BIRMINGHAM STEEL CORPORATION

10-K 1 g78703e10vk.htm BIRMINGHAM STEEL CORPORATION BIRMINGHAM STEEL CORPORATION

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K


(Mark One)
x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended June 30, 2002

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		From the transition period from to

Commission File Number 1-9820

BIRMINGHAM STEEL CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware		13-3213634
(State or other jurisdiction of		(I.R.S.Employer
Incorporation or organization)		Identification Number)

1000 Urban Center Drive, Suite 300
Birmingham, Alabama		35242-2516
(Address of principal executive offices)		(Zip Code)

(205) 970-1200
(Registrant’s telephone number, including area code)

Securities Registered pursuant to Section 12 (b) of the Act:


		Name of Each Exchange
Title of Each Class		on Which Registered

Common Stock, par value		Over the Counter
$0.01 per share		Bulletin Board

Securities Registered pursuant to Section 12 (g) of the Act:

NONE

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 report), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

As of October 1, 2002, 31,941,627 shares of Common Stock of the registrant were outstanding. On such date the aggregate market value of shares (based upon the closing market price of the Company’s Common Stock on the Over the Counter Bulletin Board on October 1, 2002) held by non-affiliates was $11,401,246. For purposes of this calculation only directors and officers are deemed to be affiliates.

ITEM 1. BUSINESS

Recent Events

On May 30, 2002, Birmingham Steel Corporation (the Company) announced it had reached a definitive agreement to sell substantially all the assets of the Company and its subsidiaries to a wholly-owned subsidiary of Nucor Corporation (Nucor) for $615 million in cash. Terms of the agreement provide for an increase or decrease to the purchase price in the event that accounts receivable and inventories at the time of closing are not within a predetermined range (with any difference in the sale proceeds impacting the distribution to secured lenders). On June 3, 2002, as a means of effecting the transaction and in accordance with the terms of the definitive agreement with Nucor, the Company and four of its subsidiaries filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code before the United States Bankruptcy Court for the District of Delaware (the Court). On August 12, 2002, Birmingham Steel Management, Inc., a subsidiary which was not included in the Company’s initial Chapter 11 filing, filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code before the Court. By order entered on September 17, 2002, the Company’s pre-arranged Chapter 11 plan (Plan of Reorganization) was confirmed by the Court, thereby approving the sale to Nucor and the distribution of sale proceeds proposed under the plan. Subject to the U.S. Department of Justice (DOJ) decision regarding filings by the Company and Nucor concerning the Hart-Scott-Rodino implications of the transaction, (see discussion below), the Company expects the sale to Nucor will close prior to the end of calendar 2002.

Under the Company’s Plan of Reorganization, the proceeds from the sale to Nucor, together with certain other assets of the Company (or the proceeds thereof) which were excluded from the sale, will be applied to retire the Company’s secured debt. These proceeds will be less than the total obligations under the Company’s long-term secured debt agreements. However, pursuant to the Plan of Reorganization and the Plan Support Agreement dated May 30, 2002, among the Company, Nucor and the Company’s secured lenders, the secured lenders have agreed, among other things, to accept the payments under the Plan of Reorganization in full satisfaction of their claims and to cause $17 million of the proceeds to be paid to claimants under the Company’s employee severance and retirement plans, $17.5 million to the Company’s unsecured creditors, and up to $15 million, or approximately $0.47 per share, to stockholders of the Company. (See Note 2 to the Consolidated Financial Statements).

Upon filing for Chapter 11 relief, the Company obtained a $40 million debtor-in-possession financing credit facility (DIP Facility) from two lenders and is conducting business as a debtor-in-possession. The DIP Facility is being used to fund working capital requirements, operating expenses, employee obligations and adequate protection payments to secured lenders. The DIP Facility was also utilized to pay certain pre-petition obligations approved by the Court, including up to $28 million of trade payables and employee and tax related claims. As of October 14, 2002, approximately $17.5 million was available to be drawn under the DIP Facility to fund the Company’s ongoing obligations. The Company expects the DIP Facility will be sufficient to fund the Company’s obligations through the expected closing date of the Nucor transaction.

Nucor has undertaken to take any and all steps, including divesting and/or agreeing to divest assets, necessary to obtain the required approvals of the DOJ to proceed with the transaction, and such approvals are not conditions precedent to the transaction. The DOJ is currently investigating the transaction to determine if there are any anti-competitive issues. Although approval by the DOJ is not a condition to the purchase by Nucor, the timing of the closing of the transaction may be impacted by the DOJ’s decision. The terms of the various agreements between the Company, Nucor and the secured lenders require that the closing of the transaction must occur no later than 270 days from June 3, 2002 if the Plan of Reorganization is confirmed. Therefore, because the Company’s Plan of Reorganization has been confirmed, the sale to Nucor must be completed no later than February 23, 2003. The Company expects closing will occur prior to the end of calendar 2002.

Overview

Company produced structural products such as angles, channels and beams three inches wide and above at its Cartersville facility through December 2001 when the Cartersville facility was sold. The Company also operates regional warehouse and steel distribution facilities.

The following table summarizes the Company’s principal production facilities:


Location	Operation	Primary Products Produced

Birmingham, AL	Mini Mill	Billets, Rebar, Merchant Products
Kankakee, IL	Mini Mill	Billets, Rebar, Merchant Products
Seattle, WA	Mini Mill	Billets, Rebar, Merchant Products
Jackson, MS (A)	Mini Mill	Billets, Rebar, Merchant Products
Joliet, IL (B)	Rolling Mill	Rebar, Merchant Products
Cartersville, GA (A), (C)	Mini Mill	Billets, Merchant Products, Structural Products
Cleveland, OH (C)	Rolling Mills	Special Bar Quality (SBQ) Rods, Bars and Wire
Memphis, TN (C)	Melt Shop	SBQ Blooms and Billets

(A) Facilities owned by Birmingham Southeast, L.L.C., an 85% owned consolidated subsidiary.

(B) The Joliet rolling mill was shut-down indefinitely in June 2001.

(C) These facilities are designated as discontinued operations in fiscal 2001— see “Discontinued Operations.” In June 2001, the Company suspended rolling operations at Cleveland. Melting operations were suspended at Memphis in January 2000. The Cartersville facility was sold to AmeriSteel Corporation (a U.S. subsidiary of Gerdau S.A. of Rio de Janeiro Brazil) on December 28, 2001. The Cleveland facility was sold to Charter Manufacturing Inc., of Mequon, Wisconsin on March 1, 2002. The Memphis, TN facility is currently classified as assets held for disposal

In addition to the production facilities listed above, the Company owns a 50% equity interest in Richmond Steel Recycling, Ltd., a joint venture scrap collecting and processing operation located in Vancouver, British Columbia. The Company also owns a 50% interest in American Iron Reduction, L.L.C. (AIR), a direct reduced iron (DRI) production facility in Convent, Louisiana. AIR filed for Chapter 7 protection under the United States Bankruptcy Code in March 2001.

Change in Management

In July 1999, The United Company Shareholder Group (United Group) initiated a proxy contest to replace the Company’s then Chief Executive Officer and Board of Directors and certain members of management. On December 2, 1999, the Company and the United Group reached a settlement appointing John D. Correnti as Chairman and Chief Executive Officer and reconstituting the Board of Directors to include a total of twelve directors, nine of which were appointed by the United Group and three of which were appointed by previous management.

In response to the Company’s over-leveraged financial condition and industry conditions, management has taken aggressive steps during the past 30 months to stabilize the Company’s operations, manage liquidity and respond to deteriorating industry conditions, including the following:

• Shutdown of operations at Memphis, resulting in cash savings of approximately $2 million per month (January 2000);

• Shutdown of operations at Cleveland, resulting in cash savings of $2 million to $3 million per month (completed July 2001);

• Shutdown of operations of the Convent, Louisiana DRI facility (AIR), resulting in cash savings of approximately $1 million per month (October 2000);

• Sale of the Company’s interest in the California scrap processing joint venture, eliminating $34 million in contingent liabilities (June 2000);

• Reduction of corporate headquarters personnel by more than 45%, resulting in annual savings of more than $2 million per year (December 1999 to June 2002);

• Hiring of highly experienced steel operations and sales individuals from other steel companies to join the Correnti management team;

• Reduction in inventories by $130 million (from December 1999 to June 2002);

• Reduction in trade accounts payable by $75 million (from December 1999 to June 2002), and improvement in vendor relationships, which had been impaired under prior management;

• Sale of the Cartersville facility in December 2001 providing approximately $86.6 million reduction in total debt and operating lease obligations and elimination of $1 million to $2 million monthly operating losses; and

• Sale of the Cleveland facility in March 2002 providing approximately $18.6 million debt reduction and relief from approximately $0.5 million monthly carrying costs.

During the extremely challenging business conditions which have prevailed in the U.S. steel industry during the past 30 months, the Company has reduced conversion costs, improved margins, reduced debt, maintained vendor relations and maintained sufficient availability under its revolving credit facility to continue operations. However, deteriorating conditions in the domestic steel industry, a surge in steel imports and a general decline in U.S. economic conditions have offset the positive financial impact of management’s actions.

Discontinued Operations

Fiscal 1999

In fiscal 1999, prior to the conclusion of a proxy contest and change in management, the Company announced plans to sell its Special Bar Quality (SBQ) segment, which included 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), a facility in Louisiana which produced direct reduced iron (DRI). Accordingly, the operating results of the SBQ segment were reflected as discontinued operations in the Company’s Consolidated Financial Statements for fiscal 1999 and in the first quarter of fiscal 2000, in accordance with Accounting Principles Board Opinion (APB) No. 30.

Fiscal 2000

In January 2000, subsequent to a change in management which occurred after a proxy contest, the Company re-established its Cleveland-based American Steel & Wire (AS&W) SBQ operations because new management believed there was a viable SBQ market to support operations at the Cleveland facility and efforts to sell the SBQ facilities up to that time had not been successful. In accordance with Emerging Issues Task Force (EITF) 90-16, Accounting for Discontinued Operations Subsequently Retained, the results of operations of the SBQ segment were reported within continuing operations from the second quarter of fiscal 2000 through the first fiscal quarter of 2001. Consequently, in the quarter ended December 31, 1999, the operating results of the SBQ segment for all periods prior to October 1, 1999 were reclassified from discontinued operations to continuing operations.

Fiscal 2001

In September 2000, the Company signed a definitive agreement with North American Metals, Ltd. (NAM) to sell the Cleveland and Memphis facilities of the SBQ segment by March 23, 2001. Accordingly, as required by APB 30 (as interpreted by EITF 95-18), the operating results of the SBQ segment for the second quarter of fiscal 2001 and prior periods were restated and again reported in discontinued operations. Subsequently, the Company reported that the definitive agreement with NAM for the sale of the SBQ assets had been terminated because NAM was unable to complete financing arrangements by the March 23, 2001 deadline. The Company continued to pursue discussions with other interested parties; however, due to a general economic slowdown in the U.S. steel industry, which impacted demand for all steel products, shipments for the Cleveland facility fell precipitously in the third fiscal quarter of 2001. As a result, operations at the Cleveland facility were suspended in June 2001.

In September 2001, the Company announced that a letter of intent had been signed to sell the idled Cleveland facility to Corporacion Sidenor, S.A. (Sidenor), an SBQ producer headquartered in Bilbao, Spain.

Fiscal 2002

On November 9, 2001, the letter of intent with Sidenor regarding sale of the SBQ facility in Cleveland, Ohio expired. On January 10, 2002, the Company announced it had signed an option agreement with Charter Manufacturing, Inc. of Mequon, Wisconsin (Charter), and on March 1, 2002, the Company completed the sale of the Cleveland facility to Charter.

In the second quarter ended December 31, 2001, the Company announced and completed the sale of its mini-mill facility in Cartersville, Georgia to AmeriSteel Corporation (AmeriSteel), a U.S. subsidiary of Gerdau S.A. of Rio de Janeiro, Brazil. Consequently, the operations for the Cartersville facility were restated in the second quarter of fiscal 2002 and all prior periods in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.”

History

The Company was formed in 1983 and began operations in 1984. Upon commencement of operations, the Company owned two mini-mills located in Birmingham, Alabama and Kankakee, Illinois. Subsequently, the Company followed a strategy of growing by acquisition when market and economic conditions warranted. The Company acquired additional mini-mills in Jackson, Mississippi (1985) and Seattle, Washington (1986). In 1991, the Company acquired the assets of Seattle Steel, Inc. and consolidated all of its Seattle operations at the former Seattle Steel site. In 1993, the Company entered the SBQ market with the acquisition of AS&W, which added the Joliet mini-mill as well as rod and wire mill assets at the Company’s Cleveland facility.

In 1994, the Company acquired a Florida-based steel distributor, Port Everglades Steel Corporation, which distributes steel products manufactured by the Company and other third parties. In December 1996, the Company contributed its Jackson, Mississippi mini-mill facility to Birmingham Southeast, L.L.C. (Birmingham Southeast), a consolidated subsidiary owned 85% by Birmingham East Coast Holdings, a wholly-owned subsidiary of the Company, and 15% by a subsidiary of IVACO, Inc. Birmingham Southeast then purchased steel production assets located in Cartersville, Georgia from Atlantic Steel Industries, Inc. (Atlantic), a subsidiary of IVACO, Inc. In March 1999, the Company commenced start-up of a new medium-section mill to replace the rolling production that was provided under a tolling arrangement with Atlantic. In July 2000, the Company completed the start-up phase of its Cartersville rolling mill. The Cartersville rolling mill facility was expected to expand the Company’s merchant and structural product offerings and enable the Company to penetrate new markets.

Following its acquisition of AS&W in 1993, management sought to build the Company’s SBQ operations using the AS&W assets as a platform. In addition to building additional rolling mill capacity in Cleveland, the Company constructed a melt shop in Memphis, Tennessee. The Memphis melt shop facility was intended to provide lower cost raw materials (high grade, low carbon billets) for the Cleveland SBQ rod, bar and wire operations. During the development and expansion of the Cleveland and Memphis facilities, industry overcapacity and an increase in imported SBQ products created unfavorable pricing conditions. In August 1999, the Company announced its intention to divest its SBQ operations in order to focus on its core mini-mill and scrap operations. In January 2000, under new management, the Company decided to rationalize the SBQ operations by suspending melting operations at the Memphis facility and continuing operations at the AS&W facilities using third-party billets. In December 2001, new management announced its intention to divest its SBQ operations in order to focus on its core mini-mill and scrap operations. On March 1, 2002, the Company completed the sale of the Cleveland facility to Charter Manufacturing Inc. The Company continues to hold the Memphis facility as assets held for disposal.

Operational Management

The Company’s strategies for its remaining rebar/merchant mini-mills have been to (a) increase sales by actively pursuing new customers and strengthening relationships with existing customers; (b) improve its position as a low-cost producer through continued operating cost reductions; (c) optimize capacity utilization at each facility; and (d) increase production and sales of merchant and structural products.

For management purposes, the Company’s rebar and merchant product mini-mills are operated as independent business units, reporting directly to the Company’s Chief Executive Officer. The rebar/merchant facilities are aggregated and reported within a single segment because, among other things, they produce essentially the same products using essentially identical production equipment and techniques and they sell steel products to the same classes of customers. In addition, their distribution methods are identical and they operate under the same regulatory environment. Furthermore, over the long-term, the rebar/merchant facilities are expected to generate similar long-term average gross margins.

SBQ operations were considered a separate segment for financial reporting purposes due to differences in: (a) the class of customer served; (b) finished product chemistry and surface quality; (c) intended uses of finished product; and (d) expected long-term average profit margins. The SBQ operations are reported in discontinued operations (see Note 3 to the Consolidated Financial Statements).

Steel Manufacturing

Steel can be produced at significantly lower costs by mini-mills than by integrated steel operations, which typically process iron ore and other raw materials in blast furnaces to produce steel. Integrated steel mills generally (a) use more costly raw materials; (b) consume more energy; (c) consist of older and less efficient facilities which are more labor-intensive; and (d) employ a larger labor force than the mini-mill industry. In general, individual mini-mills produce a limited line of products. The domestic mini-mill steel industry currently has excess production capacity, which, together with competition from foreign producers, has resulted in competitive product pricing and cyclical pressures on industry profit margins. In this environment, efficient production and cost controls are critical to the viability of domestic mini-mill steel producers.

The Company operates mini-mills (electric arc furnace melt shops and finished product rolling mills) in Birmingham, Alabama; Kankakee, Illinois; and Seattle, Washington. The Company also has a rolling mill in Joliet, Illinois (which was indefinitely shut-down in June 2001), and has warehouse and distribution facilities in Fontana and Stockton, California; Baltimore, Maryland; Ft. Worth, Texas; and Ft. Lauderdale, Florida. Through its wholly owned subsidiary, Birmingham East Coast Holdings, the Company owns 85% of Birmingham Southeast, a consolidated subsidiary that operates a mini-mill in Jackson, Mississippi. The Company also owns an idled SBQ melt shop in Memphis, Tennessee.

Carbon steel rebar products produced by the Company are sold primarily to independent fabricators and distributors for use in the construction industry. Merchant products are sold to fabricators, steel service centers and original equipment manufacturers for use in general industrial applications. SBQ rod, bar and wire products are targeted to customers in the automotive, fastener, welding, appliance and aerospace industries.

The Company’s mini-mills melt ferrous scrap to produce rebar and merchant steel products. Production begins with melting ferrous scrap in an electric arc furnace. The molten steel is then funneled through a continuous caster which produces steel billets (continuous rectangular strands of steel), which are then cut into predetermined lengths. Billets are transferred to a rolling mill where they are reheated, passed through a roughing mill for size reduction, rolled into finished rebar and merchant products and cooled. Merchant products then pass through state-of-the-art straightening and stacking equipment. At the end of the production process, rebar and merchant steel products pass through automated bundling equipment to ensure uniform packaging for shipment to customers.

The Company’s electric arc furnace in Memphis, Tennessee has capability to melt high quality scrap and DRI to produce molten steel that is then poured into a continuous caster to form a bloom—which is a larger size than a billet. In a continuous process, blooms are moved from the caster directly to stands which reduce the blooms to billets. The bloom cast is essential to achieving the necessary quality for SBQ products.

Raw Materials and Energy Costs

The principal raw material used in the Company’s mini-mills is ferrous scrap, generally derived from automobile, industrial and railroad scrap. The market for scrap steel is highly competitive and its price volatility is influenced by periodic shortages, freight costs, speculation by scrap brokers and other conditions largely beyond the Company’s control. The Company purchases its outside scrap requirements from a number of scrap merchants and is not generally dependent on any single supplier. In fiscal 2002, scrap costs represented approximately 41% of the Company’s total manufacturing costs at its core mini-mills.

Within the commodity product ranges dominated by the mini-mill industry, fluctuations in scrap market conditions have an industry-wide impact on manufacturing costs and selling prices of finished goods. During periods of scrap price escalation, the mini-mill industry seeks to maintain profit margins and the Company has in the past been able to pass along increased raw material costs to customers. However, temporary reductions in profit margin spreads frequently occur because of a timing lag between the escalation of scrap prices and the effective market acceptance of higher selling prices for finished steel products. Following this delay in margin recovery, steel industry profitability has historically escalated during periods of inflated scrap market pricing. There can be no assurance that competitive conditions will permit the Company to pass on scrap cost increases in the future.

The Company consumes large amounts of electricity and natural gas. The Company purchases electricity from regulated utilities under interruptible service contracts because the costs of interruptible contracts are generally lower than alternative arrangements. However, under these high volume industrial contracts, electricity suppliers may periodically interrupt service during peak demand periods. Although service interruptions have ordinarily been limited to several hours and have occurred no more than ten days per year, there can be no assurance that such interruptions will not be more severe in the future. The Company also consumes substantial amounts of natural gas. Since deregulation of the natural gas industry, the Company has generally obtained natural gas through negotiated contract purchases of well-head gas, with transportation through local pipeline distribution networks.

Production Capacity

The table below presents the Company’s estimated melting and rolling mill capacity, together with actual steel melting and rolling production for fiscal 2002. The capacities presented are management’s estimates and are based upon a normal 168-hour weekly work schedule, assuming an average product mix for each facility and include the effects of capacity limitations currently impacting each facility. Production capacities listed below are estimated year-end capacity levels:


		Annual		Fiscal		Annual		Fiscal
		Melting		2002		Rolling		2002
		Capacity		Production		Capacity		Production

		(in thousands of tons)				(in thousands of tons)

Continuing core mini-mills:
	Birmingham		500		484		550		482
	Kankakee		835		557		600		536
	Seattle		750		579		750		535
	Jackson		450		295		400		262
Discontinued Operations:
	Cartersville (A)		1,000		216		600		151
	Cleveland (B)		—		—		1,100		—
	Memphis (C)		1,000		—		—		—

			4,535		2,131		4,000		1,966

(A) The Cartersville facility was sold in December 2001. See “Discontinued Operations”.

(B) The Cleveland facility ceased operations in June 2001 and was sold in March 2002. See “Discontinued Operations”.

(C) The Memphis facility ceased operations in December 1999. See “Discontinued Operations”.

The Company has the capability to produce both rebar and merchant products at each of its core mini-mills. Converting rebar production to merchant products production is a routine facet of operations at the Company’s mini-mill facilities and no major impediments exist which would preclude changing the product mix to meet changes in demand.

Production Facilities—Continuing Operations — Core Mini-Mills

Birmingham, Alabama

The Birmingham, Alabama facility was the first mini-mill built in the United States. Since acquisition of the Birmingham facility, the Company has installed a new electric arc furnace and sequence casting system in the melt shop, a new reheat furnace, finishing stands, cooling bed and product shear in the rolling mill as well as a new finished goods storage area. In 1992, the Company transferred an in-line rolling mill from its idled facility in Norfolk, Virginia to Birmingham. In 1994, the Company installed finished goods bundling and transfer equipment at its Birmingham facility. The Birmingham facility produces primarily rebar and some merchant products.

Kankakee, Illinois

The Kankakee, Illinois facility is located approximately 50 miles south of Chicago. Since its acquisition in 1981, the Company has renovated the operation and installed a new melt shop, continuous caster, rolling mill, reheat furnace and in-line straightening, stacking and bundling equipment. Kankakee enjoys a favorable geographical proximity to key Midwest markets for merchant products. This freight cost advantage and Kankakee’s state-of-the-art equipment capabilities are competitive advantages in the Company’s strategy to expand market share of merchant products. The Kankakee operation produces rebar and a variety of merchant products, including rounds, angles, channels, squares, flats and strip.

Seattle, Washington

The Seattle, Washington facility is located adjacent to the Port of Seattle. The Company began operating in Seattle in 1986 upon the acquisition of a local steel company, which provided entry to the West Coast steel markets. In 1991, the Company purchased the assets of Seattle Steel, Inc., in west Seattle, and consolidated all of its steel operations to the west Seattle site. Soon after the acquisition of the west Seattle operations, the Company began a modernization program which included installation of a new baghouse, new ladle turret and billet runout table. In 1993, the Company completed construction of a new state-of-the-art in-line rolling mill which includes automated in-line straightening, stacking and bundling equipment designed to facilitate Seattle’s expansion in merchant product production. The Seattle operation produces rebar and a variety of merchant products, including rounds, angles, channels, squares, flats and strip.

Jackson, Mississippi

The Company originally acquired the Jackson facility in August 1985. In December 1996, upon formation of Birmingham Southeast, the Company contributed the assets of its Jackson facility to the newly-formed limited liability company, Birmingham Southeast, LLC. The Company, through its Birmingham East Coast Holdings subsidiary, owns 85% of Birmingham Southeast.

Since acquiring the Jackson operation, the Company has renovated the facilities and equipment. The Jackson facility includes a melt shop which was completed in 1993 and a modern in-line rolling mill. Installations of automated in-line straightening and stacking equipment were completed in fiscal 1994. The Jackson facility produces primarily merchant products including rounds, squares, flats, strip and angles. The Jackson facility also has the capability to produce rebar.

Joliet, Illinois

The Joliet, Illinois facility was acquired with the Company’s purchase of AS&W Corporation in November 1993. In fiscal 1996, concurrent with the start-up of the new high quality bar mill in Cleveland (see ''Cleveland, Ohio’’ below), the Company transferred the operation of the Joliet facility from the management in Cleveland to the operational control of the Kankakee management group. The Company also invested approximately $30 million to upgrade the rolling mill and enable Joliet to produce coiled and straight length rebar, flats, rounds and squares. The Joliet operation consists of a modernized 2-strand, 19-stand Morgan mill, 3-zone top-fired walking beam furnace, no-twist finishing and a coil and cut-to-length line. The Joliet operation obtains its semi-finished steel billet requirements primarily from the Company’s Kankakee facility. Because of deteriorating market conditions, the operations at Joliet were indefinitely suspended in June 2001.

PESCO Facilities

In December 1994, the Company acquired substantially all of the assets of Port Everglades Steel Corporation (PESCO), a Florida-based steel distributor which operates facilities in Florida and Texas. PESCO obtains the majority of its steel requirements from the Company’s Birmingham, Jackson and Kankakee mills.

Production Facilities—Discontinued Operations

SBQ Operation

In February 2001, the Company announced its intention to divest its SBQ operations in order to focus efforts on its core mini-mill and scrap operations. The Company’s SBQ operations included the Cleveland, Ohio mill and Memphis, Tennessee melt shop. The Company completed the sale of the Cleveland facility to Charter Manufacturing, Inc. in March 2002. The Company ceased operations of the Memphis facility as of January 1, 2000 and committed to a plan to sell the assets. The Memphis facility assets are held for sale as of June 30, 2002. See Note 3 to the Consolidated Financial Statements.

Birmingham Southeast acquired the Cartersville, Georgia facility in December 1996. The facility included a melt shop with a 24 foot, 140 ton Demag AC electric arc furnace and Demag 6-strand billet caster. In addition to merchant and structural products, Cartersville produced billets for feedstock to the Cleveland facility. In March 1999, the Company began its own rolling operations in Cartersville and produced a wide range of merchant and structural products at this facility. The Company completed the sale of the Cartersville facility in December 2001 to AmeriSteel Corporation.

Products

Note 13 to the Consolidated Financial Statements provides information about net sales for each of the past three years by type of product and by geographic area. Following is a discussion of each of the Company’s principal products and distribution methods.

Rebar Products

The Company has the capability to produce rebar at each of its continuing core mini-mill facilities. Rebar is generally sold to fabricators and manufacturers who cut, bend, shape and fabricate the steel to meet engineering, architectural or end-product specifications. Rebar is used primarily for strengthening concrete in highway construction, building construction and other construction applications. Unlike some other manufacturers of rebar, the Company does not engage in the rebar fabrication business, which could put the Company into direct competition with its major rebar customers. The Company instead focuses its marketing efforts on independent rebar fabricators and steel service centers.

Rebar is a commodity steel product, which makes price, including freight cost, the primary competitive factor. Except in unusual circumstances, the customer’s delivery expense is limited to freight from the nearest mini-mill. Any incremental freight charges from another source must be absorbed by the supplier. The Company ships rebar products to customers primarily via common carrier and, to a lesser extent, by rail.

Rebar is consumed in a wide variety of end uses, divided into roughly equal portions between private sector applications and public works projects. Private sector applications include commercial and industrial buildings, construction of apartments and hotels, utility construction, agricultural uses and various maintenance and repair applications. Public works projects include construction of highways and streets, public buildings, water treatment facilities and other projects.

