-----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, Q3PThCbkNrDDtrGMx1cNwXzaUz3OQOFH9XDiUD9sbjeJtS+nvpPCoAp8L+7rskVr w7QXKUTzo7vRfFHvZ0frsA== 0000084278-97-000009.txt : 19970929 0000084278-97-000009.hdr.sgml : 19970929 ACCESSION NUMBER: 0000084278-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970731 FILED AS OF DATE: 19970911 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: SEC FILE NUMBER: 000-02389 FILM NUMBER: 97678800 BUSINESS ADDRESS: STREET 1: P O BOX 13948 CITY: ROANOKE STATE: VA ZIP: 24038-3948 BUSINESS PHONE: 5403421831 MAIL ADDRESS: STREET 1: PO BOX 13948 CITY: ROANOKE STATE: VA ZIP: 24038-3948 10-Q 1 3RD QUARTER 1997 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, 1997 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, 1997. 7,454,097 Shares outstanding ROANOKE ELECTRIC STEEL CORPORATION FORM 10-Q CONTENTS Page 1. Part I - Financial Information 3 - 10 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 - 7 e. Independent Accountants' Report 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 -10 2. Part II - Other Information 11 Item 1. Legal Proceedings 11 Item 6. Exhibits and Reports on Form 8-K 11 3. Signatures 12 4. Exhibit Index pursuant to Regulation S-K 13 5. Exhibits a. Financial Data Schedule 14 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Balance Sheets ASSETS (Unaudited) July 31, October 31, 1997 1996 CURRENT ASSETS Cash and cash equivalents $ 3,634,079 $ 1,038,689 Investments 8,194,577 6,059,853 Accounts receivable 38,208,538 40,479,798 Inventories 34,966,435 34,314,899 Prepaid expenses 2,030,551 651,013 Deferred income taxes 1,039,542 1,039,542 Total current assets 88,073,722 83,583,794 PROPERTY, PLANT AND EQUIPMENT Land 4,325,872 4,291,522 Buildings 18,631,458 17,889,855 Other property and equipment 126,369,235 123,215,697 Assets under construction 2,811,700 1,054,026 Total 152,138,265 146,451,100 Less--accumulated depreciation 70,279,154 63,216,681 Property, plant and equipment, net 81,859,111 83,234,419 OTHER ASSETS 191,314 197,688 TOTAL ASSETS $ 170,124,147 $ 167,015,901 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 4,250,000 $ 4,250,000 Accounts payable 14,097,203 10,977,510 Dividends payable 969,032 904,944 Employees' taxes withheld 103,378 284,466 Accrued profit sharing contribution 3,221,345 3,911,957 Accrued wages and expenses 2,201,406 2,745,159 Accrued income taxes 892,496 879,569 Total current liabilities 25,734,860 23,953,605 LONG-TERM DEBT Notes payable 33,854,166 39,541,666 Less--current portion 4,250,000 4,250,000 Total long-term debt 29,604,166 35,291,666 POSTRETIREMENT LIABILITIES 928,817 742,839 DEFERRED INCOME TAXES 13,258,700 12,594,700 STOCKHOLDERS' EQUITY Common stock--no par value--authorized 20,000,000 shares, issued 9,010,040 shares in 1997 and 8,994,140 in 1996 2,078,646 1,916,796 Capital in excess of stated value 9,349,429 9,349,429 Retained earnings 99,673,124 92,097,683 Total 111,101,199 103,363,908 Less--treasury stock, 1,555,943 shares in 1997 and 1,452,943 in 1996 -- at cost 10,503,595 8,930,817 Total stockholders' equity 100,597,604 94,433,091 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 170,124,147 $ 167,015,901 The accompanying notes to consolidated financial statements are 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, 1997 1996 1997 1996 SALES $ 68,768,769 $ 61,532,232 $ 188,420,399 $ 178,105,842 COST OF SALES 55,187,551 51,531,067 153,657,173 145,085,743 GROSS EARNINGS 13,581,218 10,001,165 34,763,226 33,020,099 OTHER OPERATING EXPENSES Administrative 4,586,175 4,085,174 12,945,279 11,915,150 Interest, net 396,639 142,439 1,286,335 1,031,857 Profit sharing 1,441,043 858,218 3,320,313 3,020,207 Total 6,423,857 5,085,831 17,551,927 15,967,214 EARNINGS BEFORE INCOME TAXES 7,157,361 4,915,334 17,211,299 17,052,885 INCOME TAX EXPENSE 2,857,809 1,961,042 6,868,003 6,804,426 NET EARNINGS $ 4,299,552 $ 2,954,292 $ 10,343,296 $ 10,248,459 Weighted average number of common shares outstanding 7,486,456 7,744,451 7,494,896 7,958,944 Net earnings per share of common stock $ 0.57 $ 0.39 $ 1.38 $ 1.29 Cash dividends per share of common stock $ 0.13 $ 0.11 $ 0.37 $ 0.33 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, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 10,343,296 $ 10,248,459 Adjustments to reconcile net earnings to net cash provided by operating activities: Postretirement liabilities 185,978 186,186 Depreciation and amortization 7,099,106 6,045,294 (Gain) loss on sale of investments and property, plant and equipment 4,207 (15,206) Deferred income taxes 664,000 524,000 Changes in assets and liabilities which provided (used) cash, exclusive of changes shown separately 1,957,353 (2,741,592) Net cash provided by operating activities 20,253,940 14,247,141 CASH FLOWS FROM INVESTING ACTIVITIES Expenditures for property, plant and equipment (5,704,791) (16,493,470) Proceeds