RESC 10-K F/Y 2000

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M3AuDfg4YbVAKhTuDaTqku+1F1Czk0NTqTOz/tAuVBZk5uoMBW3a3kidHFoRKkHy BJXQaDrUy4cM2cAqPVfcuQ== 0000084278-01-500007.txt : 20010129 0000084278-01-500007.hdr.sgml : 20010129 ACCESSION NUMBER: 0000084278-01-500007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001031 FILED AS OF DATE: 20010125 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROANOKE ELECTRIC STEEL CORP CENTRAL INDEX KEY: 0000084278 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 540585263 STATE OF INCORPORATION: VA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-02389 FILM NUMBER: 1515294 BUSINESS ADDRESS: STREET 1: 102 WESTSIDE BLVD N W STREET 2: P O BOX 13948 CITY: ROANOKE STATE: VA ZIP: 24038 BUSINESS PHONE: 5403421831 MAIL ADDRESS: STREET 1: 102 WESTSIDE BLVD N W CITY: ROANOKE STATE: VA ZIP: 24017 10-K 1 resc00-10k1.htm FORM 10-K FOR 2000 RESC RESC 10-K F/Y 2000

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended October 31, 2000

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-2389

ROANOKE ELECTRIC STEEL CORPORATION

(Exact name of Registrant as specified in its charter)

	Virginia	54-0585263
	(State or other jurisdiction of	(I.R.S. Employer
	incorporation or organization)	Identification No.)

	P.O. Box 13948, Roanoke, Virginia	24038-3948
	(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (540) 342-1831

Securities registered pursuant to Section 12(b) of the Act: None

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

Common Stock, No Par Value

(Title of class)

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

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)

State the aggregate market value of the voting stock held by nonaffiliates of the Registrant.

Aggregate market value at December 29, 2000: $103,464,771

Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of December 29, 2000.

10,901,063 Shares outstanding

Portions of the following documents are incorporated by reference:

(1) 2000 Annual Report to Stockholders in Parts II and IV.

(2) Proxy Statement dated December 27, 2000 in Part III.

PART I

ITEM 1. BUSINESS

(a) General Development of Business.
During the fiscal year ended October 31, 2000, the Registrant continued for the most part to operate its business as it has the past four years by manufacturing merchant steel bar products, fabricating open-web steel joists and concrete reinforcing steel, and extracting scrap steel and other materials from junked automobiles. Roanoke Technical Treatment & Services, Inc., a Roanoke, Virginia subsidiary, was formed in 1990 to license a process for the treatment of electric arc furnace dust, but the opportunity never materialized. During fiscal year 1994, the Registrant's auto shredding subsidiary, Shredded Products Corporation, completed construction of a modern facility in Rocky Mount, Virginia, and in November 1994 began operations at this locality, at a total investment in excess of $8,000,000 for plant and equipment. This facility, with its own landfill, is providing considerable savings in waste disposal costs. In addition, cost savings and better metal recoveries are being achieved through the use of the more technologically advanced equipment.

During the later part of 1996, the Registrant, at its main plant, completed the installation of a new ladle refining furnace and the upgrade of an electric arc furnace, for approximately $17,000,000. With this new state-of-the-art equipment in operation, the Registrant has increased raw steel production, improved quality, reduced production costs and improved operating efficiencies. In January 1996, Socar, Inc. , a South Carolina subsidiary, sold its long-time idle plant in Bucyrus, Ohio to the unaffiliated manufacturer who had been leasing the facility for several years under a lease-purchase agreement, for a final settlement price of $130,000.

On December 16, 1998, the Registrant acquired all of the outstanding common shares of Steel of West Virginia, Inc. ("SWVA"), a Huntington, West Virginia steel manufacturer, upon completion of its cash tender offer. The consideration given was approximately $117.1 million, including the assumption of approximately $52.3 million of indebtedness, which translates into $10.75 net per SWVA share, for approximately 6,028,000 shares on a fully-diluted basis. Upon merger, SWVA became a wholly-owned subsidiary of Roanoke Electric Steel Corporation, and each share of SWVA common stock not purchased in the offer (approximately 3.6% of SWVA's outstanding shares) was converted, subject to appraisal rights, into the right to receive $10.75 in cash, without interest. On the date of acquisition the Registrant closed on $180,000,000 of secured credit facilities with a syndicate of four banks. The facilities are comprised of a $150,000,000 seven year term loan and a $30,000,000 five year revolver. The term loan was used to purchase all of the outstanding capital stock of SWVA, and refinance both the existing term debt of the Registrant and most of SWVA's bank debt assumed through the merger. SWVA operates a mini-mill in Huntington, West Virginia, and steel fabrication facilities in Huntington and Memphis, Tennessee, while custom designing and manufacturing special steel products principally for use in the construction of truck trailers, industrial lift trucks, off-highway construction equipment (such as bulldozers and graders), manufactured housing, guardrail posts and mining equipment. The Registrant and SWVA do not generally compete as regards customers and products. The acquisition was accounted for as a purchase. Accordingly, the results of operations and cash flows were reflected in the consolidated financial statements from the date of acquisition, and the acquired assets and liabilities were included in the 1999 consolidated balance sheet at values based on a purchase price allocation, rendered through appraisals and other evaluations.

The other subsidiaries of the Registrant, John W. Hancock, Jr., Inc. and RESCO Steel Products Corporation, have had no material changes in operations or in the mode of conducting their business for the past five years. John W. Hancock, Jr. founded both the Hancock joist subsidiary and its parent, Roanoke Electric Steel Corporation, and served on the Registrant's Board of Directors as Chairman of the Executive Committee until his death in March 1994.

(b) Financial Information about Industry Segments.
The Registrant's business consists of one industry segment or line of business, which is the extracting of scrap metal from discarded automobiles and the manufacturing, fabricating and marketing of merchant steel bar products, specialty steel sections, reinforcing bars, open-web steel joists and billets. The industry segment consists of three classes of products - merchant steel products and specialty steel sections, fabricated bar joists and reinforcing bars and billets.

FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
AND CLASSES OF PRODUCTS OR SERVICES

	2000	1999 *	1998 *
Sales to Unaffiliated Customers:
Merchant Steel and Specialty
Steel Sections	$228,202,644	$210,850,231	$116,226,463
Bar Joists and Rebar	122,549,851	125,854,046	121,000,869
Billets	21,975,613	36,258,673	57,976,642
Total Consolidated Sales	$372,728,108	$372,962,950	$295,203,974
Net Earnings from Operations	$14,061,449	$22,479,179	$19,760,570
Identifiable Assets	$339,678,909	$352,045,812	$189,996,218

*Restated for change in method of accounting for certain inventories.

(c) Narrative Description of Business.
(1) (i) The Registrant manufactures merchant steel products consisting of Angles, Plain Rounds, Flats, Channels and Reinforcing Bars of various lengths and sizes. The principal markets for the Registrant's products are steel fabricators and steel service centers. The products are distributed directly to customers from orders solicited by a paid sales staff of the Registrant.

The Registrant's subsidiary, Shredded Products Corporation, is involved in the extraction of scrap iron and steel and other metals from junked automobiles and other waste materials. Almost all of the ferrous material is used by the Parent as raw materials. The non-ferrous metals are sold to unrelated purchasers.

Two other subsidiaries, John W. Hancock, Jr., Inc. and Socar, Inc., are engaged in the manufacturing of long- and short-span steel joists. Joists are open-web steel horizontal supports for floors and roofs, used primarily in the construction of commercial and industrial buildings such as shopping centers, factories, warehouses, hospitals, schools, office buildings, nursing homes, and the like. Joists are cheaper and lighter than structural steel or reinforced concrete. The joists are distributed by these subsidiaries to their customers from orders solicited by manufacturer's representatives and pursuant to successful bids placed directly by the companies.

The Registrant's subsidiary, RESCO Steel Products Corporation, fabricates concrete reinforcing steel by cutting and bending rebars to contractors' specifications. The rebars are distributed to contractors from orders solicited by a paid sales staff and pursuant to successful bids placed directly by the subsidiary.

The Registrant's subsidiary, Steel of West Virginia, Inc., operates both a steel mini-mill which produces specialty steel sections, and fabrication facilities which add finishing operations to create custom-designed products placed directly into customers' assembly lines. The niche markets supplied with these cross-member and sub-frame section of products include truck trailers, industrial lift trucks, guardrail posts, manufactured housing, off-highway construction equipment, and mining equipment. These products are marketed by senior management and in-house sales representatives of SWVA, whose sales efforts cover all of the continental United States, and to a very small degree, certain foreign markets.

(ii) The Registrant has not in fiscal 2000 introduced a new product or begun to do business in a new industry segment that will require the investment of a material amount of assets or that otherwise is material.

(iii) The Registrant's main raw material, scrap steel, is supplied for the most part by scrap dealers within a 250 mile radius of the mill. This raw material is purchased through the David J. Joseph Company, scrap brokers. The Shredded Products subsidiary supplies 10,000 to 15,000 tons of scrap per month. Although scrap is generally available to the Registrant, the price of scrap steel is highly responsive to changes in demand, including demand in foreign countries as well as in the United States. The ability to maintain satisfactory profit margins in times when scrap is relatively high priced is dependent upon the levels of steel prices, which are determined by market forces. Alloys and other materials needed for the melting process are provided by various domestic and foreign companies.

Shredded Products Corporation often experiences difficulty in purchasing scrap automobiles at a satisfactory level. Competition from an increasing number of shredding operations and reluctance by dealers to sell scrap automobiles due to market conditions are the main causes. High offering prices generally increase the supply; however, the increased cost to produce sometimes is very competitive with the price of similar scrap that can be purchased on the outside.

Substantially all of John W. Hancock, Jr., Inc.'s steel components are purchased from the Parent, which is located conveniently nearby and, therefore such components are generally available to the Company as needed.

RESCO Steel Products Corporation purchases most of its steel components from suppliers within its market area, determined mainly by freight cost. Such components would be generally available to the Company, since the Parent could produce and supply this raw material, as needed.

Socar, Inc. receives most of its raw steel material from the Parent and other nearby suppliers, the determinant usually being freight cost. The availability of raw materials is not of major concern to the Company, since the Parent could supply most of its needs.