The following data, reported by the American Iron and Steel Institute (a steel trade association), depict apparent rebar consumption in the United States from 1989 through 2001. The table also includes rebar shipments by the Company and its approximate market share percentage for the periods indicated:


	Rebar		Company		Approximate
	Consumption		Shipments		Market
Calendar Year	(in tons)		(in tons)		Share

1989		5,213,000		972,000		18.6	%
1990		5,386,000		972,000		18.0	%
1991		4,779,000		945,000		19.8	%
1992		4,764,000		1,060,000		22.3	%
1993		5,051,000		1,181,000		23.4	%
1994		5,151,000		1,185,000		23.0	%
1995		5,454,000		1,108,000		20.3	%
1996		6,071,000		1,288,000		21.2	%
1997		6,188,000		1,432,000		23.1	%
1998		7,373,000		1,363,000		18.5	%
1999		6,546,000		1,446,000		22.1	%
2000		6,907,000		1,402,000		20.3	%
2001		6,937,000		1,322,000		19.1	%

The Company’s rebar operations are subject to a period of moderately reduced sales from November to February, when winter weather and the holiday season impact construction market demand.

Merchant and Structural Products

The Company has the capability to produce merchant products at each of its continuing core mini-mill facilities. Merchant products consist of rounds, squares, flats and strip, along with angles and channels less than three inches wide. Merchant products are generally sold to fabricators, steel service centers and manufacturers who cut, bend, shape and fabricate steel to meet engineering or end product specifications. Merchant products are used to manufacture a wide variety of products, including gratings, steel floor and roof joists, safety walkways, ornamental furniture, stair railings and farm equipment.

The Company produced structural products at its Cartersville mini-mill facility. Structural products consist of angles, channels and beams that are three inches wide and above. Structural products are used to manufacture a wide variety of products including housing beams, trailers, light to medium structural support for buildings and other construction based uses. The Cartersville mill was sold in December 2001. Operations for Cartersville are reported in discontinued operations.

Merchant and structural products typically require more specialized processing and handling than rebar, including straightening, stacking and specialized bundling. Because of the greater variety of shapes and sizes, merchant and structural products are typically produced in shorter production runs, requiring more frequent

changeovers in rolling mill equipment. Merchant products generally command higher prices and can produce higher profit margins on a per ton basis than rebar products. The Company has installed modern straightening, stacking and bundling equipment at its mills to strengthen its competitiveness in merchant and structural markets. As with rebar, the Company generally ships merchant products to customers by common carrier or by rail and equalizes freight costs to the nearest competing mill.

The following data reported by the American Iron and Steel Institute depict apparent consumption of merchant products in the United States from 1989 through 2001. The table also includes merchant product shipments by the Company and its approximate market share percentage for the periods indicated:


	Merchant Product		Company		Approximate			Structural		Company		Approximate
	Consumption		Shipments		Market			Product		Shipments			Market
Calendar Year	(in tons)		(in tons)		Share			Consumption		(in tons)			Share

1989		8,398,000		272,000		3.2	%
1990		8,379,000		306,000		3.7	%
1991		7,045,000		287,000		4.1	%
1992		7,504,000		330,000		4.4	%
1993		8,445,000		395,000		4.6	%
1994		10,113,000		484,000		4.8	%
1995		10,618,000		524,000		4.9	%
1996		10,341,000		520,000		5.0	%
1997		10,534,000		925,000		8.8	%
1998		11,600,000		909,000		7.8	%
1999		10,237,000		908,000		8.9	%		6,391,000		—			—
2000		9,236,000		955,000		10.3	%		8,691,000		23,000			0.3	%
2001		8,023,000		754,000		9.4	%		7,820,000		73,000			0.9	%

SBQ Rod, Bar and Wire Products

The Company’s SBQ facilities sold high-quality rod, bar and wire products to customers in the automotive, agricultural, industrial fastener, welding, appliance and aerospace industries. Because of the flexibility of the Cleveland facility, the Company produced a wide variety of SBQ products, including cold heading quality, cold finish quality, cold rolling quality, welding quality, specialty high carbon quality, industrial quality, bearing quality and wire products. Approximately 70% of the Company’s SBQ shipments were to customers serving the original equipment and after-market segments of the automotive industry.

Competition

Price sensitivity in markets for the Company’s products is driven by competitive factors, including the cost and availability of steel in the marketplace. The geographic marketing areas for the Company’s products are principally the United States and Canada.

Because rebar, merchant and structural products are commodity products, the major factors affecting the sale of finished products are competitive pricing, inventory availability, facility location and service. The Company competes in the rebar, merchant and structural markets primarily with numerous domestic mini-mill companies and foreign importers.

Foreign Competition

During the past four years, foreign steel imports have had a significant impact on the Company’s shipments. Selling prices have decreased in each of the past three years, primarily because of increased imports. In July 2000, the Company and other United States rebar producers (the Rebar Trade Action Coalition) filed a petition with the International Trade Commission (ITC) against dumping rebar in certain United States regional markets. In August 2000, the ITC ruled in favor of the Rebar Trade Action Coalition, preliminarily finding that certain regional United States markets had been injured or threatened with injury due to dumped steel imports. As a result of these findings, the Department of Commerce imposed duties ranging from 17% to 133% on imports from eight countries beginning in April 2001. In addition, in fiscal 2002, the Bush Administration announced steel import tariffs under Section 201 of the International Trade Code. Initial announcements indicated that tariffs of 15% on rebar and 30% on certain merchant products would be established to protect U.S. steel producers from less expensive, foreign government subsidized imported steel. Opposition within the U.S. as well as abroad continues to mount against the tariffs, which have slowed their implementation. Also, until economic conditions and seasonal demand return to normalized levels, selling price and shipping level pressures will likely continue.

Employees

Production Facilities

At June 30, 2002, the Company employed 1,023 people at its production facilities. The Company estimates that approximately 30% of its current employee compensation in operations is earned on an incentive basis linked to production. The percentage of incentive pay varies from mill to mill based upon operating efficiencies. During fiscal 2002, hourly employee costs at these facilities were approximately $38 per hour, including overtime and fringe benefits, which is competitive with other mini-mills. In prior years, employees at the Joliet facility were represented by the United Steelworkers of America. Due to continued deteriorating business conditions, the Joliet operations were indefinitely suspended in June 2001. Affected employees were provided a sixty day advance notice of the shutdown in compliance with the Worker Adjustment and Retraining Notification Act (WARN). The Company’s other facilities are not unionized. The Company has never experienced a strike or other work stoppage at its steel mills and management believes that employee relations remain good.

Sales and Administrative Personnel

At June 30, 2002, the Company employed 148 sales and administrative personnel, of which 69 were employed at the Company’s corporate office headquarters located in Birmingham, Alabama.

Environmental and Regulatory Matters

The Company is subject to federal, state and local environmental laws and regulations concerning, among other matters, waste water effluent, air emissions and furnace dust disposal. As these regulations increase in complexity and scope, environmental considerations play an increasingly important role in planning, daily operations and expenses.

The Company operates engineering/environmental services departments and has environmental coordinators at its facilities to maintain compliance with applicable laws and regulations. These personnel are responsible for the daily management of environmental matters. The Company believes it is currently in material compliance with all known and applicable environmental regulations. Changes in federal or state regulations or a discovery of unknown conditions could require substantial additional expenditures by the Company.

The Company’s mini-mills are classified as hazardous waste generators because they produce and collect certain types of dust containing lead and cadmium. The Company currently collects and disposes of such wastes at approved landfill sites or recycling sites through contracts with approved waste disposal and recycling firms.

The Cleveland and Joliet facilities were acquired pursuant to an Asset Sales Agreement dated May 19, 1986 (the Agreement), by and between AS&W and USX Corporation (formerly United States Steel Corporation) (USX). Pursuant to the Agreement, AS&W is indemnified by USX for claims, if any, which may be asserted against AS&W under the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Subsection 6901, et seq., and the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sub-section 9601, et. Seq., or which may be asserted under similar federal or state statutes or regulations, which arise out of USX’s actions on or prior to June 30, 1986, the date on which AS&W acquired these facilities. To date, no material claims have been identified or asserted against AS&W.

Executive Officers of the Registrant

Pursuant to General Instruction G(3) to Form 10-K, information regarding the executive officers of the Company called for by Item 401(b) of Regulation S-K is presented below.

The following table sets forth the name of each executive officer of the Company, the offices they hold, and their ages as of October 1, 2002:


Name	Age		Office Held

John D. Correnti		55	Chairman of the Board and Chief Executive Officer
James A. Todd, Jr.		74	Vice Chairman and Chief Administrative Officer
Michael J. Wagner		43	Executive Vice President and Chief Operating Officer
J. Daniel Garrett		44	Executive Vice President and Chief Financial Officer
Robert G. Wilson		65	Vice President – Rebar Sales

John D. Correnti joined the Company as Chairman of the Board and Chief Executive Officer in December 1999. Prior to joining the Company, Mr. Correnti served as Vice Chairman, President and Chief Executive Officer of Nucor Corporation from 1996 to 1999.

James A. Todd, Jr. joined the Company as Chief Administrative Officer in December 1999. Mr. Todd served as Chairman of the Board and Chief Executive Officer of the Company from 1991 to January 1996.

Michael J. Wagner joined the Company as Vice President sales in 2000 and has served as Executive Vice President and Chief Operating Officer since January 2002. Prior to joining the Company, Mr. Wagner served as Sales Manager with Nucor Corporation from 1994 to 2000.

J. Daniel Garrett joined the Company in 1986 and has served as Chief Financial Officer and Executive Vice President – Finance since January 2002. From October 1997 to January 2002, Mr. Garrett served as Vice President-Finance & Control.

Robert G. Wilson joined the Company in 1988 as Vice President – Sales and has served as Vice President – Rebar Sales since December 1999.

ITEM 2. PROPERTIES

The following table lists the Company’s real property and production facilities. Management believes that these facilities are adequate to meet the Company’s current and future commitments.

Building

Owned

Square

Location

Acreage

Footage

Leased

Corporate Headquarters:

Birmingham, Alabama

—

38,278

Leased

Continuing Operating Facilities:

Rebar/Merchant mini-mills:

Birmingham, Alabama

260,900

Owned

Kankakee, Illinois

222

400,000

Owned

Seattle, Washington

736,000

Owned

Jackson, Mississippi

323,000

Owned(A)

Distribution Facility:

Ft. Lauderdale, Florida

—

29,500

Leased

SBQ Operations (B):

Memphis, Tennessee

500

184,800

Owned(A)

All of these facilities are encumbered by mortgages held by lenders as security for outstanding debt.

(A) Portions of equipment that were financed by Industrial Revenue Bonds are leased pursuant to the terms of such bonds.

(B) This facility is designated as discontinued operations in fiscal 2002 – see “Discontinued Operations”. Melting operations were suspended at Memphis in January 2000. This facility is currently classified as assets held for disposal.

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in litigation relating to claims arising out of its operations in the normal course of business. Most of the existing known claims against the Company are covered by insurance, subject to the payment of deductible amounts by the Company. Management believes that substantially all uninsured or unindemnified liability resulting from existing litigation will not have a material adverse effect on the Company’s business or financial position. However, there can be no assurance that insurance, including product liability insurance, will be available in the future at reasonable rates.

Amtrak Litigation

The Company has been named as a defendant in a number of lawsuits arising out of an accident on March 15, 1999, involving the Amtrak passenger train, City of New Orleans, and a tractor trailer at the McKnight Road Grade Crossing located in front of the Company’s plant in Kankakee, Illinois. The truck was owned and operated by Melco Transfer, Inc., and driven by John R. Stokes, a Melco employee. The railroad tracks, warning lights and gates were owned, operated and maintained by Illinois Central Railroad. At the time of the accident, the truck was just leaving the Kankakee plant carrying steel reinforcing bar produced by the Company. There were approximately 122 injuries and 11 deaths in the accident. The Company has been named as a defendant or counter defendant in 56 cases pending in the Circuit Court of Cook County, Illinois, which have been consolidated under the style Deborah Dowe, personal representative of the Estate of Sheena Dowe, Deceased v. Melco Transfer, Inc., et al. The Company has

also been named as a defendant in five Federal Employers Liability Act (FELA) cases brought by Amtrak employees in the Circuit Court of Cook County, which have also been consolidated in the Dowe case. The Company has also been named as a defendant in a suit brought by Amtrak in the Circuit Court of Cook County, Illinois, styled National Railroad Passenger Corporation d/b/a Amtrak v. Birmingham Steel Corporation, et al. Amtrak’s complaint seeks to recover for property damage to the train, cleanup costs and loss of income resulting from the accident and contribution in any judgments awarded against Amtrak in any personal injury actions arising out of the lawsuits. The Amtrak case has been consolidated with the Dowe case. The Company has been named as a defendant in a case pending in the United States District Court for the Northern District of Illinois, Anna Wilson-McCray v. John R. Stokes, et al. The Company has been named as a counter defendant in two cases pending in the Circuit Court for Kankakee County, Illinois, styled Dawson v. Illinois Central Railroad, and Neils v. Illinois Central Railroad. The Dawson and Neils cases are injury cases. The Company has also been named as a defendant in four cases filed in New Orleans Parish, Louisiana. Those cases are Williams, Brister, George, and Martin. The plaintiffs in those cases were all employees of Amtrak at the time of the accident. The Williams, Brister and George cases have been settled by Northland Insurance Company. The Company has been named as a defendant in third party complaints filed by Amtrak in four (4) bodily-injury suits pending in the U.S. District Court for the Central District of Illinois where the plaintiffs were employees of Amtrak and/or Illinois Central who filed FELA claims against Amtrak.

The various plaintiffs in both the Illinois and Louisiana cases contend that at the time of the accident John R. Stokes, the driver of the truck, was acting as an employee or agent of the Company; that the Company was negligent in loading the trailer; that the load placed on the trailer exceeded the weight limit allowed by statute; and that the Company negligently allowed some rail cars to be parked on a side track near the intersection. The Company is being defended in all of the cases through insurance counsel. The Company denies all liability, and is vigorously defending the cases. At this time, however, the cases remain in their early stages, and discovery is incomplete. The Company cannot accurately assess the plaintiffs’ chance of recovery against the Company. On May 29, 2001, the Company’s insurer, Reliance Insurance Company, was placed into rehabilitation in the state of Pennsylvania. It is, therefore, doubtful that Reliance will be able to provide the Company a defense or pay any claims arising out of the accident. Birmingham Steel filed a Suggestion of Bankruptcy on June 17, 2002, and further proceedings against the Company have been stayed. The Bankruptcy Court has, however, granted a limited relief from the stay to Northland Insurance Company (Melco’s insurance carrier) at Northland’s request, to allow Northland to attempt to settle claims against the Company. The Company does not believe any settlement reached by Northland will materially affect the Company’s ultimate exposure.

PSC Metals, Inc. v. Birmingham Steel Corporation

On December 19, 2001 PSC Metals, Inc. (“PSC”) filed a complaint against the Company in the U.S. District Court for the Northern District of Ohio. The case arises out of a Mill Services Contract (the “Contract”) the Company entered into with PSC on February 25, 1997 for the Company’s facility in Memphis, Tennessee. PSC claims that the Company breached the Contract, misrepresented to PSC the annual production levels and service requirements at the Memphis facility and assured PSC that the Memphis facility would continuously operate for 10 years in order to get PSC to enter into the Contract. The Contract is a ten year agreement which provides for a minimum monthly payment of $80,831. In addition, at the end of ten years the Company is required to repurchase certain fixed assets installed by PSC to perform the mill services required under the contract for $2,242,748. According to PSC, in order to perform the services required under the Contract, PSC invested in excess of $14 million in capital facilities, equipment and staffing. PSC seeks compensatory damages in an amount to be proven at trial but not less than $38 million, and any other relief the Court deems appropriate. The Company filed a motion to transfer this case from the United States District Court for the Northern District of Ohio to the United States District Court for the Western District of Tennessee on the grounds that Tennessee is a more convenient and appropriate forum for this litigation. The Court denied the motion. The Company intends to vigorously defend the case. No discovery was conducted in the lawsuit prior to The Company’s bankruptcy. Subsequent to the bankruptcy filing the case was stayed and PSC has filed a proof of claim in the bankruptcy proceeding.

Company Bankruptcy

On June 3, 2002, the Company, along with certain of its subsidiaries, filed a case in the United States Bankruptcy Court for the District of Delaware (the “Court”) under Chapter 11 (“Chapter 11”) of Title 11 of the United States Code (the “Bankruptcy Code”) styled In re Birmingham Steel Corporation, et al. (Case No. 02-11586) (the “Case”), pursuant to which it is seeking to effect the sale of substantially all of its assets to a wholly owned subsidiary Nucor Corporation. On September 17, 2002, the Court entered an order (the “Confirmation Order”) confirming the Third Amended and Restated Joint Plan of Reorganization as modified (“Plan of Reorganization”), of the Company under Chapter 11 of the Bankruptcy Code.

Material features of the Plan of Reorganization are:

The Plan of Reorganization provides for the sale of substantially all of the Company’s assets to a wholly owned subsidiary of Nucor Corporation. (“Nucor”) pursuant to the Asset Purchase Agreement. The Plan of Reorganization provides for the liquidation of the Excluded Assets that are not being sold to Nucor. The liens of the secured creditors in Class 2 (as defined below) will attach to the proceeds of the sale. Such secured creditors hold liens on substantially all the assets of the debtors and the aggregate amount of their claims exceeds the expected amount of the proceeds of the sale of the Company’s assets. Although secured parties are not being paid in full, pursuant to the Plan Support Agreement the secured creditors have agreed to pay certain sums to unsecured and other creditors and interest holders in the Company. For a more complete description of the Plan Support Agreement and its effect on the distribution of the proceeds of the sale of the Company’s assets, see Section IV of Exhibit 2 to the Company’s Form 8-K filed with the SEC on September 27, 2002, the Disclosure Statement for Joint Plan of Reorganization of Birmingham Steel Corporation (the “Disclosure Statement”).

The Plan of Reorganization places Claims against the Company and Interests in the Company in the following classes:

Class 1 consists of Allowed Priority Claims, other than Priority Tax Claims. Each holder of an Allowed Class 1 Claim shall be paid cash on the Effective Date or, if later, the 15^th business day after such claim becomes allowed. Cash from existing proceeds after the Confirmation Date shall be paid in an amount equal to the amount of such Class 1 Claim. Claims in Class 1 are not impaired under the Plan of Reorganization.

Class 2 consists of the Allowed Secured Claims of each party to the Omnibus Collateral Agreement and the Intercreditor Agreement, in their capacities as such, including the 1993 Noteholders, the Bank Group, the Indenture Trustee (as assignee of the Owner Trustee for the benefit of the Memphis Equipment Noteholders), PNC and the Collateral Agent. The holders of Claims in Class 2 shall retain the liens securing such Claims to the extent of the Allowed amount of such Claims. Upon the closing of the Sale, such Liens shall attach to the Class 2 Distribution Amount, subject to the terms and conditions set forth in the Plan of Reorganization. In full and final settlement and discharge of Class 2 Claims, the Collateral Agent on account of each holder of an Allowed Class 2 Claim shall receive on the Closing Date, and from time to time thereafter (if applicable) the Class 2 Distribution Amount and upon payment of all claims payable from such reserve in accordance with the Plan, the unused portions, if any of the Administrative Claim Reserve. Notwithstanding any other provisions of the Plan, as of the Effective Date, the Secured Claims of each holder of a Class 2 Claim shall be deemed Allowed without defense, set off, offset, right of recoupment or counterclaim.

Class 3 consists of Allowed Secured Claims other than Allowed Secured Claims in Class 2. In full and final satisfaction and discharge of all Class 3 Claims, if any, to the extent not previously paid, each holder of an Allowed Class 3 Claim shall receive on the Effective Date or, if later, the fifteenth (15th) day after such Claim becomes an Allowed Claim,

(1) If the collateral securing such claim is in the Excluded Assets (as defined in the Asset Purchase Agreement) and to the extent not already received by such holder, the collateral securing such claim, without representation, warranty or recourse; or

(2) If the collateral securing such claim is not in the Excluded Assets, cash equal to the amount of such allowed claim from the Administrative Claim Reserve; provided, however, the aggregate amount of such payments shall not exceed $500,000, without the consent of the Informal Group.

Class 4 consists of Allowed Claims of (a) the Cartersville Noteholders; (b) the AIR Lenders; (c) the holders of the Rejection Damages Claims; and (d) the holders of any other Allowed Unsecured Claims, including, without limitation, the Claims of each party to the Omnibus Collateral Agreement and the Intercreditor Agreement to the extent such Claims are Unsecured Claims by operation of Section 506(a) of the Bankruptcy Code. On the initial Trust Distribution Date, Class 4 Creditors will receive a Pro Rata payment of the Class 4 Dividend, with a retention in an amount sufficient to distribute to any contested but unresolved Class 4 Claims in accordance with Section VIIB of the Plan; provided however, (i) that the claims of each of the Secured Parties (as defined in the Intercreditor Agreement and solely in their capacity as Secured Parties pursuant to that agreement) who are parties to the Omnibus Collateral Agreement and the Intercreditor Agreement included in Class 4 by operation of Section 506(a) of the Bankruptcy Code shall be subordinated to all other Allowed Claims in Class 4 for the purposes of distribution of the Class 4 Dividend only from the Liquidation Trust; (ii) there shall be no distribution of the Class 4 Dividend on account of Severance and Retirement Claims or on account of any portion of any Class 4 Claim paid after the Filing Date.

Class 5 consists of Interests in the Company other than the Lender Warrants. The Class 5 Interests shall be cancelled as of the Effective Date; however, according to terms of the Plan Support Agreement, Claims relating to Class 5 Interests shall receive, Pro Rata, a portion of the Plan Support Agreement Equity Dividend equal to $7.7 million and the Net Proceeds from the liquidation of Excluded Assets, as defined in the Asset Purchase Agreement. The Company expects such Net Proceeds of Excluded Assets to total approximately $7.3 million, resulting in a total distribution to stockholders of approximately $15.0 million, or $0.47 per share.

Class 6 consists of Interests in the Company that are Lender Warrants. The Lender Warrants shall be cancelled as of the Effective Date. The holders of Interests in Class 6 shall not receive or retain any Distribution or other property on account of such Interests.

Class 7 consists of Intercompany Claims. The holders of Class 7 Claims shall not receive or retain any Distribution or other property on account of such Claims.

Class 8 consists of Intercompany Interests. The holders of Class 8 interests shall not receive or retain any Distribution or other property on account of such Interests.

As part of the Chapter 11 process, unsecured creditors are allowed to file claims against the Company directly with the Court. Unsecured claims filed with the Court totaled approximately $341.7 million. Of unsecured claims voting, over 97% in number and over 99% in amount voted in support of the Plan of Reorganization. More than $100 million of these claims are being disputed by the Company. The Plan of Reorganization provides for maximum payments totaling $17.5 million to be paid to unsecured creditors if, and only if, the sale of assets to Nucor discussed below is finalized.

Sale of Assets:

On May 30, 2002, the Company signed an asset purchase agreement with a wholly-owned subsidiary of Nucor to purchase substantially all of the Company’s assets for $615 million in cash (subject to adjustment depending on the value of inventories and accounts receivable at the closing date). The Company also entered into an agreement, dated May 30, 2002, with its secured lenders in support of the transaction. These agreements require that the transaction with Nucor be approved pursuant to a pre-arranged Chapter 11 bankruptcy filing by the bankruptcy court in Delaware. The $615 million purchase price proposed by Nucor is less than the face value of the Company’s secured debt. The Company and its secured lenders negotiated a plan support agreement which provides that secured lenders distribute a portion of the proceeds from the transaction to unsecured creditors and stockholders. The agreements contemplate payments of approximately $15 million to stockholders, $17 million to claimants under severance and retirement plans of the Company, and $17.5 million to other unsecured creditors. The plan also provides for the continued and uninterrupted payments to the Company’s critical vendors from operating cash flows and a financing arrangement.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the fourth quarter of fiscal year 2002.

PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company’s Common Stock, par value $0.01 per share, was traded on the New York Stock Exchange (NYSE) until November 17, 2001, under the symbol BIR. On November 14, 2001, the Company announced that the New York Stock Exchange (NYSE) had initiated procedures to delist the Common Stock of the Company. The NYSE decision was reached in view of the fact that the Company had fallen below the following NYSE continued listing standards: average global market capitalization over a consecutive 30 trading-day period of less than $50 million, total stockholders’ equity of less than $50 million, and the average closing price of the Company’s Common Stock below one dollar over a consecutive 30 trading-day period. Effective with the market opening on November 18, 2001, the Company’s common stock began trading on the OTC Bulletin Board under the symbol BIRS.

The table below sets forth for the two fiscal years ended June 30, 2002 and 2001, the high and low prices of the Company’s Common Stock based upon (1) the high and low sales prices of the Common Stock as reported on the NYSE Composite Tape for periods ending on or before November 17,2001, and (2) the OTC Bulletin Board for periods ended after November 17, 2001.


		High		Low

Fiscal Year Ended June 30, 2002 First Quarter		$	1.20	$	0.85
	Second Quarter		1.00		0.20
	Third Quarter		0.70		0.26
	Fourth Quarter		0.68		0.31


Fiscal Year Ended June 30, 2001 First Quarter		$	3.75	$	2.25
	Second Quarter		2.88		0.75
	Third Quarter		2.15		0.93
	Fourth Quarter		1.60		0.60

The last sale price of the Common Stock as reported on the OTC Bulletin Board on October 1, 2002 was $0.41. As of October 1, 2002, there were 1,430 holders of record of the Common Stock. The Company’s registrar and transfer agent is First Union National Bank of North Carolina.

The Company has paid no dividends since December 1999. Per terms of the Plan of Reorganization related to the Company’s sale of substantially all of its assets to Nucor and the pre-arranged Chapter 11 bankruptcy filings, Company stockholders will receive a total distribution of up to $15 million, or up to $0.47 per share. After the transaction with Nucor is closed, outstanding shares of Company stock will be cancelled. Stockholders of record prior to cancellation of shares will receive final distributions from the distribution agent and liquidation trustee as soon as is practicable after the transaction with Nucor is closed. See Note 2 to the Consolidated Financial Statements for further information.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA


			Years Ended June 30,

			2002			2001(A)			2000(A)			1999(A)			1998(A)

			(In thousands, except per share data)
Statement of Operations Data:
Net sales			$	513,799		$	599,875		$	685,216		$	669,382		$	750,453
Cost of sales:
		Other than depreciation and amortization		420,271			507,039			560,529			555,733			604,895
		Depreciation and amortization		29,945			34,255			34,527			35,038			34,052

	Gross profit			63,583			58,581			90,160			78,611			111,506
Impairment and other unusual items, net (B)				28,250			(206	)		19,513			5,267			1,075
Selling, general and administrative expense				30,417			32,504			34,402			34,945			43,189

	Operating income			4,916			26,283			36,245			38,399			67,242
Interest expense				50,284			33,761			24,193			11,681			7,678
Other income, net (C)				1,322			1,554			2,807			9,911			12,818
(Loss) income from equity investments (D)				—			(23	)		1,974			(24,563	)		(18,326	)
Minority interest in loss of subsidiary				—			—			7,978			5,497			1,643
Reorganization items				7,803			—			—			—			—

(Loss) income from continuing operations before income taxes				(51,849	)		(5,947	)		24,811			17,563			55,699
(Benefit from) provision for income taxes				(5,454	)		184			33,835			14,814			14,960

(Loss) income from continuing operations				(46,395	)		(6,131	)		(9,024	)		2,749			40,739
Loss from discontinued operations, net (E)				(176,273	)		(190,855	)		(44,127	)		(226,985	)		(39,110	)

(Loss) income before extraordinary item				(222,668	)		(196,986	)		(53,151	)		(224,236	)		1,629
Loss on restructuring of debt, net				—			—			(1,669	)		—			—

Net (loss) income			$	(222,668	)	$	(196,986	)	$	(54,820	)	$	(224,236	)	$	1,629

Basic and diluted per share amounts:
	(Loss) income from continuing operations		$	(1.48	)	$	(0.20	)	$	(0.30	)	$	0.09		$	1.37
	Loss from discontinued operations			(5.61	)		(6.16	)		(1.47	)		(7.70	)		(1.32	)
	Loss on restructuring of debt			—			—			(0.06	)		—			—

	Net (loss) income		$	(7.09	)	$	(6.36	)	$	(1.82	)	$	(7.61	)	$	0.05

Dividends declared per share			$	0.00		$	0.00		$	0.05		$	0.175		$	0.40


	June 30,

	2002			2001(A)			2000(A)		1999(A)		1998(A)

Balance Sheet Data:
Working capital (deficit)	$	85,942		$	(195,070	)	$	142,659	$	110,434	$	237,673
Total assets		428,006			701,344			859,375		877,466		1,158,015
Long-term debt less current portion		—			254,000			551,965		469,135		516,439
Stockholders’ (deficit) equity		(228,486	)		(6,504	)		188,015		230,731		460,607

(A) The selected consolidated financial data for fiscal 1998 through 2001 has been restated, as required by generally accepted accounting principles, to reflect the Company’s special bar quality (SBQ) business and the Cartersville facility as discontinued operations. Refer to Note 3 to the Consolidated Financial Statements.

