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 December 31, 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: 30,380,741 Shares of Common
Stock, of the registrant were outstanding at February 18, 2000.
<PAGE>
PART I - FINANCIAL INFORMATION (unaudited)
BIRMINGHAM STEEL CORPORATION
Consolidated Balance Sheets
(in thousands, except per share data)
December 31, June 30,
ASSETS 1999 1999
(Unaudited) (Audited)
----------------- -----------------
Current assets:
Cash and cash equivalents $ 778 $ 935
Accounts receivable, net of
allowance for doubtful accounts
$1,285 at December 31, 1999
and $1,207 at June 30, 1999 94,932 104,462
Inventories 199,107 161,801
Other 6,943 53,324
----------------- -----------------
Total current assets 301,760 320,522
Property, plant and equipment
Land and buildings 296,043 293,363
Machinery and equipment 623,293 714,094
Construction in progress 23,588 30,683
----------------- -----------------
942,924 1,038,140
Less accumulated depreciation (293,204) (272,579)
Less allowance for loss on
disposal of SBQ assets - (158,523)
----------------- -----------------
Net property, plant and equipment 649,720 607,038
Excess of cost over net assets
acquired 16,706 17,769
Other 32,873 25,408
----------------- -----------------
Total assets $ 1,001,059 $ 970,737
================= =================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 99,811 $ 96,336
Accrued interest payable 3,764 1,506
Accrued payroll expenses 11,533 9,930
Accrued operating expenses 7,971 10,636
Reserve for potential loss on
purchase commitment 10,238 -
Other current liabilities 35,362 24,978
Current portion of long term debt 161 10,157
Reserve for discontinued operations - 56,544
----------------- -----------------
Total current liabilities 168,840 210,087
Deferred liabilities 12,440 10,581
Reserve for potential loss on
purchase commitment 30,000 -
Long-term debt less current portion 571,801 511,360
Minority interest in subsidiary 2,295 7,978
Stockholders' equity:
Preferred stock, par value
$.01; authorized: 5,000 shares - -
Common stock, par value
$.01; authorized: 75,000
shares; issued: 29,980 at
December 31, 1999 and
29,836 at June 30, 1999 300 298
Additional paid-in capital 329,846 329,056
Treasury stock, 120 and 150
shares at December 31,
1999 and June 30, 1999,
respectively, at cost (611) (791)
Unearned compensation (919) (718)
Retained earnings deficiency (112,933) (97,114)
----------------- -----------------
Total stockholders' equity 215,683 230,731
----------------- -----------------
Total liabilities and
stockholders' equity $ 1,001,059 $ 970,737
================= =================
See accompanying notes.
<PAGE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
Three months ended Six months ended
December 31, December 31,
-------------------- ----------------------
1999 1998 1999 1998
-------------------- ----------------------
Net sales $ 231,530 $ 226,853 $ 466,293 $ 497,810
Cost of sales:
Other than depreciation
and amortization 211,362 197,079 406,598 426,103
Depreciation and amortization 15,922 15,024 31,715 29,983
-------- ------- ------- -------
Gross profit 4,246 14,750 27,980 41,724
Start-up and restructuring
costs and other unusual
items 185,643 8,979 198,848 19,844
Selling, general and
administrative 13,850 8,932 28,341 20,421
Interest 13,126 8,583 23,554 17,383
------- ------ ------ ------
(208,373) (11,744) (222,763) (15,924)
Other income, net 1,074 4,413 2,049 11,286
Loss from equity investments (13,987) (1,676) (13,979) (3,355)
Minority interest in loss
of subsidiary 3,924 1,177 5,682 1,929
------- ------ ------ ------
Loss from continuing
operations before income
taxes (217,362) (7,830) (229,011) (6,064)
Provision for income tax
benefits (46,830) (2,864) (42,824) (2,122)
-------- ------- ------- -------
Loss from continuing
operations (170,532) (4,966) (186,187) (3,942)
Discontinued Operations
Reversal of loss on disposition,
(net of income taxes
of $78,704) 151,763 - 173,183 -
------- ------ -------- -------
Loss before extraordinary
item (18,769) (4,966) (13,004) (3,942)
Restructuring of debt,
(net of income
taxes of $924) (1,330) - (1,330) -
------- ------ -------- -------
Net loss $ (20,099) $ (4,966) $(14,334) $ (3,942)
Weighted average shares ======= ======= ========= ========
outstanding 29,763 29,254 29,734 29,371
======= ======= ========= ========
Loss from continuing
operations $ (5.74) $ (0.17) $ (6.26) $ (0.13)
Reversal of loss on
disposition of
discontinued operations,
(net of income taxes) 5.10 - 5.82 -
Restructuring of debt,
(net of income taxes) (0.04) - (0.04) -
------- ------- -------- -------
Net loss $ (0.68) $ (0.17) $ (0.48) $ (0.13)
======= ======== ======== =======
Cash dividends declared
per share $ 0.025 $ 0.100 $ 0.025 $ 0.100
======= ======== ======== =======
See accompanying notes.
