling joint venture.
Financial highlights for the quarter and year ended June 30, 1999 include:
<TABLE>
<CAPTION>
QUARTER YEAR
------- ------
<S> <C> <C>
- - EPS from Core Operations (excluding start-up expenses).... $0.20 $1.19
- - EPS from Continuing Operations............................ ($0.59) $0.11
- - EPS from Discontinued Operations.......................... ($6.31) ($7.72)
- - Reported EPS.............................................. ($6.90) ($7.61)
</TABLE>
CORE OPERATIONS
Despite continued adverse industry conditions, including record-high import
levels that constrained shipping levels and reduced selling prices, Birmingham
Steel achieved strong fourth-quarter and full-year results throughout its core
merchant and rebar businesses. The Company's core mini-mill operations, which
together provide industrial customers a broad range of merchant and rebar
products, include facilities in Kankakee, Illinois; Joliet, Illinois;
Birmingham, Alabama; Jackson, Mississippi; Seattle, Washington; and
Cartersville, Georgia. The Company's core businesses also include scrap
operations in Jackson, Mississippi and Vancouver, British Columbia, and the Port
Everglades Steel sales and distribution business in Ft. Lauderdale, Florida.
For the fourth quarter ended June 30, 1999, Birmingham Steel's core
operations generated earnings before interest, taxes, depreciation and
amortization ("EBITDA") of $26.5 million and operating income of $15.7 million.
EBITDA and operating income from core operations were $35.3 million and $18.7
million, respectively, in the fourth quarter last year. EBITDA and operating
income from core operations in the fiscal 1999 fourth quarter also included $3.9
million of start-up expenses associated with the new Cartersville rolling
facility, which began start-up operations in March, 1999. In the same period
last year, pre-operating expenses at Cartersville were $616,000. For the fiscal
1999 fourth quarter, earnings per share from core operations, excluding start-up
expenses, were $0.20.
Fiscal 1999 fourth-quarter shipments by the Company's core operations
increased significantly from the immediately preceding quarter, reflecting a
modest reduction in steel imports. Fourth-quarter net sales from core operations
were $184.0 million, versus $214.2 million last year, as shipments fell to
642,000 tons from 678,000 tons in the same period last year.
For the fiscal year ended June 30, 1999, core operations generated EBITDA
of $106.9 million and operating income of $57.0 million. EBITDA and operating
income from core operations in fiscal 1998 were $116.4 million and $66.0
million, respectively. Core operations EBITDA in fiscal 1999 also included pre-
operating and start-up expenses at Cartersville of $12.9 million, versus $1.3
million in fiscal 1998. Earnings per share from core operations, excluding
start-up expenses, were $1.19.
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Net sales from core operations in fiscal 1999 were $709.9 million, versus
$836.9 million in the prior year. Shipments from core operations in fiscal 1999
were 2,389,000 tons, compared with 2,667,000 tons in the prior year.
Robert A. Garvey, Chairman and Chief Executive Officer, said: "Our core
mini-mill and scrap operations are highly efficient and solidly profitable,
despite record imports and resulting reductions in steel prices and margins.
Reflecting the strength of our core operations and with the restructuring
charges behind us, we fully expect the Company to return to net profitability in
the first quarter of fiscal 2000. I am confident, moreover, that once the
Company's strategic restructuring is completed, we will be well-positioned to
achieve increasingly strong operational and financial results, continue to
reduce debt, increase our strategic and financial flexibility and, in turn,
achieve our overriding objective of building shareholder value."
Brian F. Hill, who joined the Company in June 1999 as Chief Operating
Officer after 15 years in the steel and steel-related businesses with Cargill,
Inc., including serving as Executive Vice President of Operations at North Star
Steel, said: "Birmingham Steel has grown from what was essentially a one-product
(rebar) company serving only one industry (construction), to a well-balanced,
broadly based company providing a wide range of merchant and rebar products to
multiple industries. While adverse market conditions and operational challenges
in the Company's SBQ operations have masked the strength and progress of our
core merchant, rebar and scrap businesses, I am confident that these core
operations will provide the platform for the future growth and success of
Birmingham Steel."