(B) In fiscal 2002 and 2000, the Company recorded asset impairment charges totaling $28,250 and $28,698, respectively. Refer to Note 15 to the Consolidated Financial Statements.

(C) Includes $4,414 in refunds from electrode suppliers in both 1999 and 1998 and $5,200 and $5,225 gain on sales of idle properties and equipment in 1999 and 1998, respectively.

(D) Includes impairment losses for equity investees of $19,275 and $12,383 in 1999 and 1998, respectively.

(E) Reflects $142,245 loss on sale of the Cartersville facility in 2002, and $138,236, $(173,183) and $173,183 loss (reversal of loss) on disposal of SBQ segment in 2001, 2000 and 1999, respectively, including estimated losses during the disposal period (net of income tax expense of $78,704 in 2000 and benefit of $78,704 in 1999). Refer to Note 3 to the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

SELECTED QUARTERLY FINANCIAL DATA
(Unaudited; in thousands, except per share data)


		2002 Quarters(A)

		First			Second			Third			Fourth

Net sales		$	137,722		$	115,438		$	123,509		$	137,130
Gross profit			21,969			11,866			11,883			17,865
Income (loss) from continuing operations			3,980			(5,974	)		(9,192	)		(35,209	)
Loss from discontinued operations (B)			(15,287	)		(153,621	)		(2,286	)		(5,079	)
Net loss			(11,307	)		(159,595	)		(11,478	)		(40,288	)
Weighted average shares outstanding			31,167			31,327			31,491			31,697

Basic and diluted per share amounts:
	Income (loss) from continuing operations	$	0.13		$	(0.19	)	$	(0.29	)	$	(1.11	)
	Loss from discontinued operations		(0.49	)		(4.90	)		(0.07	)		(0.16	)

	Basic and diluted loss per share	$	(0.36	)	$	(5.09	)	$	(0.36	)	$	(1.27	)


		2001 Quarters(A)

		First			Second			Third			Fourth

Net sales		$	171,124		$	136,173		$	144,831		$	147,747
Gross profit			17,485			10,023			12,507			18,566
Start-up and restructuring costs and other unusual items			—			(206	)		—			—
Income (loss) from continuing operations			644			(5,525	)		(4,430	)		3,180
Income (loss) from discontinued operations (B)			(15,673	)		(113,635	)		(18,805	)		(42,742	)
Net income (loss)			(15,029	)		(119,160	)		(23,235	)		(39,562	)
Weighted average shares outstanding			30,892			30,987			31,032			31,065

Basic and diluted per share amounts:
	Income (loss) from continuing operations	$	0.02		$	(0.18	)	$	(0.14	)	$	0.10
	(Loss) income from discontinued operations		(0.50	)		(3.67	)		(0.61	)		1.38

	Basic and diluted loss per share	$	(0.48	)	$	(3.85	)	$	(0.75	)	$	(1.27	)

(A) Operating results of the SBQ segment and the Cartersville facility for fiscal 2002 and 2001 and all prior periods presented herein have been restated and reported in discontinued operations. See Note 3 to the Consolidated Financial Statements.

(B) Fiscal 2002 reflects the loss on disposition of the Cartersville facility as well as the disposition of the SBQ segment. Fiscal 2001 reflects the accrued loss on disposition of the SBQ segment. Refer to Note 3 to the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.


ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Recent Events

On May 30, 2002, Birmingham Steel Corporation (the Company) announced it had reached a definitive agreement to sell substantially all the assets of the Company and its subsidiaries to a wholly owned subsidiary of Nucor Corporation (Nucor) for $615 million in cash. Terms of the agreement call for an increase or decrease to the purchase price in the event that accounts receivable and inventory at the time of closing are not within a predetermined range (with any difference in the sale proceeds impacting the distribution to secured lenders). On June 3, 2002, as a means of effecting the transaction and in accordance with the terms of the definitive agreement with Nucor, the Company and four of its subsidiaries filed voluntary petitions for relief under Chapter 11 of title 11 of the United States Code before the United States Bankruptcy Court for the District of Delaware (the Court). On August 12, 2002, Birmingham Steel Management, Inc., a subsidiary which was not included in the Company’s initial Chapter 11 filing, filed a voluntary petition for relief under Chapter 11 of title 11 of the United States Code before the Court. By order entered September 17, 2002, the Company’s pre-arranged Chapter 11 plan (Plan of Reorganization) was confirmed by the Court, thereby approving the sale to Nucor and the distribution of sale proceeds proposed under the Plan of Reorganization. Subject to the U.S. Department of Justice (DOJ) decision regarding filings by the Company and Nucor concerning the Hart-Scott-Rodino implications of the transaction, (see discussion below), the Company expects the sale to Nucor will close prior to the end of calendar 2002.

Under the Company’s Plan of Reorganization, the proceeds from the sale to Nucor, together with certain other assets of the Company (or the proceeds thereof) which were excluded from the sale, will be applied to retire the Company’s secured debt. These proceeds will be less than the total obligations under the Company’s long-term secured debt agreements. However, pursuant to the Plan of Reorganization and the Plan Support Agreement dated May 30, 2002, among the Company, Nucor and the Company’s secured lenders, the secured lenders have agreed, among other things, to accept the payments under the plan in full satisfaction of their claims and to cause $17 million of the proceeds to be paid to claimants under the Company’s employee severance and retirement plans, $17.5 million to the Company’s unsecured creditors, and up to $15 million, or approximately $0.47 per share, to stockholders of the Company (see Note 2 to the Consolidated Financial Statements).

As more fully described below, the Company has aggressively pursued strategies to improve its overall financial performance and condition. Although in the face of declining industry conditions, significant improvements have been achieved during the past three years, management and the board of directors have determined the sale to Nucor represents the best alternative for the Company’s creditors, stockholders, employees and other stakeholders.

In July 1999, The United Company Shareholder Group (the United Group), initiated a proxy contest to replace the Company’s then Chief Executive Officer and Board of Directors and certain members of management. On December 2, 1999, the Company and the United Group reached a settlement appointing John D. Correnti as Chairman and Chief Executive Officer and reconstituting the Board of Directors. Since 1999, the Correnti management team has accomplished a number of significant achievements, which it believes improved the overall financial condition of the Company and positioned the Company for improved financial results in the future. These accomplishments were achieved notwithstanding that, in the opinion of management, conditions in the U.S. steel industry declined during this time to its lowest level in nearly 30 years. During this period, approximately 25 steel companies filed for bankruptcy under the provisions of the United States Bankruptcy Code.

In January 2000, one month after joining the Company, the Correnti management team publicly articulated a strategy for returning to profitability and providing a platform for the Company to refinance its debt. The key elements of management’s turnaround strategy as set forth by new management upon assuming office in December 1999 were as follows:

• Completing start-up operations at Cartersville;

• Rationalization of the Cleveland and Memphis operations;

• Sale of the Company’s interest in the California scrap joint venture;

• Reducing and limiting the Company’s liability with respect to the Louisiana DRI joint venture;

• Reducing overall spending;

• Reducing selling, general and administrative expenses and headcount at the corporate headquarters;

• Strengthening and reorganizing of the Company’s sales and marketing functions; and

• Stabilizing the Company’s management and workforce.

Since December 1999, the Company has completed each of the key elements of its turnaround strategy. Unfortunately, the benefits of these accomplishments have been overshadowed by a drastic deterioration of economic conditions in the U.S. steel industry which began in 1998. The actions of the Correnti management team essentially returned the Company to the business platforms of its core operations under which the Company was previously successful. Significant measures implemented by the Correnti management team since 1999 include the following:

• Shutdown of operations at the Memphis melt shop, resulting in cash savings of approximately $2 million per month (January 2000);

• Completion of necessary capital expenditures and completion of start-up operations at the Cartersville rolling mill (July 2000);

• Sale of the Cartersville operations, which eliminated operating losses and reduced total debt by approximately $86.6 million (December 2001);

• Shutdown of operations at Cleveland, which resulted in cash savings of $2 million to $3 million per month (completed July 2001);

• Shutdown of operations of the Convent, Louisiana DRI facility (AIR), resulting in cash savings of approximately $1 million per month (October 2000);

• Sale of the Company’s interest in the California scrap processing joint venture, which eliminated $34 million in contingent liabilities (June 2000);

• Reduction of corporate headquarters personnel by more than 46%, resulting in annual savings of $2 million per year (December 1999 to June 2002);

• Hiring additional highly experienced steel operations and sales individuals from other steel companies

• Reduction in inventories by $130 million (from December 1999 to June 2002); and

• Reduction in trade accounts payable by $75 million (from December 1999 to June 2002), and significant improvement in vendor relationships which had been impaired under prior management.

The actions above indicate the aggressive steps the Correnti management team undertook to attain a profitable turnaround of the Company. Also, during the extremely challenging business conditions which have continued to prevail in the U.S. steel industry, the Company reduced conversion costs, improved margins, reduced debt, improved vendor relations and improved availability under its revolving credit facility. However, the positive financial impact of management’s actions was offset by prolonged deteriorating conditions in the domestic steel industry, a surge in steel imports and a general decline in U.S. economic conditions.

In addition to implementing measures to reduce costs, enhance margins, improve cash flow and reduce debt, a goal of the Correnti management team was to position the Company to be a leader in the consolidation of the U.S. steel industry. Based upon the prevalent and declining economic conditions which have existed in the steel industry for several years, a consensus of industry experts agree that consolidation must occur in order for the domestic industry to remain viable. The Correnti management team had aspired to lead the industry consolidation efforts utilizing its experienced and capable management team its low-cost, highly efficient and state-of-the-art core operations. In addition, since 1999, the Company attracted experienced sales and operations managers from other steel companies to join the Correnti management team. Because of the quality of its core assets and management team, management believed the Company had the capability to be a leader in the prospective consolidation of the domestic industry.

Upon assuming management of the Company, the primary obstacle which faced the Correnti management team was the Company’s large debt level. Since 1999, management explored numerous alternatives to address the debt in order to enable the Company to proactively participate in consolidation activity. In addition to improving financial performance and operating cash flow, management sold non-core assets as a means of obtaining proceeds to reduce debt. The Company also extensively explored debt financing and debt restructuring as a means of allowing the Company to recapitalize its balance sheet and reduce debt.

The refinancing of debt was an important element of management’s turnaround plan, because of the Company’s over-leveraged condition and the fact that the maturity dates of its debt did meet its cash flow capabilities. In addition, the Company employed a highly complex financial structure involving approximately 55 lenders.

The Company never had a monetary default on any interest or principal payment and, until May 31, 2001, generated sufficient cash flow to service debt as payments were due. Since 1999, the Company’s lenders were generally supportive of the Correnti management team’s turnaround initiatives and accommodated the Company’s requests to relax certain covenants, extend certain maturity dates and provide adequate liquidity for management to implement a turnaround plan.

Because of general economic conditions in the U.S. financial markets and the prolonged decline in the domestic steel industry, limited alternatives for refinancing or restructuring the Company’s debt emerged. In the latter half of calendar 2001 and the first half of calendar 2002, the Company and its secured lenders engaged in extensive discussions regarding an overall debt restructure or extension of maturity dates under existing financing arrangements. Approximately $291 million of the Company’s debt was scheduled to mature on April 1, 2002. The maturity date for this debt was subsequently extended to May 15, 2002 and, later, to May 31, 2002.

On February 14, 2002, the Company received an unsolicited offer from Nucor to purchase substantially all of the Company’s assets for $500 million. The Company engaged CIBC World Markets Group to determine its strategic alternatives, including the possible sale of assets. The Company also engaged in discussions with its secured lenders regarding the Nucor offer. The Company formed a Special Committee comprised of outside members of the board of directors to evaluate the strategic alternatives available to the Company, including the Nucor proposal. Upon completion of an extensive review by CIBC, discussions with interested parties and further negotiations with Nucor, on May 30, 2002, the Company announced it had signed a definitive agreement with Nucor to sell substantially all of its assets for $615 million. (See Note 2 to the Consolidated Financial Statements).

Results From Continuing Operations

The following table sets forth, for the fiscal years indicated, trade shipments, product mix percentages and average selling prices per ton for the Company’s continuing rebar, merchant/structural and scrap operations:


		2002							2001							2000

		Tons		% of			Avg.		Tons		% of			Avg.		Tons		% of			Avg.
		Shipped		Total			Selling		Shipped		Total			Selling		Shipped		Total			Selling
		(000’s)		Sales			Price		(000’s)		Sales			Price		(000’s)		Sales			Price

Rebar			1,309		69.0	%	$	258		1,386		66.3	%	$	260		1,459		63.9	%	$	263
Merchant/structural			511		26.9			274		612		29.3			287		769		33.6			312
Other			77		4.1			212		93		4.4			240		57		2.5			322

	Total continuing		1,897		100.0	%				2,091		100.0	%				2,285		100.0	%

Loss from continuing operations for fiscal 2002 was $46.4 million, or $1.48 per share, basic and diluted, compared to the loss of $6.1 million, or $0.20 per share in fiscal 2001. The following table sets forth, for the years indicated, selected items in the consolidated statements of operations as a percentage of net sales:


		Years Ended June 30,

		2002			2001			2000

					(Restated)			(Restated)
Net sales			100	%		100	%		100	%
Cost of sales:
	Other than depreciation and amortization		81.8			84.5			81.8
	Depreciation and amortization		5.8			5.7			5.0

Gross margin			12.4			9.8			13.2
Impairment and other unusual items			5.5			—			2.8
Selling, general and administrative expense			5.9			5.4			5.0
Interest expense			9.8			5.6			3.5
Other income, net			0.3			0.2			0.4
Income from equity investments			—			—			0.2
Minority interest in loss of subsidiary			—			—			1.1
Reorganization items			1.5			—			—
(Benefit from) provision for income taxes			(1.0	)		—			4.9

Net loss from continuing operations			(9.0	)%		(1.0	)%		(1.3	)%

Net Sales

Fiscal 2002 compared to fiscal 2001

In fiscal 2002, net sales from continuing operations decreased 14.3% to $513.8 million from $599.9 million in fiscal 2001. Shipments and selling prices declined in fiscal 2002 primarily because of continuing pricing pressure of steel imports and a general decline in United States economic conditions. The Company’s average selling price for rebar decreased $2 per ton in 2002 versus 2001 while the average selling price for merchant/structural products decreased $13 per ton in 2002 versus 2001.

While the Company announced various price increases in the peak summer seasonal period in fiscal 2002, continued industry pricing pressure has kept prices relatively flat. U.S. economic conditions have been stagnant in 2002, and the expected price increases from tariffs issued under Section 201 trade ruling by the President of the United States have not materialized. Management believes this trend will likely continue until consumer confidence is restored. The Company will follow industry pricing trends while maintaining regular production levels.

Fiscal 2001 compared to fiscal 2000

In fiscal 2001, net sales from continuing operations decreased 12.5% to $599.9 million from $685.2 million in fiscal 2000, reflecting an 8.3% decrease in steel shipments and a decrease in rebar and merchant selling prices. The Company’s average selling price for rebar decreased $3 per ton in 2001 versus 2000 while the average selling price for merchant products decreased $25 per ton in 2001 versus 2000. The decline in overall selling prices and sales volume was attributable to continued pressure from steel imports that reached unprecedented levels in 1999, reduced demand because of higher overall inventories of existing steel service center customers and a general decline in U.S. economic conditions.

Cost of Sales

Fiscal 2002 compared to fiscal 2001

As a percent of net sales, cost of sales (other than depreciation and amortization) from continuing operations decreased to 81.8% in fiscal 2002, compared to 84.5% in 2001. The decrease in cost of sales as a percentage of sales during fiscal 2002 has resulted primarily due to cost reduction measures implemented at the mini-mill facilities resulting in various costs savings for maintenance, manufacturing supplies, utilities, and other costs. At the Company’s continuing mini-mill facilities, average scrap cost per ton was $90 for fiscal 2002 and 2001. The cost per ton to convert scrap to finished steel products decreased to $130 per ton in fiscal 2002 from $138 per ton in fiscal 2001.

Depreciation and amortization expense from continuing operations decreased 12.8% in fiscal 2002 to $29.9 million as compared to $34.3 million in fiscal 2001 due to assets being fully depreciated and the cessation of the amortization of goodwill.

Fiscal 2001 compared to fiscal 2000

Cost of sales (other than depreciation and amortization), as a percent of net sales, increased to 84.5% in fiscal 2001 from 81.8% in fiscal 2000. The increase in cost of sales resulted primarily because of record low average selling prices because of higher import levels, higher energy costs and higher production costs due to production curtailments implemented to control inventories. At the Company’s continuing mini-mill facilities, average scrap cost per ton was $90 and $106 for fiscal 2001 and 2000, respectively. The cost per ton to convert scrap to finished steel products increased to $138 per ton in fiscal 2002 from $132 per ton in fiscal 2000.

Depreciation and amortization expense from continuing operations was relatively unchanged in fiscal 2001 compared to fiscal 2000 and increased as a percentage of sales because of the decrease in sales.

Impairment and Other Unusual Items

Fiscal 2002 compared to fiscal 2001

Asset Impairment: In the fourth quarter of fiscal 2002, the Company wrote down the value of the Joliet mill to an estimated fair value of $3.0 million. In prior periods, the Joliet mill, which had been indefinitely suspended in June 2001 pending improved market conditions, was under the operational control of the Kankakee facility and included with that division for financial reporting purposes. The Joliet mill is an excluded asset in the Asset Purchase Agreement between the Company and Nucor and will be ultimately disposed of by the Company in its wind down affairs. (See further discussion in Note 2 to the Consolidated Financial Statements.)

Fiscal 2001 compared to fiscal 2000

In fiscal 2000 the Company recognized the following asset impairment and other unusual expenses:

Asset Impairment: In the second quarter of fiscal 2000, the Company wrote off equipment taken out of service at the Seattle mill and recognized a loss of $3.9 million.

Proxy Solicitation: In fiscal 2000 the Company incurred $6.9 million in proxy solicitation costs, principally consisting of legal, public relations and other consulting fees in the Company’s defense of a proxy contest led by The United Company Shareholder Group (United Group). In December 1999, the former Board of Directors of the Company and the United Group reached a settlement appointing John D. Correnti as Chairman and Chief Executive Officer and appointing nine new board members approved by the former Board of Directors of the Company and the United Group.

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 incurring costs of $6.3 million. These executives were covered by the Company’s executive severance plan, which provides for specified benefits after a change in the majority of the Board of Directors of the Company, among other triggering events.

Debt Amendment Costs: In conjunction with the May 2000 amendments to the Company’s borrowing agreements, the Company incurred $2.4 million in legal and financial consulting fees.

Selling, General and Administrative Expenses (SG&A)

Fiscal 2002 compared to fiscal 2001

SG&A expenses from continuing operations were $30.4 million in fiscal 2002 compared to $32.5 million in fiscal 2001, a decrease of 6.5%. The decrease in current year SG&A expenses is primarily the result of a reduction in fees attributable to a contract for computer services that was terminated and reduced expense by approximately $1.9 million.

Fiscal 2001 compared to fiscal 2000

SG&A expenses were $32.5 million in fiscal 2001 compared to $34.4 million in fiscal 2000, a decrease of 5.5%. The decrease in SG&A was primarily due to a 14% reduction in personnel at the corporate office during fiscal 2001 and decreased overall spending levels in conjunction with the Company’s turnaround efforts.

Interest Expense (including debt issuance cost amortization)

Fiscal 2002 compared to fiscal 2001

Interest expense attributable to continuing operations increased to $50.3 million in fiscal 2002 compared with $33.8 million in fiscal 2001. The increase in interest expense attributable to continuing operations is primarily due to an increase in amortization of debt issuance costs in the current year and a decrease in interest expense allocable to discontinued operations in the current year due to the sale of the Cartersville facility in December 2001 and the Cleveland facility in March 2002. Total interest expense, including amounts allocated to continuing and discontinued operations was $61.3 million including $12.6 amortization of debt issuance costs for fiscal 2002 compared to $61.1 for fiscal 2001 including $6.7 million amortization of debt issuance costs. Amortization of debt issuance costs increased because $7.3 million was amortized in the fourth quarter of fiscal 2002 in conjunction with the maturity of the Company’s long term debt on May 31, 2002. The Company’s total average borrowing rate decreased to 7.20% in fiscal 2002, from 8.78% in the fiscal 2001.

The Company allocates interest expense among its continuing operating divisions based on the percentage of assets employed at the respective facilities compared to total Company assets. The Cartersville facility was allocated $6.3 million of the total for fiscal 2002, compared to an allocation of $15.8 in fiscal 2001. The SBQ segment was allocated $2.8 million in fiscal 2002 compared to $9.9 million in fiscal 2001.

The Company is currently limited as to the amount of capital expenditures it can make under capital spending programs per terms of the DIP Facility and does not expect significant levels of capital expenditures or capitalized interest during fiscal 2003. Refer to “Liquidity and Capital Resources – Financing Activities”.

Fiscal 2001 compared to fiscal 2000

Interest expense attributable to continuing operations increased to $33.8 million in fiscal 2001 compared with $24.2 million in fiscal 2000. The increase in interest expense was primarily due to higher average debt balances in fiscal 2001, higher debt issuance cost amortization in fiscal 2001, reflecting the impact of amendment fees and other issuance costs incurred in connection with amending the Company’s debt agreements, and a decrease in the amount of interest expense allocated to discontinued operations. These increases were partially offset by a decrease in the Company’s average borrowing rate to 7.94% in fiscal 2001 from 8.96% in fiscal 2000.

Income Tax

The effective tax rate applicable to continuing operations in fiscal 2002 was 10.5%, as compared to (0.5)% in fiscal 2001 and (131.9)% in fiscal 2000. These rates were adversely impacted by valuation allowances established to reserve the Company’s net deferred tax assets to zero based on uncertainty about the Company’s ability to realize future tax benefits through offset to future taxable income.

The Company’s consolidated federal net operating loss (NOL) for fiscal 2002 was approximately $251 million which will be carried forward and may be used to reduce taxes in future periods for up to 20 years. In addition, the Company has loss carryforwards from prior years of approximately $322 million that will be carried forward for a period of up to 19 years, for a total NOL carryforward of approximately $573 million. None of these losses will be carried back, because available prior year taxes have been recovered through previous carryback claims. In fiscal 2002, the Company recorded refunds totaling $3.7 million for carryback of federal alternative tax NOLs and $1 million for amending the method of allocating its sales to a foreign sales corporation. The Company also has state net operating losses of approximately $772 million, the majority of which will expire in 15 years.

The Company is expected to realize a significant gain on the sale of its assets to Nucor, however, as a result of the sizeable NOL carryforwards, the Company does not expect to pay a significant amount of taxes related to this transaction.

Results from Discontinued Operations

Discontinued operations include the results from the SBQ segment, including the Cleveland, Ohio rolling mill facility, the high-quality melt shop in Memphis, Tennessee, and the Company’s 50% interest in AIR, a DRI production facility and the results from the Cartersville, Georgia merchant and structural mini-mill. Discontinued operations accounting treatment for the SBQ segment is recorded under provisions of APB No. 30, while discontinued operations accounting treatment for the Cartersville facility is recorded under the provisions of SFAS No. 144 (see Note 3 to Consolidated Financial Statements).

As of June 30, 2002, all SBQ facilities have either been idled or shutdown and have been reported in discontinued operations since December 2000. The Cleveland rolling mill facility was sold on March 1, 2002 to Charter Manufacturing, Inc. of Mequon, Wisconsin. The Cartersville facility was sold on December 28, 2001 to AmeriSteel Corporation (AmeriSteel), a U.S. subsidiary of Gerdau S.A. (NYSE: GGB) of Rio de Janeiro, Brazil. The results of operations for the Cartersville facility were restated in discontinued operations beginning with the second quarter of fiscal 2002 and all prior periods. As a result of the sale of the Cleveland facility, the Company reduced debt by $18.6 million through Charter’s assumption of $15 million industrial revenue bonds and $3.6 million reduction in senior notes and Revolving Credit Facility debt from net cash proceeds. In addition, the Company is relieved of approximately $0.4 million monthly carrying costs of the Cleveland facility. The Company reported net losses from discontinued operations of $176.3 million or $5.61 per share, basic and diluted for fiscal 2002; $190.9 million, or $6.16 per share, basic and diluted in fiscal 2001; and $44.1 million, or $1.47 per share, basic and diluted in fiscal 2000.

As a result of the sale of Cartersville, the Company recorded a $142.4 million loss on disposal of the assets, which included a charge of $7.3 million to write off remaining goodwill. Terms of the transaction with AmeriSteel provided approximately $17.7 million in cash from the sale of working capital and release from $68.7 million of future operating lease obligations in exchange for issuance of a $10.0 million unsecured, non-interest bearing (until December 2004 when the note will bear interest at 9%, compounded monthly) note payable to the former lessors due in December 2005. The Company also reduced debt under the Company’s Revolving Credit Facility from collection of retained trade accounts receivable of $12.0 million and sale of the inventories of $0.9 million, partially offset by payment of approximately $3.0 million of retained liabilities. An escrow of $3.0 million of the sale proceeds was established at the time of the sale to be held until December 2007. In August 2002, and subsequently approved by the Court, the Company agreed to split the $3.0 million escrow with AmeriSteel. Approximately $1.5 million of proceeds collected from the escrow account will be applied to pay Company Stockholders according to the terms of the Plan of Reorganization as further described in Note 2 to the Consolidated Financial Statements. The Company does not anticipate any future obligations related to the Cartersville facility.

Operating losses from discontinued SBQ operations of $22.2 million and $27.0 million for fiscal 2002 and the six months ended June 30, 2001, respectively, were charged to the reserve for disposal period losses and did not impact current period results. In fiscal 2002, the Company provided $19.0 to the reserve for disposal period losses as changes in the estimated disposition dates of the facilities were made. As of June 30, 2002, the Company has $6.0 million remaining reserve for future operating losses of the SBQ segment.

Actual operating losses in fiscal 2002 of the SBQ segment reflect carrying costs for the Memphis facility (shutdown December 1999) and the Cleveland facility (shutdown June 2001) as well as liquidation of inventories at the Cleveland facility at selling prices below cost through the first quarter of fiscal 2002. Management expects to incur approximately $1.0 million per month to maintain the Memphis facility and service outstanding lease and debt obligations until the facility is sold or disposed of otherwise.