<PAGE>
BIRMINGHAM STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
December 31,
--------------------------------
1999 1998
(Unaudited) (Unaudited)
-------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (14,334) $ (3,942)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Reversal of loss on discontinued
operations, (net of income taxes
of $78,704) (173,183) -
Depreciation and amortization 31,715 29,983
Provision for doubtful accounts receivable 1,285 (200)
Deferred income taxes (42,824) (1,568)
Minority interest in loss of subsidiary (5,682) (1,929)
Loss from equity investments 13,979 3,355
Accrued loss on purchase commitment 40,238 -
Writeoff of goodwill 22,134 -
Asset impairment charges 98,111 -
Other (280) 986
Changes in operating assets and liabilities:
Accounts receivable 8,245 30,085
Inventories (37,306) 35,477
Other current assets 11,426 2,525
Accounts payable 3,475 (21,353)
Other accrued liabilities 12,013 (19,080)
Deferred compensation 1,426 900
------- --------
Net cash (used in) provided by
operating activities (29,562) 55,239
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (13,011) (71,889)
Proceeds from lease agreement - 7,779
Proceeds from disposal of property,
plant, and equipment 1,030 2,584
Additions to other non-current assets (3,039) (2,242)
Reductions in other non-current assets 465 2,070
-------- --------
Net cash used in investing activities (14,555) (61,698)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings and repayments - (10,000)
Payment of debt issue costs (5,000) -
Payments on long-term debt (10,000) (59)
Borrowings under revolving credit facility 727,270 1,050,646
Payments on revolving credit facility (666,825) (1,027,045)
Purchase of treasury stock - (3,209)
Cash dividends paid (1,485) (3,686)
-------- ----------
Net cash provided by financing activities 43,960 6,647
-------- ----------
Net (decrease) increase in cash and
cash equivalents (157) 188
Cash and cash equivalents at:
Beginning of period 935 902
-------- ----------
End of period $ 778 $ 1,090
======== ==========
See accompanying notes.
<PAGE>
BIRMINGHAM STEEL CORPORATION
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. The Company also owns equity interests
in scrap collection and processing operations. The Company's rebar/merchant
segment 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 warehouses and distribution facilities which are used to distribute its
rebar and merchant product.
In addition, the Company's SBQ (special bar quality) segment, which was reported
in discontinued operations prior to the second quarter of fiscal 2000, 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 Unites States and Canada.
Basis of Presentation
The accompanying unaudited consolidated financial statements are prepared in
accordance with accounting principals generally accepted in the United States
(GAAP) for 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.
The balance sheet at June 30, 1999 has been derived from the audited financial
statements at that date, and includes reclassifications to reflect the reversal
of discontinued operations accounting for the Company's SBQ line of business
(see Note 2).
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. 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. Operating results for the interim periods reflected
herein are not necessarily indicative of the results that may be expected for
full fiscal year periods.
2. DISCONTINUED OPERATIONS SUBSEQUENTLY RETAINED
In fiscal 1999, prior management of the Company announced plans 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). Accordingly, as
required by APB Opinion 30 (as interpreted by EITF 95-18) the operating results
of the SBQ division were reflected as discontinued operations in the Company's
annual financial statements for fiscal 1999 and in the first quarter of fiscal
2000. On January 31, 2000, subsequent to a change in management which occurred
after a prolonged proxy contest, new management announced the Company would no
longer reflect its SBQ operations as discontinued operations. The change was
required as a result of new management's decision to re-establish its
Cleveland-based American Steel & Wire (AS&W) in the SBQ markets by purchasing
semi-finished steel billets from qualified third-party suppliers. Management's
decision to continue operating the AS&W facilities was based on the following
considerations:
o To date the Company's attempts to sell the facility have not been
successful, and a sale in the current economic climate would not generate
sufficient proceeds to pay down a meaningful amount of the Company's
long-term debt.
o New management believes there is a viable long-term market for AS&W's
high-quality rod, bar and wire products.
o The Company has identified several potential sources of high-quality
billets for the AS&W operations to replace the Memphis production as
primary supply source.
Furthermore, management concluded that a sale of the entire SBQ line of business
by the end of fiscal 2000, as had been previously anticipated, is no longer
likely based upon the results of selling efforts to date and current market
conditions. In accordance with EITF 90-16, Accounting for Discontinued
Operations Subsequently Retained, the results of operations of the SBQ division
are reported within continuing operations for the second quarter. In addition,
the operating results of the SBQ division for all periods prior to October 1,
1999 (previously reflected in discontinued operations) have been (or will be)
reclassified from discontinued operations to continued operations. As a result
of unwinding the discontinued operations treatment of the SBQ division, the
Company reversed the remaining balance of the reserves for losses on disposal
and operating losses, and their related tax effects, in the second quarter of
fiscal 2000. The reversal of previously established reserves (net of tax)
increased net income by $151,763,000 in the second quarter ($5.10 per share) and
$173,183,000 ($5.82 per share) for the six months ended December 31, 1999.
Significant components of the reversals are as follows: (in thousands)
Three Months Ended Six Months Ended
December 31, 1999 December 31, 1999
Reserve for estimated loss
on disposal $ 195,343 $ 195,343
Reversal and reclassification
of SBQ operating losses 35,124 56,544
Less income taxes (78,704) (78,704)
----------------- -----------------
Net reversal $ 151,763 $ 173,183
================= =================
Refer to Note 2 to the Company's 1999 consolidated financial statements for
further information on the nature and components of the estimated loss on
disposal.
Following is a summary of selected financial data for the SBQ division for prior
periods that were previously classified in discontinued operations (in
thousands):
Three Months
Ended Fiscal Fiscal Fiscal
September 30, 1999 1999 1998 1997
------------------ -------- -------- ----------
Net Sales $ 57,961 $270,398 $299,144 $ 311,233
Loss before income taxes $(21,420) $(85,261) $(40,112) $ (7,912)
In the Company's Form 10-Q for the quarter ended September 30, 1999, the pre-tax
loss from the SBQ division was charged to the balance sheet reserve that had
been established in fiscal 1999. The divisions operating results for the second
quarter are presented in continuing operations (see Note 8 for segment
information).
