SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ROANOKE ELECTRIC STEEL CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[logo] ROANOKE ELECTRIC STEEL CORPORATION
P.O. BOX 13948
ROANOKE, VIRGINIA 24038-3948
December 28, 1998
DEAR SHAREHOLDER:
The Annual Meeting of Shareholders of Roanoke Electric
Steel Corporation will be held at 10:00 a.m. on Tuesday,
February 16, 1999, in the Auditorium of the American Electric
Power Company Building, 40 Franklin Road, S.W., Roanoke,
Virginia. Enclosed you will find the formal Notice, Proxy and
Proxy Statement detailing the matters which will be acted upon.
WE URGE YOU TO SIGN AND DATE THE PROXY, AND RETURN IT AS
SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE. SHOULD
YOU DECIDE TO ATTEND THE MEETING AND VOTE IN PERSON, YOU MAY
WITHDRAW YOUR PROXY.
We appreciate your continued interest and investment in
Roanoke Electric Steel Corporation.
Sincerely,
/s/ DONALD G. SMITH
------------------------
DONALD G. SMITH
CHAIRMAN AND CEO
<PAGE>
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF ROANOKE ELECTRIC STEEL CORPORATION:
NOTICE is hereby given that the 1999 Annual Meeting of Shareholders
of Roanoke Electric Steel Corporation (the "Company") will be held in
the Auditorium of the American Electric Power Company Building, 40
Franklin Road, S.W., Roanoke, Virginia, on Tuesday, February 16, 1999,
at 10:00 a.m., local time, for the following purposes:
1. To elect three Class C directors to serve until the Annual
Meeting of Shareholders in 2002, and, in the case of each
director, until his successor is duly elected and qualifed; and
2. To transact such other business as may properly come before the
Meeting, or any adjournments thereof.
Only shareholders of record at the close of business on December 8,
1998, are entitled to notice of and to vote at the Annual Meeting, or
any adjournments thereof.
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING,
PLEASE COMPLETE, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY CARD
IN THE RETURN ENVELOPE PROVIDED. YOUR PROXY IS REVOCABLE AT ANY TIME
PRIOR TO ITS EXERCISE, AND IF YOU ARE PRESENT AT THE MEETING, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON IF YOU SO DESIRE.
By Order of the Board of Directors
/s/ THOMAS J. CRAWFORD
-------------------------------------
THOMAS J. CRAWFORD
VICE PRESIDENT ADMINISTRATION
AND SECRETARY
December 28, 1998
<PAGE>
[logo] ROANOKE ELECTRIC STEEL CORPORATION
P.O. BOX 13948
ROANOKE, VIRGINIA 24038-3948
PROXY STATEMENT
1999 ANNUAL MEETING OF SHAREHOLDERS
The solicitation of the enclosed 1999 proxy is made by and on behalf of
the Board of Directors (the "Board") of Roanoke Electric Steel Corporation (the
"Company") to be used at the 1999 Annual Meeting of Shareholders to be held on
Tuesday, February 16, 1999, at 10:00 a.m., local time, in the Auditorium of the
American Electric Power Company Building, 40 Franklin Road, S.W., Roanoke,
Virginia, and at any adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. The approximate mailing
date of the Proxy Statement and the accompanying proxy is December 28, 1998.
The cost of the solicitation of proxies will be borne by the Company.
Solicitations will be made only by the use of the mails, except that, if
necessary, officers, directors and regular employees of the Company, or its
affiliates, may make solicitations of proxies by telephone, telegram or
personal calls. No additional compensation will be paid by the Company to such
officers, directors and regular employees for such solicitation assistance. It
is contemplated that brokerage houses and nominees will be requested to forward
the proxy solicitation material to the beneficial owners of the stock held of
record by such persons, and the Company will reimburse them for reasonable
charges and expenses in this connection.
All properly executed proxies delivered pursuant to this solicitation will
be voted at the Annual Meeting in accordance with any instructions thereon. Any
person signing and mailing the enclosed proxy may, nevertheless, revoke the
proxy at any time prior to the actual voting thereof by attending the Annual
Meeting and voting in person, by submitting a signed proxy bearing a later date
or by written notice of revocation of the proxy sent to the Corporate Secretary
of the Company, P.O. Box 13948, Roanoke, Virginia 24038-3948.