In connection with the Company's Chapter 11 bankruptcy proceedings, the AIR lenders asserted an unsecured claim against the Company in excess of $300 million, which the Company disputed. The Company engaged in extensive negotiations toward the confirmation of the Company's Chapter 11 Plan of Reorganization on a consensual basis. In this negotiation process, the Company stipulated with the AIR lenders that, if the Chapter 11 Plan of Reorganization was confirmed and became effective, they would have an allowed $115.0 million unsecured claim under the Chapter 11 Plan of Reorganization. This stipulation was conditioned upon the AIR lenders' support of, and affirmative vote in favor of confirmation of, the plan, and is further conditioned upon the consummation of the sale to Nucor and the effectiveness of the plan. AIR continues in liquidation proceedings under Chapter 7 of the U.S. bankruptcy code. The Company did not incur any costs in fiscal 2002 under its purchase commitment with AIR. Under terms of the Plan of Reorganization, which was confirmed on September 17, 2002, and the Plan Support Agreement, the Company’s secured lenders agreed to pay a portion of the unsecured claims totaling $17.5 million to be apportioned to the unsecured claimants based, among other things, on the amount of the individual unsecured claim as a percentage of the total of all allowed unsecured claims. Accordingly, AIR will receive some portion of the $17.5 million payment to unsecured creditors. Management does not believe that AIR’s claim is valid under terms of its purchase commitment with AIR and the Company’s agreement to stipulate AIR’s $115.0 million claim is effective only upon closing of the Company’s proposed sale of substantially all of its assets to Nucor. If for any unforeseen reason the sale to Nucor were not to close, the Company would vigorously contest the AIR claim. See Note 2 in the Notes to the Consolidated Financial Statements for further information regarding the Company’s Plan of Reorganization.

There are no known material contingent liabilities related to discontinued operations, such as product or environmental liabilities or litigation, that are expected to remain with the Company after the disposal of the SBQ segment or subsequent to the Cartersville sale other than remaining reserves for claims under the Company’s workers’ compensation and health insurance plans and contingencies associated with AIR, as discussed above and in Notes 2 and 3 in the Notes to the Consolidated Financial Statements.

Liquidity and Capital Resources

Operating Activities

Fiscal 2002 compared to fiscal 2001

Net cash provided by operating activities of continuing operations was $27.5 million in fiscal 2002 compared to $15.6 million in fiscal 2001. The improvement in cash generated from continuing operations is primarily attributable to improved net operating profits in the Company’s core mini-mill operations. In fiscal 2002, changes in operating assets provided cash of $6.6 million compared to $3.0 million in fiscal 2001. The increase in cash provided by operating assets is generated from continued efforts to control inventory levels and effectively manage payables and spending within the constraints of credit facility availability. Days sales outstanding in accounts receivable remained relatively stable in 2002 and 2001.

Fiscal 2001 compared to fiscal 2000

Net cash provided by operating activities of continuing operations was $15.6 million in fiscal 2001, compared to $23.2 million in fiscal 2000. In fiscal 2001, margins deteriorated due to lower average selling prices and higher conversion costs during the second and third quarters of fiscal 2001. In fiscal 2001, changes in operating assets provided cash of $3.0 million compared to $21.4 million in 2000. In fiscal 2000 the Company collected tax refunds of approximately $16.0 million which increased cash provided by operating assets. Days sales outstanding in accounts receivable remained relatively stable in 2001 and 2000.

Investing Activities

Fiscal 2002 compared to fiscal 2001

Net cash flows used in investing activities of continuing operations were $4.2 million in fiscal 2002 compared to $1.8 million in fiscal 2001, primarily attributable to reduced capital spending for major projects in fiscal 2002. Debt covenants in the Company’s interim DIP financing agreements restrict capital expenditures to $2.7 million in any twelve-month period subsequent to June 3, 2002, the bankruptcy filing date. Expenditures related to capital projects of continuing operations decreased to $2.4 million in fiscal 2002 versus $10.5 million in 2001. The Company does not anticipate significant capital spending through the closing of the sale of substantially all of its assets to Nucor.

Fiscal 2001 compared to fiscal 2000

Net cash flows used in investing activities of continuing operations were $1.8 million in fiscal 2001, compared to $8.4 million in fiscal 2000. Expenditures related to capital projects of continuing operations decreased to $10.5 million in fiscal 2001 compared to $22.7 million in fiscal 2000 principally related to the cash conservation measures implemented by the Company.

In June 2000, the Company sold its interest in Pacific Coast Recycling, L.L.C., an equity investee, to Mitsui & Co., Ltd. for $2.5 million and recognized a $2.1 million gain, partially recovering a portion of amounts written down in fiscal 1999.

Financing Activities

Fiscal 2002 compared to fiscal 2001

On May 14, 2002, the Company announced it had obtained an extension of the due dates for its $276 million revolving credit facility and $26 million of senior secured notes previously due on May 15, 2002, until May 31, 2002. The extension was granted in view of the Company’s negotiations with Nucor and consideration of other

strategic alternatives at that time. On June 3, 2002, in accordance with terms of the Plan Support Agreement between the Company, its secured lenders and Nucor, the Company filed for Chapter 11 bankruptcy protection in connection with the sale of substantially all of its assets to a wholly-owned subsidiary of Nucor. Under Chapter 11 bankruptcy proceedings, actions by creditors to collect prepetition claims are stayed, absent specific Court authorization to pay such claims, while the Company continues to manage the business as a debtor-in-possession. All of the Company’s long-term debt is currently stayed and interest expense is currently not being accrued or paid; however, per terms of the Plan Support Agreement, the Company is required to make adequate protection payments to the lenders in an amount that approximates interest expense previously charged. Adequate protection payments accrued and unpaid at June 30, 2002 totaled $3.1 million. Terms of the DIP Facility provide that the Company is not required to make adequate protection payments if there is not sufficient availability under the DIP Facility when payments are due and the failure to pay adequate protection payments under these terms does not represent a condition of default.

Subsequent to the Chapter 11 bankruptcy filings, the Company entered into a Post Petition Credit Agreement for a term of six months providing up to $40.0 million in interim DIP Facility financing. Per terms of the Plan Support Agreement, the Company used availability under the DIP Facility to pay a priority portion of the Revolving Credit Facility totaling $32.2 million when the DIP Facility became available. Otherwise, the DIP Facility is being used to fund working capital requirements, operating expenses, employee obligations, and adequate protection payments to secured lenders during the term of the bankruptcy case. The balance of the DIP Facility at June 30, 2002 was approximately $10 million.

Net cash used in financing activities of continuing operations was $19.8 million in fiscal 2002 compared to $7.9 million in fiscal 2001. Net outstanding borrowings on the Company’s Revolving Credit Agreements decreased $30.0 million during fiscal 2000 due to payment of the priority portion of the Revolving Credit Facility and repayment of the BSE Revolving Credit Facility from sale proceeds of the Cartersville facility. Additionally, payments on long-term debt totaled $6.0 million for fiscal 2002, as a result of $3.6 million payments on the senior notes from proceeds on the sale of the Cleveland facility in March 2002, and payment of a $2.5 million industrial revenue bond related to the Jackson facility in November 2001. The Company also paid $3.8 million in additional debt issuance and amendment costs in fiscal 2002.

Terms of the sale of the Cartersville facility to AmeriSteel provided approximately $17.7 million in cash from the sale of working capital and release from $68.7 future operating lease obligations in exchange for issuance of a $10.0 million unsecured, non-interest bearing note payable. The Company also further reduced debt under the Company’s Revolving Credit Facility from collection of retained trade accounts receivable of $12.0 million and sale of inventory of $0.9 million, partially offset by payment of approximately $3.0 million of retained liabilities.

As a result of the sale of the Cleveland facility, the Company reduced debt by $18.6 million through Charter’s assumption of the $15.0 million industrial revenue bonds and $3.6 million reduction in senior notes and Revolving Credit Facility debt. In addition, the Company was relieved of approximately $0.4 million monthly carrying costs of the Cleveland facility.

Fiscal 2001 compared to fiscal 2000

Net cash used in financing activities of continuing operations was $7.9 million in fiscal 2001 compared to cash provided by financing activities of $65.2 million in fiscal 2000. Net outstanding borrowings on the Company’s Revolving Credit Agreement decreased $4.5 million during fiscal 2001 as a result of cash conservation measures put in place by management. The Company also paid $3.4 million in additional debt issuance costs in fiscal 2001.

The Company’s loan agreements were amended on February 20, 2001. Among other things, the February 2001 amendments changed the financial covenants and extended the maturity dates for principal payments previously due before March 31, 2002. The revised agreements maintained the interest rates or spreads previously in effect for the Company’s debt. The amendments also limited the borrowings under the Company’s Revolving Credit Facility and BSE Credit Facility to $290 million and $10 million, respectively. In consideration for the financing agreement modifications, and in lieu of any cash fees, the exercise price for three million warrants held by the Company’s lenders was reduced from $3.00 to $0.01 per share.

Outlook

The Company expects to complete the sale of substantially all its assets prior to December 31, 2002 and, pursuant to the terms of the definitive agreement with Nucor, no later than February 23, 2003. As more fully described above in “Recent Events”, because the Company’s Chapter 11 Reorganization Plan has been confirmed by the Bankruptcy Court, the Nucor transaction must close no later than February 23, 2003. Until closing of the transaction, the Company expects to have sufficient liquidity and cash flow to conduct normal operations. Excluding adequate protection payments to its secured lenders and non-recurring charges, the Company’s continuing operations are currently profitable, and management expects these operations to perform at normal seasonal levels until closing of the Nucor transaction. See “Risk Factors That May Affect Future Results; Forward-Looking Statements”.

Compliance with Environmental Laws and Regulations

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. Company management is highly conscious of these regulations and supports an ongoing program to maintain the Company’s strict adherence to required standards. The Company believes that it is currently in compliance with all known material and applicable environmental regulations.

Impact of Inflation

The Company has not experienced any material adverse effects on operations in recent years because of inflation, though margins can be affected by inflationary conditions. The Company’s primary cost components are ferrous scrap, high quality semi-finished steel billets, energy and labor, all of which are susceptible to domestic inflationary pressures. Finished product prices, however, are influenced by nationwide construction activity, automotive production and manufacturing capacity within the steel industry and, to a lesser extent, the availability of lower-priced foreign steel in the Company’s market channels. While the Company has generally been successful in passing on cost increases through price adjustments, the effect of steel imports, severe market price competition and under-utilized industry capacity has in the past, and could in the future, limit the Company’s ability to adjust pricing.

Critical Accounting Policies and Estimates

The Company bases this discussion and analysis on results of operations, cash flows and financial condition on the Consolidated Financial Statements, which have been prepared in accordance with principles generally accepted in the United States. When these financial statements are prepared, estimates and judgments are made that affect the amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities reported therein. On an on-going basis, the estimates are evaluated, including those related to bad debts, inventories, intangible assets, long-lived assets, environmental and other contingencies and litigation. Current market conditions, customer demand, historical trends and other factors are considered when judgments about carrying value of assets and liabilities are made when other pertinent information is not available. Actual results may differ materially from these estimates when different assumptions or conditions are considered. Management believes the critical accounting policies impacted by significant judgments and estimates relate to inventory, long-lived assets and continuing costs of discontinued operations.

Inventory

Inventories are stated at the lower of cost or market value. The cost of inventories is determined using the first in, first out method. Inventory is adjusted for estimated obsolescence or unmarketable inventory. The amount of this reduction is equal to the estimated cost of our inventory less the market value. Estimated market value is based on assumptions about future demand and market conditions.

Long-lived Assets

The depreciable lives of property, plant and equipment are estimated and are reviewed for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recovered.

Assets held for sale include the net assets of the Memphis facility. The carrying value for these assets is estimated based on the appraised value less estimated costs to sell. Also included in assets held for sale is the property, plant and equipment of the Joliet Facility, which operations were idled in 2001. The carrying value for these assets is based on estimates of the net realizable value from the sale of these assets. Although the Company believes it has appropriately reduced the carrying values of all assets held for sale to their estimated recoverable amounts, net of disposal costs where appropriate, actual results could be different and the results of operations in future periods could reflect gains or losses on those assets.

Discontinued Operations

Continuing costs of operations during the disposal period are based on estimated operating losses at the Memphis Facility through the anticipated disposal date. The Company continues to assess the adequacy of this estimate; however, as with all estimates of future events and circumstances, the actual operating losses through the disposal period will most likely be different from the estimates reflected in the Consolidated Financial Statements.

Risk Factors That May Affect Future Results; Forward-Looking Statements

Certain statements contained in this report are forward-looking statements based on the Company’s current expectations and projections about future events. The words “believe,” “expect,” “anticipate” and similar expressions identify forward-looking statements. These forward-looking statements include statements concerning market conditions, financial performance, potential growth, future cash sources and requirements, competition, production costs, strategic plans (including asset sales and potential acquisitions), environmental matters, labor relations and other matters.

These forward-looking statements are subject to a number of risks and uncertainties, which could cause the Company’s actual results to differ materially from those expected results described in the forward-looking statements. Due to such risks and uncertainties, readers are urged not to place undue reliance on 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 statement. 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 statement. All forward-looking statements contained in this report are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

Risks that could cause actual results to differ materially from expected results include, but are not limited to, the following:

• Changes in market supply and demand for steel, including the effect of changes in general economic conditions;

• Changes in U.S. or foreign trade policies affecting steel imports or exports;

• Changes in the availability and costs of steel scrap, steel scrap substitute materials, steel billets and other raw materials or supplies used by the Company, as well as the availability and cost of electricity and other utilities;

• Unplanned equipment failures and plant outages;

• Actions by the Company’s domestic and foreign competitors;

• Excess production capacity at the Company or within the steel industry;

• Costs of environmental compliance and the impact of governmental regulations;

• Changes in the Company’s relationship with its workforce;

• The Company’s highly leveraged capital structure and the effect of restrictive covenants in the Company’s debt instruments on the Company’s operating and financial flexibility;

• Changes in interest rates or other borrowing costs, or the availability of credit;

• Changes in the Company’s business strategies or development plans, and any difficulty or inability to successfully consummate or implement as planned any projects, acquisitions, dispositions, joint ventures or strategic alliances;

• The effect of unanticipated delays or cost overruns on the Company’s ability to complete or start-up a project when expected, or to operate it as anticipated;

• The effect of existing and possible future litigation filed by or against the Company; and

• Failure to complete the transaction with Nucor.

• Proceeds from the sale of excluded assets could be less than the amount necessary to pay the full amount of the distribution to stockholders provided in the Company’s Bankruptcy Plan.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Sensitive Instruments

The Company and five of its subsidiaries have filed voluntary petitions for relief under Chapter 11 of title 11 of the United States Code before the U.S. Bankruptcy Court for the District of Delaware. Under Chapter 11 bankruptcy proceedings, actions by creditors to collect prepetition claims are stayed, absent specific Court authorization to pay such claims, while the Company continues to manage the business as a debtor-in-possession. Accordingly, the long-term debt of the Company has been stayed and, additionally, interest expense has not been charged to operations or paid since June 3, 2002. Subsequent to the Chapter 11 bankruptcy filing, the Company obtained a variable rate $40 million DIP Facility with two existing lenders. Since all of the Company’s debt, except for the DIP Facility has been stayed and interest expense is not currently being charged as of June 30, 2002, the Company is not exposed to significant financial instrument market risk.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BIRMINGHAM STEEL CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)


			June 30,

			2002			2001

						(Restated)
ASSETS
Current assets:
	Cash and cash equivalents		$	755		$	935
	Accounts receivable, net of allowance for doubtful accounts of $2,757 in 2002 and $2,146 in 2001			58,250			58,261
	Inventories			66,042			71,708
	Other current assets			8,478			2,986
	Current assets of discontinued operations			3,019			71,979

		Total current assets		136,544			205,869
Property, plant and equipment:
	Land and buildings			101,200			111,773
	Machinery and equipment			350,882			384,411
	Construction-in-progress			11,396			12,369

				463,478			508,553
	Less accumulated depreciation			(271,016	)		(256,807	)

		Net property, plant and equipment		192,462			251,746
Excess of cost over net assets acquired				6,211			13,515
Other assets				13,704			16,957
Non-current assets of discontinued operations				79,085			213,258

		Total assets	$	428,006		$	701,345

See accompanying notes.

BIRMINGHAM STEEL CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS—(Continued)
(in thousands, except share data)


					June 30,

					2002			2001

								(Restated)
				LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
	Accounts payable				$	20,354		$	37,692
	Accrued interest payable					134			3,365
	Accrued adequate protection payments					3,001			—
	Accrued payroll expenses					1,198			4,884
	Accrued operating expenses					4,737			8,568
	Other current liabilities					3,631			17,483
	Debtor in possession revolver (DIP Facility)					9,973			—
	Current maturities of long-term debt					—			293,500
	Current liabilities – discontinued operations					1,574			25,312
	Reserve for disposal period losses on discontinued operations					6,000			10,137

			Total current liabilities			50,602			400,941
Liabilities subject to compromise						605,890			—
Deferred liabilities						—			7,701
Long-term debt, less current portion						—			254,000
Non-current liabilities – discontinued operations						—			45,207
Stockholders’ deficit:
	Preferred stock, par value $.01; 5,000,000 shares authorized					—			—
	Common stock, par value $.01; authorized: 195,000,000 shares; issued:
		31,857,083 in 2002 and 31,142,113 in 2001				318			311
	Additional paid-in capital					344,357			343,908
	Unearned compensation					(87	)		(317	)
	Accumulated deficit					(573,074	)		(350,406	)

			Total stockholders’ deficit			(228,486	)		(6,504	)

				Total liabilities and stockholders’ deficit	$	428,006		$	701,345

See accompanying notes.

BIRMINGHAM STEEL CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)


		Years Ended June 30,

		2002			2001			2000

					(restated)			(restated)
Net sales		$	513,799		$	599,875		$	685,216
Cost of sales:
	Other than depreciation and amortization		420,271			507,039			560,529
	Depreciation and amortization		29,945			34,255			34,527

Gross profit			63,583			58,581			90,160
Impairment and other unusual items, net			28,250			(206	)		19,513
Selling, general and administrative expense			30,417			32,504			34,402

	Operating income		4,916			26,283			36,245
Interest expense, including amortization of debt issuance costs			50,284			33,761			24,193
Other income, net			1,278			1,554			2,807
Income (loss) from equity investments			44			(23	)		1,974
Minority interest in loss of subsidiary			—			—			7,978
Reorganization items			7,803			—			—

(Loss) income from continuing operations before income taxes			(51,849	)		(5,947	)		24,811
(Benefit from) provision for income taxes			(5,454	)		184			33,835

Loss from continuing operations			(46,395	)		(6,131	)		(9,024	)
Discontinued operations:
Loss from discontinued operations (net of income tax benefit of $74,836 in 2000)			(32,028	)		(52,619	)		(217,310	)
(Loss) reversal of loss on disposal of assets (net of income tax expense of $78,704 in 2000)			(144,245	)		(138,236	)		173,183
Loss before extraordinary item			(222,668	)		(196,986	)		(53,151	)
Extraordinary loss on restructuring of debt (net of income taxes of $1,160)			—			—			(1,669	)
Net loss		$	(222,668	)	$	(196,986	)	$	(54,820	)

Weighted average shares outstanding			31,420			30,994			30,118

Basic and diluted per share amounts:
	Loss from continuing operations	$	(1.48	)	$	(0.20	)	$	(0.30	)
	Loss from discontinued operations		(5.61	)		(6.16	)		(1.47	)
	Extraordinary loss on restructuring of debt		—			—			(0.06	)

Net loss		$	(7.09	)	$	(6.36	)	$	(1.82	)

See accompanying notes.

BIRMINGHAM STEEL CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(In thousands)


	Years Ended June 30, 2002, 2001 and 2000

					Additional															Total
	Common Stock				Paid-in			Treasury Stock						Unearned			Accumulated			Stockholders'
	Shares		Amount		Capital			Shares			Amount			Compensation			Deficit			Equity (Deficit)

Balances at June 30, 1999		29,836	$	298	$	329,056			(150	)	$	(791	)	$	(718	)	$	(97,114	)	$	230,731
Options exercised and shares issued (repurchased) under stock compensation plans, net		146		1		844			69			326			(686	)		—			485
Issuance of common stock to employee benefit plan		577		6		2,447			—			—			—			—			2,453
Reduction of unearned compensation		—		—		—			—			—			737			—			737
Issuance of warrants		—		—		8,250			—			—			—			—			8,250
Issuance of common stock to affiliates as reimbursement of proxy solicitation costs		499		5		1,660			—			—			—			—			1,665
Net loss		—		—		—			—			—			—			(54,820	)		(54,820	)
Cash dividends declared, $0.05 per share		—		—		—			—			—			—			(1,486	)		(1,486	)

Balances at June 30, 2000		31,058		310		342,257			(81	)		(465	)		(667	)		(153,420	)		188,015
Options exercised and shares issued (repurchased) under stock compensation plans, net		84		1		(109	)		81			465			—			—			357
Reduction of unearned compensation		—		—		—			—			—			350			—			350
Repricing of warrants		—		—		1,760			—			—			—			—			1,760
Net loss		—		—		—			—			—			—			(196,986	)		(196,986	)

Balances at June 30, 2001		31,142		311		343,908			—			—			(317	)		(350,406	)		(6,504	)
Options exercised and shares issued under stock compensation plans, net		715		7		449			—			—			—			—			456
Reduction of unearned compensation		—		—		—			—			—			230			—			230
Net loss		—		—		—			—			—			—			(222,668	)		(222,668	)

Balances at June 30, 2002		31,857	$	318	$	344,357			—		$	—		$	(87	)	$	(573,074	)	$	(228,486	)

See accompanying notes.

BIRMINGHAM STEEL CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


				Years Ended June 30,

				2002			2001			2000

							(restated)			(restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss from continuing operations		$		(46,395	)	$	(6,131	)	$	(9,024	)
	Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities:
		Depreciation and amortization			29,945			34,255			34,527
		Provision for doubtful accounts receivable			742			90			(908	)
		Deferred income taxes			—			(22,556	)		(21,417	)
		Minority interest in loss of subsidiary			—			—			(7,978	)
		Loss (gain) on sale of equity interest in subsidiaries, idle facilities and equipment			—			(27	)		670
		Loss (income) from equity investments			(44	)		23			(1,974	)
		Reorganization expenses			7,803			—			—
		Impairment of fixed assets, goodwill and property, plant and Equipment			28,250			—			3,926
		Other			13,067			6,935			3,935
	Changes in operating assets and liabilities:
		Accounts receivable			(731	)		9,854			145
		Inventories			5,666			24,005			(22,108	)
		Other current assets			(5,492	)		1,543			19,862
		Accounts payable			4,310			(23,923	)		9,982
		Accrued liabilities			(3,491	)		(6,790	)		12,910
		Deferred liabilities			(1,446	)		(1,641	)		642

		Net cash provided by operating activities of continuing operations before reorganization items			32,184			15,637			23,190
		Operating cash flows used by reorganization items			(4,720	)		—			—

		Net cash provided by operating activities of continuing operations			27,464			15,637			23,190
		Net cash used in operating activities of discontinued operations			(5,282	)		(6,056	)		(68,509	)

		Net cash provided by (used in) operating activities			22,182			9,581			(45,319	)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Additions to property, plant and equipment				(2,352	)		(10,538	)		(18,884	)
	Proceeds from sale of equity investments, property, plant and equipment, idle facilities and other				—			1,665			5,971
	Other non-current assets				(1,864	)		7,027			4,483

		Net cash used in investing activities of continuing operations			(4,216	)		(1,846	)		(8,430	)
		Net cash provided by (used in) investing activities of discontinued operations			16,820			266			(11,238	)

		Net cash provided by (used in) investing activities			12,604			(1,580	)		(19,668	)

See accompanying notes.

BIRMINGHAM STEEL CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
(In thousands)


			Years Ended June 30,

			2002			2001			2000

						(restated)			(restated)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Net short-term borrowings and repayments		$	9,973		$	—		$	(10,000	)
	Issuance of long–term note payable			10,000			—			—
	Borrowings under revolving credit facility			2,283,183			1,875,331			1,083,830
	Payments on revolving credit facility			(2,313,182	)		(1,879,796	)		(1,001,001	)
	Debt issue and amendment costs paid			(3,779	)		(3,405	)		(6,232	)
	Long–term debt payments			(6,024	)		—			—
	Cash dividends paid			—			—			(1,485	)

		Net cash (used in) provided by financing activities of continuing operations		(19,829	)		(7,870	)		65,112
		Net cash used in financing activities of discontinued operations		(15,137	)		(131	)		(125	)
		Net cash (used in) provided by financing activities		(34,966	)		(8,001	)		64,987

	Net decrease in cash and cash equivalents			(180	)		—			—
Cash and cash equivalents at:
	Beginning of year			935			935			935

			$	755		$	935		$	935

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the year for:
	Interest (net of amounts capitalized)		$	41,374		$	40,155		$	34,478
	Income taxes paid (refunded), net			3,435			96			(15,397	)
NON CASH FINANCING AND INVESTING ACTIVITIES:
Issuance of warrants to purchase 3,000,000 shares of common stock in connection with debt amendments			$	—		$	—		$	8,250
Repricing of warrants in connection with debt amendments				—			1,760			—

See accompanying notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DEBTOR-IN-POSSESSION)
June 30, 2002, 2001 and 2000

1. Description of the Business and Significant Accounting Policies

Sale to Nucor, Chapter 11 Bankruptcy Proceedings and Going Concern

On May 30, 2002, Birmingham Steel Corporation (the Company) announced it had reached a definitive agreement to sell substantially all the assets of the Company and its subsidiaries to a wholly owned subsidiary of Nucor Corporation (Nucor) for $615 million in cash. Terms of the agreement call for an increase or decrease to the purchase price in the event that accounts receivable and inventory at the time of closing are not within a predetermined range (with any difference in the sales proceeds impacting the distribution to secured lenders). On June 3, 2002, as a means of effecting the transaction and in accordance with the terms of the definitive agreement with Nucor, the Company and four of its subsidiaries filed voluntary petitions for relief under Chapter 11 of title 11 of the United States Code before the United States Bankruptcy Court for the District of Delaware (the Court). On August 12, 2002, Birmingham Steel Management, Inc., a subsidiary which was not included in the Company’s initial Chapter 11 filing, filed a voluntary petition for relief under Chapter 11 of title 11 of the United States Code before the Court. By order entered on September 17, 2002, the Company’s pre-arranged Chapter 11 plan (Plan of Reorganization) was confirmed by the Court, thereby approving the sale to Nucor and the distribution of sale proceeds proposed under the plan. Subject to the U.S. Department of Justice (DOJ) decision regarding filings by the Company and Nucor concerning the Hart-Scott-Rodino implications of the transaction, (see discussion below), the Company expects the sale to Nucor will close prior to the end of calendar 2002.

Under the Company’s Plan of Reorganization, the proceeds from the sale to Nucor, together with certain other assets of the Company (or the proceeds thereof) which were excluded from the sale, will be applied to retire the Company’s secured debt. These proceeds will be less than the total obligations under the Company’s long-term secured debt agreements. However, pursuant to the Plan of Reorganization and the Plan Support Agreement dated May 30, 2002, among the Company, Nucor and the Company’s secured lenders, the secured lenders have agreed, among other things, to accept the payments under the plan in full satisfaction of their claims and to cause $17 million of the proceeds to be paid to claimants under the Company’s employee severance and retirement plans, $17.5 million to the Company’s unsecured creditors, and up to $15 million, or approximately $0.47 per share, to stockholders of the Company (see Note 2).

The Company’s Consolidated Financial Statements have been prepared in conformity with the AICPA’s Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (SOP 90-7). The Consolidated Financial Statements are prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business and do not reflect adjustments that might result if the Debtors are unable to continue as a going concern. SOP 90-7 also requires the segregation of liabilities subject to compromise by the Court as of the bankruptcy filing date and identification of all transactions and events that are associated with the reorganization of the Company. Liabilities that are expected to be settled for an amount less than the face value of the liability as part of the Plan of Reorganization are classified as “Liabilities subject to compromise”. Costs incurred related to the bankruptcy are classified as “Reorganization items”.

