-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, NtzVirryRsBqv+o2N2lVODY5EWVmubkAP79Z4cBA/0+fA8YByaQuj/v8VVsInb7/ 3hC+ZP7PDboLNPrYF4w9Mg== 0000084278-94-000009.txt : 19940722 0000084278-94-000009.hdr.sgml : 19940722 ACCESSION NUMBER: 0000084278-94-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940614 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROANOKE ELECTRIC STEEL CORP CENTRAL INDEX KEY: 0000084278 STANDARD INDUSTRIAL CLASSIFICATION: 3312 IRS NUMBER: 540585263 STATE OF INCORPORATION: VA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02389 FILM NUMBER: 94534160 BUSINESS ADDRESS: STREET 1: 102 WESTSIDE BLVD N W CITY: ROANOKE STATE: VA ZIP: 24017 BUSINESS PHONE: 7033421831 MAIL ADDRESS: STREET 1: PO BOX 13948 CITY: ROANOKE STATE: VA ZIP: 24038 10-Q 1 2ND QTR 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1994 OR ( ) 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.) 102 Westside Blvd., N.W., Roanoke, Virginia 24017 (Address of principal executive offices) (Zip Code) (703) 342-1831 (Registrant's telephone number, including area 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. Yes x No Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of April 30, 1994. 5,317,309 Shares outstanding ROANOKE ELECTRIC STEEL CORPORATION FORM 10-Q CONTENTS Page 1. Part I - Financial Information 3 - 9 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 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 - 8 Review by Independent Certified Public Accountants 9 2. Part II - Other Information 10 Item 1. Legal Proceedings 10 Item 6. Exhibits and Reports on Form 8-K 10 3. Signatures 11 4. Exhibit Index pursuant to Regulation S-K 12 5. Exhibits a. Executive Officer Incentive Arrangement 13 b. Roanoke Electric Steel Corporation Employees' Stock Option Plan 13 c. Independent Accountants' Report 14 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ROANOKE ELECTRIC STEEL CORPORATION Consolidated Balance Sheets ASSETS (Unaudited) (Audited) April 30, October 31, 1994 1993 CURRENT ASSETS Cash and cash equivalents $ 325,309 $ 3,067,418 Investments 5,490,043 5,243,735 Accounts receivable 30,789,206 28,074,878 Inventories 25,694,398 24,069,180 Prepaid expenses 1,000,166 1,324,123 Total current assets 63,299,122 61,779,334 PROPERTY, PLANT AND EQUIPMENT Land 3,243,426 3,243,426 Building 15,165,846 15,121,826 Other property and equipment 94,332,410 93,677,568 Assets under construction 6,637,725 2,897,377 Sub-total 119,379,407 114,940,197 Less--accumulated depreciation 52,257,459 48,728,280 67,121,948 66,211,917 OTHER ASSETS Unamortized excess of cost of investment in subsidiary over net assets acquired 202,012 295,247 Other 1,070,509 1,015,741 1,272,521 1,310,988 $ 131,693,591 $ 129,302,239 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 4,965,500 $ 4,965,500 Notes payable 6,500,000 6,000,000 Accounts payable 15,941,051 11,595,102 Dividend payable 638,077 636,589 Employees' taxes withheld 246,824 207,069 Accrued profit-sharing contribution 1,102,986 1,680,246 Accrued wages and expenses 1,162,499 1,536,585 Accrued income taxes 355,359 69,538 Total current liabilities 30,912,296 26,690,629 LONG-TERM DEBT Notes payable 27,378,750 30,486,500 Less--current portion 4,965,500 4,965,500 22,413,250 25,521,000 DEFERRED INCOME TAXES 10,617,093 13,887,033 POSTRETIREMENT LIABILITIES 121,000 - STOCKHOLDERS' EQUITY Common stock--no par value--authorized 10,000,000 shares, issued 5,915,138 shares in 1994 and 5,902,738 in 1993 857,051 722,151 Capital in excess of stated value 9,349,429 9,349,429 Retained earnings 58,618,340 54,326,865 68,824,820 64,398,445 Less--treasury stock, 597,829 shares--at cost 1,194,868 1,194,868 Total stockholders' equity 67,629,952 63,203,577 $ 131,693,591 $ 129,302,239 The accompanying notes to consolidated financial statements are an integral part of this statement. ROANOKE ELECTRIC STEEL CORPORATION Consolidated Statements of Earnings
