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, 1995
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 January 31, 1995.
5,348,909 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 4. Submission of Matters to a Vote of
Security Holders 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
<TABLE>
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Balance Sheets
ASSETS
<CAPTION>
(Unaudited) (Audited)
January 31, October 31,
1995 1994
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,212,778 $ 150,036
Investments 3,909,139 5,333,895
Accounts receivable 31,728,735 34,840,838
Inventories 33,033,746 26,969,662
Prepaid expenses 774,678 1,159,074
Deferred income taxes 1,215,551 1,215,551
Total current assets 73,874,627 69,669,056
PROPERTY, PLANT AND EQUIPMENT
Land 4,666,070 3,243,426
Buildings 16,670,108 15,712,110
Other property and equipment 102,850,353 94,942,955
Assets under construction 2,507,455 9,664,843
Total 126,693,986 123,563,334
Less--accumulated depreciation 55,027,077 53,088,234
Property, plant and equipment, net 71,666,909 70,475,100
OTHER ASSETS
Unamortized excess of cost of investment in
subsidiary over net assets acquired 62,158 108,777
Other 218,053 220,577
Total other assets 280,211 329,354
TOTAL $ 145,821,747 $ 140,473,510
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 3,723,960 $ 4,791,834
Notes payable 12,000,000 6,500,000
Accounts payable 17,090,269 16,560,157
Dividends payable 641,869 1,337,227
Employees' taxes withheld 330,033 254,965
Accrued profit sharing contribution 1,386,330 3,269,640
Accrued wages and expenses 1,364,564 1,764,863
Accrued income taxes 2,693,853 685,950
Total current liabilities 39,230,878 35,164,636
LONG-TERM DEBT
Notes payable 22,578,125 25,521,000
Less--current portion 3,723,960 4,791,834
Total long-term debt 18,854,165 20,729,166
POSTRETIREMENT LIABILITIES 305,148 242,000
DEFERRED INCOME TAXES 11,830,039 11,920,039
STOCKHOLDERS' EQUITY
Common stock--no par value--authorized 10,000,000
shares, issued 5,946,738 shares 1,330,650 1,330,650
Capital in excess of stated value 9,349,429 9,349,429
Retained earnings 66,116,306 62,932,458
Total 76,796,385 73,612,537
Less--treasury stock, 597,829 shares--at cost 1,194,868 1,194,868
Total stockholders' equity 75,601,517 72,417,669
TOTAL $ 145,821,747 $ 140,473,510
</TABLE>
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,
1995 1994
SALES $ 57,520,532 $ 47,052,752
COST OF SALES 45,571,355 40,998,635
GROSS EARNINGS 11,949,177 6,054,117
OTHER OPERATING EXPENSES
Administrative 3,667,022 3,307,537
Interest, net 500,267 454,737
Profit sharing 1,386,330 567,721
Total 5,553,619 4,329,995
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES 6,395,558 1,724,122
INCOME TAX EXPENSE 2,569,842 692,526
EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLES 3,825,716 1,031,596
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLES FOR INCOME TAXES - 3,093,940
NET EARNINGS $ 3,825,716 $ 4,125,536
Weighted average number of common
shares outstanding * 5,348,909 5,306,751
Earnings per share of common stock
Earnings before cumulative effect of
accounting change $ 0.72 $ 0.20
Cumulative effect of accounting change for
income taxes - 0.58
Net earnings per share of common stock $ 0.72 $ 0.78
Cash dividends per share of common stock $ 0.12 $ 0.12
* Adjusted for stock options exercised.
The accompanying notes to consolidated financial statements are an integral
part of this statement.