from sale of property, plant and equipment 100 58,253 Purchase of investments (2,151,663) (2,166,988) Other - 142,239 Net cash used in investing activities (7,856,354) (18,459,966) CASH FLOWS FROM FINANCING ACTIVITIES Decrease in notes payable - (11,000,000) Cash dividends (2,767,856) (2,591,401) Increase (decrease) in dividends payable 64,088 (40,535) Proceeds from exercise of common stock options 161,850 167,668 Payment of long-term debt (5,687,500) (12,624,999) Proceeds from long-term debt - 34,500,000 Repurchase of common stock (1,572,778) (5,645,568) Net cash provided by (used in) financing activities (9,802,196) 2,765,165 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,595,390 (1,447,660) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,038,689 6,999,644 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,634,079 $ 5,551,984 CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED (USED) CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY (Increase) decrease in accounts receivable $ 2,271,260 $ 2,698,559 (Increase) decrease in inventories (651,536) (2,474,047) (Increase) decrease in prepaid expenses (1,379,538) (716,559) Increase (decrease) in accounts payable 3,119,693 364,811 Increase (decrease) in employees' taxes withheld (181,088) 39,124 Increase (decrease) in accrued profit sharing contribution (690,612) (1,550,826) Increase (decrease) in accrued wages and expenses (543,753) 39,359 Increase (decrease) in accrued income taxes 12,927 (1,142,013) Total $ 1,957,353 $ (2,741,592) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 1,805,026 $ 1,259,748 Income taxes $ 6,191,077 $ 7,422,440 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, 1997 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, 1997 and the results of operations for the three months and nine months ended July 31, 1997 and 1996 and cash flows for the nine months ended July 31, 1997 and 1996. Note 2. Inventories include the following major classifications: (Unaudited) July 31, October 31, 1997 1996 Scrap Steel $ 5,687,744 $ 5,313,335 Melt Supplies 2,268,949 2,416,879 Billets 6,818,251 7,103,342 Mill Supplies 3,306,850 3,085,749 Finished Steel 16,884,641 16,395,594 Total Inventories $ 34,966,435 $ 34,314,899 Note 3. In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 is effective for transactions entered into in fiscal years that begin after December 15, 1995. This statement 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 No. 25, "Accounting for Stock Issued to Employees" (APB No. 25), provided that they make pro forma disclosures on net income 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. Note 4. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share", which changes the method of calculating earnings per share. SFAS No. 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. The statement is effective for financial statements for periods ending after December 31, 1997, and early adoption is not permitted. The pro forma basic earnings per share and diluted earnings per share calculated in accordance with SFAS No. 128 are as follows: (Unaudited) (Unaudited) Three Months Nine Months Ended Ended July 31, July 31, 1997 1996 1997 1996 Pro forma basic earnings per share $ 0.57 $ 0.39 $ 1.38 $ 1.29 Pro forma diluted earnings per share $ 0.57 $ 0.38 $ 1.37 $ 1.28 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, 1997, the related consolidated statements of earnings for the three-month and nine-month periods ended July 31, 1997 and 1996, and the related consolidated statements of cash flows for the nine month periods ended July 31, 1997 and 1996. 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, 1996, 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 21, 1996, 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, 1996 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Deloitte & Touche LLP September 3, 1997 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, 1997 and 1996 1997 and 1996 Amount Percent Amount Percent Sales 7,236,537 11.8 10,314,557 5.8 Cost of Sales 3,656,484 7.1 8,571,430 5.9 Administrative Expenses 501,001 12.3 1,030,129 8.6 Interest Expense 254,200 178.5 254,478 24.7 Profit Sharing Expense 582,825 67.9 300,106 9.9 Earnings before Income Taxes 2,242,027 45.6 158,414 0.9 Income Tax Expense 896,767 45.7 63,577 0.9 Net Earnings 1,345,260 45.5 94,837 0.9 The significant increase in sales for both periods compared resulted, primarily, from increased tons shipped of both merchant bar products and billets, together with improved selling prices for bar products, even though billet prices declined slightly. Fabricated product selling prices favorably impacted the three month period, but negatively affected the nine month period. Shipments of fabricated products declined slightly for the quarter, while remaining flat for the nine months. Merchant bar shipments