-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, PYDG3gTa7+M2RZmJWshoAV+SlJIAt7y9b6Y9XNelKgXPyqytUdS2ovnUW+Yhk6U5 orWK8wTM5A3WrYfDXmi6zQ== 0000779334-95-000008.txt : 19950612 0000779334-95-000008.hdr.sgml : 19950612 ACCESSION NUMBER: 0000779334-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIRMINGHAM STEEL CORP CENTRAL INDEX KEY: 0000779334 STANDARD INDUSTRIAL CLASSIFICATION: 3312 IRS NUMBER: 133213634 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09820 FILM NUMBER: 95539698 BUSINESS ADDRESS: STREET 1: 1000 URBAN CENTER PARKWAY STREET 2: SUITE 300 CITY: BIRMINGHAM STATE: AL ZIP: 35242 BUSINESS PHONE: 2059701255 MAIL ADDRESS: STREET 1: P.O. BOX 1208 CITY: BIRMINGHAM STATE: AL ZIP: 35201-1208 10-Q 1 - - -------------------------------------------------------- - - -------------------------------------------------------- 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 March 31, 1995 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 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: 28,532,452 Shares of Common Stock, Par Value $.01 Outstanding at May 2, 1995. - - -------------------------------------------------------- BIRMINGHAM STEEL CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT NUMBER OF SHARES) ASSETS March 31, 1995 June 30, 1994 (Unaudited) (Audited) ------------------ ----------------- Current Assets: Cash and cash equivalents $ 6,268 $ 28,916 Accounts receivable, net of allowance for doubtful accounts of $1,844 at March 31, 1995; $1,737 at June 30, 1994 118,755 108,834 Inventories 160,119 132,459 Prepaid expenses 3,739 1,208 Other 4,406 4,385 ------- ------- Total current assets 293,287 275,802 Property, plant and equipment (including property and equip- ment, net, held for disposition of $27,267 and $27,590 at March 31, 1995 and June 30, 1994, respectively): Land and buildings 111,808 109,490 Machinery and equipment 334,728 328,537 Construction in progress 47,221 35,235 ------- ------- 493,757 473,262 Less accumulated depreciation (104,017) (98,402) ------- ------- Net property, plant and equipment 389,740 374,860 Excess of cost over net assets acquired 32,872 32,408 Other assets 11,448 6,808 ------- ------- Total assets $ 727,347 $ 689,878 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 52,991 $ 36,438 Accrued operating expenses 3,821 3,857 Accrued payroll expenses 6,463 7,210 Income taxes payable 3,058 3,493 Other accrued liabilities 13,989 11,729 ------- ------- Total current liabilities 80,322 62,727 Deferred income taxes 47,130 41,086 Deferred compensation 5,098 4,516 Long-term debt less current portion 142,500 142,500 Commitments and contingencies (Note 6) Stockholders' equity: Preferred stock, par value $.01; authorized 5,000,000 shares - - Common stock, par value $.01; authorized 75,000,000 shares; 28,608,112 and 29,389,174 shares issued at March 31, 1995 and June 30, 1994, respectively 295 294 Additional paid-in capital 328,945 327,285 Treasury stock, 881,300 shares at March 31, 1995 (17,608) - Unearned compensation (2,757) (2,947) Retained earnings 143,422 114,417 ------- ------- Total stockholders' equity 452,297 439,049 ------- ------- Total liabilities and stockholders' equity $ 727,347 $ 689,878 =========== ========= See accompanying notes - - -------------------------------------------------------- - - -------------------------------------------------------- BIRMINGHAM STEEL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA; UNAUDITED) Three months ended Nine months ended March 31, March 31, ------------------ ---------------- 1995 1994 1995 1994 -------- -------- -------- -------- Net Sales $236,900 $204,192 $660,739 $478,624 Cost of sales: Other than depreciation and amortization 194,186 175,113 537,775 410,508 Depreciation and amortization 8,205 7,878 24,186 19,591 -------- -------- -------- -------- Gross profit 34,509 21,201 98,778 48,525 Provision for loss on disposition of property, plant and equipment - - 1,325 - Selling, general and administrative 10,857 9,652 29,309 22,997 Interest 2,342 4,089 6,872 7,898 -------- -------- -------- -------- 21,310 7,460 61,272 17,630 Other income, net 1,270 1,336 3,134 3,150 Income before income taxes and cumulative effect of a change in the method of accounting for income taxes 22,580 8,796 64,406 20,780 Provision for income taxes 9,316 3,678 26,568 8,592 ------- -------- -------- -------- Income before cumulative effect of a change in accounting principle 13,264 5,118 37,838 12,188 Cumulative effect, as of June 30, 1993, of a change in the method of accounting for income taxes (See Note 1) - - - 380 -------- -------- -------- -------- Net Income $ 13,264 $ 5,118 $ 37,838 $ 12,568 ======== ======== ======== ======== Weighted average shares outstanding 29,283 25,399 29,380 23,018 ======== ======== ======== ======== Earnings per share: Income before cumulative effect of a change in accounting principle $ 0.45 $ 0.20 $ 1.29 $ 0.53 Cumulative effect of a change in the method of accounting for income taxes - - - 0.02 -------- -------- -------- -------- Net Income $ 0.45 $ 0.20 $ 1.29 $ 0.55 ======== ======== ======== ======== Dividends declared per share $ 0.10 $ 0.10 $ 0.30 $ 0.30 ======== ======== ======== ======== See accompanying notes. BIRMINGHAM STEEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Nine months ended March 31, ----------------------- 1995 1994 (unaudited) (unaudited) ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 37,838 $ 12,568 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of a change in account- ing principle - (380) Depreciation and amortization 24,186 19,591 Provision for doubtful accounts receivable 1,023 445 Deferred income taxes 5,770 1,971 Provision for loss on disposition of property, plant and equipment 1,325 - Other 1,929 1,743 Changes in operating assets and liabilities, net of effects from business acquisitions and dispositions: Accounts receivable (3,955) (15,369) Inventories (34,874) (21,178) Prepaid expenses (2,538) 1,476 Other current assets (1) (3,003) Accounts payable 15,116 7,088 Other accrued liabilities 2,046 5,328 Deferred compensation 582 497 -------- --------- Net cash provided by operating activities 48,447 10,777 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (47,589) (27,414) Payments for business acquisitions (11,374) (5,699) Net proceeds from sale of mine roof business unit 15,802 Proceeds from disposal of property, plant and equipment 90 - Additions to other non-current assets (2,056) (4,850) Reductions in other non-current assets 260 791 --------- --------- Net cash used for investing activities (45,867) (37,172) CASH FLOWS FROM FINANCING ACTIVITIES: Net short-term borrowings and repayments - (73,332) Proceeds from issuance of long-term debt - 130,000 Payments of long-term debt - (80,716) Proceeds from issuance of common stock 214 154,406 Issuance of stock from treasury - 942 Purchase of treasury stock (17,608) (348) Cash dividends paid (8,834) (6,633) --------- --------- Net cash (used in) provided by financing activities (26,228) 124,319 --------- --------- Net (decrease) increase in cash and cash equivalents (22,648) 97,924 Cash and cash equivalents at: Beginning of period 28,916 270 -------- --------- End of period 6,268 98,194 ======== ========= Supplemental cash flow disclosures: Cash paid during the period for: Interest (net of amounts capitalized) 4,321 5,329 Income taxes 21,874 4,168 See accompanying notes BIRMINGHAM STEEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1995 AND 1994 1. Significant Accounting Policies Presentation The accompanying unaudited quarterly financial information reflects all normal and recurring adjustments which are, in the opinion of the management of Birmingham Steel Corporation (the Company), necessary for a fair statement of the results for the interim periods presented. Income taxes Deferred income taxes are provided for temporary differences between taxable income and financial reporting income. The Company adopted the liability method of accounting for income taxes prescribed in FASB Statement No. 109 as of July 1, 1993 and reported a benefit of $380,000 ($.02 per share) in the first quarter of fiscal 1994 to reflect the cumulative effect of adoption. Earnings per share Earnings per share are computed using the weighted average number of outstanding common shares and dilutive equivalents (if any). 2. Business Acquisitions On December 31, 1994, the Company acquired Port Everglades Steel Corporation (PESCO), a steel distribution company headquartered in Fort Lauderdale, Florida for a total cash purchase price of $11,374,000. The acquisition has been accounted for as a purchase. The purchase price has been allocated to the assets and liabilities of PESCO based upon their estimated fair values, as follows (in thousands): Current assets $10,712 Property, plant and equipment 225 Other non-current assets 1,797 Excess of costs over net assets acquired 1,674 ------- Total assets acquired 14,408 Fair value of liabilities assumed 3,034 ------- Total purchase price $11,374 ======= Proforma results for prior year and current year would not be materially different from the amounts reported in the Company's consolidated income statements if the acquisition had occurred as of the beginning of either period. The results of operations for the nine months ended March 31, 1995 include the operations of the Company's American Steel & Wire subsidiary, which was acquired on November 23, 1993. Assuming the acquisition had occurred at the beginning of fiscal 1993, proforma net sales for the nine months ended March 31, 1994 would have been $586,091,000. Proforma net income and earnings per share would have been $14,140,000 and $.58, respectively. 3. Business Disposition On March 12, 1995, the Company sold its mine roof bolt business unit to Excel Mining Systems, Inc., a mine roof bolt manufacturer headquartered in Cadiz, Ohio. The purchase price is subject to adjustment based on the results of an audit of inventories at the date of sale. The Company expects to realize gain of at least $3 million on the sale. For accounting purposes, the Company has deferred the estimated gain on sale until the purchase price is finalized and the proceeds of a $9.5 million note receivable from the Purchaser are collected. In connection with the sale, the Company entered into a five year supply agreement to provide Excel the majority of its steel requirements. Because of the expectation of continued steel shipments to Excel, the Company does not believe that the sale of its mine roof bolt business will have a material effect on its continuing operations. 