UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 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.)
P.O. Box 13948, Roanoke, Virginia 24038-3948
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (540) 342-1831
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (x)
State the aggregate market value of the voting stock held by nonaffiliates
of the Registrant.
Aggregate market value at December 29, 1995: $120,486,030
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of December 29, 1995.
8,076,897 Shares outstanding
Portions of the following documents are incorporated by reference:
(1) 1995 Annual Report to Stockholders in Part II.
(2) Proxy Statement dated December 22, 1995 in Part III.
PART I
ITEM 1. BUSINESS
(a) General Development of Business.
During the fiscal year ended October 31, 1995, the Registrant
continued for the most part to operate its business as it has the past four
years by manufacturing merchant steel bar products, fabricating open-web
steel joists and concrete reinforcing steel, and extracting scrap steel and
other materials from junked automobiles. In December 1988, however, the
Registrant's rebar subsidiary, RESCO Steel Products Corporation, purchased
the assets of another rebar fabricating facility located in Salem, Virginia
at a cost of $775,000, doubling its production capacity. Due to adverse
economic conditions, and in order to initiate cost saving measures, in
November 1990, the two rebar facilities were consolidated into one plant,
now operating out of the newer location. Roanoke Technical Treatment &
Services, Inc., a Roanoke, Virginia subsidiary, was formed in 1990 to
license a process for the treatment of electric arc furnace dust. The
subsidiary is awaiting various approvals and permits and is uncertain as to
a specific time for start-up. In March 1991, the Registrant closed its
merchant steel bar rolling mill located in Salem, Virginia due to a decline
in order rates. The products manufactured at the Salem plant were produced
at the Roanoke plant, which is considerably more efficient. During fiscal
year 1994, the Registrant's auto shredding subsidiary, Shredded Products
Corporation, completed construction of its new modern facility in Rocky
Mount, Virginia, and in November 1994 began operations at the new locality,
at a total investment in excess of $8,000,000 for plant and equipment.
The new facility, with its own landfill, is providing considerable savings
in waste disposal costs. In addition, cost savings and better metal
recoveries are being achieved through the use of the more technologically
advanced equipment. The other subsidiaries of the Registrant, John W.
Hancock, Jr., Inc. and Socar, Inc., have had no material changes in
operations or in the mode of conducting their business for the past five
years. John W. Hancock, Jr. founded both the Hancock joist subsidiary and
its parent, Roanoke Electric Steel Corporation, and served on the
Registrant's Board of Directors as Chairman of the Executive Committee
until his death in March 1994.
PART I
(con'd.)
The Registrant currently anticipates no material changes in operations
during the next fiscal year unless there are unforeseen changes in market
conditions and profitability.
(b) Financial Information about Industry Segments.
The Registrant's business consists of one industry segment or
line of business, which is the extracting of scrap metal from discarded
automobiles and the manufacturing, fabricating and marketing of merchant
steel bar products, reinforcing bars, open-web steel joists and billets.
The industry segment consists of three classes of products - merchant steel
products, fabricated bar joists and reinforcing bars and billets.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
AND CLASSES OF PRODUCTS OR SERVICES
1995 1994 1993
Sales to Unaffiliated Customers:
Merchant Steel $103,531,770 $96,782,588 $75,531,009
Bar Joists & Rebar $110,370,872 $78,854,207 $56,503,380
Billets $46,065,882 $40,172,433 $35,259,989
$259,968,524 $215,809,228 $167,294,378
Net Earnings from Operations $20,228,902 $8,766,435 $4,750,106
Identifiable Assets $157,774,658 $140,473,510 $130,620,435
(c) Narrative Description of Business.
(1) (i) The Registrant manufactures merchant steel products
consisting of Angles, Plain Rounds, Flats, Channels and Reinforcing Bars of
various sizes and lengths. The principal markets for the Registrant's
products are steel fabricators and steel service centers. The products are
distributed directly to customers from orders solicited by a paid sales
staff of the Registrant.
PART I
(con'd.)
The Registrant's subsidiary, Shredded Products Corporation, is
involved in the extraction of scrap iron and steel and other metals from
junked automobiles and other waste materials. Almost all of the ferrous
material is used by the Parent as raw materials. The non-ferrous metals
are sold to unrelated purchasers.
Two other subsidiaries, John W. Hancock, Jr., Inc. and Socar,
Inc., are engaged in the manufacturing of long- and short-span steel
joists. Joists are open-web steel horizontal supports for floors and
roofs, used primarily in the construction of commercial and industrial
buildings such as shopping centers, factories, warehouses, hospitals,
schools, office buildings, nursing homes, and the like. Joists are
cheaper and lighter than structural steel or reinforced concrete. The
joists are distributed by these subsidiaries to their customers from orders
solicited by manufacturer's representatives and pursuant to successful bids
placed directly by the companies.
The Registrant's subsidiary, RESCO Steel Products Corporation,
fabricates concrete reinforcing steel by cutting and bending rebars to
contractors' specifications. The rebars are distributed to contractors
from orders solicited by a paid sales staff and pursuant to successful bids
placed directly by the subsidiary.
(ii) The Registrant has not recently introduced a new product or
begun to do business in a new industry segment that will require the
investment of a material amount of assets or that otherwise is material.
(iii) The Registrant's main raw material, scrap steel, is
supplied for the most part by scrap dealers within a 200 mile radius of the
mill. It is purchased through the David J. Joseph Company who are scrap
brokers. The Shredded Products subsidiary supplies 9,000 to 13,000 tons of
scrap per month. Although scrap is generally available to the Registrant,
the price of scrap steel is highly responsive to changes in demand,
including demand in foreign countries as well as in the United States. The
ability to maintain satisfactory profit margins in times when scrap is
relatively high priced is dependent upon the levels of steel prices, which
are determined by market forces. Alloys and other materials needed for the
melting process are provided by various domestic and foreign companies.
PART I
(con'd.)
Shredded Products Corporation often experiences difficulty in
purchasing scrap automobiles at a satisfactory level. Competition from an
increasing number of shredding operations and reluctance by dealers to sell
scrap automobiles due to market conditions are the main causes. High
offering prices generally increase the supply; however, the increased cost
to produce sometimes is very competitive with the price of similar scrap
that can be purchased on the outside.
Substantially all of John W. Hancock, Jr., Inc.'s steel
components are purchased from the Parent, which is located conveniently
nearby and, therefore such components are generally available to the
Company as needed.
RESCO Steel Products Corporation purchases most of its steel
components from suppliers within its market area, determined mainly by
freight cost. Such components would be generally available to the Company,
since the Parent could produce and supply this raw material, as needed.
Socar, Inc. receives most of its raw steel material from the
Parent and other nearby suppliers, the determinant usually being freight
cost. The availability of raw materials is not of major concern to the
Company, since the Parent could supply most of its needs.
(iv) The Registrant currently holds no patents, trade marks,
licenses, franchises or concessions that are material to its business
operations.
(v) The business of the Registrant is not seasonal.
(vi) The Registrant does not offer extended payment terms to its
customers nor is it normally required to carry significant amounts of
inventory to meet rapid delivery requirements of customers; although, at
times market conditions have required the stockpiling of popular bar
products for rapid delivery. Working capital practices generally remain
constant during the course of business except when the Registrant
determines it to be advantageous to stockpile raw materials due to price
considerations.
(vii) During fiscal year 1995, sales (tons) by the Registrant to
John W. Hancock, Jr., Inc., Socar, Inc. and RESCO Steel Products Corporation,
wholly-owned subsidiaries, were approximately 10%, 8% and less than 1% of the
PART I
(con'd.)
Registrant's total sales (tons), respectively. The largest nonaffiliated
customer purchased approximately 26% of total sales (tons) ---15% of total
sales (dollars). Alternative marketing and production arrangements were
available to the Registrant, so that the loss of this nonaffiliate would
not have had a materially adverse effect on the Registrant and its
subsidiaries taken as a whole.
(viii) The Registrant is of the opinion that the amount of its
backlog is not generally material to an understanding of the business. All
backlog is shipped within the current fiscal year.
(ix) None of the business of the Registrant is subject to
renegotiation of profits or termination of contracts or subcontracts at the
election of the Government.
(x) The Registrant competes with steel-producing mills of
similar size operative within its market region and also larger mills
producing similar products. The market region in which the Registrant
sells its products consists of the majority of states east of the
Mississippi River. Price, including transportation cost, is the major
determinant in securing business. Economic recession began to intensify
competition during 1990, as selling prices dropped due to a softening in
demand. This trend continued through most of 1991 with sharp declines in
selling prices due to poor demand and excess inventories and capacity at
most mills, although by year-end prices rose slightly. In comparison to
the 1991 recession lows, order rates in 1992 showed some improvement while
selling prices remained flat. In 1993, market conditions and demand
improved significantly, while industry-wide selling prices increased to
offset higher raw material costs. Demand in 1994 was fueled by continued
improvement in business conditions and economic growth, with higher raw
material costs again forcing selling prices upward, although some of the
increased selling prices were demand driven. Even though market conditions
and backlogs remained strong for much of 1995, shipments were flat due to
customers' inventory reductions, while improved selling prices were
attributable to higher raw material costs and rising demand, although by
year-end prices fell slightly.
PART I
(con'd.)
The joist business is highly competitive. Due to similarity of
product, relatively small price differences are often determinative in
placing business. Ability to meet the customer's time requirements for
delivery also is important in securing business. Competing successfully
becomes more difficult with the distance to point of delivery due to
transportation costs. In 1990, selling prices and order rates declined as
a result of a weakened construction industry, causing increased
competition. The severely depressed activity in the construction industry,
due to overbuilding, again in 1991 resulted in drastic declines in selling
prices and demand. In spite of depressed conditions, 1992 brought improved
shipments due mainly to successful job bidding; however, in order to book a
higher percentage of quotations, selling prices consequently suffered.
Again in 1993, successful job bidding resulted in improved shipment levels,
while higher raw material costs pushed selling prices upward, even though
the construction industry remained depressed and highly competitive. In
1994, an easing of competitive conditions within the construction industry
led to increased shipment levels, while selling prices were again forced
upward by higher raw material costs. Reduced competition and increased
activity in 1995 again led to higher shipment levels within the
construction industry, as demand and increased raw material costs forced
selling prices higher.
Billets are semi-finished products used by the Registrant in its
rolling mill process to manufacture various merchant bar products. With
the addition of new casting equipment in recent years, the Registrant has
anticipated a growing billet market of nonaffiliated customers who further
fabricate the billets for various end uses. Competition within the
industry caused a drop in selling prices in 1990, with demand slowing. In
1991, selling prices trended further downward, while order rates fell due
to the sagging economy. Billet sales improved significantly in 1992 as a
result of increased domestic demand and entry into the much more
competitive export markets, although selling prices still continued to
slump. Again in 1993, increased export business and improved domestic
demand resulted in significantly higher billet shipments. Selling prices
also rose in reaction to higher scrap steel costs. Shipments of billets
declined slightly in 1994 due to a lack of export shipments, although
domestic shipments improved significantly. While the export markets
PART I
(con'd.)
were much more competitive, domestic demand improved dramatically. Higher
billet prices were also driven by higher scrap steel costs, but the increased
domestic billet shipments, which bring a higher price, also contributed.
Improved market conditions and increased domestic demand resulted in improved
1995 billet shipments, as export markets remained highly competitive.
Higher scrap steel costs and improved product mix together caused billet
selling prices to climb.
(xi) During the last three fiscal years, the Registrant was not
involved in any material research and development activities.
(xii) The United States Environmental Protection Agency (EPA)
has notified the Registrant and the County of Roanoke (County) of their
potential liability and responsibility for costs of response to materials
at a County-owned landfill site and adjacent streams near Salem, Virginia.
The Registrant has entered into a cost-sharing agreement with the County
for response action (cleanup) at the landfill site and the streams.
Pursuant to a Consent Decree to which EPA, the County and the Registrant
were parties, the County completed a remedial action at the landfill in
1995. Under a separate consent order with EPA, the Registrant is
performing a removal action at the streams, which includes removal,
treatment and on-site placement of materials and affected sediment and
soil. That work is approximately 30% performed, and completion is expected
in approximately one year. The Registrant has not received notification of
other claims associated with the landfill or streams. The Registrant does
not anticipate significant future potential liability for response costs
associated with the landfill, and while the cost of future response
activities or any future claims associated with the streams is difficult to
project, management believes such costs would not have a materially adverse
effect on the consolidated financial position, results of operations and
competitive position of the Registrant. See Note 7, "Commitments and
Contingent Liabilities", in Notes to Consolidated Financial Statements
contained in the Registrant's 1995 Annual Report to Stockholders, filed as
an Exhibit to this Form 10-K.
PART I
(con'd.)
The Registrant currently disposes of the furnace dust through a
contract with an approved waste disposal firm. The Registrant believes it
is in substantial compliance with applicable federal, state and local
regulations. However, future changes in regulations may require
expenditures which could adversely affect earnings in subsequent years.
