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The following is an excerpt from a 10-K405 SEC Filing, filed by AMERISTEEL CORP on 6/23/2000.
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AMERISTEEL CORP - 10-K405 - 20000623 - PART_I
PART 1

ITEM 1. BUSINESS

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 Statements--Segment Information."

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.

Products

The following table shows the percentage of the Company's net sales derived from each product category in the relevant time period:

                                         Year Ended
                                          March 31,
                                          ---------
                                 2000        1999        1998
                                 ----        ----        ----

Fabricated Rebar                   31%         25%         24%
Stock Rebar                        25          29          27
Merchant Bars                      33          34          33
Rods                                3           4           5
Billets and other                   8           8          11
                                -----         ---        ----
                                  100%        100%        100%
                                  ===         ===         ===

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.

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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 projects.

Merchant Bars

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.

Rods

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.

Billets

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.

3

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 industry.

Competition

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 domestic prices.

Stock Rebar

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.

Merchant Bar

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 allow.

Rods

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.

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Fabricated Rebar

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.

Employees

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.

Environmental Regulation

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.

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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 rolled.

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

Charlotte Minimill

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.

6

Jackson Minimill

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.

Jacksonville Minimill

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.

Knoxville Minimill

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.

Fabrication

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 115,000 tons.

7

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:

                                                   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
                                                     ------
Total                                               480,000
                                                    =======

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.

Other Operations

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

Not applicable.

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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
                                                     and Director

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 affiliates worldwide.

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.

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