4. Inventories Inventories were valued as summarized in the following table (in thousands): March 31 June 30 1995 1994 ----------- --------- (unaudited) (audited) At lower of cost (first-in, first-out) or market: Raw materials and mill supplies $ 47,241 $ 51,233 Work-in-progress 49,912 37,298 Finished goods 62,966 44,327 -------- -------- 160,119 132,858 Allowance to adjust bolt inventories to cost on last-in, first-out method (approximately 8% of total inventory at June 30, 1994) 0 ( 399) -------- -------- $160,119 $132,459 ======== ======== 5. Short-Term Borrowing Arrangements Under line of credit arrangements for short-term borrowings with four banks, the Company may borrow up to $185,000,000 with interest at market rates mutually agreed upon by the Company and the banks. One of these lines of credit supports an $80,000,000 bankers' acceptance and commercial paper program. The full line of credit was available under these facilities at March 31, 1995. 6. 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 disposal. The Company has been advised by the Virginia Department of Waste Management of certain conditions involving the disposal of hazardous materials at the Company's Norfolk, Virginia property which existed prior to the Company's acquisition of the facility. The Company has also been notified by the department of Toxic Substances Control of the Environmental Protection Agency of the State of California of certain environmental conditions regarding its property in Emeryville, California. The Company is performing environmental assessments of these sites and developing work plans for remediation of the properties for approval by the applicable regulatory agencies. As part of its ongoing environmental compliance and monitoring programs, the Company is voluntarily developing work plans for environmental conditions involving certain of its operating facilities and other properties which are held for sale. Based upon the Company's study of the known conditions and its prior experience in investigating and correcting environmental conditions, the Company estimates that the potential costs of these site restoration and remediation efforts may range from $3,972,000 to $5,767,000. Approximately $1,829,000 of these costs is recorded in accrued liabilities at March 31, 1995. The remaining costs principally consist of site restoration and environmental exit costs to ready the idle facilities for sale, and have been considered in determining whether the carrying amounts of the properties exceed their net realizable values. These expenditures are expected to be made in the next two to three years, if the necessary regulatory agency approvals of the Company's work plans are obtained. Though the Company believes it has adequately provided for the cost of all known environmental conditions, the applicable regulatory agencies could insist upon different and more costly remediative measures than those the Company believes are adequate or required by existing law. Otherwise, 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. 7. Sale of Idle Facilities In the second quarter, the Company entered into an agreement to sell its idle facility in Ballard, Washington. The Company also entered into a memorandum of understanding with the Port of Seattle to exchange the idle Kent, Washington facility and approximately 22.5 acres of property adjacent to the Seattle, Washington steel-making facility for the Port's Terminal 105 and other property adjacent to the steel-making facility. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the third quarter of fiscal 1995, the Company reported record earnings of $13,264,000, an increase of 159 percent compared with $5,118,000 in the third period of fiscal 1994. Earnings per share for the quarter were $.45, up from $.20 reported last year. Third quarter steel shipments of 595,000 tons increased 4 percent compared with 572,000 tons shipped a year ago. Net sales for the third quarter increased 16 percent to $236,900,000, compared with $204,192,000 last year. For the nine months ended March 31, 1995 the Company reported earnings of $37,838,000, compared with $12,568,000 last year. Earnings per share for the period were $1.29, up from $.55 reported last year. Steel shipments increased 17 percent to 1,755,000 tons, compared with 1,498,000 tons last year. Net sales increased 38 percent to $660,739,000, compared with $478,624,000 in the same period a year ago. Results for the prior year nine month period included only four months of sales and earnings from the Company's American Steel & Wire subsidiary ("ASW"). Net Sales Compared with the prior year, the