Following is a summary of SBQ assets and liabilities at June 30, 1999 (as
reclassified in the accompanying balance sheet) and as reported in the
accompanying unaudited consolidated balance sheet at December 31, 1999 (in
thousands):
December 31, 1999 June 30, 1999
Current Assets:
Accounts Receivable, net $ 28,171 $ 32,414
Inventories 75,233 61,471
Other 521 1,303
------------------- -----------------
$ 103,925 $ 95,188
Non-current Assets:
Net property, plant
and equipment, less
valuation allowance of
$85,000 at12/31/99 and
allocated loss on disposal
of $158,523 at 6/30/99 233,880 121,082
Goodwill and Other Non-Current
Assets, net of reserve for
loss of $22,134 635 1,446
Investment in American Iron
Reduction, LLC, net of reserve
for loss on permanent impairment
of $13,889 - -
--------------------- -----------------
Total SBQ division assets, net of
valuation allowances and reserves $ 338,440 $ 217,716
Current liabilities:
Accounts payable (18,281) (35,190)
Accrued loss on purchase
commitment-current (10,238) -
Other accrued expenses (13,656) (14,440)
--------------------- -----------------
(42,175) (49,630)
Non-current liabilities:
Long term debt (42,159) (42,224)
Other non-current liabilities (1,782) (1,414)
Accrued loss on purchase
commitment-non-current (30,000) -
--------------------- -----------------
Total SBQ division liabilities (116,116) (93,268)
--------------------- -----------------
Net assets (liabilities) of
SBQ division $ 222,324 $ 124,448
===================== =================
As reflected in the table above, after reversing the previously established
reserves and allowances for losses on disposal, the Company evaluated the SBQ
assets for impairment. The Company also reconsidered the adequacy of its
reserves and provisions for contingencies, contract losses and other issues that
developed during the quarter related to both the rebar/merchant and SBQ
segments. The resulting charges and provisions are described in Note 3.
3. START-UP AND RESTRUCTURING COSTS AND OTHER UNUSUAL ITEMS
Start-up and restructuring costs and other unusual items consist of the
following (in thousands):
Three Months Ended Six Months Ended
December 31 December 31
--------------------- ----------------------
1999 1998 1999 1998
Start-up expenses: -------- --------- -------- ----------
Memphis $ 7,251 $ 7,248 $ 15,396 $ 16,749
Cartersville 4,372 1,694 8,870 2,828
Other - 37 - 267
Asset impairment:
Memphis facility 85,000 - 85,000 -
Assets taken out of service 13,111 - 13,111 -
SBQ division goodwill 22,134 - 22,134 -
Restructuring charges:
Severance and termination
benefits (Memphis) 2,473 - 2,473 -
Loss on purchase commitment 40,238 - 40,238 -
Other unusual items:
Proxy solicitation 5,986 - 6,548 -
Executive severance 5,078 - 5,078 -
-------- -------- -------- ---------
$185,643 $ 8,979 $198,848 $ 19,844
======== ======== ======== =========
The above charges are reflected in the Company's reportable segments as follows
(in thousands):
Three Months Ended Six Months Ended
December 31 December 31
----------------------- -------------------------
1999 1998 1999 1998
----------------------- -------------------------
Rebar/Merchant $ 17,483 $ 1,694 $ 21,981 $ 2,828
SBQ 157,096 7,248 165,241 16,749
Corporate -
unallocated 11,064 37 11,626 267
--------- ---------- ---------- -----------
$185,643 $ 8,979 $ 198,848 $ 19,844
========= ========== ========== ===========
As of December 31, 1999, none of the accrued provisions for Memphis severance
and termination benefits, executive severance or purchase commitment losses has
been paid. Approximately $4.9 million of the proxy solicitation costs accrued
have been paid, with the remainder expected to be paid or settled in the last
half of fiscal 2000.
A narrative description of the significant items summarized in the preceding
tables follows:
Asset Impairment: On December 28, 1999, the Company announced the suspension of
operations at its melt shop facility in Memphis, Tennessee. The results of the
Company's impairment review indicated that the Memphis facility was impaired.
Accordingly, in the second quarter of fiscal 2000, the Company recorded an
impairment charge of $85 million representing the difference between the
carrying value of those assets and the estimated fair market value (based on an
appraisal) less estimated costs to sell the facility. Management is actively
pursuing a sale or other disposition of the Memphis facility, including joint
venture opportunities. As a result of the Company's decision to continue SBQ
rolling operations in Cleveland using third party billet sources, there is no
operational requirement to continue billet production in Memphis. Accordingly,
Memphis will be treated as an asset held for disposition beginning January 1,
2000, and depreciation will no longer be recognized in future financial results.
The estimated impairment loss also reflects the expected loss on settlement of
an operating lease for equipment at Memphis. Substantially all of the steel
produced at Memphis has historically been transferred to Cleveland for further
processing. Virtually all of the Memphis facility's net sales are thus
eliminated in the consolidated financial statements. Consequently, closing the
Memphis facility is not expected to cause a decrease in SBQ net sales, provided
the Company is able to secure an adequate third-party billet source for the
Cleveland rolling mill.
Considerable management judgment is necessary to estimate fair value,
accordingly, the ultimate loss on disposition of the facility could vary
significantly from the estimates used in determining the loss in the second
quarter. The adjusted carrying value of the Memphis facility, which is reflected
in property, plant and equipment is $70.8 million at December 31, 1999.
Assets taken out of service: In the second quarter of fiscal 2000, the Company
wrote off equipment taken out of service and recognized losses of $13.1 million.
Severance and Termination Benefits: In connection with the shut down of the
Memphis facility, the Company accrued severance and other employee related exit
costs of approximately $2.5 million in the second quarter of fiscal 2000. The
Memphis shut down resulted in the termination of approximately 250 employees,
including management, administrative, and labor positions. In accordance with
EITF 94-3 Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity, the Company established a liability for
severance and other related costs associated with involuntary termination of
employees. The affected employees were notified of their terminations and their
severance benefits before the end of the quarter. Most of the Memphis employees
were terminated as of December 31, 1999 and the remaining employees are expected
to substantially complete mill clean-up and other exit activities by March 31,
2000.
