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, 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.)
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 31, 1996: $112,713,413
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of December 31, 1996.
7,492,097 Shares outstanding
Portions of the following documents are incorporated by reference:
(1) 1996 Annual Report to Stockholders in Part II.
(2) Proxy Statement dated January 3, 1997 in Part III.
PART I
ITEM 1. BUSINESS
(a) General Development of Business.
During the fiscal year ended October 31, 1996, 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. 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, and
currently 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. During
the later part of 1996, the Registrant, at its main plant, completed the
installation of a new ladle refining furnace and the upgrade of an electric
arc furnace, for approximately $17,000,000. With this new state-of-the-art
equipment in operation, the Registrant expects to increase raw steel
production, improve quality, reduce production costs and improve operating
efficiencies. Also in 1996, the Registrant closed on an unsecured
$60,000,000 credit facility with a syndicate of lenders. The facility was
comprised of a $30,000,000 ten-year term loan and a $30,000,000 five-year
revolver. The term loan was used to purchase additional equipment and
refinance debt at much lower interest rates. The revolver replaced lines
of credit that were not legally binding. This restructuring of debt
provided the Registrant with the capital resources necessary to maintain
its competitive position and ensure future growth. In January 1996, Socar,
Inc. , a South Carolina subsidiary, sold its long-time idle plant in
Bucyrus, Ohio to the unaffiliated manufacturer who had been leasing the
facility for several years under a lease-purchase agreement, for a final
settlement price of $130,000. The other subsidiaries of the Registrant,
John W. Hancock, Jr., Inc. and RESCO Steel Products Corporation, 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
1996 1995 1994
Sales to Unaffiliated Customers:
Merchant Steel $104,180,746 $103,531,770 $96,782,588
Bar Joist & Rebar $112,572,549 $110,370,872 $78,854,207
Billets $ 29,533,357 $ 46,065,882 $40,172,433
$246,286,652 $259,968,524 $215,809,228
Net Earnings from Operations $ 15,414,834 $ 20,228,902 $ 8,766,435
Identifiable Assets $167,015,901 $157,774,658 $140,473,510
(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 10,000 to 15,000 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.
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.
PART I
(con'd.)
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 1996, 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
Registrant's total sales (tons), respectively. The largest nonaffiliated
customer purchased approximately 21% of total sales (tons) ---11% 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
PART I
(con'd.)
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. Demand and backlogs continued
high through 1996, allowing for increased bar product shipments, in spite
of increased competition, which forced sharp reductions in selling prices
throughout the industry.
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. Generally strong business conditions within the
commercial construction industry continued during 1996 to bring
improvements to selling prices for fabricated products, while shipment
levels were relatively flat, as weather related construction delays offset
otherwise strong demand.
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
PART I
(con'd.)
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 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. A planned melt shop
shutdown during 1996 to install a new ladle furnace and upgrade an electric
arc furnace was unexpectedly prolonged due to problems with construction
and installation, resulting in a sharp decline in billet production and
causing a significant reduction in billet shipments for the year, while the
highly competitive export market remained in effect. Billet selling prices
declined with a downward trend in scrap prices.
(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 75% performed, and completion is expected
within a 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 1996 Annual Report to Stockholders, filed as
an Exhibit to this Form 10-K.
PART I
(con'd.)
Near the end of fiscal year 1996, the Registrant began treating a
portion of its electric arc furnace dust, a hazardous substance, utilizing
its own stabilization process. Significant savings are being realized as
this process replaces off-site and more expensive treatment methods that
had been used 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 $9,600,000. Annual operating
expenses and depreciation of all pollution control equipment and waste
disposal costs are in excess of $3,900,000 in the aggregate. The
Registrant is expected to spend approximately $1,000,000 to $1,500,000 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, 1996, the Registrant employed 508 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 276, 276, 50 and 45 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, although, there were no foreign sales of excess billets
or other products during fiscal years 1994, 1995 and 1996. 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.
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 338,000 square feet of manufacturing space with an annual billet
capacity of approximately 650,000 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 I
(con'd.)
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 subsidiary are located in Florence, South
Carolina, and in Continental, 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 32 acre site 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.
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 cost reimbursement received
from other potentially responsible parties, if any. The County has filed
suit to recover such costs. 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
PART I
(con'd.)
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 1996 Annual Report to
Stockholders, filed as an Exhibit to this Form 10-K.
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 18, 1997.
The names, ages and positions of all of the executive officers of
the Registrant as of October 31, 1996 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, 41, 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 19 years of service with the
Registrant.
Donald R. Higgins, 51, 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 31
years of service with the Registrant.
John E. Morris, 55, 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 25 years of
service with the Registrant.
Donald G. Smith, 61, 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 39 years of service with the Registrant.
PART I
(con'd.)
FORWARD-LOOKING STATEMENTS
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and
development activities and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the
Company notes that a variety of factors could cause the Company's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the Company's forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development and results of the Company's business include economic and
industry conditions, availability and prices of supplies, prices of steel
products, competition, governmental regulations, interest rates, inflation,
labor relations, environmental concerns, and others.
PART II
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 1996
Annual Report to Stockholders. The Registrant did not during fiscal year
1996 make any sale of securities not registered under the Securities Act of
1993.
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 1996 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 1996
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 1996 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 January 3, 1997, 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", "Certain Relationships and Related Transactions",
"Performance Graph" and "Board of Directors and Committees -- Director
Compensation" in the Proxy Statement dated January 3, 1997, 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 January 3, 1997, 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" and "Certain Relationships and
Related Transactions" in the Proxy Statement dated January 3, 1997, 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 1996 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, as amended 19
(b) By-Laws, as amended 20
(4) Instruments Defining the Rights of 21
Security Holders
(10) * (a) Executive Officer Incentive Arrangement 22
Incorporated by
Reference
* (b) Roanoke Electric Steel Corporation Employees' 22
Stock Option Plan
Incorporated by
Reference
* (c) Roanoke Electric Steel Corporation 22
Consulting Arrangement
* (d) Roanoke Electric Steel Corporation 22
Severance Agreements
(13) 1996 Annual Report to Stockholders 23
(21) Subsidiaries of the Registrant 24
(23) Consent of Independent Auditors 25
(27) Financial Data Schedule 26
(b) Reports on Form 8-K.
A report on Form 8-K was filed September 20, 1996, during the
last quarter of the period covered by this report, stating that the
Registrant had approved the repurchase of up to an additional 250,000
shares of the Company's common stock, both in the open market and in
privately negotiated transactions. The Registrant had previously approved
a plan for the repurchase of up to 500,000 shares of the Company's common
stock during a twelve-month period ending April, 1997, but as of the Form
8-K report date, nearly all of the initially approved
PART IV
(con'd.)
repurchase was complete. The repurchased shares, to be held as authorized
and unissued shares, will be available for general corporate purposes and
to fund the Company's stock option plan.
* 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 21, 1997
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 21, 1997
Donald G. Smith, Chairman, President,
Treasurer and Chief Executive Officer
(Principal Executive Officer, Principal
Financial Officer and Director)
John E. Morris January 21, 1997
John E. Morris, Vice President - Finance
and Assistant Treasurer (Principal
Accounting Officer)
George B. Cartledge, Jr. January 21, 1997
George B. Cartledge, Jr. Director
Paul E. Torgersen January 21, 1997
Paul E. Torgersen Director
William L. Neal January 21, 1997
William L. Neal Director
Thomas L. Robertson January 21, 1997
Thomas L. Robertson Director
EXHIBIT NO. 3 (a)
ARTICLES OF INCORPORATION, AS AMENDED
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 1996 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.
* (c)
ROANOKE ELECTRIC STEEL CORPORATION
CONSULTING ARRANGEMENT
In January 1996, the Company entered into an arrangement with
William L. Neal, a director of the Company and former President of John W.
Hancock, Jr., Inc., whereby Mr. Neal has agreed to provide consultation and
advisory services to the Company and its subsidiaries. The arrangement
will continue in effect until terminated by either party. The Company has
agreed to pay Mr. Neal compensation at a rate of $100,000 per year.
* (d)
ROANOKE ELECTRIC STEEL CORPORATION
SEVERANCE AGREEMENTS
On August 20, 1996 Severance Agreements in the forms attached
hereto were executed by the Company and the following executive officers:
Donald G. Smith - Chairman, President, Treasurer and Chief
Executive Officer
415 Canterbury Lane S.W., Roanoke, VA 24014
Donald R. Higgins - Vice President - Sales
5014 Hunting Hills Circle S.W., Roanoke, VA 24014
John E. Morris - Vice President - Finance and Assistant
Treasurer
1783 Laurel Mountain Drive, Salem, VA 24153
Thomas J. Crawford - Assistant Vice President and Secretary
1646 Millbridge Rd., Salem, VA 24153
THIS AGREEMENT ("Agreement") dated as of August 20, 1996, by and
between Roanoke Electric Steel Corporation, 102 Westside Boulevard, N.W.,
Roanoke, Virginia 24017, a Virginia corporation (the "Company"), and
______________________ , _______________________ (the "Executive").
(address)
WITNESSETH THAT:
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the
best interest of the Company and its shareholders; and
WHEREAS, the Company recognizes that the possibility of a change in
control exists and may exist in the future, and that such possibility, and
the uncertainty and questions which it may raise among management, may
result in the departure or distraction of management personnel to the
detriment of the Company and its shareholders; and
WHEREAS, the Board of Directors of the Company ("Board") has
determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the
Company's management to their assigned duties without distraction in the
face of the circumstances arising from the possibility of a change in
control.
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein contained, the Company and the Executive hereby agree as follows:
1. The capitalized terms in this Agreement shall have the meanings
set forth in the "Definitions Addendum" attached hereto as Exhibit A and
incorporated herein by reference.