rise in third quarter net sales reflected a significant increase in average steel selling prices, coupled with a rise in steel shipment levels. Third quarter average rebar/merchant selling prices rose to $324 per ton, compared with $312 in the immediately preceding quarter and $282 in the third quarter last year. Demand for rebar/merchant products remained steady through the third quarter, with the expectation of strong demand in the seasonally stronger fourth quarter. Third quarter shipments of the Company's rod & wire products (ASW) increased 25 percent from the prior year to 182,000 tons, while average selling prices rose $6 per ton during the same period. In March, ASW recorded its highest monthly shipment total at 67,000 tons. ASW is currently negotiating model year pricing contracts with its automotive related customer base and expects to realize pricing gains to reflect current market conditions. Continued strength in demand for rod & wire products is expected through the remainder of fiscal 1995 and into fiscal 1996. In mid-March, the Company completed the sale of its Mine Roof Support Business to Excel Mining Systems, Inc. headquartered in Cadiz, Ohio. The Company's overall sales volume is not expected to decline as a result of this sale, as the Company will be the primary steel supplier to Excel. Cost of Sales As a percentage of net sales, cost of sales (other than depreciation and amortization) declined to 82.0% in the third quarter of fiscal 1995, compared with 85.8% in the third quarter last year. This substantial improvement resulted primarily from the increases in overall steel selling prices mentioned above and productivity increases at ASW. For the nine months ended March 31, 1995, cost of sales declined to 81.4% compared with 85.8% in the same period last year primarily due to the reasons stated above. The Company's third quarter scrap raw material cost of $142 per ton rose $5 from the second quarter level and $7 above the prior year. Scrap market prices have indicated a rising trend heading into the late spring. In the third quarter, steel conversion cost at the Company's mini-mills increased approximately $4 per ton compared with last year primarily due to a temporary equipment outage at the Birmingham mill and scheduled maintenance at the Seattle melt shop. During March, the Birmingham facility suffered a transformer failure which disrupted melt shop production for 13 days, though normal operations were restored upon installation of a backup unit. Operations at the Kankakee mill improved significantly during the quarter, as increased production tonnage and efficient operations led to a $5 per ton decline in conversion cost compared with the prior year. Raw material billet cost at ASW was $327 per ton in the third quarter, an increase of approximately 1 percent from last year. Upward pressure on billet pricing has emerged recently, as high quality billet producers seek to increase margins on sales of both finished and semi-finished products. Billet cost at ASW is expected to rise modestly during the fourth quarter. The Company continues to focus on the construction of a state-of-the-art melt shop for ASW that would manufacture a substantial portion of the high quality billets required by ASW. The Company has signed a technical assistance agreement with Sumitomo Metal Industries for design and engineering assistance in the development of this proposed facility. Design criteria are expected to be completed in June 1995. For the third quarter, steel conversion cost at ASW fell approximately 9 percent compared with last year, as significant productivity gains led to a 15 percent increase in finished goods production. Overall production tons-per-hour at ASW in the third quarter improved 12 percent from the prior year level. This productivity gain was primarily attributable to the introduction of the Company's incentive wage system subsequent to the November 1993 acquisition. Conversion cost at ASW may rise modestly in the fourth quarter due to an April equipment outage at Cuyahoga which resulted in 7 days of lost production. Depreciation and amortization expense increased to $8,205,000 from $7,878,000 in the third quarter of fiscal 1994, primarily due to the recognition of depreciation on fixed asset additions during fiscal 1994 and fiscal 1995. For the nine months ended March 31, 1995, depreciation and amortization expense increased to $24,186,000 from $19,591,000 in the same period of fiscal 1994, primarily due to the reason stated above and the November 1993 acquisition of ASW. Selling, General and Administrative Expenses ("SG&A") Third quarter SG&A increased to $10,857,000 from $9,652,000 reported in the same period last year primarily due to general expense increases. As a percent of net sales, third quarter SG&A were 4.6 percent, compared with 4.7 percent last year. For the nine months ended March 31, 1995, SG&A increased to $29,309,000 from $22,997,000 reported in the same period last year primarily due to the full nine month inclusion of ASW's SG&A expenses which were only present