Upon filing for Chapter 11 relief, the Company obtained a $40 million debtor-in-possession (DIP) financing credit facility (DIP Facility) from two lenders and is conducting business as a debtor-in-possession. The DIP Facility is being used to fund working capital requirements, operating expenses, employee obligations and adequate protection payments to secured lenders. The DIP Facility was also utilized to pay certain pre-petition obligations approved by the Court, including up to $28 million of trade payables and employee and tax related claims. The Company expects the DIP Facility will be sufficient to fund the Company’s obligations through the expected closing date of the Nucor transaction.

The Company believes provisions have been made in the accompanying Consolidated Financial Statements for the potential claims that could be estimated at the date of these financial statements based on the provisions of SFAS No. 5, Accounting for Contingencies. The amount of the claims filed by creditors with the Court in the Chapter 11 bankruptcy proceedings is significantly different than the amount of the liabilities recorded by the Company; however, the Company is disputing claims of various unsecured creditors. See further discussion in Note 2.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. However, as a result of the previously described bankruptcy filings and circumstances relating thereto, including the Company’s leveraged financial structure and cumulative losses from operations, such realization of assets and liquidation of liabilities is subject to significant uncertainty. During the pendency of the Debtors’ Chapter 11 bankruptcy proceedings, the Company intends to substantially sell all of its assets to Nucor and liquidate or settle liabilities for amounts other than the carrying amounts in the Consolidated Financial Statements.

Description of the Business

The Company owns and operates facilities in the mini-mill sector of the steel industry. In addition, the Company owns an equity interest in a scrap collection and processing operation. From these facilities, which are located across the United States and Canada, the Company produces a variety of steel products including semi-finished steel billets, reinforcing bars, merchant products such as rounds, flats, squares and strips, along with angles and channels less than three inches wide. These products are sold primarily to customers in the steel fabrication, manufacturing and construction business. The Company has regional warehouse and distribution facilities that sell its finished products.

In addition, the Company’s special bar quality (SBQ) segment, which is reported in discontinued operations (see Note 3), produced high quality rod, bar and wire sold primarily to customers in the automotive, agricultural, industrial fastener, welding, appliance and aerospace industries in the U.S. and Canada.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Equity Investments

Investments in 50% or less owned affiliates where the Company has substantial influence over the affiliate are accounted for using the equity method of accounting. Under the equity method, the investment is carried at cost of acquisition plus additional investments and advances and the Company’s share of undistributed earnings or losses since acquisition. The Company generally records its share of income and losses in equity investees on a one-month lag. Impairment losses are recognized when management determines that the investment or equity in earnings is not realizable.

Revenue Recognition

Revenue from sales of steel products is recorded at the time the goods are shipped or when title passes, if later. Substantially all shipments reflect “free-on-board” (FOB) shipping point terms. The Company adopted the Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs, in the fourth quarter of fiscal 2001. Shipping and handling fees billed to customers are recognized as revenue and cost of sales, respectively.

Cash Equivalents

The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The carrying amounts reported in the accompanying consolidated balance sheets for cash and cash equivalents approximate their fair values.

Inventories

Inventories are stated at the lower of cost or market value. The cost of inventories is determined using the first-in, first-out method.

Long-lived Assets and Depreciation

The Company recognizes impairment losses on long-lived assets used in operations, including allocated goodwill, when impairment indicators are present and the undiscounted cash flows estimated to be generated by those assets are less than their carrying values. Long-lived assets held for disposal are valued at the lower of carrying amount or fair value less cost to sell.

Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. Estimated useful lives range from ten to thirty years for buildings and from five to twenty-five years for machinery and equipment.

Excess of Cost Over Net Assets Acquired

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets. This pronouncement provides guidance on financial accounting and reporting for acquired goodwill and other intangible assets. Under SFAS No. 142, goodwill and indefinite-lived intangible assets will no longer be amortized but will be reviewed annually for impairment. The Company adopted SFAS No. 142 in the first quarter of fiscal 2002. Effective July 1, 2001, the Company no longer recognized goodwill amortization in the Consolidated Financial Statements which positively impacted pre-tax earnings $2.1 million in fiscal 2002. The results of the Company, if goodwill had not been amortized during fiscal 2001 and 2000, would have been positively impacted by $2.1 million or $.07 per share and $2.9 million or $.10 per share, respectively. In the second quarter of fiscal 2002, the Company wrote off $7.3 million goodwill on the Cartersville facility included in the loss on sale of the facility (see Note 3). The carrying value of the Company’s other goodwill is considered to not be impaired because the fair market value of Company assets in the imminent transaction with Nucor exceeds the Company’s asset carrying cost.

Prior to fiscal 2002, goodwill was amortized on a straight-line basis over periods not exceeding twenty years. Accumulated amortization of goodwill was approximately $52.4 and $45.1 million at June 30, 2002 and 2001, respectively. Prior to fiscal 2002, the carrying value of goodwill was reviewed if the facts and circumstances suggested that it could be impaired under provisions of SFAS No. 121 Accounting for Impairment of Long-Lived Assets. If such review indicated that goodwill was not recoverable based upon the undiscounted expected future cash flows over the remaining amortization period, the carrying value of the goodwill was reduced to its estimated fair value. In fiscal 2000, the Company recorded an impairment charge of $22,134,000 relating to SBQ segment goodwill (see Note 3).

Income Taxes

Deferred income taxes are provided for temporary differences between taxable income or loss and financial reporting income or loss in accordance with SFAS No. 109, Accounting for Income Taxes.

Earnings per Share

Earnings per share are presented in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per share are computed using the weighted average number of outstanding common shares for the period, excluding unvested restricted stock. Diluted earnings per share are computed using the weighted average number of outstanding common shares and dilutive equivalents, if any. Because the Company reported net losses in each of the three fiscal years ended June 30, 2002, none of the options outstanding at the end of those years (see Note 11) were dilutive. Warrants to purchase 3,000,000 shares of the Company’s common stock are not included in the calculation of earnings per share because to do so would be anti-dilutive.

Start-up Costs

The Company recognizes start-up costs as expense when incurred. The Company considers a facility to be in ''start-up’’ until it reaches commercially viable production levels. During the start-up period, costs incurred in excess of expected normal levels, including non-recurring operating losses, are classified as impairment and other unusual items in the Consolidated Statements of Operations.

Credit Risk

The Company extends credit, primarily on the basis of 30-day terms, to various companies in a variety of industrial market sectors. The Company does not believe it has a significant concentration of credit risk in any one geographic area or market segment. The Company performs periodic credit evaluations of its customers and generally does not require collateral. Historically, credit losses have not been significant.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in these Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses significant issues regarding the recognition, measurement and reporting of costs associated with exit and disposal activities, including restructuring activities. SFAS No. 146 also addresses recognition of certain costs related to terminating a contract that is not a capital lease, costs to consolidate facilities, relocate employees and termination benefits provided to employees that are involuntary terminated under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS No. 146 was issued in June 2002 and is not yet effective. The impact on the Company’s financial position and results of operations from adopting SFAS No. 146 has not been determined.

In April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 145, Rescission of FASB Statements No. 44, and No. 64, Amendment of FASB Statement No. 13, and Technical Corrections, which updates, clarifies and simplifies existing accounting pronouncements. SFAS No. 4, which required all gains and losses from the extinguishment of debt to be aggregated and , if material, classified as an extraordinary item, net of related tax effect was rescinded, as a result, SFAS 64, which amended SFAS No. 4, was rescinded as it was no longer necessary. SFAS No. 145 amended SFAS No. 13 to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. Management has not yet determined the effects of adopting this statement on the financial position and results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes SFAS Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. This new statement also supersedes certain aspects of the Accounting Principles Board Opinion (APB) No. 30, Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, with regard to reporting the effects of a disposal of a segment of a business and will require expected future operating losses from discontinued operations to be reported in discontinued operations in the period incurred (rather than estimated as of the measurement date as was required by APB No. 30). The Company adopted the provisions of FAS No. 144 in the second quarter of fiscal 2002 and reflected the loss on sale and operating losses from the Cartersville facility in discontinued operations in the accompanying financial statements. Under the transition provisions of FAS No. 144, any segment previously reported in discontinued operations will continue to be accounted for under provisions of APB No. 30. As such, the SBQ segment will continue to be accounted for under APB No. 30.

Reclassifications

Certain prior year amounts have been reclassified to conform to the fiscal 2002 presentation.

2. Sale to Nucor and Pre-arranged Reorganization Under Chapter 11 of the U.S. Bankruptcy Code

On February 14, 2002, Nucor announced an unsolicited offer to purchase substantially all of the Company’s assets for $500 million. On May 30, 2002, the Company signed an asset purchase agreement with a wholly owned subsidiary of Nucor whereby Nucor would purchase substantially all of the Company’s assets for $615 million in cash, subject to adjustment as described in Note 1 above. The Company also entered into a plan support agreement (Plan Support Agreement), dated May 30, 2002, with its secured lenders in support of the transaction. These agreements required the transaction with Nucor and the secured lenders be approved by the U.S. Bankruptcy Court in Delaware (the Court) pursuant to a pre-arranged Chapter 11 plan of reorganization.

Net proceeds from the $615 million purchase price from Nucor will be applied under the Plan of Reorganization to retire the Company’s long term debt. However, the selling price is less than the face amount of the Company’s secured debt obligations. Although the secured parties are not being paid in full, the Plan of Reorganization and the Plan Support Agreement provide that the secured creditors will pay, or cause the payment of, certain amounts to unsecured and other creditors and interest holders in the Company as more fully described below.

In accordance with the Plan Support Agreement, on June 3, 2002, Birmingham Steel Corporation and four of its subsidiaries filed voluntary petitions for relief under Chapter 11 of title 11 of the United States Code before the U.S. Bankruptcy Court for the District of Delaware, Case No.’s 02-11586 to 02-11590. On August 12, 2002, Birmingham Steel Management, Inc., a subsidiary which was not included in the Company’s initial Chapter 11 filing, filed a voluntary petition for relief under Chapter 11 of title 11 of the United States Code before the Court Case No. 02-12-395. The Company is currently managing the business as a debtor-in-possession (DIP).

Subsequent to the Chapter 11 filings, the Company entered into a Post Petition Credit Agreement (DIP Facility) for a term of six months providing up to $40.0 million in interim DIP financing. On June 3, 2002, the Court issued an interim order approving the DIP financing arrangements. Per terms of the Plan Support Agreement, the Company used availability under the DIP Facility to pay a priority portion of the Revolving Credit Facility totaling $32.2 million when the DIP Facility became available. Otherwise, the DIP Facility is being used to fund working capital requirements, operating expenses, employee obligations and adequate protection payments to secured lenders during the term of the bankruptcy case. Additionally, on June 3, 2002, the Court issued orders providing the Company authority to pay employee related obligations, ordinary course tax obligations and up to $28.0 million in prepetition critical trade vendor payments. The balance of the DIP Facility at June 30, 2002 was approximately $10.0 million.

On September 17, 2002 (the Confirmation Date) the Court entered an order (the Confirmation Order) confirming the Third Amended and Restated Joint Plan of Reorganization as modified (Plan of Reorganization). Although the Company‘s secured lenders are not being paid in full, pursuant to the Plan Support Agreement and the Plan of Reorganization, the secured creditors have agreed to pay certain amounts to unsecured and other creditors and stockholders in the Company. Under the Plan of Reorganization, the following distributions will be made from the gross proceeds of the sale and the other assets and proceeds described in the Plan of Reorganization.

• Repayment of DIP Facility outstanding at the closing date;

• Payment of all cure amounts due under contracts being assumed and assigned by Nucor of approximately $0.5 million;

• Payment of post-petition payables in amounts to be determined at the time of closing;

• Payment of $13.5 million to the distribution agent for payment of administrative claims including investment banking fees, professional fees, incentive payments described in the plan, and all other administrative expense claims not paid at closing;

• Payments to stockholders of up to $7.7 million ($0.24 per share) less $0.2 million withheld from members of the board of directors to be used to pay a portion of the unsecured creditors payments (The total amount to be paid to stockholders is up to $15.0 million or $0.47 per share. A portion of that amount will be funded from liquidation of Excluded Assets as further described below);

• Payments of $17.5 million to unsecured creditors ($0.2 million of the payments to unsecured creditors will be funded by the Company’s board of directors as described above);

• Payments of $17.0 million to claimants under the Company's severance and retirement plans; and

• Payment of up to $0.5 million for liquidating trust expenses.

Company stockholders will receive up to $15 million, approximately $0.47 per share, pursuant to the terms of the Plan Support Agreement and the Plan of Reorganization. A portion of the payment to stockholders ($7.3 million or $0.23 per share) will be funded from (1) liquidation of the excluded assets defined in the Asset Purchase Agreement between the Company and Nucor; (2) settlement of amounts held in from the Cartersville facility sale in December 2002; and (3) an expected tax refund. The Company is currently in negotiations with Nucor regarding the sale of the Joliet rolling mill facility, selected causes of action and certain expected tax refunds. The Company is currently in negotiations with an unrelated third-party regarding sale of land at the Joliet facility. Gross proceeds from these transactions are expected to be approximately $5.6 million. In addition, the Company has agreed with AmeriSteel to settle the escrow receivable, which was scheduled to be held through December 2007, which will provide $1.5 million for payment to Company stockholders. The Company also expects to receive $0.2 million from a tax escrow established at the closing of the Cartersville sale. Management expects that the gross proceeds from liquidations of the Excluded Assets will total approximately $7.3 million. If the net proceeds from the sale or liquidation of the Excluded Assets are less than $7.3 million, the shortfall will reduce the payout to stockholders on a pro rata basis. If the net proceeds are greater than $7.3 million, the excess will be paid to secured lenders.

Subsequent to closing the transaction with Nucor, the Company’s board of directors and officers will resign. Employees at the production and distribution facilities will become employees of Nucor and certain corporate office employees will either be employed by Nucor, severed or work a transition period with Nucor. A liquidation trust and trustee have been established to wind down the affairs of the Company. Duties of the liquidating trustee include filing all final tax returns, filing final reports required under the Securities Act of 1933 and the Securities and Exchange Act of 1934, and dissolving the Company and its subsidiaries. Fees and expense of the liquidating trust will be paid from a $0.5 million reserve established from the proceeds from the sale. Any amounts that remain undistributed after all claims have been paid under the Company’s Plan of Reorganization will be distributed by the liquidating trustee to the secured lenders.

As part of the Chapter 11 bankruptcy process, unsecured creditors are allowed to file claims against the Company directly with the Court. Unsecured claims filed with the Court totaled $341.7 million. Of the claims that voted, over 97% in number and over 99% in amount voted in support of the Plan of Reorganization. Of this amount, approximately $25.2 million relates to severance and retirement claims. The Company has provisions for $35.0 million of the total claims included with liabilities subject to compromise at June 30, 2002. The Company believes provisions have been made in the accompanying Consolidated Financial Statements for viable potential claims that could be estimated at the date of these financial statements based on the provisions of SFAS No. 5, Accounting for Contingencies. The Company is currently disputing unsecured claims that it does not believe are valid claims against the Company. These disputed claims include a claim by Norfolk Southern Railway Company (Norfolk) of approximately $53 million, a claim by Canadian National Railway Company (Canadian National) of approximately $28 million, and a claim by Atlantic Steel Company (Atlantic) of approximately $20 million. Although no legal proceedings have been initiated, the Norfolk and Canadian National claims arise out of allegations of breach of contract relating to agreements entered into with these railroad companies by the Company to provide freight services and equipment to the Company’s shut down Memphis, Tennessee facility. The Atlantic claim relates to allegations that the Company breached contractual and fiduciary duties under a Limited Liability Company Agreement between Atlantic and a subsidiary of the Company that governs the operations of Birmingham Southeast, LLC, of which the Company owns 85% and Atlantic owns the remaining 15%. The Company has filed objections to the claims of Norfolk, Canadian National and Atlantic and intends to vigorously dispute these claims. In connection with the Company’s Chapter 11 bankruptcy proceedings, the American Iron Reduction, L.L.C. (AIR) lenders asserted an unsecured claim against the Company in excess of $300 million, which the Company disputed. The Company engaged in extensive negotiations toward the confirmation of the Company’s Plan of Reorganization on a consensual basis. In this negotiation process, the Company stipulated with the AIR lenders that, if the Plan of Reorganization was confirmed and became effective, the Company would not object to the AIR lenders’ $115.0 million unsecured claim. This stipulation was conditioned upon the AIR lenders’ support of, and affirmative vote in favor of confirmation of, the Plan of Reorganization, and is further conditioned upon the consummation of the sale to Nucor and the effectiveness of the plan. If for any reason the sale to Nucor is not consummated, the Company would vigorously contest the AIR claim. The Plan of Reorganization provides for maximum payments to unsecured creditors (other than retirement and severance claims) totaling $17.5 million to be paid if, and only if, the contemplated transaction with Nucor is finalized. If for some unforeseen reason, the transaction is not finalized, the Company also will dispute the claims of other unsecured creditors, which were allowed in the bankruptcy process and voted in favor of the Plan of Reorganization.

For a more complete description of the Plan Support Agreement and its effect on the distribution of the proceeds of the sale of the Debtor’s assets, see the Disclosure Statement for Joint Plan of Reorganization of Birmingham Steel Corporation (the “Disclosure Statement”) included as an exhibit to Form 8-K filed September 27, 2002.

Liabilities of the Company that existed at the time of filing of Chapter 11 petitions on June 3, 2002, are classified as liabilities subject to compromise. Liabilities subject to compromise at June 30, 2002 include (in thousands):


Long-term debt – continuing operations	$	521,479
Long-term debt – discontinued operations		26,987
Trade accounts payable		24,731
Accrued taxes and interest		7,542
Deferred rent – discontinued operations		6,614
Deferred compensation		6,255
Accrued employment costs		4,619
Other accrued liabilities		5,947
Other accrued liabilities – discontinued liabilities		1,716

Total	$	605,890

Net costs resulting from the Plan of Reorganization of the Company are reported separately in the statement of operations as “reorganization items.” Through June 30, 2002, the following costs have been incurred (in thousands):


Professional fees	$	4,720
Adequate protection payments to secured lenders		3,083

	$	7,803

The DOJ is currently investigating the transaction to determine if there are any anti-competitive issues for the U.S. steel industry. Nucor has undertaken to take any and all steps, including divesting and/or agreeing to divest assets necessary to obtain the required approvals of the DOJ to proceed with the transaction, and such approvals are not conditions precedent to the transaction. Although approval by the DOJ is not a condition to the purchase by Nucor, the timing of the closing of the transaction may be impacted. The terms of the various agreements between

the Company, Nucor and the secured lenders require that the closing of the transaction must occur no later than 270 days from June 3, 2002 if the Plan of Reorganization is confirmed. Therefore, because the Company’s Plan of Reorganization has been confirmed, the sale to Nucor must be completed no later than February 23, 2003. The Company expects closing will occur prior to the end of calendar 2002. However, there can be no assurance that the transaction with Nucor will be finalized. If for some unforeseen reason the transaction is not finalized, the Company’s Plan of Reorganization will be voided and the Company will have to file a regular Plan of Reorganization of reorganization, which would likely result in the secured lenders owning substantially all of the Company’s assets.

3. Discontinued Operations

The following table sets forth events that have occurred in connection with the disposal of the SBQ segment (recorded under provisions of APB No. 30) and the sale of the Cartersville facility (recorded under the provisions of SFAS No. 144), and the related recording of discontinued operations accounting treatment. See further discussion of each event below:


			Reported in Financial
Date		Event	Statements Dated

August 1999	•	Prior Board of Directors adopts plan of disposal for SBQ segment	Fiscal year ended
	•	SBQ segment presented as discontinued operations	June 30, 1999

January 2000	•	Following proxy contest, reconstituted Board of Directors elects to re-establish SBQ segment	Fiscal quarter ended December 31, 1999
	•	Discontinued operations accounting treatment recorded in June 1999 reversed
	•	Memphis facility shut-down, $85 million reserve for impairment established

February 2001	•	Board of Directors authorizes sale of SBQ assets (Cleveland and Memphis) to North American Metals (NAM)	Fiscal quarter ended December 31, 2000
	•	Discontinued operations accounting treatment re-established, $89.9 million reserve for loss on disposal and disposal period losses established

March 2001	•	Definitive agreement with NAM for the sale of SBQ assets is terminated because NAM is unable to secure financing for the purchase by March 23, 2001 deadline	Fiscal quarter ended March 31, 2001
	•	American Iron Reduction, L.L.C., (AIR) filed for protection under Chapter 7 of the U.S. Bankruptcy Code

April 2001	•	Management announces decision to close the Cleveland, Ohio plant unless the facility is sold by June 22, 2001	Fiscal quarter ended March 31, 2001
	•	Estimated loss on SBQ segment is increased by $12.3 million to reflect extension of disposal period

September 2001	•	Management announces intent to sell Cleveland facility to Sidenor, S.A.	Fiscal quarter ended June 30, 2001
	•	Estimated loss on sale of SBQ segment is increased by $36.1 million to reflect additional estimated loss on sale, additional disposal period losses and adjustment to previous reserve for loss on purchase commitment for AIR

September 2001	•	Reserve for disposal period losses is increased by $9 million to reflect longer anticipated disposal period for Memphis facility	Fiscal quarter ended September 30, 2001

December 2001	•	Sale of Cartersville, Georgia mini-mill is completed. Results of discontinued operations restated to include the Cartersville facility	Fiscal quarter ended December 31, 2001
	•	Loss on sale of $142.4 million recorded on sale of Cartersville assets

January 2002	•	Management announces intent to sell Cleveland facility to Charter Manufacturing, Inc. Reserve for disposal period losses is increased by $1.6 million to reflect revised anticipated disposal date	Fiscal quarter ended December 31, 2001

March 2002	•	Sale of Cleveland, Ohio facility is completed. Recorded additional $1.8 million loss on sale	Fiscal quarter ended March 31, 2002
	•	Reserve for disposal period losses are increased by $0.5 million to reflect revised anticipated disposal date of the Memphis SBQ facility

June 2002	•	Reserve for disposal period losses are increased by $6.0 million to reflect revised anticipated disposal date of the Memphis SBQ facility	Fiscal quarter ended June 30, 2002

Discontinued operations — SBQ Segment

Fiscal 1999

In fiscal 1999, prior to the conclusion of a proxy contest and change in management, the Company announced plans to sell its SBQ segment, which included 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), a facility in Louisiana which produced direct reduced iron (DRI). Accordingly, the operating results of the SBQ segment were reflected as discontinued operations in the Company’s annual Consolidated Financial Statements for fiscal 1999 and in the first quarter of fiscal 2000, in accordance with APB No. 30.

Fiscal 2000

In January 2000, subsequent to a change in management which occurred after a proxy contest, the Company re-established its Cleveland-based American Steel & Wire (AS&W) SBQ operations because new management believed there was a viable SBQ market to support operations at the Cleveland facility and efforts to sell the SBQ facilities up to that time had not been successful. In accordance with EITF 90-16, Accounting for Discontinued Operations Subsequently Retained, the results of operations of the SBQ segment were reported within continuing operations from the second quarter of fiscal 2000 through the first fiscal quarter of 2001. Consequently, in the quarter ended December 31, 1999, the operating results of the SBQ segment for all periods prior to October 1, 1999 were reclassified from discontinued operations to continuing operations. As a result of unwinding the discontinued operations accounting treatment of the SBQ segment, the Company reversed the remaining balance of the reserves for loss on disposal and operating losses, and their related income tax effects. The reversal of previously established reserves (net of tax) increased net income in fiscal 2000 by $173.2 million ($5.82 per share).

Fiscal 2001

Subsequently, management reported that the definitive agreement with NAM for the sale of the SBQ assets had been terminated because NAM was unable to complete financing arrangements by the March 23, 2001 deadline. The Company continued to pursue discussions with other interested parties; however, due to a general economic slowdown in the U.S. steel industry, which impacted demand for all steel products, shipments for the Cleveland facility fell precipitously in the third fiscal quarter of 2001. As a result, operations at the Cleveland facility were suspended in June 2001.

In September 2001, the Company announced that a letter of intent had been signed to sell the idled Cleveland facility to Corporacion Sidenor, S.A. (Sidenor), an SBQ manufacturer headquartered in Bilbao, Spain. Based on the terms of the letter of intent, the Company established an additional $61.2 million reserve for loss on sale in the quarter ended June 30, 2001 (offset by a reversal of $36.6 million loss reserve for the Company’s purchase commitment to AIR). In addition, the Company recorded additional reserves for estimated losses, through the anticipated disposal period, of $10.1 million.

Fiscal 2002

On November 9, 2001, the previously signed letter of intent with Sidenor regarding sale of the SBQ facility in Cleveland, Ohio expired. On January 10, 2002, the Company announced it had signed an option agreement with Charter Manufacturing, Inc. of Mequon, Wisconsin (Charter) and on March 1, 2002, the Company completed the sale of the Cleveland facility to Charter. Terms of the transaction included sale of remaining inventories and production assets of the Cleveland facility for $26.0 million in cash and assumption of debt. As a result of completing the sale, the Company recorded an additional $1.8 million loss on sale primarily related to the sale of

remaining inventories at the Cleveland facility. The transaction provided the Company with $15.0 million long-term debt relief through Charter’s assumption of $15.0 million industrial revenue bonds and $11.0 million in cash. A portion of the cash proceeds were used to (1) settle a $3.1 million inventory purchase obligation; (2) pay $1.2 million in retention bonus obligations for selected employees, and, (3) pay remaining liabilities totaling approximately $1.0 million. Net proceeds were used to pay down $3.6 million long-term debt and $1.6 million interest and lease related obligations.

The Company increased the reserve for estimated disposal period losses by $9.0 million in the first quarter of fiscal 2002, $1.6 million in the second quarter of fiscal 2002, by $0.5 million in the third quarter of fiscal 2002 and by $6.0 million in the fourth quarter of fiscal 2002 to reflect revised disposition dates of the Memphis facility and its obligation related to AIR. For fiscal 2002, SBQ operating losses of $23.1 million have been charged against the reserve. As of June 30, 2002, the Company has a $6.0 million reserve for estimated (pre-tax) disposal period losses. Such amount excludes corporate overhead but includes approximately $0.6 million of direct and allocated interest expense. AIR continues in liquidation proceedings under Chapter 7 of the U.S. Bankruptcy Code. The Company has not incurred any costs in fiscal 2002 under its purchase commitment with AIR. On an accrual basis, carrying costs for the Memphis facility are approximately $1.0 million per month. The expected loss on sale and disposal period losses are based on management’s estimates of the most likely outcome based on the carrying costs of the SBQ assets and anticipated costs to complete the sale of the Company’s assets to Nucor.

In connection with the Company’s Chapter 11 bankruptcy proceedings, the AIR lenders asserted an unsecured claim against the Company in excess of $300 million, which the Company disputed. The Company engaged in extensive negotiations toward the confirmation of the Company’s Plan of Reorganization on a consensual basis. In this negotiation process, the Company stipulated with the AIR lenders that, if the Plan of Reorganization was confirmed and became effective, the Company would not object to the AIR lenders’ $115.0 million unsecured claim under the Plan of Reorganization. This stipulation was conditioned upon the AIR lenders’ support of, and affirmative vote in favor of confirmation of, the Plan of Reorganization, and is further conditioned upon the consummation of the sale to Nucor and the effectiveness of the plan. AIR continues in liquidation proceedings under Chapter 7 of the U.S. bankruptcy code. The Company did not incur any costs in fiscal 2002 under its purchase commitment with AIR. Under terms of the Plan of Reorganization, which was confirmed on September 17, 2002, and the Plan Support Agreement, the Company’s secured lenders agreed to pay a portion of the unsecured claims totaling $17.5 million to be apportioned to the unsecured claimants based, among other things, on the amount of the individual unsecured claim as a percentage of the total of all allowed unsecured claims. AIR will receive some portion of the $17.5 million payment to unsecured creditors. Management does not believe that AIR's claim is valid under terms of its purchase commitment with AIR. The Company's agreement to allow AIR's $115.0 million claim is effective only upon closing of the Company’s proposed sale of substantially all of its assets to Nucor. If for any unforeseen reason the sale to Nucor were not to close, the Company would vigorously contest the AIR claim. See Note 2 to the Consolidated Financial Statements for further information regarding the Company’s pre-arranged Plan of Reorganization.