2. In order to protect the Executive against the possible
consequences of a Change in Control and thereby induce the Executive to
continue to serve as ______________________ of the Company and/or in such
other office or position to which he may be elected, the Company agrees
that if (a) a Change in Control occurs and (b) the Executive leaves the
employment of the Company for whatever reason (except because of the
Executive's death or Retirement, discharge by the Company for Cause or
Disability, or voluntary termination by the Executive other than for Good
Reason) within thirty-six (36) months after such Change in Control:
(A) The Company shall pay the Executive his full salary (whether
such salary has been previously been paid by the Company or by any of its
subsidiaries) through the Date of Termination at the rate in effect at the
time Notice of Termination is given and all other unpaid amounts, if any,
to which the Executive is entitled as of the Date of Termination under any
Plan or other arrangement of the Company at the time such payments are due;
(B) The Company shall pay to the Executive an amount equal to
2.99 multiplied by the Executive's annualized includable compensation for
the base period, as defined by Section 280G(d)(1) of the Internal Revenue
Code of 1986, as amended, (the"Code") (hereinafter the "Severance
Payment"), provided, however, that if any of such payment is or will be
subject to the excise tax imposed by Section 4999 of the Code or any
similar tax that may hereafter be imposed ("Excise Tax"), such payment
shall be reduced to a smaller amount, even to zero, which shall be the
largest amount payable under this paragraph that would not be subject, in
whole or in part, to the Excise Tax after considering all other payments to
the Executive required to be considered under Sections 4999 or 280G of the
Code.
In the event that the Severance Payment is subsequently determined to
be less than the amount actually paid hereunder, the Executive shall repay
the excess to the Company at the time that the proper amount is finally
determined, plus interest on the amount of such repayment at the Applicable
Federal Rate. In the event that the Severance Payment is determined to
exceed the amount actually paid hereunder, the Company shall pay the
Executive such difference, plus interest on the amount of such additional
payment at the Applicable Federal Rate at the time that the amount of such
difference is finally determined.
(C) The Company shall also pay to the Executive all legal fees
and related expenses incurred by the Executive in connection with this
Agreement, including any dispute arising out of this Agreement, whether or
not the Executive prevails (including, without limitation, all such fees
and expenses, if any, incurred in contesting or disputing any termination
or in seeking to obtain or enforce any right or benefit provided by this
Agreement).
(D) The Company shall maintain in full force and effect, for the
Executive's continued benefit until the earlier of (a) three years after
the Date of Termination; or (b) the Executive's commencement of full-time
employment with a new employer, all life insurance, medical, health and
accident, and disability plans, programs or arrangements in which the
Executive was entitled to participate immediately prior to the Date of
Termination, provided that the Executive continued participation is
possible under the general terms and provisions of such plans and programs.
In the event that the Executive's participation in any such plan or program
is barred, the Company shall arrange to provide the Executive with benefits
substantially similar to those which the Executive is entitled to receive
under such plans and programs.
3. The Executive's benefits hereunder shall be considered severance
pay in consideration of his past service, and pay in consideration of his
continued service from the date hereof, and his entitlement thereto shall
not be governed by any duty to mitigate his damages by seeking further
employment nor offset by any compensation which he may receive from future
employment.
4. The Company shall require any Successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, prior to the
effectiveness of any such Change in Control, to expressly assent and agree
to perform the Company's obligations under this Agreement.
5. This Agreement shall be binding upon and shall inure to the
benefit of the respective successors, assigns, legal representatives and
heirs to the parties hereto. If the Executive should die while any amount
would still be payable to the Executive hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
Executive's beneficiary designated in writing and delivered to the Company,
if any, and if none to the Executive's estate.
6. Any payment or delivery required under this Agreement shall be
subject to all requirements of the law with regard to withholding, filing,
making of reports and the like, and the Company shall use its best efforts
to satisfy promptly all such requirements.
7. This Agreement shall commence on the date hereof and shall
continue in effect through October 31, 2001. Prior to a Change in Control,
this Agreement shall terminate if the Executive shall resign voluntarily,
Retire, become Disabled, voluntarily take another position requiring a
substantial portion of his time, or die. This Agreement shall also
terminate if the Executive's employment as an officer of the Company shall
have been terminated for any reason by the Board as constituted prior to
any Change in Control. Notwithstanding anything in this Agreement to the
contrary, this Agreement shall continue in effect for at least a period of
thirty-six (36) months beyond the date of a Change in Control, if one shall
have occurred during the term of this Agreement.
8. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth on the first page of this Agreement,
provided that all notices to the Company shall be directed to the attention
of the President of the Company, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
9. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of
any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in
this Agreement. The validity, interpretation, construction and performance
of this agreement shall be governed by the law of the Commonwealth of
Virginia without regard to the state's conflict of law rules.
10. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in the City of
Roanoke, Virginia, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided however, that the
Executive shall be entitled to seek specific performance of his right to be
paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement. The
Company shall bear all costs and expenses arising in connection with any
arbitration proceeding pursuant to this Paragraph.
IN WITNESS WHEREOF, this Agreement has been executed by the
undersigned as of the date and year first above written.
ROANOKE ELECTRIC STEEL CORPORATION
By Donald G. Smith
Its Chairman, President, Treasurer and
Chief Executive Officer
Witness: EXECUTIVE
Carolyn J. Walker _________________________________________
Carolyn J. Walker
Print Name
EXHIBIT A
To
Agreement between ______________________ (the "Executive") and
Roanoke Electric Steel Corporation
Dated August 20, 1996
Definitions Addendum
As used in this Agreement, the following capitalized terms have
the indicated meanings unless the context clearly requires otherwise:
(A) "Applicable Federal Rate" has the meaning ascribed to that
term in Section 1274(d)(1) of the Internal Revenue Code of 1986, as
amended.
(B) "Board" means Board of Directors of the Company.
(C) "Cause" means (i) the willful and continued failure by the
Executive to substantially perform his duties hereunder (other than any
such failure resulting from his incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to
the Executive by the Board (excluding the Executive), which demand
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed his duties, or (ii) the willful
engaging by the Executive in illegal conduct or any conduct which is
demonstrably and materially injurious to the Company. Notwithstanding the
foregoing, the Executive shall not be deemed to be terminated for Cause
unless and until there has been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of not less than 75% of the
membership of the Board (excluding the Executive) at a meeting of such
Board called and held for such purpose (after a reasonable notice to the
Executive and an opportunity for the Executive, together with his counsel,
to be heard before the Board), finding that in the good faith opinion of
the Board the Executive was guilty of conduct set forth above and
specifying the particulars thereof in detail.
(D) "Change in Control" means a change in control of a nature
that would be required to be reported (assuming such event has not been
"previously reported") in response to Item 1(a) of the Current Report on
Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended ("Exchange Act");
provided that, without limitation, such a Change in Control shall be deemed
to have occurred at such time as (i) any Person is or becomes the
"beneficial owner" (as defined in Rule 13d-3 or Rule 13d-5 under the
Exchange Act as in effect on January 1, 1996), directly or indirectly, of
20% or more of the combined voting power of the Company's voting
securities; (ii) the Incumbent Board ceases for any reason to constitute at
least the majority of the Board; provided, however, that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders was approved by a
vote of at least 75% of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without
objection to such nomination) shall be, for purposes of this clause (ii),
considered as though such person were a member of the Incumbent Board;
(iii) all or substantially all of the assets of the Company are sold,
transferred or conveyed if the transferee is not controlled by the Company
(control meaning the ownership of more than 50% of the combined voting
power of such entity's voting securities); or (iv) the Company is merged or
consolidated with another corporation or entity and as a result of such
merger or consolidation less than 75% of the outstanding voting securities
of the surviving or resulting corporation or entity shall be owned in the
aggregate by the former shareholders of the Company. Notwithstanding
anything in the foregoing to the contrary, no Change in Control shall be
deemed to have occurred for purposes of this Agreement by virtue of any
transaction (i) which results in the Executive or a group of Persons which
includes the Executive, acquiring, directly or indirectly, 20% or more of
the combined voting power of the Company's voting securities; or (ii) which
results in the Company, any subsidiary of the Company or any profit-sharing
plan, employee stock ownership plan or employee benefit plan of the Company
or any of its subsidiaries (or any trustee of or fiduciary with respect to
any such plan acting in such capacity) acquiring, directly or indirectly,
20% or more of the combined voting power of the Company's voting
securities.
(E) "Date of Termination" means (i) if the Executive's
employment is terminated by the Executive for other than Good Reason,
ninety (90) days after Notice of Termination is given, (ii) if the
Executive's employment is to be terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that in the case of
Disability, the Executive shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day period), (iii) if
the Executive's employment is to be terminated for Cause or by the
Executive for Good Reason, the date specified in the Notice of Termination,
(iv) the date of the Executive's death, or (v) if the Executive's
employment is to be terminated by the Company for any reason other than
Cause, the date specified in the Notice of Termination, which in no event
shall be a date earlier than ninety (90) days after the date on which such
Notice of Termination is given.
(F) "Disability" means (i) as a result of the Executive's
inability due to physical or mental illness, the Executive shall have been
absent from the full-time performance of his duties with the Company for
six (6) consecutive months, and (ii) within thirty (30) days after Notice
of Termination is given the Executive shall not have returned to the
full-time performance of his duties.
(G) "Company" includes any corporation or other entity which is
the surviving or continuing entity in respect of any merger, consolidation
or form of business combination in which the Company ceases to exist.
(H) "Federal Funds Rate" means a rate of interest equal to the
average of (i) the near closing bid and (ii) offered as quoted in the Wall
Street Journal for reserves traded among commercial banks for overnight use
in amounts of $1,000,000 or more. Should such rate of interest ever cease
to exist, the parties shall mutually agree upon a comparable rate of
interest.