Steel of West Virginia, Inc., like the parent, uses scrap steel as its main raw material. Even though the purchase of steel scrap is subject to market conditions largely beyond its control, the Company is located in a scrap surplus region, and therefore typically maintains less than a one month supply of scrap, which keeps inventory costs to a minimum. Although one scrap dealer supplies 25% to 30% of SWVA's requirements, the Company believes that a number of adequate sources of scrap and other raw materials that it uses are readily available. SWVA has historically been successful in passing on scrap cost increases through price increases, however, the effect of market price competition has limited the Company's ability to increase prices.

(iv) The Registrant currently holds no patents, trade marks, licenses, franchises or concessions that are material to its business operations.

(v) The business of the Registrant is not seasonal.

(vi) The Registrant does not offer extended payment terms to its customers nor is it normally required to carry significant amounts of inventory to meet rapid delivery requirements of customers; although, at times market conditions have required the stockpiling of popular bar products for rapid delivery. Working capital practices generally remain constant during the course of business except when the Registrant determines it to be advantageous to stockpile raw materials due to price considerations.

(vii) During fiscal year 2000, sales (tons) by the Registrant to Steel of West Virginia, Inc., John W. Hancock, Jr., Inc., Socar, Inc. and RESCO Steel Products Corporation, wholly-owned subsidiaries, were approximately 16%, 10%, 7% and less than 1% of the Registrant's total sales (tons), respectively. The largest nonaffiliated customer purchased approximately 8% of total sales (tons)--3% of total sales (dollars), significantly down from recent years, as poor market conditions in the steel industry contributed to this customer's worsened financial condition and eventual bankruptcy. The bankruptcy resulted in a charge to bad debts of $2.6 million and contributed to lower billet production levels. Poor market conditions prevented placing the lost tonnage with alternate sources. However, under normal market conditions, we would not expect the loss of this customer to have a materially adverse effect on the Registrant and its subsidiaries taken as a whole. In addition, considerably more billet tons were used internally by SWVA, which helped to mitigate the lost billet sales.

(viii) The Registrant is of the opinion that the amount of its backlog is not generally material to an understanding of the business. All backlog is shipped within the current fiscal year.

(ix) None of the business of the Registrant is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the Government.

(x) The Registrant competes with steel-producing mills of similar size operative within its market region and also larger mills producing similar products. The market region in which the Registrant sells its products mainly consists of the majority of states east of the Mississippi River. Price, including transportation cost, is the major determinant in securing business. Even though market conditions and backlogs remained strong for much of 1995, shipments were flat due to customers' inventory reductions, while improved selling prices were attributable to higher raw material costs and rising demand, although by year-end prices fell slightly. Demand and backlogs continued high through 1996, allowing for increased bar product shipments, in spite of increased competition, which forced sharp reductions in selling prices throughout the industry. As competition eased during 1997, bar product shipments increased with higher demand, causing improvements in order levels, backlogs and prices. Strong business conditions kept bar prices up during fiscal 1998, in spite of the temporary drop in merchant bar shipments, caused by excess inventories at steel service centers. On December 16, 1998, the Registrant acquired 100% of the capital stock of Steel of West Virginia, Inc. ("SWVA"), a steel manufacturer, and 1999 results reflect the operations of SWVA from the date of acquisition. The 1998 financial statements have not been restated to include SWVA because the acquisition was treated as a purchase for accounting purposes. Consequently, the significant increase in 1999 sales was due, primarily, to the inclusion of SWVA's revenues in consolidated sales. Increased competition from foreign and domestic producers prompted industry-wide list price reductions for bar products at the beginning of fiscal 1999, and prices had not fully recovered by year end. Excess inventories at steel service centers and a shortage of transportation equipment contributed to the slight reduction in tons shipped of bar products as bar markets were generally good throughout the year. Sales for 2000 were flat due, again, to the acquisition of SWVA. Sales for the current year included SWVA's revenues for the entire period, whereas sales for 1999 included only the portion of SWVA's revenues from the date of acquisition. Average selling prices for bar and specialty products increased slightly for 2000, but list prices had fallen sharply by the end of the year as a result of increased foreign and domestic competition. The increased competition and price uncertainty reduced order entry and backlogs and caused decreases in both bar and specialty products shipments.

The joist business is highly competitive. Due to similarity of product, relatively small price differences are often determinative in placing business. Ability to meet the customer's time requirements for delivery also is important in securing business. Competing successfully becomes more difficult with the distance to point of delivery due to transportation costs. Reduced competition and increased activity in 1995 led to higher shipment levels within the construction industry, as demand and increased raw material costs forced selling prices higher. Generally strong business conditions within the commercial construction industry continued during 1996 to bring improvements to selling prices for fabricated products, while shipment levels were relatively flat, as weather related construction delays offset otherwise strong demand. Even though market conditions continued to be favorable during 1997, competition within the industry forced lower selling prices for fabricated products, and also kept shipment levels flat. Continued favorable market conditions in the construction industry during fiscal 1998 led to the increased shipments and level selling prices for fabricated products. Competitive conditions within the commercial construction industry generally impact selling prices and shipment levels of fabricated products and were relatively favorable during 1999 as reflected in the higher selling prices. The reduced shipments were caused by minor factors other than competition as business conditions continued strong and backlogs remained high. In 2000, the decline in fabricated products selling prices and shipments was caused by increased competition within the construction industry, even though business conditions continued strong and backlogs were high. The decline in shipments was also affected by shortages of structural steel components.

Billets are semi-finished products used by the Registrant, and the SWVA subsidiary, in their rolling mill processes to manufacture various merchant bar products and specialty steel sections. Excess billet production is sold to nonaffiliated customers who further fabricate the billets for various end uses. Improved market conditions and increased domestic demand resulted in improved 1995 billet shipments, as export markets remained highly competitive. Higher scrap steel costs, which normally trigger higher prices, and improved product mix together caused billet selling prices to climb. A planned melt shop shutdown during 1996 to install a new ladle furnace and upgrade an electric arc furnace was unexpectedly prolonged due to problems with construction and installation, resulting in a sharp decline in billet production and causing a significant reduction in billet shipments for the year, while the highly competitive export market remained in effect. Billet selling prices declined with a downward trend in scrap prices. Increased billet shipments for 1997 resulted both from increased production, which hampered shipments in 1996, and improved domestic demand, as export markets remained very competitive. Lower scrap prices continued to keep billet prices down. The significant increase in billet shipments for fiscal 1998 was attributable to record raw steel production, coupled with unprecedented demand. Billet prices were flat due to relatively unchanged scrap prices. A dramatic change in our market for billets during 1999 brought diminished demand and a significant decline in tons shipped. Billet selling prices declined with sharp reductions in scrap prices. The dramatic reduction in billet shipments, again in 2000, and the continued drop in market conditions was attributable to the financial condition and eventual bankruptcy of a major customer. Shipments to this customer were purposely curtailed to reduce our exposure to bad debts. Due to market conditions, we were not able to place the lost tonnage with alternate sources, other than the tons used internally by SWVA. Billet selling prices were higher due to increased scrap prices.

(xi) During the last three fiscal years, the Registrant was not involved in any material research and development activities.

(xii) The Registrant and SWVA are subject to federal, state and local environmental laws and regulations concerning, among other matters, wastewater discharge, air emissions and furnace dust disposal. As with similar mills in the industry, the Registrant's, and SWVA's, furnaces are classified as generating hazardous waste because they produce certain types of dust containing lead, zinc and cadmium. Near the end of fiscal year 1996, the Registrant began treating a portion of its electric arc furnace dust, a hazardous substance, utilizing its own stabilization process. Significant savings are being realized as this process replaces off-site and more expensive treatment methods that had been used through a contract with an approved waste disposal firm. SWVA currently collects and handles its furnace waste through contracts with a company which reclaims, from the waste dust, certain materials and recycles or disposes of the remainder. The Registrant believes it is in substantial compliance with applicable federal, state and local regulations. However, future changes in regulations may require expenditures which could adversely affect earnings in subsequent years.

The Registrant has constructed over the years pollution control equipment at a net aggregate cost of over $9,900,000. Annual operating expenses and depreciation of all pollution control equipment and waste disposal costs are in excess of $3,900,000 in the aggregate. The Registrant is expected to spend less than $1,000,000 for additional pollution control and waste disposal equipment and facilities during subsequent fiscal years. Adoption of the Clean Air Act Amendments of 1990, or any other environmental concerns, is not anticipated to have a materially adverse effect on the Registrant's operations, capital resources or liquidity, nor should any incremental increase in capital expenditures occur due to the Act.

See Note 7, "Commitments and Contingent Liabilities", in Notes to Consolidated Financial Statements contained in the Registrant's 2000 Annual Report to Stockholders, filed as an Exhibit to this Form 10-K.

(xiii) At October 31, 2000, the Registrant employed 528 persons at its Roanoke plant, with no employment at its Salem division, idle since mid-1991. The Registrant's subsidiaries, Steel of West Virginia, Inc., John W. Hancock, Jr., Inc., Socar, Inc., Shredded Products Corporation and RESCO Steel Products Corporation employed 586, 320, 270, 64 and 43 persons, respectively.

(d) Financial Information about Foreign and Domestic Operations and Export Sales.
When the Registrant's billet production exceeds its required needs, this semi-finished product is offered for sale. During past years, a portion of the excess billets has been sold to brokers who represent foreign purchasers. During fiscal years 1998, 1999 and 2000, the Registrant did not make any foreign sales of excess billets, however, the SWVA subsidiary sold a small percentage of its products to foreign markets during these years. The information required by this paragraph by geographical area, as to foreign and domestic operations, is not provided since it is identical to the table in paragraph (b) with virtually all information pertaining to the United States.

ITEM 2. PROPERTIES
The Registrant owns 72 acres situated in the City of Roanoke, Virginia, which comprises its main plant, of which 25 acres are used to provide 364,500 square feet of manufacturing space with an annual billet capacity of approximately 650,000 tons and rolling mill capacity of 400,000 tons. A 30 acre site is owned in Salem, Virginia, of which 10 acres were used to provide 51,355 square feet of manufacturing space, until March 1991, when the plant was idled. The Registrant acquired in 1991 a 447 acre tract of land in Franklin County, Virginia, 100 acres of which were transferred to Shredded Products Corporation in a move of shredding operations from its Montvale location. Part of this new Shredded Products property is being used as an approved industrial landfill. The remaining 347 acres of this land, 113 acres of which were sold in 1995, 1997, 1998 and 1999, is being marketed as an industrial park for Franklin County.

