AmeriSteel Corporation ("the Company") operates four non-union
minimills located in the southeastern U.S. that produce steel concrete
reinforcing bars ("rebar"), light structural shapes such as rounds, squares,
flats, angles and channels ("merchant bars") and, to a lesser extent, wire rod
("rods") and billets (which are semi-finished steel products). The Company also
operates 18 rebar fabricating plants, 13 of which are located throughout the
southeast in close proximity to its mills and five in the northeast as a result
of the acquisition of Brocker Rebar Co. and Milton Rebar Coating on April 29,
1999. Additionally, the Company operates two rail spike manufacturing facilities
in Paragould, Arkansas and Lancaster, South Carolina, and a wire mesh and
collated nail manufacturing facility in New Orleans, Louisiana.
During fiscal 2000, approximately 57% of the Company's mill rebar
production was sold directly to distributors and independent fabricating
companies in stock lengths and sizes. The remaining 43% of the rebar produced by
the mills was transferred to the Company's fabricating plants where value is
added by cutting and bending the rebar to meet strict engineering, architectural
and other end-product specifications. Merchant bars and rods generally are sold
to steel service centers, original equipment manufacturers and fabricators in
stock lengths and sizes.
The Company's four minimills are located in Jacksonville, Florida,
Charlotte, North Carolina, and Jackson and Knoxville, Tennessee. Minimills are
steel mills that use electric arc furnaces to melt steel scrap and cast the
resulting molten steel into long strands called billets in a continuous casting
process. The billets are typically transferred to a rolling mill where they are
reheated, passed through roughing mills for size reduction and then rolled into
rebar, merchant bars or rods. These products emerge from the rolling mill and
are uniformly cooled on a cooling bed. Most merchant products then pass through
automated straightening and stacking equipment. Rebar and merchant products are
neatly bundled prior to shipment to customers by rail or truck.
The Company is organized into two primary business segments: (a) Mill
Operations and (b) Steel Fabrication. For financial information concerning
segments, see "Note M to March 31, 2000 Consolidated Financial
The predecessor of the Company was formed in 1937 as a rebar
fabricator. In 1956, it merged with five steel fabricators in Florida to form
Florida Steel Corporation, which then commenced construction of its first
minimill in Tampa, Florida. In 1996, the Company changed its name to AmeriSteel
Corporation. In late 1992, Kyoei Steel, Ltd. ("Kyoei"), a private Japanese
minimill company purchased 100% of FLS Holdings, Inc. (the "Holding Company" or
"FLS"), whose only business is to own AmeriSteel common stock. In September
1999, Kyoei sold 88% of its interest in FLS to Brazilian steel manufacturer,
Gerdau S.A. ("Gerdau") through one of Gerdau's Canadian subsidiaries. As a
result, Gerdau is the majority owner of AmeriSteel with an indirect controlling
interest of approximately 76%. Kyoei retains an indirect 10% minority interest
in the Company while an institutional investor owns approximately 4% of the
common stock of the Company. The remaining 10% of the Company's common stock is
owned by executives and other employees.
The following table shows the percentage of the Company's net sales
derived from each product category in the relevant time period:
The increase in fabricated rebar sales and the decrease in stock rebar
sales are attributable to the new northeast region. A greater percentage of the
Company's stock rebar sales from the mills are shipped to the northeast region,
however the intercompany sales are eliminated upon consolidation.
Rebar Products (Stock and Fabricated)
The Company produces rebar products primarily at its minimills in
Knoxville, Jacksonville and Charlotte. The Company's rebar either is sold
directly to distributors and independent fabricating companies in stock lengths
and sizes or is transferred to the Company's fabricating plants where it is cut
and bent to meet engineering, architectural and other end-product
specifications. The Company's rebar products are used primarily in two sectors
of the construction industry: non-residential building projects, such as
institutional buildings, retail sites, commercial offices, apartments and hotels
and manufacturing facilities, and infrastructure projects such as highways,
bridges, utilities, water and waste treatment facilities and sports stadiums.
The Company's rebar products are also used in multi-family residential
construction such as apartments, condominiums and multi-family homes. Usage of
the Company's rebar products is roughly split evenly between private and public
The Company produces merchant bars primarily at its minimills in
Jackson and Charlotte. Merchant bars consist of rounds, squares, flats, angles
and channels. Merchant bars are generally sold to steel service centers, and
manufacturers who fabricate the steel to meet engineering or end-product
specifications. Merchant bars are used to manufacture a wide variety of
products, including gratings, transmission towers, floor and roof joists, safety
walkways, ornamental furniture, stair railings and farm equipment. Merchant bar
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 bars typically are produced in
shorter production runs, necessitating more frequent changeovers in rolling mill
equipment. Merchant products generally command higher prices and produce higher
profit margins than rebar.