(I) "Good Reason" means:
(i) In the event of a Change in Control of the Company, an
adverse change in the Executive's status or position(s) with the Company
including, without limitation, any material diminution of his duties or
responsibilities or the assignment to the Executive of any duties or
responsibilities which, in the Executive's reasonable judgment, are
inconsistent with such status or position(s);
(ii) The failure by the Company to obtain from any Successor
the assent to this Agreement;
(iii) In the event of a Change in Control, any purported
termination by the Company of the Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
subparagraph (K) below (and, if applicable, subparagraph (B) above); and
for purposes of this Agreement, no such purported termination shall be
effective;
(iv) In the event of a Change in Control, the failure by the
Company to continue in effect any Plan in which Executive participates at
the time of the Change in Control (or Plans providing the Executive with at
least substantially similar benefits) other than as a result of the normal
expiration of any such Plan in accordance with its terms as in effect at
the time of the Change in Control, or the taking of any action, or the
failure to act, by the Company which would adversely affect the Executive's
continued participation in any of such Plans on at least as favorable a
basis as in the case on the date of the Change in Control or which would
materially reduce the Executive's benefits in the future under any such
Plans or deprive the Executive of any material benefit enjoyed by the
Executive at the time of the Change in Control;
(v) In the event of a Change in Control, the failure by the
Company to provide and credit the Executive with a number of paid vacation
days to which the Executive would then be entitled in accordance with the
Company's normal vacation policy as in effect immediately prior to the
Change in Control; or
(vi) In the event of a Change in Control, the Company
requiring the Executive to be based anywhere other than where his office is
located immediately prior to the Change in Control.
(J) "Incumbent Board" means the Board as constituted on the date
hereof.
(K) "Notice of Termination" means a written notice that
indicates the specific termination provision of this Agreement relied upon
and sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated.
(L) "Person" has the meaning ascribed to that term in Sections
3(d)(9) and 13(d)(3) of the Exchange Act.
(M) "Plan" means any compensation plan such as an incentive,
bonus, stock option or restricted stock plan, any pension or profit sharing
plan or any welfare benefit plan (including, but not limited to, health,
life or disability insurance).
(N) "Retirement" and "Retire" means the Executive's voluntary
termination of employment after the attainment of age sixty-five (65) or
the attainment of age fifty-five (55) having worked full time for the
Company for a period of ten (10) consecutive employment years.
(O) "Successor" means any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage of
time) the Company's business directly, by merger or consolidation, or
indirectly by purchase of the Company's voting securities, all or
substantially all of its assets or otherwise.
ROANOKE ELECTRIC STEEL CORPORATION
By Donald G. Smith
Its Chairman, President, Treasurer and
Chief Executive Officer
Witness: EXECUTIVE
Carolyn J. Walker _________________________________________
Carolyn J. Walker
Print Name
* 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
1996 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 21, 1996, 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, 1996.
Deloitte & Touche LLP
Winston-Salem, North Carolina
January 21, 1997
Deloitte Touche
Tohmatsu
International
EXHIBIT NO. 27
FINANCIAL DATA SCHEDULE
CERTIFICATE OF INCORPORATION
OF
ROANOKE ELECTRIC STEEL CORPORATION
This is to certify that we, the undersigned, desire to
and do hereby associate to establish a corporation under the
provisions and subject to the requirements of the laws in such
cases made and provided, and we, by this our certificate of
incorporation, set forth as follows:
I
The name of the Corporation is to be
ROANOKE ELECTRIC STEEL CORPORATION
II
The principal office of the Corporation is to be
located in the County of Roanoke, Virginia. The post office
address is to be Roanoke, Virginia.
III
The purposes for which the Corporation is formed are as
follows:
(1) To manufacture, buy, sell or otherwise deal or
traffic in iron, steel, manganese, nickel,
copper, coal, coke, or other metals or minerals.
(2) To acquire, own, lease, occupy, use, develop or
deal in, any lands containing coal, iron,
manganese, nickel, copper, or other minerals, and
to mine or otherwise extract or to remove such
minerals.
(3) To apply for, obtain, register, purchase, lease
or otherwise to acquire, and to hold, use, own,
exercise, develop, operate and introduce, and to
sell, assign, grant licenses in respect to, or
otherwise dispose of, any trade-marks,
trade-names, patents or inventions, improvements
or processes used in connection with or secured
under letters patent of the United States or
elsewhere in relation to any of the other
purposes herein stated, and to acquire, use,
exercise, or otherwise turn to gain licenses in
respect of any such trade-marks, patents,
inventions, processes and the like, or any such
property or rights.
(4) To acquire by purchase, subscription or
otherwise, and to invest in, hold or dispose of
stocks, bonds, securities or other obligations
of any other corporation or corporations;
domestic or foreign, and while owner of any such
stocks, bonds, securities or other obligations to
exercise all the rights, powers and privileges of
ownership, including the right to vote thereon
for any and all purposes; and to do any acts or
things for the preservation, protection,
improvement or enhancement of the value of any
such stocks, bonds, securities or obligations.
(5) To borrow money; to issue bonds, debentures or
obligations of the corporation from time to time,
for monies borrowed or in payment for property
purchased or for any of the other obligations or
purposes of the corporation; to secure the same
by mortgage or mortgages or deed or deeds of
trust upon or pledge of any or all of the
property, rights, privileges, or franchises of
the corporation, wheresoever situated, acquired
or to be acquired; and to sell or otherwise
dispose of any or all such bonds, debentures,
and obligations; provided, that no bonded
indebtedness, or increase in bonded indebtedness,
secured by a lien on any of the property or
franchises of the Corporation, shall be created
until the creation or increase of such
indebtedness be sanctioned by a vote in person or
by proxy of a majority in amount of all the
stockholders having voting power, present or
represented and voting, at a meeting of the
stockholders called by the Board of Directors for
that purpose pursuant to notice according to
law; provided further, that no approval of or
submission to the stockholders shall be required
for any notes or bonds given for deferred
installments of the purchase price of property
and secured by deeds of trust, mortgages, or
other liens on the property of the Corporation.
(6) To conduct its business in all or any of its
branches in the State of Virginia and in other
states of the United States of America, and in
the territories and the District of Columbia, and
in any or all dependencies, colonies, or
possessions of the United States of America and
in foreign countries, and for or in connection
with such business, to hold, possess, purchase,
mortgage and convey real and personal property
and to maintain offices and agencies either
within or without the State of Virginia.
IN GENERAL, to do any or all of the things and
exercise all of the powers hereinabove set forth to
the same extent, within the limits of the law
pertaining to corporations, as natural persons might
or could do and in any part of the world, as
principals, agents, contractors, or otherwise, either
alone or in company with others, and to carry on any
other business connected with the above set forth
general purposes consistent with the powers conferred
upon corporations by the laws of the State of
Virginia. The purposes hereinabove enumerated are
intended to be in furtherance of and not in
limitation of the powers generally granted to
corporations by the laws of the State of Virginia,
and nothing herein contained is intended to limit the
powers of this corporation to less than those powers
granted generally under the law.
IV
The capital stock of the Corporation shall consist of
common stock of no par value. The maximum amount of capital
stock of the Corporation is to be five thousand (5,000) shares of
common stock of no par value, and the minimum amount of capital
stock of the Corporation is to be five hundred (500) shares of
common stock of no par value.
V
The period for duration of the Corporation is
unlimited.
VI
The names and residences of the Directors, who, unless
sooner changed by the Stockholders, are for the first year to
manage the affairs of the Corporation, are as follows:
Name Residence
John W. Hancock, Jr. 2801 Avenham Ave., S.W.,
Roanoke, Virginia
Orran D. Oakey, Jr. 2425 Willow, Western Hills,
R. D. 4, Roanoke, Virginia
Barton W. Morris 2406 Wycliffe Avenue, S.W.,
Roanoke, Virginia
A. Blair Antrim 3105 Somerset Avenue, S.W.,
Roanoke, Virginia
Charles P. Lunsford 3015 Avenham Avenue, S.W.,
Roanoke, Virginia
S. Colston Snead, Jr. 701 Red Lane, Salem, Virginia
The names, residences and offices of the officers, who,
unless sooner changed by the Stockholders, are for the first year
to manage the affairs of the Corporation, are as follows:
Name Residence Office
John W. Hancock, Jr. 2801 Avenham Avenue, S.W., President
Roanoke, Va. and
Treasurer
Elizabeth B. Hancock 2801 Avenham Avenue, S.W., Secretary
Roanoke, Va.
VII
The amount of real estate to which the holdings of the
Corporation are at any time to be limited is fifty thousand
(50,000) acres.
GIVEN under our hands and seals this ______ day of
_________, 1955.
John W. Hancock, Jr. (SEAL)
Orran D. Oakey, Jr. (SEAL)
Barton W. Morris (SEAL)
STATE OF VIRGINIA )
) To-wit:
CITY OF ROANOKE )
I, ____________________________________________, a
Notary Public in and for the City of Roanoke, State of Virginia,
do hereby certify that JOHN W. HANCOCK, JR., ORRAN D. OAKEY, JR.
and BARTON W. MORRIS, whose names are signed to the foregoing
certificate of incorporation bearing date on the ______ day of
April, 1955, have this day personally appeared before me in my
City and State aforesaid and acknowledged the same.
GIVEN under my hand this ______ day of April, 1955.
__________________________________
Notary Public
My Commission expires:
_______________________
ARTICLES OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF ROANOKE ELECTRIC STEEL CORPORATION
These Articles of Amendment are filed pursuant to the
provisions of 13.1-58 of the Code of Virginia of 1950 as amended.
(a) The name of the corporation is ROANOKE ELECTRIC STEEL
CORPORATION.
(b) Article IV of the Articles of Incorporation is amended
to read as follows:
"The maximum capital stock of the corporation is to be
One Hundred Thousand (100,000) shares of common stock
of no par value."
(c) On October 15, 1958, after proper notice, the proposed
amendment was found in the best interests of the
corporation and was adopted by the Board of Directors
by a vote of six "for" and one absent and not voting.
On December 15, 1958, notice was given to each
stockholder of record entitled to vote in the manner
provided in 13.1 Code of Virginia of 1950 as amended,
accompanied by a copy of the proposed amendment, and
such proposed amendment was adopted at a regular
meeting of the stockholders held pursuant to such
notice on January 19, 1959.
(d) On the date of such meeting, 2720 shares were
outstanding and entitled to vote on the proposed
amendment.
(e) On the date of such meeting, 2291 shares were voted
in person or by proxy for such amendment, and no
shares were voted in person or by proxy against such
amendment.
(f) Such amendment does not effect a change in the amount
of stated capital of the corporation.
(g) Such amendment does not effect a restatement of the
Articles of Incorporation.