Shredded Products Corporation operates in both Montvale and Rocky Mount, Virginia. The Montvale plant is situated on a 75 acre site owned by the Registrant, approximately 20 acres of which are regularly used in its scrap processing operation, with an annual production capacity of approximately 24,000 tons. The Rocky Mount facility is located on a 100 acre site owned by Shredded Products Corporation, partially consisting of a 25 acre industrial landfill used for the disposal of its auto fluff, and another 25 acres of which are regularly used in its shredding operation, with an annual production capacity of approximately 150,000 tons.

John W. Hancock, Jr., Inc. is located in Roanoke County near Salem, Virginia. The plant is situated on a 37 acre site owned by Hancock, Inc., 17 acres of which are regularly used in its operations. Buildings on the site contain 131,614 square feet of floor space.

Socar, Inc. and its subsidiary are located in Florence, South Carolina, and in Continental, Ohio. The Florence facility is located on a 28 acre site owned by Socar, Inc., 16 acres of which are regularly used in its operations. Buildings on the site contain 93,359 square feet of floor space. The plant located on a 32 acre site in Continental, Ohio, owned by Socar, Inc., has 86,400 square feet of floor space in manufacturing buildings,situated on 8 acres regularly used in its operations.

RESCO Steel Products Corporation operates from a building containing 43,340 square feet of floor space, located in Salem, Virginia, on a 7 acre site owned by RESCO.

Steel of West Virginia, Inc. and its subsidiary are located in Huntington, West Virginia and in Memphis, Tennessee. The Huntington facility is located on a 42 acre site owned by SWVA, most of which are regularly used in its operations. Buildings on the site contain 558,175 square feet of manufacturing space with an annual billet capacity of approximately 280,000 tons and rolling mill capacity of 300,000 tons. The plant located in Memphis, Tennessee owned by SWVA operates in 41,000 square feet of manufacturing space on approximately 4 acres.

The various buildings are of modern design, well-maintained, and suitable and adequate for the requirements of the business.

ITEM 3. LEGAL PROCEEDINGS
None.
See Note 7, "Commitments and Contingent Liabilities", in Notes to Consolidated Financial Statements contained in the Registrant's 2000 Annual Report to Stockholders, filed as an Exhibit to this Form 10-K.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of stockholders during the fourth quarter of the fiscal year covered.

EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following list is included as an unnumbered Item in Part I of this report in lieu of being included in the Proxy Statement for the Annual Meeting of Shareholders to be held on February 20, 2001.

The names, ages and positions of all of the executive officers of the Registrant as of October 31, 2000 are listed below with their business experience with the Registrant for the past five years. Officers are elected annually by the Board of Directors at the first meeting of directors following the annual meeting of shareholders. There are no family relationships among these officers, nor any agreement or understanding between any officer and any other person pursuant to which the officer was selected.

Thomas J. Crawford, 45, has served as Secretary of the Registrant since January 1985 and as Vice President-Administration since February 1998; prior thereto, he had served as Assistant Vice President since January 1993, as Manager of Inside Sales since 1984 and as a Sales Representative since 1977. He has 23 years of service with the Registrant.

Timothy R. Duke, 49, has served as President and Chief Executive Officer of Steel of West Virginia, Inc. ("SWVA"), a wholly-owned subsidiary of the Registrant, since July 1997; prior thereto, he had served as President and Chief Operating Officer of SWVA since October 1996 and as Vice President, Treasurer and Chief Financial Officer of SWVA since February 1988. He has 13 years of service with SWVA.

Donald R. Higgins, 55, has served as Vice President - Sales of the Registrant since January 1986; prior thereto, he had served as General Sales Manager since 1984 and Assistant Sales Manager since 1978. He has 35 years of service with the Registrant.

John E. Morris, 59, has served as Vice President - Finance of the Registrant since October 1988 and as Assistant Treasurer since 1985; prior thereto, he had served as Controller since 1971. He has 29 years of service with the Registrant.

Donald G. Smith, 65, has served as Chairman of the Board of the Registrant since February 1989, as Chief Executive Officer since November 1986, as President and Treasurer since January 1985 and as Director of the Registrant since April 1984; prior thereto, he had served as Vice President - Administration since September 1980 and as Secretary since January 1967. He has 43 years of service with the Registrant.

FORWARD-LOOKING STATEMENTS
From time to time, the Company may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include economic and industry conditions, availability and prices of supplies, prices of steel products, competition, governmental regulations, interest rates, inflation, labor relations, environmental concerns, and others.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The specified information required by this item is incorporated by reference to the information under the heading "Stock Activity" in the 2000 Annual Report to Stockholders. The Registrant did not during fiscal year 2000 make any sale of securities not registered under the Securities Act of 1933.

ITEM 6. SELECTED FINANCIAL DATA
The specified information required by this item is incorporated by reference to the information under the heading "Selected Financial Data" in the 2000 Annual Report to Stockholders.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The specified information required by this item is incorporated by reference to the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2000 Annual Report to Stockholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The specific information required by this item is incorporated by reference to the information under the headings "Notes to Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2000 Annual Report to Stockholders.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The specified information required by this item is incorporated by reference to the information under the headings "Independent Auditors' Report", "Consolidated Financial Statements" and "Notes to Consolidated Financial Statements" in the 2000 Annual Report to Stockholders.

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
The specified information required by this item is incorporated by reference to the information under the heading "Information Concerning Directors and Nominees" in the Proxy Statement dated December 27, 2000, as filed with the Commission, or is included under the heading "Executive Officers of the Registrant" in Part I of this 10-K filing. The disclosure required by Item 405 of Regulation S-K is not applicable.

ITEM 11. EXECUTIVE COMPENSATION
The specified information required by this item is incorporated by reference to the information under the headings "Executive Compensation", "Compensation and Stock Option Committee Report on Executive Compensation", "Performance Graph" and "Board of Directors and Committees -- Director Compensation" in the Proxy Statement dated December 27, 2000, as filed with the Commission.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The specified information required by this item is incorporated by reference to the information under the headings "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" in the Proxy Statement dated December 27, 2000, as filed with the Commission.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.

PART IV

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

          (a) The following documents are filed as a part of this report:
               (1) The following financial statements filed as part of the 2000 Annual Report to Stockholders are incorporated herein by reference:
                         (a) Consolidated Balance Sheets
                         (b) Consolidated Statements of Stockholders' Equity
                         (c) Consolidated Statements of Earnings
                         (d) Consolidated Statements of Cash Flows
                         (e) Notes to Consolidated Financial Statements
                         (f) Independent Auditors' Report

Individual financial statements of the Registrant are not being filed because the Registrant is primarily an operating company and its subsidiaries do not have minority equity interests and/or long-term indebtedness (including current portions) to any person outside the consolidated group (excluding long-term indebtedness which is collateralized by the Registrant by guarantee, pledge, assignment or otherwise), in amounts which together exceed 5 percent of the total consolidated assets. > (2) Pursuant to Regulation S-K the following Exhibit Index is added immediately preceding the exhibits filed as part of the subject Form 10-K:

EXHIBIT INDEX

EXHIBIT NO.	EXHIBIT	PAGE

(3)	(a) Articles of Incorporation, as amended	20
		Incorporated by reference

	(b) By-Laws, as amended	21
		Incorporated by reference

(4)	Instruments Defining the Rights of Security Holders	22

(10)	*(a) Executive Officer Incentive Arrangement	23
		Incorporated by reference

	*(b) Roanoke Electric Steel Corporation
	Employees' Stock Option Plan	23
		Incorporated by reference
	*(c) Roanoke Electric Steel Corporation
	Non- Employee Directors' Stock Option Plan	23
		Incorporated by reference

	*(d) Roanoke Electric Steel Corporation Severance Agreements	23
		Incorporated by reference

	*(e) SWVA Collective Bargaining Agreement	23
		Incorporated by reference

	*(f) SWVA Employee Agreement with Timothy R. Duke	23
		Incorporated by reference

(13)	2000 Annual Report to Stockholders	24

(18)	Letter Regarding Change in Accounting Principle	25
		Incorporated by reference

(21)	Subsidiaries of the Registrant	26

(23)	Independent Auditor's Consent	27

(27)	Financial Data Schedule	28

(b) Reports on Form 8-K.

There were no reports on Form 8-K filed by the Registrant during the last quarter of the fiscal period covered by the Annual Report.

* Management contract, or compensatory plan or agreement, required to be filed as an Exhibit to this Form 10-K pursuant to Item 14 (c).

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.

	ROANOKE ELECTRIC STEEL CORPORATION
	Registrant

	By: Donald G. Smith
	Donald G. Smith, Chairman, President,
	Treasurer and Chief Executive Officer
	(Principal Executive Officer, Principal
	Financial Officer and Director)

Date: January 16, 2001

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.

	Name and Title	Date

	Donald G. Smith	January 16, 2001
	Donald G. Smith, Chairman, President,
	Treasurer and Chief Executive Officer
	(Principal Executive Officer, Principal
	Financial Officer and Director)

	John E. Morris	January 16, 2001
	John E. Morris, Vice President - Finance
	and Assistant Treasurer (Principal
	Accounting Officer)

	George B. Cartledge	January 16, 2001
	George B. Cartledge, Jr. Director

	Thomas L. Robertson	January 16, 2001
	Thomas L. Robertson Director

	Charles I. Lunsford, II	January 16, 2001
	Charles I. Lunsford, II Director

	Paul E. Torgersen	January 16, 2001
	Paul E. Torgersen Director

EXHIBIT NO. 3 (a)

ARTICLES OF INCORPORATION, AS AMENDED

Incorporated by reference to the previously filed Form 10-K for October 31, 1996 on file in the Commission office.

EXHIBIT NO. 3 (b)

BY-LAWS, AS AMENDED

Incorporated by reference to the previously filed Form 10-Q for January 31, 1999 on file in the Commission office.

EXHIBIT NO. 4

INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS

Pursuant to Item 601(b) (4) (iii) of Regulation S-K, the Registrant hereby undertakes to furnish to the Commission, upon request, copies of the instruments defining the rights of holders of the long-term debt of Roanoke Electric Steel Corporation and its subsidiaries described in its 2000 Annual Report to Stockholders and Form 10-K.

EXHIBIT NO. 10

*(a)
EXECUTIVE OFFICER INCENTIVE ARRANGEMENT

Incorporated by reference to the previously filed Form 10-K for October 31, 1999 on file in the Commission office.