(Unaudited)111 (Unaudited) Three Months Ended Six Months Ended April 30, April 30, 1994 1993 1994 1993 NET SALES $ 50,599,134 $ 40,975,239 $ 97,311,674 $ 76,975,027 COST OF SALES 43,996,969 35,517,107 84,655,392 67,556,762 GROSS EARNINGS 6,602,165 5,458,132 12,656,282 9,418,265 OTHER OPERATING EXPENSES Administrative 3,214,440 3,096,340 6,521,977 5,629,602 Interest, net 446,274 420,464 901,011 855,746 Profit-sharing 535,265 388,752 1,102,986 561,655 4,195,979 3,905,556 8,525,974 7,047,003 EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES 2,406,186 1,552,576 4,130,308 2,371,262 INCOME TAXES 964,559 603,334 1,657,085 904,164 NET EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES 1,441,627 949,242 2,473,223 1,467,098 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES FOR INCOME TAXES - - 3,093,940 - NET EARNINGS $ 1,441,627 $ 949,242 $ 5,567,163 $ 1,467,098 Weighted average number of common shares outstanding * 5,315,262 5,304,119 5,310,936 5,303,911 Net earnings per share of common stock Net earnings before cumulative effect of accounting change $ .27 $ .18 $ .47 $ .28 Cumulative effect of accounting change for income taxes $ - $ - $ .58 $ - Net earnings per share of common stock $ .27 $ .18 $ 1.05 $ .28 Cash dividends per share of common stock $ .12 $ .12 $ .24 $ .24
* Adjusted for stock options exercised. The accompanying notes to consolidated financial statements are an integral part of this statement. ROANOKE ELECTRIC STEEL CORPORATION Consolidated Statements of Cash Flows (Unaudited) Six Months Ended April 30, 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 5,567,163 $ 1,467,098 Adjustments to reconcile net earnings to net cash provided by operating activities: Cumulative effect of change in accounting for income taxes (3,093,940) - Postretirement liabilities 121,000 - Depreciation and amortization 3,729,764 3,717,118 Gain on sale of property, plant and equipment (19,524) (48,400) Deferred income taxes (176,000) (78,000) Changes in assets and liabilities which provided (used) cash, exclusive of changes shown seperately (295,410) 2,313,853 Net cash provided by operating activities 5,833,053 7,371,669 CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property, plant and equipment (4,560,227) (1,598,810) Proceeds from sale of property, plant and equipment 39,124 53,000 Purchases of investments (246,308) (98,551) Other (60,703) (45,811) Net cash used in investing activities (4,828,114) (1,690,172) CASH FLOWS FROM FINANCING ACTIVITIES: Notes payable--net 500,000 (2,000,000) Cash dividends (1,275,686) (1,272,950) Increase in dividends payable 1,488 60 Proceeeds from exercise of common stock options 134,900 3,625 Redemption of long-term debt (3,107,750) (3,107,750) Net cash used in financing activities (3,747,048) (6,377,015) NET DECREASE IN CASH AND CASH EQUIVALENTS (2,742,109) (695,518) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,067,418 1,766,134 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 325,309 $ 1,070,616 CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED (USED) CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY: (Increase) decrease in accounts receivable $ (2,714,328) $ 882,568 (Increase) decrease in inventories (1,625,218) 1,557,097 (Increase) decrease in prepaid expenses 323,957 23,308 Increase (decrease) in accounts payable 4,345,949 774,574 Increase (decrease) in employees' taxes withheld 39,755 22,723 Increase (decrease) in accrued profit-sharing (577,260) (336,183) Increase (decrease) in accrued wages and expenses (374,086) (362,976) Increase (decrease) in accrued income taxes 285,821 (247,258) Total $ (295,410) $ 2,313,853 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 1,155,468 $ 1,093,139 Income taxes $ 1,547,264 $ 1,229,422 The accompanying notes to consolidated financial statements are an integral part of this statement. ROANOKE ELECTRIC STEEL CORPORATION Notes to Consolidated Financial Statements April 30, 1994 Note 1. In the opinion of the Registrant, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of April 30, 1994 and the results of operations for the three months and six months ended April 30, 1994 and 1993 and cash flows for the six months ended April 30, 1994 and 1993. Note 2. Inventories include the following major classifications: (Unaudited) (Audited) April 30, October 31, 1994 1993 Scrap Steel $ 1,939,335 $ 2,651,005 Melt Supplies 2,019,845 2,034,790 Billets 2,756,618 2,400,164 Mill Supplies 2,890,814 2,745,971 Finished Steel 16,087,786 14,237,250 $ 25,694,398 $ 24,069,180 Note 3. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", effective November 1, 1993. The cumulative effect of adopting SFAS No. 109 on the Company's statements was to increase income by $3,093,940 ($.58 per share) for the three months ended January 31, 1994 and the six months ended April 30, 1994. PART I - ITEM 2 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: Comparison of Increases (Decreases) Three Months Ended Six Months Ended April 30, April 30, 1994 and 1993 1994 and 1993 Amount Percent Amount Percent Net Sales 9,623,895 23.5 20,336,647 26.4 Cost of Sales 8,479,862 23.9 17,098,630 25.3 Administrative Expenses 118,100 3.8 892,375 15.9 Interest Expense 25,810 6.1 45,265 5.3 Profit-sharing Expense 146,513 37.7 541,331 96.4 Earnings before Income Taxes and Cumulative Effect of Change in Accounting Principles 853,610 55.0 1,759,046 74.2 Income Taxes 361,225 59.9 752,921 83.3 Net Earnings before Cumulative Effect of Change in Accounting Principles 492,385 51.9 1,006,125 68.6 Cumulative Effect of Change in Accounting Principles for Income Taxes - - 3,093,940 * Net Earnings 492,385 51.9 4,100,065 279.5 * Cannot be Calculated The significant increase in sales for both the six month and three month periods compared was due to substantial increases in tons shipped of merchant bar products and fabricated products (bar joists and rebar) together with improved selling prices for bar products and billets, eventhough billet tons shipped and fabricated product selling prices declined. The increased bar product shipments were due to improved market conditions, while merchant bar selling prices improved as a result of higher scrap costs which prompted industry-wide price increases. Successful job bidding resulted in increased fabricated product shipments, while competition within the construction industry caused the decline in selling prices. Billet selling prices increased primarily due to improved domestic demand and higher scrap prices which normally trigger changes in billet pricing. The decrease in billet tons shipped resulted mainly from a decline in the more competitive export business caused by selling prices not keeping pace with rising production costs; however, during both periods compared, domestic shipments showed significant improvements over last year's tonnage. Cost of sales increased for both the six month and three month periods compared primarily due to the increases in both tons shipped of merchant bar and fabricated products and the cost of scrap steel, our main raw material, in spite of the reduction in billet tons shipped. Inflation in general was not significant. Gross profit as a percentage of sales increased by approximately .8% for the six months compared due mainly to the higher selling prices for merchant bar products and billets and the increased production levels for raw steel, merchant bar and fabricated products which reduced unit costs for fixed expenses, which more than offset the higher scrap costs and lower selling prices for fabricated products. Gross profit as a percentage of sales declined by approximately .3% for the three months compared primarily as a result of higher scrap costs and lower fabricated product prices, in spite of improved merchant bar and billet selling prices and the increased production levels. The increase in gross profit margins at the higher shipment levels was the reason for the increase in both gross profit and net earnings for the six months compared. For the three months compared, both the gross profit and net earnings improved as a result of the significant increase in volume, eventhough margins were lower. Administrative expenses increased in both periods compared mainly as a result of increased executive and other compensation, based on various incentive arrangements, together with higher insurance expenses and the recognition of post-retirement benefits. Interest expense increased in both periods compared due to higher interest rates, in spite of lower average borrowings and increased capitalized interest and interest income. Profit-sharing expense, computed as a percentage of pretax income, increased in both periods compared as a result of the improvements in earnings. For both periods compared, the effective income tax rate increased in 1994, resulting from lower tax-exempt investment income. The 1994 six month period reflects the adoption of an accounting principles change in reporting for income taxes, resulting in the cumulative effect of $3,093,940 of increased income through a deferred tax benefit. Working capital decreased $2,701,879 during the period to $32,386,826 mainly as a result of capital expenditures, dividends and current maturities of long-term debt amounting to $4,560,227, $1,275,686 and $3,107,750, respectively, which exceeded working capital provided from operations. Borrowings against the Registrant's $37,500,000 lines of credit were $6,500,000 leaving a balance of $31,000,000 for future use. As a condition of our loan agreements, the real estate and equipment at the Roanoke plant and the capital stock of Socar, Inc. have been pledged as security for the loans. In addition, the terms do not allow consolidated current