The Registrant has constructed over the years pollution control
equipment at an aggregate cost of over $7,700,000. Annual operating
expenses and depreciation of all pollution control equipment and waste
disposal costs are in excess of $4,300,000 in the aggregate. The
Registrant is expected to spend approximately $1,000,000 to $2,000,000 for
additional pollution control and waste disposal equipment and facilities
during subsequent fiscal years. Adoption of the Clean Air Act Amendments
of 1990 is not anticipated to have a materially adverse effect on the
Registrant's operations, capital resources or liquidity, nor should any
incremental increase in capital expenditures occur due to the Act.
(xiii) At October 31, 1995, the Registrant employed 499 persons
at its Roanoke plant, with no employment at its Salem division, idle since
mid-1991. The Registrant's subsidiaries, John W. Hancock, Jr., Inc.,
Socar, Inc., Shredded Products Corporation and RESCO Steel Products
Corporation employed 259, 259, 47 and 44 persons, respectively.
(d) Financial Information about Foreign and Domestic Operations and
Export Sales.
When the Registrant's billet production exceeds its required
needs, this semi-finished product is offered for sale. During past years,
a portion of the excess billets has been sold to brokers who represent
foreign purchasers. During 1993, export (billet) sales to China and Mexico
amounted to $4,485,565 and $620,028, respectively, slightly below
break-even margins. There were no foreign sales of excess billets or other
products during fiscal years 1994 and 1995. The information required by
this paragraph by geographical area, as to foreign and domestic operations,
is not provided since it is identical to the table in paragraph (b) with
all information pertaining to the United States.
PART I
(con'd.)
ITEM 2. PROPERTIES
The Registrant owns 68 acres situated in the City of Roanoke,
Virginia, which comprises its main plant, of which 25 acres are used to
provide 334,000 square feet of manufacturing space with an annual billet
capacity of approximately 600,000 tons. A 30 acre site is owned in Salem,
Virginia, of which 10 acres were used to provide 51,355 square feet of
manufacturing space, until March 1991, when the plant was idled. The
Registrant acquired in 1991 a 447 acre tract of land in Franklin County,
Virginia, 100 acres of which was transferred to Shredded Products
Corporation in a move of shredding operations from its Montvale location.
Part of this new Shredded Products property is being used as an approved
industrial landfill. The remaining 337 acres of this land, 47 acres of
which was sold in 1995, will be marketed as an industrial park for Franklin
County.
Shredded Products Corporation operates in both Montvale and Rocky
Mount, Virginia. The Montvale plant is situated on a 75 acre site owned by
the Registrant, approximately 20 acres of which are regularly used in its
scrap processing operation, with an annual production capacity of
approximately 18,000 tons. The new Rocky Mount facility is located on a
100 acre site owned by Shredded Products Corporation, partially consisting
of a 25 acre industrial landfill used for the disposal of its auto fluff,
and another 25 acres of which are regularly used in its shredding
operation, with an annual production capacity of approximately 150,000
tons.
John W. Hancock, Jr., Inc. is located in Roanoke County near
Salem, Virginia. The plant is situated on a 37 acre site owned by Hancock,
Inc., 17 acres of which are regularly used in its operations. Buildings on
the site contain 131,614 square feet of floor space.
Socar, Inc. and its subsidiaries are located in Florence, South
Carolina, and in Continental and Bucyrus, Ohio. The Florence facility is
located on a 28 acre site owned by Socar, Inc., 16 acres of which are
regularly used in its operations. Buildings on the site contain 93,359
square feet of floor space. The plant located on a 31 acre site
PART I
(con'd.)
in Continental, Ohio, owned by Socar, Inc., has 81,172 square feet of
floor space in manufacturing buildings, situated on 8 acres regularly used
in its operations. There is an idle facility in Bucyrus, Ohio, owned by
Socar, Inc. (leased to an unaffiliated manufacturer), and located on a 17 acre
site, 7 acres of which contain 118,228 square feet of building floor space.
RESCO Steel Products Corporation operates from a building
containing 43,340 square feet of floor space, located in Salem, Virginia,
on a 7 acre site owned by RESCO.
The various buildings are of modern design, well-maintained, and
suitable and adequate for the requirements of the business.
ITEM 3. LEGAL PROCEEDINGS
A County of Roanoke (County) landfill site, where the Registrant
disposed of furnace dust from 1969 until 1976, was placed on the National
Priorities List as a Superfund site in 1989. The United States
Environmental Protection Agency (EPA) has notified the Registrant and the
County of their potential liability and responsibility for costs of
response at the landfill site and adjacent streams. The Registrant has
entered into a cost-sharing agreement with the County for response action
(cleanup) at the landfill site and sharing of contribution received from
other potentially responsible parties, if any. Under EPA oversight, the
County completed remediation action there in 1995. The Registrant's costs
associated with that work were reflected in past financial statements or in
the accompanying financial statements. Under a consent order and EPA
oversight, the Registrant, is implementing a removal action (cleanup) of
the streams. While the cost of future response activities or any future
claims associated with the streams is difficult to project, management
believes such costs would not have a materially adverse effect on the
consolidated financial position, results of operations and competitive
position of the Registrant. See Note 7, "Commitments and Contingent
Liabilities", in Notes to Consolidated Financial Statements contained in
the Registrant's 1995 Annual Report to Stockholders, filed as an Exhibit to
this Form 10-K.
PART I
(con'd.)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of stockholders during
the fourth quarter of the fiscal year covered.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following
list is included as an unnumbered Item in Part I of this report in lieu of
being included in the Proxy Statement for the Annual Meeting of Shareholders
to be held on February 20, 1996.
The names, ages and positions of all of the executive officers of
the Registrant as of October 31, 1995 are listed below with their business
experience with the Registrant for the past five years. Officers are
elected annually by the Board of Directors at the first meeting of
directors following the annual meeting of shareholders. There are no family
relationships among these officers, nor any agreement or understanding
between any officer and any other person pursuant to which the officer was
selected.
Thomas J. Crawford, 40, has served as Secretary of the Registrant
since January 1985 and as Assistant Vice President since January 1993;
prior thereto, he had served as Manager of Inside Sales since 1984 and as a
Sales Representative since 1977. He has 18 years of service with the
Registrant.
Donald R. Higgins, 50, has served as Vice President - Sales of
the Registrant since January 1986; prior thereto, he had served as General
Sales Manager since 1984 and Assistant Sales Manager since 1978. He has 30
years of service with the Registrant.
John E. Morris, 54, has served as Vice President - Finance of the
Registrant since October 1988 and as Assistant Treasurer since 1985; prior
thereto, he had served as Controller since 1971. He has 24 years of
service with the Registrant.
PART I
(con'd.)
William L. Neal, 68, has served as President of John W. Hancock,
Jr., Inc. (wholly-owned subsidiary of the Registrant) since October 1984
and as Director of the Registrant since January 1989; prior thereto, he had
served as Executive Vice President since December 1972. He has 40 years of
service with Hancock, Inc.
Donald G. Smith, 60, has served as Chairman of the Board of the
Registrant since February 1989, as Chief Executive Officer since November
1986, as President and Treasurer since January 1985 and as Director of the
Registrant since April 1984; prior thereto, he had served as Vice President
- - Administration since September 1980 and as Secretary since January 1967.
He has 38 years of service with the Registrant.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The specified information required by this item is incorporated by
reference to the information under the heading "Stock Activity" in the 1995
Annual Report to Stockholders.
ITEM 6. SELECTED FINANCIAL DATA
The specified information required by this item is incorporated by
reference to the information under the heading "Selected Financial Data" in
the 1995 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The specified information required by this item is incorporated by
reference to the information under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 1995
Annual Report to Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The specified information required by this item is incorporated by
reference to the information under the headings "Independent Auditors'
Report", "Consolidated Financial Statements" and "Notes to Consolidated
Financial Statements" in the 1995 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The specified information required by this item is incorporated
by reference to the information under the heading "Information Concerning
Directors and Nominees" in the Proxy Statement dated December 22, 1995, as
filed with the Commission, or is included under the heading "Executive
Officers of the Registrant" in Part I of this 10-K filing. The disclosure
required by Item 405 of Regulation S-K is not applicable.
ITEM 11. EXECUTIVE COMPENSATION
The specified information required by this item is incorporated
by reference to the information under the headings "Executive
Compensation", "Compensation and Stock Option Committee Report on Executive
Compensation", "Compensation Committee Interlocks and Insider
Participation", "Performance Graph" and "Board of Directors and Committees
- -- Director Compensation" in the Proxy Statement dated December 22, 1995,
as filed with the Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The specified information required by this item is incorporated
by reference to the information under the headings "Security Ownership of
Certain Beneficial Owners" and "Security Ownership of Management" in the
Proxy Statement dated December 22, 1995, as filed with the Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The specified information required by this item is incorporated
by reference to the information under the heading "Compensation Committee
Interlocks and Insider Participation" in the Proxy Statement dated December
22, 1995, as filed with the Commission.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) The following financial statements are filed as part of
the 1995 Annual Report to Stockholders which is incorporated by reference:
(a) Consolidated Balance Sheets
(b) Consolidated Statements of Stockholders' Equity
(c) Consolidated Statements of Earnings
(d) Consolidated Statements of Cash Flows
(e) Notes to Consolidated Financial Statements
(f) Independent Auditors' Report
Individual financial statements of the Registrant are not being
filed because the Registrant is primarily an operating company and its
subsidiaries do not have minority equity interests and/or long-term
indebtedness (including current portions) to any person outside the
consolidated group (excluding long-term indebtedness which is
collateralized by the Registrant by guarantee, pledge, assignment or
otherwise), in amounts which together exceed 5 percent of the total
consolidated assets.
.
PART IV
(con'd.)
(2) Pursuant to Regulation S-K the following Exhibit Index is
added immediately preceding the exhibits filed as part of the subject Form
10-K:
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT PAGE
(3) (a) Articles of Incorporation 20
Incorporated by
Reference
(b) By-Laws, as amended 21
(4) Instruments Defining the Rights of
Security Holders 22
(10) * (a) Executive Officer Incentive Arrangement 23
Incorporated by
Reference
* (b) Roanoke Electric Steel Corporation
Employees'Stock Option Plan 23
Incorporated by
Reference
(13) 1995 Annual Report to Stockholders 24
(21) Subsidiaries of the Registrant 25
(23) Consent of Independent Auditors 26
(27) Financial Data Schedule 27
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Registrant during
the last quarter of the fiscal period covered by the Annual Report.
* Management contract, or compensatory plan or agreement, required to be
filed as an Exhibit to this Form 10-K pursuant to Item 14 (c).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: Donald G. Smith
Donald G. Smith, Chairman,
President, Treasurer and
Chief Executive Officer
(Principal Executive Officer,
Principal Financial Officer
and Director)
Date: January 25, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Name and Title Date
Donald G. Smith January 25, 1996
Donald G. Smith, Chairman, President,
Treasurer and Chief Executive Officer
(Principal Executive Officer, Principal
Financial Officer and Director)
John E. Morris January 25, 1996
John E. Morris, Vice President - Finance
and Assistant Treasurer (Principal
Accounting Officer)
George B. Cartledge, Jr. January 25, 1996
George B. Cartledge, Jr. Director
Paul E. Torgersen January 25, 1996
Paul E. Torgersen Director
William L. Neal January 25, 1996
William L. Neal Director
Thomas L. Robertson January 25, 1996
Thomas L. Robertson Director
Gordon C. Willis January 25, 1996
Gordon C. Willis Director
EXHIBIT NO. 3 (a)
ARTICLES OF INCORPORATION
Incorporated by reference to the previously filed Form 10-K for
October 31, 1990 on file in the Commission office.
EXHIBIT NO. 3 (b)
BY-LAWS, AS AMENDED
EXHIBIT NO. 4
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
Pursuant to Item 601(b) (4) (iii) of Regulation S-K, the
Registrant hereby undertakes to furnish to the Commission, upon request,
copies of the instruments defining the rights of holders of the long-term
debt of Roanoke Electric Steel Corporation and its subsidiaries described
in its 1995 Annual Report to Stockholders and Form 10-K.
EXHIBIT NO. 10
* (a)
EXECUTIVE OFFICER INCENTIVE ARRANGEMENT
Incorporated by reference to the previously filed Form 10-K for
October 31, 1993 on file in the Commission office.
* (b)
ROANOKE ELECTRIC STEEL CORPORATION
EMPLOYEES' STOCK OPTION PLAN
Incorporated by reference to the previously filed Form 10-K for
October 31, 1992 on file in the Commission office.
* Management contract, or compensatory plan or agreement, required to be
filed as an Exhibit to this Form 10-K pursuant to Item 14 (c).
EXHIBIT NO. 13
1995 ANNUAL REPORT TO STOCKHOLDERS
EXHIBIT NO. 21
SUBSIDIARIES OF THE REGISTRANT
Registrant: Roanoke Electric Steel Corporation
Organized Under
Subsidiary of Registrant Jurisdiction of
Shredded Products Corporation Virginia
John W. Hancock, Jr., Inc. Virginia
Socar, Incorporated South Carolina
RESCO Steel Products Corporation Virginia
Roanoke Technical Treatment and Services, Inc. Virginia
EXHIBIT NO. 23
DELOITTE & TOUCHE LLP
Suite 1401 Telephone: (910) 721-2300
500 West Fifth Street Facsimile: (910) 721-2301
P.O. Box 20129
Winston-Salem, North Carolina 27120-0129
CONSENT OF INDEPENDENT AUDITORS
Roanoke Electric Steel Corporation:
We hereby consent to the incorporation by reference in Registration
Statement Nos. 33-27359 and 33-35243 on Form S-8 of our report dated
November 17, 1995, appearing in and incorporated by reference in this
Annual Report on Form 10-K of Roanoke Electric Steel Corporation for the
year ended October 31, 1995.