* (b)
ROANOKE ELECTRIC STEEL CORPORATION
EMPLOYEES' STOCK OPTION PLAN

Incorporated by reference to the previously filed Form 10-K for October 31, 1998 on file in the Commission office.

*(c)
ROANOKE ELECTRIC STEEL CORPORATION
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

Incorporated by reference to the previously filed Form 10-K for October 31, 1997 on file in the Commission office.

* (d)
ROANOKE ELECTRIC STEEL CORPORATION SEVERANCE AGREEMENTS

Incorporated by reference to the previously filed Form 10-K for October 31, 1996 on file in the Commission office.

* (e)
SWVA COLLECTIVE BARGAINING AGREEMENT

Incorporated by reference to the previously filed Form 10-Q for July 31, 1999 on file in the Commission office.

* (f)
SWVA EMPLOYMENT AGREEMENT WITH TIMOTHY R. DUKE

Incorporated by reference to the previously filed Form 10-Q for January 31, 1999 on file in the Commission office.

* Management contract, or compensatory plan or agreement, required to be filed as an Exhibit to this Form 10-K pursuant to Item 14 (c).

EXHIBIT NO. 13

2000 ANNUAL REPORT TO STOCKHOLDERS

EXHIBIT NO. 18

LETTER REGARDING CHANGE IN ACCOUNTING PRINCIPLE

Incorporated by reference to the previously filed Form 10-Q for January 31, 2000 on file in the Commission office.

EXHIBIT NO. 21

SUBSIDIARIES OF THE REGISTRANT

	Registrant:	Roanoke Electric Steel Corporation
	Subsidiary of Registrant	Organized Under Jurisdiction of
	Shredded Products Corporation	Virginia
	John W. Hancock, Jr., Inc.	Virginia
	Socar, Incorporated	South Carolina
	RESCO Steel Products Corporation	Virginia
	Roanoke Technical Treatment and Services, Inc.	Virginia
	Steel of West Virginia, Inc.	Delaware

EXHIBIT NO. 23

INDEPENDENT AUDITORS' CONSENT

Roanoke Electric Steel Corporation:

We consent to the incorporation by reference in Registration Statement Nos. 33-27359, 33-35243, 333-25299 and 333-49525 of Roanoke Electric Steel Corporation on Form S-8 of our report dated November 17, 2000, incorporated by reference in the Annual Report on Form 10-K of Roanoke Electric Steel Corporation for the year ended October 31, 2000.