The Annual Report to Shareholders, including the financial statements for
the year ended October 31, 1998, reported upon by Deloitte & Touche LLP, is
being mailed concurrently with this Proxy Statement, but should not be
considered proxy solicitation material.
As of December 8, 1998, the Company had outstanding 11,075,888 shares of
common stock, each of which is entitled to one vote at the Annual Meeting. Only
shareholders of record at the close of business on December 8, 1998, will be
entitled to vote at the Annual Meeting or any adjournments thereof.
A majority of votes entitled to be cast on matters to be considered at the
Annual Meeting constitutes a quorum. If a share is represented for any purpose
at the Annual Meeting, it is deemed to be present for purposes of establishing
a quorum. Abstentions and shares held of record by a broker or its nominee
("Broker Shares") which are voted on any matter are included in determining the
number of votes present or represented at the Annual Meeting. Conversely,
Broker Shares that are not voted on any matter will not be included in
determining whether a quorum is present. If a quorum is established, directors
will be elected by a plurality of the votes cast by shares entitled to vote at
the Annual Meeting. Votes that are withheld and Broker Shares that are not
voted will not be included in determining the number of votes cast.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of December 8, 1998, information with
respect to the known beneficial owners of more than five percent of the
outstanding common stock of the Company. Unless otherwise noted in the
footnotes to the table, the named beneficial owners have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF BENEFICIAL BENEFICIALLY OF
OWNER OWNED CLASS
- ------------------------------------------- ------------------ --------
<S> <C> <C>
Thomas M. Taylor & Co., 684,0751 6.2%
Wesley Guylay Capital Management, L.P. and
Wesley Guylay Capital Management III, L.P.
c/o W. Robert Cotham
201 Main Street, Suite 2600
Fort Worth, TX 76102
Dimensional Fund Advisors Inc. 744,3492 6.7%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Sarah Hancock McClain 951,969 8.6%
3912 Bosworth Drive, S.W.
Roanoke, VA 24014
</TABLE>
- ----------
1 Information is based on an amended Schedule 13D, dated May 28, 1998,
reporting sole voting and dispositive power as follows: Thomas M. Taylor &
Co., 138,150 shares; Wesley Guylay Capital Management, L.P., 366,834 shares;
and, Wesley Guylay Capital Management III, L.P., 179,091 shares.
2 Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 744,349 shares as of
September 30, 1998, all of which are held in portfolios of DFA Investment
Dimensions Group Inc. (the "Fund"), a registered open-end investment
company, or in series of The DFA Investment Trust Company (the "Trust"), a
Delaware business trust, or the DFA Group Trust and the DFA Participating
Group Trust, investment vehicles for qualified employee benefit plans, all
of which Dimensional serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares. Dimensional has sole voting power
of 541,099 shares. Officers of Dimensional also serve as officers of the
Fund and the Trust and vote 65,250 shares owned by the Fund and 138,000
shares owned by the Trust.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of December 8, 1998, certain information
regarding the beneficial ownership of the common stock of the Company by each
director and nominee, each named executive officer, and directors, nominees and
executive officers as a group. Unless otherwise noted in the footnotes to the
table, the named persons have sole voting and investment power with respect to
all outstanding shares of common stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL
OWNER AND NUMBER OF SHARES OF COMMON STOCK PERCENT
PERSONS IN GROUP BENEFICIALLY OWNED OF CLASS
- -------------------------------------- ------------------------ ---------
<S> <C> <C>
Frank A. Boxley 155,700(1) 1.4%
George B. Cartledge, Jr. 53,792(2) *
Thomas J. Crawford 29,322(3) *
Donald R. Higgins 41,302(4) *
George W. Logan 260,950(5) 2.4%
Charles I. Lunsford, II 20,245(6) *
John E. Morris 39,897(7) *
Thomas L. Robertson 18,225(8) *
Donald G. Smith 149,727(9) 1.3%
Paul E. Torgersen 25,000(10) *
John D. Wilson 4,486(11) *
All directors, nominees and executive
officers as a group (11 persons) 798,646(12) 7.1%
</TABLE>
- ----------
* Less than one percent.
1 Includes 85,906 shares held in the name of Mr. Boxley's spouse and 3,000
shares which Mr. Boxley has the right to acquire through the exercise of
stock options.