Deloitte & Touche LLP
Winston-Salem, North Carolina
January 25, 1996
Deloitte Touche
Tohmatsu
International
EXHIBIT NO. 27
FINANCIAL DATA SCHEDULE
ROANOKE ELECTRIC STEEL CORPORATION / ANNUAL REPORT 1995
<PAGE>
CELEBRATING OUR
[ROANOKE LOGO]
40TH ANNIVERSARY
40 YEARS OF QUALITY PRODUCTS
FOR OUR CUSTOMERS
40 YEARS OF QUALITY EMPLOYMENT
FOR OUR PEOPLE
40 YEARS OF VALUABLE SERVICE
TO OUR COMMUNITY
$142 MILLION IN PROFITS
FOR OUR COMPANY
$55 MILLION IN DIVIDENDS
FOR OUR STOCKHOLDERS
<PAGE>
ROANOKE ELECTRIC STEEL CORPORATION
Roanoke Electric Steel Corporation and its wholly-owned subsidiaries
are engaged in the manufacturing, fabricating and marketing of merchant steel
products, billets, open-web steel joists and reinforcing bars. Each subsidiary
is either a supplier to the parent company or a purchaser of its finished
product.
The main plant of Roanoke Electric Steel Corporation is a
state-of-the-art steel mini-mill located in Roanoke, Virginia. This facility
melts scrap steel in electric furnaces and continuously casts the molten steel
into billets. These billets are rolled into merchant steel products consisting
of angles, plain rounds, flats, channels and reinforcing bars of various lengths
and sizes. Excess steel billet production is sold to mills without melting
facilities. Roanoke Electric Steel Corporation markets its products to steel
service centers and fabricators in 21 states east of the Mississippi River.
Shredded Products Corporation, a subsidiary with operations in Rocky
Mount and Montvale, Virginia, extracts scrap steel and other metals from junked
automobiles and other waste materials. These facilities supply the main plant
with a substantial amount of its raw materials. Non-ferrous metals generated in
the process are sold to unrelated customers.
John W. Hancock, Jr., Inc. and Socar, Inc. are steel fabrication
subsidiaries located in Salem, Virginia, Florence, South Carolina and
Continental, Ohio. All three operations purchase rounds and angles from the main
plant to fabricate long- and short-span open-web steel joists. These joists are
used as horizontal supports for floors and roofs in commercial and industrial
buildings.
RESCO Steel Products Corporation, a Salem, Virginia based subsidiary,
fabricates concrete reinforcing steel by cutting and bending it to contractor
specifications.
1
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended October 31, 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Sales $259,968,524 $215,809,228 $167,294,378 $146,036,301 $126,977,104
Gross earnings 56,097,685 33,732,184 22,565,662 17,562,115 12,835,197
Interest expense-net 2,053,643 1,891,263 1,730,822 2,031,154 2,490,129
Income taxes 13,035,243 5,684,150 2,785,168 1,491,474 74,384
Earnings before cumulative
effect of change in
accounting principle 20,228,902 8,766,435 4,750,106 2,655,006 227,230
Net earnings 20,228,902 11,860,375 4,750,106 2,655,006 227,230
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $45,483,760 $34,504,420 $36,406,901 $26,188,178 $28,942,912
Total assets 157,774,658 140,473,510 130,620,435 125,558,910 124,648,573
Long-term debt 16,979,166 20,729,166 25,521,000 20,486,500 25,452,000
Stockholders' equity 90,062,598 72,417,669 63,203,577 60,990,935 60,859,300
- ------------------------------------------------------------------------------------------------------------------------------------
SELECTED RATIOS
Gross profit margin 21.6% 15.6% 13.5% 12.0% 10.1%
Operating income margin 7.8% 5.5% 2.8% 1.8% 0.2%
Effective tax rate 39.2% 39.3% 37.0% 36.0% 24.7%
Current ratio 2.2 2.0 2.4 1.9 2.2
Quick ratio 1.3 1.2 1.4 1.1 1.2
Funded debt as a percentage
of total capital 26.1% 30.7% 36.6% 38.0% 39.0%
Pretax return on average total
assets 22.3% 10.7% 5.9% 3.3% 0.2%
Return on average stockholders'
equity 24.9% 12.9%* 7.6% 4.4% 0.4%
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Earnings before cumulative
effect of change
in accounting principle $2.51 $1.09 $0.60 $0.33 $0.03
Net earnings 2.51 1.48 0.60 0.33 0.03
Cash dividends 0.37 0.41 0.32 0.32 0.32
Stockholders' equity 11.19 9.06 7.94 7.67 7.65
- ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,045,644 7,988,985 7,956,339 7,952,539 7,950,912
</TABLE>
Per share information has been adjusted for three-for-two stock split effective
May 1, 1995
[insert graphs here]
1995 1994 1993 1992 1991
Sales (in millions) 260 216 167 146 127
Net Earnings (in millions)* 20.2 8.8 4.8 2.7 .2
Earnings Per Share (in dollars)* 2.51 1.09 .60 .33 .03
Return on Average Equity (in percent)* 24.9 12.9 7.6 4.4 .4
Total Assets (in million) 158 140 131 126 125
*1994 accounting changes of $3.1 million excluded.
4
<PAGE>
TO OUR SHAREHOLDERS
Our 40th year in business, fiscal 1995, exceeded all previous
performance records and was the fourth consecutive year of significant earnings
and sales growth. Earnings reached a record $20,228,902 - up 130.8% from 1994
earnings from operations of $8,766,435 and 58.8% higher than previous record
earnings of $12,738,520 achieved in 1989. Earnings per share were $2.51 compared
to 1994 earnings per share from operations of $1.09. Sales for 1995 were
$259,968,524, a 20.5% increase over 1994 record sales of $215,809,228.
Strong demand continued throughout most of 1995, as steady economic
growth positively affected the steel and construction industries. The healthy
demand and economic conditions favorably impacted selling prices and shipment
levels for steel bar products, fabricated products and billets. In addition, as
expected, our relocated and modern automobile shredding facility experienced
considerable savings in waste disposal costs and 50% better metals recoveries,
contributing to the improved earnings.
Other notable highlights of 1995 were:
-- a 2.8% increase in raw steel production to a record level.
-- an 8.6% increase in rolling mill production over last year's
record total.
-- a 6.4% increase in steel bar shipments to the highest level on
record.
-- a $10,979,340 increase in working capital to a record
$45,483,760.
-- a $17,644,929 increase in stockholders' equity to a record
$90,062,598 at year end.
-- an increase in total assets to a record $157,774,658.
-- a return on average equity of 24.9%.
-- a pretax return on average total assets of 22.3%.
-- an increase in gross profit percentage to 21.6% - up from 15.6%
in 1994.
The year also produced substantial improvements to our overall
financial condition. In addition to the increases in working capital and
stockholders' equity mentioned above, curtailments of short-term and long-term
debt were $291,834 during the year, in spite of capital expenditures of
$11,654,366. The reduction in long-term debt, coupled with the increase in
stockholders' equity, caused the percentage of long-term debt to total capital
to decline from 22.2% in 1994 to a very respectable 15.9% at year end. The ratio
of debt to equity improved to .75 to 1, the current ratio was 2.2 to 1 and the
quick ratio was 1.3 to 1. Our sound financial condition has provided us with
liquidity, capital resources and an investment grade rating essential for
continued growth and prosperity.
In recognition of the record performance, our Board of Directors
increased the regular dividend 37.5% during the year. Their actions brought the
annual dividend rate to 44 cents per share, as compared to the regular dividend
of 32 cents per share paid in 1994, after adjusting for
5
<PAGE>
the three-for-two stock split in May of 1995. The 148th consecutive
quarterly cash dividend was declared by the Board on October 17, 1995 in the
amount of 11 cents per share, payable November 22, 1995.
During the year, orders were placed for the upgrade of an electric arc
furnace and the addition of a ladle furnace to melt shop operations. The upgrade
and ladle furnace will increase raw steel production, improve quality, decrease
production costs and improve operating efficiencies. The anticipated completion
and start-up in the spring of 1996 should enhance future earnings. This
$14,000,000 project is another step in our efforts to maintain a modern,
state-of-the-art manufacturing facility and remain a competitive, low cost
producer. From 1985 to 1995, capital expenditures were in excess of $97,000,000
and acquisitions exceeded $21,000,000. The record results this year could not
have been attained without these outlays. Likewise, future results will be
maximized by the ladle furnace, the arc furnace upgrade, and the pursuit of
similar opportunities in the future.
As we begin 1996, backlogs of fabricated products and billets remain
excellent, while the backlog for steel bar products is at a comfortable level.
Although selling prices for bar products are slightly lower, the reductions have
been partially offset by falling scrap prices. Economic forecasts call for
continued, although somewhat slower, growth, and 1996 should benefit from normal
election year prosperity. Inflation and interest rates are low and appear to be
under control. Consequently, we are optimistic fiscal 1996 will be a strong
year, and present indications point to improved results in the first quarter of
1996, compared to last year.
We have managed to be profitable every year since 1956, an exceptional
accomplishment in a cyclical industry. We shall endeavor to make the next 40
years as successful and prosperous as the past 40 years.
It is most gratifying to report the record results for fiscal 1995.
The achievements of the past year would not have been possible without the
dedication of our employees and the support of our valued customers. We
deeply thank them and our shareholders for their confidence and investment in
Roanoke Electric Steel Corporation.
/s/ DONALD G. SMITH
Donald G. Smith
Chairman of the Board and Chief Executive Officer
6
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year Ended October 31,
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
SALES $259,968,524 $215,809,228 $167,294,378
COST OF SALES 203,870,839 182,077,044 144,728,716
------------- ------------- -------------
GROSS EARNINGS 56,097,685 33,732,184 22,565,662
------------- ------------- -------------
OTHER OPERATING EXPENSES
Administrative 16,194,810 14,047,008 11,619,320
Interest, net 2,053,643 1,891,263 1,730,822
Profit sharing 4,585,087 3,343,328 1,680,246
------------- ------------- -------------
22,833,540 19,281,599 15,030,388
------------- ------------- -------------
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 33,264,145 14,450,585 7,535,274
INCOME TAX EXPENSE 13,035,243 5,684,150 2,785,168
------------- ------------- -------------
EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 20,228,902 8,766,435 4,750,106
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE FOR INCOME TAXES -- 3,093,940 --
------------- ------------- -------------
NET EARNINGS $ 20,228,902 $ 11,860,375 $ 4,750,106
============= ============= =============
EARNINGS PER SHARE OF COMMON STOCK
EARNINGS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $ 2.51 $ 1 .09 $ 0.60
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE FOR INCOME TAXES -- 0.39 --
------------- ------------- -------------
NET EARNINGS PER SHARE OF
COMMON STOCK $ 2.51 $ 1.48 $ 0.60
============= ============= =============
CASH DIVIDENDS PER SHARE OF
COMMON STOCK $ 0.37 $ 0.41 $ 0.32
============= ============= =============
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Capital in Treasury Stock
Common Stock Excess of (At Cost)
------------------------- Stated Retained ----------------------
Shares Amount Value Earnings Shares Amount
---------- ----------- ----------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
NOVEMBER 1, 1992 5,901,538 $ 713,451 $9,349,429 $52,122,923 597,829 $1,194,868
Stock options exercised 1,200 8,700 -- -- -- --
Net earnings -- -- -- 4,750,106 -- --
Cash dividends -- -- -- (2,546,164) -- --
---------- ----------- ----------- ------------ -------- -----------
BALANCE,
OCTOBER 31, 1993 5,902,738 722,151 9,349,429 54,326,865 597,829 1,194,868
Stock options exercised 44,000 608,499 -- -- -- --
Net earnings -- -- -- 11,860,375 -- --
Cash dividends -- -- -- (3,254,782) -- --
---------- ----------- ----------- ------------ -------- -----------
BALANCE,
OCTOBER 31, 1994 5,946,738 1,330,650 9,349,429 62,932,458 597,829 1,194,868
Three-for-two stock split 2,984,619 -- -- -- 298,914 --
Cash paid in lieu of fractional
shares on stock split (152) -- -- (1,776) -- --
Stock options exercised 39,185 398,853 -- -- -- --
Net earnings -- -- -- 20,228,902 -- --
Cash dividends -- -- -- (2,981,050) -- --
---------- ----------- ----------- ------------ -------- -----------
BALANCE, OCTOBER 31, 1995 8,970,390 $1,729,503 $9,349,429 $80,178,534 896,743 $1,194,868
========== =========== =========== ============ ======== ===========
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31,
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents .................................... $ 6,999,644 $ 150,036
Investments .................................................. 4,179,418 5,333,895
Accounts receivable .......................................... 40,159,523 34,840,838
Inventories .................................................. 30,866,238 26,969,662
Prepaid expenses ............................................. 722,729 1,159,074
Deferred income taxes ........................................ 1,125,441 1,215,551
------------ ------------
Total current assets ................................... 84,052,993 69,669,056
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Land ......................................................... 4,312,689 3,243,426
Buildings .................................................... 17,195,735 15,712,110
Other property and equipment ................................. 104,825,380 94,942,955
Assets under construction .................................... 5,741,611 9,664,843
------------ ------------
Sub-total .............................................. 132,075,415 123,563,334
Less-accumulated depreciation ................................ 58,569,617 53,088,234
------------ ------------
73,505,798 70,475,100
------------ ------------
OTHER ASSETS
Unamortized excess of cost of investment in subsidiary
over net assets acquired .................................... -- 108,777
Other ........................................................ 215,867 220,577
------------ ------------
215,867 329,354
------------ ------------
$157,774,658 $140,473,510
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt ............................ $ 3,750,000 $ 4,791,834
Notes payable ................................................ 11,000,000 6,500,000
Accounts payable ............................................. 14,483,781 16,560,157
Dividends payable ............................................ 888,101 1,337,227
Employees' taxes withheld .................................... 226,677 254,965
Accrued profit sharing contribution .......................... 4,403,031 3,269,640
Accrued wages and expenses ................................... 2,396,913 1,764,863
Accrued income taxes ......................................... 1,420,730 685,950
------------ ------------
Total current liabilities .............................. 38,569,233 35,164,636
------------ ------------
LONG-TERM DEBT
Notes payable ................................................ 20,729,166 25,521,000
Less-current portion ......................................... 3,750,000 4,791,834
------------ ------------
16,979,166 20,729,166
------------ ------------
POSTRETIREMENT LIABILITIES ..................................... 494,591 242,000
------------ ------------
DEFERRED INCOME TAXES .......................................... 11,669,070 11,920,039
------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 7)
STOCKHOLDERS' EQUITY
Common stock-no par value-authorized 10,000,000 shares, issued
8,970,390 shares in 1995 and 8,919,955 in 1994 ............. 1,729,503 1,330,650
Capital in excess of stated value ............................ 9,349,429 9,349,429
Retained earnings ............................................ 80,178,534 62,932,458
------------ ------------
91,257,466 73,612,537
Less-treasury stock, 896,743 shares-at cost .................. 1,194,868 1,194,868
------------ ------------
Total stockholders' equity ................................ 90,062,598 72,417,669
------------ ------------
$157,774,658 $140,473,510
============ ============
</TABLE>
See notes to consolidated financial statements.