Deloitte & Touche LLP

Winston-Salem, North Carolina

January 16, 2001

EXHIBIT NO. 27

FINANCIAL DATA SCHEDULE

EX-13 2 a-r2000.txt ANNUAL REPORT FOR 2000 - RESC ANNUAL REPORT 2000 ROANOKE ELECTRIC STEEL [GRAPHIC] OUR 45TH YEAR Roanoke Electric Steel Corporation is one of the nation's oldest, state-of-the-art mini-mills, and Fiscal Year 2000 marked the anniversary of our 45th year in business. Over those years, we have established ourselves as an industry leader in performance and customer satisfaction. We have attained significant growth as a result of capital expenditures and key acquisitions. Today, we have annual melting capacity of 900,000 tons, rolling mill capacity of 700,000 tons, fabrication capacity in excess of 120,000 tons and over 1800 employees performing in 9 plants located in Virginia, South Carolina, Ohio, West Virginia and Tennessee. 2000 Highlights [ ] Net earnings of $14,061,449 [ ] Earnings per share of $1.28 [ ] Sales of $372,728,108 [ ] Strong performance by fabricating subsidiaries [ ] Working capital of $111,444,079 [ ] Total assets of $339,678,909 [ ] Record stockholders' equity of $144,721,829 [ ] 10.0% return on average equity [ ] $6,766,838 returned to shareholders in dividends and repurchases of stock Officers Donald G. Smith, 65 Chairman, President, Treasurer and Chief Executive Officer 43 years of service J. Kenneth Charles, III, 47 President, Socar, Inc. 23 years of service Timothy R. Duke, 49 President and Chief Executive Officer, Steel of West Virginia, Inc. 13 years of service James F. Garlow, 64 President, John W. Hancock, Jr., Inc. 39 years of service H. James Akers, Jr., 61 Vice President, Melt Operations 44 years of service Daniel L. Board, 63 Vice President, Purchasing 40 years of service Thomas J. Crawford, 45 Vice President Administration and Secretary 23 years of service Donald R. Higgins, 55 Vice President-Sales 35 years of service John E. Morris, 59 Vice President-Finance and Assistant Treasurer 29 years of service Board Of Directors Frank A. Boxley President, Southwest Construction, Inc. George B. Cartledge, Jr. Chairman, Grand Home Furnishings, Inc. Timothy R. Duke President and Chief Executive Officer, Steel of West Virginia, Inc. George W. Logan Chairman, Valley Financial Corporation Charles I. Lunsford, II Retired Chairman, Charles Lunsford Sons & Associates Thomas L. Robertson President and Chief Executive Officer, Carilion Health System Donald G. Smith Chairman, President, Treasurer and Chief Executive Officer, Roanoke Electric Steel Corporation Paul E. Torgersen Retired President, Virginia Polytechnic Institute and State University John D. Wilson Retired President, Washington & Lee University Committees Of The Board Executive: D. G. Smith, Chairman; T. L. Robertson, P. E. Torgersen, G. B. Cartledge, Jr. Audit: T. L. Robertson, Chairman; G. W. Logan, P. E. Torgersen Profit Sharing: C. I. Lunsford, II, Chairman; D. G. Smith, J. E. Morris Compensation and Stock Option: G. B. Cartledge, Jr., Chairman; F. A. Boxley, C. I. Lunsford, II, J. D. Wilson Corporate Information Annual Meeting The 2001 Annual Meeting of Shareholders will be held at 10:00 a.m. on Tuesday, February 20, 2001 at the American Electric Power Company Building, 40 Franklin Road, S. W., Roanoke, Virginia General Counsel Woods, Rogers & Hazlegrove P.L.C. Roanoke, Virginia Independent Auditors Deloitte & Touche LLP Winston-Salem, North Carolina Transfer Agent EquiServe Trust Company, N.A. Boston, Massachusetts 1-800-633-4236 Registered and overnight mail: EquiServe Trust Company, N.A. 150 Royall Street Canton, MA 02021 All other correspondence: EquiServe Trust Company, N.A. P. O. Box 8218 Boston, MA 02266-8218 Dividend Reinvestment Plan Roanoke Electric Steel offers its shareholders a dividend reinvestment plan through its transfer agent. For more information, please contact the transfer agent or Thomas J. Crawford, Vice President Administration and Secretary. Stock Listing Nasdaq National Market Symbol: RESC Financial Information Analysts, investors and others seeking financial information are requested to contact: John E. Morris, Vice President-Finance or Thomas J. Crawford, Vice President Administration and Secretary. Copies of the Corporation's Annual Report or Form 10-K may be obtained without charge by writing to Mr. Crawford at the address below. Corporate Office 102 Westside Boulevard P. O. Box 13948 Roanoke, Virginia 24038-3948 540-342-1831 ROANOKE ELECTRIC STEEL CORPORATION Steel Mini-mills Parent: Roanoke Electric Steel Corporation 102 Westside Boulevard NW P. O. Box 13948 Roanoke, Virginia 24038-3948 Telephone: 540-342-1831 Sales: 800-753-3532 Fax: 540-342-6610 Web site: www.roanokesteel.com E-mail: sales@roanokesteel.com Subsidiary: Steel of West Virginia, Inc. 17th Street & 2nd Avenue P. O. Box 2547 Huntington, West Virginia 25726-2547 Telephone: 304-696-8200 Sales: 800-624-3492 Fax: 304-529-1479 Web site: www.swvainc.com E-mail: steel@swvainc.com Steel Fabricators Subsidiaries: John W. Hancock, Jr., Inc. 2535 Duiguids Lane P. O. Box 3400 Salem, Virginia 24153 Telephone: 540-389-0211 Sales: 800-336-5773 Fax: 540-389-0378 Web site: www.hancockjoist.com E-mail: jwhmail@hancockjoist.com Marshall Steel, Inc. 1555 Harbor Avenue P. O. Box 13463 Memphis, Tennessee 38113-0463 Telephone: 901-946-1124 Fax: 901-946-5676 Web site: www.swvainc.com E-mail: marshallsteel@aol.com RESCO Steel Products Corporation 438 Kessler Mill Road Salem, Virginia 24153 P. O. Box 13948 Roanoke, Virginia 24038-3948 Telephone: 540-387-0284 Sales: 800-868-0628 Fax: 540-389-4971 E-mail: jimcarr@rescosteel.com Socar, Inc. 2527 East National Cemetery Road P. O. Box 671 Florence, South Carolina 29503 Telephone: 843-669-5183 Sales: 800-669-5183 Fax: 843-669-0675 Web site: www.socarinc.com E-mail: llm@socarinc.com Socar of Ohio, Inc. West Rice Street P. O. Box 219 Continental, Ohio 45831 Telephone: 419-596-3100 Fax: 419-596-3120 Web site: www.socarinc.com E-mail: socaroh@bright.net Scrap Steel Processor Subsidiary: Shredded Products Corporation 700 Commerce Road Rocky Mount, Virginia 24151 Telephone: 540-489-7599 Fax: 540-489-8431 1144 Fluff Road P. O. Box 159 Montvale, Virginia 24122 Telephone: 540-947-2225 Toll free: 877-668-8253 Fax: 540-947-5173 ROANOKE ELECTRIC STEEL CORPORATION Roanoke Electric Steel Corporation and its wholly-owned subsidiaries are engaged in the manufacturing, fabricating and marketing of merchant steel products, specialty steel sections, billets, open-web steel joists and reinforcing bars. Each subsidiary is either a supplier to the parent company or a purchaser of its finished product and billets. The main plant of Roanoke Electric Steel Corporation is a state-of-the-art steel mini-mill located in Roanoke, Virginia. This facility melts scrap steel in electric furnaces and continuously casts the molten steel into billets. These billets are rolled into merchant steel products consisting of angles, plain rounds, flats, channels and reinforcing bars of various lengths and sizes. Excess steel billet production is sold to mills without melting facilities. Roanoke Electric Steel Corporation markets its products to steel service centers and fabricators in 22 states east of the Mississippi River. Like the main plant, Steel of West Virginia, Inc., is a steel mini-mill operating in Huntington, West Virginia. A steel fabricating subsidiary, Marshall Steel, is located in Memphis, Tennessee. These locations produce specialty steel sections and custom-finished products and serve niche markets throughout the continental United States. Shredded Products Corporation, a subsidiary with operations in Rocky Mount and Montvale, Virginia, extracts scrap steel and other metals from junked automobiles and other waste materials. These facilities supply the main plant with a substantial amount of its raw materials. Nonferrous metals generated in the process are sold to unrelated customers. John W. Hancock, Jr., Inc. and Socar, Inc. are steel fabrication subsidiaries located in Salem, Virginia, Florence, South Carolina and Continental, Ohio. All three operations purchase rounds and angles from the main plant to fabricate long- and short-span open-web steel joists. These joists are used as horizontal supports for floors and roofs in commercial and industrial buildings. RESCO Steel Products Corporation, a Salem, Virginia based subsidiary, fabricates concrete reinforcing steel by cutting and bending it to contractor specifications. 1 TO OUR SHAREHOLDERS 2000 Results Earnings for the year were $14,061,449 on sales of $372,728,108. Last year's sales and earnings were $372,962,950 and $22,479,179, respectively. Earnings per share were $1.28 ($1.28 diluted), compared to 1999 earnings per share of $2.03 ($2.02 diluted). Even though earnings declined from our 1999 record year, our 2000 performance is gratifying when compared to the industry results. During the year, selling prices for merchant bar products and specialty steel sections began a dramatic decline due to increased foreign and domestic competition and a softening in some of our markets. By year end, selling prices were off nearly 20% on bar products and 10% on specialty steel sections. A 20% rise in the average cost of scrap steel, our main raw material, accounted for most of the decline in our gross profit percentage from 20.2% to 16.8%. Our results were also negatively affected by a significant decline in billet shipments. Sales for the year were flat, but the current year included Steel of West Virginia's (acquired December 16, 1998) revenues for the entire period, whereas sales for last year included only the portion of SWVA's revenues from the date of acquisition. The reduction in billet shipments also had a significant impact on sales for the year. Capital Expenditures And Depreciation ($ Millions) [GRAPH] Capital Expenditures Depreciation 1995 $11,654,366 1995 $ 7,863,154 1996 $18,194,216 1996 $ 8,366,012 1997 $ 7,532,580 1997 $ 9,456,201 1998 $12,339,553 1998 $ 9,216,133 1999 $13,070,524 1999 $14,627,553 2000 $16,315,186 2000 $16,332,341 2 Our fabricating subsidiaries contributed a substantial portion of our earnings for the year, continuing their strong earnings trend of the past several years. The diversification gained by our downstream fabricating subsidiaries has been instrumental in our ability to outperform the industry. The captive business and incremental profits attributable to our affiliates have been advantageous to our financial results. We remain encouraged about our acquisition of SWVA. This subsidiary contributed $.08 of our 2000 earnings per share after taking into account interest costs and amortization of the premium paid for the acquisition. In addition, the Parent moved 85,000 tons of excess billet production to SWVA and sold over 25,000 tons of SWVA's products to its customers. Financial Position Overall, our financial condition improved from last year and remained strong. Cash and investments were $27,808,066, and working capital was $111,444,079. Both were lower than last year, but remained at very good levels. The current ratio was 3.2 to 1, and the quick ratio was 1.6 to 1, little changed from last year and very sound. Stockholders' equity improved to a record $144,721,829. Long-term debt as a percentage of total capital declined to 42.9% from 47.5% last year. After subtracting from long-term debt, cash and investments of $27,808,066, net long-term debt as a percentage of total capitalization was 35.9% - much nearer our desired level of 30%. In addition, Stockholders' Equity ($ Millions) [GRAPH] Stockholders' Equity 1995 $ 91,002,194 1996 $ 95,353,468 1997 $107,336,437 1998 $120,233,217 1999 $137,158,131 2000 $144,721,829 3 TO OUR SHAREHOLDERS CONTINUED the ratio of debt to equity declined from 1.6 to 1.3. Our $30,000,000 revolving credit facility was unused at October 31, 2000. This facility combined with cash flows from operations and the cash and investments mentioned above should provide the liquidity and capital resources necessary to remain competitive, fund operations and future growth and meet required debt retirement. Shareholder Value During the year, your Company continued its dividend policy of $.40 per year and repurchased 155,000 shares of its common stock. Cash dividends paid to shareholders in 2000 amounted to $4,376,150, and our shareholders received an additional $2,390,688 for the repurchase of their shares. In the last five years, we have returned $17,021,005 to shareholders with the repurchase of 1,088,200 company shares, and there remains 411,000 shares authorized for repurchase. In October 2000, the Board of Directors declared the 168th (42 years) consecutive quarterly cash dividend in the amount of 10 cents per share, payable November 24, 2000. At year end, our dividend yield was a respectable 4.0%.Unfortunately, our share price declined 37.5% during the year to 75.3% of book value. We can only take comfort in the fact that this is an industry trend and not an isolated Sales ($ Millions) [GRAPH] Sales 1991 $126,977,104 1992 $146,036,301 1993 $167,294,378 1994 $215,809,228 1995 $259,968,524 1996 $246,286,652 1997 $265,108,639 1998 $295,203,974 1999 $372,962,950 2000 $372,728,108 4 case with respect to the Company. Steel company stocks are simply not in favor, given current market conditions and earnings estimates. However, as history has proven, we are confident share values will rebound in the future. Looking Forward We cannot predict the direction of selling prices near term, but we expect our fabricating subsidiaries to continue to make good contributions to earnings well into the new year. Regardless of future outcomes, we are confident we will be one of the leading performers in the industry. We continue to be encouraged about our future prospects as we realize more of the synergies inherent in the SWVA acquisition. We expect continued development of new products and penetration of new markets as we utilize SWVA's excess production capacity. In addition, we plan major improvements to our melting facilities that will improve operating efficiencies, reduce costs and increase earnings. We thank our dedicated employees and our loyal customers for making the year the best possible. We, also, thank our shareholders for their confidence and patience. Sincerely, /s/ Donald G. Smith -------------------- Donald G. Smith Chairman of the Board and Chief Executive Officer Capitalization ($ Millions) Capitalization Stockholders' Equity Long-Term Debt 1995 $ 91,002,194 1995 $ 20,729,166 1996 $ 95,353,468 1996 $ 39,541,666 1997 $107,336,437 1997 $ 32,791,667 1998 $120,233,217 1998 $ 28,541,667 1999 $137,158,131 1999 $138,944,689 2000 $144,721,829 2000 $123,910,990 5 STEEL AT WORK A customer profile [PHOTO] [Caption: Caterpillar Inc. Peoria, Illinois] Caterpillar is the world's #1 maker of earthmoving equipment and a leading supplier of a variety of agricultural, construction, mining and logging machinery. Caterpillar is also the world's #1 maker of engines for trucks, locomotives, boats and electrical generation systems. Roanoke Electric Steel, through its subsidiary, Steel of West Virginia, Inc., supplies Caterpillar with main frame sections used in the manufacture of earthmoving equipment. 6 STEEL AT WORK A customer profile {PHOTO] [Caption: Trinity Industries, Inc. Dallas, Texas] "Trinity Industries' Highway Safety Products business unit has enjoyed a strong relationship with Steel of West Virginia, Inc. for many years. This partnership allows us to provide responsive and high quality service to our customers and the market we serve." Mark W. Stiles Senior Vice President Trinity Industries,Inc. and Group President The Highway Safety Products business unit of Trinity Industries is a major supplier of guardrail to the nation. Through its subsidiary, Steel of West Virginia, Inc., Roanoke Electric Steel supplies Trinity Industries structural beams used as guardrail posts. These posts are driven into the ground and the guardrail attached. 7 STEEL AT WORK A customer profile [PHOTO] [Caption: Meyer Products Cleveland, Ohio] Meyer is the world leader in snow plows and snow plow accessories, parts, spreaders and controls. Meyer markets its products through 580 sales and service locations. Roanoke Electric Steel supplies Meyer with a wide range of merchant bar products. 8 STEEL AT WORK A customer profile [PHOTO] [Caption: Wabash National Corporation Lafayette, Indiana] "Steel of West Virginia, Inc. trailer floor crossmembers `carry the load' for Wabash National. Their high quality and customer focus make Steel of West Virginia, Inc. the ideal partner to supply the thousands of crossmembers that Wabash National uses every working day." Stan Sutton Vice President, Purchasing Wabash National The number one maker of standard and customized truck trailers, Wabash National holds nearly 25% of the nation's trailer market. Wabash markets its products nationwide to trucking companies, fleet operators, leasing companies and railroads. Through its Steel of West Virginia, Inc. subsidiary, Roanoke Electric Steel supplies Wabash steel beams used as crossmembers in truck trailer construction. 9 STEEL AT WORK A customer profile [PHOTO] [Caption: NACCO Industries, Inc. Portland, Oregon] NACCO Materials Handling Group makes Hyster and Yale forklift trucks and controls a sizable share of the U.S. and international industrial truck market. Roanoke Electric Steel, through its subsidiary, Steel of West Virginia, Inc., supplies NACCO special sections used in the construction of masts and fork hanger bars. 10 SELECTED FINANCIAL DATA

* Restated for change in method of accounting for certain inventories. Per share information has been adjusted for a three-for-two stock split effective March 25, 1998. [GRAPH] [GRAPH] Working Capital Total Assets ($ Millions) ($ Millions) 1995 $ 46,423,356 1991 $125,344,669 1996 $ 60,550,566 1992 $126,170,191 1997 $ 68,928,961 1993 $131,420,969 1998 $ 75,703,207 1994 $141,454,970 1999 $117,241,158 1995 $158,714,254 2000 $111,444,079 1996 $167,936,278 1997 $177,760,387 1998 $189,996,218 1999 $352,045,812 2000 $339,678,909 11 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements Of Earnings

Consolidated Statements Of Stockholders' Equity

* Restated for change in method of accounting for certain inventories. See notes to consolidated financial statements. 12 Consolidated Balance Sheets

* Restated for change in method of accounting for certain inventories. See notes to consolidated financial statements. 13 Consolidated Statements Of Cash Flows