Proxy Solicitation: These costs, principally consisting of legal, public
relations and other consulting fees, were incurred in the Company's defense of a
proxy contest led by The United Company Shareholder Group (the "United Group").
On December 2, 1999, the Company and United Group reached a settlement
appointing John D. Correnti as Chairman and Chief Operating Officer and
appointing nine new board members approved by the group. The charges include
approximately $1.6 million to reimburse the United Group for certain of its
costs in connection with the proxy fight. As agreed, this portion of the total
costs is expected to be settled in shares of the Company's common stock which
have not been issued.
Executive Severance: As a result of the proxy contest, the Company terminated
several executives, including the former CEO, in the second quarter of fiscal
2000. As described in the Company's Annual Report on Form 10-K, several key
executives of the Company are covered by the Company's executive severance plan,
which provides for specified benefits after a change in control of a majority of
the Board of Directors of the Company, among other triggering events. Through
December 31, 1999, four executives covered by the Plan were severed and other
terminations of covered executives have been announced in the third quarter. The
executive severance provision recorded in the second quarter reflects executives
who were terminated by the end of that quarter. Additional executive severance
expenses are expected in the third quarter.
Intangible Write-off: The $22.2 million impairment charge for intangible assets
represents the unamortized balance of goodwill related to the SBQ division as of
December 31, 1999. This goodwill was previously written down as a part of the
1999 provision for loss on discontinued operations. After reversing the loss on
disposition (as described in Note 2), the Company effectively restored the
previous charge as a component of continuing operations (as required by EITF
90-16). Thus, the second quarter of fiscal 2000 goodwill charge is principally a
reclassification within the income statement and had no impact on cash flows for
the quarter or on stockholder's equity. The goodwill remains impaired because
the estimated undiscounted cash flows of the SBQ division are insufficient to
cover the net carrying amount of the division's assets, considering recent
changes in management's operating strategy and its plan for continuing only the
Cleveland facility as a part on ongoing operations.
Loss on purchase commitment: Through June 30, 1999, the Company had made equity
investments of $23,750,000 in American Iron Reduction LLC (AIR), a 50% owned
joint venture that operates a direct reduced iron (DRI) facility in Convent,
Louisiana. DRI is a substitute for high grade scrap that, until December 31,
1999, was used to produce high quality billets at the Company's Memphis
facility. In the fourth quarter of 1999, the Company announced its intention to
dispose of its investment in AIR as a part of its plan of disposal for the SBQ
line of business. Given market conditions that persisted at that time, and
continue to persist in the second quarter of fiscal 2000, the Company concluded
that its investment in AIR was impaired and included the estimated loss on sale
of its investment in AIR ($13,889,000) in the fourth quarter of fiscal 1999 loss
on disposal of the SBQ business. As described in Note 2, in the second quarter
of fiscal 2000, new management of the Company concluded that a sale of the
entire SBQ line of business was unlikely to occur in the near term, and the
previously accrued loss on disposition of the SBQ disposition, including the
previous write-down of the Company's investment in AIR, was reversed. However,
the Company continues to believe that the investment in AIR remains impaired.
Accordingly, the previous write-down of the AIR investment has been reinstated
(reclassified) as a component of continuing operations in the second quarter of
fiscal 2000. The impairment loss is reflected in "Loss from equity investment"
in the consolidated statements of operations.
The AIR project is financed on a non-recourse basis to the Company and the other
venture partner. In the fourth quarter of fiscal 1999, AIR defaulted on $178.9
million of non-recourse project finance debt. The Company, AIR and the other
venture partner have continued workout discussions with AIR's lenders concerning
the project finance debt and the related DRI purchase commitments.
In connection with AIR's project financing agreements, the Company and its
venture partner have each agreed to purchase 50% of AIR's annual DRI production
(up to 600,000 metric tons), if tendered, at prices which are equivalent to
AIR's total production costs (excluding depreciation and amortization but
including debt service payments under AIR's project finance obligations). The
market price of DRI has remained approximately $30 per ton less than the price
that the venture partners are committed to pay under the DRI purchase commitment
to AIR. In the Company's Annual Report on Form 10-K for the year ended June 30,
1999, the Company disclosed that although it intended to dispose of its interest
in AIR as a part of its overall plan of disposal for the SBQ line of business,
the Company could remain obligated to purchase DRI from AIR after the disposal
of the SBQ business. At the end of fiscal 1999, the Company had no viable
strategy for terminating or settling the DRI purchase commitment. Furthermore,
because of the length of the remaining term of the commitment at that time
(approximately 8 years), prior management of the Company concluded that it could
not reasonably predict DRI price movements over such a long period, and
consequently it could not reasonably estimate the ultimate amount of loss, if
any, on the DRI purchase commitment. The Company disclosed that if it is unable
to find a buyer or another third party to assume its obligations under the AIR
purchase agreement and future market prices for DRI remain less than the
committed costs under the purchase agreement, the Company will incur losses on
future merchant DRI sales. On the other hand, if the market price of DRI
increases during the term of the purchase commitment, the Company could generate
trading profits from merchant DRI sales.
New management has continued negotiations with AIR's lenders and the Company's
venture partner to find an acceptable alternative to the Company's continued
participation in the AIR project. Based on these negotiations, the Company is
pursuing an exit strategy that will provide for the sale of the project,
settlement of AIR's obligations under its nonrecourse financing obligations and
settlement of the Company's and its venture partner's DRI purchase commitments.
Management believes that a sale of the facility can be completed in one to two
years. The Company could continue to be obligated to purchase approximately
300,000 metric tons per year (approximately equal to the 1999 run rate) until a
sale is completed. Management expects that during this time, the current spread
between the Company's committed cost under the DRI purchase contract and the
market price of DRI will essentially remain at the current level. Management
also expects to be able to resale substantially all of its share of AIR's
production to third parties in the merchant DRI market, but the Company will
incur continuing losses on these merchant DRI activities, at least for the near
term. In addition, management expects that the Company will absorb a portion of
the expected loss on sale of AIR's production facility. Accordingly, the Company
recorded a $40.2 million loss on the AIR purchase commitment in the second
quarter of fiscal 2000, of which $30 million is classified as non-current and
the remainder is classified as a current liability.
