UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-2389
ROANOKE ELECTRIC STEEL CORPORATION
(Exact name of Registrant as specified in its charter)
Virginia 54-0585263
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 Westside Blvd., N.W., Roanoke, Virginia 24017
(Address of principal executive offices) (Zip Code)
(540) 342-1831
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of January 31, 1996.
8,077,647 Shares outstanding
ROANOKE ELECTRIC STEEL CORPORATION
FORM 10-Q
CONTENTS
Page
1. Part I - Financial Information 3 - 9
Item 1. Financial Statements:
a. Consolidated Balance Sheets 3
b. Consolidated Statements of Earnings 4
c. Consolidated Statements of Cash Flows 5
d. Notes to Consolidated Financial Statements 6
e. Independent Accountants' Report 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 9
2. Part II - Other Information 10
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
3. Signatures 11
4. Exhibit Index pursuant to Regulation S-K 12
5. Exhibits
a. Financial Data Schedule 13
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Balance Sheets
ASSETS
(Unaudited) (Audited)
January 31, October 31,
1996 1995
CURRENT ASSETS
Cash and cash equivalents $ 8,482,076 $ 6,999,644
Investments 3,975,551 4,179,418
Accounts receivable 31,107,337 40,159,523
Inventories 33,457,551 30,866,238
Prepaid expenses 1,036,834 722,729
Deferred income taxes 1,125,441 1,125,441
Total current assets 79,184,790 84,052,993
PROPERTY, PLANT AND EQUIPMENT
Land 4,312,689 4,312,689
Buildings 17,336,987 17,195,735
Other property and equipment 105,304,431 104,825,380
Assets under construction 9,593,935 5,741,611
Total 136,548,042 132,075,415
Less--accumulated depreciation 60,441,165 58,569,617
Property, plant and equipment, net 76,106,877 73,505,798
OTHER ASSETS 215,138 215,867
TOTAL $ 155,506,805 $ 157,774,658
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 3,750,000 $ 3,750,000
Notes payable 12,500,000 11,000,000
Accounts payable 12,369,810 14,483,781
Dividends payable 888,541 888,101
Employees' taxes withheld 206,577 226,677
Accrued profit sharing contribution 1,238,065 4,403,031
Accrued wages and expenses 1,400,098 2,396,913
Accrued income taxes 2,576,772 1,420,730
Total current liabilities 34,929,863 38,569,233
LONG-TERM DEBT
Notes payable 18,854,167 20,729,166
Less--current portion 3,750,000 3,750,000
Total long-term debt 15,104,167 16,979,166
POSTRETIREMENT LIABILITIES 556,653 494,591
DEFERRED INCOME TAXES 11,641,070 11,669,070
STOCKHOLDERS' EQUITY
Common stock--no par value--authorized
10,000,000 shares, issued 8,974,390 shares
in 1996 and 8,970,390 in 1995 1,772,171 1,729,503
Capital in excess of stated value 9,349,429 9,349,429
Retained earnings 83,348,320 80,178,534
Total 94,469,920 91,257,466
Less--treasury stock, 896,743
shares--at cost 1,194,868 1,194,868
Total stockholders' equity 93,275,052 90,062,598
TOTAL $ 155,506,805 $ 157,774,658
The accompanying notes to consolidated financial statements are an integral
part of this statement.
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended
January 31,
1996 1995
SALES $ 58,429,217 $ 57,520,532
COST OF SALES 46,473,918 45,571,355
GROSS EARNINGS 11,955,299 11,949,177
OTHER OPERATING EXPENSES
Administrative 3,777,885 3,667,022
Interest, net 402,262 500,267
Profit sharing 1,238,065 1,386,330
Total 5,418,212 5,553,619
EARNINGS BEFORE INCOME TAXES 6,537,087 6,395,558
INCOME TAX EXPENSE 2,608,674 2,569,842
NET EARNINGS $ 3,928,413 $ 3,825,716
Weighted average number of
common shares outstanding * 8,076,484 8,023,212
Net earnings per share of common stock $ 0.49 $ 0.48
Cash dividends per share of common stock $ 0.11 $ 0.08
* Adjusted for three-for-two stock split effective 5-1-95
and stock options exercised.
The accompanying notes to consolidated financial statements are an
integral part of this statement.