for 4 months last year. As a percent of net sales, year-to-date SG&A were 4.4 percent, compared with 4.8 percent last year. Interest Expense Interest expense declined modestly in the third quarter of fiscal 1995 to $2,342,000, compared with $4,089,000 reported last year, primarily due to a 44 percent reduction in the average quarterly debt level since last year, partially offset by higher average interest rates. During the third quarter, the Company capitalized approximately $557,000 in interest related to construction projects, compared with approximately $534,000 in the same period last year. For the nine months ended March 31, 1995, interest expense declined to $6,872,000, compared with $7,898,000 in the prior year essentially due to the reason stated above, partially offset by an increased amount of capitalized interest during the previous year. The Company capitalized approximately $2,361,000 in interest related to assets under construction in the prior year nine months, compared with approximately $1,329,000 in the current year period. Income Taxes Effective income tax rates for the third quarters of fiscal 1995 and fiscal 1994 were 41.3 percent and 41.8 percent, respectively. For the nine month periods ended March 31, 1995 and 1994, the effective income tax rate was 41.3 percent. Liquidity and Capital Resources Operating Activities: For the first nine months of fiscal 1995, cash provided by operating activities rose to $48.4 million, compared with $10.8 million reported last year. The substantial rise in cash flow was essentially due to a three-fold increase in net income combined with an increase in accounts payable, partially offset by increases in operating inventories and other assets. The increase in accounts payable occurred due to seasonal purchasing factors. Inventory levels rose during the period as the result of (1) Company efforts to restore finished goods inventories to a more desirable level, (2) a rise in overall production tonnage in excess of shipment levels, (3) the acquisition of Port Everglades Steel ("PESCO") and (4) the planned increase to the Seattle mill's billet inventory to facilitate installation of a new melt shop furnace in July 1995. Investing Activities: Net cash used for investing activities in the first nine months of fiscal 1995 was $44.9 million, compared with $37.2 million last year. Fiscal 1995 year-to-date capital expenditures increased to $47.6 million, compared with $27.4 million last year. During March, the Company formally announced its 5-year, $648 million capital development plan to outline the next phase of the Company's growth strategy. Included as a primary project of this plan is ASW's new $112 million bar & rod mill. This state-of-the-art facility, which is scheduled to begin operations in March 1996, will effectively double ASW's productive and shipment capacity to approximately 1.1 million tons of high quality steel products. Also outlined as part of the Company's new capital plan is the construction of a new 1.5 million ton capacity high quality melt shop ($150 million), a baghouse dust recycling project ($10 million), a new merchant rolling mill at Kankakee ($85 million), a new melt shop furnace at Seattle ($20 million) and the upgrade to several of the Company's existing facilities (approximately $125 million). Funding for the above mentioned projects is expected to be derived from available cash reserves, net cash flow and/or negotiated short-term or long-term financing arrangements. During the second quarter, the Company acquired PESCO, a rebar distributor located in Ft. Lauderdale, Florida for approximately $11.4 million. PESCO will continue to market the Company's products to steel fabricators. In March 1995, the Company sold substantially all the assets of its Mine Roof Support Business to Excel Mining Systems, Inc for net cash proceeds of approximately $15.8 million. In addition, the Company received consideration from Excel in the form of a note receivable, which primarily represents the Company's gain on the transaction. The Company will not recognized the gain associated with this transaction until final valuation of the note has been determined and the proceeds are collected. The Company is also evaluating the potential sale of this note to interested buyers. Financing Activities: Net cash used in financing activities was $26.2 million through the third quarter of fiscal 1995, compared with cash flow provided by financing activities of $124.3 million last year. Pursuant to its authorized stock repurchase, the Company purchased approximately $17.6 million (881,000 shares) of its common shares in the open market. Also during the first nine months of fiscal 1995, the Company paid cash dividends of approximately $8.8 million. During the second quarter last year, the Company completed a $130 million private debt placement which was used to fund the cash and debt refinance portions of the ASW acquisition and to pay down the Company's existing short-term debt. Working Capital: Working capital at the end of the third quarter increased to $213.0 million, compared with $213.1 million at the end of fiscal 1994. Outlook: From a long-term perspective, the Company's broad access to capital markets and internal cash flows are expected to provide the capital resources necessary to support increased operating needs and to finance continued growth. Other Comments On April 18, 1995, the Company announced that it had signed a ten-year agreement with Electronic Data Systems, Inc. (EDS) under which EDS will assume responsibility for managing, developing and integrating all information technology systems for the Company. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is involved in litigation relating to claims arising out of its operations in the normal course of business. Such claims against the Company are generally covered by insurance. It is the opinion of management that any uninsured or unindemnified liability resulting from existing litigation would not have a material adverse effect on the Company's business or financial position. There can be no assurance that insurance, including product liability insurance, will be available in the future at reasonable rates. By letter dated October 20, 1992, the Department of Toxic Substances Control of the Environmental Protection Agency of the State of California ("DTSC") submitted to Barbary Coast Steel Corporation ("BCSC"), a wholly owned subsidiary of the Company, for its review and comment a proposed Consent Order relating to BCSC's closed steel facility at Emeryville, California. BCSC and DTSC executed the terms of a Consent Order on March 22, 1993 and, pursuant to that Consent Order, BCSC is performing an environmental assessment of the site and developing a work plan for remediation of the property. The Company believes that, in connection with the January 1991 closure of the Emeryville mill, it made adequate provisions in its financial statements for the cost of remediating the site. However, DTSC could insist upon different and possibly more costly remediative measures than those believed by the Company to be adequate and in accordance with existing law. On March 26, 1993, an action entitled IMACC Corporation v. Warburton, et al. was filed in U.S. District Court for the Northern District of California, Case No. C93-1114-VRW. This action was brought by IMACC Corporation ("IMACC"), the parent of Myers Container Corporation, the lessee of property immediately adjacent to the BCSC property in Emeryville, California. IMACC has sued BCSC, Judson Steel Corporation (from whom BCSC purchased the property) and several of the individual owners of the property leased by IMACC, under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. SS9601-9675 and various state law causes of action, alleging that the defendants contributed to environmental contamination on the IMACC property. IMACC subsequently amended its complaint several times, including the addition of a citizens' suit claim under RCRA, 42 U.S.C. SS6972. BCSC has interposed numerous affirmative defenses to IMACC's claims, and additionally has counterclaimed against IMACC alleging that IMACC has contaminated the BCSC property, and cross-claimed against Judson Steel Corporation and its corporate parent, alleging that they must indemnify BCSC for any monies due to IMACC. Other parties in the case have brought additional counterclaims and cross-claims against each other, BCSC, and third parties, including Kaiser Steel Resources. The parties have exchanged numerous documents and lists of potential witnesses pursuant to the District Court's Case Management Program. IMACC has alleged current and prospective damages, including attorneys fees, of between $1,000,000 and $11,000,000. BCSC and several co-defendants successfully moved for dismissal of IMACC's RCRA claims, effectively eliminating liability for IMACC's attorneys fees. The Company believes that there is little, if any, factual basis for IMACC's claims; the Company further believes that most, if not all, of any liability imposed upon it may be recovered from other parties to the litigation through its claims of indemnity. Item 4. Submission of Matters to a Vote of Security Holders None. Item 6. Exhibits and Reports on Form 8-K No exhibits are required to be filed with this report. No reports on Form 8-K are required to be filed with this report. 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 May 15, 1995 James A. Todd, Jr. ------------------- James A. Todd, Jr. Chairman, Chief Executive Officer May 15, 1995 John M. Casey -------------------- John M. Casey Vice President, Chief Financial Officer EX-27 2
5 This schedule contains summary financial information extracted from the March 31, 1995 Consolidated Balance Sheets and Consolidated Statements of Income of Birmingham Steel Corporation and is qualified in its entirety by reference to such. 1,000 9-MOS JUN-30-1995 MAR-31-1995 6268 0 118755 1887 160119 293287 493757 104017 727347 80322 142500 295 0 0 452001 727347 660739 660739 561961 561961 0 1325 6872 64406 26568 37838 0 0 0 37838 1.29 1.29
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