UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission file number 0-2389
ROANOKE ELECTRIC STEEL CORPORATION
(Exact name of Registrant as specified in its charter)
Virginia 54-0585263
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 Westside Blvd., N.W., Roanoke, Virginia 24017
(Address of principal executive offices) (Zip Code)
(540) 342-1831
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of April 30, 1999
11,092,638 Shares outstanding
ROANOKE ELECTRIC STEEL CORPORATION
FORM 10-Q
CONTENTS
Page
1. Part I - Financial Information 3 - 13
Item 1. Financial Statements
a. Consolidated Balance Sheets 3
b. Consolidated Statements of Earnings 4
c. Consolidated Statements of Cash Flows 5
d. Notes to Consolidated Financial Statements 6 - 8
e. Independent Accountants' Report 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 13
2. Part II - Other Information 14 - 15
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
3. Signatures 16
4. Exhibit Index pursuant to Regulation S-K 17
5. Exhibits
a. Financial Data Schedule 18
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Balance Sheets
ASSETS
(Unaudited)
April 30, October 31,
1999 1998
CURRENT ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 19,636,281 $ 16,167,025
Investments 11,196,724 11,727,636
Accounts receivable 50,820,336 42,415,061
Inventories 65,835,221 31,902,900
Prepaid expenses 839,917 1,586,357
Deferred income taxes 3,076,304 1,608,938
Total current assets 151,404,783 105,407,917
PROPERTY, PLANT AND EQUIPMENT
Land 8,077,943 4,264,165
Buildings 40,473,178 19,621,407
Other property and equipment 181,021,534 123,615,952
Assets under construction 9,047,669 4,656,746
Total 238,620,324 152,158,270
Less--accumulated depreciation 75,150,568 68,522,086
Property, plant and equipment, net 163,469,756 83,636,184
GOODWILL 15,893,268 ---
OTHER ASSETS 1,147,398 166,788
TOTAL ASSETS $ 331,915,205 $ 189,210,889
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 15,034,131 $ 4,250,000
Accounts payable 14,354,295 15,273,850
Dividends payable 1,053,800 1,052,210
Employees' taxes withheld 495,008 358,851
Accrued profit sharing contribution 2,852,436 5,335,822
Accrued wages and expenses 9,354,288 2,959,367
Accrued income taxes 420,653 1,259,939
Total current liabilities 43,564,611 30,490,039
LONG-TERM DEBT
Notes payable 146,460,552 28,541,667
Less--current portion 15,034,131 4,250,000
Total long-term debt 131,426,421 24,291,667
DEFERRED INCOME TAXES 27,889,894 13,687,507
OTHER LIABILITIES 1,941,226 1,293,788
STOCKHOLDERS' EQUITY
Common stock--no par value--authorized 20,000,000 shares,
issued 12,365,752 shares in 1999 and 12,349,002 in 1998 3,289,254 2,858,128
Retained earnings 124,621,667 117,407,628
Total 127,910,921 120,265,756
Less--treasury stock, 1,273,114 shares -- at cost 817,868 817,868
Total stockholders' equity 127,093,053 119,447,888
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 331,915,205 $ 189,210,889
The accompanying notes to consolidated financial statements are an integral part of this statement.
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ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Statements of Earnings
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
SALES $101,338,801 $ 73,778,930 $ 174,742,368 $ 145,382,665
COST OF SALES 80,536,197 60,384,081 138,971,322 119,080,065
GROSS EARNINGS 20,802,604 13,394,849 35,771,046 26,302,600
OTHER OPERATING EXPENSES
Administrative 6,793,591 4,991,400 12,733,441 9,316,164
Interest, net 2,081,674 267,893 3,294,617 552,028
Profit sharing 2,236,747 1,407,987 3,650,261 2,629,948
Total 11,112,012 6,667,280 19,678,319 12,498,140
EARNINGS BEFORE INCOME TAXES 9,690,592 6,727,569 16,092,727 13,804,460
INCOME TAX EXPENSE 3,918,907 2,688,574 6,460,928 5,514,473
NET EARNINGS $ 5,771,685 $ 4,038,995 $ 9,631,799 $ 8,289,987
Net earnings per share of common stock:
Basic $ 0.52 $ 0.36 $ 0.87 $ 0.74
Diluted $ 0.52 $ 0.36 $ 0.86 $ 0.73
Cash dividends per share of common stock $ 0.095 $ 0.095 $ 0.190 $ 0.182
Weighted average number of common
shares outstanding :
Basic 11,087,000 11,123,850 11,081,352 11,168,226
Diluted 11,140,651 11,272,803 11,144,390 11,292,595
The accompanying notes to consolidated financial statements are an integral part of this statement.
