-----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, DZFZbYgwp516UMmGRe81CsUrLVpjmZuS2fxSyfiGzYU0Iu5YPXG2UmgU8UiVKyu8 xjF+G8gjBfq4YeOVC7qL2w== 0000084278-98-000006.txt : 19980313 0000084278-98-000006.hdr.sgml : 19980313 ACCESSION NUMBER: 0000084278-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980312 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: 98564395 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 1ST QUARTER 1998 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 January 31, 1998 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 January 31, 1998. 7,475,547 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 e. Independent Accountants' Report 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8- 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 2. Part II - Other Information 11 Item 1. Legal Proceedings 11 Item 5. Other Information 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) January 31, October 31, 1998 1997 CURRENT ASSETS Cash and cash equivalents $ 12,879,508 $ 8,844,537 Investments 8,073,149 7,815,682 Accounts receivable 38,018,444 38,786,302 Inventories 35,749,885 36,814,417 Prepaid expenses 1,931,208 1,900,338 Deferred income taxes 1,211,881 1,211,881 Total current assets 97,864,075 95,373,157 PROPERTY, PLANT AND EQUIPMENT Land 4,310,632 4,313,060 Buildings 18,936,089 18,874,555 Other property and equipment 120,105,643 119,266,483 Assets under construction 1,468,238 921,581 Total 144,820,602 143,375,679 Less--accumulated depreciation 64,294,861 62,077,810 Property, plant and equipment, net 80,525,741 81,297,869 OTHER ASSETS 183,591 189,193 TOTAL ASSETS $ 178,573,407 $ 176,860,219 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 4,250,000 $ 4,250,000 Accounts payable 15,484,962 13,050,874 Dividends payable 971,821 971,639 Employees' taxes withheld 270,222 151,085 Accrued profit sharing contribution 1,221,961 4,910,443 Accrued wages and expenses 1,713,843 2,938,065 Accrued income taxes 2,787,394 1,072,258 Total current liabilities 26,700,203 27,344,364 LONG-TERM DEBT Notes payable 31,729,167 32,791,667 Less--current portion 4,250,000 4,250,000 Total long-term debt 27,479,167 28,541,667 POSTRETIREMENT LIABILITIES 1,066,554 990,809 DEFERRED INCOME TAXES 13,597,110 13,547,110 STOCKHOLDERS' EQUITY Common stock--no par value--authorized 20,000,000 shares, issued 9,031,490 shares in 1998 and 9,030,090 in 1997 2,364,111 2,349,179 Capital in excess of stated value 9,349,429 9,349,429 Retained earnings 108,520,428 105,241,256 Total 120,233,968 116,939,864 Less--treasury stock, 1,555,943 shares at cost 10,503,595 10,503,595 Total stockholders' equity 109,730,373 106,436,269 TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 178,573,407 $ 176,860,219 The accompanying notes to consolidated financial statements are an integral part of this statement.
ROANOKE ELECTRIC STEEL CORPORATION Consolidated Statements of Earnings (Unaudited) Three Months Ended January 31, 1998 1997 SALES $ 71,603,735 $ 58,351,734 COST OF SALES 58,695,984 49,020,924 GROSS EARNINGS 12,907,751 9,330,810 OTHER OPERATING EXPENSES Administrative 4,324,764 3,822,215 Interest, net 284,135 466,535 Profit sharing 1,221,961 744,673 Total 5,830,860 5,033,423 EARNINGS BEFORE INCOME TAXES 7,076,891 4,297,387 INCOME TAX EXPENSE 2,825,899 1,712,713 NET EARNINGS $ 4,250,992 $ 2,584,674 Weighted average number of common shares outstanding : Basic 7,474,208 7,503,026 Diluted 7,544,714 7,539,468 Net earnings per share of common stock: Basic $ 0.57 $ 0.34 Diluted $ 0.56 $ 0.34 Cash dividends per share of common stock $ 0.13 $ 0.12 PRO FORMA INFORMATION GIVING RETROACTIVE EFFECT TO A THREE-FOR-TWO STOCK SPLIT, EFFECTIVE MARCH 25, 1998 Weighted average number of common shares outstanding : Basic 11,211,312 11,254,539 Diluted 11,317,071 11,309,202 Net earnings per share of common stock: Basic $ 0.38 $ 0.23 Diluted $ 0.38 $ 0.23 Cash dividends per share of common stock $ 0.09 $ 0.08 The accompanying notes to consolidated financial statements are an integral part of this statement.