2 Includes 1,264 shares held in the name of Mr. Cartledge's spouse, 2,528
shares held in custodian accounts for the benefit of Mr. Cartledge's
children and 3,000 shares which Mr. Cartledge has the right to acquire
through the exercise of stock options.
3 Includes 12,750 shares which Mr. Crawford has the right to acquire through
the exercise of stock options.
4 Includes 1,350 shares held in the name of Mr. Higgins' spouse and 10,000
shares which Mr. Higgins has the right to acquire through the exercise of
stock options.
5 Includes 450 shares held in the name of Mr. Logan's spouse, 22,500 shares
held in a custodian account for the benefit of Mr. Logan's son, and 3,000
shares which Mr. Logan has the right to acquire through the exercise of
stock options.
6 Includes 3,000 shares which Mr. Lunsford has the right to acquire through
the exercise of stock options.
7 Includes 15,000 shares which Mr. Morris has the right to acquire through the
exercise of stock options.
8 Includes 3,000 shares which Mr. Robertson has the right to acquire through
the exercise of stock options.
9 Includes 47,250 shares which Mr. Smith has the right to acquire through the
exercise of stock options.
10 Includes 22,500 shares held in the name of Dr. Torgersen's spouse and 2,500
shares which Dr. Torgersen has the right to acquire through the exercise of
stock options.
11 Includes 3,000 shares which Dr. Wilson has the right to acquire through the
exercise of stock options.
12 Includes 105,500 shares which directors and executive officers have the
right to acquire through the exercise of stock options.
3
<PAGE>
PROPOSAL NO. 1 ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes (A, B and
C) with staggered three-year terms. The current term of office of the Class C
directors expires at the 1999 Annual Meeting of Shareholders. The terms of the
Class A and B directors will expire in 2000 and 2001, respectively.
There are three Class C directors, Charles I. Lunsford, II, Paul E.
Torgersen and John D. Wilson, each of whom has been nominated for reelection by
the Board of Directors.
It is the intention of the persons named as proxies, unless instructed
otherwise, to vote for the election of each of the three nominees set forth
below. Each nominee has agreed to serve if elected. If any nominee shall
unexpectedly be unable to serve, the shares represented by all valid proxies
will be voted for the remaining nominees and such other person or persons as
may be designated by the Board. At this time, the Board knows of no reason why
any nominee might be unable to serve. The Class C nominees will serve for a
three-year term until the 2002 Annual Meeting and until their successors are
elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR
DIRECTORS.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
The following information, including the principal occupation during the
past five years, is given with respect to the directors and nominees for
election to the Board at the 1999 Annual Meeting of Shareholders.
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
AND CERTAIN OTHER DIRECTORSHIPS SINCE
- ------------------------------------------------------------------------------------------ ---------
<S> <C>
NOMINEES FOR DIRECTOR
CLASS C
(SERVING UNTIL 2002 ANNUAL MEETING)
CHARLES I. LUNSFORD, II (58). Retired since January, 1998. Prior thereto, Chairman, Chas. 1978
Lunsford Sons & Associates, a general insurance brokerage firm and agency.
PAUL E. TORGERSEN (67). President, Virginia Polytechnic Institute and State University 1986
since January, 1994. Prior thereto, President, Virginia Tech Corporate Research
Center, Inc.
JOHN D. WILSON (67). Retired since May, 1995. Prior thereto, President, Washington and Lee 1987
University.
DIRECTORS CONTINUING IN OFFICE
CLASS A
(SERVING UNTIL 2000 ANNUAL MEETING)
GEORGE B. CARTLEDGE, JR. (57). President, Grand Home Furnishings, a retailer of home and 1991
office furniture.
THOMAS L. ROBERTSON (55). President and Chief Executive Officer, Carilion Health System, a 1992
regional provider of healthcare services. Director, Roanoke Gas Company.
DONALD G. SMITH (63). Chairman of the Board, President, Treasurer and Chief Executive 1984
Officer of the Company. Director, American Electric Power Company, Inc.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
AND CERTAIN OTHER DIRECTORSHIPS SINCE
- ------------------------------------------------------------------------------------------ ----------
<S> <C>
DIRECTORS CONTINUING IN OFFICE
CLASS B
(SERVING UNTIL 2001 ANNUAL MEETING)
FRANK A. BOXLEY (65). President, Southwest Construction, Inc., a general contractor. 1993
GEORGE W. LOGAN (53). Chairman, Valley Financial Corporation, a holding company for Valley 1997
Bank, N.A., a general commercial and retail banking business, since 1994. Director,
Valley Financial Corporation.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES
MEETINGS OF THE BOARD
The Board of Directors held fifteen meetings during fiscal 1998. All
directors attended 75% or more of the total number of meetings of the Board and
the committees of the Board on which they served.
