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 July 31, 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 July 31, 1999.
11,004,763 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
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
3. Signatures 15
4. Exhibit Index pursuant to Regulation S-K 16
5. Exhibits
a. Steel of West Virginia Collective
Bargaining Agreement 17
b. Financial Data Schedule 18
<TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Balance Sheets
ASSETS
(Unaudited)
July 31, October 31,
1999 1998
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 32,017,569 $ 16,167,025
Investments 10,985,409 11,727,636
Accounts receivable 47,543,853 42,415,061
Refundable income taxes 744,447 ---
Inventories 60,910,323 31,902,900
Prepaid expenses 1,430,556 1,586,357
Deferred income taxes 3,076,304 1,608,938
Total current assets 156,708,461 105,407,917
PROPERTY, PLANT AND EQUIPMENT
Land 8,077,943 4,264,165
Buildings 40,777,431 19,621,407
Other property and equipment 191,784,119 123,615,952
Assets under construction 808,279 4,656,746
Total 241,447,772 152,158,270
Less--accumulated depreciation 78,907,852 68,522,086
Property, plant and equipment, net 162,539,920 83,636,184
GOODWILL 15,690,806 ---
OTHER ASSETS 1,134,247 166,788
TOTAL ASSETS $336,073,434 $189,210,889
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 15,034,131 $ 4,250,000
Accounts payable 16,622,601 15,273,850
Dividends payable 1,100,476 1,052,210
Employees' taxes withheld 605,190 358,851
Accrued profit sharing contribution 4,135,391 5,335,822
Accrued wages and expenses 8,726,164 2,959,367
Accrued income taxes --- 1,259,939
Total current liabilities 46,223,953 30,490,039
LONG-TERM DEBT
Notes payable 142,702,699 28,541,667
Less--current portion 15,034,131 4,250,000
Total long-term debt 127,668,568 24,291,667
DEFERRED INCOME TAXES 28,630,894 13,687,507
OTHER LIABILITIES 3,357,301 1,293,788
STOCKHOLDERS' EQUITY
Common stock--no par value--authorized
20,000,000 shares, issued 12,277,877 shares
in 1999 and 12,349,002 in 1998 3,416,566 2,858,128
Retained earnings 127,594,020 117,407,628
Total 131,010,586 120,265,756
Less--treasury stock, 1,273,114 shares -- at cost 817,868 817,868
Total stockholders' equity 130,192,718 119,447,888
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $336,073,434 $189,210,889
The accompanying notes to consolidated financial statements are an integral part of
this statement.
</TABLE>
<TABLE>
<CAPTION>
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Statements of Earnings
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
SALES $95,879,063 $73,119,315 $270,621,431 $218,501,980
COST OF SALES 77,155,745 58,937,231 216,127,067 178,017,296
GROSS EARNINGS 18,723,318 14,182,084 54,494,364 40,484,684
OTHER OPERATING EXPENSES (INCOME)
Administrative 6,701,636 4,817,725 19,435,077 14,133,889
Interest, net 2,042,047 220,246 5,336,664 772,274
Profit sharing 2,082,450 1,632,545 5,732,711 4,262,493
Antitrust litigation settlement (1,859,545) --- (1,859,545) ---
Total 8,966,588 6,670,516 28,644,907 19,168,656
EARNINGS BEFORE INCOME TAXES 9,756,730 7,511,568 25,849,457 21,316,028
INCOME TAX EXPENSE 3,908,900 3,002,119 10,369,828 8,516,592
NET EARNINGS $ 5,847,830 $ 4,509,449 $ 15,479,629 $12,799,436
Net earnings per share of common stock:
Basic $ 0.53 $ 0.41 $ 1.40 $ 1.15
Diluted $ 0.52 $ 0.40 $ 1.39 $ 1.14
Cash dividends per share
of common stock $ 0.10 $ 0.095 $ 0.29 $ 0.277
Weighted average number of
common shares outstanding:
Basic 11,084,043 11,107,558 11,082,259 11,147,781
Diluted 11,160,008 11,245,565 11,147,889 11,276,051
The accompanying notes to consolidated financial statements are an integral part
of this statement.
