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}
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Check the appropriate box:
{ } Preliminary Proxy Statement
{ } Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
{ } 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)
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{ } Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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computed pursuant to Exchange Act Rule 0-11:
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(5) Total fee paid.
- ----------
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{ } 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
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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:
Quarter Year
o EPS from Core Operatins (excluding
start-up expenses) $0.20 $1.19
o EPS from Continuing Operations ($0.59) $0.11
o EPS from Discontinued Operations ($6.31) ($7.72)
o Reported EPS ($6.90) ($7.61)
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.
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 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-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]
BIRMINGHAM STEEL CORPORATION
FINANCIAL HIGHLIGHTS
(In thousands except for per share date)
Three Months Ended June 30,
---------------------------------------
1999 1998
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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
Average shares outstanding 29,673,678 29,646,728
Twelve Months Ended June 30,
----------------------------------------
1999 1998
----------------------------------------
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
Average shares outstanding 29,481,185 29,674,081
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED INCOME STATEMENTS
(In thousands, expect 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 26,673,678 29,646,728 29,481,185 29,674,081
=============== ============ ============ ===========
</TABLE>