DIRECTOR COMPENSATION
Each director of the Company receives a $9,000 annual retainer plus $750
for each Board meeting attended. In addition, non-employee directors receive a
fee of $500 for each committee meeting attended. Directors not residing in
Roanoke, Virginia, are reimbursed for actual travel expenses to attend Board
and committee meetings.
On February 18, 1997, the Company implemented a Non-Employee Director
Stock Option Plan (the "Directors' Plan"). The number of shares and the
corresponding exercise prices, relating to the underlying options granted, have
been adjusted to give effect to the March 25, 1998, 3-for-2 stock dividend.
Pursuant to the Directors' Plan, each non-employee director was granted an
option to purchase 1,500 shares of common stock of the Company at $10.50 per
share, the fair market value of the common stock on the date of grant. Also,
each non-employee director who was a member of the Board on February 18, 1997,
was granted an option to purchase an additional 1,500 shares of common stock on
February 16, 1998, at $17.50 per share, the fair market value on such date,
with a term of ten years. In addition, George W. Logan, who was appointed a
director by the Board on April 15, 1997, was granted an option to purchase
3,000 shares of common stock on February 16, 1998, at $17.50 per share, the
fair market value on such date, with a term of ten years. Future non-employee
directors are eligible for participation in the Directors' Plan. In all
instances, the total underlying shares issuable pursuant to options granted to
any individual non-employee director under the Directors' Plan is limited to a
maximum of 3,000 shares, with a maximum aggregate of 25,000 shares issuable
under the Directors' Plan. To date, 24,000 shares of the maximum aggregate
shares pursuant to options have been granted to non-employee directors.
DIRECTORS' RETIREMENT PLAN
The Board adopted, effective as of January 24, 1989, an unfunded
directors' retirement plan, whereby eligible directors of the Company will
receive a monthly benefit following retirement from the Board. A director is
eligible after five years of service as a director and will be paid an amount
equal to the retainer fee being paid to then current members of the Board for a
period corresponding in duration with the participant's years of service as a
director of the Company, or such longer or shorter period as the Board may
determine. In all cases, payment of benefits will cease upon the death of the
participant.
5
<PAGE>
COMMITTEES OF THE BOARD
The Board of Directors of the Company has standing Executive, Audit,
Profit Sharing Plan and Compensation and Stock Option Committees. The
respective membership on and functions of such committees are set forth below.
The Board has no standing Nominating Committee.
The Executive Committee of the Board is composed of directors Smith
(Chairman), Cartledge, Robertson and Torgersen. This Committee is authorized to
act, between meetings of the Board, in the place and stead of the Board, except
with respect to matters reserved for the Board by Virginia law or by resolution
of the Board. The Executive Committee met twelve times in fiscal 1998.
The Audit Committee of the Board is composed of directors Robertson
(Chairman), Logan and Torgersen. The functions of the Audit Committee include
reviewing the accounting principles and procedures employed by the Company,
reviewing annual and interim reports of the Company and the independent public
accountants of the Company, reviewing significant financial information,
reviewing the Company's system of internal controls, reviewing all related
party transactions and recommending the selection of the independent public
accountants. The Audit Committee met twice in fiscal 1998.
The Profit Sharing Plan Committee of the Board is composed of directors
Lunsford (Chairman) and Smith. The Committee meets quarterly to administer the
Employees' Profit Sharing Plan of the Company, including making amendments
thereto and issuing rulings or interpretations thereunder. The Profit Sharing
Plan Committee met four times in fiscal 1998.