8
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended October 31,
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ................................................ $ 20,228,902 $ 11,860,375 $ 4,750,106
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 ............................... 252,591 242,000 --
Depreciation and amortization ............................ 7,989,663 7,559,118 7,492,567
Gain on sale of investments and property,
plant and equipment ..................................... (193,926) (12,017) (124,088)
Deferred income taxes .................................... (160,859) (88,605) 37,082
Changes in assets and liabilities which provided (used)
cash, exclusive of changes shown separately ............. (8,383,359) (2,054,358) (2,513,772)
------------ ------------ ------------
Net cash provided by operating activities ................... 19,733,012 14,412,573 9,641,895
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment ........... (11,654,366) (11,744,913) (5,767,423)
Proceeds from sale of property, plant and equipment ...... 952,635 189,849 53,900
Purchase of investments .................................. (1,879,186) (3,489,816) (2,159,645)
Proceeds from sale of investments ........................ 3,022,446 3,342,493 3,150,546
Other .................................................... -- 783,577 (115,169)
------------ ------------ ------------
Net cash used in investing activities ....................... (9,558,471) (10,918,810) (4,837,791)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in notes payable ..................... 4,500,000 500,000 (6,000,000)
Cash dividends ........................................... (2,981,050) (3,254,782) (2,546,164)
Cash paid for fractional shares on stock split ........... (1,776) -- --
Increase (decrease) in dividends payable ................. (449,126) 700,638 144
Proceeds from exercise of common stock options ........... 398,853 608,499 8,700
Payment of long-term debt ................................ (4,791,834) (4,965,500) (4,965,500)
Proceeds from long-term debt ............................. -- -- 10,000,000
------------ ------------ ------------
Net cash used in financing activities ....................... (3,324,933) (6,411,145) (3,502,820)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .............................................. 6,849,608 (2,917,382) 1,301,284
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ................ 150,036 3,067,418 1,766,134
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR ...................... $ 6,999,644 $ 150,036 $ 3,067,418
============ ============ ============
CHANGES IN ASSETS AND LIABILITIES WHICH
PROVIDED (USED) CASH, EXCLUSIVE OF CHANGES
SHOWN SEPARATELY
(Increase) decrease in accounts receivable ............... $ (5,318,685) $ (6,765,960) $ (4,001,379)
(Increase) decrease in inventories ....................... (3,896,576) (2,900,482) (338,492)
(Increase) decrease in prepaid expenses .................. 436,345 165,049 (632,862)
Increase (decrease) in accounts payable .................. (2,076,376) 4,965,055 1,911,486
Increase (decrease) in employees' taxes withheld ......... (28,288) 47,896 59,132
Increase (decrease) in accrued profit sharing contribution 1,133,391 1,589,394 782,408
Increase (decrease) in accrued wages and expenses ........ 632,050 228,278 38,806
Increase (decrease) in accrued income taxes .............. 734,780 616,412 (332,871)
------------ ------------ ------------
Total ....................................................... $ (8,383,359) $ (2,054,358) $ (2,513,772)
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest (net of amount capitalized) ..................... $ 2,484,598 $ 2,343,960 $ 2,219,291
------------ ------------ ------------
Income taxes ............................................. $ 12,461,322 $ 5,156,266 $ 3,080,957
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Roanoke
Electric Steel Corporation and its wholly-owned subsidiaries, Shredded
Products Corporation, John W. Hancock, Jr., Inc., Socar, Inc., RESCO Steel
Products Corporation and Roanoke Technical Treatment & Services, Inc. (the
"Company"). All significant intercompany accounts and transactions have been
eliminated.
Inventories
Inventories of the Company, with the exception of John W. Hancock, Jr.,
Inc., are generally valued at cost on a first-in, first-out (FIFO) method
or market, if lower. A major portion of the inventories of John W.
Hancock, Jr., Inc. is valued on a last-in, first-out (LIFO) method. LIFO
cost is not in excess of replacement or current cost.
Property, Plant and Equipment
These assets are stated at cost. Depreciation expense is computed by
straight-line and declining-balance methods. Maintenance and repairs are
charged against operations as incurred. Major items of renewals and
betterments are capitalized and depreciated over their estimated useful
lives. Upon retirement or other disposition of plant and equipment, the cost
and related accumulated depreciation are removed from the property and
allowance accounts, and the resulting gain or loss is reflected in earnings.
Income Taxes
Prior to November 1, 1993, the Company provided deferred income taxes when
timing differences occurred in reporting income and expenses for financial
reporting and income tax reporting. Effective November 1, 1993, the Company
adopted the provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109). Under SFAS 109, deferred
income taxes are provided by the asset and liability method, which requires
the recognition of deferred tax assets and liabilities for the future tax
consequences of temporary differences between tax bases and financial
reporting bases of other assets and liabilities.
Goodwill
The excess of cost over fair value of net assets of acquired subsidiary
has been amortized using the straight-line method over the estimated benefit
period of ten years. At October 31, 1995, goodwill of $1,864,703 has been
fully amortized.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Investments
Investments consist primarily of debt securities which mature between 1996
and 2024. On November 1, 1994, the Company adopted Statement of Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115). In accordance with the provisions of SFAS 115,
management has classified its entire debt securities portfolio as "available
for sale". Under SFAS 115, "available for sale" securities are reported at
fair value with unrealized gains and losses reported as a separate component
of equity. These investments are carried on the October 31, 1995 balance
sheet at fair value, which approximates amortized cost. Accordingly, there
was no adjustment to equity at October 31, 1995.
Prior to the adoption of SFAS 115, these investments were carried at
amortized cost, which approximated market value.
Revenue Recognition
Revenues from sales are recognized when products are shipped to customers,
except for fabrication products which are recognized by the
percentage-of-completion method in accordance with industry practice. Sales
to an unaffiliated customer amounted to 15% and 13% of consolidated sales for
1995 and 1994, respectively.
Concentration of Credit Risk
The Company sells to a large customer base of steel fabricators, steel
service centers and construction contractors, most all of which deal
primarily on 30-day credit terms. The Company believes its concentration of
credit risk to be minimal in any one geographic area or market segment.
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Credit losses have not
been significant in the past, and are generally within management's
expectations.
Fair Value of Financial Instruments
At October 31, 1995, the fair value of the Company's cash and cash
equivalents, accounts receivable, investments and long-term debt approximated
amounts recorded in the accompanying consolidated financial statements (see
notes 1 and 6).
(NOTE 2) INVENTORIES
If the FIFO method of valuing inventories had been used by John W.
Hancock, Jr., Inc., consolidated inventories would have been $1,549,596
greater in 1995 and $1,611,460 greater in 1994.
<TABLE>
<CAPTION>
Inventories include the following major classifications:
October 31,
-------------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Scrap steel . . . . . . . . . . . . . . . . . . . . . . $3,728,612 $ 4,737,074 $ 2,651,005
Melt supplies . . . . . . . . . . . . . . . . . . . . . 2,443,827 1,888,830 2,034,790
Billets . . . . . . . . . . . . . . . . . . . . . . . . 1,748,778 3,209,030 2,400,164
Mill supplies . . . . . . . . . . . . . . . . . . . . . 3,210,946 2,867,779 2,745,971
Finished steel . . . . . . . . . . . . . . . . . . . . 19,734,075 14,266,949 14,237,250
------------ ------------ ------------
Total inventories . . . . . . . . . . . . . . . . $30,866,238 $26,969,662 $24,069,180
============ ============ ============
</TABLE>
10
<PAGE>
(NOTE 3) PROPERTIES AND DEPRECIATION
Depreciation expense for the years ended October 31, 1995, 1994 and 1993
amounted to $7,863,154, $7,332,833 and $7,295,885, respectively. Generally,
the rates of depreciation range from 3.3% to 20% for buildings and
improvements and 5% to 33% for machinery and equipment. Property additions in
1995, 1994 and 1993 included $10,146, $19,341 and $42,418 of interest
capitalized, respectively.
(NOTE 4) SHORT-TERM DEBT
The following information relates to aggregate short-term borrowings:
<TABLE>
<CAPTION>
October 31,
-----------------------------
1995 1994
------------ -----------
<S> <C> <C>
Notes payable to banks with interest ranging from 6.08% to 6.20% for 1995. $ 11,000,000 $ 6,500,000
============ ===========
Maximum borrowings outstanding at any month end $ 14,000,000 $ 6,500,000
============ ===========
Weighted average loans outstanding to banks $ 11,364,384 $ 6,112,329
============ ===========
Weighted average interest rates for the year 6.33% 4.31%
============ ===========
Weighted average interest rates at October 31 6.17% 5.45%
============ ===========
</TABLE>
At October 31, 1995, the Company had lines of credit with various domestic
banks aggregating $39,500,000 with $28,500,000 unused. These arrangements are
reviewed periodically by the lending banks for renewal, and although not
legally binding, commitments have been traditionally honored. These lines of
credit do not require compensating balances.
(NOTE 5) INCOME TAXES
The Company files a consolidated federal income tax return. The federal
income tax returns through October 31, 1990 have been examined by the
Internal Revenue Service with all issues settled.
The following is a reconciliation of income tax expense per consolidated
statements of earnings to that computed by using the federal statutory tax
rate of 35% for 1995, 34.33% for 1994 and 34% for 1993.
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------
<S> <C> <C> <C>
1995 1994 1993
----------- ---------- ------------
Federal tax at the statutory rate . . . . . . . . . . . . . . . $11,642,451 $4,960,886 $ 2,561,993
Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit . . . . 1,297,302 560,240 298,397
Other items, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,490 163,024 (75,222)
------------ ----------- -----------
Income taxes per consolidated statements of earnings $13,035,243 $ 5,684,150 $ 2,785,168
=========== =========== ===========
The components of income tax expense are as follows:
Year Ended October 31,
Year Ended October 31,
----------------------------------------------------
1995 1994 1993
----------- ---------- ------------
Current income taxes:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . $11,463,015 $ 4,859,095 $ 2,377,778
State . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,733,087 913,660 370,308
------------ ----------- -----------
Total current income taxes . . . . . . . . 13,196,102 5,772,755 2,748,086
------------ ----------- -----------
Deferred income taxes:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . (122,692) (28,059) 65,971
State . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,167) (60,546) (28,889)
------------ ----------- -----------
Total deferred income taxes. . . . . . . (160,859) (88,605) 37,082
------------ ----------- -----------
Total income taxes . . . . . . . . . . . . . . . . $13,035,243 $5,684,150 $ 2,785,168
============ ========== ============
</TABLE>
The Company adopted SFAS 109, effective November 1, 1993. The cumulative
effect of adopting SFAS 109 on the Company's consolidated statements of
earnings was to increase income by $3,093,940 ($.39 per share) for 1994.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for tax purposes, and operating loss
and tax credit carryforwards. As of October 31, 1995 and 1994, the Company
had total deferred tax liabilities of $11,669,070 and $11,920,039,
respectively, and deferred tax assets of $1,125,441 and $1,215,551,
respectively. Deferred tax liabilities result exclusively from excess tax
depreciation, and deferred tax assets result, primarily, from reserves not
currently deductible of $988,429 for 1995 and $1,001,280 for 1994. There were
no valuation allowances.
