-----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, AgCIcc08WkwCm0/UOid35/kpsK15TAm3yIGkfxmFzzbQ0zci2XrlwfEyatGOfT12 fBpNN2xLQhTEfXL1L/RO/w== 0000084278-96-000020.txt : 19960916 0000084278-96-000020.hdr.sgml : 19960916 ACCESSION NUMBER: 0000084278-96-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960731 FILED AS OF DATE: 19960913 SROS: NASD 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02389 FILM NUMBER: 96629841 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 3RD QUARTER 1996 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 July 31, 1996 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) (540) 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 July 31, 1996. 7,699,147 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 e. Independent Accountants' Report 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 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. Financial Data Schedule 13 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ROANOKE ELECTRIC STEEL CORPORATION Consolidated Balance Sheets ASSETS
(Unaudited) July 31, October 31, 1996 1995 CURRENT ASSETS Cash and cash equivalents $ 5,551,984 $ 6,999,644 Investments 6,298,626 4,179,418 Accounts receivable 37,460,964 40,159,523 Inventories 33,340,285 30,866,238 Prepaid expenses 1,439,288 722,729 Deferred income taxes 1,125,441 1,125,441 Total current assets 85,216,588 84,052,993 PROPERTY, PLANT AND EQUIPMENT Land 4,328,189 4,312,689 Buildings 17,848,122 17,195,735 Other property and equipment 123,611,427 104,825,380 Assets under construction 2,144,889 5,741,611 Total 147,932,627 132,075,415 Less--accumulated depreciation 63,970,205 58,569,617 Property, plant and equipment, net 83,962,422 73,505,798 OTHER ASSETS 199,825 215,867 TOTAL ASSETS $ 169,378,835 $ 157,774,658 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 4,250,000 $ 3,750,000 Notes payable - 11,000,000 Accounts payable 14,848,592 14,483,781 Dividends payable 847,566 888,101 Employees' taxes withheld 265,801 226,677 Accrued profit sharing contribution 2,852,205 4,403,031 Accrued wages and expenses 2,436,272 2,396,913 Accrued income taxes 278,717 1,420,730 Total current liabilities 25,779,153 38,569,233 LONG-TERM DEBT Notes payable 42,604,167 20,729,166 Less--current portion 4,250,000 3,750,000 Total long-term debt 38,354,167 16,979,166 POSTRETIREMENT LIABILITIES 680,777 494,591 DEFERRED INCOME TAXES 12,193,070 11,669,070 STOCKHOLDERS' EQUITY Common stock--no par value--authorized 20,000,000 shares, issued 8,991,890 shares in 1996 and 8,970,390 in 1995 1,897,171 1,729,503 Capital in excess of stated value 9,349,429 9,349,429 Retained earnings 87,965,504 80,178,534 Total 99,212,104 91,257,466 Less--treasury stock, 1,292,743 shares in 1996 and 896,743 in 1995 -- at cost 6,840,436 1,194,868 Total stockholders' equity 92,371,668 90,062,598 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 169,378,835 $ 157,774,658 The accompanying notes to consolidated financial statements are an integral part of this statement.
ROANOKE ELECTRIC STEEL CORPORATION Consolidated Statements of Earnings
(Unaudited) (Unaudited) Three Months Ended Nine Months Ended July 31, July 31, 1996 1995 1996 1995 SALES $ 61,532,232 $ 68,570,080 $ 178,105,842 $ 188,292,764 COST OF SALES 51,531,067 53,243,158 145,085,743 147,636,228 GROSS EARNINGS 10,001,165 15,326,922 33,020,099 40,656,536 OTHER OPERATING EXPENSES Administrative 4,085,174 4,228,458 11,915,150 12,176,843 Interest, net 142,439 545,855 1,031,857 1,594,703 Profit sharing 858,218 1,918,292 3,020,207 4,756,878 Total 5,085,831 6,692,605 15,967,214 18,528,424 EARNINGS BEFORE INCOME TAXES 4,915,334 8,634,317 17,052,885 22,128,112 INCOME TAX EXPENSE 1,961,042 3,452,553 6,804,426 8,873,983 NET EARNINGS $ 2,954,292 $ 5,181,764 $ 10,248,459 $ 13,254,129 Weighted average number of common shares outstanding * 7,744,451 8,060,688 7,958,944 8,038,278 Net earnings per share of common stock $ 0.39 $ 0.65 $ 1.29 $ 1.65 Cash dividends per share of common stock $ 0.11 $ 0.09 $ 0.33 $ 0.26 * Adjusted for three-for-two stock split effective 5-1-95. The accompanying notes to consolidated financial statements are an integral part of this statement.