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ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
April 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net earnings $ 9,631,799 $ 8,289,987
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Deferred compensation liability 280,286 ---
Postretirement liabilities 160,225 151,490
Depreciation and amortization 7,157,467 4,581,070
Gain on sale of investments and property, plant and equipment (41,152) (10,738)
Deferred income taxes 759,000 134,000
Changes in assets and liabilities which provided
(used) cash, exclusive of changes shown seperately (2,778,402) (328,295)
Net cash provided by operating activities 15,169,223 12,817,514
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (6,956,419) (4,856,788)
Proceeds from sale of property, plant and equipment 274,553 300
(Purchase) sale of investments 520,418 (250,847)
Acquisition of Steel of West Virginia, Inc. (67,921,073) ---
Other (202,141) ---
Net cash used in investing activities (74,284,662) (5,107,335)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends (2,106,010) (2,029,194)
Increase in dividends payable 1,590 82,758
Proceeeds from exercise of common stock options 431,126 195,015
Payment of long-term debt (84,916,468) (2,125,000)
Proceeds from long-term debt 150,000,000 ---
Repurchase of common stock (311,750) (2,387,703)
Loan costs (513,793) ---
Net cash provided by (used in) financing activities 62,584,695 (6,264,124)
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,469,256 1,446,055
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 16,167,025 8,844,537
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 19,636,281 $ 10,290,592
CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED
(USED) CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY
(Increase) decrease in accounts receivable $ 6,625,864 $ (4,868,188)
(Increase) decrease in inventories 1,157,444 4,837,981
(Increase) decrease in prepaid expenses 1,127,927 602,767
Increase (decrease) in accounts payable (10,007,466) 2,205,104
Increase (decrease) in employees' taxes withheld (340,932) 195,468
Increase (decrease) in accrued profit sharing contribution (2,726,816) (2,280,495)
Increase (decrease) in accrued wages and expenses (555,728) (644,360)
Increase (decrease) in accrued income taxes 1,941,305 (376,572)
Total $ (2,778,402) $ (328,295)
The accompanying notes to consolidated financial statements are an integral part of this statement.
</TABLE>
ROANOKE ELECTRIC STEEL CORPORATION
Notes to Consolidated Financial Statements
April 30, 1999
Note 1. In the opinion of the Registrant, the accompanying unaudited
consolidated financial statements contain all adjustments necessary
to present fairly the financial position as of April 30, 1999 and
the results of operations for the three months and six months ended
April 30, 1999 and 1998 and cash flows for the six months ended April
30, 1999 and 1998.
Note 2. Inventories include the following major classifications:
(Unaudited)
April 30, October 31,
1999 1998
Scrap steel $ 4,380,096 $ 4,876,856
Melt supplies 3,440,828 2,408,961
Billets 11,877,110 3,499,907
Mill supplies 5,387,380 3,176,619
Work-in-process 5,455,941 ---
Finished steel 35,293,866 17,940,557
Total inventories $ 65,835,221 $ 31,902,900
Note 3. In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings per Share", which changes the method of
calculating earnings per share. SFAS No. 128 requires the
presentation of "basic" earnings per share and "diluted" earnings per
share on the face of the income statement. Basic earnings per share
is computed by dividing the net income available to common
shareholders by the weighted average shares of outstanding common
stock. The calculation of diluted earnings per share is similar to
basic earnings per share except that the denominator includes
dilutive common stock equivalents such as stock options and warrants.
The statement is effective for financial statements for periods
ending after December 15, 1997. Basic earnings per share and diluted
earnings per share calculated in accordance with SFAS No. 128 are
presented in the consolidated statements of earnings.