11
<PAGE>
Under the previous income tax accounting rules, deferred income taxes were
provided for significant timing differences in the recognition of revenue and
expense for tax and financial statement purposes. The source of these timing
differences and the tax effect of each are as follows:
Year Ended
October 31, 1993
----------------
Attributable to depreciation . . . . . . . . .$ 155,345
Other, net . . . . . . . . . . . . . . . . . . (118,263)
-----------
Total deferred income taxes . . . . . . . . . $ 37,082
============
(NOTE 6) LONG-TERM DEBT
Long-term debt at October 31 consisted of the following:
<TABLE>
<CAPTION>
October 31,
------------------------------
1995 1994
------------ -------------
<S> <C> <C>
Term loan collateralized by land, buildings and equipment at Roanoke
plant, payable in quarterly installments of $312,500, plus
interest at the LIBOR rate of 5.91% plus 5/8%. Due September 1, 1999. . . . $ 4,687,500 $ 5,937,500
Term loan collateralized by equipment at Roanoke plant,
payable in monthly installments of $104,167 beginning
September 1, 1995. Interest payable monthly at 6.87%. Due September
1, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,791,666 10,000,000
Term loan collateralized by equipment at Roanoke plant,
payable in annual installments of $1,250,000.
Interest payable at the LIBOR rate of 5.94% plus 1/2%. Due November 1, 1999 . . 6,250,000 7,500,000
Other -- 2,083,500
------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,729,166 25,521,000
Less-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,750,000 4,791,834
------------ ------------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,979,166 $20,729,166
============ ============
</TABLE>
To offset the variable rate characteristic of the long-term borrowings,
the Company entered into interest rate swap agreements with major banks
resulting in fixed rates of 8.78% on the notional amount of $4,687,500
through June 1996 and 8.92% on the notional amount of $6,250,000 through
April 1996.
Under the loan agreements, the Company must maintain total liabilities,
exclusive of deferred income taxes, of not greater than 1.55 times tangible
net worth and maintain consolidated current assets of not less than 1.25
times consolidated current liabilities. The consolidated current assets or
the property of Socar, Inc. cannot be mortgaged, pledged, used as a security
interest or lien, or encumbered. Currently, consolidated tangible net worth
cannot be less than $64,626,784 and consolidated working capital cannot be
less than $15,000,000. Cash flow from net income, depreciation and deferred
income taxes for the prior four quarters must be equal to or greater than
$2,500,000. In addition, the ratio of earnings to debt service must equal at
least 1.0.
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments", requires disclosure of the year-end
fair value of significant financial instruments, including long-term debt.
The Company's carrying value of long-term, funded fixed-rate debt
approximates fair value, with near-term swap agreements in place.
Annual aggregate long-term debt maturities are $3,750,000 in 1996, 1997
and 1998, $3,437,500 in 1999 and $2,500,000 in 2000.
(NOTE 7) COMMITMENTS AND CONTINGENT LIABILITIES
At October 31, 1995, the Company was committed for $9,432,331 for
purchases of equipment and production facilities.
The Company and the County of Roanoke, Va. have entered into consent
agreements with the United States Environmental Protection Agency (EPA) for
the clean-up of specific portions of a landfill site and adjacent streams
near Salem, Va. One agreement is a "remedial action" for the removal and
off-site treatment and disposal of an emission control dust pile located on
the site. This action was completed during 1995 with all costs reflected in
the accompanying consolidated financial statements. Another agreement
pertains to a "removal action" for the removal and treatment of emission
dust, sediment and contaminated soil associated with the streams. The EPA has
approved on-site stabilization and disposal with the work estimated to be 30%
completed. The Company has entered into a cost sharing agreement with the
County of Roanoke for both response actions at the landfill. It is not known
whether other potentially responsible parties will pay some of the costs. The
Company estimates its share of the remaining costs to be $1,100,000 which is
included in liabilities. The material components of these costs are the
stream sediment removal, chemicals for treatment of the sediment, landfill
operation for on-site storage and EPA oversite charges. Significant
assumptions underlying the estimates are cubic yards or tons of dust,
sediment and contaminated soil to be removed from the stream. Completion is
expected within a year. The Company received a settlement from its primary
insurance carrier in 1995 and is presently in discussions with its excess
carriers concerning possible recoveries. Any additional recoveries, if any,
are uncertain.
12
<PAGE>
(NOTE 8) COMMON STOCK AND EARNINGS PER SHARE
Outstanding common stock consists of 560,000 shares, issued prior to
October 31, 1967, at no stated value; 750,656 shares issued subsequent to
October 31, 1967, at a stated value of $.50 per share; 1,310,656 shares
issued in 1981 at no stated value; 1,310,656 shares, less the equivalent of
42 fractional shares, issued in 1986 at no stated value; 1,965,963 shares,
less the equivalent of 151 fractional shares, issued in 1988 at no stated
value; 800 shares issued in 1989 at no stated value; 3,000 shares issued in
1992 at no stated value; 1,200 shares issued in 1993 at no stated value;
44,000 shares issued in 1994 at no stated value and 3,023,804 shares, less
the equivalent of 152 fractional shares, issued in 1995 at no stated value.
During the year ended October 31, 1986, the Company increased authorized
common stock from 4,000,000 shares to 10,000,000 shares.
Earnings per share have been computed based on the weighted average number
of shares outstanding of 8,045,644 for 1995, 7,988,985 for 1994 and 7,956,339
for 1993. The average number of shares outstanding were weighted after giving
effect both to stock options exercised during 1995, 1994 and 1993 and to a
three-for-two stock split effective May 1, 1995. Stock options are not
included in the computation of earnings per share since inclusion has less
than a 3% effect.
(NOTE 9) PROFIT SHARING PLANS
The Company, including Shredded Products Corporation, RESCO Steel Products
Corporation and Socar, Inc., has qualified profit sharing plans which cover
substantially all employees. John W. Hancock, Jr., Inc. has an unqualified
plan. Socar, Inc.'s annual contribution is discretionary while the other
plans' annual contribution cannot exceed 20% of their combined earnings
before income taxes. Total contributions of all Companies shall not exceed
the maximum amount deductible for such year under the Internal Revenue Code
and amounted to $4,585,087 for 1995, $3,343,328 for 1994 and $1,680,246 for
1993.
(NOTE 10) INTEREST EXPENSE
Interest expense is stated net of interest income of $400,692 in 1995,
$438,466 in 1994 and $525,784 in 1993.
(NOTE 11) STOCK OPTIONS
Under a nonqualified stock option plan approved by the stockholders in
1989, the Company may issue 75,000 shares of unissued common stock to
employees of the Company each plan year. Options for 41,500 shares were
granted for 1995, for 36,000 shares for 1992 and for 32,500 shares for both
1990 and 1989. A three-for-two stock split in 1995 increased these grants an
additional 32,300 shares. These options are exercisable for a term of five
years from the date of grant, and a summary follows:
Option Price
Per Share Shares
--------------- ----------------
Balance, November 1, 1992. . . . . $6.16 - $13.60 94,500
Granted. . . . . . . . . . . . . . - -
Exercised. . . . . . . . . . . . . 6.16 (1,200)
Expired or terminated. . . . . . . - -
-------
Balance, October 31, 1993. . . . . 6.16 - 13.60 93,300
Granted. . . . . . . . . . . . . . - -
Exercised. . . . . . . . . . . . . 6.16 - 13.60 (44,000)
Expired or terminated. . . . . . . 11.05 - 13.60 (1,200)
-------
Balance, October 31, 1994. . . . . 6.16 - 11.05 48,100
Granted. . . . . . . . . . . . . . 13.60 41,500
Stock Split. . . . . . . . . . . . 4.11 - 9.07 32,300
Exercised. . . . . . . . . . . . . 4.11 - 9.07 (39,185)
Expired or terminated. . . . . . . 4.11 - 7.37 (7,565)
-------
Balance, October 31, 1995. . . . . 4.11 - 9.07 75,150
=======
Shares available for grant at year end -
=======
(NOTE 12) HEALTH BENEFITS AND POSTRETIREMENT COSTS
Effective November 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" (SFAS 106). The Company currently provides
certain health care benefits for terminated employees who have completed 10
years of continuous service after age 45, and SFAS 106 requires the Company
to accrue the estimated cost of such benefit payments during the years the
employee provides services. The Company previously expensed the cost of these
benefits as claims were incurred. SFAS 106
13
<PAGE>
allows recognition of the cumulative effect of the liability in the year
of adoption or the amortization of the obligation over a period of up to
twenty years. The Company has elected to recognize this obligation of
approximately $1,381,000 over a period of twenty years. Cash flows are not
affected by implementation of SFAS 106, but implementation decreased net
earnings from continuing operations for 1995 and 1994 by approximately
$154,200 ($.02 per share) and $152,000 ($.02 per share), respectively.
The Company's postretirement benefit plan is not funded. The accrued
postretirement benefit cost recognized in the balance sheet at October 31 is
as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ----------
Accumulated postretirement benefit obligation:
<S> <C> <C>
Retirees . . . . . . . . . . . . . . . . . . . . . $ 347,019 $ 312,000
Fully eligible plan participants . . . . . . . . 723,491 637,000
Other active plan participants . . . . . . . . . . 661,479 605,000
---------- ----------
Accumulated postretirement benefit obligation . . 1,731,989 1,554,000
Unrecognized net actuarial gains (losses) . . . . 5,602 --
Unrecognized transition obligation . . . . . . . . (1,243,000) (1,312,000)
---------- ----------
Accrued postretirement benefit cost. . . . . . . . $494,591 $ 242,000
========== ==========
Net postretirement benefit cost consisted of the
following components:
Service cost . . . . . . . . . . . . . . . . . . . $ 143,279 $ 127,000
Interest cost on accumulated postretirement
benefit obligation. . . . . . . . . . . . . . . . 120,658 118,000
Amortization of transition obligation. . . . . . . 69,000 69,000
---------- ----------
Net postretirement benefit cost . . . . . . . . . . $ 332,937 $ 314,000
========== ==========
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 12% for 1994, decreasing linearly each
successive year until it reached 6.5% in 2004, after which it remains
constant. A one-percentage-point increase in the assumed health care cost
trend rate for each year would increase the accumulated postretirement
benefit obligation by approximately $115,000 and the net postretirement
benefit cost by approximately $28,000. The assumed discount rate used in
determining the accumulated postretirement benefit obligation was 8% for the
years ended October 31, 1995 and 1994.
(NOTE 13) UNAUDITED QUARTERLY FINANCIAL DATA
Summarized unaudited quarterly financial data for 1995 follows:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------
January 31 April 30 July 31 October 31
<S> <C> <C> <C> <C>
------------ ------------ ------------ ------------
Sales . . . . . . . . . . . . . . . . . . . $ 57,520,532 $ 62,202,152 $ 68,570,080 $ 71,675,760
============ ============ ============ ============
Gross earnings . . .. . . . . . . . . . . . $ 11,949,177 $ 13,380,437 $ 15,326,922 $ 15,441,149
============ ============ ============ ============
Net earnings . . . . . . . . . . . . . . . $ 3,825,716 $ 4,246,649 $ 5,181,764 $ 6,974,773
============ ============ ============ ============
Earnings per share . . . . . . . . . . . . $ .48 $ .52 $ .65 $ .86
============ ============ ============ ============
</TABLE>
Summarized unaudited quarterly financial data for 1994 follows:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------
January 31 April 30 July 31 October 31
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . $ 47,052,752 $51,626,556 $ 55,914,438 $ 61,215,482
============ =========== ============ ============
Gross earnings . . . . . . . . . . . . . . . $ 6,054,117 $ 6,602,165 $ 7,658,343 $ 13,417,559
============ =========== ============ ============
Net earnings . . . . . . . . . . . . . . . . $ 4,125,536 $ 1,441,627 $ 1,776,602 $ 4,516,610
============ =========== ============ ============
Earnings per share . . . . . . . . . . . . . . $ .52 $ .18 $ .22 $ .56
============ =========== ============ ============
</TABLE>
14
INDEPENDENT AUDITORS' REPORT
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF
ROANOKE ELECTRIC STEEL CORPORATION:
We have audited the accompanying consolidated balance sheets of Roanoke
Electric Steel Corporation and its wholly-owned subsidiaries as of October 31,
1995 and 1994, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the three years in the period
ended October 31, 1995. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Roanoke Electric Steel Corporation
and its wholly-owned subsidiaries at October 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended October 31, 1995 in conformity with generally accepted accounting
principles.
As discussed in Notes 5 and 12 to the consolidated financial statements,
effective November 1, 1993, the Corporation changed its method of accounting for
income taxes and its method of accounting for postretirement benefits other than
pensions.
/S/ DELOITTE & TOUCHE LLP
Winston-Salem, North Carolina
November 17, 1995
STOCK ACTIVITY
The Common Stock of Roanoke Electric Steel Corporation is traded nationally over
the counter on Nasdaq National Market using the symbol RESC. At year end, there
were approximately 780 shareholders of record. The following has been adjusted
for the three-for-two stock split effective May 1, 1995.
