Birmingham Steel Corporation Reports Second Quarter Results; Results Reflect Impact of Unwinding Discontinued Operations Accounting, Executive Severance and One-Time Proxy Expenses.

Business Editors

BIRMINGHAM, Ala.--(BUSINESS WIRE)--Feb. 17, 2000

Company in Compliance with Debt Covenants

Birmingham Steel Corporation (NYSE: BIR) today announced financial results for the second quarter ended December 31, 1999. The results reflect the unwinding of special accounting treatment previously applied to the Company's SBQ (special bar quality) operations, executive severance and one-time proxy expenses.

For the quarter ended December 31, 1999, the Company reported a net loss of $20,099,000, or $.68 per share. The net loss includes essentially break-even results from the rebar and merchant facilities and losses of $17.9 million from the SBQ operations. In addition, the results reflect pre-tax charges for proxy expenses ($5.9 million), executive severance expenses ($5.1 million), expenses associated with the restructuring of long-term debt agreements ($2.3 million) and start-up expenses at Cartersville ($3.2 million). On a comparable basis, the Company reported a net loss of $5.0 million, or $.17 per share, for the same period of the prior fiscal year.

The Company's new management, which was elected by shareholders in December 1999 after a prolonged proxy contest, announced last month the Company would seek to reestablish its Cleveland, Ohio-based American Steel &Wire operations in the SBQ markets. Prior management had announced its intention to sell the SBQ business and determined that accounting rules required they be treated as discontinued operations under general accepted accounting principles (GAAP). As a result of the decision to continue operations in Cleveland, the Company has determined the SBQ operations no longer qualify as discontinued operations.

In accordance with the accounting treatment applicable to discontinued operations, the Company excluded losses from SBQ operations in its income statement for the first quarter ended September 30, 1999. First quarter SBQ operating losses instead were applied against a balance sheet reserve which had been established in the fourth quarter of the prior fiscal year when the Company began reporting the SBQ businesses as discontinued operations. As a result of unwinding the discontinued operations accounting treatment, the Company's ongoing income statements will now include results from the SBQ operations.

Steel shipments in the current quarter were 759,000 tons, an increase of 8 percent from the 706,000 tons reported in the same period last year. Average steel selling prices, however, were down 7 percent from the same period of the prior year, reflecting the impact of imports on steel selling prices. Net sales were $231.5 million, up 2 percent from $226.9 million in the second quarter of fiscal 1999.

For the six months ended December 31, 1999, the Company reported a net loss of $14,334,000, or $.48 per share. The six-month results included pre-tax charges for proxy expenses ($6.5 million), executive severance expenses ($5.1 million), expenses associated with the restructuring of long-term debt agreements ($2.3 million) and start-up expenses at Cartersville ($7.8 million). On a comparable basis, the Company reported a net loss of $3,942,000, or $.13 per share, for the six months ended December 31, 1998.

Steel shipments for the six months ended December 31, 1999 were 1,545,000 tons, up 3 percent from 1,505,000 tons reported for the same period of the prior fiscal year. Net sales for the most recent period were $466.3 million compared with $497.8 million for the same period last year.

John Correnti, Chairman and Chief Executive Officer of Birmingham Steel, commented, &uot;The financial results for the second quarter reflect the presentation required by GAAP for the unwinding of discontinued operations. Excluding start-up expenses at Cartersville, the rebar and merchant operations reported slightly better than break-even financial results; however, the Cleveland and Memphis operations together generated losses of $17.9 million.&uot; Correnti noted that new management did not join the Company until December, and that second quarter results were generated under the direction of prior management.

Correnti continued, &uot;Since arriving eight weeks ago, new management has taken decisive steps to improve future profitability and position the Company for a turnaround. These steps include suspending operations at Memphis, implementing spending controls, eliminating two layers of operational management and reducing the corporate headquarters staff by 40 people. We also have been working closely with our lenders to insure that new management has the financial resources and operational flexibility necessary to successfully return the Company to profitability.&uot; Correnti said he expects to announce soon modifications to the Company's financing arrangements that will provide sufficient financial support for management's turnaround plans.

Correnti said the Cleveland and Cartersville operations are the most important challenges currently facing new management. &uot;We believe American Steel &Wire can regain its position as the premier wire rod supplier in North America. We are in discussions with qualified third party billet suppliers and expect to finalize supply arrangements shortly,&uot; said Correnti. Correnti noted the key to AS&'s success is to restore the confidence of its customers. &uot;The market wants the AS& product. The problem has been the inability to secure a consistent and reliable supply of quality billets from Memphis. Using qualified purchased billets, we soon should be in a position to reestablish our customer base,&uot; said Correnti.

Correnti also said the Company is close to completion of start-up operations at Cartersville. &uot;Installation of the new electrical controls for the rolling mill was completed last week,&uot; said Correnti. &uot;The new electrical controls will facilitate the ramp-up of production, and we expect to complete initial rollings of all products by the end of June.&uot; Correnti said he was also hopeful the Cartersville facility will reach a break-even operating level by the end of June.

Correnti concluded, &uot;New management is committed to returning Birmingham Steel to a strong financial condition. Already we have made difficult decisions, and will not hesitate to do so in the future. Although we face a challenging task, we are confident we have the operational assets, dedicated workforce and committed management team necessary to be successful.&uot;

Earlier this week, the Company stated it had delayed the filing of its Quarterly Report on Form 10-Q for five days as statutorily permitted in order to allow additional time to prepare its financial statements and related notes to reflect the change in accounting treatment for SBQ operations. The Company also said it had notified its lenders that it is in compliance with its debt covenants.

Birmingham Steel 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 &uot;BIR&uot;.

Except for historical information, the matters described in this press release are forward-looking statements within the meaning of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including economic conditions, market demand factors, equipment breakdowns or failures, Birmingham Steel's success in implementing the restructuring plan, the Company's continued compliance with its financing arrangements and its principal debt agreements, as well as other risks described from time to time in the Company's periodic and special filings with the Securities and Exchange Commission. Any forward-looking statements contained in this document speak only as of the date hereof, and the Company disclaims any intent or obligation to update such forward-looking statements.