Note 4. The Registrant retired all of its treasury stock applicable to the
shares recently acquired through its common stock repurchase plan.
Note 5. In June 1997, the Financial Accounting Standards Board issued SFAS
No. 130, "Comprehensive Income", and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 130
establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial
statements. The Company adopted SFAS No. 130 during the 1999 first
quarter, but comprehensive income, and its required disclosure, is
the same as that shown in the consolidated statements of earnings.
SFAS No. 131 establishes disclosure standards regarding information
about operating segments in interim and annual financial statements.
The Company will be required to adopt SFAS No. 131 at the close of
fiscal year 1999 and, based on current circumstances, does not
believe the effect of adoption will be significant.
Note 6. On December 16, 1998, the Registrant acquired all of the
outstanding common shares of Steel of West Virginia, Inc. ("SWVA"), a
Huntington, West Virginia steel manufacturer, upon completion of its
cash tender offer. The consideration given was approximately $117.1
million, including the assumption of approximately $52.3 million of
indebtedness, which translates into $10.75 net per SWVA share, for
approximately 6,028,000 shares on a fully-diluted basis. Upon
merger, SWVA became a wholly-owned subsidiary of Roanoke Electric
Steel Corporation, and each share of SWVA common stock not purchased
in the offer (approximately 3.6% of SWVA's outstanding shares) will
be converted, subject to appraisal rights, into the right to receive
$10.75 in cash, without interest. Funding for the acquisition was
provided by a syndicate of four banks, including First Union National
Bank, Agent. SWVA operates a mini-mill in Huntington, West Virginia,
and steel fabrication facilities in Huntington and Memphis,
Tennessee, while custom designing and manufacturing special steel
products principally for use in the construction of truck trailers,
industrial lift trucks, off-highway construction equipment (such as
bulldozers and graders), manufactured housing, guard rail posts and
mining equipment. For its year ended December 31, 1997, SWVA
reported net sales, net income and total stockholder's equity of
$112,776,000, $5,259,000 and $54,302,000, respectively. The
acquisition has been accounted for as a purchase. Accordingly, the
acquired assets and liabilities are included in the accompanying
April 30, 1999 consolidated balance sheet at values based on a
preliminary purchase price allocation. The purchase price allocation
will be finalized by October 31, 1999 based upon appraisals and other
evaluations currently in process. The preliminary purchase price
allocation is summarized below:
(Unaudited)
December 16, 1998
Accounts and other receivable $ 17,811,730
Inventories 35,089,765
Prepaid expenses and other current assets 1,848,853
Property, plant and equipment 79,914,154
Goodwill 16,196,961
Other assets 304,356
Accounts and other payables (9,596,233)
Accrued expenses and other current liabilities (7,194,079)
Long-term debt (52,804,120)
Other liabilities (13,650,314)
$ 67,921,073
Unaudited pro forma consolidated results of operations for the three
month period ended April 30, 1998 and the six month periods ended
April 30, 1999 and 1998, assuming the SWVA acquisition had occurred at
the beginning of each period, are as follows:
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
1998 1999 1998
Sales $ 106,021,279 $ 186,901,479 $ 207,231,191
Net earnings $ 4,703,705 $ 8,411,007 $ 10,567,639
Net earnings per share
of common stock:
Basic $ 0.43 $ 0.76 $ 0.95
Diluted $ 0.42 $ 0.75 $ 0.94
The pro forma consolidated results of operations include adjustments
to give effect to amortization of goodwill, interest expense on
acquisition debt and certain other adjustments, together with related
income tax effects. The unaudited pro forma information is not
necessarily indicative of the results of operations that would have
occurred had the purchase been made at the beginning of the periods
presented or the future results of the combined operations.
Note 7. Supplemental cash flow information:
(Unaudited)
Six Months Ended
April 30,
1999 1998
Cash paid during the period for:
Interest $ 3,495,976 $ 1,105,888
Income taxes $ 3,760,623 $ 5,757,045
Detail of acquisition:
Fair value of assets acquired $ 151,165,819
Liabilities assumed (83,244,746)
Net cash paid for acquisition $ 67,921,073
INDEPENDENT ACCOUNTANTS' REPORT
DELOITTE & TOUCHE LLP
Suite 1401 Telephone: (336) 721-2300
500 West Fifth Street Facsimile: (336) 721-2301
Winston-Salem, North Carolina 27152
Board of Directors
Roanoke Electric Steel Corporation:
We have reviewed the accompanying consolidated balance sheet of Roanoke
Electric Steel Corporation (the "Corporation") and subsidiaries as of April
30, 1999, and the related consolidated statements of earnings and cash flows
for the three-month and six-month periods ended April 30, 1999 and 1998.