</TABLE>
<TABLE>
<CAPTION>
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
July 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $ 15,479,629 $ 12,799,436
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Deferred compensation liability 316,249 ---
Postretirement liabilities 240,337 227,234
Depreciation and amortization 11,235,135 6,890,501
Gain on sale of investments and property, plant and equipment (29,382) (13,081)
Deferred income taxes 1,500,000 237,000
Changes in assets and liabilities which provided
(used) cash, exclusive of changes shown separately 6,700,559 2,521,487
Net cash provided by operating activities 35,442,527 22,662,577
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (9,900,358) (8,141,975)
Proceeds from sale of property, plant and equipment 315,553 300
(Purchase) sale of investments 712,390 (3,251,508)
Acquisition of Steel of West Virginia, Inc. (67,921,073) ---
Other (223,849) ---
Net cash used in investing activities (77,017,337) (11,393,183)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends (3,206,486) (3,085,621)
Increase in dividends payable 48,266 84,788
Proceeds from exercise of common stock options 558,438 378,765
Payment of long-term debt (88,674,321) (3,187,500)
Proceeds from long-term debt 150,000,000 ---
Repurchase of common stock (2,086,750) (2,387,703)
Loan costs (513,793) ---
Interest rate reverse swap settlement from lender 1,300,000 ---
Net cash provided by (used in) financing activities 57,425,354 (8,197,271)
NET INCREASE IN CASH AND CASH EQUIVALENTS 15,850,544 3,072,123
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 16,167,025 8,844,537
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 32,017,569 $ 11,916,660
CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED
(USED) CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY
(Increase) decrease in accounts receivable $ 9,902,347 $ (1,085,925)
(Increase) decrease in refundable income taxes 2,036,144 ---
(Increase) decrease in inventories 6,082,342 3,000,373
(Increase) decrease in prepaid expenses 537,288 (291,186)
Increase (decrease) in accounts payable (7,739,160) 2,445,727
Increase (decrease) in employees' taxes withheld (230,750) 56,392
Increase (decrease) in accrued profit sharing contribution (1,443,861) (856,356)
Increase (decrease) in accrued wages and expenses (1,183,852) (409,085)
Increase (decrease) in accrued income taxes (1,259,939) (338,453)
Total $ 6,700,559 $ 2,521,487
The accompanying notes to consolidated financial statements are an integral
part of this statement.
</TABLE>
ROANOKE ELECTRIC STEEL CORPORATION
Notes to Consolidated Financial Statements
July 31, 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 July 31,
1999 and the results of operations for the three months and nine
months ended July 31, 1999 and 1998 and cash flows for the nine
months ended July 31, 1999 and 1998.
Note 2. Inventories include the following major classifications:
(Unaudited)
July 31, October 31,
1999 1998
Scrap steel $ 4,040,281 $ 4,876,856
Melt supplies 3,910,448 2,408,961
Billets 13,231,583 3,499,907
Mill supplies 4,884,431 3,176,619
Work-in-process 4,715,991 ---
Finished steel 30,127,589 17,940,557
Total inventories $ 60,910,323 $ 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 stockholders' 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 July
31, 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 July 31, 1998 and the nine month periods
ended July 31, 1999 and 1998, assuming the SWVA acquisition had
occurred at the beginning of each period, are as follows:
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
1998 1999 1998
Sales $ 106,244,220 $ 282,780,542 $ 313,475,411
Net earnings $ 5,487,804 $ 14,258,837 $ 16,055,443
Net earnings per share
of common stock:
Basic $ 0.49 $ 1.29 $ 1.44
Diluted $ 0.48 $ 1.28 $ 1.42
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)
Nine Months Ended
July 31,
1999 1998
Cash paid during the period for:
Interest $ 5,917,187 $ 1,609,994
Income taxes $ 8,093,623 $ 8,618,045
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
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 July
31, 1999, and the related condensed consolidated statements of income and
cash flows for the three-month and nine-month periods ended July 31, 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 income, 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 condensed 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
August 20, 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 Nine Months Ended
July 31, July 31,
1999 1998 1999 1998
Amount Percent Amount Percent
Sales 22,759,748 31.1 52,119,451 23.9
Cost of Sales 18,218,514 30.9 38,109,771 21.4
Administrative Expenses 1,883,911 39.1 5,301,188 37.5
Interest Expense 1,821,801 827.2 4,564,390 591
Profit Sharing Expense 449,905 27.6 1,470,218 34.5
Antitrust Settlement Income 1,859,545 * 1,859,545 *
Earnings before Income Taxes 2,245,162 29.9 4,533,429 21.3
Income Tax Expense 906,781 30.2 1,853,236 21.8
Net Earnings 1,338,381 29.7 2,680,193 20.9
* Cannot be calculated
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 nine months ended July 31, 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. Sales for both the nine month and three
month periods compared increased significantly, due mainly 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 reductions in tons shipped