<TABLE>
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Statements of Cash Flows
<CAPTION>
(Unaudited)
Three Months Ended
January 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 3,928,413 $ 3,825,716
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Postretirement liabilities 62,062 63,148
Depreciation and amortization 1,952,535 1,992,865
Loss on sale of investments and property, plant and equipment 35,414 -
Deferred income taxes (28,000) (90,000)
Changes in assets and liabilities which provided
(used) cash, exclusive of changes shown separately 1,006,958 (2,238,111)
Net cash provided by operating activities 6,957,382 3,553,618
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (4,551,316) (3,130,652)
Proceeds from sale of property, plant and equipment 6,000 -
Sale of investments 160,884 1,419,878
Other 129,914 -
Net cash used in investing activities (4,254,518) (1,710,774)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in notes payable 1,500,000 5,500,000
Cash dividends (888,541) (641,869)
Increase (decrease) in dividends payable 440 (695,358)
Proceeds from exercise of common stock options 42,668 -
Payment of long-term debt (1,874,999) (2,942,875)
Net cash provided by (used in) financing activities (1,220,432) 1,219,898
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,482,432 3,062,742
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,999,644 150,036
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,482,076 $ 3,212,778
CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED
(USED) CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY
(Increase) decrease in accounts receivable $ 9,052,186 $ 3,112,103
(Increase) decrease in inventories (2,591,313) (6,064,084)
(Increase) decrease in prepaid expenses (314,105) 384,396
Increase (decrease) in accounts payable (2,113,971) 530,112
Increase (decrease) in employees' taxes withheld (20,100) 75,068
Increase (decrease) in accrued profit sharing contribution (3,164,966) (1,883,310)
Increase (decrease) in accrued wages and expenses (996,815) (400,299)
Increase (decrease) in accrued income taxes 1,156,042 2,007,903
Total $ 1,006,958 $ (2,238,111)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 553,057 $ 601,218
Income taxes $ 1,480,633 $ 651,507
The accompanying notes to consolidated financial statements are an integral part of this statement.
</TABLE>
ROANOKE ELECTRIC STEEL CORPORATION
Notes to Consolidated Financial Statements
January 31, 1996
Note 1. In the opinion of the Registrant, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to
present fairly the financial position as of January 31, 1996
and the results of operations and cash flows for the three months
ended January 31, 1996 and 1995.
Note 2. Inventories include the following major classifications:
(Unaudited) (Audited)
January 31, October 31,
1996 1995
Scrap Steel $ 2,830,762 $ 3,728,612
Melt Supplies 2,612,014 2,443,827
Billets 4,497,968 1,748,778
Mill Supplies 3,179,385 3,210,946
Finished Steel 20,337,422 19,734,075
Total Inventories $ 33,457,551 $ 30,866,238
INDEPENDENT ACCOUNTANTS' REPORT
DELOITTE & TOUCHE LLP
Suite 1401 Telephone: (910) 721-2300
500 West Fifth Street Facsimile: (910) 721-2301
Winston-Salem, North Carolina 27152
Board of Directors
Roanoke Electric Steel Corporation:
We have reviewed the accompanying consolidated balance sheet of Roanoke
Electric Steel Corporation and subsidiaries as of January 31, 1996, and the
related consolidated statements of earnings and cash flows for the
three-month periods ended January 31, 1996 and 1995. These financial
statements are the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Roanoke Electric Steel
Corporation and subsidiaries as of October 31, 1995, and the related
consolidated statements of earnings, stockholders' equity, and cash flows
for the year then ended (not presented herein); and in our report dated
November 17, 1995, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of October 31, 1995 is fairly
stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Deloitte & Touche LLP
March 6, 1996
Deloitte Touche
Tohmatsu
International
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's earnings during the periods
included in the accompanying consolidated statements of earnings.
A summary of the period to period changes in the principal items included in
the consolidated statements of earnings is shown below:
Comparison of Increases (Decreases)
Three Months Ended
January 31,
1996 and 1995
Amount Percent
Sales 908,685 1.6
Cost of Sales 902,563 2.0
Administrative Expenses 110,863 3.0
Interest Expense (98,005) (19.6)
Profit Sharing Expense (148,265) (10.7)
Earnings before Income Taxes 141,529 2.2
Income Tax Expense 38,832 1.5
Net Earnings 102,697 2.7
Sales for the period compared increased mainly as a result of a significant
increase in selling prices for fabricated products (bar joists and rebar),
in spite of declines in both tons shipped of billets and fabricated products
and selling prices of merchant bar products. Billet prices and merchant bar
shipments showed only slight improvements and contributed to the increase in
sales. Fabricated product selling prices improved primarily as a result of
the less competitive conditions within the commercial construction industry
as demand and backlogs remained high. Shipment levels for all product
classes were either reduced or relatively flat, primarily due to an
abnormally severe winter, where heavy snows caused plant closings and
delayed shipments. Selling prices for bar products dropped slightly due to
some weakness in demand and business conditions within the industry. Billet
prices remained steady, eventhough demand and scrap prices were lower, only
because price changes lagged market changes. Cost of sales increased,
eventhough tons shipped of fabricated products and billets declined, and in
spite of a drop in the cost of scrap steel, our main raw material. The
increase was due to increased costs and expenses and the slightly higher bar
products shipments. The effects of lower production levels and selling
prices for bar products more than offset the higher selling prices for
fabricated products and lower scrap costs, and gross profits as a percentage
of sales dropped .3%. The increased costs and expenses offset the higher
sales, leaving gross earnings unchanged for the period compared.