* Restated for change in method of accounting for certain inventories. See notes to consolidated financial statements. 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation - The consolidated financial statements include the accounts of Roanoke Electric Steel Corporation and its wholly-owned subsidiaries, Shredded Products Corporation, John W. Hancock, Jr., Inc., Socar, Inc., RESCO Steel Products Corporation, Roanoke Technical Treatment & Services, Inc. and Steel of West Virginia, Inc. (the "Company"). All significant intercompany accounts and transactions have been eliminated. Steel of West Virginia, Inc. was acquired in December 1998 (see Note 14). The Company operates in a single business segment. Inventories - Inventories of the Company are generally valued at cost on a first-in, first-out ("FIFO") method or market, if lower. A major portion of the inventories of John W. Hancock, Jr., Inc. were valued on a last-in, first-out ("LIFO") method, until November 1, 1999, when a change to FIFO valuation became effective (see Note 2). Property, Plant and Equipment - These assets are stated at cost. Depreciation expense is computed by straight-line and declining-balance methods. Maintenance and repairs are charged against operations as incurred. Major items of renewals and betterments are capitalized and depreciated over their estimated useful lives. Upon retirement or other disposition of plant and equipment, the cost and related accumulated depreciation are removed from the property and allowance accounts, and the resulting gain or loss is reflected in earnings. Income Taxes - The Company applies the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Under SFAS No. 109, deferred income taxes are provided by the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities. Cash and Cash Equivalents - The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Investments - Investments consist primarily of debt securities which mature between 2000 and 2030. The Company complies with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". In accordance with the provisions of SFAS No. 115, management has classified its entire debt securities portfolio as "available for sale". Under SFAS No. 115, "available for sale" securities are reported at fair value with unrealized gains and losses reported as other comprehensive income. These investments are carried on the balance sheets at fair value, which approximates amortized cost. Accordingly, there were no adjustments to other comprehensive income at October 31, 2000, 1999 and 1998. Revenue Recognition - Revenues from sales are recognized when products are shipped to customers, except for fabrication products which are recognized by the percentage-of-completion method in accordance with industry practice. Sales to an unaffiliated customer amounted to 13% of consolidated sales for 1998. Goodwill - The excess of cost over fair value of net assets of acquired subsidiary is amortized using the straight-line method over the estimated benefit period of 20 years. At October 31, 2000, accumulated amortization is $1,518,465. The carrying value of goodwill is periodically reviewed based upon an assessment of operations of the acquired entity. Management is not aware of any facts or circumstances indicating that the carrying value of goodwill has been impaired. Concentration of Credit Risk - The Company sells to a large customer base of steel fabricators, steel service centers and construction contractors, most all of which deal primarily on 30-day credit terms. The Company believes its concentration of credit risk to be minimal in any one geographic area or market segment. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Credit losses have not been significant in the past, with the exception of fiscal year 2000, and are generally within management's expectations. Fair Value of Financial Instruments - At October 31, 2000, the fair value of the Company's cash and cash equivalents, accounts receivable, investments and long- term debt approximated amounts recorded in the accompanying consolidated financial statements (see Notes 1 and 6). Stock Options - SFAS No. 123, "Accounting for Stock-Based Compensation", adopts a "fair value based method" of accounting for employee stock option plans or similar stock-based compensation plans. Under the fair value based method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service or vesting period. The statement does allow entities to continue to measure compensation using the "intrinsic value based method" of Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees", provided that they make pro forma disclosures on net earnings and earnings per common share as if the fair value based method of accounting had been applied. The Company has elected to continue to follow APB No. 25. Use of Estimates in the Preparation of Financial Statements - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 15 Comprehensive Income - In June 1997, SFAS No. 130, "Comprehensive Income", was issued, establishing standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The Company adopted SFAS No. 130 in the first quarter of fiscal year 1999, but comprehensive income, and its required disclosure, is the same as that shown in the consolidated statements of earnings. Segment Information - In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", was issued, establishing standards for the way public enterprises report information about operating segments in annual financial statements. The Company adopted SFAS No. 131 at the close of fiscal year 1999 (see Note 17). Derivative Instruments - In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", was issued, establishing standards for accounting and reporting derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. The Company will be required to adopt SFAS No. 133 in the first quarter of fiscal year 2001 and, based on current evaluations, the Company does not believe there will be any material impact on its consolidated financial statements. Effective November 1, 2000, the Company will adopt the policy of accounting and reporting the fair value of derivatives used as cash flow hedging activities, as referred to in SFAS No. 133, through other comprehensive income. Reclassifications - Certain amounts included in the consolidated financial statements for prior years have been reclassified from their original presentation to conform with the current year presentation. NOTE 2 - INVENTORIES Effective November 1, 1999, the Company changed its inventory costing method for a fabricating subsidiary's raw material (steel bar) inventory from LIFO to FIFO. One reason for the change was to bring this portion of inventory in line with all other inventories reported consistently throughout the Company on the FIFO method. Further, due to fluctuating steel prices, the move to FIFO reporting will provide for accounting simplification. The effect of the change in accounting principle was to increase net earnings reported for the year ended October 31, 2000 by $9,884, or $.00 per basic share. The change has been applied to prior years by retroactively restating the financial statements. The effect of this restatement was to increase retained earnings as of October 31, 1999, 1998 and 1997 by $616,590, $785,329 and $900,168, respectively, and to reduce net earnings for the years ended October 31, 1999 and 1998 by $168,739 ($.02 per basic share) and $114,839 ($.02 per basic share), respectively. Inventories include the following major classifications: October 31, --------------------------------------- 2000 1999* 1998* --------------------------------------- Scrap Steel........ $ 5,721,583 $ 5,090,322 $ 4,876,856 Melt supplies...... 3,318,385 3,520,825 2,408,961 Billets............ 17,266,805 14,477,006 3,499,907 Mill supplies...... 3,485,332 4,274,660 3,176,619 Work-in-process.... 6,877,954 4,234,402 - Finished steel..... 39,779,153 32,928,404 19,145,886 ----------- ----------- ----------- Total inventories.. $76,449,212 $64,525,619 $33,108,229 =========== =========== =========== *Restated for change in method of accounting for certain inventories. NOTE 3 - PROPERTIES AND DEPRECIATION Depreciation expense for the years ended October 31, 2000, 1999 and 1998 amounted to $16,332,341, $14,627,553 and $9,216,133, respectively. Generally, the rates of depreciation range from 3.3% to 20% for buildings and improvements and 5% to 33% for machinery and equipment. Property additions in 1999 and 1998 included $193,052 and $53,722 of interest capitalized, respectively. During the year ended October 31, 1998, the Company recorded a $733,067 loss on assets abandoned at its Salem, Virginia plant. This loss was included in the statement of earnings in administrative expenses. NOTE 4 - SHORT-TERM DEBT On December 15, 1998, the Company replaced its existing credit facility with a new syndicated loan facility, part of which provides a five-year $30,000,000 revolver, as explained in Note 6. There also exists a $5,000,000 line of credit to be used to cover overdrafts in a demand deposit account. This line of credit was unused at October 31, 2000 and 1999. NOTE 5 - INCOME TAXES The Company files a consolidated federal income tax return. The federal income tax returns through October 31, 1990 have been examined by the Internal Revenue Service with all issues settled, while the Company is currently under review by the IRS on its most recent filings. 16 The following is a reconciliation of income tax expense per consolidated statements of earnings to that computed by using the federal statutory tax rate of 35% for 2000, 1999 and 1998:

The components of income tax expense are as follows:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. As of October 31, 2000, 1999* and 1998*, the Company had total long-term deferred tax liabilities of $31,575,856, $30,902,712 and $13,687,507, respectively, and net current deferred tax assets of $5,600,031, $5,879,314 and $1,188,938, respectively. At October 31, 2000, deferred tax liabilities result from excess tax depreciation, purchase price accounting differences and change in inventory method of $29,378,741, $1,578,852 and $618,263, respectively, and deferred tax assets result from self-insurance, reserves not currently deductible, uniform capitalization and other accrued expenses not currently deductible of $1,345,506, $1,955,519, $798,253 and $1,500,753, respectively. At October 31, 1999, deferred tax liabilities result from excess tax depreciation, purchase price accounting differences and change in inventory method of $27,693,846, $1,972,341 and $1,236,525, respectively, and deferred tax assets result from self-insurance, reserves not currently deductible, uniform capitalization and other accrued expenses not currently deductible of $1,417,008, $1,048,833, $975,444 and $2,438,029, respectively. There were no valuation allowances. *Restated for change in method of accounting for certain inventories. NOTE 6 - LONG-TERM DEBT Long-term debt consisted of the following:

In December 1998, the Company entered into a $30,000,000 revolving credit agreement with a group of banks that extends through December 15, 2003. Under the revolving credit agreement, interest is payable at October 31, 2000 and 1999, at the LIBOR rates of 6.815% plus .40% and 6.08% plus .40%, respectively. The agreement requires the Company to pay a facility fee at an annual rate of .25% for 2000 and 1999. The Company does not use derivatives for trading purposes. Interest rate swaps, a form of derivative, are used to manage interest costs. On June 25, 1999, the Company did a reverse swap, converting $40,000,000 of term debt to a variable interest rate from a fixed rate. A fee of $1,300,000 was received and is being recorded in income ratably over the 6 1/2 years which remained to maturity of the term loan. Currently, the Company maintains an interest rate swap agreement resulting in a fixed rate of 6.61% on the notional amount of $88,750,000 through January 3, 2006. The difference between fixed rate and floating rate interest is recognized as an adjustment to interest expense in the period incurred. The remaining $35,000,000 of variable rate term debt is subject to the risk of fluctuations in short-term interest rates; however, cash and investments at October 31, 2000 provided a hedge against rising interest rates. The fair value 17 of the current swap is estimated based on current settlement prices and was approximately $2,800,000, in favor of the Company at October 31, 2000. Under the loan agreements, the Company must maintain consolidated current assets of not less than 1.5 times consolidated current liabilities and maintain consolidated funded debt of not greater than .55 times consolidated total capitalization. In addition, consolidated funded debt cannot be greater than 3 times consolidated EBITDA, and the ratio of EBITDA to the sum of current maturities of long-term debt and consolidated interest expense must equal at least 1.5. The Company was in compliance with the loan agreements as of October 31, 2000 and 1999. SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", requires disclosure of the year end fair value of significant financial instruments, including long-term debt. The Company's carrying value of long-term debt approximates fair value. The fair value of the 1999 swap agreement is mentioned above. Annual aggregate long-term debt maturities are approximately $15,000,000 for each of the next five years. NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES At October 31, 2000, the Company was committed for $1,878,426 for purchases of equipment and production facilities. The Company is not involved in any legal proceedings or environmental matters outside the ordinary course of business. In the opinion of management, amounts accrued for potential awards or assessments in connection with these matters at this time are adequate, and the outcome of such environmental and legal concerns currently pending will not have a material effect on the Company's consolidated financial position, results of operations, or cash flows. The Company reassesses these matters as new facts and cases are brought to management's attention. NOTE 8 - COMMON STOCK AND EARNINGS PER SHARE Outstanding common stock consists of 560,000 shares, issued prior to October 31, 1967, at no stated value; 750,656 shares issued subsequent to October 31, 1967, at a stated value of $.50 per share; 1,310,656 shares issued in 1981 at no stated value; 1,310,656 shares, less the equivalent of 42 fractional shares, issued in 1986 at no stated value; 1,965,963 shares, less the equivalent of 151 fractional shares, issued in 1988 at no stated value; 800 shares issued in 1989 at no stated value; 3,000 shares issued in 1992 at no stated value; 1,200 shares issued in 1993 at no stated value; 44,000 shares issued in 1994 at no stated value; 3,023,804 shares, less the equivalent of 152 fractional shares, issued in 1995 at no stated value; 23,750 shares issued in 1996 at no stated value; 35,950 shares issued in 1997 at no stated value; 4,572,870 shares, less the equivalent of 158 fractional shares, issued in 1998 at no stated value, less 1,253,800 treasury (repurchased) shares retired during 1998; 75,900 shares issued in 1999 at no stated value, less 126,000 treasury (repurchased) shares retired during 1999 and 30,275 shares issued in 2000 at no stated value, less 155,000 treasury (repurchased) shares retired during 2000. During the years ended October 31, 1986 and October 31, 1996, the Company increased authorized common stock from 4,000,000 shares to 10,000,000 shares, and from 10,000,000 shares to 20,000,000 shares, respectively. The Company retired in 1998, 1999 and 2000 all of its treasury stock applicable to the shares acquired through its common stock repurchase plans. SFAS No. 128, "Earnings per Share", requires the presentation of "basic" earnings per share and "diluted" earnings per share on the face of the statement of earnings. Basic earnings per share is computed by dividing the net income available to common stockholders by the weighted average shares of outstanding common stock. The calculation of diluted earnings per share is similar to basic earnings per share except that the denominator includes dilutive common stock equivalents such as stock options and warrants. Basic earnings per share have been computed based on the weighted average number of shares outstanding of 10,952,529 for 2000, 11,065,531 for 1999 and 11,132,910 for 1998. The average number of shares outstanding was weighted after giving effect to both stock options exercised and repurchased common stock during 2000, 1999 and 1998 and to a three-for-two stock split effective March 25, 1998. Diluted earnings per share have been computed based on the weighted average number of shares outstanding (including outstanding and exercisable stock options) of 10,990,032 for 2000, 11,134,118 for 1999 and 11,248,029 for 1998. NOTE 9 - PROFIT SHARING PLANS The Company, including Shredded Products Corporation, RESCO Steel Products Corporation, Socar, Inc. and Steel of West Virginia, Inc. ("SWVA"), has qualified profit sharing plans which cover substantially all employees. John W. Hancock, Jr., Inc. has an unqualified plan. Socar, Inc.'s annual contribution is discretionary while the other plans', except SWVA, annual contribution cannot exceed 20% of their combined earnings before income taxes. SWVA's annual contribution cannot exceed 17% of its pretax profit for bargaining unit employees, with comparable amounts contributed ratably to the nonbargaining group. Total contributions of all Companies shall not exceed the maximum amount deductible for such year under the Internal Revenue Code and amounted to $5,093,651 for 2000, $7,887,891 for 1999 and $5,674,077 for 1998. NOTE 10 - INTEREST EXPENSE Interest expense is stated net of interest income of $2,028,208 in 2000, $1,923,754 in 1999 and $1,214,017 in 1998. NOTE 11 - STOCK OPTIONS Under a nonqualified stock option plan approved by the stockholders in 1989, the Company may issue 112,500 shares of unissued common stock to employees of the Company each plan year. Under a non-statutory stock option plan approved by the Board in 1997, the Company may issue 25,000 shares of unissued common stock to directors of the Company over the life of the plan. Options for 112,500 shares 18 were granted for 2000, 112,500 shares for 1999, 84,000 shares for 1998, 82,000 shares for 1997, 75,000 shares for 1996, 41,500 shares for 1995, 36,000 shares for 1992 and 32,500 shares for 1990. Three-for-two stock splits in 1998 and 1995 increased these grants an additional 117,275 and 32,300 shares, respectively. These options are exercisable for a term of 5 years for employees and 10 years for directors from the date of grant, and a summary follows:

The Company applies APB No. 25 and related Interpretations in accounting for the nonqualified stock option plans. Accordingly compensation cost of $286,875, $272,813 and $295,313 for the years ended October 31, 2000, 1999 and 1998, respectively, was recognized for the difference between the exercise price and the fair value of the stock price at the grant date. Had compensation cost been determined based on the fair value at the grant dates consistent with the method of SFAS No. 123, the Company's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:

*Restated for change in method of accounting for certain inventories. The fair value of options granted during the years ended October 31, 2000, 1999 and 1998 was $6.89, $7.22 and $7.64, respectively. The following table summarizes information about stock options outstanding and exercisable at October 31, 2000:

19 The fair value of each option is estimated on the date of grant using the Black- Scholes option-pricing model with the following weighted average assumptions used for grants in 2000, 1999 and 1998, respectively: dividend yield of 2.59%, 2.42% and 2.18%; expected volatility of 41.41%, 47.81% and 47.25%; risk-free interest rates of 5.81%, 5.93% and 4.23%; and an expected life of 5 years. NOTE 12 - HEALTH BENEFITS AND POSTRETIREMENT COSTS The Company currently provides certain health care benefits for terminated employees who have completed 10 years of continuous service after age 45, and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", requires the Company to accrue the estimated cost of such benefit payments during the years the employee provides services. The Company previously expensed the cost of these benefits as claims were incurred. SFAS No. 106 allows recognition of the cumulative effect of the liability in the year of adoption or the amortization of the obligation over a period of up to 20 years. The Company has elected to recognize this obligation of approximately $1,381,000 over a period of 20 years. Cash flows are not affected by implementation of SFAS No.106, but implementation decreased net earnings from continuing operations for 2000, 1999 and 1998 by approximately $195,442, $199,447 and $188,695, respectively. The Company's postretirement benefit plan is not funded. The accrued postretirement benefit cost recognized in the balance sheets at October 31 is as follows:

The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 8.5% for 1999, decreasing linearly each successive year until it reaches 5.16% in 2006, after which it remains constant. A one-percentage-point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation by approximately $172,000 and the net postretirement benefit cost by approximately $39,000. The assumed discount rate used in determining the accumulated postretirement benefit obligation was 7.75% and 6.5% for the years ended October 31, 2000 and 1999, respectively. NOTE 13 - UNAUDITED QUARTERLY FINANCIAL DATA Summarized unaudited quarterly financial data for 2000 follows:

*Restated for change in method of accounting for certain inventories. 20 NOTE 14 - ACQUISITION On December 16, 1998, the Company acquired all of the outstanding common shares of Steel of West Virginia, Inc. ("SWVA"), a Huntington, West Virginia steel manufacturer, upon completion of its cash tender offer. The consideration given was approximately $117.1 million, including the assumption of approximately $52.3 million of indebtedness, which translates into $10.75 net per SWVA share, for approximately 6,028,000 shares on a fully-diluted basis. Upon merger, SWVA became a wholly-owned subsidiary of Roanoke Electric Steel Corporation, and each share of SWVA common stock not purchased in the offer (approximately 3.6% of SWVA's outstanding shares) was converted, subject to appraisal rights, into the right to receive $10.75 in cash, without interest. Funding for the acquisition was provided by a syndicate of four banks, including First Union National Bank, Agent. SWVA operates a mini-mill in Huntington, West Virginia, and steel fabrication facilities in Huntington and Memphis, Tennessee, while custom designing and manufacturing special steel products principally for use in the construction of truck trailers, industrial lift trucks, off-highway construction equipment (such as bulldozers and graders), manufactured housing, guardrail posts and mining equipment. The acquisition has been accounted for as a purchase. Accordingly, the results of operations and cash flows are reflected in the consolidated financial statements from the date of acquisition, and the acquired assets and liabilities are included in the accompanying 1999 consolidated balance sheet at values based on a purchase price allocation, rendered through appraisals and other evaluations. The purchase price allocation is summarized below:

Unaudited pro forma consolidated results of operations for the years ended October 31, 1999 and 1998, assuming the SWVA acquisition had occurred at the beginning of each period, are as follows:

*Restated for change in method of accounting for certain inventories. The pro forma consolidated results of operations include adjustments to give effect to amortization of goodwill, interest expense on acquisition debt and certain other adjustments, together with related income tax effects. The unaudited pro forma information is not necessarily indicative of the results of operations that would have occurred had the purchase been made at the beginning of the periods presented or the future results of the combined operations. NOTE 15 - SUPPLEMENTAL CASH FLOW INFORMATION

NOTE 16 - DEFERRED COMPENSATION PLAN The Company maintains a nonqualified deferred compensation plan (the "Executive Deferred Compensation Plan"). The purpose of the Executive Deferred Compensation Plan is to provide to certain eligible employees of the Company the opportunity to: (1) defer elements of their compensation (including any 21 investment income thereon) which might not otherwise be deferrable under the current plans; and (2) receive the benefit of additions to their deferral comparable to those obtainable under the current plans in the absence of certain restrictions and limitations in the Code. Amounts deferred are paid into a trust owned by the Company and are included in other assets. The Company's liability and trust asset under the Executive Deferred Compensation Plan as of October 31, 2000 was $541,553. NOTE 17 - ENTERPRISE-WIDE INFORMATION The Company's business consists of one industry segment, which is the extracting of scrap metal from discarded automobiles and the manufacturing, fabricating and marketing of merchant steel bar products and specialty steel sections, reinforcing bars, open-web steel joists and billets. The industry segment consists of three classes of products - merchant steel products and specialty steel sections, fabricated bar joists and reinforcing bars and billets.