As is the case with all estimates that involve predictions of future outcomes,
management's estimate of the loss is subject to change. The principal factors
which could cause the actual results to vary are the length of time the Company
remains obligated under the purchase commitment until an acceptable sale of the
AIR facility can be completed, the proceeds from the sale, fluctuations in the
market price of DRI and changes in AIR's production costs.
4. INVENTORIES
Inventories valued at the lower of cost (first-in, first-out) or market, as
summarized in the following table (in thousands):
December 31, 1999 June 30, 1999
Raw Materials and Mill Supplies $ 59,052 $ 52,658
Work-in-Process 59,893 40,928
Finished Goods 80,162 68,215
------------------ ----------------
$ 199,107 $ 161,801
================== ================
5. LONG-TERM DEBT
On October 13, 1999, the Company and its lenders executed amendments to its
principal debt and letter of credit agreements to provide for the continuation
of the Company's borrowing arrangements on a long-term basis. Among other
things, the Company granted the lenders a security interest in substantially all
assets of the Company and agreed to pay modification fees and generally higher
interest rates. The financial covenants also were amended. The Company's Annual
Report on Form 10-K for the year ended June 30, 1999 contain a complete
description of the principal terms and provisions of the amended debt
agreements, including the financial covenants. For accounting purposes the
October 1999 modification of the Company's $280 million Senior Note obligations
is reflected as an extinguishment. Accordingly, the Company recorded a $1.3
million extraordinary loss (net of tax) on the debt restructuring in the second
quarter of fiscal 2000, consisting principally of amendment fees paid to the
lenders ($1.7 million) and the write-down of unamortized debt issuance costs
associated with the original debt ($.5 million).
As further explained in the Company's 1999 Annual Report on Form 10-K, under the
Company's debt agreements a change in a majority of the Company's Board of
Directors, including as a result of a contested proxy solicitation could, under
certain circumstances, give rise to an acceleration of the Company's debt
obligations. As described in the Company's annual meeting proxy statement for
the December 1999 stockholders' meeting, effective December 17, 1999, the
Company's Board of Directors nominated a new slate of directors consisting of
nine representatives from the United Group, which led the dissident proxy
solicitation, and three representatives from the former Board of Directors of
the Company. The Company believes that, under its interpretation of the change
in control provisions of the debt agreements, the manner in which control of the
Board of Directors was transferred to the United Group did not cause an
acceleration of the Company's obligations under its debt agreements.
Furthermore, the lenders have not asserted that an event of acceleration has
occurred.
Nevertheless, the Company is engaged in continuing discussions with its lenders
to further amend its debt agreements. Although the Company was in compliance
with its restrictive financial covenants at December 31, 1999, management
believes that further amendments will be necessary in order to remain in
compliance for the remainder of fiscal 2000. The Company also is seeking to
obtain additional financing from the lending group. Although a definitive
agreement has not been reached, the Company and its lenders have reached certain
mutual understandings and conclusions regarding appropriate modifications to the
current provisions of the debt agreements and management expects these
negotiations will be completed during the third quarter of fiscal 2000.
6. INCOME TAXES
In connection with the Company's unwinding of discontinued operations treatment
of the SBQ division, the Company reversed the related $78,704,000 deferred tax
asset in the second quarter of fiscal 2000.
The Company established certain charges and provisions in the second quarter of
fiscal 2000 (see Note 3), resulting in a significant deferred tax benefit.
However, this benefit is not expected to be realized in the new term and,
accordingly, the Company has provided a valuation allowance in the tax provision
applicable to continuing operations.
7. 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.
8. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company has two different product classes, steel reinforcing bar/merchant
and SBQ rod, bar and wire, sold predominantly to the construction and automotive
industries throughout the United States and Canada. In accordance with SFAS No.
131, the financial data for steel reinforcing bar/merchant products are
aggregated due to the similarity of products, production process, class of
customers, and methods of distribution. The SBQ products are identified as a
separate reportable segment, mainly due to customer and product line
specialization and differences in long-term average gross margins. The Company
evaluates performance based on operating earnings of the respective facilities.
Summarized financial information concerning the Company's reportable segments is
shown in the following table.
SBQ
Rebar/ Rod, Bar,
Merchant and Wire
Three months ended December 31, 1999
Net sales $ 170,614 $ 60,916
Start-up costs and unusual items
reflected in segment profit (loss) 17,483 157,096
Profit (loss) from continuing
operations before taxes (16,203) (168,047)
Assets 626,175 338,440
Six months ended December 31, 1999
Net sales $ 347,416 $ 118,887
Start-up costs and unusual items
reflected in segment profit (loss) 21,981 165,241
Profit (loss) from continuing
operations before taxes (9,994) (189,467)
Three months ended December 31, 1998
Net sales $ 166,226 $ 60,627
Start-up costs and unusual items
reflected in segment profit (loss) 1,694 7,248
Profit (loss) from continuing
operations before taxes 11,545 (20,983)
Assets 722,963 227,290
Six months ended December 31, 1998
Net sales $ 373,729 $ 124,081
Start-up costs and unusual items
reflected in segment profit (loss) 2,828 16,749
Profit (loss) from continuing operations
before taxes 28,046 (38,472)
Reconciliation of corporate items:
Three Months Ended Six Months Ended
December 31 December 31
---------------------- --------------------
1999 1998 1999 1998
Profit (loss) from continuing
operations before taxes $ (33,112) $ 1,608 $ (29,551) $ 4,362
Assets (36,444) 20,484 (36,444) 20,484
Start-up costs and unusual items 11,064 37 11,626 267
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
In August 1999, prior management of the Company announced a strategic
restructuring plan to dispose of its special bar quality (SBQ) operations in
order to focus on its core rebar, merchant product and scrap businesses. In its
results for the fourth quarter of fiscal 1999, the Company recorded $173.2
million in charges for the estimated loss on the sale of the SBQ operations,
which included a $56.5 million provision (pre-tax) for estimated losses during
the expected one-year disposal period.