of bar products, fabricated products and billets, with the latter down
substantially. Increased competition from foreign and domestic producers
prompted industry-wide list price reductions for bar products during both
periods compared. The increased competition, excess inventories at steel
service centers and a shortage of transportation all contributed to the
decreased tons shipped of bar products for the periods compared. A dramatic
change in market conditions for billets brought diminished demand and
declines in tons shipped of 37% for the nine months and 26% for the quarter
. Billet selling prices declined in both periods with sharp reductions in
scrap prices which normally trigger changes in billet pricing. Competitive
conditions within the commercial construction industry generally impact
selling prices and shipment levels of fabricated products and were
relatively favorable during both periods as reflected in the higher selling
prices. The reduced shipments were caused by minor factors other than
competition as business conditions continued strong and backlogs remained
high. Cost of sales increased in both periods compared mainly due to the
impact of SWVA costs, in spite of the effects of the decreased tons shipped
for all product classes and the drop in the cost of scrap steel, our main
raw material. Gross profit as a percentage of sales increased during the
nine month period from 18.5% to 20.1%, and during the three month period
from 19.4% to 19.5%, primarily as a result of the impact of substantially
reduced billet shipments which carry much lower margins. In addition, lower
scrap costs and higher selling prices for fabricated products offset the
lower selling prices for bar products 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. The increased earnings, as mentioned above, resulted in
spite of the negative effects of a two week work stoppage at SWVA that
concluded with a new three year collective bargaining agreement.
Administrative expenses increased in both periods compared mainly as a
result of the inclusion of SWVA's expenses in 1999 results, together with
higher insurance costs and increased executive and other compensation.
Administrative expenses, as a percentage of sales, rose from 6.5% to 7.2%
for the nine month period and from 6.6% to 7.0% for the three 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. During the 1999 quarter and nine month periods,
other operating expenses were reduced by $1,859,545 as a result of a partial
settlement from a number of our graphite electrode suppliers for antitrust
violations. The effective income tax rate was relatively constant for both
periods compared.
Working capital increased $35,566,630 during the period to $110,484,508
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 3.4 to 1
and the quick ratio of 2.0 to 1 both indicate very strong liquidity and a
healthy financial condition. In addition, cash, cash equivalents and
investments increased $15,108,317 during the period to $43,002,978. On
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 July 31, 1999, there were commitments for the purchase of property, plant
and equipment approximating $3,200,000, a significant portion of which is
for new state-of-the art stacking and bundling equipment, expected to be in
operation during the next 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 period, 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
49.5% during the nine months. Long-term debt increased $103,376,901 to
$127,668,568, which could limit the capital resources available to the
Registrant. Stockholders' equity increased to $130,192,718 mainly due to
net earnings of $15,479,629 exceeding dividends of $3,206,486 and common
stock repurchases of $2,086,780.
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 September 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 3rd quarter 10-Q filing, except as follows:
The Company uses interest rate swaps, a form of derivative, to manage
interest costs. On June 25, 1999, the Company did a reverse swap,
converting $40,000,000 of term debt to a variable interest rate from
a fixed rate. A fee of $1,300,000 was received and will be recorded
in income ratably over the 6 1/2 years remaining to maturity of the term
loan. Currently, the Company maintains an interest rate swap agreement
resulting in a fixed rate of 6.81% on the notional amount of
$102,500,000 through January 3, 2006. The difference between fixed
rate and floating rate interest is recognized as an adjustment to
interest expense in the period incurred. The $40, 000,000 of variable
rate term debt is subject to the risk of fluctuations in short-term
interest rates; however, the $43,002,978 of cash and investments at
July 31, 1999 provided a hedge against rising interest rates.
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
Forms 10-Q for the quarters ended January 31, 1999 and April 30,
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 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
(10) SWVA Collective Bargaining Agreement
(27) Financial Data Schedule
b. Reports on Form 8-K.
Reports on Form 8-K, dated June 4, 1999 and June 20, 1999, filed
during the quarter for which this report is filed, were related
to SWVA's collective bargaining agreement. The earlier Form 8-K,
under Item 5, reported that the labor contract between the United
Steelworkers of America, AFL-CIO ("Steelworkers") and SWVA, Inc.