The Company produces steel rod at its Jacksonville minimill. Most of
this rod is sold directly to third-party customers, while the remainder,
depending on market conditions, is shipped to the Company's New Orleans,
Louisiana facility, where the rod is drawn down to wire for use in the
manufacture of wire mesh and collated nails.
The Company's melt shops produce semi-finished billets for conversion
to rebar, merchant bar and rods in the rolling mills. Because the Company's
melting capacity generally exceeds rolling mill capacity, the Company sells
excess billet production to steel mills that have less steel melting capacity
than rolling mill capacity.
Marketing and Customers
The Company conducts its marketing operation through both its own
inside and outside sales personnel. The outside sales personnel for mill rebar
and merchant bar are located in close proximity to the Company's major markets
and customers. The Company's salespeople handle both rebar and merchant bar
sales in a geographic area. This structure has several advantages in that it
eliminates duplicate sales calls on customers, enables salespeople to cover
smaller geographic areas, improves customer relationships and facilitates flow
of reliable market information to the Company. The Company's inside sales force
is centralized at the Company's Tampa, Florida headquarters, where all order
taking, mill production scheduling, inventory management and shipping
arrangements are coordinated. Metallurgical service representatives, located at
each of the Company's mills, provide technical support to the sales force.
Principal customers of the Company include steel distributors, steel
service centers, rebar fabricators, other metal fabricators and manufacturers,
railroads, building material dealers and contractors. Its fabricated rebar
products are sold to contractors performing work for residential and
nonresidential building, road, bridge, public works, utility and other
miscellaneous construction. The Company's business is not dependent upon any
single customer. The Company's customer base is fairly stable from year to year,
and during fiscal 2000 no one customer accounted for more than 4.6% of net sales
and the five largest customers accounted for approximately 12.9% of net sales.
The Company's credit terms to customers are generally determined based on market
conditions. The Company, however, generally does not offer extended (more than
30 days) payment terms to customers. The Company's business is seasonal, with
orders in the Company's first and second fiscal quarters tending to be stronger
than the third and fourth quarters.
Fabricated rebar sales personnel are located at the Company's
fabricating facilities where engineering service representatives provide
technical and sales support. Fabricated rebar is generally produced in response
to specific customer orders. The amount of sales order backlog pertaining to
fabrication contracts was approximately 285,000 tons at March 31, 2000. The
Company expects almost all of the March 31, 2000 backlog to be filled by
December 31, 2000.
Despite the commodity characteristics of the stock rebar and merchant
bar markets, the Company believes that it is able to distinguish itself from its
competitors to some extent due to its product quality, its consistent delivery
record, its capacity to service large orders, and its ability to fill most
orders quickly from inventory. Moreover, although construction and
infrastructure projects are generally nonrecurring in nature, the steel
fabricators, distributors and service centers which supply many of these
projects tend to be long-time customers of the Company. The Company believes
that its reputation for quality products and service is among the highest in the
The Company experiences substantial competition in the sale of each of
its products from a large number of companies in its geographic markets. Rebar
and merchant bars are commodity steel products, making price the primary
competitive factor. Due to the high cost of freight relative to the value of the
Company's steel products, competition from non-regional producers is limited.
Rebar deliveries are generally concentrated within a 350 mile radius of a
minimill, while merchant bar deliveries are generally concentrated within a 500
mile radius of a minimill. Except in unusual circumstances, the customer's
delivery expense is limited to freight charges from the nearest competitive
minimill and any incremental freight charges are absorbed by the supplier. The
Company has experienced significant import competition from foreign finished
steel bar producers during the past year. Due to unfavorable foreign economic
conditions, imports of cheaply priced steel bar products to the U.S. market have
continued to occur at unusually high levels which has had a negative effect on
The boundary of the current market area for the Company's rebar
products is roughly defined by a line running through New Orleans, Louisiana,
Little Rock, Arkansas, Kansas City, Kansas, St. Louis, Missouri, Chicago,
Illinois, Indianapolis, Indiana, Columbus, Ohio, and Baltimore, Maryland. The
Company has found shipping outside of this market area to be only marginally
profitable because of freight cost considerations.