WITNESS the signature of ROANOKE ELECTRIC STEEL
CORPORATION by John W. Hancock, Jr., its President, attested by
William M. Meador, its Secretary, with its corporate seal duly
affixed, this ____________ day of January, 1959.
ROANOKE ELECTRIC STEEL CORPORATION
BY: John W. Hancock, Jr.
John W. Hancock, Jr., President
ATTEST:
William M. Meador
William M. Meador, Secretary
STATE OF VIRGINIA )
) To-wit:
CITY OF ROANOKE )
I, ________________________________________, a Notary
Public in and for the City of Roanoke, State of Virginia, do
hereby certify that John W. Hancock, Jr., President, and William
M. Meador, Secretary, respectively, of the Roanoke Electric Steel
Corporation, whose names are affixed to the foregoing Articles of
Amendment bearing date on the ___________ day of January, 1959,
have each this day personally appeared before me in my City and
State aforesaid and acknowledged the same.
GIVEN under my hand this __________ day of January, 1959:
__________________________________
Notary Public
My Commission expires:
____________________
Admitted to record by State Corporation Commission, January 28, 1959.
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1 - 58, Code of Virginia, 1950,
as amended, Roanoke Electric Steel Corporation executes Articles
of Amendment to its Articles of Incorporation as follows:
(a) The name of the Corporation is ROANOKE ELECTRIC STEEL
CORPORATION.
(b) The amendment so adopted amends Article IV of the
Articles of Incorporation to read as follows:
"The maximum capital stock of the Corporation is
to be Six Hundred Thousand (600,000)
shares of common stock of no par value."
(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 6th day of December, 1960.
Notice was given to each stockholder of record entitled to vote
on the 15th day of December, 1960, 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 16th day
of January, 1961.
(d) The number of shares outstanding and the number of
shares entitled to vote on the amendment was 55,330 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 50,925 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 17th day of January, 1961.
ROANOKE ELECTRIC STEEL CORPORATION
BY John W. Hancock, Jr.
President
ATTEST:
William M. Meador
Secretary
STATE OF VIRGINIA )
) To-Wit:
CITY OF ROANOKE )
I, Elizabeth G. Dyer, a Notary Public in and for the
City of Roanoke, State of Virginia, do hereby certify that John
W. Hancock, Jr., and William M. Meador, 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 17th day of January, 1961. My
commission expires January 5, 1962.
Elizabeth G. Dyer
Notary Public
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1 - 58, Code of Virginia, 1950,
as amended, Roanoke Electric Steel Corporation executes Articles
of Amendment to its Articles of Incorporation as follows:
(a) The name of the Corporation is ROANOKE ELECTRIC STEEL
CORPORATION.
(b) The amendment so adopted amends Article IV of the
Articles of Incorporation to read as follows:
"The maximum capital stock of the Corporation is
to be One Million (1,000,000) shares of
common stock of no par value."
(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 13th day of November, 1968.
Notice was given to each stockholder of record entitled to vote
on the 16th day of December, 1968, 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 20th day of
January, 1969.
(d) The number of shares outstanding and the number of
shares entitled to vote on the amendment was 599,076 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 512,678 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 25th day of January, 1969.
ROANOKE ELECTRIC STEEL CORPORATION
By William M. Meador
President
ATTEST:
Donald G. Smith
Secretary
STATE OF VIRGINIA )
) To-Wit:
COUNTY OF ROANOKE )
I, Estelle S. DeWitt, 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 25th day of January, 1969. My
commission expires September 19, 1976.
Estelle S. DeWitt
Notary Public
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1-58 of the Code of Virginia,
the Articles of Amendment to the Articles of Incorporation of
Roanoke Electric Steel Corporation are hereby set forth as
follows:
(a) The name of the corporation is ROANOKE ELECTRIC
STEEL CORPORATION.
(b) The amendment so adopted reads as follows:
"Article IV of the Articles of Incorporation is
amended by deleting existing Article IV and substituting
in lieu thereof:
"Article IV
"The aggregate number of shares which the corporation
shall have authority to issue and the par value per share
are as follows:
Class No. of Shares Par Value Per Share
Common 2,000,000 No Par"
(c) The date of 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 the stockholders was November 12, 1973. The date when
notice was given to each stockholder of record entitled to vote
was December 20, 1973. Such notice was given in the manner
provided by the Virginia Stock Corporation Act and was
accompanied by a copy of the proposed amendment. The date of the
adoption of the amendment by the stockholders was January 21,
1974.
(d) The number of shares outstanding is 763,228
shares, each share being entitled to vote on the amendment.
(e) The number of shares voted for the amendment was
652,250 shares, and the number of shares voted against the
amendment was 3,773 shares.
Executed this 21st day of January, 1974, by Roanoke
Electric Steel Corporation, by its President and Secretary.
ROANOKE ELECTRIC STEEL CORPORATION
By William M. Meador
William M. Meador, President
Donald G. Smith
Donald G. Smith, Secretary
STATE OF VIRGINIA )
) To-Wit:
COUNTY OF ROANOKE )
I, Estelle S. DeWitt, 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 ____________ day of
________________, 19___.
My commission expires September 19, 1976.
Estelle S. DeWitt
Notary Public
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1-58 of the Code of Virginia,
the Articles of Amendment to the Articles of Incorporation of
Roanoke Electric Steel Corporation are hereby set forth as
follows:
(a) The name of the corporation is ROANOKE ELECTRIC
STEEL CORPORATION.
(b) The amendment so adopted reads as follows:
"Article IV of the Articles of incorporation is
amended by deleting existing Article IV and substituting
in lieu thereof:
"Article IV
"The aggregate number of shares which the corporation
shall have authority to issue and the par value per
share are as follows:
Class No. of Shares Par Value Per Share
Common 4,000,000 No Par"
(c) The date of 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 the stockholders was November 20, 1979. The date when
notice was given to each stockholder of record entitled to vote
was December 21, 1979. Such notice was given in the manner
provided by the Virginia Stock Corporation Act and was
accompanied by a copy of the proposed amendment. The date of the
adoption of the amendment by the stockholders was January 21,
1980.
(d) The number of shares outstanding is 1,185,065
shares, each share being entitled to vote on the amendment.
(e) The number of shares voted for the amendment was
1,037,578 shares, and the number of shares voted against the
amendment was 8,349 shares.
Executed this 25th day of January, 1980, by Roanoke
Electric Steel Corporation, by its President and Secretary.
ROANOKE ELECTRIC STEEL CORPORATION
By William M. Meador
William M. Meador, President
Donald G. Smith
Donald G. Smith, Secretary
STATE OF VIRGINIA )
) To-Wit
CITY OF ROANOKE )
I, C. William Sarver, Jr., a Notary Public in and for
the City 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 __________ day of
______________, 19___.
My commission expires ________________________________.
C. William Sarver, Jr.
Notary Public
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1-710 of the Code of Virginia of 1950, as
amended, the Articles of Incorporation of Roanoke Electric Steel
Corporation are hereby amended as follows:
A. The name of the Corporation is: Roanoke Electric Steel
Corporation.
B. The Amendment of the Articles of Incorporation is as
follows:
Article IV of the Articles of Incorporation is amended by
deleting existing Article IV and substituting in lieu thereof:
"ARTICLE IV
The aggregate number of shares which the Corporation
shall have authority to issue and the par value per
share are as follows:
Class Number of Shares Par Value Per Share
Common 10,000,000 No Par"
C. The amendment was adopted by the shareholders of the
Corporation at the annual meeting held January 20, 1986.
D. The Amendment was proposed by the Board of Directors
and submitted to the shareholders in accordance with the
provisions of Chapter 9 of Title 13.1 of the Code of Virginia.
As of the record date for the annual meeting 2,369,832 shares of
the Common Voting Stock of the Corporation were outstanding and
entitled to vote. Of the total shares voted, 1,896,227
undisputed votes were cast in favor of the Amendment by the
holders of Common Voting Stock, which number was sufficient for
approval of the Amendment pursuant to Section 13.1-707 of the Code of
Virginia of 1950, as amended.
Executed this 27 day of January, 1986 on behalf of Roanoke
Electric Steel Corporation by its President and Secretary.
ROANOKE ELECTRIC STEEL CORPORATION
By: Donald G. Smith
Donald G. Smith, President
By: Thomas J. Crawford
Thomas J. Crawford, Secretary
ARTICLES OF AMENDMENT
OF THE ARTICLES OF INCORPORATION
OF ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1-710 of the Code of Virginia, the
Articles of Amendment of the Articles of Incorporation of Roanoke
Electric Steel Corporation are hereby set forth as follows:
(a) The name of the Corporation is ROANOKE ELECTRIC
STEEL CORPORATION.
(b) The amendment of the Articles of Incorporation is
as follows:
Article IV of the Articles of Incorporation, as
amended, is amended by adding the following sentence:
"No stockholder shall have any preemptive right
to acquire unissued shares of the Corporation's
capital stock when issued."
(c) The amendment was adopted at the Annual Meeting of
Shareholders held on January 19, 1987.
(d) The amendment was proposed by the Board of
Directors of the Corporation and submitted to the shareholders in
accordance with the requirements of the Virginia Stock
Corporation Act.
(e) At the meeting of the shareholders where the
proposed amendment was voted upon, a quorum of the shareholders
of the Corporation's Common Stock was present, in person or by
proxy.
(f) As of the record date for the Annual Meeting,
there were 3,554,706 shares of Common stock of Roanoke Electric
Steel Corporation issued and outstanding. 2,667,917 votes were
cast "For" the amendment and 157,601 votes were withheld or cast
"Against" the amendment. The number of votes cast "For" the
amendment was sufficient for approval of the amendment by the
shareholders.
EXECUTED this 28th day of January, 1987, on behalf of
Roanoke Electric Steel Corporation, by its President.
ROANOKE ELECTRIC STEEL CORPORATION
By Donald G. Smith
Donald G. Smith, President
ARTICLES OF AMENDMENT
OF THE ARTICLES OF INCORPORATION
OF ROANOKE ELECTRIC STEEL CORPORATION
Pursuant to Section 13.1-710 of the Code of Virginia, the
Articles of Amendment of the Articles of Incorporation of Roanoke
Electric Steel Corporation are hereby set forth as follows:
A. The name of the Corporation is Roanoke Electric Steel
Corporation.