NON-CORE OPERATIONS
As announced on August 18th, Birmingham Steel is pursuing a strategic
restructuring in which the Company will focus on its strong and profitable core
mini-mill and scrap operations. Accordingly, the Company announced that it will
divest its SBQ operations, which originally became part of the Company when it
acquired American Steel & Wire Corporation (AS&W) in 1993.
The Company's decision to discontinue its SBQ operations, which include its
Memphis and Cleveland facilities and the Company's 50% stake in American Iron
Reduction, LLC ("AIR"), was attributable to continuing financial and operational
challenges that have required a major and continuing commitment of management
and financial resources and have masked the strength and success of the
Company's core rebar, merchant and scrap businesses. Losses from the SBQ
operations have also constrained the Company's financial flexibility by
significantly increasing its debt level.
Mr. Garvey said: "Questionable strategic and operational decisions made
before 1996 led directly to the continuing challenges experienced by the SBQ
operations and the adverse impact to shareholder value that has occurred over
the past three years."
Mr. Garvey continued: "Although the SBQ operations have made meaningful
progress, we believe that the long-term interests of the Company's shareholders
will be better served by building upon our core rebar, merchant and scrap
operations. We intend to seek a buyer for the SBQ operations whose business
strategy and operational resources are more aligned with those operations, and
who is prepared to help the SBQ operations realize their full potential. We
believe the SBQ operations have significant potential in a consolidating
industry. Meanwhile, we plan to support the SBQ operations to enhance their
ability to achieve continued operational and financial progress."
Also as previously announced, the Company is exploring its options with
regard to its investment in Pacific Coast Recycling, LLC, a West Coast scrap
joint venture. Because the activities of PCR are not strategic to the Company's
core operations, and also because of continued economic distress in the Asian
export market for scrap, the Company has decided to write-off its investment in
PCR.
REPORTED CONSOLIDATED RESULTS FOR FISCAL 1999 FOURTH-QUARTER AND FULL-YEAR
In the financial statements for the fourth quarter and fiscal year ended
June 30, 1999, the Memphis, Cleveland and AIR operations have been presented as
Discontinued Operations. In accordance with the provisions of generally accepted
accounting principles ("GAAP"), losses in fiscal 1999 associated with PCR
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have been included in the Company's results from Continuing Operations. However,
as a result of the write-down of the PCR investment in the fiscal 1999 fourth
quarter, future losses at PCR are not expected to adversely affect the Company's
financial results.
On a consolidated basis, the Company's net loss for the fourth quarter of
fiscal 1999 from all operations, including Continuing Operations and
Discontinued Operations, was $204.7 million, or $6.90 per share. For the fiscal
year ended June 30, 1999, the Company reported a consolidated net loss of $224.2
million, or $7.61 per share. The consolidated net loss in the fourth quarter of
the prior fiscal year was $4.2 million, or $0.14 per share. Net income for the
fiscal year ended June 30, 1998 was $1.6 million, or $0.05 per share.
Financial Results from Continuing Operations
For the fourth quarter of fiscal 1999, the Company reported a net loss from
Continuing Operations of $17.4 million, or $0.59 per share. Because of the
special income tax treatment afforded to capital loss transactions, which the
Company's write-off of its investment in PCR is considered, the Company's
effective tax rate for Continuing Operations for fiscal year 1999 was 81.9%.
The fourth-quarter results include a pre-tax charge of $19.3 million
related to the write-off of the Company's 50% stake in PCR and $3.9 million of
start-up expenses associated with the new Cartersville rolling mill. Excluding
losses associated with PCR and start-up expenses, earnings per share from
Continuing Operations for the fourth quarter were $0.20.
For the year-ended June 30, 1999, the Company's Continuing Operations
recorded net income of $3.3 million, or $0.11 per share. Excluding losses
associated with PCR and start-up expenses related to Cartersville, earnings per
share from Continuing Operations were $1.19.
