Body

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

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

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

102 Westside Blvd., N.W., Roanoke, Virginia 24017
(Address of principal executive offices) (Zip Code)

N/A
(Former name, former address and former fiscal year, if
changed since last report)

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.

Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of January 31, 2001.

	Page
1. Part I - Financial Information	3 - 12
Item 1. Financial Statements

a. Consolidated Balance Sheets	3
b. Consolidated Statements of Earnings	4
c. Consolidated Statements of Cash Flows	5
d. Notes to Consolidated Financial Statements	6 - 8
e. Independent Accountants' Report	9


Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations	10 - 11


Item 3. Quantitative and Qualitative Disclosures About Market Risk	12


2. Part II - Other Information	13
Item 1. Legal Proceedings	13
Item 6. Exhibits and Reports on Form 8-K	13


3. Signatures	14


4. Exhibit Index pursuant to Regulation S-K	15

Note 1.

In the opinion of the Registrant, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position as of January 31, 2001 and the results of operations and cash flows for the three months ended January 31, 2001 and 2000.

Certain amounts included in this Form 10-Q filing for prior years have been reclassified from their original presentation to conform with the current year presentation.

Note 3.

In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share", which changed the method of calculating earnings per share. SFAS 128 requires the presentation of "basic" earnings per share and "diluted" earnings per share on the face of the income statement. Basic earnings per share is computed by dividing the net income available to common shareholders 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 and diluted earnings per share calculated in accordance with SFAS 128 are presented in the consolidated statements of earnings.

Note 4.

The Registrant retired all of its treasury stock applicable to the shares recently acquired through its common stock repurchase plan.

Note 5.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Comprehensive Income", 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 130 during the 1999 first quarter. The components of comprehensive income were as follows:

Note 6.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", establishing disclosure standards regarding information about operating segments in interim and annual financial statements. The Company adopted SFAS 131 at the close of fiscal year 1999. 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.

Note 8.

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. Effective November 1, 2000, the Company adopted SFAS 133. In accordance with the transition provisions of SFAS 133, the Company recorded a cumulative effect earnings adjustment, after applicable taxes, of $1,663,516 in other comprehensive income to recognize the fair value of all derivatives designated as cash-flow hedging instruments. For certain hedging relationships, SFAS 133 eliminates special accounting formerly provided by U.S. GAAP. The Company has traditionally entered into interest rate swap and similar instruments to manage its exposure to movements in interest rates paid on corporate debt. Such instruments are matched with underlying borrowings. SFAS 133 eliminates special hedge accounting if the swap agreements do not meet certain criteria, thus requiring the Company to reflect all changes in their fair value in its current earnings. Since the Company's current swap agreements meet the required criteria necessary to use special hedge accounting, the Company recorded a $1,808,666 after-tax loss adjustment, for the quarter ended January 31, 2001, through other comprehensive income, as a result of the change in the fair value of these swap instruments. Due to fluctuations in interest rates and volatility in market expectations, the fair market value of interest rate swap instruments can be expected to appreciate or depreciate over time. The Company plans to continue its practice of economically hedging various components of its debt. However, as a result of SFAS133, such swap instruments may now create volatility in future reported earnings or other comprehensive income.

We have reviewed the accompanying consolidated balance sheet of Roanoke Electric Steel Corporation (the "Corporation") and subsidiaries as of January 31, 2001, and the related consolidated statements of earnings and cash flows for the three-month periods ended January 31, 2001 and 2000. These financial statements are the responsibility of the Corporation's management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Roanoke Electric Steel Corporation and subsidiaries as of

October 31, 2000, and the related consolidated statements of earnings, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated November 17, 2000, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of October 31, 2000 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

As discussed in Note 8 to the consolidated financial statements, effective November 1, 2000, the Corporation changed its method for accounting and reporting derivative instruments.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion and analysis of certain significant factors which have affected the Company's earnings during the periods included in the accompanying consolidated statements of earnings.