These financial statements are the responsibility of the Corporation's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Roanoke Electric Steel
Corporation and subsidiaries as of October 31, 1998, and the related
consolidated statements of earnings, stockholders' equity, and cash flows
for the year then ended (not presented herein); and in our report dated
November 18, 1998, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of October 31, 1998 is fairly
stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Deloitte & Touche LLP
Winston-Salem, North Carolina
June 2, 1999
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's earnings during the periods
included in the accompanying consolidated statements of earnings.
A summary of the period to period changes in the principal items included in
the consolidated statements of earnings is shown below:
Comparison of Increases (Decreases)
Three Months Ended Six Months Ended
April 30, April 30,
1999 1998 1999 1998
Amount Percent Amount Percent
Sales 27,559,871 37.4 29,359,703 20.2
Cost of Sales 20,152,116 33.4 19,891,257 16.7
Administrative Expenses 1,802,191 36.1 3,417,277 36.7
Interest Expense 1,813,781 677.1 2,742,589 496.8
Profit Sharing Expense 828,760 58.9 1,020,313 38.8
Earnings before Income Taxes 2,963,023 44.0 2,288,267 16.6
Income Tax Expense 1,230,333 45.8 946,455 17.2
Net Earnings 1,732,690 42.9 1,341,812 16.2
On December 16, 1998, the Registrant acquired 100% of the capital stock of
Steel of West Virginia, Inc. ("SWVA"), a steel manufacturer; and results for
the three months and six months ended April 30, 1999 reflect the operations
of SWVA from the date of acquisition. The 1998 financial statements have
not been restated to include SWVA because the acquisition was treated as a
purchase for accounting purposes. The significant increase in sales for
both the six month and three month periods compared was primarily due to the
inclusion of SWVA's revenues in 1999 consolidated sales, together with
improved selling prices for fabricated products. Sales for both periods,
however, were negatively affected by significant declines in selling prices
for both merchant bar products and billets, together with a substantial drop
in billet shipments. Slightly reduced shipment levels for both bar and
fabricated products during the six month period also had a negative impact
on sales. For the three months compared, sales were favorably impacted by
increased fabricated product shipments, while tons shipped of merchant bar
products were flat. During both periods compared, competition from foreign
and domestic producers increased, prompting industry-wide list price
reductions for bar products. In spite of the increased competition, tons
shipped of bar products were flat during the second quarter; however, for
the six month period, shipments declined due to the lower shipments
sustained in the first quarter. A dramatic change in market conditions for
billets brought diminished demand and a near 40% decline in tons shipped for
both periods. Billet selling prices declined in both periods with sharp
reductions in scrap prices which normally trigger changes in billet pricing.
Fabricated product selling prices improved during the six month and three
month periods primarily resulting from less competitive conditions within
the commercial construction industry, as business conditions continued
strong and backlogs remained high. Shipments of fabricated products
increased slightly as a result of the more favorable competitive conditions;
however shipments lagged for the six months due to the lower tons shipped in
the first quarter. Cost of sales increased in both periods compared mainly
due to the impact of SWVA costs, in spite of the significant reductions in
both billet shipments and the cost of scrap steel, our main raw material.
Gross profit as a percentage of sales increased during both periods from
18.1% to 20.5%, primarily as a result of the impact of substantially reduced
billet shipments which carry much lower margins. Also, lower scrap costs
coupled with higher fabricated product selling prices more than offset the
lower bar prices and the effects of reduced production levels on costs. For
both periods compared, the increase in gross profit and net earnings was
mainly due to the inclusion of SWVA's gross profits in 1999 results,
together with improvements in gross profits for fabricated products, which
more than offset higher administrative, interest and profit sharing
expenses. Administrative expenses increased in both periods compared mainly
as a result of the inclusion of SWVA's expenses in 1999 results, coupled
with higher insurance costs and increased executive and other compensation.