1995 1994
Stock Prices Stock Prices
High Low High Low
First Quarter . . . . . . . . . 11 3\8 10 10 5\8 8 1\8
Second Quarter . . . . . . . . 11 7\8 10 1\2 12 1\8 10
Third Quarter . . . . . . . . . 14 1\2 11 11 7\8 9 5\8
Fourth Quarter . . . . . . . . 16 7\8 13 3\4 11 9 3\8
Cash Dividends
1995 1994
First Quarter. . . . . . $.08 $.08
Second Quarter. . . . . .09 .08
Third Quarter. . . . . . .09 .08
Fourth Quarter. . . . . .11 .08
Extra. . . . . . . . . .09
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales
Sales increased for the period 1993 through 1995. In 1993, sales
increased 14.5% due mainly to much improved billet shipments, increased bar and
fabricated products (bar joist and rebar) tons shipped and higher selling prices
for all products. Improved market conditions and demand resulted in the
increased bar products shipments, while the higher billet shipments were due to
both increased export business and improved domestic demand. The improvement in
bar and billet selling prices resulted, primarily, from higher scrap steel
costs, our main raw material, prompting industry-wide price increases. Even
though the construction industry remained depressed and highly competitive,
shipments of fabricated products increased slightly due to successful job
bidding. Selling prices for fabricated products rose due to higher raw material
costs. The 29% increase in sales in 1994 was the result of significant increases
in shipments of bar and fabricated products and increased selling prices for all
product classes, while shipments of billets declined slightly. Continued
improvement in business conditions and economic growth fueled demand and
resulted in the increased shipments of bar products. An easing of competitive
conditions within the construction industry led to the increased fabricated
products shipments. Billet tonnage shipped declined slightly due to a lack of
export shipments, although domestic shipments improved significantly. While the
export markets were much more competitive, domestic demand improved
substantially. Selling prices for bar and fabricated products increased, mainly,
as a result of higher raw material costs, but some of the increased selling
prices were demand driven. The higher billet prices were also driven by higher
raw material costs, but the increased domestic billet shipments, which bring a
higher price, also contributed. In 1995, sales were 20.5% higher due to
substantial increases in shipments of fabricated products and billets, together
with much improved selling prices for all product classes, while bar products
shipments were flat. Reduced competition and increased activity within the
construction industry led to the higher shipment levels of fabricated products.
Improved market conditions and increased domestic demand resulted in the
improved billet tons shipped, as export markets were highly competitive.
Inventory reductions by bar products customers accounted for the flat shipments,
even though market conditions and backlogs remained strong for much of the year.
Selling prices for fabricated products increased due to higher raw material
costs and demand. The improved selling prices for bar products were mostly
attributable to increased scrap prices and rising demand in the early part of
the year, as prices fell slightly near year-end. Billet selling prices were
higher due again to the increased scrap costs and improved product mix.
Cost of Sales and Gross Margins
In 1993, the increase in cost of sales was attributable to the increased
tons shipped of all product classes, together with increased costs of scrap
steel. Cost of sales increased in 1994 as a result of the increased tons shipped
of bar and fabricated products in addition to a continued rise in scrap steel
costs. The increase in cost of sales in 1995 was due primarily to the higher
shipments of fabricated products and billets, together with an increase in both
scrap and other raw material costs.
Gross earnings as a percentage of sales improved 1.5% to 13.5% for 1993
due to the increased selling prices for all products which more than offset the
increased scrap costs. The gross profit percentage continued to increase in 1994
and finished up 2.1% to 15.6%. Higher selling prices for all product classes and
the efficiencies of much improved production accounted for the higher margins in
spite of the significant increase in scrap costs. In 1995, gross earnings as a
percentage of sales climbed an additional 6.0% to 21.6%. 16
The improvement was mainly the result of the higher selling prices for
all product classes and increased production levels which reduced unit costs for
fixed expenses, in spite of the higher scrap costs.
For all years in the 1993-1995 period, the increased shipment levels
at the higher gross profit margins provided the improvements in gross and net
earnings.
Administrative Expenses
In 1993, administrative expenses increased due mainly to executive and
management compensation which increased with production, shipments and earnings
in accordance with various incentive arrangements. However, administrative
expenses were 6.9% of sales - down from 7.2% in 1992. The percentage declined
further in 1994 to 6.5%, even though administrative expenses increased as a
result of higher executive and management compensation, taxes, insurance, bad
debts and professional fees. The majority of the increase in administrative
expenses in 1995 was attributable to executive and management compensation as
production, shipments and earnings improved significantly. The percentage of
administrative expenses to sales improved to 6.2%.
Interest Expense
In 1993, interest expense declined due to lower interest rates and
average borrowings, in spite of a decline in interest income to $525,784 and
less capitalized interest of $42,418. Interest expense increased in 1994 as a
result of higher interest rates, lower interest income of $438,466 and decreased
capitalized interest of $19,341, even though average borrowings were lower. In
1995, interest expense increased due to higher interest rates, increased average
borrowings and declines in interest income and capitalized interest to $400,692
and $10,146, respectively.
Profit Sharing Expense and Income Taxes
Contributions to various profit sharing plans are determined as a
proportion of earnings before income taxes and should normally increase and
decrease with earnings. In 1993, income tax expense as a percentage of pretax
income was relatively constant with 1992. Income tax expense in 1994 and 1995
was affected by higher tax rates and the adjustment of deferred taxes required
by SFAS 109.
Financial Condition, Liquidity and Capital Resources
At October 31, 1995, working capital was $45,483,760, the current ratio
was 2.2 to 1 and the quick ratio was 1.3 to 1 - all improved and very sound.
Cash, investments and accounts receivable of $51,338,585 were more than adequate
to pay current liabilities of $38,569,233 which is a good indication of
liquidity and a healthy financial condition. Commitments for the purchase of
property, plant and equipment at year end were $9,432,331 and 1996 curtailments
of long-term debt will be $3,750,000. These obligations will affect future
liquidity and working capital; however, profits and depreciation should provide
adequate working capital to fund these items. Cash and cash equivalents
increased $6,849,608 during the year to $6,999,644, providing additional
liquidity.
Total long-term and short-term borrowings declined $291,834 during the
year, in spite of capital expenditures of $11,654,366. The ratio of debt to
equity improved to .75 to 1, and the percentage of long-term debt to total
capital decreased from 22.2% to 15.9%. This low percentage provided significant
additional debt capacity, and the strong financial condition and results of
operations assured an investment grade rating. Various lenders have found the
Company attractive, and several proposals were being reviewed at year end for
term debt and revolving credit facilities. In addition, there were capital
resources available in the amount of $28,500,000, representing the unused
portion of $39,500,000 in lines of credit made available by various banks. The
Company believes its capital resources more than adequately meet its needs.
Management is of the opinion that adoption of the Clean Air Act
Amendments or any other environmental concerns will not have a materially
adverse effect on the Company's operations, capital resources or liquidity (see
note 7). Additional future capital expenditures are presently estimated to be
less than $1,000,000.
17
<PAGE>
OFFICERS
Donald G. Smith, 60
Chairman, President, Treasurer
and Chief Executive Officer
38 years of service
Frank S. Key, Jr., 71
President, Socar, Inc.
29 years of service
William L. Neal, 68
President, John W. Hancock, Jr., Inc.
40 years of service
H. James Akers, Jr., 56
Vice President, Melt Operations
39 years of service
Donald R. Higgins, 50
Vice President - Sales
30 years of service
Watson B. King, 56
Vice President, Mill Operations
34 years of service
John E. Morris, 54
Vice President - Finance
and Assistant Treasurer
24 years of service
Thomas J. Crawford, 40
Assistant Vice President and Secretary
18 years of service
Daniel L. Board, 58
Assistant Vice President, Purchasing
35 years of service
William O. Warwick, 63
Assistant Vice President, Human
Resources and Environmental Affairs
28 years of service
BOARD OF DIRECTORS
Frank A. Boxley
President,
Southwest Construction, Inc.
T. A. Carter
Architect
George B. Cartledge, Jr.
President,
Grand Piano & Furniture Co., Inc.
Charles I. Lunsford, II
Chairman,
Charles Lunsford Sons & Associates
William L. Neal
President,
John W. Hancock, Jr., Inc.
Thomas L. Robertson
President and Chief Executive Officer,
Carilion Health System
Donald G. Smith
Chairman, President, Treasurer
and Chief Executive Officer,
Roanoke Electric Steel Corporation
Paul E. Torgersen
President,
Virginia Polytechnic Institute
and State University
Gordon C. Willis
Chairman of the Board,
Rockydale Quarries Corporation
John D. Wilson
Retired President,
Washington & Lee University
COMMITTEES OF THE BOARD
Executive:
D. G. Smith, Chairman; T. L. Robertson,
P. E. Torgersen, G. C. Willis
Audit:
G. C. Willis, Chairman; T. A.
Carter,
T. L. Robertson, P. E. Torgersen
Compensation and Stock Option:
G. B. Cartledge, Jr., Chairman;
F. A. Boxley, C. I. Lunsford, II, J. D. Wilson
Profit Sharing:
C. I. Lunsford, II, Chairman; D. G. Smith
CORPORATE INFORMATION
Corporate Office
102 Westside Boulevard,
P.O. Box 13948, Roanoke, Virginia 24038
540-342-1831
Annual Meeting
The 1996 annual meeting of shareholders
will be held at 10:00 a.m. on
Tuesday, February 20, 1996 at the Appalachian
Power Company Building, 40 Franklin
Road, S. W., Roanoke, Virginia.
General Counsel
Woods, Rogers & Hazlegrove P.L.C.
Roanoke, Virginia
Independent Auditors
Deloitte & Touche LLP
Winston-Salem, North Carolina
Transfer Agent and Registrar
Wachovia Bank of North Carolina, N.A.
Corporate Trust Department,
P.O. Box 3001, Winston-Salem, NC 27102
800-633-4236
Stock Listing
Nasdaq National Market; Symbol: RESC
Dividend Reinvestment Plan
Roanoke Electric Steel offers its
shareholders a dividend reinvestment
plan through its transfer agent.
For more information, please contact
the transfer agent or
Thomas J. Crawford, Secretary.
Financial Information
Analysts, investors and others seeking
financial information are requested to
contact: John E. Morris, Vice President-
Finance or Thomas J. Crawford, Assistant
Vice President and Secretary.
Copies of the Corporation's Annual Report or Form 10-K may be obtained
without charge by writing to Mr. Crawford at the above address.
18
<PAGE>
ROANOKE ELECTRIC STEEL CORPORATION
P.O. BOX 13948, ROANOKE, VIRGINIA 24038 540-342-1831
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information
extracted from the 4th Quarter Consolidated Balance Sheets
and Statement of Earnings and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<CASH> 6,999,644
<SECURITIES> 4,179,418
<RECEIVABLES> 40,159,523
<ALLOWANCES> 0
<INVENTORY> 30,866,238
<CURRENT-ASSETS> 84,052,993
<PP&E> 132,075,415
<DEPRECIATION> 58,569,617
<TOTAL-ASSETS> 157,774,658
<CURRENT-LIABILITIES> 38,569,233
<BONDS> 16,979,166
0
0
<COMMON> 1,729,503
<OTHER-SE> 88,333,095
<TOTAL-LIABILITY-AND-EQUITY> 157,774,658
<SALES> 259,968,524
<TOTAL-REVENUES> 259,968,524
<CGS> 203,870,839
<TOTAL-COSTS> 203,870,839
<OTHER-EXPENSES> 20,779,897
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,053,643
<INCOME-PRETAX> 33,264,145
<INCOME-TAX> 13,035,243
<INCOME-CONTINUING> 20,228,902
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,228,902
<EPS-PRIMARY> 2.51
<EPS-DILUTED> 2.51
</TABLE>
BY-LAWS
OF
ROANOKE ELECTRIC STEEL CORPORATION
ARTICLE I
Offices
The principal office and place of business of the
Corporation shall be in the County of Roanoke, State of Virginia,
and the post office address of the Corporation shall be in the
City of Roanoke, State of Virginia.
ARTICLE II
Stockholders
Section 1 - Annual Meeting - The annual meeting of the
Stockholders of the Corporation shall be held on the third Monday
in January of each year.
Section 2 - Special Meetings - Special meetings of the
Stockholders may be called by the President and shall be called
by the President or Secretary at the request in writing of a
majority of the Board of Directors, or at the request in writing
by Stockholders owning a majority in amount of the entire capital
stock of the Corporation issued and outstanding and entitled to
vote.
Section 3 - Notice and Place of Meetings - The
Secretary shall cause written notice of the time and place of the
holding of each annual or special meeting to be mailed, at least
ten (10) days prior to such meeting, to each Stockholder entitled
to vote, to the post office address of record with the
Corporation. Notice of special meetings of the Stockholders
shall state the purpose or purposes of such meetings. Meetings
shall be held at such place in the City or County of Roanoke as
may be designated in the notice.
Section 4 - Quorum - At any meeting of the
Stockholders, the holders of a majority of the shares of the
capital stock of the Corporation, issued and outstanding and
entitled to vote, present in person or represented by proxy,
shall represent a quorum of the Stockholders for all purposes.