ROANOKE ELECTRIC STEEL CORPORATION Consolidated Statements of Cash Flows (Unaudited) Three Months Ended January 31, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 4,250,992 $ 2,584,674 Adjustments to reconcile net earnings to net cash provided by operating activities: Postretirement liabilities 75,745 61,993 Depreciation and amortization 2,293,429 2,340,756 (Gain) loss on sale of investments and property, plant and equipment (13,399) 1,054 Deferred income taxes 50,000 183,000 Changes in assets and liabilities which provided (used) cash, exclusive of changes shown separately 1,157,177 5,330,402 Net cash provided by operating activities 7,813,944 10,501,879 CASH FLOWS FROM INVESTING ACTIVITIES Expenditures for property, plant and equipment (1,507,987) (1,164,926) Purchase of investments (251,779) (159,225) Net cash used in investing activities (1,759,766) (1,324,151) CASH FLOWS FROM FINANCING ACTIVITIES Cash dividends (971,821) (898,692) Increase (decrease) in dividends payable 182 (5,892) Proceeds from exercise of common stock options 14,932 18,850 Payment of long-term debt (1,062,500) (3,562,499) Repurchase of common stock - (754,028) Net cash used in financing activities (2,019,207) (5,202,261) NET INCREASE IN CASH AND CASH EQUIVALENTS 4,034,971 3,975,467 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,844,537 1,038,689 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,879,508 $ 5,014,156 CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED (USED) CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY (Increase) decrease in accounts receivable $ 767,858 $ 7,082,448 (Increase) decrease in inventories 1,064,532 615,165 (Increase) decrease in prepaid expenses (30,870) (668,852) Increase (decrease) in accounts payable 2,434,088 2,081,465 Increase (decrease) in employees' taxes withheld 119,137 (208,467) Increase (decrease) in accrued profit sharing contribution (3,688,482) (3,117,284) Increase (decrease) in accrued wages and expenses (1,224,222) (1,128,819) Increase (decrease) in accrued income taxes 1,715,136 674,746 Total $ 1,157,177 $ 5,330,402 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 561,005 $ 637,916 Income taxes $ 1,060,764 $ 854,968 The accompanying notes to consolidated financial statements are an integral part of this statement.
ROANOKE ELECTRIC STEEL CORPORATION Notes to Consolidated Financial Statements January 31, 1998 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, 1998 and the results of operations and cash flows for the three months ended January 31, 1998 and 1997. Note 2. Inventories include the following major classifications: (Unaudited) January 31, October 31, 1998 1997 Scrap Steel $ 6,346,051 $ 7,579,552 Melt Supplies 2,439,138 2,212,939 Billets 4,608,142 5,960,432 Mill Supplies 3,399,635 3,484,688 Finished Steel 18,956,919 17,576,806 Total Inventories $ 35,749,885 $ 36,814,417 Note 3. 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 15, 1997. Basic earnings per share and diluted earnings per share calculated in accordance with SFAS No. 128 are presented in the consolidated statements of earnings. Note 4. Certain amounts included in the consolidated financial statements for 1997 have been reclassified from their original presentation to conform with the current year presentation. Note 5. The Registrant declared a three-for-two common stock split payable March 25, 1998, to shareholders of record March 6, 1998. Pro forma references to the number of common shares (basic and diluted) and per common share amounts (basic and diluted) have been restated, in the consolidated statements of earnings, to retroactively reflect the stock split. INDEPENDENT ACCOUNTANTS' REPORT DELOITTE & TOUCHE LLP Suite 1401 Telephone: (910) 721-2300 500 West Fifth Street Facsimile: (910) 721-2301 Winston-Salem, North Carolina 27152 Board of Directors Roanoke Electric Steel Corporation: We have reviewed the accompanying consolidated balance sheet of Roanoke Electric Steel Corporation and subsidiaries as of January 31, 1998, and the related consolidated statements of earnings and cash flows for the three-month periods ended January 31, 1998 and 1997. 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 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, 1997, 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 18, 1997, 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, 1997 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Deloitte & Touche LLP March 3, 1998 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 January 31, 1998 and 1997 Amount Percent Sales 13,252,001 22.7 Cost of Sales 9,675,060 19.7 Administrative Expenses 502,549 13.1 Interest Expense (182,400) (39.1) Profit Sharing Expense 477,288 64.1 Earnings before Income Taxes 2,779,504 64.7 Income Tax Expense 1,113,186 65.0 Net Earnings 1,666,318 64.5 Sales for the periods compared increased significantly as a result of increases in tons shipped of fabricated products and billets, together with improved selling prices for merchant bar products and billets. Sales were negatively affected by slightly lower selling prices for fabricated