Administrative expenses, as a percentage of sales, dropped from 6.8% to 6.7%
for the three month period, but rose from 6.4% to 7.3% for the six month
period. Interest expense increased in both periods compared primarily due
to substantially higher average borrowings, related to the SWVA acquisition,
and slightly higher interest rates, in spite of increased capitalized
interest and interest income. Profit sharing expense is based on earnings
before income taxes in accordance with the provisions of various plans. For
both periods compared, profit sharing expense increased as a result of
improvements in earnings. The effective income tax rate was relatively
constant for both periods compared.
Working capital increased $32,922,294 during the period to $107,840,172
resulting both from acquired SWVA working capital and working capital
provided from operations exceeding capital expenditures, dividends, debt
maturities and repurchases of common stock. The current ratio of 3.5 to 1
and the quick ratio of 1.9 to 1 both indicate very strong liquidity and a
healthy financial condition. In addition, cash, cash equivalents and
investments increased $2,938,344 during the period to $30,833,005. At
December 15, 1998, the Registrant's outstanding bank debt was $27,583,333.
On December 16, 1998, the Registrant closed on $180,000,000 of secured
credit facilities with a syndicate of four banks. The facilities are
comprised of a $150,000,000 seven year term loan and a $30,000,000 five year
revolver. The term loan was used to purchase all of the outstanding capital
stock of SWVA, and refinance both the existing term debt of the Registrant
and most of SWVA's bank debt assumed through the merger. Due to this new
credit facility, current debt maturities are now $15,000,000 annually, which
will affect working capital and future liquidity. Although, our unused
$30,000,000 revolving credit facility combined with the cash and investments
mentioned above provided the liquidity and capital resources necessary to
fund operations and remain competitive.
At April 30, 1999, there were commitments for the purchase of property,
plant and equipment approximating $3,750,000, a significant portion of which
is for new state-of-the-art stacking and bundling equipment, expected to be
in operation by 1999's third quarter with anticipated improvements in
rolling mill productivity and efficiency. These commitments will also
affect future liquidity and will be financed from internally generated funds
and the use of the revolver mentioned above.
During the first half of the year, the ratio of debt to equity rose to 1.6
to 1 due to the new borrowings and other debt associated with the SWVA
acquisition. The percentage of long-term debt to total capitalization
increased from 16.9% to 50.8% during the period. Long-term debt increased
$107,134,754 to $131,426,421, which could limit the capital resources
available to the Registrant. Stockholders' equity increased to $127,093,053
mainly due to net earnings of $9,631,799 exceeding dividends of $2,106,010.
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, the ability of the Company and its
customers and vendors to address, effectively, Year 2000 issues, and others.
Since 1997, the Company has been involved in converting our computer
hardware and software to be Year 2000 compliant. It has been assigned the
highest priority within our information systems area utilizing all internal
personnel available. External resources have been added to assist in the
task and continue ongoing projects. We have identified the systems in our
manufacturing facilities and offices that may be affected and have completed
conversion on nearly all systems. To ensure compliance by third-party
software vendors, we are requesting in writing from our vendors confirmation
of their Year 2000 compliance. We have also purchased analytical tools to
check not only our computers for compliance, but also loaded software. The
Company has sent compliance questionnaires to its major suppliers to assess
their readiness and our need to seek alternate suppliers. We have not
totally assessed the risks of Year 2000 issues, nor have we developed any
contingency plans. We plan to utilize the remainder of 1999 for such
matters and have established a completion goal of June 30, 1999 for testing
our conversions. The estimated costs of Year 2000 issues are approximately
$400,000 and are not expected to have a material effect on results of
operations, liquidity or capital resources.