If the holders of the amount of stock necessary to
constitute a quorum shall fail to attend, in person or by proxy,
at the time and place of meeting, the Chairman of the meeting may
adjourn such meeting from time to time without notice, other than
by announcement at the meeting, until holders of the amount of
stock requisite to constitute a quorum shall attend. At any such
adjourned meeting, at which a quorum be present, any business may
be transacted which might have been transacted at the meeting as
originally called.
Section 5 - Organization - The President, and in his
absence, the Vice-President, shall call all of the meetings of
the Stockholders to order and shall act as Chairman of such
meetings. In the absence of the President and Vice-President,
the Board of Directors shall appoint any stockholder to act as
Chairman of such meeting. The Secretary of the Corporation shall
act as Secretary of all meetings of the Stockholders, and in the
absence of the Secretary, the presiding officer may appoint any
person to act in such capacity.
Section 6 - Voting - At each meeting of the
Stockholders, every Stockholder shall be entitled to vote in
person or by proxy appointed by an instrument in writing,
subscribed by such Stockholder, or by his duly authorized
attorney, and delivered to the Secretary at the meeting, and he
shall have one vote for each share of stock entitled to vote and
registered in his name at the time of taking the list of
Stockholders for such meeting. No share of stock shall be voted
at any election which shall have been transferred on the books of
the Corporation within twenty (20) days next preceding such
election. Upon the demand of any Stockholder, the vote upon any
question before the meeting shall be by ballot.
It shall be the duty of the Secretary to prepare, at
least ten (10) days before every meeting, a complete list of the
Stockholders entitled to vote, arranged in alphabetical order and
indicating the number of shares held by each. Such list shall
be open for inspection by any Stockholder at the principal place
of business of the Corporation during business hours for the ten
(10) days preceding the meeting.
Section 7 - Inspectors - At each meeting of the
Stockholders, one (1) or more inspectors of election may be
appointed by the presiding officer. It shall be the duty of the
inspectors of election to count and certify to the Secretary the
results of all votes at such meeting. In the absence of the
appointment of such inspector or inspectors, the Secretary shall
perform such duties.
Section 8 - Order of Business - At meetings of the
Stockholders, the order of business shall be:
(1) Calling of roll.
(2) Proof of due notice of meeting or of waiver of
notice.
(3) Reading and disposal of unapproved minutes.
(4) Reports of officers and committees.
(5) Election of Directors.
(6) Unfinished business.
(7) New business.
(8) Adjournment.
ARTICLE III
Board of Directors
Section 1 - Number and Term of Office - The business
and property of the Corporation shall be managed and controlled
by a Board of not less than five, nor more than nine Directors.
The Directors shall be elected by ballot, by a majority of the
Stockholders present and voting in person or by proxy, at each
annual meeting of the Stockholders, and shall be elected to serve
for a term of one (l) year and until their successors shall be
elected and shall qualify.
Section 2 - Vacancies - In case of any vacancy in the
Board of Directors through death, resignation, disqualification
or other cause, the remaining Directors, by an affirmative vote
of the majority thereof, may elect a successor to hold office for
the unexpired portion of the term.
Section 3 - Annual Meetings - The annual meeting of the
Board of Directors of the Corporation shall be held on the second
Tuesday following the annual meeting of the Stockholders of the
Corporation.
Section 4 - Special Meetings - Special meetings of the
Board of Directors shall be held whenever called by the direction
of its Chairman or the President, or by one-third in number of
the Directors then in office.
Section 5 - Time, Place and Notice of Meetings - The
Secretary shall cause written notice of the time and place of the
holding of each annual or special meeting to be mailed, at least
ten (10) days prior to the date of such meeting, to each Director
to the post office address of record with the Corporation.
Section 6 - Quorum - A majority of the Board of
Directors shall constitute a quorum for the transaction of
business, but if at any meeting of the Board, there be less than
a quorum present, a majority of those present shall adjourn the
meeting from time to time.
Section 7 - Election and Salaries of Officers - The
Directors shall elect the officers of the Corporation and fix
their salaries.
Section 8 - Order of Business - At meetings of the
Board of Directors, the order of business shall be:
(1) Calling of roll.
(2) Proof of due notice of meeting or of waiver of
notice.
(3) Reading and disposal of any unapproved minutes.
(4) Reports of officers and committees.
(5) Election of officers.
(6) Unfinished business.
(7) New business.
(8) Adjournment.
ARTICLE IV
Section 1 - Officers - The officers of the Corporation
shall be a Chairman of the Board of Directors, a President, a
Vice-President, a Secretary and a Treasurer. Any two or more of
such offices, other than those of President and Secretary, may be
held by one person. The Board of Directors may, in its
discretion, elect more than one Vice-President, and an Assistant
Secretary and Assistant Treasurer. The officers shall be elected
at each annual meeting of the Board of Directors and shall be
elected to serve for a term of one (1) year or until removed by a
majority vote of the entire Board of Directors.
Section 2 - Powers and Duties of Officers
(a) The Chairman of the Board of Directors shall
preside at all meetings of the Board of Directors.
(b) President - The President shall be elected from
the Board of Directors and shall preside at all meetings of
the Stockholders, and, in the absence of the Chairman of
the Board of Directors, at all meetings of the Directors.
He shall have power to sign certificates of stock, to sign
and execute all contracts, deeds, leases and other
documents, and to sign checks, drafts, notes and orders for
the payment of money, and to appoint, discharge and fix the
salaries of agents and employees. He shall have general
and active management of the business of the Corporation
and shall perform all of the duties incident to the office
of President.
(c) Vice-President - The Vice-President, or
Vice-Presidents, shall have such powers and perform such
duties as may be delegated to him or them by the Board of
Directors. In the absence or disability of the President,
the senior Vice-President may perform the duties and
exercise the powers of the President.
(d) Treasurer and Assistant Treasurer - The Treasurer
shall have custody of all funds and securities of the
Corporation and shall keep a full and accurate account of
all monies received and paid by him on account of the
Corporation. He shall have power to sign all checks,
drafts, notes and orders for the payment of money and shall
perform all acts incident to the position of Treasurer,
subject to the control of the Board of Directors. The
Assistant Treasurer shall have such powers and duties as
may be delegated to him by the Board of Directors and, in
the absence or disability of the Treasurer, may perform the
duties and exercise the powers of the Treasurer.
(e) Secretary and Assistant Secretary - The Secretary
shall keep the minutes of all meetings of the Board of
Directors and Stockholders, and shall give and serve all
notices. The Secretary shall attest and countersign all
contracts, deeds, leases and other documents where
necessary, and shall have charge and custody of the seal,
and of the stock certificate books, transfer books and
stock ledgers of the Corporation, and shall, in general,
perform all duties usually incident to the office of
Secretary. The Assistant Secretary shall have such powers
and duties as may be delegated to him by the Board of
Directors and, in the absence or disability of the
Secretary, may perform the duties and exercise the powers
of the Secretary.
ARTICLE V
Capital Stock, Dividends and Seal
Section 1 - Certificates of Shares - The certificates
for the shares of the capital stock of the Corporation shall be
in such form as may be approved by the Board of Directors. The
certificates shall be signed by the President and the Secretary
or Treasurer of the Corporation and shall be consecutively
numbered. The name of the person owning the shares represented
by each certificate, with the number of such shares and the date
of issue, shall be entered on the Corporation's books. The
Corporation may treat the holder of record of any share or shares
of stock as the holder-in-fact thereof, and shall not be bound
to recognize any claim to or interest in any such share on the
part of any other person.
Section 2 - Transfer of Shares - Shares of the capital
stock of the Corporation shall be transferable by the holder
thereof in person, or by his duly authorized attorney, upon
surrender and cancellation of certificates for a like number of
shares properly endorsed.
Section 3 - Regulations - The Board of Directors shall
have power and authority to make all such rules and regulations
as they may deem expedient concerning the issue, transfer and
registration of certificates for the shares of stock of the
Corporation.
Section 4 - Dividends - The Board of Directors may
declare dividends from the surplus of the Corporation or from the
net profits from the operation of its business at such times and
in such amounts as the Board, in its sole discretion, may
determine. Before the payment of any dividend or the
distribution of any profits, there may be set aside out of the
surplus or net profits arising out of the operation of the
business of the Corporation, such sum or sums as the Directors
from time to time think proper, either as working capital, a
reserve fund to meet contingencies, for the repair and
maintenance of the property of the Corporation, or for such other
purposes as the Directors shall think conducive to the interests
of the Corporation.
Section 5 - Corporate Seal - The corporate seal shall
have inscribed thereon the name of the Corporation, the year of
its organization, and the words "Corporate Seal" and "Virginia".
Section 6 - Fiscal Year and Financial Statements - The
fiscal year of the Corporation shall begin on the first day of
November and terminate on the 31st day of October in each year.
The Board of Directors shall publish and submit to the
Stockholders, along with the notice of the time and place of the
annual meeting, an operating statement of the Corporation for the
preceding fiscal year and a consolidated balance sheet showing
the assets and liabilities of the Corporation at the end of the
preceding fiscal year.
ARTICLE VI
Amendment of By-Laws
The By-Laws of the Corporation may be amended at any annual
or special meeting of the Corporation by a vote of the holders of
a majority of the shares of the capital stock of the Corporation
issued and outstanding and entitled to vote, present in person or
represented by proxy.
John W. Hancock, Jr.
President
ATTEST:
Elizabeth B. Hancock
Secretary
WAIVER OF NOTICE
We, the undersigned, being all of the members of the
Board of Directors of Roanoke Electric Steel Corporation, hereby
waive notice of the first meeting of the Board of Directors to be
held at the offices of Roanoke Iron and Bridge Works in the City
of Roanoke, Virginia at 4 p.m. o'clock on the 27th day of April,
1955, and consent to the transaction of all business that may
properly come before such meeting.
DATED at Roanoke, Virginia this 27th day of April, 1955.
John W. Hancock, Jr.
O.D. Oakey, Jr.
S. Colston Snead, Jr.
B.W. Morris
Charles P. Lunsford
A. Blair Antrim
John M. Donalson
ARTICLES OF AMENDMENT
TO BY-LAWS
OF ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1 - 3(n), Code of Virginia, 1950, as
amended, Roanoke Electric Steel Corporation executes Articles of
Amendment to its By-Laws as follows:
(a) The name of the Corporation is ROANOKE ELECTRIC STEEL
CORPORATION.
(b) The amendment so adopted amends Article VI of the
By-Laws to read as follows:
"The Corporation shall indemnify each director
and officer of the Corporation, his heirs, executors,
administrators and personal representatives, against
any and all liabilities, judgments, fines, penalties
and claims (including amounts paid in settlement)
imposed upon or asserted against him by reason of his
being or having been an officer or director of the
Corporation or of any other corporation in which he
served or serves as a director or officer pursuant to
the written request of the Corporation (whether or not
he continues to be an officer or director at the time
of such imposition or assertion), and against all
expenses (including counsel fees) reasonably incurred
by him in connection therewith, except in respect of
matters as to which he shall have been finally
adjudged to be liable by reason of having been guilty
of negligence or misconduct in the performance of his
duty as such director or officer. In the event of any
other judgment against such officer or director or in
the event of a settlement, the indemnification shall
be made only if the Corporation shall be advised (a)
by the Board of Directors, in case none of the
persons involved shall then be a director of the
Corporation, or (b) by independent counsel appointed
by the Board of Directors, in case any of the persons
involved shall then be a director of the Corporation,
that in its or his opinion, as the case may be, such
director or officer was not guilty of negligence or
misconduct in the performance of his duty, and, in the
event of a settlement, that such settlement was, or,
if still to be made, would be, in the best interests
of the Corporation. If the determination is to be
made by the Board of Directors, it may rely, as to
all questions of law, upon the advice of independent
counsel. The foregoing right of indemnification
shall not be exclusive of other rights to which any
director or officer may be entitled as a matter of law
or otherwise."
(c) The meeting of the Board of Directors at which the
amendment was found to be in the best interests of the
Corporation and directed to be submitted to a vote at a meeting
of stockholders was held on the 18th day of October, 1967.
Notice was given to each stockholder of record entitled to vote
on the 15th day of December, 1967, such notice being given more
than twenty-five and less than fifty days before the date of the
meeting and was given in the manner provided in this Act, and was
accompanied by a copy of the proposed amendment; the date of the
adoption of the amendment by the stockholders was the 15th day of
January, 1968.
(d) The number of shares outstanding and the number of
shares entitled to vote on the amendment was 560,000 shares; all
shares being common stock of no par value, there was no class
entitled to vote thereon as a class.
(e) The number of shares present in person or by proxy
voted for the amendment was 441,265 shares and none against such
amendment.
(f) Such amendment does not effect a change in the amount
of stated capital.
(g) Such amendment does not effect a restatement of the
Articles of Incorporation.
Witness the signature of Roanoke Electric Steel Corporation,
by its President, with the corporate seal affixed and attested by
the Secretary thereof, this 20th day of January, 1968.
ROANOKE ELECTRIC STEEL CORPORATION
BY William M. Meador
President
ATTEST:
Donald G. Smith
Secretary
STATE OF VIRGINIA )
) To-Wit:
COUNTY OF ROANOKE )
I, Paul D. Sturgill, a Notary Public in and for the County
of Roanoke, State of Virginia, do hereby certify that William M.