B. The Amendment of the Articles of Incorporation is as
follows:
Article IV of the Articles of Incorporation is amended by
deleting existing Article IV and substituting in lieu thereof:
"IV
The aggregate number of shares which the
Corporation shall have authority to issue and the par
value per share are as follows:
Class Number of Shares Par Value Per Share
Common 20,000,000 No Par"
Article VI of the Articles of Incorporation is amended by
deleting existing Article VI and substituting in lieu thereof:
"VI
(a) The number of directors of the Corporation, not
less than five nor more than eleven, shall be fixed by the
Bylaws and, in the absence of a Bylaw fixing the number,
shall be eleven. Upon the adoption of this Article VI,
the directors shall be divided into three classes
(A, B and C) as nearly equal in number as possible. The
initial term of office for members of Class A shall expire
at the annual meeting of shareholders in 1997; the
initial term of office for members of Class B shall
expire at the annual meeting of shareholders in 1998;
and the initial term of office for members of Class C
shall expire at the annual meeting of shareholders
in 1999. At each annual meeting of shareholders
following such initial classification and election,
directors elected to succeed those directors whose terms
expire shall be elected for a term of office to expire
at the third succeeding annual meeting of shareholders
after their election and shall continue to hold office
until their respective successors are elected and
qualify. In the event of any increase or decrease
in the number of directors fixed by the Bylaws, any
newly-created directorships and any decrease in
directorships shall be so apportioned among the
classes by the Board of Directors so as to make
all classes as nearly equal in number as possible.
(b) Newly-created directorships resulting from an
increase in the number of directors or any vacancies
in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal
from office, or other cause shall be filled by the
affirmative vote of a majority of the directors then
in office, whether or not a quorum. No decrease
in the number of directors constituting the Board
of Directors shall shorten the term of any incumbent
director. A director may be removed from office
only for a cause."
C. The Amendment was adopted at the Annual Meeting of
Shareholders held on February 20, 1996.
D. The Amendment was proposed by the Board of Directors of
the Corporation and submitted to the shareholders in accordance
with the requirements of the Virginia Stock Corporation Act.
E. The only voting group entitled to vote on the Amendment
is the holders of the Corporation's common stock. As of December
12, 1995, the record date for the Annual Meeting, there were
8,076,897 shares of common stock of the Corporation issued and
outstanding and entitled to vote. 7,258,843 votes were cast
"for" the Amendment to Article IV, and 135,567 votes were
withheld or cast "against" such Amendment. 5,391,480 votes were
cast "for" the Amendment to Article VI, and 1,298,924 votes were
withheld or cast against such Amendment. The number of votes
cast "for" the Amendments to Article IV and Article VI,
respectively, was sufficient for approval of the Amendment by
shareholders.
EXECUTED this 6 day of March, 1996, on behalf of
Roanoke Electric Steel Corporation, by its President.
ROANOKE ELECTRIC STEEL CORPORATION
By: Donald G. Smith
Donald G. Smith, President
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 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 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
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 Bylaws 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 III to read as follows:
"Section 1 - Number and Term of Office. The
number of directors of the Corporation shall be nine. The directors
shall be divided into three classes (A, B and C) as nearly equal in
number as possible. The initial term of office for members of
Class A shall expire at the annual meeting of stockholders in
1997; the initial term of office for members of Class B shall expire
at the annual meeting of stockholders in 1998; and the initial
term of office for members of Class C shall expire at the annual meeting
of stockholders in 1999.
At each annual meeting of stockholders following such
initial classification and election, directors elected to succeed
those directors whose terms expire after their election and shall
continue to hold office until their respective successors are elected
and qualify."
C. The Amendment also amends Section 2 of Article III
to read as follows:
"Section 2 - Vacancies. Newly-created directorships
resulting from an increase in the number of directors or any vacancies
in the Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office, or other cause shall be filled
by the affirmative vote of a majority of the directors then in office,
whether or not a quorum. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any
incumbent director. A director may be removed from office only for
cause."
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 15 day of October, 1996.
WITNESS the signature of Roanoke Electric Steel Corporation,
by its President, with the corporate seal affixed and attested by
the Secretary thereof, this 15 day of October, 1996.
ROANOKE ELECTRIC STEEL CORPORATION
By Donald G. Smith
President
Attest:
Thomas J. Crawford
Secretary
ANNUAL REPORT FOR 1996
ROANOKE ELECTRIC STEEL CORPORATION / ANNUAL REPORT 1996
<PAGE>
1996 Highlights
Net earnings second highest on record
Sales second highest in history
Record earnings by our fabricating subsidiaries
Record shipments of mill products
Record production of mill products
Record working capital of $59,630,189
Record total assets of $167,015,901
Record stockholders' equity of $94,433,091
16.7 % return on average equity
15.2 % pretax return on average total assets
$60,000,000 unsecured credit facility closed
750,000 share repurchase plan approved
Cash dividend increased 9.1 %
New ladle refining furnace and upgrade of
electric arc furnace completed
Dust stabilization process placed in operation
<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.
<PAGE>
To Our Shareholders
Results of Operations
Earnings for fiscal year 1996 of $15,414,834 were the second best on
record and were achieved on sales of $246,286,652. Earnings for 1995 were
$20,228,902 on sales of $259,968,524. Earnings per share for 1996 were
$1.96 compared to $2.51 last year - down 21.9%.
Gross profit margins narrowed during the year due mainly to lower selling
prices for our mill products. Selling prices came under pressure during the
year as softer markets reduced demand and increased competition. While
competition reduced selling prices, it had little impact on orders as
shipments of mill products reached record levels. In spite of the reduced
demand, we were able to sustain shipments with an exceptional marketing
effort. Strong business conditions continued within the construction industry
as our margins for fabricated products improved, and our fabricating
subsidiaries attained record earnings. Unfortunately, we were not able to
overcome the lower selling prices for mill products. In addition, billet
shipments and earnings were negatively affected when the planned shutdown
of our melt shop to install a new ladle furnace and upgrade an electric
arc furnace was unexpectedly prolonged due to construction problems.
Other notable achievements of 1996 were:
- a record year for mill production.
- a $14,146,429 increase in working capital to a record $59,630,189.
- an increase in total assets to a record $167,015,901.
- an increase in stockholders' equity to a record $94,433,091.
- a return on average equity of 16.7%.
- a pretax return on average total assets of 15.2%.
Financial Condition
Our financial condition remained strong. In addition to the increases in
working capital and stockholders' equity, the current ratio improved to 3.5
to 1 and the quick ratio improved to 2.0 to 1. During the year, we closed on
an unsecured $60,000,000 credit facility with a syndicate of lenders. The
facility was comprised of a $30,000,000 ten-year term loan and a $30,000,000
five-year revolver. The term loan was used to purchase additional equipment
and refinance debt at much lower interest rates. The revolver replaced lines
of credit that were not legally binding. In spite of the additional debt,
the percentage of long-term debt to total capital was 27.2%, and the ratio of
debt to equity was .77 to 1- both indicators of very respectable debt levels.
The substantial amount of working capital and the revolver have provided the
capital resources necessary to maintain our competitive position and ensure
future growth.
<PAGE>
Dividends
In an effort to reaffirm their confidence in the future of the Company and
the steel industry, the Board of Directors approved during the year the
repurchase of up to 750,000 shares of the Company's common stock. At year
end, the Company had acquired 556,200 shares under the plan at a cost of
$7,735,949. Also, in recognition of the excellent performance during the
current fiscal year, the Board, on October 15, 1996, approved a 9.1% increase
in the cash dividend and declared the 152nd consecutive quarterly cash
dividend in the amount of 12 cents per share payable November 25, 1996. The
increased quarterly dividend pushed the annual dividend rate to 48 cents per
share, putting the current yield on our common stock in the 3.5% range.
Construction and Development
As part of our continuing effort to build and maintain a strong
competitive Company, we completed the installation of our new ladle refining
furnace and the upgrade of an electric arc furnace, accounting for most of
the $18,194,216 in capital expenditures for 1996. The ladle furnace and
furnace upgrade are expected to increase raw steel production, improve
quality, reduce production costs and improve operating efficiencies. These
state-of-the-art improvements to our melting facilities have considerably
enhanced our competitive position. In addition, near year end, we began
treating a portion of our electric furnace dust, a hazardous substance,
utilizing our own stabilization process. Significant savings will be
realized as our process replaces off-site and more expensive treatment
methods. The melt shop enhancements and dust stabilization process have
added significant long-term value and will help to maximize the future
results of the Company.
Looking Ahead
As we begin 1997, backlogs and selling values of fabricated products are
excellent, while the backlogs for mill products are at comfortable levels.
Selling prices for mill products continue to be depressed; however, scrap
steel prices are falling which should result in improved margins in the first
quarter. Economic forecasts call for continued slow growth. Interest rates
and inflation are low, although some economists fear they could come under
pressure. With no signs of recession and favorable looking markets, the
prospects are encouraging for another good year in fiscal 1997.
We are performing as well or better than most of the industry and remain
optimistic about the future of Roanoke Electric Steel Corporation. We have
invested over $100,000,000 in plant and equipment since 1986 to improve
operating efficiencies, increase production capacity, and maximize earnings.
The Company has made key acquisitions over the years and looks to new
acquisitions for future growth. Our efforts to sustain profitable growth are
ongoing, and by being well positioned financially, we can continue to produce
positive results for our Company and shareholders. We are confident that at
the peak of the next cycle, we will again achieve record results. We are
pleased with the results for fiscal 1996 and again acknowledge, with
appreciation, the efforts of our dedicated employees. As always, we thank
our valued customers for another successful year and our shareholders for
their confidence and investment in Roanoke Electric Steel Corporation.
