Birmingham Steel Corporation Announces Temporary Suspension of Operations At Memphis Melt Shop.

Business Editors

BIRMINGHAM, Ala.--(BUSINESS WIRE)--Dec. 28, 1999

Birmingham Steel Corporation (NYSE:BIR) today announced temporary suspension of operations at its melt shop facility in Memphis, Tennessee, effective January 1, 2000. The Memphis facility, which produces high-quality semi-finished steel billets for the Company's special bar quality (SBQ) rolling mills in Cleveland, Ohio, has incurred losses of approximately $100 million since it began start-up operations in November 1997. The Company did not indicate how long operations would be curtailed.

John D. Correnti, Chairman and Chief Executive Officer of Birmingham Steel, commented, "Since beginning start-up operations in November 1997, the Memphis facility has been plagued by a series of issues including poor management, high employee turnover and equipment problems. During this prolonged period of start-up, Birmingham Steel has expended significant financial resources to support the cash drain incurred by Memphis, which has been a major reason for the dramatic increase in the Company's debt." The Company noted that total debt, including off-balance sheet operating leases, is in excess of $730 million.

Correnti continued, "Although the new management of Birmingham Steel believes the Memphis operation represents an attractive long-term opportunity to provide low-cost, high-quality billets to Cleveland, the Company's current financial position necessitates that operations be temporarily suspended in order to conserve cash. We regret the impact this decision will have upon our employees as well as the business community in Memphis and Shelby County, Tennessee. However, this decision is critical in order to begin the steps of preserving liquidity and returning Birmingham Steel to profitability and a strong financial condition."

Correnti, who was elected chairman and chief executive officer of Birmingham Steel on December 2, 1999, after a dissident group of shareholders initiated a proxy fight to replace the Company's previous management, stated he believed the Memphis facility is capable of producing in excess of 1.0 million tons of high-quality semi-finished steel for the Company's SBQ operations in Cleveland. Earlier this year, the Company announced that approximately $5 million would be spent to modify the Memphis caster. Correnti said the caster modification would be completed early in January 2000 and would enable the plant to produce at its rated capacity of 80,000 tons per month once the melt shop is restarted. "With the caster modification, the Memphis facility is a great asset. With the right operating management and $10-$15 million in additional capital expenditures, Memphis could become a world class steel-making facility," said Correnti.

However, Correnti did not preclude a sale of the Memphis facility, which had been the course of action pursued by prior management. "Birmingham Steel needs cash in order to implement an effective turnaround of the Company. Although we are hopeful that the Memphis operations can be restarted in the future, we have not abandoned prior management's strategy to sell or explore joint venture opportunities involving the Memphis facility in order to raise cash," said Correnti. In its financial results for the fiscal year ended June 30, 1999, the Company recorded a large writedown related to its decision to dispose of its SBQ operations, including Memphis.

The Company stated that approximately 30 of the plant's 250 workers affected by the layoffs at Memphis would be offered positions at other Birmingham Steel facilities. The Company stated it had previously notified City of Memphis and Shelby County economic development officials of the decision to temporarily suspend operations, and that it was working with the local authorities to determine possible purchasers or alternative users for the facility. The Company also stated that it would work with suppliers and vendors to pay all outstanding invoices, and that discussions with all major suppliers would take place in the very near future.

In a letter to Birmingham Steel stockholders on December 23, 1999, Correnti indicated that management would consider significant measures in order to improve the financial condition of the Company. Earlier this month, the Company suspended its dividend paid on common shares. The Company stated that, in addition to reviewing previous management's plans to sell the Cleveland SBQ operations, it is exploring other options for Cleveland, including the feasibility of continuing operations at Cleveland with billets purchased from qualified third-party suppliers. The Company said that it would also consider joint venture or other opportunities for the Cleveland facility.

Correnti said that, for now, Cleveland will continue operations using billets supplied by the Company's facility in Cartersville, Georgia, and qualified third-party suppliers. The Company will seek to develop long-term supply contracts with qualified billet suppliers that could sustain a profitable high-quality product supply chain to the SBQ markets. "The re-establishment of Cleveland's presence in the high-quality SBQ markets would allow for the restart of operations at Memphis in the future," said Correnti.

Birmingham Steel Corporation operates in the mini-mill sector of the steel industry and conducts operations at facilities located across the United States. The common stock of Birmingham Steel is traded on the New York Stock Exchange under the symbol "BIR."