Financial Results from Discontinued Operations
For the fourth quarter of fiscal 1999, the Company recorded a net loss from
Discontinued Operations of $187.3 million, or $6.31 per share. Losses from
Discontinued Operations included: (1) the fiscal 1999 fourth-quarter loss of
$14.1 million for these operations; and (2) a $173.2 million provision for the
estimated losses to be incurred in connection with the disposition of the SBQ
operations. For the fiscal year ended June 30, 1999, the net loss from
Discontinued Operations was $227.5 million, or $7.72 per share.
OTHER MATTERS
The Company's total debt outstanding at June 30, 1999 was $521.5 million,
down from a peak of $617.2 million in August 1998. Total debt at June 30, 1998
was $568.9 million.
The Company is currently in discussions with its lenders concerning the
terms of appropriate modifications of its various debt agreements, including the
terms of an appropriate collateral package, to ensure availability of funds
under the Company's outstanding debt facilities. The Company expects to complete
these discussions prior to the filing of its Annual Report on Form 10-K.
Credit Suisse First Boston is the Company's principal financial advisor on
matters related to the restructuring, and will be assisted by Banc of America
Securities LLC.
Birmingham Steel operates in the mini-mill sector of the steel industry and
conducts operations at facilities located across the United States. The common
stock of Birmingham Steel Corporation is traded on the New York Stock Exchange
under the symbol "BIR."
NOTICE: except for historical information, the matters described in this
press release are forward-looking statements within the meaning of the
safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and uncertainties that may
cause actual results to differ materially, including economic conditions, market
demand factors, equipment breakdowns or failures, Birmingham Steel's success in
implementing the restructuring plan, as well as other risks described from time
to time in the Company's periodic and special filings with Securities and
Exchange Commission. Any forward-
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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.
Birmingham Steel Corporation (the "Company") and certain other persons
named below may be deemed to be participants in the solicitation of proxies in
connection with the 1999 annual meeting of shareholders. The participants in
this solicitation may include the directors of the Company (William J. Cabaniss,
Jr., C. Stephen Clegg, Alfred C. DeCrane, Jr., E. Mandell de Windt, Robert A.
Garvey, E. Bradley Jones, Robert D. Kennedy, Richard de J. Osborne and John H.
Roberts) and the following executive officers, members of management and
employees of the Company: Robert A. Garvey (Chairman and Chief Executive
Officer), Brian F. Hill (Chief Operating Officer), Kevin E. Walsh (Executive
Vice President -- Chief Financial Officer), William R. Lucas, Jr. (Managing
Director -- Southern Region), Jack R. Wheeler (Managing Director -- Northern
Region), Raymond J. Lepp (Managing Director -- Western Region), J. Daniel
Garrett (Vice President -- Finance & Control). Catherine W. Pecher (Vice
President -- Administration & Corporate Secretary), Charles E. Richardson, III
(General Counsel), Philip L. Oakes (Vice President -- Human Resources), W. Joel
White (Vice President -- Information Technology) and Robert G. Wilson (Vice
President -- Business Development). As of the date of this communication, none
of the foregoing participants individually owned in excess of 1 percent of the
Company's common stock or in the aggregate in excess of 3 percent of the
Company's common stock.
The Company has retained Credit Suisse First Boston Corporation ("CSFB")
and Banc of America Securities LLC ("BAS") to act as its financial advisors, for
which CSFB and BAS will receive customary fees, as well as reimbursement of
reasonable out-of-pocket expenses. In addition, the Company has agreed to
indemnify CSFB, BAS and certain related persons against certain liabilities,
including liabilities under federal securities laws, arising out of their
engagement. Each of CSFB and BAS are investment banking firms that provide a
full range of financial services for institutional and individual clients.