Donald G. Smith
Chairman of the Board and Chief Executive Officer
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended October 31, 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operations
Sales $246,286,652 $259,968,524 $215,809,228 $167,294,378 $146,036,301
Gross earnings 47,914,269 56,097,685 33,732,184 22,565,662 17,562,115
Interest expense-net 1,538,191 2,053,643 1,891,263 1,730,822 2,031,154
Income taxes 9,305,808 13,035,243 5,684,150 2,785,168 1,491,474
Earnings before
cumulative effect
of change in
accounting
principle 15,414,834 20,228,902 8,766,435 4,750,106 2,655,006
Net earnings 15,414,834 20,228,902 11,860,375 4,750,106 2,655,006
- ------------------------------------------------------------------------------------------------------------------------
Financial Position
Working capital $ 59,630,189 $ 45,483,760 $ 34,504,420 $ 36,406,901 26,188,178
Total assets 167,015,901 157,774,658 140,473,510 130,620,435 125,558,910
Long-term debt 35,291,666 16,979,166 20,729,166 25,521,000 20,486,500
Stockholders' equity 94,433,091 90,062,598 72,417,669 63,203,577 60,990,935
- ------------------------------------------------------------------------------------------------------------------------
Selected Ratios
Gross profit margin 19.5% 21.6% 15.6% 13.5% 12.0%
Operating income margin 6.3% 7.8% 5.5% 2.8% 1.8%
Effective tax rate 37.6% 39.2% 39.3% 37.0% 36.0%
Current ratio 3.5 2.2 2.0 2.4 1.9
Quick ratio 2.0 1.3 1.2 1.4 1.1
Funded debt as a
percentage of
total capital 29.5% 26.1% 30.7% 36.6% 38.0%
Pretax return on average
total assets 15.2% 22.3% 10.7% 5.9% 3.3%
Return on average
stockholders'
equity 16.7% 24.9% 12.9%* 7.6% 4.4%
- ------------------------------------------------------------------------------------------------------------------------
Per Share Data
Earnings before
cumulative effect of
change in accounting
principle $1.96 $2.51 $1.09 $0.60 $0.33
Net earnings 1.96 2.51 1.48 0.60 0.33
Cash dividends 0.45 0.37 0.41 0.32 0.32
Stockholders' equity 11.99 11.19 9.06 7.94 7.67
- ------------------------------------------------------------------------------------------------------------------------
Weighted average common
shares outstanding 7,876,987 8,045,644 7,988,985 7,956,339 7,952,539
</TABLE>
Per share information has been adjusted for three-for-two stock split effective
May 1, 1995
* 1994 accounting change of $3.1 million excluded
[GRAPH]
1996 1995 1994 1993 1992
Stockholders'
Equity $94,433,091 $90,062,598 $72,417,669 $63,203,577 $60,990,935
Long-Term
Debt $35,291,666 $16,979,166 $20,729,166 $25,521,000 $20,486,500
8
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------
1996 1995 1994
------------ ------------ ------------
<S> <C>
SALES $246,286,652 $259,968,524 $ 215,809,228
COST OF SALES 198,372,383 203,870,839 182,077,044
------------ ------------ ------------
GROSS EARNINGS 47,914,269 56,097,685 33,732,184
------------ ------------ ------------
OTHER OPERATING EXPENSES
Administrative 17,315,039 16,194,810 14,047,008
Interest, net 1,538,191 2,053,643 1,891,263
Profit sharing 4,340,397 4,585,087 3,343,328
------------ ------------ ------------
23,193,627 22,833,540 19,281,599
------------ ------------ ------------
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 24,720,642 33,264,145 14,450,585
INCOME TAX EXPENSE 9,305,808 13,035,243 5,684,150
------------ ------------ ------------
EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 15,414,834 20,228,902 8,766,435
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE FOR INCOME TAXES - - 3,093,940
------------ ------------ ------------
NET EARNINGS $ 15,414,834 $ 20,228,902 $ 11,860,375
============ ============ ============
EARNINGS PER SHARE OF COMMON STOCK
EARNINGS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $ 1.96 $ 2.51 $ 1 .09
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE FOR INCOME TAXES - - 0.39
------------ ------------ ------------
NET EARNINGS PER SHARE OF
COMMON STOCK $ 1.96 $ 2.51 $ 1.48
============ ============ ============
CASH DIVIDENDS PER SHARE OF
COMMON STOCK $ 0.45 $ 0.37 $ 0.41
============ ============ ============
</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>
BALANCE, NOVEMBER 1, 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
Repurchase of common stock - - - - 556,200 7,735,949
Stock options exercised 23,750 187,293 - - - -
Net earnings - - - 15,414,834 - -
Cash dividends - - - (3,495,685) - -
--------- ---------- ---------- ----------- --------- ----------
BALANCE, OCTOBER 31, 1996 8,994,140 $1,916,796 $9,349,429 $92,097,683 1,452,943 $8,930,817
========= =========== ========== =========== ========= ==========
</TABLE>
See notes to consolidated financial statements.
9
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,038,689 $ 6,999,644
Investments 6,059,853 4,179,418
Accounts receivable 40,479,798 40,159,523
Inventories 34,314,899 30,866,238
Prepaid expenses 651,013 722,729
Deferred income taxes 1,039,542 1,125,441
------------ ------------
Total current assets 83,583,794 84,052,993
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Land 4,291,522 4,312,689
Buildings 17,889,855 17,195,735
Other property and equipment 123,215,697 104,825,380
Assets under construction 1,054,026 5,741,611
------------ ------------
Sub-total 146,451,100 132,075,415
Less-accumulated depreciation 63,216,681 58,569,617
------------ ------------
83,234,419 73,505,798
------------ ------------
OTHER ASSETS 197,688 215,867
------------ ------------
$167,015,901 $157,774,658
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 4,250,000 $ 3,750,000
Notes payable - 11,000,000
Accounts payable 10,977,510 14,483,781
Dividends payable 904,944 888,101
Employees' taxes withheld 284,466 226,677
Accrued profit sharing contribution 3,911,957 4,403,031
Accrued wages and expenses 2,745,159 2,396,913
Accrued income taxes 879,569 1,420,730
------------ ------------
Total current liabilities 23,953,605 38,569,233
------------ ------------
LONG-TERM DEBT
Notes payable 39,541,666 20,729,166
Less-current portion 4,250,000 3,750,000
------------ ------------
35,291,666 16,979,166
------------ ------------
POSTRETIREMENT LIABILITIES 742,839 494,591
------------ ------------
DEFERRED INCOME TAXES 12,594,700 11,669,070
------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 7)
STOCKHOLDERS' EQUITY
Common stock-no par value-authorized 20,000,000 shares,
issued 8,994,140 shares in 1996 and 8,970,390 in 1995 1,916,796 1,729,503
Capital in excess of stated value 9,349,429 9,349,429
Retained earnings 92,097,683 80,178,534
------------ ------------
103,363,908 91,257,466
Less-treasury stock, 1,452,943 shares in 1996
and 896,743 in 1995 - at cost 8,930,817 1,194,868
------------ ------------
Total stockholders' equity 94,433,091 90,062,598
------------ ------------
$167,015,901 $157,774,658
============ ============
</TABLE>
See notes to consolidated financial statements.
10
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $15,414,834 $20,228,902 $11,860,375
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 248,248 252,591 242,000
Depreciation and amortization 8,380,456 7,989,663 7,559,118
Gain on sale of investments and property,
plant and equipment (59,312) (193,926) (12,017)
Deferred income taxes 1,011,529 (160,859) (88,605)
Changes in assets and liabilities which provided (used)
cash, exclusive of changes shown separately (7,829,691) (8,383,359) (2,054,358)
----------- ----------- -----------
Net cash provided by operating activities 17,166,064 19,733,012 14,412,573
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (18,194,216) (11,654,366) (11,744,913)
Proceeds from sale of property, plant and equipment 200,666 952,635 189,849
Purchase of investments (3,840,892) (1,879,186) (3,489,816)
Proceeds from sale of investments 1,910,093 3,022,446 3,342,493
Other 12,328 - 783,577
----------- ----------- -----------
Net cash used in investing activities (19,912,021) (9,558,471) (10,918,810)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in notes payable (11,000,000) 4,500,000 500,000
Cash dividends (3,495,685) (2,981,050) (3,254,782)
Cash paid for fractional shares on stock split - (1,776) -
Increase (decrease) in dividends payable 16,843 (449,126) 700,638
Proceeds from exercise of common stock options 187,293 398,853 608,499
Payment of long-term debt (15,687,500) (4,791,834) (4,965,500)
Proceeds from long-term debt 34,500,000 - -
Repurchase of common stock (7,735,949) - -
----------- ----------- -----------
Net cash used in financing activities (3,214,998) (3,324,933) (6,411,145)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (5,960,955) 6,849,608 (2,917,382)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 6,999,644 150,036 3,067,418
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,038,689 $ 6,999,644 $ 150,036
=========== =========== ===========
CHANGES IN ASSETS AND LIABILITIES WHICH
PROVIDED (USED) CASH, EXCLUSIVE OF CHANGES
SHOWN SEPARATELY
(Increase) decrease in accounts receivable $ (320,275) $ (5,318,685) $ (6,765,960)
(Increase) decrease in inventories (3,448,661) (3,896,576) (2,900,482)
(Increase) decrease in prepaid expenses 71,716 436,345 165,049
Increase (decrease) in accounts payable (3,506,271) (2,076,376) 4,965,055
Increase (decrease) in employees' taxes withheld 57,789 (28,288) 47,896
Increase (decrease) in accrued profit sharing contribution (491,074) 1,133,391 1,589,394
Increase (decrease) in accrued wages and expenses 348,246 632,050 228,278
Increase (decrease) in accrued income taxes (541,161) 734,780 616,412
----------- ----------- -----------
Total $ (7,829,691) $ (8,383,359) $ (2,054,358)
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest (net of amount capitalized) $ 1,979,832 $ 2,484,598 $ 2,343,960
----------- ----------- -----------
Income taxes $ 8,835,440 $12,461,322 $ 5,156,266
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
11
<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. Goodwill of $1,864,703 has been fully amortized through
October 31, 1994.
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 1997
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 balance sheets at fair value,
which approximates amortized cost. Accordingly, there were no adjustments to
equity at October 31, 1996 and 1995.