Administrative expenses increased mainly as a result of increased executive
and other compensation, based on various incentive arrangements.
Administrative expenses were 6.5% of sales in 1996, compared to 6.4% in
1995. Interest expense decreased due to reduced average borrowings and
increased capitalized interest and interest income, in spite of slightly
higher interest rates. Contributions to various profit sharing plans are
determined as a proportion of earnings before income taxes. The proportion
of one plan is discretionary, while the proportion of the other plans is a
fixed percentage. Profit sharing expense declined, eventhough earnings
before profit sharing and income taxes were flat, because contributions to
the discretionary plan were $126,000 in 1996 and $81,000 in 1995, while
contributions to the other plans were $1,112,065 in 1996 and $1,305,330 in
1995. The effective income tax rate is relatively constant for both periods
compared. The lower interest and profit sharing expenses accounted for the
increased net earnings for the quarter, as gross earnings were flat.
Working capital decreased $1,228,833 during the period to $44,254,927 mainly
as a result of capital expenditures, dividends and current maturities of
long-term debt amounting to $4,551,316, $888,541 and $1,874,999,
respectively, which exceeded working capital provided from operations. The
current ratio of 2.3 to 1 and the quick ratio of 1.2 to 1 both indicate very
sound liquidity and a healthy financial condition. At January 31, 1996,
the Registrant's outstanding bank financing consisted of $18,854,167 of
term debt and $12,500,000 used on lines of credit. On February 15, 1996, the
Registrant closed on $60,000,000 of unsecured credit facilities with a
syndicate of lenders. The facilities are comprised of a $30,000,000 ten year
term loan and a $30,000,000 five year revolver. The term loan will be used
to purchase additional equipment and refinance existing debt. The revolver
replaces existing lines of credit that were not legally binding and will be
used for general corporate purposes. The loan facilities are expected to
provide increased liquidity and significantly lower interest rates.
At January 31, 1996, there were commitments for the purchase of plant and
equipment amounting to $6,566,659. Funding for most of these expenditures
will come from internally generated funds and the use of the credit
facilities mentioned above. A portion of the above commitments includes the
upgrade of an electric arc furnace and the addition of a ladle furnace to
the Company's melt shop operations. The ladle furnace and upgrade will
increase raw steel production, improve quality, decrease production costs
and improve operating efficiencies. Completion and start-up is anticipated
in May 1996, with a favorable impact on earnings.
During the quarter, the ratio of debt to equity improved to .67 to 1, and
the percentage of long-term debt to total capital decreased from 15.9% to
13.9%, due to current maturities reducing long-term debt by $1,874,999,
while stockholders' equity increased as net earnings of $3,928,413 exceeded
dividends of $888,541.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
To the best of Registrant's information and belief no new legal
proceedings were instituted against Registrant or any of its
wholly-owned subsidiaries during the period covered by this report
and there was no material development in or termination of the legal
proceedings reported earlier by Registrant on Form 10-K for fiscal
year ended October 31, 1995, as previously filed with the commission.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
(27) Financial Data Schedule
b. Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
Items 2, 3, 4 and 5 are omitted because the information required by these
items is not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROANOKE ELECTRIC STEEL CORPORATION
Registrant
Date March 6, 1996 Donald G. Smith
Donald G. Smith, Chairman, President,
Treasurer and Chief Executive Officer
(Principal Financial Officer)
Date March 6, 1996 John E. Morris
John E. Morris, Vice President-Finance
and Assistant Treasurer
(Chief Accounting Officer)
EXHIBIT INDEX
Exhibit No. Exhibit Page
(27) Financial Data Schedule 13
EXHIBIT NO. 27
FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the
1st Quarter Consolidated Balance Sheets and Statement of Earnings and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JAN-31-1996
<CASH> 8,482,076
<SECURITIES> 3,975,551
<RECEIVABLES> 31,107,337
<ALLOWANCES> 0
<INVENTORY> 33,457,551
<CURRENT-ASSETS> 79,184,790
<PP&E> 136,548,042
<DEPRECIATION> 60,441,165
<TOTAL-ASSETS> 155,506,805
<CURRENT-LIABILITIES> 34,929,863
<BONDS> 15,104,167
0
0
<COMMON> 1,772,171
<OTHER-SE> 91,502,881
<TOTAL-LIABILITY-AND-EQUITY> 155,506,805
<SALES> 58,429,217
<TOTAL-REVENUES> 58,429,217
<CGS> 46,473,918
<TOTAL-COSTS> 46,473,918
<OTHER-EXPENSES> 5,015,950
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 402,262
<INCOME-PRETAX> 6,537,087
<INCOME-TAX> 2,608,674
<INCOME-CONTINUING> 3,928,413
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,928,413
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