The Company will continue to assess the adequacy of the remaining $6.0 million reserves for expected operating losses at the Memphis facility. As with all estimates of future events and circumstances, the actual loss on disposal of the SBQ segment, including operating losses and carrying costs through the disposal period, will most likely be different from the estimates reflected in these Consolidated Financial Statements and the difference could be material. To the extent actual proceeds from the eventual sale of the remaining assets of the SBQ segment and operating losses during the disposal period differ from the estimates reflected in these Consolidated Financial Statements, the variance will be reported within discontinued operations in future periods.

In the quarter ended December 31, 2001, the Company announced and completed the sale of its mini-mill facility in Cartersville, Georgia to AmeriSteel Corporation (AmeriSteel), a U.S. subsidiary of Gerdau S.A. of Rio de Janeiro, Brazil. Accordingly, as required by SFAS No. 144, the operating results for the Cartersville facility for fiscal 2002 and prior periods have been restated in discontinued operations.

As a result of the sale of the Cartersville Facility, the Company recorded a $142.4 million loss on disposal of the assets, which included a charge of $7.3 million to write off remaining goodwill. Terms of the transaction with AmeriSteel provided approximately $17.7 million in cash from the sale of working capital and release from $68.7 million of future operating lease obligations in exchange for issuance of a $10.0 million unsecured, non-interest bearing (until December 2004 when the note will bear interest at 9%, compounded monthly) note payable to the former lessors due in December 2005. The Company also reduced debt under the Company’s Revolving Credit Facility from collection of retained trade accounts receivable of $12.0 million and sale of the inventories of $0.9 million, partially offset by payment of approximately $3.0 million of retained liabilities. An escrow of $3.0 million of the sale proceeds was established at the time of the sale to be held until December 2007. In August 2002, the Company agreed to split the $3.0 million escrow with Ameristeel in exchange for collection of $1.5 million of the escrow account at the time of closing the transaction with Nucor. The Company will use proceeds collected from the escrow account to pay Company stockholders according to the terms of the Plan of Reorganization as further described in Note 2. The Company does not anticipate any future obligations related to the Cartersville facility.

Operating results of the discontinued operations, which include the SBQ segment and Cartersville facility, were as follows (in thousands):


	Years Ended June 30,

	2002			2001			2000

Net sales	$	56,196		$	165,054		$	304,325
Costs of sales		74,058			210,659			349,533

Gross loss		(17,862	)		(45,605	)		(45,208	)
Impairment and other unusual items		—			(35,150	)		190,963
Selling, general and administrative expenses		6,762			6,866			14,824
Interest expense		11,059			27,353			27,494
Other (income) expense		(53	)		(791	)		13,657

Loss before income taxes and use of reserves		(35,630	)		(43,883	)		(292,146	)
Benefit from income taxes		—			—			74,836
Net amounts charged to reserve for discontinued operating losses		3,602			(8,736	)		—

Loss from discontinued operations, net of tax	$	(32,028	)	$	(52,619	)	$	(217,310	)

Interest expense attributable to discontinued operations includes interest on industrial revenue bonds and other debt specifically associated with the assets to be sold, plus an allocation of interest on general corporate credit facilities.

Impairment and other unusual items applicable to discontinued operations consist of the following (in thousands):


		Years Ended June 30,

		2002		2001			2000

Start-up expenses:
	Memphis	$	—	$	—		$	15,396
	Cartersville		—		190			16,537
Asset impairment:
	Memphis facility		—		—			85,000
	SBQ segment goodwill impairment		—		—			22,134
	Cartersville facility		—		—			9,185
Restructuring charges:
	Loss (reversal of loss) on purchase commitment		—		(36,575	)		40,238
	Severance and termination benefits		—		1,235			2,473

		$	—	$	(35,150	)	$	190,963

A narrative description of the significant items summarized in the preceding table follows:

Start-up expenses: The Company considers a facility to be in start-up until it reaches commercially viable production levels. During start-up, costs incurred in excess of expected normal levels, including non-recurring operating losses, are classified as start-up expenses. The start-up and restructuring costs incurred by the SBQ segment during the year ended June 30, 2000 were incurred in the first and second quarters of the fiscal year. In the third quarter of fiscal 1999, the Cartersville, Georgia mid-section mill began operations and was considered to be in the start-up phase through July 2000.

Asset Impairment: On December 28, 1999, the Company announced the suspension of operations at its melt shop facility in Memphis as of January 1, 2000. Accordingly, in the second quarter of fiscal 2000, the Company classified the facility as held for disposal and recorded an impairment charge of $85.0 million. The adjusted carrying value of the Memphis facility, which is reflected in non-current assets of discontinued operations is approximately $75.8 million at June 30, 2002. The Memphis facility is included in the assets to be sold to Nucor.

In fiscal 2000, the Company wrote off equipment taken out of service at the Cartersville facility and recognized a loss of $9.2 million.

Intangible Write-off: The $22.1 million impairment charge for intangible assets represents the unamortized balance of goodwill related to the SBQ division as of December 31, 1999, which was impaired because the estimated undiscounted cash flows of the SBQ segment were estimated to be insufficient to cover the net carrying amount of the segment’s assets.

AIR purchase commitment: In the second quarter of fiscal 2000, the Company recorded a $40.2 million estimated probable loss on settlement of a contract to purchase direct reduced iron (DRI) from American Iron Reduction, L.L.C. (AIR), a 50% owned joint venture. The estimated probable loss was based on management’s assessment of DRI market conditions, AIR’s cost structure and settlement options that were being pursued at that time. Total purchases of DRI from AIR under the contract were $–0–, $9.4 million (37,901 metric tons) and $26.6 million (175,000 metric tons) in 2002, 2001 and 2000, respectively.

In response to unforeseeable market conditions, the co-sponsors decided to suspend production at AIR in October 2000. In February 2001, the other co-sponsor (which was contractually committed to purchase 50% of AIR’s annual DRI production under a purchase commitment that was similar to the Company’s) filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In March 2001, AIR filed for protection under Chapter 7 of the U.S. Bankruptcy Code and is now in liquidation. Although the Company’s purchase commitment has not been terminated, the Company would be obligated to purchase DRI if produced and tendered by AIR. Given AIR’s uncertain status, management concluded in the fourth quarter of fiscal 2001 that it was no longer probable that the Company would incur further losses on purchases of DRI from AIR and reversed the remaining $36.6 million loss reserve ($1.18 per share) through discontinued operations.

Severance and Termination Benefits: Certain key employees at the Cleveland facility were offered a retention incentive to stay employed until the facility sold. As a result, the Company recorded an accrual of approximately $1.2 million in the second quarter of fiscal 2001.

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. Most of the Memphis employees were terminated as of December 31, 1999. As of June 30, 2002 all severance benefits were paid.

Assets and liabilities of the discontinued operations have been reflected in the Consolidated Balance Sheets as current or non-current based on the original classification of the accounts. Non-current assets at June 30, 2001, reflect a valuation allowance of $136.8 million to recognize the estimated loss on disposal which was utilized upon completion of the sale of Cleveland in March 2002. In accordance with SOP 90-7, liabilities that are subject to compromise in the Chapter 11 bankruptcy proceedings are presented separately. The following is a summary of assets and liabilities of discontinued operations (in thousands):


		June 30,		June 30,
		2002		2001

				(Restated)
Current assets:
	Accounts receivable	$	374	$	21,603
	Inventories		2,232		49,215
	Other		413		1,161

			3,019		71,979
Non-current assets:
	Property, plant and equipment, net of accumulated depreciation		75,777		348,792
	Other non-current assets		3,308		1,302
	Provision for estimated loss on disposal of discontinued operations		—		(136,836	)

			79,085		213,258

Total assets of discontinued operations		$	82,104	$	285,237

Current liabilities:
	Accounts payable	$	95	$	8,515
	Other accrued expenses		1,479		16,797

			1,574		25,312
Non-current liabilities:
	Long term debt		—		41,988
	Deferred rent		—		3,219

			—		45,207
	Liabilities subject to compromise		35,317		—

Total liabilities of discontinued operations		$	36,891	$	70,519

There are no known material contingent liabilities related to discontinued operations, such as product or environmental liabilities or litigation, that are expected to remain with the Company after the disposal of the SBQ segment or Cartersville facility other than remaining reserves for claims under the Company’s workers’ compensation and health insurance plans and contingencies associated with AIR.

4. Investment in Affiliated Companies

Pacific Coast Recycling, L.L.C. (Pacific Coast)

On June 29, 2000, the Company sold its interest in Pacific Coast for $2,500,000 and was relieved of all liabilities and guarantee obligations associated with Pacific Coast. The resulting gain of $2,100,000 was recognized in the fourth quarter of fiscal 2000 and is included in “(Loss) income from equity investments.”

Richmond Steel Recycling Limited

The Company also owns a 50% interest in Richmond Steel Recycling Limited (RSR), a scrap processing facility located in Richmond, British Columbia, Canada, which is accounted for using the equity method. The investment in and equity in earnings of RSR are not significant.

5. Inventories

Inventories as of June 30 were valued at the lower of cost (first-in, first-out) or market as summarized in the following table (in thousands):


		2002			2001

Raw materials and mill supplies	$		13,783	$		17,120
Work-in-progress			5,378			6,844
Finished goods			46,881			47,744

	$		66,042	$		71,708

6. Capitalized Interest and Interest Expense

Capitalized interest on qualifying assets under construction and total interest incurred for continuing and discontinued operations were as follows (in thousands):


		Continuing		Discontinued		Consolidated
		Operations		Operations		Total

Capitalized interest:
	Fiscal 2002	$	343	$	45	$	388
	Fiscal 2001		430		252		682
	Fiscal 2000		486		730		1,216
Total interest incurred:
	Fiscal 2002		50,627		11,104		61,731
	Fiscal 2001		34,191		27,605		61,796
	Fiscal 2000		24,679		28,224		52,903

7. Short-Term Borrowing Arrangements

The following information relates to the Company’s borrowings under short-term credit facilities (in thousands):


	Years Ended June 30,

	2002			2001		2000

Maximum amount outstanding	$	12,802		$	—	$	10,000
Average amount outstanding		439			—		864
Weighted average interest rate		6.50	%		—		6.40	%

8. Debt

The Company’s filing for Chapter 11 bankruptcy protection represents an event of default under each of its debt agreements. Because the secured debt is undersecured, it has been classified with liabilities subject to compromise in the 2002 Consolidated Balance Sheet. The following description of the Company’s debt is presented for informational purposes. Because liabilities are stayed in Chapter 11 bankruptcy, the Company is no longer permitted to make scheduled principal and interest payments nor is it required to maintain financial ratios and covenants set forth in the various debt agreements. However, in lieu of making interest payments, the Plan Support Agreement between the Company and its secured lenders require the Company to make Adequate Protection Payments of approximately $3.3 million per month during the duration of the bankruptcy proceedings, subject to certain limitations. Interest on undersecured debt that was not charged to earnings or paid from June 3, 2002, the petition date, to June 30, 2002 was $3.1 million.

Debt included in liabilities subject to comprise consists of the following (in thousands):


		June 30,

		2002			2001

Continuing operations:
	Senior Notes, $130,000 face amount; interest at 10.03%, due in 2005, in default	$	128,387		$	130,000
	Senior Notes, $150,000 face amount; interest at 9.80% due in 2002 and 2005, in default		148,092			150,000
	Revolving Credit Facility, payable in 2002; in default		235,000			255,000
	Unsecured non-interest bearing note due December 2005		10,000			—
	$10,000 BSE Credit Facility, interest at 8.13% at June 30, 2001, paid in 2002		—			10,000
	Capital lease obligations, interest rates principally ranging from 43% to 45% of bank prime, paid in 2002		—			2,500

			521,479			547,500
	Less current portion		(521,479	)		(293,500	)

		$	—		$	254,000

Discontinued operations:
	Promissory Note, interest at 5.0%, payable in installments through 2008	$	987		$	1,125
	Industrial Revenue Bonds, interest rates principally ranging from 44% to 45% of bank prime, payable in 2025 and 2026, in default		26,000			41,000

			26,987			42,125
	Less: current portion		(26,987	)		(138	)

		$	—		$	41,987

Subsequent to the Chapter 11 filings, the Company entered into a Post Petition Credit Agreement for a term of six months providing up to $40.0 million in interim DIP financing. Per terms of the Plan Support Agreement, the Company used availability under the DIP Facility to pay a priority portion of the Revolving Credit Facility totaling $32.2 million when the DIP Facility became available. Otherwise, the DIP Facility is being used to fund working capital requirements, operating expenses, employee obligations, and adequate protection payments to secured lenders during the term of the bankruptcy case. The balance of the DIP financing at June 30, 2002 was $9,973,000.

The total carrying value of the Company’s long-term debt obligations, not including the outstanding amount under the DIP Facility (which will be repaid as a priority amount from the gross proceeds of the transaction with Nucor), is $548,466,000. Net proceeds from the transaction with Nucor will not be sufficient to repay all of the long-term debt. Based on the terms of the Plan of Reorganization, the Asset Purchase Agreement, and the Plan Support Agreement, the Company estimates that secured lenders will be paid approximately 80% of the outstanding balances of the obligations. However, terms of the agreements prevent an actual calculation until the transaction is finalized and the actual amount the secured lenders receive will be different than the estimate and could be substantially different.

In consideration for prior financing agreement modifications, and in lieu of any cash fees, the exercise price for $3.0 million warrants held by the Company’s lenders was reduced from $3.00 to $0.01 per share. The fair value of the re-pricing of the warrants was estimated to be approximately $1.8 million at the date of re-pricing using a Black-Scholes option pricing model and assumptions of 5.016% for the risk-free interest rate, a 54.4% expected volatility and a remaining expected life of 9.2 years. The Company recorded the incremental fair value of the re-priced warrants as an equity transaction in March 2001. Warrants held by the Company’s lenders are cancelled under the Plan of Reorganization.

9. Commitments

The Company leases office space and certain production equipment under operating lease agreements. Following is a schedule by year of future minimum rental payments, net of minimum rentals on subleases, required under operating leases that have initial lease terms in excess of one year (in thousands):


			Continuing			Discontinued			Consolidated
			Operations			Operations			Total

Fiscal Year Ending June 30,
	2003	$		1,120	$		6,767	$		7,887
	2004			421			6,650			7,071
	2005			96			6,645			6,741
	2006			39			6,645			6,684
	2007			2			6,645			6,647
	Thereafter			—			49,744			49,744

		$		1,678	$		83,096	$		84,774

As a result of the Company’s Chapter 11 bankruptcy proceedings, certain lease agreements are subject to automatic stay provisions, which preclude the parties under such agreements from taking remedial action in response to any defaults. Moreover, no amounts are included in continuing operations in the table above for lease rejections that have been approved by the Bankruptcy Court. Substantially all of the leases included in discontinued operations have been rejected and the rejections have been approved by the bankruptcy court.

Rental expense under operating lease agreements charged to continuing operations was $1.6 million, $1.8 million and $1.7 million in fiscal 2002, 2001 and 2000, respectively. Rental expense charged to discontinued operations was $12.8 million, $19.0 million and $18.4 million in fiscal 2002, 2001 and 2000, respectively.

The Company has a fifteen year operating lease on production equipment at the Memphis melt shop. Future minimum lease payments required by the lease are reflected in the preceding table under discontinued operations. The Company has options to purchase the equipment both prior to and at the end of the lease for amounts that are expected to approximate fair market value at the exercise date of the options. This lease has been rejected by the Company in its bankruptcy proceedings.

10. Income Taxes

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax liabilities and assets are as follows (in thousands):


		June 30,

		2002			2001

Deferred tax liabilities:
	Tax depreciation in excess of book depreciation	$	(21,180	)	$	(51,273	)
	Equity investments		(11,178	)		—

	Deferred tax liabilities		(32,358	)		(51,273	)
Deferred tax assets:
	Allowance for losses on disposal of discontinued operations		2,279			55,826
	Federal net operating loss carryforwards		201,021			104,199
	State net operating loss carryforwards		26,772			16,285
	Book amortization in excess of tax amortization		4,783			—
	AMT credit carryforwards		1,982			5,687
	Capital loss carryforwards		3,580			3,580
	Deferred compensation		2,547			2,943
	Worker’s compensation		907			1,095
	Inventories		1,424			1,282
	Equity investments		—			2,071
	Other, net		5,793			4,201

	Gross deferred tax assets		251,088			197,169
	Less valuation allowance		(218,730	)		(145,896	)

	Deferred tax assets		32,358			51,273

	Net deferred tax asset (liability)	$	—		$	—

The (benefit from) provisions for income taxes applicable to continuing operations consisted of the following (in thousands):


		Years Ended June 30,

		2002			2001			2000

					(Restated)			(Restated)
Current:
	Federal	$	(5,454	)	$	189		$	2,564
	State		—			(5	)		(400	)

			(5,454	)		184			2,164
Deferred:
	Federal		—			—			39,937
	State		—			—			(8,266	)

			—			—			31,671

		$	(5,454	)	$	184		$	33,835

The (benefit from) provisions for income taxes applicable to continuing operations differ from the statutory tax amounts as follows (in thousands):


	Years Ended June 30,

	2002			2001			2000

				(Restated)			(Restated)
Tax at statutory rates during the year	$	(18,147	)	$	(13,424	)	$	(9,117	)
State income taxes, net		(4,074	)		(1,449	)		(1,422	)
Amortization of non-deductible goodwill		—			125			125
Increase in valuation allowance applicable to continuing operations		17,495			11,853			51,139
Other		(728	)		3,079			(6,890	)

	$	(5,455	)	$	184		$	33,835

The Company’s federal net operating loss for fiscal 2002 was approximately $251.3 million, all of which will be carried forward, and may be used to reduce taxes due in future periods for up to 20 years, along with the previous years’ losses of approximately $321.9 million, which will be carried forward for a period of up to 19 years, for a total carryforward of $573.2 million. The capital loss carryover of $3.6 million may be carried forward four years, while the alternative minimum tax credit carryforwards of $2.0 million may be carried forward indefinitely. In addition, the Company has state net operating loss carryforwards of approximately $772 million, the majority of which will expire in 15 years.

In fiscal 2001, the Company provided a valuation allowance in the tax provision applicable to continuing operations in the amount of $11.9 million. The Company further increased the total valuation allowance for deferred tax assets by $72.8 million ($17.5 million applicable to continuing operations) in fiscal 2002 because, in light of recent trends and circumstances, management concluded that the net deferred tax assets might not be realized.

11. Stock Compensation Plans

The Company has six stock compensation plans that provide for the granting of stock options, stock appreciation rights and restricted stock to officers, directors and employees. The exercise price of stock option awards issued under these plans equals or exceeds the market price of the Company’s common stock on the date of grant. Stock options under these plans are exercisable one to ten years after the grant date, usually in annual installments. No stock appreciation rights have been issued. Until January 14, 2000, the Company maintained a stock accumulation plan, which provided for the purchase of restricted stock with a three-year vesting period to participants in lieu of a portion of their cash compensation.

The status of the Company’s stock compensation plans is summarized below as of June 30, 2002:


	Total Number of Options or Shares

			Available for		Reserved for
			Future Grant		Issuance Under
	Authorized		or Purchase		the Plan

1986 Stock Option Plan		900,000		—		—
1990 Management Incentive Plan		900,000		—		194,450
1996 Director Stock Option Plan		100,000		750		97,750
1997 Management Incentive Plan		900,000		269,131		558,050
2000 Management Incentive Plan		2,900,000		900,500		1,999,500
2000 Director Stock Option Plan		200,000		156,750		43,250

The Company records stock-based compensation under the provisions of APB No. 25, Accounting for Stock Issued to Employees and related Interpretations. An alternative method of accounting exists under SFAS No. 123, Accounting for Stock-Based Compensation, which requires the use of option valuation models; however, these models were not developed for use in valuing employee stock compensation awards. Under APB No. 25, because the exercise price of the Company’s employee stock options equals or exceeds the market price of the underlying stock on the date of grant, no compensation expense is recognized for stock options. The Company recognizes compensation expense on grants of restricted stock and stock grants under the 1995 Stock Accumulation Plan based on the intrinsic value of the stock on the date of grant amortized over the vesting period. Total compensation expense recognized for stock-based employee compensation awards was $229,000, $310,000 and $621,000 in 2002, 2001 and 2000, respectively.

As required by SFAS No. 123, the Company has determined pro forma net income and earnings per share as if it had accounted for its employee stock compensation awards using the fair value method of that statement. The fair value for these awards was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:


		2002			2001			2000

Risk free interest rate			4.94	%		4.95	%		6.18	%
Dividend yield			0.00	%		0.00	%		0.00	%
Volatility factor			98.84	%		80.19	%		69.5	%
Weighted average expected life:
	Stock options	5 years			5 years			5 years
	Restricted stock awards		—			—		3 years

The Company’s pro forma information follows (in thousands, except for per share information):


		Years Ended June 30,

		2002			2001			2000

					(Restated)			(Restated)
Pro forma:
	Loss from continuing operations	$	(47,440	)	$	(7,197	)	$	(10,991	)
	Loss per share from continuing operations		(1.51	)		(0.23	)		(0.36	)
	Net loss		(223,713	)		(198,052	)		(56,787	)
	Net loss per share		(7.12	)		(6.39	)		(1.89	)

A summary of the Company’s stock option activity and related information for the years ended June 30 is as follows:


	2002					2001					2000

				Weighted					Weighted					Weighted
				Average					Average					Average
	Number of			Exercise		Number of			Exercise		Number of			Exercise
	Options			Price		Options			Price		Options			Price

Outstanding—beginning of year		3,050,355		$	6.06		3,379,181		$	6.51		1,654,621		$	10.99
Granted		70,000			4.56		126,040			3.96		2,347,500			4.62
Exercised		—			—		—			—		(29,500	)		4.76
Canceled		(133,853	)		13.64		(454,866	)		17.13		(593,440	)		11.61

Outstanding—end of year		2,986,502			5.75		3,050,355			6.06		3,379,181			6.51

Exercisable at end of year		1,764,617		$	6.45		1,192,103		$	8.00		844,681		$	10.86

Weighted-average fair value of options granted during year				$	0.57				$	1.78				$	2.43

Summary information about the Company’s stock options outstanding at June 30, 2002 is as follows:


	Options Outstanding						Options Exercisable

			Weighted
			Average Remaining		Weighted				Weighted
			Contractual		Average				Average
	Number of		Term (in		Exercise		Number of		Exercise
Range of Exercise Prices	Options		Years)		Price		Options		Price

$3.00		60,000		8.1	$	3.00		20,000	$	3.00
$4.00 - $6.31		2,633,500		7.5		4.63		1,479,015		4.65
$7.94 - $9.62		35,000		6.3		9.38		20,000		9.46
$15.38 - $18.63		255,502		2.5		17.24		243,102		17.17
$31.88		2,500		1.7		31.88		2,500		31.88

$3.00 - $31.88		2,986,502		7.1		5.75		1,764,617		6.45

In addition to the stock option activity presented in the preceding table, the Company granted 100,000 shares of restricted stock to employees in 2000. The weighted average fair value of these awards was $2.82 in 2000. The Company also issued 32,195 shares to employees in 2000 under the Stock Accumulation Plan.

12. Deferred Compensation and Employee Benefits

The Company maintains a defined contribution 401(K) plan that covers substantially all non-union employees. The Company makes both discretionary and matching contributions to the plan based on employee compensation and contributions. Company contributions charged to continuing operations amounted to $2,124,507, $1,755,110 and $4,985,440 in fiscal 2002, 2001 and 2000, respectively. Discontinued operations include charges of $286,940, $921,703 and $1,220,164 related to the plan for those same periods. During 2002, the Company determined that discretionary matching contributions accrued in prior years of $2,429,622 would not be paid to plan participants and reversed those charges in the fourth quarter resulting in a net credit of $305,115 for 401(k) matching contributions expense in fiscal 2002.

Certain officers and key employees participate in the Executive Retirement and Compensation Deferral Plan, a non-qualified deferred compensation plan, which allows participants to defer specified percentages of base and bonus pay, and provides for Company contributions. This plan was amended effective January 1, 2001 to discontinue the Compensation Deferral Plan (CDP) component of the plan. As part of the amendment, existing participant CDP account balances were distributed in the fourth quarter of fiscal 2001. Under the Executive Retirement Plan, the Company recognizes compensation costs as contributions become vested. Investment performance gains and losses on each participant’s plan account result in additional compensation costs to the Company. The Company has $6.3 million accrued under the deferred compensation plan. This amount is included in liabilities subject to compromise at June 30, 2002.

Other than the plans referred to above, the Company provides no post-retirement or post-employment benefits to its employees that would be subject to the provisions of SFAS No. 106 or No. 112.

Subsequent to the sale of substantially all of the Company’s assets to Nucor (see Note 1), the Company’s deferred compensation and employee benefit plans will be terminated. Employees covered under the Company’s health plans who will not be retained by Nucor will be eligible for coverage under the provisions of COBRA.

13. Products and Geographic Areas

Net sales from continuing operations to external customers, by product type and geographic area, were as follows for the periods indicated (in thousands):


		Years Ended June 30,

		2002		2001		2000

				(restated)		(restated)
By product class:
	Reinforcing bar	$	349,821	$	387,166	$	412,008
	Merchant products		145,555		186,653		252,311
	Semi-finished billets		13,233		16,178		7,768
	Strand, mesh and other		5,190		9,878		13,129

		$	513,799	$	599,875	$	685,216

By geographic area
	United States	$	476,545	$	553,868	$	633,420
	Canada		37,137		45,658		51,351
	All others		117		349		445

		$	513,799	$	599,875	$	685,216

Substantially all of the Company’s long-lived tangible assets are located in the continental United States. Revenue in the preceding table are attributed to countries based on the location of the customers. No single customer accounted for 10% or more of consolidated net sales.

14. 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, substantially all 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.

Amtrak Litigation

The Company has been named as a defendant in a number of lawsuits arising out of an accident that occurred on March 15, 1999 involving an Amtrak passenger train and a truck carrying steel reinforcing bar produced by the Company’s Kankakee plant. There were approximately 122 injuries and 11 deaths in the accident. The plaintiffs in these lawsuits claim that at the time of the accident, the driver of the truck was acting as an employee or agent of the Company; that the Company was negligent in loading the trailer; that the load placed on the trailer exceeded the weight limit allowed by statute; and that the Company negligently allowed some rail cars to be parked on a side track near the intersection. The Company is being defended in all of the cases by counsel provided by its liability insurance carrier. The Company denies all liability and is vigorously defending all of these cases. At this time, however, the cases remain in their early stages and discovery is incomplete. Although the Company believes its defenses should prevail in these actions, the Company cannot predict the ultimate outcome of these cases or the probability of recovery from insurance with certainty. However, no amount of loss is considered probable at this time, and accordingly no reserve has been provided for these actions. Because of the Company’s bankruptcy filing, all of the cases have been stayed. However, a limited relief from the stay has been granted to allow one of the insurance carriers to seek settlements.