The Company's primary marketing area for merchant bars encompasses the
southeastern and midwestern U.S. The Company's merchant bar sales represent
approximately 33% of the Company's total sales. The market for merchant bars is
very competitive, with price being the primary competitive factor. In the last
four years, the Company has upgraded its rolling mills to increase the Company's
ability to shift production from rebar to merchant bar as market conditions
The Company produces rods at its Jacksonville minimill. The Company's
primary marketing area for rods includes Florida, South Carolina, Georgia,
Alabama and Louisiana. The Company does not intend to geographically expand its
marketing beyond these states due to the relatively low margins and prohibitive
freight cost inherent to rod products. The market for rods can be heavily
influenced by foreign imports and in fiscal 2000, rod sales by foreign
competitors had a significant negative effect on the Company's rod prices.
With 18 rebar fabricating plants located throughout the eastern U.S.,
generally within support distance from one of the Company's four minimills, the
Company is a major factor in all the markets it serves. In the sale of
fabricated rebar, the Company competes with other steel fabricators in its
marketing area, some of whom purchase their stock rebar from the Company.
Raw Materials and Energy Costs
Steel scrap is the Company's primary raw material and comprised
approximately 36% of the Company's costs of sales in fiscal 2000. The relatively
simple metallurgical requirements of the Company's products enable the Company
to use low quality, and thus lower cost, steel scrap. Various domestic and
foreign firms supply other important raw materials or operating supplies
required for the Company's business, including refractories, ferroalloys and
carbon electrodes. The Company has historically obtained adequate quantities of
such raw materials and supplies to permit efficient mill operations.
Electricity and natural gas represent approximately 15% and 6%,
respectively, of the Company's mill conversion costs. Access to attractively
priced electric power and natural gas can be an important competitive cost
advantage to a minimill. The Company purchases its power from its utilities
under interruptible service contracts. Under such contracts, the utilities
provide service at less than firm tariff rates in return for the right to
curtail power deliveries during peak demand periods. Such interruptions usually
occur with sufficient notice to allow the Company to curtail production in an
orderly manner. Since deregulation of the natural gas industry, natural gas
requirements have generally been provided through purchase of well-head gas
delivered via the interstate pipeline system and local distribution companies.
Open access to competitively priced supply of natural gas enables the Company to
secure adequate supplies at competitive prices.
As of March 31, 2000, the Company had 2,201 employees, none of whom are
covered by a collective bargaining agreement. The Company believes that its
relations with its employees are good. The Company has been, and continues to
be, proactive in establishing and maintaining a climate of good employee
relations with its employees. Ongoing initiatives include organizational
development skills training, team building programs, opportunities for
participation in employee involvement teams, and an "open book" system of
management. The Company believes high employee involvement is a key factor in
the success of the Company's operations. The Company's compensation program is
designed to make the Company's employees' financial interest congruous with
those of the Company's shareholders.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations --Compliance with Environmental Laws and Regulations" and
"Note I to March 31, 2000 Consolidated Financial Statements--Environmental
Matters" for a discussion of the Company's cleanup liabilities with state and
federal regulators regarding the investigation and/or cleanup of certain sites.
ITEM 2. PROPERTIES
Production and Facilities
Steel can be produced at significantly lower costs by minimills than by
integrated steel operators. Integrated steel mills, which typically process iron
ore and other raw materials in blast furnaces to produce steel, generally use
costlier raw materials, consume more energy, operate older facilities that are
more labor intensive and employ a more highly paid labor force. In general,
minimills serve localized markets and produce a limited line of steel products.
The domestic minimill steel industry currently has excess production
capacity. This excess capacity has resulted in competitive product pricing and
cyclical pressures on industry profit margins. The high fixed costs of operating
a minimill encourage mill operators to maintain high levels of output even
during periods of reduced demand, which exacerbates the pressures on profit
margins. In this environment, efficient production and cost controls are
important to domestic minimill steel producers.
The Company's minimills operate their melting facilities seven days per
week and have an annual aggregate melting capacity of approximately 2.1 million
tons. The Company's rolling facilities are also operated seven days per week.
The annual aggregate rolling capacity is approximately 2.0 million tons, however
this capacity is dependent on the types, sizes and grades of bar products
The following table sets forth certain information regarding the
Company's four minimills, including the current estimated annual production
capacity and actual production of the minimills in thousands of tons. Billets
produced in the melting process in excess of rolling needs are sold to third
parties. Note: annual rolling capacities are estimates based on maximized
product mix, and actual utilization may vary significantly due to changes in
customer requirements and production efficiencies. Increased utilization at the
mills is a result of upgraded machinery and equipment capital spending programs
in conjunction with an incentive oriented workforce.