ROANOKE ELECTRIC STEEL CORPORATION Consolidated Statements of Cash Flows
(Unaudited) Nine Months Ended July 31, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 10,248,459 $ 13,254,129 Adjustments to reconcile net earnings to net cash provided by operating activities: Postretirement liabilities 186,186 189,443 Depreciation and amortization 6,045,294 6,039,134 Gain on sale of investments and property, plant and equipment (15,206) (177,027) Deferred income taxes 524,000 (213,000) Changes in assets and liabilities which provided (used) cash, exclusive of changes shown separately (2,741,592) (7,403,146) Net cash provided by operating activities 14,247,141 11,689,533 CASH FLOWS FROM INVESTING ACTIVITIES Expenditures for property, plant and equipment (16,493,470) (7,689,570) Proceeds from sale of property, plant and equipment 58,253 582,754 Sale (purchase) of investments (2,166,988) 1,085,919 Other 142,239 - Net cash used in investing activities (18,459,966) (6,020,897) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in notes payable (11,000,000) 4,500,000 Cash dividends (2,591,401) (2,094,724) Decrease in dividends payable (40,535) (611,274) Proceeds from exercise of common stock options 167,668 323,228 Payment of long-term debt (12,624,999) (4,036,625) Proceeds from long-term debt 34,500,000 - Repurchase of common stock (5,645,568) - Net cash provided by (used in) financing activities 2,765,165 (1,919,395) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,447,660) 3,749,241 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,999,644 150,036 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,551,984 $ 3,899,277 CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED (USED) CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY (Increase) decrease in accounts receivable $ 2,698,559 $ (2,944,592) (Increase) decrease in inventories (2,474,047) (3,558,604) (Increase) decrease in prepaid expenses (716,559) 300,188 Increase (decrease) in accounts payable 364,811 (2,765,521) Increase (decrease) in employees' taxes withheld 39,124 58,860 Increase (decrease) in accrued profit sharing contribution (1,550,826) 1,407,190 Increase (decrease) in accrued wages and expenses 39,359 16,456 Increase (decrease) in accrued income taxes (1,142,013) 82,877 Total $ (2,741,592) $ (7,403,146) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 1,259,748 $ 1,887,650 Income taxes $ 7,422,440 $ 9,004,106 The accompanying notes to consolidated financial statements are an integral part of this statement.
ROANOKE ELECTRIC STEEL CORPORATION Notes to Consolidated Financial Statements July 31, 1996 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 July 31, 1996 and the results of operations for the three months and nine months ended July 31, 1996 and 1995 and cash flows for the nine months ended July 31, 1996 and 1995. Note 2. Inventories include the following major classifications: (Unaudited) July 31, October 31, 1996 1995 Scrap Steel $ 5,552,703 $ 3,728,612 Melt Supplies 1,975,815 2,443,827 Billets 3,488,231 1,748,778 Mill Supplies 2,929,088 3,210,946 Finished Steel 19,394,448 19,734,075 Total Inventories $ 33,340,285 $ 30,866,238 DELOITTE & TOUCHE LLP Suite 1401 Telephone: (910) 721-2300 500 West Fifth Street Facsimile: (910) 721-2301 Winston-Salem, North Carolina 27152 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 July 31, 1996, and the related consolidated statements of earnings and cash flows for the three-month and nine-month periods ended July 31, 1996 and 1995. 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, 1995, 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, 1995, 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, 1995 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Deloitte & Touche LLP August 29, 1996 Deloitte Touche Tohmatsu International 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 Nine Months Ended July 31, July 31, 1996 and 1995 1996 and 1995 Amount Percent Amount Percent Sales (7,037,848) (10.3) (10,186,922) (5.4) Cost of Sales (1,712,091) (3.2) (2,550,485) (1.7) Administrative Expenses (143,284) (3.4) (261,693) (2.1) Interest Expense (403,416) (73.9) (562,846) (35.3) Profit Sharing Expense (1,060,074) (55.3) (1,736,671) (36.5) Earnings before Income Taxes (3,718,983) (43.1) (5,075,227) (22.9) Income Tax Expense (1,491,511) (43.2) (2,069,557) (23.3) Net Earnings (2,227,472) (43.0) (3,005,670) (22.7) The significant decrease in sales for both periods compared was due to sharp declines in both merchant bar selling prices and billet tons shipped, while shipments of fabricated products (bar joists and rebar) and billet prices declined slightly. Sales were favorably impacted by increased merchant bar shipments and improved fabricated product selling prices, although fabricated prices were relatively flat for the three month period. Selling prices for bar products declined as a result of increased competition, prompting industry-wide price reductions. The planned shutdown of the melt shop during the quarter to install a new ladle furnace and upgrade the electric arc furnace was unexpectedly prolonged due to problems with construction and installation, resulting in a 42.5% decline in billet production for the quarter and causing the significant reduction in billet shipments. Shipments of fabricated products decreased, due mainly to weather related construction delays. Billet selling prices declined with the downward trend in scrap prices, which normally trigger changes in billet pricing. Merchant bar shipments increased as demand and backlogs remained high, in spite of increased competition. Fabricated product selling prices improved for the nine months compared as a result of generally strong business conditions