PSC Metals, Inc. v. Birmingham Steel Corporation

On December 19, 2001, PSC Metals, Inc. (PSC) filed a complaint against the Company in the U.S. District Court for the Northern District of Ohio. The case arises out of a Mill Services Contract (the “Contract”) the Company entered into with PSC on February 25, 1997 for the Company’s facility in Memphis, Tennessee. PSC claims that the Company breached the Contract, misrepresented to PSC the annual production levels and service requirements at the Memphis facility and assured PSC that the Memphis facility would continuously operate for 10 years in order to get PSC to enter into the Contract. The Contract is a ten year agreement which provides for a minimum monthly payment of $80,831. In addition, at the end of ten years the Company is required to repurchase certain fixed assets installed by PSC to perform the mill services required under the contract for $2,242,748. According to PSC, in order to perform the services required under the Contract, PSC invested in excess of $14 million in capital facilities, equipment and staffing. PSC seeks compensatory damages in an amount to be proven at trial but not less than $38 million, and any other relief the Court deems appropriate. Birmingham Steel filed a motion to transfer this case from the United States District Court for the Northern District of Ohio to the United States District Court for the Western District of Tennessee on the grounds that Tennessee is a more convenient and appropriate forum for this litigation. The Court denied the motion. Birmingham Steel intends to vigorously defend the case. No discovery was conducted in the lawsuit prior to Birmingham Steel’s bankruptcy. Subsequent to the bankruptcy filing the case was stayed and PSC has filed a proof of claim in the bankruptcy proceeding,

15. Impairment and Other Unusual Items

Impairment and other unusual items, net, consist of the following (in thousands):


			Years Ended June 30,

			2002			2001				2000

						(restated)				(restated)
Asset impairment:
	Assets idled or retired	$		28,250	$		—		$		3,926
Other unusual items:
	Proxy solicitation costs			—			—				6,887
	Executive severance costs			—			—				6,298
	Debt amendment costs
	Other, net			—			(206	)			2,402

		$		28,250	$		(206	)	$		19,513

A narrative description of the significant items summarized in the preceding table follows:

Asset impairment: In the fourth quarter of fiscal 2002, the Company wrote down the value of the Joliet mill to its estimated fair value of $3.0 million. In prior periods, the Joliet mill was under the operational control of the Kankakee facility and included with that division for financial reporting purposes. The Joliet mill, which has been shut down shut since June 2001, will be disposed of by the Company in its wind down affairs.

In the second quarter of fiscal 2000, the Company wrote off equipment taken out of service at the Seattle mill and recognized a loss of $3.9 million.

Proxy Solicitation: These costs, principally consisting of legal, public relations and other consulting fees, were incurred during fiscal 2000 in the Company’s defense of a proxy contest led by The United Company Shareholder Group (the “United Group). In December 1999, the former Board of Directors of the Company and the United Group reached a settlement appointing John D. Correnti as Chairman and Chief Executive Officer and appointing nine new board members approved by the former Board of Directors of the Company and the United Group.

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. These executives were covered by the Company’s executive severance plan, which provides for specified benefits after a change in the majority of the Board of Directors of the Company, among other triggering events.

Debt Amendment Costs: In conjunction with amendments to the Company’s borrowing agreements in May 2000, the Company incurred $2.4 million in legal and financial consulting fees.

Other: In fiscal 2001, the Company recovered a portion of professional fees previously charged to unusual items related to a settlement of a loss of a piece of machinery in transport.

16. Stockholder Rights Plan

On January 16, 1996, the Company’s Board of Directors adopted a stockholder rights plan. Under the plan, rights to purchase stock, at a rate of one right for each share of common stock held, were distributed to stockholders of record on January 19, 1996. The rights generally become exercisable after a person or group (i) acquires 10% or more of the Company’s outstanding common stock or (ii) commences a tender offer that would result in such a person or group owning 10% or more of the Company’s common stock. When the rights first become exercisable, a holder will be entitled to buy from the Company a unit consisting of one one-hundredth of a share of Series A Junior Participating Preferred Stock of the Company at a purchase price of $74. In the event that a person acquires 10% or more of the Company’s common stock, each right not owned by the 10% or more stockholder would become exercisable for common stock of the Company having a market value equal to twice the exercise price of the right. Alternatively, after such stock acquisition, if the Company is acquired in a merger or other business combination or 50% or more of its assets or earning power are sold, each right not owned by the 10% or more stockholder would become exercisable for common stock of the party which has engaged in a transaction with the Company having a market value equal to twice the exercise price of the right. Prior to the time that a person acquires 10% or more of the Company’s common stock, the rights are redeemable by the Board of Directors at a price of $.01 per right. The rights expire on January 16, 2006, except as otherwise provided in the plan.

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Birmingham Steel Corporation

We have audited the accompanying consolidated balance sheets of Birmingham Steel Corporation as of June 30, 2002 and 2001, and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for each of the three years in the period ended June 30, 2002. Our audits also included the financial statement schedule listed in the index at Item 14 (a) 2. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Birmingham Steel Corporation at June 30, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the Consolidated Financial Statements, in fiscal 2002, the Company changed its method of accounting for goodwill amortization and impairment.

The accompanying financial statements have been prepared assuming that Birmingham Steel Corporation will continue as a going concern. As more fully described in Note 1, the Company has filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. Furthermore, the Company has entered into an agreement to sell substantially all of its assets. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

/s/ Ernst & Young LLP

Birmingham, Alabama
September 17, 2002

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Executive officers are listed in Item 1 of this Form 10-K. Following is a listing of the current board of directors:


Name And Year First
Became Director		Business Experience

John D. Correnti 1999 Age 55		Chairman of the Board and Chief Executive Officer of the Company since December 2, 1999; President, Chief Executive Officer and Vice Chairman of Nucor Corporation, a mini-mill manufacturer of steel products, from 1996 to 1999 and President and Chief Operating Officer from 1991 to 1996; director of Correction Corporation of America and Navistar International Corporation.

Donna M. Alvarado 1999 Age 53		Managing Director of Aguila International, an international business development consulting firm, since 1994; President and Chief Executive Officer of Quest International, a non-profit organization engaged worldwide in developing, publishing, and marketing training products for public and private education systems, from 1989 to 1994; director of Park National Bank.

Steven R. Berrard 1999 Age 48		Managing Partner of NewRiver Capital Partners, a private equity firm with an investment strategy focused on branded specialty retail, e-commerce and education; Co-Chief Executive Officer of AutoNation, Inc., the world’s largest automotive retailer and a leading provider of vehicle rental services, from 1997 to 1999; President and Chief Executive Officer of the Blockbuster Entertainment Group, a division of Viacom, from 1994 to 1997; President and Chief Executive Officer of Spelling Entertainment Group, Inc. from 1993 to 1996; director of Boca Resorts, Inc.

Alvin R. Carpenter 1999 Age 60		Retired; Vice Chairman of CSX Corporation from 1999 to 2001; President and CEO of CSX Transportation, Inc., a railroad corporation, from 1992 to 1999; director of Regency Centers Corporation, Florida Rock Industries and Stein Mart, Inc.

Jerry E. Dempsey 1999 Age 70		Retired; Chairman of the Board and Chief Executive Officer of PPG Industries, Inc., a manufacturer of protective and decorative coatings, fiberglass products, and specialty chemicals, from 1993 to 1997; director of Eastman Chemical Company and Navistar International Corporation.

Robert M. Gerrity 1999 Age 64		Self-employed consultant since 1995; Vice Chairman of the Board of New Holland N.V., an agricultural and industrial equipment manufacturing company, from 1991 to 1995; President and Chief Executive Officer of Ford New Holland, Inc., from 1987 to 1991; director of Standard Motor Products.

James W. McGlothlin 1999 Age 62		Chairman of the Board, Chief Executive Officer and President of The United Company, a financial services, oil and gas, and real estate company, since 1987; director of CSX Corporation.

Robert H. Spilman 1999 Age 75		Sole-proprietor of Spilman Properties, an investment company; Served in various capacities at Bassett Furniture Industries, Inc., a manufacturer and retail seller of home furniture, from 1957 to 1997, including as Chairman of the Board and Chief Executive Officer; director of Dominion Resources, Inc.

James A. Todd, Jr. 1999 Age 74		Vice Chairman of the Board and Chief Administrative Officer of the Company; Chairman of the Board and Chief Executive Officer of the Company from 1991 to January 1996.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE
(AS OF JUNE 30, 2002, 2001, 2000)


													Long Term
		Annual Compensation											Compensation Awards

										Other Annual			Restricted			Options/		All Other
				Salary			Bonus			Compensation			Stock			SARs		Compensation
Name and Principal Position		Year		($)			($)(1)			($)			($)(2)			(#)		($)(3)

John D. Correnti (4)			2002		600,000			0			723,421	(5)		0			0		66,855
	Chief Executive Officer		2001		534,231			273,170	(6)		170,182			0			0		57,189
			2000		300,115	(7)		288,300	(6)		0			630,250	(8)		1,000,000		30,463
James A. Todd, Jr. (9)			2002		470,000			0			227,684	(10)		0			0		6,855
	Chief Administrative		2001		454,808	(6)		0			227,684	(10)		0			0		11,266
	Officer		2000		175,000	(6)		0			236,441	(10)		0			300,000		6,007
J. Daniel Garrett			2002		227,115			0			0			0			0		29,074
	Chief Financial Officer &		2001		199,423			0			0			0			0		24,651
	Executive Vice President		2000		161,923	(7)		0			0			0			72,000		26,736
Michael J. Wagner			2002		195,385			0			0			0			0		25,762
	Chief Operating Officer &		2001		155,385			0			0			0			0		5,139
	Executive Vice President (11)		2000		34,615			0			0			0			30,000		3,996
Robert G. Wilson			2002		180,000			0			730,280	(12)		0			0		19,277
	Vice President- Rebar		2001		174,154			0			0			0			0		5,878
	Sales		2000		178,615	(7)		0			0			0			98,000		10,266

(1)		Represents cash incentive compensation accrued for the fiscal year (but paid in the subsequent fiscal year).
(2)		The value of the Restricted Stock awards shown in the table above reflects the number of shares awarded during the year indicated multiplied by the closing market price of the Company’s unrestricted common stock on the date of the award (net of any consideration paid by the Named Executive Officer). The number and dollar value of all Restricted Stock holdings of the Named Executive Officers with respect to which the restrictions have not lapsed as of October 1, 2002, calculated using the closing market price of the Company’s unrestricted common stock on June 30, 2002, was as follows: 33,334 shares ($12,000) by Mr. Correnti.

(3)

The compensation reported represents Company contributions to the 401(k) Plan, premiums for life insurance, and contributions to the Birmingham Steel Corporation Executive Retirement and Compensation Deferral Plan (the “ERP/CDP”). The following information is provided with respect to the specific allocation of compensation shown in this column for the Named Executive Officers for the fiscal year ended June 30, 2002.


			Term and Whole
Name	401(k)Plan $		Life Insurance $		ERP/CDP $

John D. Correnti		5,100		1,755		60,000
James A. Todd, Jr.		5,100		1,755		0
J. Daniel Garrett		5,100		1,262		22,712
Michael J. Wagner		4,962		1,262		19,539
Robert G. Wilson		5,100		1,024		13,154

(4) Mr. Correnti became Chairman of the Board and Chief Executive Officer of the Company on December 2, 1999.

(5) Includes $129,491 for reimbursement of closing costs on sale of his house, $417,764 for reimbursement on the loss incurred on the sale of his house, $161,328 for reimbursement of relocation expenses and $10,070 for reimbursement of payroll taxes on the vesting of restricted stock.

(6) Paid principally in common stock of the Company except for sufficient funds to pay income taxes.

(7) Includes amounts deferred by Named Executive Officers pursuant to the ERP/CDP.

(8) Includes the value of Restricted Stock awards granted under the 1990 Management Incentive Plan (“MIP”) on the date of such grants. Restricted Stock awards under the 1990 MIP were made in the discretion of the Compensation and Stock Option Committee of the Board of Directors, and recipients pay only a nominal consideration (par value) for the issuance of the Restricted Stock. Mr. Correnti was awarded 100,000 shares on December 7, 1999 at a per share price of $6.3125, which vest in equal increments of one-third over three years.

(9) Mr. Todd rejoined the Company as a director and Chief Administrative Officer on December 2, 1999. Mr. Todd previously served as Chairman of the Board and Chief Executive Officer of the Company from 1991 until January 1996.

(10) Represents retirement payments made to Mr. Todd under provisions of the Company’s Management Security Plan.

(11) Mr. Wagner joined the Company on April 10, 2000.

(12) Includes a distribution of $726,323 paid to Mr. Wilson under the Company’s Executive Retirement Plan.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

The following table provides certain information concerning each exercise of stock options during the fiscal year ended June 30, 2002, by each of the Named Executive Officers, and the fiscal year-end value of unexercised options held by such persons, under the Company’s 1990 MIP, 1997 MIP and 2000 MIP.

Number Of

Securities

Value Of

Underlying

Unexercised

In-The-Money

Options At

FY-End (#)

FY-End ($)

Shares Acquired

Value

Exercisable/

Name

On Exercise (#)

Realized ($)

Unexercisable

Unexercisable (1)

John D. Correnti

400,000/600,000

0/0

James A. Todd, Jr.

300,000/0

0/0

J. Daniel Garrett

70,899/34,601

0/0

Michael J. Wagner

20,000/10,000

0/0

Robert G. Wilson

77,933/33,067

0/0

(1) The stock options were granted under the 1990 MIP, the 1997 MIP and the 2000 MIP. The closing price of the Common Stock at June 30, 2002, was $.36 per share. The actual value, if any, an executive may realize will depend upon the amount by which the market price of the Company’s Common Stock exceeds the exercise price when the options are exercised.

Executive Retirement And Compensation Deferral Plan

The Company’s Executive Retirement and Compensation Deferral Plan (“ERP/CDP”) is a non-qualified deferred compensation plan pursuant to which, prior to January 1, 2001, key members of management could defer compensation in amounts between 2% and 20% of bi-weekly base pay and 5% to 50% of bonus pay, which amounts were deemed to be credited to their CDP Accounts under the Plan. Effective January 1, 2001, the deferred compensation portion of the Plan was suspended and the CDP Accounts of the plan participants were thereafter distributed to plan participants. The retirement components for the ERP participants consist of ongoing Company contributions equal to 10% of eligible compensation, which contributions are deemed to be credited at the end of each quarter and are fully vested. Benefits under the ERP/CDP are unfunded and are payable from the Company’s general assets. CDP accounts were deemed to be credited with bonus interest of 4% for those employed at the end of each plan year, with interest becoming 100% vested after completion of five years of participation in the ERP/CDP, except full vesting occurs in the event of a Change in Control or the participant’s death, disability, attainment of the normal retirement age of sixty-five, or attainment of age sixty and completion of fifteen years of service. Upon normal retirement, benefits are paid based upon the method of distribution previously selected by the participant. A lump sum of the vested balance is paid upon other termination of employment. Upon death, all account balances plus twice the participant’s annual base pay rate are paid to the participant’s designated beneficiary.

Executive Severance Plan

The Birmingham Steel Corporation Executive Severance Plan (the “Severance Plan”) is limited to a select number of key members of management of the Company as designated by the Board of Directors, including the executive officers named in the Summary Compensation Table and is designed to reassure participants in the event of a Change in Control (as defined below) of the Company, so that they can continue to focus their time and energy on business-related concerns rather than personal concerns. A Change in Control is generally defined as (i) the acquisition by any person, entity, or group of 15% or more of the combined voting power of the Company’s

outstanding securities; (ii) a change in the majority of the Board of Directors within a period of two consecutive years or less unless the new directors were elected or nominated by at least two-thirds of the continuing directors; or (iii) the consummation of a transaction requiring stockholder approval for the acquisition of the Company by an entity other than the Company or a subsidiary through the purchase of assets, by merger, or otherwise. A participant is entitled to benefits under the Severance Plan if, within two years after a Change in Control, the participant’s employment is terminated by the Company without Substantial Cause (as defined below) or is voluntarily terminated by the participant for Good Reason (as defined below). “Substantial Cause” for purposes of the Severance Plan shall mean: (i) a participant’s felony conviction (or failure to contest prosecution for a felony); or (ii) a participant’s willful misconduct or dishonesty, in each case that is materially harmful to the business or reputation of the Company. “Good Reason” is defined as: (i) the assignment to the participant of duties that are materially inconsistent with the participant’s position immediately prior to the Change in Control or a change in the participant’s title or office from that in effect immediately prior to the Change in Control without his or her consent; (ii) a reduction in the participant’s salary as in effect immediately prior to the Change in Control or the Company’s failure to increase the participant’s salary by a specified percentage and by a specified date; (iii) a change in the participant’s principal work location to a location more than 25 miles from his or her principal work location immediately prior to the Change in Control; (iv) the Company’s failure to maintain any benefit or compensation plan (collectively, “Plans”) in which the participant was participating immediately prior to the Change in Control, a reduction of the participant’s benefits under the Plans, or the failure to provide the participant with the same number of vacation days to which he or she was entitled prior to the Change in Control; (v) the Company’s failure to pay the participant any compensation within seven days of its due date; (vi) the failure of any successor to the Company to assume the obligations pursuant to the Severance Plan; or (vii) any purported termination of the participant’s employment by the Company in a manner inconsistent with the Severance Plan.

Severance payments and benefits under the Severance Plan include (i) a lump sum payment equal to two or three times (as applicable) the sum of the participant’s annual salary and target bonus and (ii) continued participation in Company welfare benefit plans for a number of years equal to the multiple applicable to the participant as described in clause (i).

In the event any payment or benefit received by a participant is deemed to be a “parachute payment” under the Internal Revenue Code (the “Code”), the payments and benefits payable under the Severance Plan will be reduced so that they will not be subject to the excise taxes imposed by the Code, but only if reducing the payments and benefits will result in a greater after-tax benefit to the participant.

Director Compensation

For fiscal 2002 and pursuant to the Company’s Directors’ Compensation Plan, the Company awarded each non-employee director 1,500 shares of Company Common Stock as his or her annual retainer fee and paid each non-employee director $1,000 (in Company stock) for each meeting of the Board of Directors or committee thereof ($1,500 to the Chairman of a committee) attended by such director, plus reasonable travel expenses. Directors who are also employees of the Company are not separately compensated for their services as a director.

A non-employee director is permitted to defer receipt of his or her annual retainer award and/or meeting fees during the term of his or her directorship pursuant to a Deferred Compensation Plan adopted by the Board of Directors. Currently, one director has elected to have meeting fees deferred and accumulated in phantom stock units. Phantom stock units are hypothetical shares of the Company’s stock. Phantom stock units are credited to an account for the director and no tax is payable by the director at the time of such crediting. Upon termination as a director of the Company, the director receives actual shares of the Company in an amount equal to the number of deferred phantom shares credited to such director’s account. Upon a Change in Control, all deferred accounts will be paid out to the directors.

Director Stock Option Plan

In 2000, the Company’s Board of Directors and stockholders approved the Birmingham Steel Corporation 2000 Director Stock Option Plan (the “2000 Director Plan”). The 2000 Director Plan is a continuation of the Company’s original Director Stock Option Plan adopted in 1996 (the “1996 Director Plan”). The purpose of the Director Plan is to provide stock-based compensation to eligible directors of the Company in order to encourage the highest level of director performance and to promote long-term stockholder value. The Director Plan provides such directors with a proprietary interest in the Company’s success and progress through annual grants of options to purchase shares of the Company’s Common Stock.

Participation in the Director Plan is limited to Company directors who are not employees of the Company or any of its subsidiaries. There are currently seven directors eligible to participate in the Director Plan.

Under the Director Plan, on the date of each Annual Meeting of the Company’s stockholders, each non-employee director will be granted a non-qualified stock option to purchase 5,000 shares of Common Stock at a purchase price equal to the greater of the fair market value per share of the common stock on such grant date or $4.5625.

Each option granted under either Director Plan vests on the first anniversary of the date of grant and remains exercisable for a period of ten (10) years beginning on the date of its grant. In the event of termination of service of a director by reason of disability or death, options held by such director shall be immediately exercisable and, if issued under the 1996 Director Plan, may be exercised until the earlier of the expiration of the stated term of the option or the first anniversary of the death or disability of such director (as the case may be), or, if issued under the 2000 Director Plan, may be exercised until the expiration of the stated term of the option. In the event of termination of service of a director by reason of retirement, any options held by such director may thereafter be exercised (to the extent then exercisable) until the earlier of the expiration of the stated term of the option or the third anniversary of the effective date of the director’s retirement if issued under the 1996 Director Plan, or until the expiration of the stated term of the option if issued under the 2000 Director Plan. If a director who has retired dies while any option is still outstanding, the option may be exercised by the former director’s legal representative until the earlier of the expiration of the stated term of the option or the first anniversary of the death of the former director if issued under the 1996 Director Plan, or until the expiration of the stated term of the option if issued under the 2000 Director Plan.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


		Number of Shares			Percent
Name of Beneficial Owner		Beneficially Owned			of Class

Directors and Officers
	James W. McGlothlin		2,758,414	(1)(2)		8.4	%
	John D. Correnti		783,578	(3)		2.4	%
	James A. Todd, Jr.		589,951	(4)		1.8	%
	Steven R. Berrard		172,391	(5)		*
	Robert M. Gerrity		135,686	(5)		*
	Jerry E. Dempsey		128,010	(5)		*
	Robert G. Wilson		120,013	(6)		*
	Donna M. Alvarado		115,509	(5)		*
	Alvin R. Carpenter		115,257	(7)		*
	Robert H. Spilman		96,540	(5)		*
	J. Daniel Garrett		77,284	(8)		*
	Michael J. Wagner		22,500	(9)		*
	Directors and executive officers as a group (12 persons)		5,115,133	(10)		15.5	%

*		Less than 1%

(1)		Includes 2,588,633 shares owned of record or beneficially owned by The United Company and its affiliates. Mr. McGlothlin shares controlling ownership over The United Company and therefore shares voting and dispositive powers with respect to the aforementioned shares.
(2)		Includes 25,000 shares owned directly by Mr. McGlothlin’s spouse, 5,264 phantom stock units and 15,000 shares subject to stock options exercisable within 60 days.
(3)		Includes 33,334 shares of Restricted Stock awarded under the 1990 MIP, 400,000 shares subject to stock options exercisable within 60 days, 16,468 shares held in the Company’s 401(k) Plan and 8,000 shares owned directly by Mr. Correnti’s spouse.
(4)		Includes 74,549 shares owned directly by Mr. Todd’s spouse, 300,000 shares subject to stock options exercisable within 60 days and 29,452 shares held in the Company’s 401(k) Plan.
(5)		Includes 15,000 shares subject to stock options exercisable within 60 days.
(6)		Includes 14,574 shares held in the Company’s 401(k) Plan and 77,933 shares subject to stock options exercisable within 60 days.
(7)		Includes 95,757 phantom stock units and 15,000 shares subject to stock options exercisable within 60 days.
(8)		Includes 82 shares held in the Company’s 401(k) Plan and 70,899 shares subject to stock options exercisable within 60 days.
(9)		Includes 20,000 shares subject to stock options exercisable within 60 days.
(10)		Includes an aggregate of 868,832 shares subject to stock options held by certain officers, an aggregate of the 33,334 shares of Restricted Stock awarded under the 1990 MIP, an aggregate of 105,000 shares subject to options granted under the Company’s 1996 and 2000 Director Stock Option Plans, and an aggregate of 101,021 shares granted as phantom stock units.

Employees, Officers and Directors own 27 % of the Company’s Common Stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During fiscal 2002, the Company paid an aggregate of $66,192 for private aircraft services to Nicholas Aviation, which is 80% owned by Mr. Correnti’s spouse. The Company pays Nicholas Aviation normal market rates for such services.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

ITEM 14 (a) 1. INDEX TO CONSOLIDATED STATEMENTS COVERED BY REPORT OF INDEPENDENT AUDITORS

The following Consolidated Financial Statements of Birmingham Steel Corporation are included in Item 8:

Consolidated Balance Sheets—June 30, 2002 and 2001

Consolidated Statements of Operations—Years ended June 30, 2002, 2001 and 2000

Consolidated Statements of Changes in Stockholders’ Equity—Years ended June 30, 2002, 2001 and 2000

Consolidated Statements of Cash Flows—Years ended June 30, 2002, 2001 and 2000

Notes to Consolidated Financial Statements—June 30, 2002, 2001 and 2000

Report of Ernst & Young LLP, Independent Auditors

ITEM 14 (a) 2. INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

The following consolidated financial statement schedule is included in item 14 (d) of this report.

Form 10-K

Schedule II—Valuation and Qualifying Accounts—Years ended June 30, 2002, 2001 and 2000

Schedules other than those listed above are omitted because they are not required or are not applicable, or the required information is shown in the Consolidated Financial Statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable.

ITEM 14 (a) 3. EXHIBITS

The exhibits listed on the Exhibit Index below are filed or incorporated by reference as part of this report and such Exhibit Index is hereby incorporated herein by reference.

ITEM 14 (b). REPORTS ON FORM 8-K

On May 30, 2002, the Company filed a Current Report on Form 8-K regarding the sale of substantially all of the Company’s assets to a wholly-owned subsidiary of Nucor Corporation.

On June 2, 2002, the Company filed a Current Report on Form 8-K regarding the Company’s voluntary petition for relief under Chapter 11 of title 11 of the United States Code before the U.S. Bankruptcy Court for the District of Delaware in accordance with the Company’s Plan Support Agreement between the Company, Nucor, and the Company’s secured lenders.