In January 2000, following conclusion of a proxy contest which resulted in the
election of new management and a reconstituted board of directors, the Company
decided to retain its SBQ rolling mill facilities in Cleveland, Ohio, which
represent a substantial portion of the previously discontinued SBQ operations.
As a result, the Company was required to reestablish the SBQ operations as part
of continuing operations. The financial statements for the second quarter of
fiscal 2000 include the reversal of $151.8 million of the original $173.2
million estimated net loss associated with previously discontinued operations,
and reclassification of net assets, results of operations and cash flows from
discontinued operations to continuing operations.
Results from Operations
The Company reported a net loss of $20.1 million or $.68 per share, basic and
diluted, for the second quarter of fiscal 2000 compared with a net loss of $5.0
million or $.17 per share in the second quarter of fiscal 1999. The current
period loss from continuing operations of $170.5 million was largely impacted by
the Company's decision to retain a significant portion of the previously
discontinued SBQ operations segment. However, this loss was partially offset by
net income from reversal of previous charges for discontinued operations of
$151.8 million. The reclassification of discontinued operations required
reversal of reserves for estimated losses which had been established in
connection with prior management's planned disposal of the SBQ operations. In
addition, a substantial portion of these losses were required to be reclassified
to continuing operations. The loss from continuing operations was further
impacted by significant proxy and executive severance expenses related to the
recent proxy contest, start-up expenses, debt restructuring expenses, asset
impairment charges and other unusual items more fully described in the notes to
financial statements.
The following tables compare shipments and average selling prices per ton for
the second quarters of fiscal 2000 and 1999 and the six months ended December
31, 1999 and 1998:
Three months ended December, 31
1999 1998
Product Tons Shipped Sales Price Tons Shipped Sales Price
- ------- ------------ ----------- ------------ -----------
Rebar Products 335,387 $263 293,434 $285
Merchant Products 237,901 306 208,854 335
SBQ Products 151,911 418 140,253 432
Billets/Other 33,764 198 63,046 194
------------ ----------- ----------- -----------
Totals 758,963 $305 705,587 $322
============ =========== =========== ===========
Six months ended December 31,
1999 1998
Product Tons Shipped Sales Price Tons Shipped Sales Price
- ------ ------------ ----------- ------------ -----------
Rebar Products 740,638 $264 648,821 $293
Merchant Products 461,144 305 438,180 344
SBQ Products 296,741 409 283,216 439
Billets/Other 47,261 193 134,372 216
------------ ----------- ------------ -----------
Totals 1,545,784 $302 1,504,589 $328
============ =========== ============ ===========
Sales
Sales for the second quarter of fiscal 2000 were $231.5 million, up 2% from
fiscal 1999 second quarter sales of $226.9 million. The increase was
attributable to a 7.6% increase in total tons shipped from 705,587 tons in the
second quarter of fiscal 1999 to 758,963 tons in the second quarter of fiscal
2000. The increase in tons shipped was, however, offset by a $17 average price
per ton decrease as market pressures continued to depress prices.
Fiscal year 2000 sales for the six months ended December 31, 1999 were $466.3
million, down 7% from $497.8 million from the same period last year. While
shipments increased to 1,545,784 tons from 1,504,589 tons in the prior year,
average selling price per ton decreased $26 per ton due to the impact of imports
on the steel market and general market downward pressure on pricing.
Cost of Sales
As a percentage of net sales, cost of sales (other than depreciation and
amortization) increased to 91.3% in the current quarter compared to 86.9% in the
second quarter of fiscal 1999. For fiscal year 2000, cost of sales as a
percentage of sales was 87.2% compared to 85.6% for the six months ended
December 31, 1998. The percentage increase in cost of sales for the quarter and
the six months period resulted primarily because of lower average sales prices,
along with higher operating lease costs for equipment at the Cartersville,
Georgia facility which became effective in the second half of fiscal 1999. In
addition, the Company recorded expenses for inventory writedowns (primarily for
lower of cost or market adjustments) and established a liability for a sales and
use tax assessment.
Increased depreciation and amortization expense compared to the quarter and six
months results last year 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 second quarter of fiscal 2000, SG&A expenses increased from $8.9 million
to $13.9 million, or 50.9% above the same period last year. As a percentage of
sales, SG&A expenses increased from 3.9% to 6.0%. For the first six months of
fiscal 2000, SG&A expense increased from $20.4 million to $28.3 million, or
27.9% over the six months ended December 31, 1999, and increased as a percentage
of sales from 4.1% to 6.1%.
The increase in current year expenses relates to higher salaries and benefits
associated with increased headcount and increased computer equipment and
telephone equipment lease expense. In the second quarter of fiscal 2000, the
Company also incurred additional bad debt expense. In accordance with new
management goals to streamline operations, the Company believes that expenses
related to salaries and benefits will be reduced in future months as a result of
recent reductions in corporate administrative staff and the senior management
group.
Start-Up and Restructuring Costs and Other Unusual Items
Pre-operating/start-up costs were $11.6 million in the second quarter of fiscal
2000, compared to $9.0 million in the same period last year. Substantially all
of these costs relate to start-up costs at the Memphis melt shop and the
Cartersville, Georgia mid-section mill which began operations in March 1999. In
December 1999, the Company announced suspension of operations at the Memphis
facility. The Company expects to complete the shut down at Memphis by March 2000
and expects to subsequently incur costs of approximately $1 million per month to
maintain the facility until it is sold or otherwise disposed of. The Company
expects to continue incurring start-up costs at Cartersville through the quarter
ended June 30, 2000, at which time management anticipates that the facility will
be producing at or near break-even operating level.