Neither CSFB nor BAS admit that it or any of its directors, officers or
employees is a "participant," as defined in Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended, in the solicitation, or that
Schedule 14A requires the disclosure of certain information concerning CSFB or
BAS. In connection with their role as financial advisors to the Company, each of
CSFB and BAS, and the following investment banking employees of CSFB or BAS, as
the case may be, may communicate in person, by telephone or otherwise with a
limited number of institutions, brokers or other persons who are stockholders of
the Company: Peter R. Matt, William C. Sharpstone and Murari S. Rajan of CSFB;
and Gidon Y. Cohen, Shawn B. Welch and Sumner T. Farren of BAS. In the normal
course of their business, both CSFB and BAS regularly buy and sell securities
issued by the Company for their own account and for the accounts of their
respective customers, which transactions may result in CSFB, BAS or their
respective associates having a net "long" or net "short" position in the
Company's securities, or option contracts or other derivatives in or relating to
such securities. As of September 3, 1999, CSFB had a net long position of 14,200
shares of the Company's common stock and as of September 8, 1999, BAS had a net
long position of 264,224 shares of the Company's common stock.
CONTACT: J. Daniel Garrett, 205-970-1213
or
Roy Winnick/Roanne Kulakoff
Kekst and Company
212-521-4842 or 4837
[TABLES FOLLOW]
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BIRMINGHAM STEEL CORPORATION
FINANCIAL HIGHLIGHTS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenues.................................................... $ 183,967 $ 214,208
Net income (loss) from continuing operations................ (17,378) 5,780
Loss from discontinued operations........................... (187,285) (10,025)
Net Loss.................................................... (204,663) (4,245)
Earnings per share:
From continuing operations................................ $ (0.59) $ 0.19
From discontinued operations.............................. $ (6.31) $ (0.33)
Net Loss.................................................. $ (6.90) $ (0.14)
From core operations (excluding start-up costs)........... $ 0.20 $ 0.51
Weighted average shares outstanding......................... 29,673,678 29,646,728
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED JUNE 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenues.................................................... $ 709,876 $ 836,875
Net income from continuing operations....................... 3,284 27,945
Loss from discontinued operations........................... (227,520) (26,316)
Net Income (Loss)........................................... (224,236) 1,629
Earnings per share:
From continuing operations................................ $ 0.11 $ 0.94
From discontinued operations.............................. $ (7.72) $ (0.89)
Net Income (Loss)......................................... $ (7.61) $ 0.05
From core operations (excluding start-up costs)........... $ 1.19 $ 1.37
Weighted average shares outstanding......................... 29,481,185 29,674,081
</TABLE>
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BIRMINGHAM STEEL CORPORATION
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT NUMBER OF SHARES AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, YEAR ENDED JUNE 30,
--------------------------- -------------------------
1999 1998 1999 1998
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales................................... $ 183,967 $ 214,208 $ 709,876 $ 836,875
Cost of sales:
Other than depreciation and
amortization........................... 143,901 172,575 568,688 689,347
Depreciation and amortization............. 10,887 9,544 40,227 37,954
----------- ----------- ----------- -----------
Gross profit.............................. 29,179 32,089 100,961 109,574
Provision for loss on mill modernization
program, pre-operating/start-up costs and
unusual items............................. 3,923 616 12,854 1,305
Selling, general and administrative......... 11,287 13,148 36,625 44,214
Interest.................................... 9,396 2,231 24,248 17,261
Minority Interest........................... 1,771 400 5,496 1,643
----------- ----------- ----------- -----------
6,344 16,494 32,730 48,437
Other income, net........................... (7) 6,966 9,931 12,794
Loss from equity investments................ (20,027) (14,268) (24,563) (18,326)
----------- ----------- ----------- -----------
Income (loss) from continuing operations
before income taxes....................... (13,690) 9,192 18,098 42,905
Provision for (benefit from) income taxes... 3,688 3,412 14,814 14,960
----------- ----------- ----------- -----------
Income (loss) from continuing operations.... $ (17,378) $ 5,780 $ 3,284 $ 27,945
Discontinued operations:
Loss from operation of SBQ division (net
of income tax benefit)................. (14,102) (10,025) (54,337) (26,316)
Loss on disposal of SBQ division, including
provision for estimated operating losses
during phase-out period (net of income tax
benefit).................................. (173,183) -- (173,183) --
----------- ----------- ----------- -----------
Net income (loss)........................... $ (204,663) $ (4,245) (224,236) 1,629
=========== =========== =========== ===========
Weighted average shares outstanding......... 29,673,678 29,646,728 29,481,185 29,674,081
=========== =========== =========== ===========
</TABLE>
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