ROANOKE ELECTRIC STEEL CORPORATION
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
(Unaudited)
Three Months Ended
January 31,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 3,825,716 $ 4,125,536
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 63,148 60,500
Depreciation and amortization 1,992,865 1,865,385
Deferred income taxes (90,000) (92,000)
Changes in assets and liabilities which provided
(used) cash, exclusive of changes shown separately (2,238,111) 3,081,070
Net cash provided by operating activities 3,553,618 5,946,551
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (3,130,652) (2,558,243)
Sales (purchases) of investments 1,419,878 (980,865)
Other - (42,474)
Net cash used in investing activities (1,710,774) (3,581,582)
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable--net 5,500,000 (1,000,000)
Cash dividends (641,869) (637,069)
Increase (decrease) in dividends payable (695,358) 480
Proceeds from exercise of common stock options - 29,000
Redemption of long-term debt (2,942,875) (2,178,875)
Net cash provided by (used in) financing activities 1,219,898 (3,786,464)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,062,742 (1,421,495)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 150,036 3,067,418
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,212,778 $ 1,645,923
CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED
(USED) CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY:
(Increase) decrease in accounts receivable $ 3,112,103 $ 4,081,745
(Increase) decrease in inventories (6,064,084) (162,728)
(Increase) decrease in prepaid expenses 384,396 (20,487)
Increase (decrease) in accounts payable 530,112 (123,315)
Increase (decrease) in employees' taxes withheld 75,068 45,238
Increase (decrease) in accrued profit
sharing contribution (1,883,310) (1,112,525)
Increase (decrease) in accrued wages and expenses (400,299) (346,940)
Increase (decrease) in accrued income taxes 2,007,903 720,082
Total $ (2,238,111) $ 3,081,070
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 601,218 $ 592,639
Income taxes $ 651,507 $ 64,443
</TABLE>
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, 1995
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 January 31, 1995 and the results of
operations and cash flows for the three months ended January 31, 1995
and 1994.
Note 2. Inventories include the following major classifications:
(Unaudited) (Audited)
January 31, October 31,
1995 1994
Scrap Steel $ 4,873,977 $ 4,737,074
Melt Supplies 2,190,646 1,888,830
Billets 4,865,267 3,209,030
Mill Supplies 3,034,295 2,867,779
Finished Steel 18,069,561 14,266,949
$ 33,033,746 $ 26,969,662
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.
Note 4. Certain amounts included in the consolidated financial statements
for 1994 have been reclassified from their original presentation
to conform with the current year presentation.
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, 1995, and the
related consolidated statements of earnings and cash flows for the
three-month periods ended January 31, 1995 and 1994. 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, 1994, 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, 1994, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as October 31, 1994 is fairly
stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Deloitte & Touche LLP
February 24, 1995
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,
1995 and 1994
Amount Percent
Sales 10,467,780 22.2
Cost of Sales 4,572,720 11.2
Administrative Expenses 359,485 10.9
Interest Expense 45,530 10.0
Profit Sharing Expense 818,609 144.2
Earnings before Income Taxes and
Cumulative Effect of Change
in Accounting 4,671,436 270.9
Principles
Income Tax Expense 1,877,316 271.1
Earnings before Cumulative Effect of
Change in Accounting Principles 2,794,120 270.9
Cumulative Effect of Change in
Accounting Principles for
Income Taxes (3,093,940) *
Net Earnings (299,820) (7.3)
* Cannot be calculated
Sales for the periods compared increased significantly as a result of
increases in selling prices and tons shipped for both merchant bar products
and fabricated products (bar joists and rebar). Sales were negatively
affected by lower billet tons shipped, eventhough selling prices for billets
were improved. The increased bar product shipments were due to the
continued improvement in market conditions, while merchant bar selling
prices improved as a result of higher scrap costs and increased demand, both
prompting industry-wide price increases. Shipments of fabricated products
increased substantially, fueled both by increased activity and an easing of
competition within the construction industry, while fabricated product
selling prices increased mainly as a result of higher raw material costs and
less competitive conditions. Billet selling prices increased primarily due
to rising scrap prices which normally trigger changes in billet pricing.