Year Ended Year Ended
Approx. March 31, Approx. March 31,
Annual 2000 Capacity Annual 2000 Capacity
Start-up Melting Melting Utilization Rolling Rolling Utilization
Location Date Capacity Production Percentage Capacity Production Percentage
-------- ---- -------- ---------- ---------- -------- ---------- ----------
Charlotte, NC 1961 480 429 89% 400 363 91%
Jackson, TN 1981 700 667 95 550 526 96
Jacksonville, FL 1976 620 598 96 600 579 97
Knoxville, TN 1987(1) 330 304 92 480 388 81
----- ----- ----- -----
Total 2,130 1,998 94% 2,030 1,856 91%
===== ===== ===== =====
(1) Purchase Date
The Charlotte minimill produces rebar and merchant bars. Rebar produced
in Charlotte is marketed primarily in the states from South Carolina to
Pennsylvania. Merchant bar produced in Charlotte is marketed primarily along the
eastern seaboard states from Florida to Pennsylvania.
Charlotte's melting equipment includes a 75 ton electric arc furnace
utilizing the Consteel process, a continuous scrap feeding and preheating
system, and a ladle refining station. The melting facilities also include a
3-strand continuous caster and material handling equipment. Charlotte's rolling
mill includes a reheat furnace, 15 in-line mill stands, a 200 foot cooling bed,
an in-line straightener and flying cut-to-length shear, and an automatic stacker
for merchant bars and rebar.
The Jackson minimill produces mostly merchant bars and some larger size
rebar. This minimill is the Company's largest single producer of merchant bars.
The merchant bars are marketed primarily in the southeastern U.S., as well as
into southern Illinois, Indiana and Ohio.
Melting equipment includes a 135 ton electric arc furnace, a 4-strand
continuous billet caster and material handling equipment. The rolling mill
consists of a 120 tons per hour reheat furnace, 16 Danieli vertical and
horizontal in-line quick-change mill stands, a cooling bed, an in-line
straightener, a cut-to-length product shear, an automatic stacker, and
associated shipping and material handling facilities.
The Jacksonville minimill produces rebar and rods. The rebar is
marketed primarily in Florida, the nearby Gulf Coast states and Puerto Rico,
with coiled rebar being shipped throughout the Company's marketing area. The rod
products are sold throughout the southeastern U.S.
Jacksonville's melting equipment consists of a 90 ton capacity electric
arc furnace and a 4-strand continuous caster. The rolling mill includes a 100
tons per hour reheat furnace, a 16-stand horizontal Danieli in-line mill, a
10-stand Danieli rod block, a cooling bed for straight bars and a controlled
cooling line for coiled products, a cut-to-length product shear, and automatic
bundling and tying equipment for straight bars and coils.
The Knoxville minimill produces almost exclusively rebar. The rebar is
marketed throughout the Ohio Valley, including all areas of Ohio and Kentucky
and parts of Illinois, Indiana, Virginia, West Virginia, Tennessee, and in
portions of North and South Carolina, Georgia and Alabama.
Knoxville's melting equipment currently consists of two 35 ton electric
arc furnaces, a 3-strand continuous caster and material handling equipment. The
rolling mill consists of a reheat furnace, 16 in-line mill stands utilizing the
Thermex in-line heat treating process, a cooling bed, a cut-to-length shear
line, and associated shipping and material handling facilities. The Company has
embarked upon a $34 million modernization of the melt shop. The new facility, a
90 ton electric arc furnace utilizing the Consteel process, is anticipated to
start up operations in July 2000. Melting capacity is expected to increase to
450 tons annually.
The Company believes that it operates the largest rebar fabricating
group in the U.S., consisting of a network of 18 strategically located
reinforcing steel fabricating plants throughout the southeastern and
northeastern U.S. with an annual capacity of approximately 480,000 tons. The
facilities are interconnected via satellite for the immediate transfer of
customer engineering and production information utilized in its computer
assisted design detailing programs. The fabricating plants are a downstream
operation of the Company, purchasing the majority of its rebar from the
Company's minimills, primarily Knoxville, Jacksonville and Charlotte.