PART I - ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Quantitative and qualitative information about market risk was addressed in
Form 10-K for fiscal year ended October 31, 1998, as previously filed with
the commission. There has been no material changes to that information
required to be disclosed in this 2nd quarter 10-Q filing.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
To the best of Registrant's information and belief no new legal
proceedings were instituted against Registrant or any of its
wholly-owned subsidiaries, including SWVA, during the period
covered by this report and there was no material development in or
termination of the legal proceedings reported earlier by both the
Registrant on Form 10-K for fiscal year ended October 31, 1998 and
Form 10-Q for the quarter ended January 31, 1999 and by SWVA on
Form 10-K for fiscal year ended December 31, 1997 and Forms 10-Q
for the quarters ended March 31, 1998, June 30, 1998 and September
30, 1998, all previously filed with the Commission.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On February 16, 1999, the Annual Meeting of Shareholders was held
and the following persons were elected as Class C directors of the
Registrant, with terms expiring in 2002:
Authority Not
Director For Withheld Voted
Charles I. Lunsford, II 10,253,407 2,693 818,988
Paul E. Torgersen 10,253,912 2,188 818,988
John D. Wilson 10,253,762 2,338 818,988
The following persons continued to serve as Class A and Class B
directors of the Registrant after the annual meeting:
Class A directors, with terms expiring in 2000
George B. Cartledge, Jr.
Thomas L. Robertson
Donald G. Smith
Class B directors, with terms expiring in 2001
Frank A. Boxley
George W. Logan
Timothy R. Duke *
* Elected to the Board on January 19, 1999 as a result of
the SWVA merger transaction.
ITEM 5. OTHER INFORMATION.
The labor contract between the United Steelworkers of America,
AFL-CIO ("Steelworkers") and SWVA, Inc. ("Steel"), located in
Huntington, West Virginia, expired on June 4, 1999 at 4:00 p.m. On
June 6, 1999, the Steelworkers called a strike at Steel's mill
after the parties failed to ratify the terms of a new collective
bargaining agreement. Steel is a wholly owned subsidiary of
Roanoke Electric Steel Corporation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
(27) Financial Data Schedule
b. Reports on Form 8-K.
A report on Form 8-K was filed February 4, 1999, during the quarter
for which this report is filed, stating under Item 2 that on
December 16, 1998, the Registrant acquired all of the outstanding
common shares of Steel of West Virginia, Inc., upon completion of
its cash tender offer. The consideration given was approximately
$117.1 million, including the assumption of approximately $52.3
million of indebtedness. Funding was provided by a syndicate of
four banks, including First Union National Bank, Agent. Item 7
included SWVA financial statements on its most recent Form 10-K and
Forms 10-Q, pro forma condensed financial statements combining
historical financial data of the Registrant with that of SWVA
adjusted for events attributable to the acquisition, and exhibits.
Items 2, and 3 are omitted because the information required by these items
is not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROANOKE ELECTRIC STEEL CORPORATION
Registrant
Date June 2, 1999 Donald G. Smith
Donald G. Smith, Chairman, President,
Treasurer and Chief Executive Officer
(Principal Financial Officer)
Date June 2, 1999 John E. Morris
John E. Morris, Vice President-Finance
and Assistant Treasurer
(Chief Accounting Officer)
EXHIBIT INDEX
Exhibit No. Exhibit Page
(27) Financial Data Schedule 18
EXHIBIT NO. 27
FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information
extracted from the 2nd 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> 6-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> APR-30-1999
<CASH> 19,636,281
<SECURITIES> 11,196,724
<RECEIVABLES> 50,820,336
<ALLOWANCES> 0
<INVENTORY> 65,835,221
<CURRENT-ASSETS> 151,404,783
<PP&E> 238,620,324
<DEPRECIATION> 75,150,568
<TOTAL-ASSETS> 331,915,205
<CURRENT-LIABILITIES> 43,564,611
<BONDS> 131,426,421
0
0
<COMMON> 3,289,254
<OTHER-SE> 123,803,799
<TOTAL-LIABILITY-AND-EQUITY> 331,915,205
<SALES> 174,742,368
<TOTAL-REVENUES> 174,742,368
<CGS> 138,971,322
<TOTAL-COSTS> 138,971,322
<OTHER-EXPENSES> 16,383,702
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,294,617
<INCOME-PRETAX> 16,902,727
<INCOME-TAX> 6,460,928
<INCOME-CONTINUING> 9,631,799
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,631,799
<EPS-BASIC> .87
<EPS-DILUTED> .86
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