The decrease in billet tons shipped resulted from the lack of available
billets as demand and market conditions remained strong. Cost of sales
increased as a result of 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 and the cost savings
realized with the start-up of our modern auto shredding operation. Gross
profit as a percentage of sales increased by approximately 7.9% primarily
as a result of the higher selling prices for all product classes and
increased production levels for raw steel, merchant bar and fabricated
products which reduced unit costs for fixed expenses, in spite of higher
scrap costs. The increase in gross profit margins at the higher shipment
levels was the reason for the significant improvements in gross profit and
net earnings from operations for the period. Administrative expenses
increased mainly as a result of increased executive and other compensation,
based on various incentive arrangements. Interest expense increased as
higher interest rates and reduced capitalized interest and interest income
more than offset lower average borrowings. Profit sharing expense, computed
as a percentage of pretax income, increased due to the improvement in
earnings. The effective income tax rate is relatively constant for both
periods compared. The 1994 quarter 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 increased $139,329 during the period to $34,643,749 mainly
as a result of working capital provided from operations exceeding capital
expenditures, dividends and current maturities of long-term debt amounting
to $3,130,652, $641,869 and $1,875,001, respectively. The current ratio of
1.9 and the quick ratio of 1.0 both indicate very sound liquidity and a
healthy financial condition. Borrowings against the Registrant's
$37,500,000 lines of credit were $12,000,000 leaving a balance of
$25,500,000 for future use. As a condition of our loan agreements, the real
estate and equipment at the Roanoke plant 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, the secured creditors
are over collateralized and additional long-term funding is available to the
Company through its various lenders, who have expressed their confidence and
willingness to provide additional financing.
At January 31, 1995, there were commitments for the purchase of plant and
equipment amounting to $13,351,299. Funding for most of these expenditures
will come from internally generated funds and the use of the credit lines
mentioned above. A portion of the above commitments includes the upgrade of
an electric arc furnace and the addition of a ladle furnace to the Company's
melt shop operations. The ladle furnace and upgrade will increase raw steel
production, improve quality, decrease production costs and improve operating
efficiencies. Start-up is anticipated in 1996.
The percentage of long-term debt to total capital decreased from 22.2% to
20.0% during the quarter, due to current maturities reducing long-term debt
by $1,875,001, while stockholders' equity increased as net earnings of
$3,825,716 exceeded dividends of $641,869.
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, 1994, as previously filed with the
commission.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On January 16, 1995, the Annual Meeting of Shareholders was held and
the following persons were elected as Directors of the Registrant:
AUTHORITY
DIRECTOR FOR WITHHELD
Frank A. Boxley 4,852,327 1,820
T.A. Carter 4,848,377 5,770
George B. Cartledge, Jr. 4,852,327 1,820
Charles I. Lunsford, II 4,852,327 1,820
William L. Neal 4,852,127 2,020
Thomas L. Robertson 4,852,327 1,820
Donald G. Smith 4,852,327 1,820
Paul E. Torgersen 4,852,327 1,820
Gordon C. Willis 4,852,127 2,020
John D. Wilson 4,849,827 4,320
No other matters were voted on at the Annual Meeting.
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 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 3/15/95 Donald G. Smith
Donald G. Smith, Chairman, President,
Treasurer and Chief Executive Officer
(Principal Financial Officer)
Date 3/15/95 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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JAN-31-1995
<CASH> 3,212,778
<SECURITIES> 3,909,139
<RECEIVABLES> 31,728,735
<ALLOWANCES> 0
<INVENTORY> 33,033,746
<CURRENT-ASSETS> 73,874,627
<PP&E> 126,693,986
<DEPRECIATION> 55,027,077
<TOTAL-ASSETS> 145,821,747
<CURRENT-LIABILITIES> 39,230,878
<BONDS> 18,854,165
<COMMON> 1,330,650
0
0
<OTHER-SE> 74,270,867
<TOTAL-LIABILITY-AND-EQUITY> 145,821,747
<SALES> 57,520,532
<TOTAL-REVENUES> 57,520,532
<CGS> 45,571,355
<TOTAL-COSTS> 45,571,355
<OTHER-EXPENSES> 5,053,352
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 500,267
<INCOME-PRETAX> 6,395,558
<INCOME-TAX> 2,569,842
<INCOME-CONTINUING> 3,825,716
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,825,716
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