ITEM 14 (c) EXHIBITS


Exhibit		Description of Exhibits

3.1		Restated Certificate of Incorporation of the Registrant (incorporated by reference from Form 8-A, Exhibit 2.2, filed November 16, 1986)

3.2		By-laws of the Registrant as amended on August 3, 1999 (incorporated by reference to Exhibit 3.1 from Current Report on Form 8-K filed August 11, 1999)

4.1		Amended and Restated $130,000,000 Senior Note Purchase Agreement dated as of October 12, 1999 between the registrant and the financial parties thereto (incorporated by reference to Exhibit 4.1.4 from Form 10-K/A for the year ended June 30, 1999)

4.1.1		Second Amendment to the Amended and Restated $130,000,000 Senior Note Purchase Agreement dated May 15, 2000 (incorporated by reference to Exhibit 4.1.1 from Annual Report on Form 10-K for year ended June 30, 2000)
4.1.2		Third Amendment to the Amended and Restated $130,000,000 Senior Note Purchase Agreement dated February 20, 2001 (incorporated by reference to Exhibit 4.1.2 from Form 10-Q/A for quarter ended December 31, 2000)

4.1.3		Fifth Amendment to Note Purchase Agreement Re: Amended and Restated $130,000,000 Senior Note Purchase Agreement dated March 31, 2002 (incorporated by reference from Exhibit 99.3 to Form 8-K dated March 29, 2002)

4.2		Amended and Restated $150,000,000 Senior Note Purchase Agreement dated as of October 12, 1999 (incorporated by reference to Exhibit 4.2.3 from Form 10-K/A for the year ended June 30, 1999)

4.2.1		Second Amendment to the Amended and Restated $150,000,000 Senior Note Purchase Agreement dated May 15, 2000 (incorporated by reference to Exhibit 4.2.1 from Annual Report on Form 10-K for year ended June 30, 2000)


4.2.2		Third Amendment to the Amended and Restated $150,000,000 Senior Note Purchase Agreement dated February 20, 2001 (incorporated by reference to Exhibit 4.2.2 from Form 10-Q/A for quarter ended December 31, 2000)

4.2.3		Fifth Amendment to Note Purchase Agreement Re: Amended and Restated $150,000,000 Senior Note Purchase Agreement dated March 31, 2002 (incorporated by reference from Exhibit 99.4 to Form 8-K dated March 29, 2002)

4.3		Letter from Birmingham Steel Corporation to Senior Noteholders dated October 13, 1999 (incorporated by reference to Exhibit 4.3 from Form 10-K/A for the year ended June 30, 1999)

4.4		Shareholder Rights Plan of Registrant (incorporated by reference from Form 8-K filed January 23, 1996)

4.5		Reimbursement Agreement, dated as of October 1, 1996, between Birmingham Steel Corporation and PNC Bank, Kentucky, Inc. (incorporated by reference to Exhibit 4.1 from Form 10-Q for quarter ended December 31, 1996)

4.5.1		Fifth Amendment to the Reimbursement Agreement, dated as of February 20, 2001, between Birmingham Steel Corporation and PNC Bank, Kentucky, Inc. (incorporated by reference to Exhibit 4.5.1 from Form 10-Q/A for quarter ended December 31, 2000)

4.6		Warrant Agreement dated May 15, 2000, between the Registrant and the warrant holders parties thereto (incorporated by reference to Exhibit 4.6 from Annual Report on Form 10-K for year ended June 30, 2000)

4.6.1		First Amendment to the Warrant Agreement dated February 20, 2001, between the Registrant and the warrant holders parties thereto (incorporated by reference to Exhibit 4.6.1 from Form 10-Q/A for quarter ended December 31, 2000)

10.1		1986 Stock Option Plan of Registrant, as amended (incorporated by reference from Registration Statement on Form S-8 (No. 33-16648), filed August 20, 1987)

10.2		Amended and Restated Management Security Plan, effective January 1, 1994 (incorporated by reference to Exhibit 1.2 from Form 10-K for year ended June 30, 1994)

10.4		Supply Agreement, dated as of August 2, 1985, among MC Acquisition Corp., Birmingham Bolt Company, Inc., Magna Corporation, Contractors Material Co., Inc., and Hackney Steel Co., Inc. (incorporated by reference to Exhibit 10.6.3 from Registrant Statement No. 33-945 filed November 20, 1985)


10.5		1989 Non-Union Employees’ Stock Option Plan of the Registrant (incorporated by reference to Exhibit 4.1 from a Registration Statement on Form S-8, Registration No. 33-30848, filed August 31, 1989)

10.6		Restated Birmingham Steel Corporation 401(k) Plan restated as of January 1, 1990 (incorporated by reference to Exhibit 4.1 from Post-Effective Amendment No. 1 to Form S-8, Registration No. 33-23563, filed July 12, 1990)

10.7		Special Severance Benefits Plan of the Registrant (incorporated by reference to Exhibit 10.12 from the Annual Report on Form 10-K for the Year ended June 30, 1989)

10.8		Lease Agreement, as amended, dated July 13, 1993 between Torchmark Development Corporation and Birmingham Steel Corporation (incorporated by reference to Exhibit 10.12 from Annual Report on Form 10-K for year ended June 30, 1993)

10.8.1		Third Amendment to Lease Agreement, dated November 30, 1993, between Torchmark Development Corporation and Birmingham Steel Corporation (incorporated by reference to Exhibit 10.8.1 from Annual Report on Form 10-K for year ended June 30, 1997)

10.8.2		Fourth Amendment to Lease Agreement, dated June 13, 1994, between Torchmark Development Corporation and Birmingham Steel Corporation (incorporated by reference to Exhibit 10.8.2 from Annual Report on Form 10-K for year ended June 30, 1997)

10.8.3		Fifth Amendment to Lease Agreement, dated September 6, 1995, between Torchmark Development Corporation and Birmingham Steel Corporation (incorporated by reference to Exhibit 10.8.3 from Annual Report on Form 10-K for year ended June 30, 1997)

10.8.4		Sixth Amendment to Lease Agreement, dated April 11, 1997, between Torchmark Development Corporation and Birmingham Steel Corporation (incorporated by reference to Exhibit 10.8.4 from Annual Report on Form 10-K for year ended June 30, 1997)

10.8.5		Seventh Amendment to Lease Agreement, dated April 11, 1997, between Torchmark Development Corporation and Birmingham Steel Corporation (incorporated by reference to Exhibit 10.8.5 from Annual Report on Form 10-K for year ended June 30, 1997)

10.8.6		Eighth Amendment to Lease Agreement, dated April 11, 1997, between Torchmark Development Corporation and Birmingham Steel Corporation (incorporated by reference to Exhibit 10.8.6 from Annual Report on Form 10-K for the year ended June 30, 1998)

10.9		1990 Management Incentive Plan of the Registrant (incorporated by reference to Exhibit 4.1 from a Registration Statement on Form S-8, Registration No. 33-41595, filed July 5, 1991)


10.10		1992 Non-Union Employees’ Stock Option Plan of the Registrant (incorporated by reference to Exhibit 4.1 from a Registration Statement on Form S-8, Registration No. 33-51080, filed August 21, 1992)

10.11		Employment Agreement, dated May 12, 2000, between Registrant and John D. Correnti (incorporated by reference to Exhibit 10.11 from Annual Report on Form 10-K for year ended June 30, 2000)

10.11.1		Amendment to Employment Agreement, dated May 12, 2000, between Registrant and John D. Correnti (incorporated by reference to Exhibit 10.11.1 from Annual Report on Form 10-K for year ended June 30, 2000)

10.11.2		Amendment to Employment Agreement dated April 19, 2002, between Registrant and John D. Correnti (incorporated by reference from Exhibit 10.4 to Form 10-Q for the quarter ended March 31, 2002)

10.12		Stock Accumulation Plan of the Registrant (incorporated by reference to Exhibit 4.1 from a Registration Statement on Form S-8, Registration No. 33-64069, filed November 8, 1995)

10.13		Lease Agreement, dated January 7, 1997, between Torchmark Development Corporation and Birmingham Southeast, L.L.C. (incorporated by reference to Exhibit 10.13 from Annual Report on Form 10-K for year ended June 30, 1998)

10.14		Director Stock Option Plan of the Registrant (incorporated by reference to exhibit 10.1 from Form 10-Q for quarter ended September 30, 1996)

10.15		Director Compensation Plan of the Registrant (incorporated by reference to Exhibit 10.18 from Form 10-K/A for the year ended June 30, 1999)

10.16		Amended and Restated Executive Severance Plan of the Registrant (incorporated by reference to Exhibit 10.19 from Annual Report on From 10-K for the year ended June 30, 1999)

10.17		Chief Executive Officer Incentive Compensation Plan of the Registrant (incorporated by reference to Exhibit 10.2 from Form 10-Q for quarter ended September 30, 1996)

10.18		Equity Contribution Agreement among American Iron Reduction, L.L.C., GS Technologies Operating Co., Inc., Birmingham Steel Corporation and Nationsbank, N.A., dated August 30, 1996 (incorporated by reference to Exhibit 10.3 from Form 10-Q for quarter ended September 30, 1996)

10.19		DRI Purchase Agreement between Birmingham Steel Corporation and American Iron Reduction, L.L.C., dated as of August 30, 1996 (incorporated by reference to Exhibit 10.4 from Form 10-Q for quarter ended September 30, 1996)


10.19.1		Amended and Restated DRI Purchase Agreement between Birmingham Steel Corporation and American Iron Reduction, L.L.C. dated as of May 5, 2000 (incorporated by reference to Exhibit 10.19.1 from Annual Report on Form 10-K for year ended June 30, 2000)

10.20		Operating Agreement between Birmingham Steel Corporation and Raw Material Development Co., Ltd., dated as of September 18, 1996 (incorporated by reference to Exhibit 10.5 from Form 10-Q for quarter ended September 30, 1996)

10.21		Asset Purchase Agreement, dated as of October 31, 1996, among Mitsui & Co., Ltd., R. Todd Neilson, as Chapter 11 Trustee for the bankruptcy estate of Hiuka America Corporation, All-Ways Recycling Company, B&D Auto & Truck Salvage, and Weiner Steel Corporation (incorporated by Reference to Exhibit 10.1 from Form 10-Q for quarter ended December 31, 1996)

10.22		Contribution Agreement, dated as of November 15, 1996, among IVACO, Inc., Atlantic Steel Industries, Inc., Birmingham Steel Corporation and Birmingham Southeast, L.L.C. (incorporated by reference from Current Report on Form 8-K filed December 12, 1996)

10.23		$300 million Credit Agreement, dated as of March 17, 1997 by and among Birmingham Steel Corporation, as Borrower, the financial institutions party hereto and their assignees under section 12.5.(d), as Lenders, PNC Bank, National Association and The Bank of Nova Scotia, as Co-agents and Nationsbank, N.A. (South), as Agent and as Arranger (incorporated by reference to Exhibit 10.1 from Form 10-Q for quarter ended March 31, 1997)

10.23.1		First Amendment to Credit Agreement dated June 23, 1998 (incorporated by reference to Exhibit 10.2 from Current Report on Form 8-K filed September 30, 1999)

10.23.2		Second Amendment to Credit Agreement dated September 30, 1998 (incorporated by reference to Exhibit 10.1 from Form 10-Q for quarter ended December 31, 1998)

10.23.3		Third Amendment to Credit Agreement dated July 27, 1999 (incorporated by reference to Exhibit 10.4 from Current Report on Form 8-K filed September 30, 1999)

10.23.4		Fourth Amendment to Credit Agreement dated September 28, 1999 (incorporated by reference to Exhibit 10.5 from Current Report on Form 8-K filed September 30, 1999)

10.23.5		Fifth Amendment to Credit Agreement dated October 12, 1999 (incorporated by reference to Exhibit 10.26.5 from Annual Report on Form 10-K/A for year ended June 30, 1999)

10.23.6		Seventh Amendment to Credit Agreement dated May 15, 2000 (incorporated by reference to Exhibit 10.23.6 from Annual Report on Form 10-K for year ended June 30, 2000)


10.23.7		Eighth Amendment to Credit Agreement dated February 20, 2001 (incorporated by reference from Exhibit 10.23.7 to Form 10-Q/A for quarter ended December 31, 2000)

10.23.8		Tenth Amendment to Credit Agreement dated February 20, 2001 (incorporated by reference to Exhibit 99.2 to Form 8-K filed on March 29, 2002)

10.24		Collateral Agency and Intercreditor Agreement dated October 12, 1999 (incorporated by reference to Exhibit 10.26.6 from Form 10-K/A for the year ended June 30, 1999)

10.24.1		Amended and Restated Collateral Agency and Intercreditor Agreement dated May 15, 2000 amending and restating the Collateral Agency and Intercreditor Agreement dated October 12, 1999 (incorporated by reference to Exhibit 10.24.1 from Annual Report on Form 10-K for year ended June 30, 2000)

10.25		$25,000,000 Credit Agreement dated as of May 15, 2000, by and among Birmingham Southeast, L.L.C., as Borrower, the financial institutions party thereto, as lenders, and Bank of America, N.A., as agent (incorporated by reference to Exhibit 10.25 from Annual Report on Form 10-K for year ended June 30, 2000)

10.25.1		First Amendment to the $25,000,000 Credit Agreement dated as of February 20, 2001, by and among Birmingham Southeast, L.L.C., as Borrower, the financial institutions party thereto, as lenders, and Bank of America, N.A., as agent (incorporated by reference from Exhibit 10.25.1 to Form 10-Q/A for quarter ended December 31, 2000)

10.26		Security Agreement dated as of October 12, 1999, executed by Birmingham Steel Corporation, as Debtor, in favor of State Street Bank and Trust Company, as Collateral Agent, for the benefit of the secured parties named therein (incorporated by reference to Exhibit 10.26 from Annual Report on Form 10-K for year ended June 30, 2000)

10.26.1		Security Agreement dated as of May 15, 2000, executed by Birmingham Southeast, L.L.C., as Debtor, in favor of SouthTrust Bank, National Association, as Collateral Agent, for the benefit of the secured parties named therein (incorporated by reference to Exhibit 10.26.1 from Annual Report on Form 10-K for year ended June 30, 2000)

10.27		Amended and Restated Collateral Agency and Intercreditor Agreement dated May 15, 2000 amending and restating the Collateral Agency and Intercreditor Agreement dated November 12, 1999 (incorporated by reference to Exhibit 10.27 from Annual Report on Form 10-K for year ended June 30, 2000)

10.28		Executive Retirement and Compensation Deferral Plan of the Registrant (incorporated by reference to Exhibit 10.22 from Annual Report on Form 10-K for year ended June 30, 1998)

10.28.1		Amendment Number Two to the Executive Retirement and Compensation Deferral Plan of the Registrant (incorporated by reference from Form 10-Q for quarter ended March 31, 2001)


10.29		1997 Management Incentive Plan of the Registrant (incorporated by reference to Exhibit 4.6 from a Registration Statement on Form S-8, Registration No. 333-46771, filed February 24, 1998)

10.30		Master Restructure Agreement among American Iron Reduction L.L.C., GS Industries, GS Technologies Operating Co., Inc., Birmingham Steel Corporation, Bank of America, N.A., and Canadian Imperial Bank of Commerce dated May 5, 2000 (incorporated by reference to Exhibit 10.30 from Annual Report on Form 10-K for year ended June 30, 2000)

10.31		Letter agreement dated February 20, 2001 between the Company and the Memphis Leaseholders (incorporated by reference to Exhibit 10.32 from Form 10-Q/A for quarter ended December 31, 2000)

10.32		2000 Management Incentive Plan of the Registrant (incorporated by reference to Exhibit 4.4 from Registration Statement on Form S-8, Registration No. 333-57048, filed March 14, 2001)

10.33		2000 Director Stock Option Plan of the Registrant (incorporated by reference to Exhibit 4.4 from Registration Statement on Form S-8, Registration No. 333-57032, filed March 14, 2001)

10.34		Third Amended Plan of Reorganization of the Company and its subsidiaries dated September 12, 2002 (incorporated by reference to Exhibit 1 from form 8-K filed on September 27, 2002.

10.35		Amended and Restated Disclosure Statement for Joint Plan of Reorganization of the Company and its subsidiaries under Chapter 11 of the U.S. Bankruptcy Code (incorporated by reference to Exhibit 2 from Form 8-K filed in September 27, 2002)

10.36		Confirmation Order of the Third Amended and Restated Joint Plan of Reorganization of the Company and its subsidiaries entered by the Court on September 17, 2002 (incorporated by reference to Exhibit 3 from Form 8-K filed on September 27, 2002)

22.1		Subsidiaries of the Registrant*

23.1		Consent of Ernst & Young LLP, Independent Auditors*

99.1		Certification of Chief Executive Officer*

99.2		Certification of Chief Financial Officer*

* Being filed herewith

ITEM 14 (d) FINANCIAL STATEMENTS

The list of financial statements and schedules referred to in Items 14(a)(1) and 14(a)(2) is incorporated herein by reference.

BIRMINGHAM STEEL CORPORATION

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)


			Balance		Charged
			at		to Costs						Balance at
			Beginning		and						End of
			of Year		Expenses			Deductions			Year

Year Ended June 30, 2002:
	Deducted from assets accounts:
		Allowance for doubtful accounts	$	2,146	$	1,640		$	1,029	(A)	$	2,757
		Provision for estimated losses for SBQ division during disposal period		10,137		18,958	(B)		23,095	(C)		6,000
		Provision for estimated loss on disposal of discontinued operations		136,836		—			136,836	(C)		—

			$	149,119	$	20,598		$	160,960		$	8,757

Year Ended June 30, 2001:
	Deducted from assets accounts:
		Allowance for doubtful accounts	$	1,614	$	660		$	128	(A)	$	2,146
		Provision for estimated losses for SBQ division during disposal period		—		35,963	(B)		25,826	(C)		10,137
		Provision for estimated loss on disposal of discontinued operations		—		138,849	(B)		2,013	(C)		136,836

			$	1,614	$	175,472		$	27,967		$	149,119

Year Ended June 30, 2000:
	Deducted from assets accounts:
		Allowance for doubtful accounts	$	1,207	$	908		$	501	(A)	$	1,614
		Provision for estimated losses for SBQ division during disposal period		56,544		(56,544	)(D)		—			—
		Provision for estimated loss on disposal of discontinued operations		195,342		(195,342	)(D)		—			—

			$	253,093	$	250,978		$	501		$	1,614

(A) Represents accounts written off

(B) Represents the provision for the estimated loss on disposal of the SBQ segment.

(C) Represents use of the reserve for loss on disposal of discontinued operations.

(D) Represents the reversal of the 1999 provision for the loss on disposal of the SBQ segment.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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

/s/ John D. Correnti		10/14/2002

John D. Correnti		Date
Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


	Signature	Title	Date

/s/	JOHN D. CORRENTI	Chairman of the Board, Chief	October 14, 2002
		Executive Officer, Director
	John D. Correnti	(Principal Executive Officer)

/s/	JAMES A. TODD JR	Vice Chairman of the Board, Chief	October 14, 2002
		Administrative Officer, Director
	James A. Todd Jr.

/s/	DONNA M. ALVARADO	Director	October 14, 2002

	Donna M. Alvarado

/s/	STEVEN R. BERRARD	Director	October 14, 2002

	Steven R. Berrard

/s/	ALVIN R. CARPENTER	Director	October 14, 2002

	Alvin R. Carpenter

/s/	JERRY E. DEMPSEY	Director	October 14, 2002

	Jerry E. Dempsey

/s/	ROBERT M. GERRITY	Director	October 14, 2002

	Robert M. Gerrity

/s/	JAMES W. MCGLOTHLIN	Director	October 14, 2002

	James W. McGlothlin

/s/	ROBERT H. SPILMAN	Director	October 14, 2002

	Robert H. Spilman

/s/	J. DANIEL GARRETT	Chief Financial Officer –	October 14, 2002
		Executive Vice President
	J. Daniel Garrett

/s/	BRANT R. HOLLADAY	Vice President – Controller	October 14, 2002

	Brant R. Holladay

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Section 302 Certification

I, John D. Correnti, certify that:

(1) I have reviewed this Annual Report on Form 10-K of Birmingham Steel Corporation, a Delaware corporation (the “registrant”);

(2) Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report;

(3) Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this Annual Report.

Date: October 14, 2002

By: /s/ John D. Correnti

John D. Correnti
Chairman of the Board,
Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Section 302 Certification

I, J. Daniel Garrett, certify that:

Date: October 14, 2002

By: /s/ J. Daniel Garrett

J. Daniel Garrett
Chief Financial Officer
Executive Vice President

(A)		Facilities owned by Birmingham Southeast, L.L.C., an 85% owned consolidated subsidiary.
(B)		The Joliet rolling mill was shut-down indefinitely in June 2001.
(C)		These facilities are designated as discontinued operations in fiscal 2001— see “Discontinued Operations.” In June 2001, the Company suspended rolling operations at Cleveland. Melting operations were suspended at Memphis in January 2000. The Cartersville facility was sold to AmeriSteel Corporation (a U.S. subsidiary of Gerdau S.A. of Rio de Janeiro Brazil) on December 28, 2001. The Cleveland facility was sold to Charter Manufacturing Inc., of Mequon, Wisconsin on March 1, 2002. The Memphis, TN facility is currently classified as assets held for disposal

•		Shutdown of operations at Memphis, resulting in cash savings of approximately $2 million per month (January 2000);
•		Shutdown of operations at Cleveland, resulting in cash savings of $2 million to $3 million per month (completed July 2001);
•		Shutdown of operations of the Convent, Louisiana DRI facility (AIR), resulting in cash savings of approximately $1 million per month (October 2000);
•		Sale of the Company’s interest in the California scrap processing joint venture, eliminating $34 million in contingent liabilities (June 2000);
•		Reduction of corporate headquarters personnel by more than 45%, resulting in annual savings of more than $2 million per year (December 1999 to June 2002);

•		Hiring of highly experienced steel operations and sales individuals from other steel companies to join the Correnti management team;
•		Reduction in inventories by $130 million (from December 1999 to June 2002);
•		Reduction in trade accounts payable by $75 million (from December 1999 to June 2002), and improvement in vendor relationships, which had been impaired under prior management;
•		Sale of the Cartersville facility in December 2001 providing approximately $86.6 million reduction in total debt and operating lease obligations and elimination of $1 million to $2 million monthly operating losses; and
•		Sale of the Cleveland facility in March 2002 providing approximately $18.6 million debt reduction and relief from approximately $0.5 million monthly carrying costs.

(A)		The Cartersville facility was sold in December 2001. See “Discontinued Operations”.
(B)		The Cleveland facility ceased operations in June 2001 and was sold in March 2002. See “Discontinued Operations”.
(C)		The Memphis facility ceased operations in December 1999. See “Discontinued Operations”.

(A)		Portions of equipment that were financed by Industrial Revenue Bonds are leased pursuant to the terms of such bonds.
(B)		This facility is designated as discontinued operations in fiscal 2002 – see “Discontinued Operations”. Melting operations were suspended at Memphis in January 2000. This facility is currently classified as assets held for disposal.

(A)		The selected consolidated financial data for fiscal 1998 through 2001 has been restated, as required by generally accepted accounting principles, to reflect the Company’s special bar quality (SBQ) business and the Cartersville facility as discontinued operations. Refer to Note 3 to the Consolidated Financial Statements.
(B)		In fiscal 2002 and 2000, the Company recorded asset impairment charges totaling $28,250 and $28,698, respectively. Refer to Note 15 to the Consolidated Financial Statements.
(C)		Includes $4,414 in refunds from electrode suppliers in both 1999 and 1998 and $5,200 and $5,225 gain on sales of idle properties and equipment in 1999 and 1998, respectively.
(D)		Includes impairment losses for equity investees of $19,275 and $12,383 in 1999 and 1998, respectively.
(E)		Reflects $142,245 loss on sale of the Cartersville facility in 2002, and $138,236, $(173,183) and $173,183 loss (reversal of loss) on disposal of SBQ segment in 2001, 2000 and 1999, respectively, including estimated losses during the disposal period (net of income tax expense of $78,704 in 2000 and benefit of $78,704 in 1999). Refer to Note 3 to the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(A)		Operating results of the SBQ segment and the Cartersville facility for fiscal 2002 and 2001 and all prior periods presented herein have been restated and reported in discontinued operations. See Note 3 to the Consolidated Financial Statements.
(B)		Fiscal 2002 reflects the loss on disposition of the Cartersville facility as well as the disposition of the SBQ segment. Fiscal 2001 reflects the accrued loss on disposition of the SBQ segment. Refer to Note 3 to the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

•		Completing start-up operations at Cartersville;
•		Rationalization of the Cleveland and Memphis operations;
•		Sale of the Company’s interest in the California scrap joint venture;
•		Reducing and limiting the Company’s liability with respect to the Louisiana DRI joint venture;
•		Reducing overall spending;
•		Reducing selling, general and administrative expenses and headcount at the corporate headquarters;
•		Strengthening and reorganizing of the Company’s sales and marketing functions; and
•		Stabilizing the Company’s management and workforce.

•		Shutdown of operations at the Memphis melt shop, resulting in cash savings of approximately $2 million per month (January 2000);
•		Completion of necessary capital expenditures and completion of start-up operations at the Cartersville rolling mill (July 2000);
•		Sale of the Cartersville operations, which eliminated operating losses and reduced total debt by approximately $86.6 million (December 2001);
•		Shutdown of operations at Cleveland, which resulted in cash savings of $2 million to $3 million per month (completed July 2001);
•		Shutdown of operations of the Convent, Louisiana DRI facility (AIR), resulting in cash savings of approximately $1 million per month (October 2000);
•		Sale of the Company’s interest in the California scrap processing joint venture, which eliminated $34 million in contingent liabilities (June 2000);
•		Reduction of corporate headquarters personnel by more than 46%, resulting in annual savings of $2 million per year (December 1999 to June 2002);
•		Hiring additional highly experienced steel operations and sales individuals from other steel companies
•		Reduction in inventories by $130 million (from December 1999 to June 2002); and
•		Reduction in trade accounts payable by $75 million (from December 1999 to June 2002), and significant improvement in vendor relationships which had been impaired under prior management.

•		Changes in market supply and demand for steel, including the effect of changes in general economic conditions;

•		Changes in U.S. or foreign trade policies affecting steel imports or exports;

•		Changes in the availability and costs of steel scrap, steel scrap substitute materials, steel billets and other raw materials or supplies used by the Company, as well as the availability and cost of electricity and other utilities;

•		Unplanned equipment failures and plant outages;

•		Actions by the Company’s domestic and foreign competitors;

•		Excess production capacity at the Company or within the steel industry;

•		Costs of environmental compliance and the impact of governmental regulations;

•		Changes in the Company’s relationship with its workforce;

•		The Company’s highly leveraged capital structure and the effect of restrictive covenants in the Company’s debt instruments on the Company’s operating and financial flexibility;

•		Changes in interest rates or other borrowing costs, or the availability of credit;

•		Changes in the Company’s business strategies or development plans, and any difficulty or inability to successfully consummate or implement as planned any projects, acquisitions, dispositions, joint ventures or strategic alliances;

•		The effect of unanticipated delays or cost overruns on the Company’s ability to complete or start-up a project when expected, or to operate it as anticipated;

•		The effect of existing and possible future litigation filed by or against the Company; and

•		Failure to complete the transaction with Nucor.

•		Proceeds from the sale of excluded assets could be less than the amount necessary to pay the full amount of the distribution to stockholders provided in the Company’s Bankruptcy Plan.

	•		Repayment of DIP Facility outstanding at the closing date;
	•		Payment of all cure amounts due under contracts being assumed and assigned by Nucor of approximately $0.5 million;
	•		Payment of post-petition payables in amounts to be determined at the time of closing;
	•		Payment of $13.5 million to the distribution agent for payment of administrative claims including investment banking fees, professional fees, incentive payments described in the plan, and all other administrative expense claims not paid at closing;
	•		Payments to stockholders of up to $7.7 million ($0.24 per share) less $0.2 million withheld from members of the board of directors to be used to pay a portion of the unsecured creditors payments (The total amount to be paid to stockholders is up to $15.0 million or $0.47 per share. A portion of that amount will be funded from liquidation of Excluded Assets as further described below);
	•		Payments of $17.5 million to unsecured creditors ($0.2 million of the payments to unsecured creditors will be funded by the Company’s board of directors as described above);
	•		Payments of $17.0 million to claimants under the Company's severance and retirement plans; and
	•		Payment of up to $0.5 million for liquidating trust expenses.

(4)		Mr. Correnti became Chairman of the Board and Chief Executive Officer of the Company on December 2, 1999.
(5)		Includes $129,491 for reimbursement of closing costs on sale of his house, $417,764 for reimbursement on the loss incurred on the sale of his house, $161,328 for reimbursement of relocation expenses and $10,070 for reimbursement of payroll taxes on the vesting of restricted stock.
(6)		Paid principally in common stock of the Company except for sufficient funds to pay income taxes.
(7)		Includes amounts deferred by Named Executive Officers pursuant to the ERP/CDP.
(8)		Includes the value of Restricted Stock awards granted under the 1990 Management Incentive Plan (“MIP”) on the date of such grants. Restricted Stock awards under the 1990 MIP were made in the discretion of the Compensation and Stock Option Committee of the Board of Directors, and recipients pay only a nominal consideration (par value) for the issuance of the Restricted Stock. Mr. Correnti was awarded 100,000 shares on December 7, 1999 at a per share price of $6.3125, which vest in equal increments of one-third over three years.
(9)		Mr. Todd rejoined the Company as a director and Chief Administrative Officer on December 2, 1999. Mr. Todd previously served as Chairman of the Board and Chief Executive Officer of the Company from 1991 until January 1996.
(10)		Represents retirement payments made to Mr. Todd under provisions of the Company’s Management Security Plan.
(11)		Mr. Wagner joined the Company on April 10, 2000.
(12)		Includes a distribution of $726,323 paid to Mr. Wilson under the Company’s Executive Retirement Plan.

(A)		Represents accounts written off
(B)		Represents the provision for the estimated loss on disposal of the SBQ segment.
(C)		Represents use of the reserve for loss on disposal of discontinued operations.
(D)		Represents the reversal of the 1999 provision for the loss on disposal of the SBQ segment.

	(1)		I have reviewed this Annual Report on Form 10-K of Birmingham Steel Corporation, a Delaware corporation (the “registrant”);
	(2)		Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report;
	(3)		Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this Annual Report.