The accounting treatment for retaining the discontinued SBQ segment required the
reversal of $173.2 million of reserves which had been previously established for
estimated losses to be incurred until disposition of the SBQ operations.
Although the discontinued operations reserves were reversed in the current
quarter, significant new charges were necessary to fairly state SBQ assets,
liabilities, and operating results. These items were expensed in the current
quarter and partially offset the income from reversal of the charges associated
with the previously discontinued operations. Following is a summary of after-tax
charges for the SBQ operations which offset the income from the reversal of
discontinued operations reserves:
Charge
(Net of
Description Tax Benefit)
--------------------------------------------------- ------------
o SBQ loss from operations - first quarter fiscal 2000 $ 13,922
o SBQ loss from operations - second quarter fiscal 2000 11,658
o Asset impairment - Memphis facility 55,250
o Asset impairment - Investment in AIR 9,028
o Loss on purchase commitment - AIR 26,154
o Asset impairment - SBQ division goodwill 22,134
o Service and termination benefits - Memphis 1,608
o Inventory and other adjustments at Memphis
and Cleveland 3,624
------------
Total SBQ Operation after-tax charges $ 143,378
============
In addition to above adjustments, reserves and other charges for SBQ operations,
the Company incurred other unusual charges during the six months ended December
31, 1999. The following table summarizes these charges:
Description Charge (Net of
Tax Benefit)
o Proxy solicitation expenses $ 4,257
o Executive severance 3,301
o Asset impairment - Assets taken out of service 8,522
-----------
Total other unusual after-tax changes $ 16,080
============
For additional discussion of each of the above items refer to Note 3 of the
financial statements.
The recognition of these items in the second quarter of fiscal 2000 will benefit
future results. For example, as a result of the charges taken in the current
quarter, amortization of goodwill at Cleveland and depreciation expense for the
Memphis facility will no longer impact income from operations. For the six
months ended December 31, 1999, losses recorded at Memphis totaled $21.2 million
(pre-tax).
For the six months ended December 31, 1999, the Company also recognized $6.4
million cost in excess of market value for direct reduced iron purchased under a
long term supply agreement with its American Iron Reduction, LLC (AIR) joint
venture in Louisiana. Beginning in the third quarter of fiscal 2000, such losses
will be charged to balance sheet reserves.
Interest Expense
Interest expense increased to $13.1 million in the second quarter of fiscal 2000
from $8.6 in the same period last year. For the six months ended December 31,
1999, interest expense increased to $23.6 million from $17.4 million in the same
period last year. Higher interest charges are the result of a series of
modifications to the Company's long-term debt agreements which increased the
Company's average borrowing rate to 8.45% in the second quarter of fiscal 2000
from 6.45% in the same period last year. For the six months, the average
borrowing rate increased to 7.58% from 6.54% last year. Additionally, interest
expense increased because of a decline in capitalized interest previously
attributed to the mid-section mill project at the Cartersville, Georgia
facility, which was placed in service in the third and fourth quarters of fiscal
1999.
Income Taxes
The Company's financial results reflect an income tax benefit of $46.8 million
in the second quarter of fiscal 2000 compared to $2.9 million for the same
period last year. The effective income tax rate applicable to continuing
operations for the three months ended December 31, 1999 was 21.5% versus 36.6%
in the same period last year. The decrease in effective income tax benefit rate
in the second quarter of fiscal 2000 is primarily attributable to the
establishment of valuation allowances for deferred tax assets. Such valuation
allowances were established because of management's view that a sale of the SBQ
operations will most likely take longer than prior management had expected. The
Company will therefore incur continuing carrying costs and losses associated
with Memphis and the AIR purchase commitment beyond the time frame previously
anticipated. These losses will impact the Company's ability to generate
sufficient taxable income in the near term and impede the Company's ability to
utilize net operating loss carryforwards and other net deductible temporary
differences that impact deferred tax assets.
Liquidity and Capital Resources
Operating Activities
Net cash used by operating activities was $29.6 million for the six months ended
December 31, 1999, compared to cash provided of $55.2 million for the comparable
period in fiscal 1999. Cash required for operating activities increased because
of larger operating losses of $10.4 million and inventory build up of $37.3
million, primarily attributable to the SBQ operations. As part of the Company's
decision to retain the previously discontinued SBQ segment, the Company will
continue operations at the Cleveland mill while the Memphis facility has been
idled and is held for disposition. The Company is negotiating with third party
suppliers of high quality billets to support operations at Cleveland and expects
to finalize agreements in the third quarter. The Memphis facility will require
approximately $1 million per month in cash outlays, including operating lease
payments to maintain the idled facilities until they are sold or otherwise
disposed of.
Investing Activities
Net cash used in investing activities was $14.6 million for the six months of
fiscal 2000, as compared to $61.7 million in the same period last year. The
change was attributable to reduced capital spending for major projects at the
Memphis melt shop and the Cartersville mid-section mill. The Company's debt
covenants currently restrict capital expenditures to $30 million per year,
however, the Company is currently in discussions with its lenders regarding
modifications to its loan agreements which include the ability to incur more
capital expenditures.
Financing Activities
Net cash provided by financing activities was $44.0 million in the first half of
fiscal 2000, compared to $6.6 million in the same period last year. Net
outstanding borrowings on the Company's revolving credit facility increased
$60.5 million during the first half of fiscal 2000. The Company also made a
principal reduction payment on an Industrial Revenue Bond totaling $10 million
and paid $5 million debt issue costs in the second quarter of 2000.