A summary of the period to period changes in the principal items included in the consolidated statements of earnings is shown below:

Sales for the quarter decreased significantly, due mainly to sharp declines in merchant bar selling prices and tons shipped of billets, merchant bar products and specialty steel sections. Sales were also negatively impacted by reduced shipment levels for fabricated products and a drop in selling prices for specialty products; eventhough, selling prices were higher for billets and fabricated products. Selling prices and shipments of bar products declined, primarily, as a result of increased foreign competition prompting industry-wide price reductions and excess inventory levels. Specialty steel sections showed a drop in selling prices mainly due to increased domestic competition and product mix. A softening in demand, caused by poor economic conditions within certain niche markets, resulted in a significant decrease in tons shipped of specialty products. A dramatic change in market conditions for billets, coupled with the bankruptcy of a major customer, brought diminished demand and a 77% decline in tons shipped. Billet prices showed only a slight increase, eventhough scrap prices were lower, due to improved mix. Fabricated product shipments decreased for the quarter, due mainly to longer delivery schedules for various custom-made product lines. These custom-made products brought higher prices, resulting in overall increased selling prices for fabricated products, as business conditions within the construction industry continued healthy and backlogs remained at good levels. Cost of sales declined as a result of the decreased tons shipped of all product classes, together with a reduction in the cost of scrap steel, our main raw material. Gross profit as a percentage of sales declined from 18.0% to 12.9%, primarily, as a result of lower bar and specialty product selling prices, coupled with the effects of decreased production levels on costs, which more than offset the improved selling prices for both billets and fabricated products and lower scrap costs. The decline in gross profit margins at the reduced shipment levels caused the reductions in gross profit and net earnings for the quarter. Administrative expenses decreased due, mainly, to reduced executive and other compensation, which offset higher insurance expenses and professional fees. Administrative expenses, as a percentage of sales, rose from 7.1% in 2000 to 8.6% in 2001, resulting from the significant drop in sales. Interest expense increased due to lower interest income and higher average interest rates, which more than offset reduced average borrowings. Profit sharing expense is based on earnings before income taxes in accordance with the provisions of various plans. For the quarter, profit sharing expense declined as a result of lower earnings. The effective income tax rate is slightly lower for the 2001 quarter due to the effects of nondeductible amortization.

Working capital decreased $740,560 during the period to $110,703,519 mainly as a result of capital expenditures, dividends and debt maturities amounting to $1,144,521, $1,090,106 and $3,758,847, respectively, which exceeded working capital provided from operations. The current ratio of 3.5 to 1 and the quick ratio of 1.6 to 1 both indicate very strong liquidity and a healthy financial condition. In addition, cash, cash equivalents and investments total $26,656,499. Our unused $30,000,000 revolving credit facility, combined with the cash and investments mentioned above, should provide the liquidity and capital resources necessary to fund operations and remain competitive, while meeting approximately $15,000,000 of annual required debt retirement.

At January 31, 2001, there were commitments for the purchase of property, plant and equipment of approximately $1,400,000. These commitments, together with current debt maturities, will affect working capital and future liquidity and will be financed from internally generated funds, the revolving credit facility and existing cash reserves. Borrowings under our revolving credit facility could be limited due to restrictive financial covenants contained in the loan agreement.

During the quarter, the ratio of debt to equity decreased to 1.3 to 1, and the percentage of long-term debt to total capitalization declined to 42.2%, due to current maturities of $3,758,847 reducing long-term debt to $105,112,655. Stockholders' equity declined to $144,111,210 as dividends of $1,090,106 exceeded earnings.

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.

Quantitative and qualitative information about market risk was addressed in Form 10-K for fiscal year ended October 31, 2000, as previously filed with the commission. There has been no material changes to that information required to be disclosed in this 1st quarter 10-Q filing, except the required disclosure for SFAS 133, as reported in Note 8.

Items 2, 3, 4 and 5 are omitted because the information required by these items is not applicable.

Pursuant to the requirements 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



Date	March 5, 2001	Donald G. Smith
		Donald G. Smith, Chairman, President,
		Treasurer and Chief Executive Officer
		(Principal Financial Officer)



Date	March 5, 2001	John E. Morris
		John E. Morris, Vice President-Finance
		and Assistant Treasurer
		(Chief Accounting Officer)