products, while shipment levels for bar products were flat. Strong domestic demand and lower excess billet availability in the market resulted in billet shipments nearly doubling the 1997 levels. The increase in tons shipped of fabricated products was the result of a difference in the delivery schedules of the respective backlogs. Selling prices for bar products improved during the period, as market conditions remained strong, prompting a number of industry-wide price increases since last year's first quarter. The higher billet selling prices were mainly attributable to increased scrap prices, which normally trigger changes in billet pricing. Fabricated product selling prices declined due to increased competition within the commercial construction industry, even though business conditions continued strong and backlogs remained high. Cost of sales increased mainly as a result of the increased tons shipped of fabricated products and billets, together with an increase in the cost of scrap steel, our main raw material. Gross profit as a percentage of sales increased from 16% to 18%, primarily as a result of the higher selling prices for both mill products and billets and increased raw steel, merchant bar and fabricated production levels which reduced unit costs for fixed expenses, which more than offset lower fabricated product selling prices. The significant improvement in gross profit and net earnings was mainly attributable to the increase in gross profit margins for mill products, coupled with the increased volume of fabricated product and billet shipments. Administrative expenses increased 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. However, current year administrative expenses were 6.0% of sales, down from 6.6% in 1997. Interest expense decreased primarily due to reduced average borrowings and increased capitalized interest and interest income, as interest rates remained unchanged. Profit sharing expense, computed as a percentage of pre-tax income, increased due to the improvement in earnings. The effective income tax rate was relatively constant for both periods compared. Working capital increased $3,135,079 during the period to $71,163,872 mainly as a result of working capital provided from operations exceeding capital expenditures, dividends and debt maturities amounting to $1,507,987, $971,821 and $1,062,500, respectively. The current ratio of 3.7 to 1 and the quick ratio of 2.2 to 1 both indicate very sound liquidity and a healthy financial condition. In addition, cash, cash equivalents and investments increased $4,292,438 during the period to $20,952,657. Our $30,000,000 revolver, unused at January 31, 1998, provides the liquidity and capital resources necessary to maintain our competitive position and ensure future growth. The Company's approved common stock buy-back plan currently stands at 659,200 shares repurchased, of the 750,000 authorized, at a cost of $9,308,727. At January 31, 1998, commitments for the purchase of property, plant and equipment of $2,968,752, and the repurchase of the remaining 90,800 shares will affect future liquity. Funding for these needs will come from internally generated funds and the use of the revolver mentioned above. During the quarter, the ratio of debt to equity improved to .63 to 1, and the percentage of long-term debt to total capital decreased from 21.2% to 20.0%, due to current maturities reducing long-term debt by $1,062,500, while stockholders' equity increased as net earnings of $4,250,992 exceeded dividends of $971,821. 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 I - ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Quantitative and qualitative information about market risk was addressed in Form 10-K for fiscal year ended October 31, 1997, 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. 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, 1997, as previously filed with the commission. ITEM 5. OTHER INFORMATION. On February 17, 1998, the Registrant's Board declared a three-for-two common stock split payable March 25, 1998 to shareholders of record March 6, 1998. The stock split, intended to broaden the market for the Company's shares, will result in the issuance of approximately 3,738,000 shares, bringing the total outstanding shares to roughly 11,213,000 after the split. 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 and 4 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 03/12/98 Donald G. Smith Donald G. Smith, Chairman, President, Treasurer and Chief Executive Officer (Principal Financial Officer) Date 03/12/98 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 1st Quarter Consolidated Balance Sheets and Statement of Earnings and is qualified in its entirety by reference to such financial statements. 3-MOS OCT-31-1998 JAN-31-1998 12,879,508 8,073,149 38,018,444 0 35,749,885 97,864,075 144,820,602 64,294,861 178,573,407 26,700,203 27,479,167 0 0 2,364,111 107,366,262 178,573,407 71,603,735 71,603,735 58,695,984 58,695,984 5,546,725 0 284,135 7,076,891 2,825,899 4,250,992 0 0 0 4,250,992 0.57 0.56
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