Included in fiscal 2000 results are the acquired operating assets of
rebar fabricator Brocker Rebar Co. and Milton Rebar Coating which expanded the
Company's fabricating operations into the northeast market. The additional
operations have a 45 year history in the industry, with plants in York,
Pennsylvania, Milton, Pennsylvania, Baltimore, Maryland, Wilmington, Delaware
and Sayreville, New Jersey with annual production capacity of approximately
Fabricated rebar is produced by cutting and bending stock rebar to meet
engineering, architectural and other end-product specifications. The fabrication
division currently employs about 800 employees. The following table shows the
fabricating plant locations and approximate annual capacity:
Fabricating Plant (in Tons)
Plant City, FL (Tampa) 35,000
Jacksonville, FL 35,000
Ft. Lauderdale, FL 35,000
Orlando, FL 15,000
Charlotte, NC 35,000
Raleigh, NC 30,000
Duluth, GA (Atlanta) 35,000
Aiken, SC 15,000
Knoxville, TN 40,000
Nashville, TN 30,000
Collierville, TN (Memphis) 16,000
Louisville, KY 22,000
St. Albans, WV 22,000
York, PA 50,000
Baltimore, MD 25,000
Wilmington, DE 20,000
Sayreville, NJ 20,000
In addition to the above fabricating capacity, the Company has epoxy
coating plants in Knoxville, TN and Milton, PA with combined annual coating
capacity of approximately 65,000 tons.
The Company's railroad spike operations, located in Lancaster, South
Carolina and Paragould, Arkansas, forge steel square bars produced at the
Charlotte mill into railroad spikes that are sold on an annual contract basis to
various railroad companies. The Company's facility in New Orleans, Louisiana
produces wire from steel rod. The wire is then either manufactured into wire
mesh for concrete pavement or converted into collated nails for use in
high-speed nail machines.
The Company's corporate offices are located in Tampa, Florida and are
comprised of 28,000 square feet of leased office space.
The Company owns its four mills and 13 of its 18 rebar fabricating
facilities, and leases the five other fabricating facilities. The following
represent other facilities currently owned or operated by the Company:
LOCATION USE ACREAGE FLOOR SPACE
-------- --- ------- -----------
Tampa, FL (Owned) Closed minimill ~57.0
Indiantown, FL (Owned) Closed minimill 151.5 130,340 sq. ft.
New Orleans, LA (Leased) Wire fabric and nail facility 5.0 120,000 sq. ft.
Lancaster, SC (Owned) Rail spike facility 41.0 52,000 sq. ft.
Paragould, AR (Owned) Rail spike facility 7.7 23,000 sq. ft.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than routine
litigation incidental to the Company's business, to which the Company is a party
or in which any of its property is the subject, and no such proceedings are
known to be contemplated by governmental authorities. However, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Compliance with Environmental Laws and Regulations" and "Note I to
March 31, 2000 Consolidated Financial Statements--Environmental Matters" for a
discussion of the Company's liabilities with respect to the investigation and/or
remediation at certain sites.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the
Company's executive officers:
Name Age Position
---- --- --------
Phillip E. Casey 57 President, Chief Executive Officer
J. Donald Haney 64 Group Vice President, Fabricated Reinforcing
Steel and Director
Tom J. Landa 48 Vice President, Chief Financial Officer,
Secretary and Director
Dennie Andrew 59 Vice President, Steel Mill Operations
J. Neal McCullohs 43 Vice President, Mill Product Sales
Robert P. Muhlhan 49 Vice President, Material Procurement
James S. Rogers, II 52 Vice President, Human Resources
Phillip E. Casey has been Chief Executive Officer and a director since
June 1994 and President since September 1999. Mr. Casey was Chairman of the
Board of AmeriSteel from June 1994 until September 1999.
J. Donald Haney has been Group Vice President, Fabricated Reinforcing
Steel since 1979. Mr. Haney joined the Company in 1958 and is principally
responsible for the Company's reinforcing steel fabricating group.
Tom J. Landa has been Chief Financial Officer, Vice President and
Secretary of the Company since April 1995. Mr. Landa was elected a director of
the Company in March 1997. Before joining the Company, Mr. Landa spent over 19
years in various financial management positions with Exxon Corporation and its
Dennie Andrew has been Vice President, Steel Mill Operations, since
October 1997. From September 1996 until September 1997, Mr. Andrew was Vice
President, Jacksonville Steel Mill Division. From 1986 until 1996, Mr. Andrew
was President of North American operations for Simac International.
J. Neal McCullohs has been Vice President, Mill Product Sales, since
August 1995. Mr. McCullohs joined the Company in 1978 and has held various sales
management positions with the Company, including division manager of the St.
Albans Reinforcing Division and Atlanta Reinforcing Division.
Robert P. Muhlhan has been Vice President, Material Procurement, since
February 1995. From 1993 until 1995, Mr. Muhlhan was Regional Vice President of
National Material Trading. Prior to 1993, Mr. Muhlhan spent 24 years with LTV
Steel Company, most recently as Manager--Production Materials.
James S. Rogers, II, has been Vice President, Human Resources, since
June 1997. From 1992 until 1996, Mr. Rogers was Vice President, Human Resources,
at Birmingham Steel Corporation.
Officers are appointed annually by the Board of Directors.