Information relating to geographic areas indicates that significantly all of the consolidated sales are domestic, as foreign revenues are not material. INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Roanoke Electric Steel Corporation: We have audited the accompanying consolidated balance sheets of Roanoke Electric Steel Corporation and its wholly-owned subsidiaries as of October 31, 2000 and 1999, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended October 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the financial position of Roanoke Electric Steel Corporation and its wholly-owned subsidiaries at October 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 2000 in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 2 to the consolidated financial statements, effective November 1, 1999, the Company changed its method of accounting for certain inventories. /s/ Deloitte & Touche LLP Winston-Salem, North Carolina November 17, 2000 STOCK ACTIVITY The Common Stock of Roanoke Electric Steel Corporation is traded nationally over the counter on Nasdaq National Market using the symbol RESC. At year end, there were approximately 720 shareholders of record.

22 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Sales Sales increased 11.4% in 1998 as a result of substantially increased billet shipments in addition to improved fabricated products shipments and higher selling prices for steel bar products. Shipments of bar products declined during the year, while billet and fabricated products prices were flat. Record raw steel production and unprecedented demand contributed to the 58.5% increase in billet shipments. Favorable market conditions in the construction industry led to the increased shipments and level selling prices for fabricated products. In spite of a 3.8% reduction in bar products shipments, business conditions remained strong and bar prices moved up 6.2% for the year. Billet prices were flat because scrap prices, which normally trigger changes in billet prices, were relatively unchanged. On December 16, 1998, the company acquired 100% of the capital stock of Steel of West Virginia, Inc. ("SWVA"), a steel manufacturer, and 1999 results reflect the operations of SWVA from the date of acquisition. The 1998 financial statements have not been restated to include SWVA because the acquisition was treated as a purchase for accounting purposes. Consequently, the 26.3% increase in 1999 sales was due, primarily, to the inclusion of SWVA's revenues in consolidated sales. Higher selling prices for fabricated products also had a favorable impact on sales. However, sales were negatively affected by significant declines in selling prices for both merchant bar products and billets, together with reductions in tons shipped of bar products, fabricated products and billets, with the latter down substantially. Increased competition from foreign and domestic producers prompted industry-wide list price reductions for bar products at the beginning of the year, and prices had not fully recovered by year's end. Excess inventories at steel service centers and a shortage of transportation equipment contributed to the slight reduction in tons shipped of bar products as bar markets were generally good thoughout the year. A dramatic change in our market for billets brought diminished demand and a 25.6% decline in tons shipped. Billet selling prices declined with sharp reductions in scrap prices. Competitive conditions within the commercial construction industry generally impact selling prices and shipment levels of fabricated products and were relatively favorable during the year as reflected in the higher selling prices. The reduced shipments were caused by minor factors other than competition as business conditions continued strong and backlogs remained high. Sales for 2000 were flat due, again, to the acquisition of SWVA. Sales for the current year included SWVA's revenues for the entire period, whereas sales for 1999 included only the portion of SWVA's revenues from the date of acquisition. Improved selling prices for billets and bar products favorably impacted sales, also. However, sales were negatively affected by a 46% decrease in billet shipments, reduced bar and fabricated products shipments and lower selling prices for fabricated products. The dramatic reduction in billet shipments and changed billet market conditions the past two years was attributable to the financial condition and eventual bankruptcy of a major customer. Shipments to this customer were purposely curtailed to reduce our exposure to bad debts. We were not able to place the lost tonnage with alternate sources, other than the tons used internally by SWVA. Billet selling prices were higher due to increased scrap prices. Average selling prices for bar products increased 1.2% for the year, but list prices had fallen sharply by the end of the year as a result of increased foreign and domestic competition. The increased competition and price uncertainty reduced order entry and backlogs and caused a 2.3% decrease in bar products shipments. The decline in fabricated products selling prices and shipments was caused by increased competition within the construction industry, even though business conditions continued strong and backlogs were high. The decline in shipments was also affected by shortages of structural steel components. Cost of Sales and Gross Margins In 1998, cost of sales increased due to the improved billet and fabricated products shipments, even though shipments of bar products declined. Cost of sales increased significantly in 1999 due, principally, to the inclusion of SWVA's costs in the consolidated statements, in spite of the decreased shipments for all products classes, and the drop in the cost of scrap steel, our main raw material. In 2000, cost of sales increased, mainly, as a result of the impact of SWVA's costs and a significant increase in the cost of scrap steel. In 1998, gross earnings as a percentage of sales were flat, even though selling prices for bar products increased and raw steel production improved by 12%. The increased billet shipments at lower margins negatively impacted margins. Gross earnings as a percentage of sales increased in 1999 from 19.5% to 20.2%, primarily, as a result of the impact of substantially reduced lower- margin billet shipments. In addition, lower scrap prices and higher selling prices for fabricated products were negatively affected by the lower selling prices for bar products and billets and the effects of lower production levels on costs. In 2000, the percentage of gross earnings to sales dropped substantially to 16.8% due, primarily, to a 20% increase in the average cost of scrap steel and lower selling prices for specialty steel sections and fabricated products. The combination of increased volume at comparable margins were, primarily, responsible for the improved gross and net earnings in 1998. For 1999, the consolidation of SWVA was, mainly, responsible for the increased gross earnings, together with the improved margins for fabricated products, which provided the 23 improved net earnings after subtracting higher administrative, interest and profit sharing expenses. Reduced margins for all product classes and significantly lower billet shipments were, mainly, responsible for the lower gross and net earnings in 2000. Administrative Expenses In 1998, the percentage of administrative expenses to sales remained the same at 6.7%, however, administrative expenses increased substantially. Executive and management compensation increased with the improved shipments and earnings in accordance with various incentive arrangements. Other expenses such as insurance, office utilities and repairs, and selling expenses increased, while bad debts and professional expenses declined. Administrative expenses also included a charge of $733,067 for the abandonment of assets. Without this charge, administrative expenses as a percentage of sales would have been 6.4%. In 1999, administrative expenses increased due, mostly, to the inclusion of SWVA's expenses. Executive and management compensation increased in addition to other expenses such as insurance. Administrative expenses as a percentage of sales increased to 6.8%. A charge to bad debts of $2.5 million due to the bankruptcy of a major billet customer accounted for most of the increase in administrative expenses in 2000. The inclusion of SWVA's expenses in 2000 covering a longer period than in 1999 also contributed to the increase, combined with higher professional fees and insurance expense. A number of expenses declined, including executive and management compensation, contributions and advertising. Administrative expenses as a percentage of 2000 sales rose to 7.7%, however, without the charge for bad debts, the percentage would have increased to only 7.0%. Interest Expense In 1998, interest expense declined 49% as a result of lower average borrowings and increased interest income of $1,214,017, while capitalized interest declined to $53,722 and interest rates were virtually unchanged. Interest expense increased significantly in 1999 due to substantially higher borrowings, related to the SWVA acquisition, and slightly higher interest rates, in spite of increased interest income of $1,923,754 and higher capitalized interest of $193,052. In 2000, interest expense increased only slightly, in spite of lower average borrowings and increased interest income of $2,028,208, as a result of higher interest rates and no reduction for capitalized interest. Profit Sharing Expense and Income Taxes Contributions to various profit sharing plans are determined as a proportion of earnings before income taxes and should normally increase and decrease with earnings. Income tax expense as a percentage of pretax income declined in 1998 due, primarily, to substantial Virginia recycling tax credits. In 1999, the effective rate increased as a result of nondeductible amortization of the excess investment in SWVA and higher West Virginia income tax rates. The effective rate declined in 2000 due to the over accrual of prior years' state income taxes, which offset the effects of increased nondeductible amortization and lower recycling credits. Financial Condition, Liquidity and Capital Resources At year end, working capital was $111,444,079, cash and investments were $27,808,066, the current ratio was 3.2 to 1 and the quick ratio was 1.6 to 1. All are sound indicators of ample liquidity and a healthy financial condition. Current debt maturities are $15,000,000 annually, which will affect future liquidity and working capital. Our unused $30,000,000 revolving credit facility, combined with earnings and the cash and investments mentioned above should provide the liquidity and capital resources necessary to remain competitive, fund operations and future growth and meet required debt retirement. At October 31, 2000, there were commitments for the purchase of property, plant and equipment of approximately $1,900,000. These commitments will also affect working capital and future liquidity and will be financed from internally generated funds, the revolving credit facility and existing cash reserves. In 2000, depreciation and amortization, alone, provided over $17,000,000 of cash flows for the replacement and modernization of our facilities. During the year, borrowings decreased to $123,910,990, and the ratio of debt to equity declined to 1.3 to 1. The percentage of long-term debt to total capitalization decreased from 47.5% to 42.9% at year end. However, net long- term debt, after deducting cash and investments, as a percentage of total capitalization was only 35.9%, much more respectable and nearer our desired level of 30%. With debt comprising a higher percentage of our capital structure, the availability of capital resources could be more limited than in the past. The Company successfully completed its efforts to ensure Year 2000 readiness for all of its critical computer systems. As a result, the Company experienced no interruption of its operations during the transition to the Year 2000. The cost of the Company's Year 2000 efforts was approximately $590,000. Management is of the opinion that adoption of the Clean Air Act Amendments or any other environmental concerns will not have a materially adverse effect on the Company's operations, capital resources or liquidity (see Note 7). Additional future capital expenditures are presently estimated to be less than $1,000,000. Forward-Looking Statements From time to time, the Company may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include economic and industry conditions, availability and prices of supplies, prices of steel products, competition, governmental regulations, interest rates, inflation, labor relations, environmental concerns and others. 24 EX-27 3 fds10k-00.frm FINANCIAL DATA SCHEDULE FOR 10-K
5 The Schedule contains summary financial information extracted from the 4th Quarter Consolidated Balance Sheets and Statement of Earnings and is qualified in its entirety by reference to such financial statements. 1 U.S.DOLLARS YEAR Nov-01-1999 Oct-31-2000 Oct-31-2000 1 15,068,443 12,739,623 51,231,810 0 76,449,212 162,274,152 252,795,447 91,322,382 339,678,909 50,830,073 108,874,521 0 0 3,968,765 140,753,064 339,678,909 372,728,108 372,728,108 310,267,046 310,267,046 32,605,970 0 7,049,342 22,805,750 8,744,301 14,061,449 0 0 0 14,061,449 1.28 1.28

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