("Steel") expired on June 4, 1999 at 4:00 p.m. On June 6, 1999,
the Steelworkers called a strike at Steel's Huntington mill after
the parties failed to ratify the terms of a new collective
bargaining agreement. The later Form 8-K, under Item 5, reported
that on June 20, 1999, Steel entered into a three year labor
contract with the Steelworkers, bringing an end to the two week
labor strike, referred to above.
Items 2, 3, 4 and 5 are omitted because the information required by these
items is not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROANOKE ELECTRIC STEEL CORPORATION
Registrant
Date 8/20/99 Donald G. Smith
Donald G. Smith, Chairman, President,
Treasurer and Chief Executive Officer
(Principal Financial Officer)
Date 8/20/99 John E. Morris
John E. Morris, Vice President-Finance
and Assistant Treasurer
(Chief Accounting Officer)
EXHIBIT INDEX
Exhibit No. Exhibit Page
(10) SWVA Collective Bargaining Agreement 17
(27) Financial Data Schedule 18
EXHIBIT NO. 10
SWVA COLLECTIVE BARGAINING AGREEMENT
COLLECTIVE BARGAINING AGREEMENT
This Agreement, made and entered into (to become
effective 12:01 a.m.) June 7, 1999, is between SWVA, Inc.,
or it's successor, at it's plant at 17th Street and Second
Avenue in Huntington, West Virginia (hereinafter referred to
as "Steel" or "Company") and the United Steelworkers of
America, AFL-CIO, (hereinafter referred to as "Steelworkers"
or "USWA").
The Company agrees that it will not sell, convey,
assign, or otherwise transfer the SWVA, INC., Plant or
significant part thereof covered by the Contract between the
Company and the United Steelworkers of America that has not
been permanently shutdown for at least eight months to any
other party ("buyer") who continues to operate the "Plant"
as the Company had, unless no later than the time of the
transfer the "buyer" agrees to assume this Agreement. Once
so assumed, this Agreement will continue to bind the Union.
Section 1 - INTENT AND PURPOSE
1-A Relationship between the parties
1. It is the intent and purpose of the parties hereto that
this Agreement shall promote and improve industrial and
economic relationships between Steel and Steelworkers and to
set forth herein the Agreement covering rates of pay, hours
of work and conditions of employment to be observed between
the parties hereto.
1-B Anti-discrimination
1. There shall be no discrimination, restraint or coercion
against any member because of membership in the Union, Union
Activity, Race, Creed, Color, Sex, National Origin,
Religion, Age or Handicap.
2. The parties agree to comply with the Federal "ADA Law".
1-C Definition of employee
1. The term "employee" as used in this Agreement will
include all production and maintenance workers of Steel at
it's Huntington plant located at Seventeenth Street and
Second Avenue in Huntington, West Virginia. Positions
herein excluded from the Bargaining Unit include
Stenographers, Secretaries, Receptionists, PBX Operators,
Messengers, Porters, Clerks (cost, inventory, stores,
production, payroll, sales, accounting and billing
personnel), Weighmaster, Draftsmen, Guards, Watchmen,
Foremen, Supervisors, Superintendents, all personnel who are
on the semi-monthly payroll of Steel, and all other
employee's agreed to by Steel and the Steelworkers.
1-D Supervisor working
1. The Company agrees that Supervisors and other members
of management are employed for the purpose of supervision.
Supervisors shall not take the place of or perform the
duties of regular bargaining unit employee's except for the
purposes of instructing, training, investigating a problem,
or where an emergency exists and/or assisting bargaining
unit employee's to maintain efficient operations as long as
assisting is minimal. However, this Section is not to
prohibit Melter Supervisors, Caster Supervisors, or Roller
Supervisors from continuing to perform their duties as they
have in the past.
2. In the event a Foreman violates Section 1-D-1 above,
the Company will compensate the employee who should have
been offered the work a minimum of one hour pay or the
actual time worked, whichever is greater.
1-E Contracting Out
1. Steel shall not have any production work performed by
non-Bargaining Unit employee's that is normally performed by
the Bargaining Unit as long as current employee's are
willing to work the overtime and equipment time is
available.
2. Steel will not contract-out work normally performed by
Bargaining Unit maintenance employee's for the purpose of
avoiding overtime or during any period of lay-off as long as
those employee's laid-off have the ability to perform the
work in question (excluding any laid-off probationary
employee's).