The Compensation and Stock Option Committee of the Board is composed of
directors Cartledge (Chairman), Boxley, Lunsford and Wilson. The Committee
meets as necessary to oversee the Company's compensation and benefit practices,
recommend to the full Board the compensation arrangements for the Company's
senior officers, administer the Company's executive compensation plans and
administer and consider awards under the Company's Employees' Stock Option
Plan. The Compensation and Stock Option Committee met twice in fiscal 1998.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table provides certain summary information for the fiscal
years ended October 31, 1998, 1997 and 1996 concerning the compensation of the
Company's Chief Executive Officer and each of the other executive officers of
the Company whose total annual compensation and bonus in fiscal 1998 exceeded
$100,000 (hereinafter referred to as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
---------------------------------- -------------
AWARDS
-------------
SECURITIES(3)
UNDERLYING ALL OTHER
NAME AND OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) (#) ($)(4)
- ------------------------------------ ------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Donald G. Smith 1998 256,917 778,849 28,125 26,638
Chairman, President, 1997 216,333 656,690 28,125 24,541
Treasurer and CEO 1996 184,667 531,087 28,125 21,935
Donald R. Higgins 1998 123,000 243,390 7,500 24,818
Vice President-Sales 1997 108,000 210,926 7,500 22,724
1996 94,667 189,674 7,500 20,132
John E. Morris 1998 122,000 243,390 7,500 25,006
Vice President-Finance 1997 107,000 210,926 7,500 22,914
and Assistant Treasurer 1996 93,667 189,674 7,500 20,331
Thomas J. Crawford 1998 108,000 180,303 7,500 24,254
Vice President Administration and 1997 93,000 126,555 5,250 22,165
Corporate Secretary 1996 79,667 113,804 3,750 19,593
</TABLE>
- ----------
1 None of the Named Executive Officers received perquisites or other personal
benefits in excess of the lesser of $50,000 or 10% of the total of his
salary and bonus reported in the above table.
2 Represents incentive compensation paid according to the incentive
compensation program, as described in the Compensation and Stock Option
Committee Report on Executive Compensation.
3 Adjusted to give effect to the March 25, 1998 3-for-2 stock dividend.
4 Includes for 1998 (i) vested contributions from the Profit Sharing Plan of
the Company and its subsidiaries, and (ii) employer paid insurance premiums,
respectively, for the Named Executive Officers as follows: Mr. Smith,
$23,870 and $2,768; Mr. Higgins, $23,754 and $1,064; Mr. Morris, $23,667 and
$1,339; and Mr. Crawford, $23,579 and $675.
7
<PAGE>
The following table sets forth information regarding stock options granted
to each of the Named Executive Officers during the fiscal year ended October
31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS(1) VALUE
---------------------------------------------------------------------- -----------
% OF TOTAL
NUMBER OF OPTIONS MARKET
SECURITIES GRANTED TO EXERCISE PRICE ON
UNDERLYING EMPLOYEES OR BASE DATE OF GRANT DATE
OPTIONS IN FISCAL PRICE(2) GRANT EXPIRATION PRESENT
NAME GRANTED(#) YEAR ($/SHARE) ($/SHARE) DATE VALUE($)(3)
- -------------------- ------------ ------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Donald G. Smith 28,125 25.0 14.875 17.50 2/16/03 212,706
Donald R. Higgins 7,500 6.7 14.875 17.50 2/16/03 56,722
John E. Morris 7,500 6.7 14.875 17.50 2/16/03 56,722
Thomas J. Crawford 7,500 6.7 14.875 17.50 2/16/03 56,722
</TABLE>
- ----------
1 Adjusted to give effect to the March 25, 1998 3-for-2 stock dividend.
2 The exercise price of the options granted is equal to 85% of the closing
sales price of the Company's common stock on the Nasdaq National Market on
the date of grant. Options generally expire five years from the date of
grant.
3 Based on a grant date present value of $11.34 per option share, which was
derived using the Black-Scholes option pricing model in accordance with the
rules and regulations of the Securities and Exchange Commission and is not
intended to forecast future appreciation of the Company's stock price. The
Black-Scholes model was used with the following assumptions: market price on
grant date of $17.50 per share; an option exercise date of February 16,
2003; a risk-free rate of return of 4.23%; a dividend yield of 2.18%; and
expected volatility of 47.25%. No adjustments are made for risk of
forfeiture or non-transferability.