increased during both periods compared as competition continued to ease, while order levels and backlogs remained high. Improved domestic demand resulted in the higher billet shipments for both periods. Selling prices for bar products improved during both periods with more favorable competitive conditions and demand, which prompted industry-wide price increases. Billet selling prices declined in both periods with the downward trend in scrap prices, which normally trigger changes in billet pricing. Fabricated product selling prices increased for the quarter, influenced mainly by higher raw material costs, but came too late to offset earlier price reductions resulting in the slight drop in nine month comparable prices. Competitive conditions in the construction industry caused the drop in fabricated product shipments for the three months compared. Cost of sales increased for both the nine month and three month periods compared primarily due to the increased tons shipped of merchant bar products and billets. Gross profit as a percentage of sales declined from 18.5% to 18.4% for the nine months compared as a result of the lower selling prices for both fabricated products and billets, which more than offset the improved bar prices. Gross profit as a percentage of sales increased from 16.3% to 19.7% for the three months compared due mainly to the higher selling prices for both mill and fabricated products and increased raw steel and merchant bar production levels which reduced unit costs for fixed expenses, which more than offset lower billet prices. For both periods compared, the increase in gross profit margins for mill products at the higher shipment levels was the primary reason for the increase in both gross profit and net earnings. Administrative expenses increased in both periods compared mainly as a result of increased executive and other compensation, in accordance with various incentive arrangements based on earnings and production, and higher insurance expenses. Administrative expenses, as a percentage of sales, were relatively constant for the periods compared. Interest expense increased in both periods compared as higher interest rates and reduced capitalized interest and interest income more than offset the lower average borrowings. Profit sharing expense, computed as a percentage of pre-tax income, increased in both periods compared as a result of the improvements in earnings. The effective income tax rate was relatively constant for both periods compared. Working capital increased $2,708,673 during the period to $62,338,862 mainly as a result of working capital provided from operations exceeding capital expenditures, dividends, debt maturities and repurchases of common stock amounting to $5,704,791, $2,767,856, $5,687,500 and $1,572,778, respectively. The current ratio of 3.4 to 1 and the quick ratio of 1.9 to 1 both indicate very sound liquidity and a healthy financial condition. In addition, cash, cash equivalents and investments increased $4,730,114 during the period to $11,828,656. Our $30,000,000 revolver, unused at July 31, 1997, provides the liquidity and capital resources necessary to maintain our competitive position and ensure future growth. The Company last year approved a common stock buy-back plan. Currently, 659,200 shares of the 750,000 authorized have been repurchased at a cost of $9,308,727. At July 31, 1997, commitments for the purchase of property, plant and equipment of $876,334, and the repurchase of the remaining 90,800 shares will affect future liquidity. Funding for these needs will come from internally generated funds and the use of the revolver mentioned above. During the period, the ratio of debt to equity improved to .69 to 1, and the percentage of long-term debt to total capital decreased from 27.2% to 22.7%, due to current maturities reducing long-term debt by $5,687,500, while stockholders' equity increased as net earnings of $10,343,296 exceeded dividends of $2,767,856 and common stock repurchases of $1,572,778. 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 - 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, 1996 and Forms 10-Q for the quarters ended January 31, 1997 and April 30, 1997, 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 August 29, 1997 Donald G. Smith Donald G. Smith, Chairman, President, Treasurer and Chief Executive Officer (Principal Financial Officer) Date August 29, 1997 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 14 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-31-1997 JUL-31-1997 3,634,079 8,194,577 38,208,538 0 34,966,435 88,073,722 152,138,265 70,279,154 170,124,147 25,734,860 29,604,166 0 0 2,078,646 98,518,958 170,124,147 188,420,399 188,420,399 153,657,173 153,657,173 16,265,592 0 1,286,335 17,211,299 6,868,003 10,343,296 0 0 0 10,343,296 1.38 1.38
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