within the commercial construction industry. Cost of sales declined for both the nine month and three month periods compared mainly due to decreased tons shipped of billets and fabricated products, together with a reduction in the cost of scrap steel, our main raw material, in spite of the increased bar product shipments. Gross profit as a percentage of sales declined by approximately 3.1% and 6.1% for the nine months and three months compared, respectively. These decreases were primarily the result of the lower selling prices for merchant bar products and billets, and the negative effect of reduced production on fixed costs, which more than offset the effects of the lower scrap costs and the improvement in fabricated product selling prices. The decline in gross profit margins at the reduced shipment levels caused the reductions in gross profits and net earnings for the periods compared. Administrative expenses decreased in both periods compared mainly as a result of decreased executive and other compensation in accordance with various incentive arrangements. Administrative expenses, as a percentage of sales, were relatively constant for both periods. Interest expense decreased in both periods compared as lower interest rates and increased capitalized interest and interest income more than offset higher average borrowings. Profit sharing expense, computed as a percentage of pre-tax income, declined in both periods compared due to decreased earnings. The effective income tax rate was relatively constant for both periods compared. Working capital increased $13,953,675 during the period to $59,437,435 mainly as a result of working capital provided from operations and long-term borrowings exceeding capital expenditures, dividends, debt maturities and repurchases of common stock amounting to $16,493,470, $2,591,401, $13,124,999 and $5,645,568, respectively. The current ratio of 3.3 to 1 and the quick ratio of 1.9 to 1 both indicate very sound liquidity and a healthy financial condition. On February 15, 1996, the Registrant closed on $60,000,000 of unsecured credit facilities with a syndicate of lenders. The facilities were comprised of a $30,000,000 ten year term loan and a $30,000,000 five year revolver. The term loan was used to purchase additional equipment and refinance debt. The revolver replaced lines of credit that were not legally binding. At July 31, 1996, $4,500,000 had been borrowed against the revolver. These new loan facilities improved liquidity and reduced interest rates significantly. The Board of Directors, at its April 16, 1996 meeting, approved the repurchase of up to 500,000 shares of the Company's common stock over the next twelve months. By the end of the quarter, a total of 396,000 shares had been repurchased at a cost of $5,645,568. The repurchase of the remaining 104,000 shares will affect future liquidity and will be financed from internally generated funds and the use of the credit facility. At July 31, 1996, there were commitments for the purchase of plant and equipment amounting to $1,693,469. Funding for these expenditures will also come from internally generated funds and the use of the revolver mentioned above. A significant portion of the above capital expenditures includes the upgrade of the electric arc furnace and the addition of the ladle furnace to the Company's melt shop operations. The Registrant expects to benefit from this new state of the art equipment with increased raw steel production, improved quality and decreased costs through improved production efficiencies. As of July 31, 1996, the upgrade on the electric arc furnace was complete and in operation, whereas equipment failures prevented completion and installation on the ladle furnace until late August. Both installations should favorably impact earnings. During the period, the ratio of debt to equity rose to .83 to 1 due to new borrowings and stock repurchases. The percentage of long-term debt to total capital increased from 15.9% to 29.3% during the nine months. Long-term debt increased $21,375,001 due to $34,500,000 borrowing against the loan facilities mentioned above net of current maturities of $13,124,999. Stockholders' equity increased as net earnings of $10,248,459 exceeded dividends of $2,591,401 and common stock repurchases of $5,645,568. 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 was no material development in or termination of the legal proceedings reported earlier by Registrant on Form 10-K for fiscal year ended October 31, 1995 and Forms 10-Q for the quarters ended January 31, 1996 and April 30, 1996, as previously filed with the commission. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. a. Exhibits. (27) Financial Data Schedule 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 September 12, 1996 Donald G. Smith Donald G. Smith, Chairman, President, Treasurer and Chief Executive Officer (Principal Financial Officer) Date September 12, 1996 John E. Morris John E. Morris, Vice President-Finance and Assistant Treasurer (Chief Accounting Officer) EXHIBIT INDEX Exhibit No. Exhibit Page (27) Financial Data Schedule 13 EXHIBIT NO. 27 FINANCIAL DATA SCHEDULE EX-27 2
5 The Schedule contains summary financial information extracted from the 3rd Quarter Consolidated Balance Sheet and Statement of Earnings and is qualified in its entirety by reference to such financial statements. 9-MOS OCT-31-1996 JUL-31-1996 5,551,984 6,298,626 37,460,964 0 33,340,285 85,216,588 147,932,627 63,970,205 169,378,835 25,779,153 38,354,167 0 0 1,897,171 90,474,497 169,378,835 178,105,842 178,105,842 145,085,743 145,085,743 14,935,357 0 1,031,857 17,052,885 6,804,426 10,248,459 0 0 0 10,248,459 1.29 1.29
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