assets or the assets of Socar, Inc. to be pledged. However, additional capital resources are available to the Company as the secured creditors are over-collateralized and the Company's lenders and other financial institutions have expressed confidence and their willingness to provide additional long-term financing. At April 30, 1994, there were commitments for the purchase of plant and equipment amounting to $4,871,503. Funding for these expenditures will come from internally generated funds or the use of the credit lines mentioned above. The percentage of long-term debt to total capital decreased from 28.8% to 24.9% during the first half of the year, due to current maturities reducing long-term debt by $3,107,750, while stockholders' equity increased as net earnings of $5,567,163 exceeded dividends of $1,275,686. REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The financial statements included in this filing on Form 10-Q have been reviewed by Deloitte & Touche, Independent Certified Public Accountants, in accordance with established professional standards and procedures for such a review. All adjustments or additional disclosures proposed by Deloitte & Touche have been reflected in the data presented. The report of Deloitte & Touche commenting upon their review is included as an Exhibit to this report. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. To the best of Registrant's information and belief no new legal proceedings were instituted against Registrant or any of its wholly-owned subsidiaries during the period covered by this report and there were no material developments in or terminations of the legal proceedings reported earlier by Registrant on Form 10-K for fiscal year ended October 31, 1993 and Form 10-Q for the quarter ended January 31, 1994, as previously filed with the commission. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. a. Exhibits. (10) (a) Executive Officer Incentive Arrangement (incorporated herein by reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1993) (10) (b) Roanoke Electric Steel Corporation Employees' Stock Option Plan (incorporated herein by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1992) (15) Independent Accountants' Report b. Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter for which this report is filed. Items 2, 3, 4 and 5 are omitted because the information required by these items is not applicable. SIGNATURES 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 6/6/94 Donald G. Smith Donald G. Smith, Chairman, President, Treasurer and Chief Executive Officer (Principal Financial Officer) Date 6/6/94 John E. Morris John E. Morris, Vice President-Finance and Assistant Treasurer (Chief Accounting Officer) EXHIBIT INDEX Exhibit No. Exhibit Page (10) (a) Executive Officer Incentive Arrangement (incorporated 13 herein by reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1993) (b) Roanoke Electric Steel Corporation Employees' Stock 13 Option Plan (incorporated herein by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1992) (15) Independent Accountants' Report 14 EX-10 2 EXHIBIT 10 EXHIBIT NO. 10 (a) EXECUTIVE OFFICER INCENTIVE ARRANGEMENT Incorporated herein by reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1993. (b) ROANOKE ELECTRIC STEEL CORPORATION EMPLOYEES' STOCK OPTION PLAN Incorporated herein by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1992. EX-15 3 EXHIBIT 15 EXHIBIT 15 DELOITTE & TOUCHE Suite 1401 Telephone: (910) 721-2300 500 West Fifth Street Facsimile: (910) 721-2301 P.O. Box 20129 Winston-Salem, North Carolina 27120-0129 INDEPENDENT ACCOUNTANTS' REPORT Board of Directors Roanoke Electric Steel Corporation: We have reviewed the accompanying consolidated balance sheet of Roanoke Electric Steel Corporation and subsidiaries as of April 30, 1994, and the related consolidated statements of earnings and cash flows for the three-month and six-month periods ended April 30, 1994 and 1993. 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 inquires of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, 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 generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Roanoke Electric Steel Corporation and subsidiaries as of October 31, 1993, 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 19, 1993, 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, 1993 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Deloitte & Touche June 1, 1994 Deloitte Touche Tohmatsu International -----END PRIVACY-ENHANCED MESSAGE-----