The following table sets forth information regarding stock options
exercised by each of the Named Executive Officers during the fiscal year ended
October 31, 1998 and the value of unexercised options held by such persons on
October 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES(1) VALUE(1) OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)
--------------- --------------
SHARES(1)
ACQUIRED ON VALUE(1) EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- -------------------- -------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Donald G. Smith 16,125 115,272 47,250/0 106,622/0
Donald R. Higgins 5,000 54,125 10,000/0 13,938/0
John E. Morris 7,500 61,906 15,000/0 41,813/0
Thomas J. Crawford 3,750 44,313 12,750/0 29,269/0
</TABLE>
- ----------
1 Adjusted to give effect to the March 25, 1998 3-for-2 stock dividend.
8
<PAGE>
CHANGE IN CONTROL ARRANGEMENTS
On August 20, 1996, the Board of Directors adopted executive severance
agreements designed to serve the best interests of the Company and its
shareholders. The purpose of the agreements is (i) to insure that the
shareholders' interest is protected during negotiations relating to possible
business combination transactions by placing the executives responsible for
negotiations in an objective, impartial position; and (ii) to encourage key
managers to remain with the Company to run the Company's business. All of the
persons named in the Summary Compensation Table have executed executive
severance agreements, and, upon termination of their employment with the
Company for any reason (other than death, retirement, cause, disability or
voluntary termination for other than good reason) within three years of that
change in control, would be entitled to benefits from the Company, including,
but not limited to, (i) a cash payment in an amount equal to 2.99 times their
respective annual compensation; and (ii) continuation of their usual executive
benefits for up to three years after termination.
The executive severance agreements define a "change in control" as a
transaction that would be required to be reported in response to Item 1(a) of
the Current Report on Form 8-K under the Securities Exchange Act of 1934,
including, without limitation, (i) any person, entity or group becoming the
beneficial owner, directly or indirectly, of the securities of the Company
representing 20% or more of the combined voting power of the Company, or (ii)
the individuals who on the date of the executive severance agreement constitute
the Board of Directors ceasing for any reason to constitute at least a majority
of the Board unless the election or the nomination for election by the
Company's shareholders of each new director was approved by a vote of at least
75% of the incumbent directors then still in office.
9
<PAGE>
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee (the "Committee") of the Board
of Directors is comprised of four non-employee directors, none of whom are
eligible to participate in any of the compensation plans administered by the
Committee. The Committee is generally charged with overseeing the Company's
compensation and benefit practices, making determinations regarding the award
of stock options to the Company's executive officers and other employees under
the Company's Employees' Stock Option Plan (the "Option Plan") and providing
recommendations to the full Board on the salary, incentives and other
compensation of the Company's senior officers.
COMPENSATION PROGRAM. The Company's executive compensation program is
designed to attract and retain qualified executives, to support a longstanding
internal culture of loyalty and dedication to the interests of the Company and
to reward its executives for short and long-term operating results and
individual contributions which enhance the value of shareholders' investment in
the Company. Compensation of the executive officers, including the Chief
Executive Officer, has been structured and administered so that a substantial
component of total compensation is dependent upon, and directly related to, the
Company's earnings, growth and profitability. Salaries are set at levels which
in general are less than amounts paid by competitors, with the incentive
compensation program (described below) providing an opportunity for executives
to earn competitive levels of total cash compensation. The Company's executive
compensation program encourages executives to increase profitability and
shareholder value.
BASE SALARY. Base salaries for executive officers for 1998 were
recommended by the Committee and approved by the Board of Directors. The amount
of base salary for executive officers other than the Chief Executive Officer is
recommended to the Committee by the Chief Executive Officer, based on his
evaluation of the executive's performance and contribution to the Company's
overall results and current and projected economic conditions. The base salary
recommendation for the Chief Executive Officer is determined separately by the
Committee after reviewing the Chief Executive Officer's performance, the
overall results of the Company and the economic climate. In recommending the
base salaries for both the Chief Executive Officer and the other executive
officers, the Committee also considers the salaries paid to the chief executive
officers and executive officers of other companies, as well as inflation and
cost of living factors. The salaries of the Named Executive Officers are listed
in the Summary Compensation Table. The Named Executive Officers received
increases in base salary in March 1998 as follows: Mr. Smith, $40,000; Mr.
Higgins, $15,000; Mr. Morris, $15,000; and Mr. Crawford, $15,000.