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 11%, 15% and 13% of consolidated
sales for 1996, 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, 1996, 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).
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(NOTE 2) INVENTORIES
If the FIFO method of valuing inventories had been used by John W. Hancock,
Jr., Inc., consolidated inventories would have been $1,480,377 greater in
1996 and $1,549,596 greater in 1995.
Inventories include the following major classifications:
<TABLE>
<CAPTION>
October 31,
------------------------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C>
Scrap steel $ 5,313,335 $ 3,728,612 $ 4,737,074
Melt supplies 2,416,879 2,443,827 1,888,830
Billets 7,103,342 1,748,778 3,209,030
Mill supplies 3,085,749 3,210,946 2,867,779
Finished steel 16,395,594 19,734,075 14,266,949
----------- ----------- -----------
Total inventories $ 34,314,899 $ 30,866,238 $ 26,969,662
=========== =========== ===========
</TABLE>
12
<PAGE>
(NOTE 3) PROPERTIES AND DEPRECIATION
Depreciation expense for the years ended October 31, 1996, 1995 and 1994
amounted to $8,366,012, $7,863,154 and $7,332,833, 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
1996, 1995 and 1994 included $438,346, $10,146 and $19,341 of interest
capitalized, respectively.
(NOTE 4) SHORT-TERM DEBT
The following information relates to aggregate short-term borrowings:
<TABLE>
<CAPTION>
October 31,
----------------------------
1996 1995
----------- -----------
<S> <C>
Notes payable to banks $ - $ 11,000,000
=========== ===========
Maximum borrowings outstanding at any month end $ 12,500,000 $ 14,000,000
=========== ===========
Weighted average loans outstanding to banks $ 3,337,432 $ 11,364,384
=========== ===========
Weighted average interest rates for the year 6.03% 6.33%
=========== ===========
Weighted average interest rates at October 31 - % 6.17%
=========== ===========
</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
were reviewed periodically by the lending banks for renewal, and although not
legally binding, commitments were traditionally honored, without requiring
compensating balances. On February 15, 1996, the Company replaced these lines
of credit with a syndicated loan facility, part of which provides a five-year
$30,000,000 revolver, as explained in note 6. Also provided by this credit
facility is a $5,000,000 line of credit to be used to cover overdrafts in a
demand deposit account.
(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 1996 and 1995 and 34.33% for 1994:
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------------
1996 1995 1994
--------- ----------- ----------
<S> <C>
Federal tax at the statutory rate $8,652,225 $11,642,451 $4,960,886
Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit 785,077 1,297,302 560,240
Other items, net (131,494) 95,490 163,024
---------- ----------- ----------
Income taxes per consolidated statements of earnings $9,305,808 $13,035,243 $5,684,150
========== =========== ==========
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------------------------
1996 1995 1994
---------- ----------- ----------
<S> <C>
Current income taxes:
Federal $7,192,428 $11,463,015 $4,859,095
State 1,101,851 1,733,087 913,660
---------- ----------- ----------
Total current income taxes 8,294,279 13,196,102 5,772,755
---------- ----------- ----------
Deferred income taxes:
Federal 905,569 (122,692) (28,059)
State 105,960 (38,167) (60,546)
---------- ----------- ----------
Total deferred income taxes 1,011,529 (160,859) (88,605)
---------- ----------- ----------
Total income taxes $9,305,808 $13,035,243 $5,684,150
========== =========== ==========
</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, 1996, 1995 and 1994, the
Company had total deferred tax liabilities of $12,594,700, $11,669,070 and
$11,920,039, respectively, and deferred tax assets of $1,039,542, $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 $675,026 for 1996, $988,429 for 1995 and
$1,001,280 for 1994. There were no valuation allowances.
13
<PAGE>
(NOTE 6) LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
October 31,
-------------------------------
1996 1995
----------- -----------
<S> <C>
Revolving credit agreement $ 2,500,000 $ -
Syndicated term loan, unsecured, payable in quarterly installments of
$750,000 beginning May 21, 1996. Interest payable quarterly at the
LIBOR rate of 5.43% plus 3/4%. Due February 21, 2006. 28,500,000 -
Term loan, unsecured, payable in monthly installments of
$104,167, plus interest at 6.44%. Due September 1, 2003. 8,541,666 9,791,666
Term loan collateralized by equipment at Roanoke plant,
payable in annual installments of $1,250,000. Interest payable monthly
at the LIBOR rate of 5.94% plus 1/2%. Due November 1, 1999.
(Paid February 20, 1996) - 6,250,000
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.
(Paid February 20, 1996) - 4,687,500
----------- -----------
Total 39,541,666 20,729,166
Less-current portion 4,250,000 3,750,000
----------- -----------
Long-term debt $ 35,291,666 $ 16,979,166
============ ===========
</TABLE>
In February 1996, the Company entered into a new $30,000,000 revolving credit
agreement with a group of banks that extends through February 21, 2001. This
agreement replaced existing lines of demand credit which were not legally
binding. The rate of interest payable under the new agreement is based on
LIBOR, which at October 31, 1996 is 5.38% plus 35 basis points. The agreement
requires the Company to pay a facility fee at an annual rate of .15%.
Revolving credit debt at October 31, 1996 was classified as long-term, based
on the terms of the agreement.
The Company does not use derivatives for trading purposes. Interest rate
swaps, a form of derivative, are used to manage interest costs. During 1996
and 1995, the Company used three interest rate swaps, two of which matured in
1996. Currently, the Company maintains an interest rate swap agreement
resulting in a fixed rate of 6.68% on the notional amount of $28,500,000
through February 2006. At the close of fiscal year 1995, the two swap
agreements, then in place, resulted in fixed rates of 8.78% on the notional
amount of $4,687,500 and 8.92% on the notional amount of $6,250,000. The
difference between fixed rate and floating rate interest is recognized as an
adjustment to interest expense in the period incurred. The fair value of the
current swap is estimated based on current settlement prices and was
approximately $138,000, in favor of the Company, at October 31, 1996.
Under the loan agreements, the Company must maintain consolidated current
assets of not less than 1.5 times consolidated current liabilities and
maintain consolidated funded debt of not greater than .5 times consolidated
total capitalization. Currently, consolidated tangible net worth cannot be
less than $69,624,450. In addition, the ratio of EBITDA to the sum of current
maturities of long-term debt and consolidated interest expense must equal at
least 1.5.
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 debt approximates fair value. The fair
value of the 1996 swap agreement is mentioned above, while the 1995 swap
agreements were near maturity at October 31, 1995, and therefore approximated
fair value.
Annual aggregate long-term debt maturities are $4,250,000 in 1997, 1998, 1999
and 2000 and $6,750,000 in 2001.
(NOTE 7) COMMITMENTS AND CONTINGENT LIABILITIES
At October 31, 1996, the Company was committed for $1,507,294 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 75%
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 $550,000 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. Additional recoveries, if any, are
uncertain.
14
<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; 3,023,804 shares, less the equivalent of
152 fractional shares, issued in 1995 at no stated value and 23,750 shares
issued in 1996 at no stated value. During the years ended October 31, 1986
and October 31, 1996, the Company increased authorized common stock from
4,000,000 shares to 10,000,000 shares, and from 10,000,000 shares to
20,000,000 shares, respectively.
Earnings per share have been computed based on the weighted average number of
shares outstanding of 7,876,987 for 1996, 8,045,644 for 1995 and 7,988,985
for 1994. The average number of shares outstanding were weighted after giving
effect both to stock options exercised during 1996, 1995 and 1994 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 $4,340,397 for 1996, $4,585,087 for 1995 and $3,343,328 for
1994.
(NOTE 10) INTEREST EXPENSE
Interest expense is stated net of interest income of $711,274 in 1996,
$400,692 in 1995 and $438,466 in 1994.
(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 75,000 shares were granted for 1996,
for 41,500 shares 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:
<TABLE>
<CAPTION>
Option Price
Per Share Shares
--------------- -------
<S> <C>
Balance, November 1, 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
Granted 11.90 75,000
Exercised 4.11 - 11.90 (23,750)
Expired or terminated 4.11 (3,000)
-------
Balance, October 31, 1996 4.11 - 11.90 123,400
=======
Shares available for grant at year end None
=======
</TABLE>
(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 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 1996, 1995 and 1994 by approximately $154,500 ($.02 per
share), $154,200 ($.02 per share) and $152,000 ($.02 per share),
respectively.
15
<PAGE>
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>
1996 1995
--------- ---------
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $ 378,968 $ 347,019
Fully eligible plan participants 652,789 723,491
Other active plan participants 688,737 661,479
--------- ---------
Accumulated postretirement benefit obligation 1,720,494 1,731,989
Unrecognized net actuarial gains (losses) 196,345 5,602
Unrecognized transition obligation (1,174,000) (1,243,000)
--------- ---------
Accrued postretirement benefit cost $ 742,839 $ 494,591
========= =========
Net postretirement benefit cost consisted of the following components:
Service cost $ 141,393 $ 143,279
Interest cost on accumulated postretirement benefit obligation 130,705 120,658
Net amortization 64,185 69,000
---------- ---------
Net postretirement benefit cost $ 336,283 $ 332,937
========== =========
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 10.5% for 1995, decreasing linearly
each successive year until it reached 6.5% in 2003, 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 $112,000 and the net postretirement
benefit cost by approximately $29,000. The assumed discount rate used in
determining the accumulated postretirement benefit obligation was 8% for the
years ended October 31, 1996 and 1995.
(NOTE 13) UNAUDITED QUARTERLY FINANCIAL DATA
Summarized unaudited quarterly financial data for 1996 follows:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------------------------
January 31 April 30 July 31 October 31
----------- ----------- ----------- ----------
<S> <C>
Sales $ 58,429,217 $ 58,144,393 $ 61,532,232 $ 68,180,810
=========== =========== =========== ===========
Gross earnings $ 11,955,299 $ 11,063,635 $ 10,001,165 $ 14,894,170
=========== =========== =========== ===========
Net earnings $ 3,928,413 $ 3,365,754 $ 2,954,292 $ 5,166,375
=========== =========== =========== ===========
Earnings per share $ .49 $ .41 $ .39 $ .67
=========== =========== =========== ===========
</TABLE>
Summarized unaudited quarterly financial data for 1995 follows:
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------------------------------------
January 31 April 30 July 31 October 31
----------- ----------- ----------- ----------
<S> <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>
16
<PAGE>
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,
1996 and 1995, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the three years in the period
ended October 31, 1996. 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, evidences 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, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended October 31, 1996 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. As discussed in Note 1 to the consolidated financial statements,
effective November 1, 1994, the Corporation changed its method of accounting for
investments.