Meador, and Donald G. Smith, President and Secretary respectively
of Roanoke Electric Steel Corporation, have this day personally
appeared before me and executed the foregoing Articles of
Amendment, and made oath that the matters therein stated are true
and correct.
Given under my hand this 20th day of January, 1968. My
commission expires April 4, 1968.
Paul D. Sturgill
Notary Public
ARTICLES OF AMENDMENT
TO BY-LAWS
OF ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1 - 24, Code of Virginia, 1950,
as amended, Roanoke Electric Steel Corporation executes Articles
of Amendment to its By-Laws as follows:
(a) The name of the Corporation is ROANOKE ELECTRIC STEEL
CORPORATION.
(b) The amendment so adopted adds a new by-law, which would
be new Article VII, to read as follows:
"The power to alter, amend or repeal the By-laws
or adopt new by-laws shall be vested in the Board of
Directors. But by-laws made by the Board of Directors
may be repealed or changed, and new by-laws made, by
the stockholders and the stockholders may prescribe
that any by-law made by them shall not be altered,
amended or repealed by the Directors."
(c) The meeting of the Board of Directors at which the
amendment was found to be in the best interests of the
Corporation and directed to be submitted to a vote at a meeting
of stockholders was held on the 18th day of October, 1967.
Notice was given to each stockholder of record entitled to vote
on the 15th day of December, 1967, such notice being given more
than twenty-five and less than fifty days before the date of the
meeting and was given in the manner provided in this Act, and was
accompanied by a copy of the proposed amendment; the date of the
adoption of the amendment by the stockholders was the 15th day of
January, 1968.
(d) The number of shares outstanding and the number of
shares entitled to vote on the amendment was 560,000 shares; all
shares being common stock of no par value, there was no class
entitled to vote thereon as a class.
(e) The number of shares present in person or by proxy
voted for the amendment was 441,265 shares and none against such
amendment.
(f) Such amendment does not effect a change in the amount
of stated capital.
(g) Such amendment does not effect a restatement of the
Articles of Incorporation.
Witness the signature of Roanoke Electric Steel Corporation,
by its President, with the corporate seal affixed and attested by
the Secretary thereof, this 20th day of January, 1968.
ROANOKE ELECTRIC STEEL CORPORATION
BY William M. Meador
President
ATTEST:
Donald G. Smith
Secretary
STATE OF VIRGINIA )
) To-Wit:
COUNTY OF ROANOKE )
I, Paul D. Sturgill, a Notary Public in and for the County
of Roanoke, State of Virginia, do hereby certify that William
M.Meador, and Donald G. Smith, President and Secretary
respectively of Roanoke Electric Steel Corporation, have this day
personally appeared before me and executed the foregoing Articles
of Amendment, and made oath that the matters therein stated are
true and correct.
Given under my hand this 20th day of January, 1968. My
commission expires April 4, 1968.
Paul D. Sturgill
Notary Public
ARTICLES OF AMENDMENT
TO BY-LAWS
OF ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1-24 of the Code of Virginia and
Article VII of the By-Laws of Roanoke Electric Steel Corporation,
The Board of Directors of Roanoke Electric Steel Corporation
hereby amends the By-Laws of the Corporation as follows:
(a) Section 2 of Article V is amended by inserting
"(subject to such restrictions as may be placed upon the transfer
of shares under the terms of the following section)" between
"transferable" and "by".
(b) Section 3 of Article V is amended by adding to the
end of such section the following sentence: "The Board of
Directors may place such restrictions upon the transferability of
all or part of the shares of the capital stock of the
Corporation as may be necessary in the opinion of the Board to
insure that any issue of stock by the Corporation will comply
with applicable federal and state securities laws and with the
terms of any agreement of merger or other corporate
reorganization duly approved by the Board."
(c) The meeting of the Board of Directors at which the
amendment was found to be in the best interest of the Corporation
was held on the 19th day of August, 1975.
Witness the signature of Roanoke Electric Steel
Corporation, by its President, with the corporate seal affixed
and attested by the Secretary thereof, this 19th day of August,
1975.
ROANOKE ELECTRIC STEEL CORPORATION
By William M. Meador
President
ATTEST:
Donald G. Smith
Secretary
ARTICLES OF AMENDMENT
TO BY-LAWS
OF ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1-24 of the Code of Virginia and
Article VII of the By-Laws of Roanoke Electric Steel Corporation,
the Board of Directors of Roanoke Electric Steel Corporation
executes Articles of Amendment to its By-Laws as follows:
(a) The name of the Corporation is ROANOKE ELECTRIC
STEEL CORPORATION.
(b) The amendment so adopted amends Section 1 of
Article III to read as follows:
"The business and property of the Corporation shall be managed
and controlled by a Board of not less than five, nor more than
ten Directors. The Directors shall be elected by ballot, by a
majority of the Stockholders present and voting in person or
by proxy, at each annual meeting of the Stockholders, and
shall be elected to serve for a term of one (1) year and
untill their successors shall be elected and shall qualify."
(c) The meeting of the Board of Directors at which the amendment
was found to be in the best interest of the Corporation was
held on the 16th day of September, 1975.
Witness the signature of Roanoke Electric Steel Corporation, by its
President, with the corporate seal affixed and attested by the
Secretary thereof, this 16th day of September, 1975.
ROANOKE ELECTRIC STEEL CORPORATION
By William M. Meador
President
ATTEST:
Donald G. Smith
Secretary
ARTICLES OF AMENDMENT
TO BY-LAWS
OF ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1-24 of the Code of Virginia and
Article VII of the By-Laws of Roanoke Electric Steel Corporation,
the Board of Directors of Roanoke Electric Steel Corporation
executes Articles of Amendment to its By-Laws as follows:
(a) The name of the Corporation is ROANOKE ELECTRIC
STEEL CORPORATION.
(b) The amendment so adopted amends Section 1 of
Article III to read as follows:
"The business and property of the Corporation shall be
managed and controlled by a Board of not less than five, nor more
than eleven Directors. The Directors shall be elected by
ballot, by a majority of the Stockholders present and voting in
person or by proxy, at each annual meeting of the Stockholders,
and shall be elected to serve for a term of one (1) year and
until their successors shall be elected and shall qualify."
(c) The meeting of the Board of Directors at which the
amendment was found to be in the best interest of the Corporation
was held on the 17th day of April 1984.
Witness the signature of Roanoke Electric Steel
Corporation, by its President, with the corporate seal affixed
and attested by the Secretary thereof, this 17th day of April
1984.
ROANOKE ELECTRIC STEEL CORPORATION
By William M. Meador
President
ATTEST:
Donald G. Smith
Secretary
ARTICLES OF AMENDMENT TO BYLAWS OF
ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1-24 of the Code of Virginia and
Article VII of the Bylaws of Roanoke Electric Steel Corporation,
the Board of Directors of Roanoke Electric Steel Corporation
hereby executes and approves these Articles of Amendment to its
Bylaws as follows:
(a) Article III, "Board of Directors", is hereby amended by
the addition of Section 9 as follows:
Section 9 - Executive Committee and Other
Committees
The Board of Directors of the Corporation,
by resolution adopted by a majority of the
Directors in office, may designate an
Executive Committee and/or such other
committees as from time to time shall be
deemed necessary and appropriate. The
Executive Committee shall be composed of two
or more Directors of the Corporation,
appointed by the Board of Directors, and, to
the extent provided in such resolution,
shall have and exercise all of the
authority of the Board of Directors except
to approve an amendment of the Articles of
Incorporation, a plan of merger or
consolidation, a plan of exchange under
which the Corporation would be acquired, the
sale, lease or exchange, or the mortgage or
pledge of for a consideration other than
money, of all or substantially all of the
property and assets of the Corporation
otherwise than in the ordinary and regular
course of business, the voluntary
dissolution of the Corporation, or
revocation of voluntary dissolution
proceedings. Other committees consisting of
two or more Directors, appointed by the
Board of Directors, may be designated by
resolution adopted by a majority of the
Directors present at a meeting at which a
quorum is present. Upon designation of any
committee, including the Executive
Committee, the Board of Directors shall
appoint a chairman thereof.
(b) A meeting of the Board of Directors at which this
Amendment was found to be in the best interest of the Corporation
was held January 29, 1985. A majority of the Board of Directors
then in office voted in favor of the Amendment.
WITNESS the signature of Roanoke Electric Steel Corporation,
by its President, with the corporate seal affixed and attested by
the Secretary of, this 29th day of January, 1985.
ROANOKE ELECTRIC STEEL CORPORATION
By Donald G. Smith
Attest: Thomas J. Crawford
Secretary
ARTICLES OF AMENDMENT TO BYLAWS OF
ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1-714 of the Code of Virginia, 1950,
as amended, and Article VII of the Bylaws of Roanoke Electric
Steel Corporation, the Board of Directors of Roanoke Electric
Steel Corporation hereby executes and approves these Articles of
Amendment to its Bylaws as follows:
(a) Article IV, Section 1 is hereby amended to read as
follows:
Section 1 - Officers - The officers of the
Corporation shall be a Chairman of the Board of
Directors, a President, a Vice President, an
Assistant Vice President, a Secretary and a
Treasurer. The Board of Directors may, in its
discretion, elect more than one Vice President,
more than one Assistant Vice President, and an
Assistant Secretary and Assistant Treasurer. The
same individual may simultaneously hold more than
one office in the Corporation. The officers
shall be elected at each annual meeting of the
Board of Directors for a term of one (1) year or
until removed by a majority vote of the entire
Board of Directors.
(b) Article IV, Section 2 (c) is hereby amended to read as
follows:
(c) Vice President and Assistant Vice President - The
Vice President(s) and Assistant Vice President(s) shall
have the powers and perform such duties as may be delegated
to him or them by the Board of Directors. In the absence
or disability of the President, the senior Vice President
may perform the duties and exercise the powers of the
President.
(c) The meeting of the Board of Directors at which these
Amendments were found to be in the best interest of the
Corporation was held October 18, 1988. The majority of the Board
of Directors then in office voted in favor of the Amendments.
The Amendments were ratified by a majority of the Board of
Directors at its meeting on November 15, 1988.
WITNESS the signature of Roanoke Electric Steel Corporation,
by its President, with the corporate seal affixed and attested
by the Secretary thereof, this 15th day of November, 1988.
ROANOKE ELECTRIC STEEL CORPORATION
By Donald G. Smith
President
ATTEST:
Thomas J. Crawford
Secretary
ARTICLES OF AMENDMENT TO BYLAWS
OF
ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1-714 of the Code of Virginia, 1950,
as amended, and Article VII of the Bylaws of Roanoke Electric
Steel Corporation, the Board of Directors of Roanoke Electric
Steel Corporation hereby executes and approves these Articles of
Amendment to its Bylaws as follows:
(a) Section 1 of Article IV of the Bylaws is hereby
amended in its entirety to read as follows:
"Section 1 - Officers - The officers of the
Corporation shall be a Chairman of the Board
of Directors, a President, a Vice President,
an Assistant Vice President, a Secretary
and a Treasurer and such other officers as
the Board may by resolution appoint. The
same individual may simultaneously hold
more than one office in the Corporation.
The Board of Directors may, in its
discretion, elect more than one Vice
President, more than one Assistant Vice
President, and an Assistant Secretary and
Assistant Treasurer. The officers shall be
elected at each annual meeting of the Board
of Directors and shall be elected to serve
for a term of one (1) year or until removed
by a majority vote of the entire Board of
Directors."
(b) The meeting of the Board of Directors at which
this Amendment was found to be in the best interests
of the Corporation was held on November 16, 1993. The
majority of the members of the Board of Directors
then in office voted in favor of the Amendment.
WITNESS the signature of Roanoke Electric Steel Corporation,
by its President, with the corporate seal affixed and attested by
the Secretary thereof, this 16th day of November, 1993.
ROANOKE ELECTRIC STEEL CORPORATION
By: Donald G. Smith
President
ATTEST:
Thomas J. Crawford
Secretary
ARTICLES OF AMENDMENT
TO BY-LAWS
OF ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1-714 of the Code of Virginia and
Article VII of the By-Laws of Roanoke Electric Steel Corporation,
the Board of Directors of Roanoke Electric Steel Corporation
executes Articles of Amendment to its By-Laws as follows:
(a) The name of the Corporation is Roanoke Electric
Steel Corporation.
(b) The amendment so adopted (the "Amendment") amends
Section 1 of Article II to read as follows:
"Section 1 - Annual Meeting - The annual meeting
of the Stockholders of the Corporation shall be held on the third
Tuesday in February of each year, or on such other date as the
Board of Directors may determine."
(c) The Amendment also amends Section 3 of Article III
to read as follows:
"Section 3 - Annual Meeting - The annual meeting
of the Board of Directors of the Corporation shall be held
immediately following the annual meeting of Stockholders, or at
such other time as the Board of Directors may determine."
(d) The meeting of the Board of Directors at which the
Amendment was found to be in the best interest of the Corporation
was held on the 19th day of September, 1995.
Witness the signature of Roanoke Electric Steel Corporation,
by its President, with the corporate seal affixed and attested by
the Secretary thereof, this 19th day of September, 1995.
ROANOKE ELECTRIC STEEL CORPORATION
By Donald G. Smith
President
ATTEST:
Thomas J. Crawford
Secretary