INCENTIVE COMPENSATION PROGRAM. The Company's incentive compensation
program, which was established in 1958, has insured that a portion of the total
compensation of the executive officers is at risk with respect to the
profitability of the Company. The purpose of the incentive program is to
directly link a significant portion of executive compensation to Company
profitability, which will motivate executives to increase profitability and
will reward executives with respect to the Company's success. The emphasis on
incentive compensation for executives is consistent with the
pay-for-performance policy applied throughout the Company. The Committee
believes this approach provides competitive compensation and is in the best
interests of the Company and its shareholders. Under the program, a percentage
of the consolidated monthly gross profits, before profit sharing and taxes, of
the Company may be distributed to Company officers. At October 31, 1998, the
10
<PAGE>
incentive percentages being paid to Messrs. Smith, Higgins, Morris and Crawford
totaled 3.75% of the consolidated monthly gross profits, before profit sharing
and taxes, of the Company. The percentage of incentive compensation to be
received by each executive officer, if any, is approved annually by the Board,
upon recommendation of the Committee, using the same procedures and criteria
that are applied in determining base salary. The Committee determines the
percentage to be awarded to the Chief Executive Officer. The percentages for
the other executive officers are recommended by the Chief Executive Officer and
are reviewed and approved by the Committee. Incentives earned by the Named
Executive Officers are listed in the Summary Compensation Table. The incentive
compensation percentage for Mr. Crawford increased by 0.125% in March, 1998,
while the other Named Executive Officers received no increase in incentive
compensation percentage in 1998.
STOCK OPTIONS. Stock options awarded under the Option Plan are used as
incentives for individual and Company performance and to foster stock ownership
by Company executives and other employees. The Compensation and Stock Option
Committee has sole responsibility for determining all awards of stock options
under the Option Plan, including awards to the Company's executive officers,
and for establishing the terms and exercise periods (not to exceed five years)
of such options, the requisite conditions for exercise and the amounts of the
awards. Under the Option Plan, the option price is 85% of the closing per share
sales price of the Company's common stock on the date of grant. In awarding
options to executive officers, the Compensation and Stock Option Committee
considers the factors set forth above, as well as the individual's current
shareholdings in the Company. The Compensation and Stock Option Committee
currently reviews and determines each year the frequency, timing, number, or
size of option grants to executive officers and other employees of the Company.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. In determining the
compensation of the Chief Executive Officer, the Committee is guided by the
policies and programs described above, Company performance and competitive
practices. The primary factor underlying this arrangement is the Company's
emphasis on tying a substantial portion of executives' total compensation to
the Company's performance. The amount of total cash compensation of the Chief
Executive Officer fluctuates depending on the profitability of the Company. As
mentioned previously, the base salary for the Chief Executive Officer increased
by $40,000 in March, 1998, and the incentive compensation percentage did not
change in 1998.
SUBMITTED BY THE COMPENSATION AND STOCK OPTION COMMITTEE:
George B. Cartledge, Jr., Chairman
Frank A. Boxley
Charles I. Lunsford, II
John D. Wilson
11
<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total shareholder return on the Company's common stock with the
cumulative total returns on the Standard & Poor's 500 Composite Stock Index
(the "S&P 500") and the Standard & Poor's Iron and Steel Index (the "S&P Iron
and Steel") for the five year period commencing on October 31, 1993 and ending
on October 31, 1998. These comparisons assume the investment of $100 in the
Company's common stock and each of the indices on October 31, 1993 and the
reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THE ROANOKE ELECTRIC STEEL CORPORATION, THE S & P 500 INDEX
AND THE S & P IRON & STEEL INDEX
<TABLE>
<CAPTION>
10/93 10/94 10/95 10/96 10/97 10/98
<S> <C> <C> <C> <C> <C> <C>
ROANOKE ELECTRIC STEEL CORPORATION 100 129 185 175 252 287
S & P 500 100 104 131 163 215 263
S & P IRON & STEEL 100 112 86 80 95 78
</TABLE>
* $100 INVESTED ON 10/31/93 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS,
FISCAL YEAR ENDING OCTOBER 31.