/s/ DELOITTE & TOUCHE LLP
Winston-Salem, North Carolina
November 21, 1996
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 834 shareholders of record. The following has been adjusted
for the three-for-two stock split effective May 1, 1995.
<TABLE>
<CAPTION>
1996 1995
Stock Prices Stock Prices
- ---------------------------------------------------------------------------------------
High Low High Low
- ---------------------------------------------------------------------------------------
<S> <C>
First Quarter 18 1/4 13 11 3/8 10
Second Quarter 16 13 1/4 11 7/8 10 1/2
Third Quarter 14 7/8 12 3/4 14 1/2 11
Fourth Quarter 14 12 16 7/8 13 3/4
<CAPTION>
Cash Dividends
- ---------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------
<S> <C>
First Quarter $.11 $.08
Second Quarter .11 .09
Third Quarter .11 .09
Fourth Quarter .12 .11
</TABLE>
<PAGE>
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SALES
In 1994, sales increased 29% due mainly to significant increases in
shipments of bar and fabricated products (bar joist and rebar) and increased
selling prices for all product classes, while shipments of billets declined
slightly. 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.
The 20.5% increase in sales in 1995 was the result of 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.
In 1996, sales declined 5.3% due, primarily, to sharp reductions in
both selling prices for bar products and billet shipments, while selling prices
for billets declined only slightly. However, sales were favorably impacted by
increased bar shipments and selling prices for fabricated products, while
shipments of fabricated products were flat. Selling prices for bar products
declined as a result of increased competition, prompting industry-wide price
reductions. The planned shutdown of the melt shop during the year to install a
new ladle furnace and upgrade an electric arc furnace was unexpectedly prolonged
due to problems with construction and installation, resulting in an 11% decline
in billet production for the year and causing the significant reduction in
billet shipments. In addition, the export markets for billets remained highly
competitive. Billet selling prices declined with a downward trend in scrap
prices. Bar products shipments increased as demand and backlogs remained high,
in spite of the increased competition. Selling prices for fabricated products
improved as a result of generally strong business conditions within the
commercial construction industry.
COST OF SALES AND GROSS MARGINS
In 1994, the increase in cost of sales was attributable to the
increased tons shipped of bar and fabricated products, together with increased
costs of scrap steel. Cost of sales increased in 1995, primarily, as a result
of the higher shipments of fabricated products and billets in addition to
increases in both scrap and other raw material costs. The decrease in cost of
sales in 1996 was due, mainly, to the decreased tons of billets shipped,
together with a reduction in the cost of scrap steel, in spite of the increased
bar products shipments.
Gross earnings as a percentage of sales improved 2.1% to 15.6% for
1994 due to the higher selling prices for all product classes and the
efficiencies of much improved production, in spite of the significant increase
in scrap costs. The gross profit percentage continued to increase in 1995 and
finished up 6.0% to 21.6%. 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. In
1996, gross earnings as a percentage of sales declined 2.1% to 19.5%. The
decrease was, primarily, the result of the lower selling prices for bar products
and billets, and the negative effect of reduced billet production on fixed
costs, which more than offset the effects of the lower scrap costs and the
improvement in fabricated products selling prices.
For 1994 and 1995, the increased shipment levels at the higher gross
profit margins provided the improvements in gross and net earnings. The decline
in gross profit margins and the reduced billet shipments were the main causes
for the lower gross profits and net earnings in 1996.
ADMINISTRATIVE EXPENSES
In 1994, administrative expenses increased as a result of higher
taxes, insurance, bad debts, professional fees and executive and management
compensation which increased with production, shipments and earnings in
accordance with various incentive arrangements. However, administrative
expenses were 6.5% of sales - down from 6.9% in 1993. The percentage declined
further in 1995 to 6.2%, even though administrative expenses increased due,
mainly, to higher executive and management compensation as production, shipments
and earnings improved significantly. The majority of the increase in
administrative expenses in 1996 was attributable to bad debts and insurance
expenses. The percentage of administrative expenses to sales increased to 7.0%.
18
<PAGE>
INTEREST EXPENSE
In 1994, interest expense increased due to higher interest rates,
lower interest income of $438,466 and decreased capitalized interest of $19,341,
even though average borrowings were lower. Interest expense increased in 1995
as a result of higher interest rates, increased average borrowings and declines
in interest income and capitalized interest to $400,692 and $10,146,
respectively. In 1996, interest expense declined due to lower interest rates,
higher interest income of $711,274 and increased capitalized interest of
$438,346, in spite of higher average borrowings.
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 1994 and 1995, income tax expense was affected by higher tax rates,
and the effective income tax rates were relatively constant. In 1996, income
tax expense as a percentage of pretax income declined due to differences in the
recognition of income and expenses between tax and books.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1996, working capital was $59,630,189, the current
ratio was 3.5 to 1 and the quick ratio was 2.0 to 1 - all vastly improved and
very sound. Cash, investments and accounts receivable of $47,578,340 were more
than adequate to pay current liabilities of $23,953,605 which is a good
indication of liquidity and a healthy financial condition. The effects of
$18,194,216 in capital expenditures and $7,735,949 in repurchases of 556,200
shares of common stock were reflected in the above ratios and amounts.
Repurchases of up to 193,800 additional shares of the Company's common stock
will affect future liquidity. Commitments for the purchase of property, plant
and equipment at year end were $1,507,294 and 1997 maturities of long-term debt
will be $4,250,000. These obligations will also affect future liquidity and
working capital; however, profits and depreciation should provide adequate
working capital to fund these items.
Total long-term and short-term borrowings increased $7,812,500 during
the year. In February 1996, the Company closed on $60,000,000 of unsecured
credit facilities with a syndicate of lenders. The facilities were comprised of
a $30,000,000 ten-year term loan and a $30,000,000 five-year revolver. The term
loan was used to purchase equipment and refinance debt. The revolver replaced
lines of credit that were not legally binding. At October 31, 1996, $2,500,000
had been borrowed against the revolver. These new loan facilities improved
liquidity, provided capital resources and reduced interest rates significantly.
In spite of the additional borrowings, the ratio of debt to equity was only .77
to 1, compared to .75 to 1 last year. The percentage of long-term debt to total
capital increased from 15.9% to 27.2%. The Company believes its debt levels are
respectable and 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.
FORWARD-LOOKING STATEMENTS
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include economic and industry conditions, availability and prices of supplies,
prices of steel products, competition, governmental regulations, interest rates,
inflation, labor relations, environmental concerns, and others.
19
<PAGE>
OFFICERS
Donald G. Smith, 61
Chairman, President, Treasurer
and Chief Executive Officer
39 years of service
Frank S. Key, Jr., 72
President, Socar, Inc.
30 years of service
James F. Garlow, 60
President, John W. Hancock, Jr., Inc.
35 years of service
H. James Akers, Jr., 57
Vice President, Melt Operations
40 years of service
Donald R. Higgins, 51
Vice President - Sales
31 years of service
Watson B. King, 57
Vice President, Mill Operations
35 years of service
John E. Morris, 55
Vice President - Finance
and Assistant Treasurer
25 years of service
Thomas J. Crawford, 41
Assistant Vice President and Secretary
19 years of service
Daniel L. Board, 59
Assistant Vice President, Purchasing
36 years of service
William O. Warwick, 64
Assistant Vice President, Human
Resources and Environmental Affairs
29 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
Retired 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
John D. Wilson
Retired President,
Washington & Lee University
COMMITTEES OF THE BOARD
Executive:
D. G. Smith, Chairman;
T. L. Robertson, P. E. Torgersen,
G. B. Cartledge, Jr.
Audit:
T. L. Robertson, Chairman;
T. A. Carter, P. E. Torgersen
Profit Sharing:
C. I. Lunsford, II, Chairman;
D. G. Smith
Compensation and Stock Option:
G. B. Cartledge, Jr., Chairman;
F. A. Boxley, C. I. Lunsford, II,
J. D. Wilson
CORPORATE INFORMATION
Annual Meeting
The 1997 annual meeting of
shareholders will be held at 10:00 a.m. on Tuesday, February 18, 1997 at the
American Electric 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
Wachovia Bank of North Carolina, N.A.
Winston-Salem, North Carolina
1-800-633-4236
Written shareholder correspondence and requests for transfer should be
sent to:
Wachovia Bank of North Carolina, N.A.
P.O. Box 8217
Boston, Massachusetts 02266-8217
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.
Stock Listing
Nasdaq National Market; Symbol: RESC
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.
Corporate Office
102 Westside Boulevard,
P.O. Box 13948, Roanoke, Virginia 24038
540-342-1831
20
<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-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 1,038,689
<SECURITIES> 6,059,853
<RECEIVABLES> 40,479,798
<ALLOWANCES> 0
<INVENTORY> 34,314,899
<CURRENT-ASSETS> 83,583,794
<PP&E> 146,451,100
<DEPRECIATION> 63,216,681
<TOTAL-ASSETS> 167,015,901
<CURRENT-LIABILITIES> 23,953,605
<BONDS> 35,291,666
0
0
<COMMON> 1,916,796
<OTHER-SE> 92,516,295
<TOTAL-LIABILITY-AND-EQUITY> 167,015,901
<SALES> 246,286,652
<TOTAL-REVENUES> 246,286,652
<CGS> 198,372,383
<TOTAL-COSTS> 198,372,383
<OTHER-EXPENSES> 21,655,436
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,538,191
<INCOME-PRETAX> 24,720,642
<INCOME-TAX> 9,305,808
<INCOME-CONTINUING> 15,414,834
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,414,834
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.96
</TABLE>