The Company is currently in compliance with the restrictive debt covenants
governing its loan agreements. However, should factors described under "Risk
factors" in the Company's 10-K filing for fiscal 1999 adversely affect future
operating results, the Company could violate one or more of its restrictive
covenants within the next twelve months. The Company has evaluated its
alternatives, including refinancing the Company's outstanding obligations, in
the event that it is unable to comply with its restrictive covenants in the near
term. The Company currently is in discussions with its lenders to further amend
debt agreements to provide additional operating and financial flexibility
sufficient to support new management plans. Management expects to conclude
modification to its current loan agreements by the end of the third quarter of
fiscal 2000. However, if changes are not made to existing debt agreements by the
end of the third quarter, the Company may be in default of one or more of the
restrictive covenants and financial tests included in the terms of the current
agreements. For additional discussion of long-term debt refer to Note 5 of the
financial statements.
Working Capital
Working capital at the end of the second quarter of fiscal 2000 was $132.9
million, compared to $110.4 million at June 30, 1999. The $22.5 million increase
in working capital was primarily attributable to a seasonal build of $37.3
million inventory offset by a $10 million principal payment on an Industrial
Revenue Bond. Working capital was substantially funded by increased long-term
borrowings under the Company's revolving credit facility.
Other Comments
On October 20, 1999, the Company declared a dividend of $0.025 per share (two &
one-half cents per share) payable on November 9, 1999 to shareholders of record
on October 29, 1999. On December 7, 1999, the Company announced the suspension
of dividends due to the current debt level and financial issues facing the
Company. The Company will consider reinstating the dividend when the overall
financial condition merits such action.
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
$281.2 million and variable rate borrowings of $290.6 million outstanding.
Assuming a hypothetical 10% adverse change in interest rates, the fair value of
the Company's fixed rate debt would decrease by $30.2 million and the Company
would incur an additional $594,000 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.
Impact of Year 2000
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $2.2 million during 1999 in connection with remediating
its systems. The Company is not aware of any material problems resulting from
Year 2000 issues, either with its products, its internal systems, or the
products and services of third parties. The Company will continue to monitor its
mission critical computer applications and those of its suppliers and vendors
throughout the year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly.
Risk Factors That May Affect Future Results; Forward Looking Statements
This quarterly report includes forward-looking statements based on our current
expectations and projections about future events, including: market conditions;
future financial performance and potential growth; effect of indebtedness;
future cash sources and requirements, including expected capital expenditures;
competition and production costs; strategic plans, including estimated proceeds
from and the timing of asset sales including the sale of the SBQ division; and
the Company's interests in AIR and Pacific Coast; environmental matters and
liabilities; possible equipment losses; Year 2000 issues; labor relations; and
other matters.
These forward-looking statements are subject to a number of risks and
uncertainties, including those identified in Exhibit 99.1 to the Annual Report
on Form 10-K for fiscal year 1999, which could cause our actual results to
differ materially from historical results or those anticipated and certain of
which are beyond our control. The words "believe," "expect," "anticipate" and
similar expressions identify forward-looking statements. All forward-looking
statements included in this document are based upon information available to the
Company on the date hereof, and the Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. It is important to note that the
Company's actual results could differ materially from those described or implied
in such forward-looking statements. Moreover, new risk factors emerge from time
to time and it is not possible for the Company to predict all such risk factors,
nor can the Company assess the impact of all such risk factors on its business
or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those described or implied in any
forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction of
actual results.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Refer to the information in MANAGEMENT'S DISCUSSION 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 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held on December 17, 1999,
at which the following matters were brought before and voted upon by the
shareholders:
1. The election of the following to the Board of Directors, each to serve until
the next Annual Meeting of stockholders:
Director Voted For Votes Withheld
--------------- ---------- --------------
John D. Correnti 16,318,322 115,099
James A. Todd, Jr. 16,316,713 116,708
Steven R. Berrard 16,318,397 115,024
Alvin R. Carpenter 16,318,372 115,049
Robert M. Gerrity 16,318,461 114,960
Jerry E. Dempsey 16,318,372 115,049
James W. McGlothlin 16,318,465 114,956
Robert H. Spilman 16,318,312 115,109
Donna M. Alvarado 16,318,397 115,024
Richard de J. Osborne 16,331,469 101,952
C. Stephen Clegg 16,331,715 101,706
Robert D. Kennedy 16,331,691 101,730
2. Proposal to approve and ratify the selection of Ernst & Young LLP as the
independent auditors for the Company and its subsidiaries for the fiscal
year ending June 30, 2000.
Voted for: 16,428,456
Voted against: 3,317
Abstained: 1,648
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
Form 8-K Current Report filed on December 29, 1999
Re: Letter to fellow shareholders from John D. Correnti, Chairman and
Chief Executive Officer on December 23, 1999
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
February 22, 2000
/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
December 31, 1999 Consolidated Balance Sheets and Consolidated Statements of
Operations of Birmingham Steel Corporation and is qualified in its entirety
by reference to such.
</LEGEND>
<CIK> 0000779334
<NAME> J. Daniel Garrett
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Jun-30-2000
<PERIOD-END> Dec-31-1999
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<ALLOWANCES> 1,285
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<PP&E> 942,924
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<TOTAL-ASSETS> 1,001,059
<CURRENT-LIABILITIES> 168,840
<BONDS> 2,500
0
0
<COMMON> 300
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<TOTAL-LIABILITY-AND-EQUITY> 1,001,059
<SALES> 231,530
<TOTAL-REVENUES> 231,530
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<OTHER-EXPENSES> 212,619
<LOSS-PROVISION> 185,643
<INTEREST-EXPENSE> 13,126
<INCOME-PRETAX> (170,532)
<INCOME-TAX> (46,860)
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<DISCONTINUED> 151,763
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