12
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountants are selected annually by the
Board upon recommendation of the Audit Committee. The public accounting firm of
Deloitte & Touche LLP has been retained by the Company as the independent
public accountants for fiscal year 1999. It is expected that a representative
of that firm will be present at the shareholders' meeting and will have the
opportunity to make a statement and respond to appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended for inclusion in the Company's proxy
statement for the 2000 Annual Meeting of Shareholders must be received by the
Company, addressed to the attention of the Corporate Secretary, at its
principal executive offices, 102 Westside Boulevard, N.W., Roanoke, Virginia
24017, no later than August 30, 1999. The Company's Bylaws limit the business
to be transacted at a meeting of shareholders to that specified in the notice
of the meeting, those otherwise properly presented by the Board of Directors
and those presented by a shareholder of record of the Company so long as the
shareholder gives the President of the Company written notice of the matter not
less than sixty nor more than ninety days prior to the meeting. However, if
less than seventy days notice or prior public disclosure of the date of the
meeting is given or made, notice by the shareholders will be considered timely
if it is received by the close of business on the tenth day following the day
on which such notice of the meeting was given or the public disclosure was
made. Notice is deemed to have been given more than seventy days in advance of
an annual meeting of shareholders if the annual meeting is called on the third
Tuesday of February. The shareholder's written notice under this Bylaw
provision must include certain specified information concerning the proposal,
and information as to the proponent's ownership of the Company common stock.
Proposals not meeting these requirements will not be entertained at a
shareholder's meeting.
MISCELLANEOUS
All properly executed proxies received by the Company will be voted at the
Annual Meeting in accordance with the specifications contained thereon.
The Board knows of no other matter which may properly come before the
Annual Meeting for action. However, if any other matter does properly come
before the Annual Meeting, the persons named in the enclosed proxy intend to
vote in accordance with their judgment upon such matter.
By Order of the Board of Directors
/s/ THOMAS J. CRAWFORD
--------------------------------
THOMAS J. CRAWFORD
VICE PRESIDENT ADMINISTRATION
AND SECRETARY
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- ---------------------------------- For All With- For All
ROANOKE ELECTRIC STEEL CORPORATION Nominees held Except
- ---------------------------------- 1. To elect three Class C directors to [ ] [ ] [ ]
serve until the Annual Meeting of
Shareholders in 2002 and, in the case
of each director, until his successor is
duly elected and qualified.
Mark box at right if an address change has been [ ]
noted on the reverse side of this card. Charles I. Lunsford, II
Paul E. Torgersen
John D. Wilson
RECORD DATE SHARES:
-----------------------------------------------------------------------
Instructions: To withhold authority to vote for any individual nominee,
mark the "For All Except" box and write that nominee's name on the line
above.
2. In their discretion, upon such other matters as may properly come
before the meeting and any adjournments thereof.
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------
The undersigned hereby acknowledges receipt of the Notice of
- -------------------------------------------------------------- Meeting and Proxy Statement dated December 28, 1998.
Shareholder sign here Co-owner sign here
DETACH CARD DETACH CARD
</TABLE>
ROANOKE ELECTRIC STEEL CORPORATION
Dear Shareholder:
Please take note of the important information enclosed with this Proxy Ballot,
which covers in detail the matters to be acted upon at the Annual Meeting of
Shareholders.
To assure that your shares are represented at the Annual Meeting, please
complete, date, signs and mail as soon as possible the detached card above in
the enclosed postage paid envelope. Your vote counts, and we strongly encourage
you to exercise your rights as a shareholder.
Thank you for your prompt attention to these matters, and we appreciate your
continued interest in Roanoke Electric Steel Corporation.
Sincerely,
Roanoke Electric Steel Corporation
<PAGE>
ROANOKE ELECTRIC STEEL CORPORATION
Proxy for Annual Meeting of Shareholders
February 16, 1999
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Donald G. Smith, John E. Morris and Thomas J.
Crawford, or any of them who shall act, proxies for and with all the powers of
the undersigned, each with powers of substitution, to vote all shares of the
common stock of Roanoke Electric Steel Corporation registered in the name of the
undersigned at the Annual Meeting of Shareholders of said Corporation to be held
in the auditorium of the American Electric Power Company Building, 40 Franklin
Road, S.W., Roanoke, Virginia, on February 16, 1999, at 10:00 a.m., local time,
and at all adjournments thereof, on all matters set forth in the Notice and
accompanying Proxy Statement for said meeting, a copy of which has been received
by the undersigned, as follows on the reverse side of this card.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign exactly as your name(s) appear(s) on the books of the Company. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED?
- --------------------------------------------------------------------------------
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