Section 2 - MANAGEMENT
2-A Management Rights
1. The Union and it's members recognize the right to
manage the plant and works, and to direct the working
forces, is vested exclusively in the Company. Among these
rights are the right to hire, suspend, discharge for just
cause, promote, demote, transfer, assign jobs, increase
forces and decrease forces, provided this Section will not
be used for purpose of discrimination against any employee
or in violation of any of the other provisions of this
Agreement.
Section 3 - RECOGNITION
3-A USWA
1. Steel recognized the Steelworkers as the exclusive
representative of all the employees of Steel, as defined in
Section 1-C-1 hereof, for the purpose of collective
bargaining in respect to rates of pay, wages, hours of work
and other conditions of employment.
3-B Committees
1. Steel will recognize the Local Union's Grievance,
Safety, Retirement, Insurance, Worker's Compensation,
Contracting Out, Labor/Management, Civil Rights and
Negotiating as committees.
2. Steel will count lost scheduled straight time hours as
time worked during Joint/Committee meetings for the
following committees only: Safety, Labor/Management and
Retirement committees. Steel will extend the same
application to the Chairman of the Union's Blood Bank.
(a) Grievance committeemen will be paid to attend
joint 3rd Step meetings.
3-C Membership
1. Steel agrees that membership in the Steelworkers shall
hereafter be a condition of employment in accordance with
the provisions which follow in paragraphs 3-D-1 & 2, 3-E-1 &
2, and 3-F-1.
3-D Probationary Employee's
1. All new employee's who are hired by Steel will become
Steelworker members after thirty (30) calendar days.
However, their probationary period shall be 525 hours of
actual performance of work, during which time employee's
have no rights under this Collective Bargaining Agreement
and can't file grievances.
2. A probation period is provided to determine if a new
employee will become an effective team member in the work
force of Steel. At the end of each 175 hours worked, during
the probationary period, the employee will either receive a
salary increase as provided in Section 8-A-6 or be
terminated, all entirely at the discretion of Steel.
3-E Authorization Cards
1. The Union shall indemnify and save Steel harmless
against any and all claims, demands, suits, or other forms
of liability that shall arise out of or by reason of action
taken by Steel in reliance upon the Union Dues Deduction
Authorization Cards including deducting "Union Dues from
probationary employees".
2. It is further agreed that during the life of this
Agreement, all members of the Steelworkers shall authorize
Steel to check off their union dues, initiation fees and
assessments, each as designated by the Secretary/Treasurer
of the International Union. Steel agrees to check off such
authorized dues, initiation fees and assessments and to
forward them to the Secretary/Treasurer of the International
Union.
3-F Loss of Membership
1. Should the Steelworkers determine for any reason that
an employee loses his membership in good standing with them
which would require termination of the employee from Steel,
the Steelworkers will hold Steel harmless from any action
taken by the employee against Steel.
Section 4 - RESPONSIBILITIES OF THE PARTIES
4-A Plant Rules
1. Steel and Steelworkers recognize and agree that basic
and fundamental rules are required to govern the interaction
between the parties, individuals and groups of individuals
of Steelworkers and Steel. The parties further agree that
these rules, stated in Section 20, will be followed by all
employees and individuals hired by Steel. Supervisors will
endeavor to call an employee's attention to violations of
the rules and give reasonable assistance in obtaining
compliance.
(a) No plant rule can be changed without the mutual joint
consent of the parties.
Section 5 - SAFETY
5-A Safety Procedures
1. Steel shall provide a safe place to work by eliminating
hazardous conditions, maintaining protective guards on
machinery and requiring employee's to wear protective
equipment needed on the job. However, it is recognized that
the only way to be certain to maintain accident free
performance is for each employee to accept a personal
responsibility to work safely. Employee's will be
familiarized about safety precautions and operating
fundamentals of equipment they are assigned to operate.
2. The parties agree the Joint Safety Committee will
conduct monthly plant tour safety inspections (or more
frequently if necessary) and report it's finding to the
President of Steel or his representative.
3. No employee shall be required to perform work that in
their opinion is unsafe and no disciplinary action will
result due to the refusal to perform such work.
4. The USWA may perform "dust checks" and "air quality
checks" at their convenience and at their expense at any
time with access to the plant.
5. A hazardous condition that could cause serious injury
or death should be fixed or the machine shut down.
Section 6 - HOURS OF WORK
6-A Work Week
1. The Company will provide forty (40) hours work per week
to those actually at work for their entire scheduled work
week, and will lay-off according to Section 7-F Lay-off if
it becomes necessary to curtail the workforce. Some
schedules and demands of the business will require
employee's to work in excess of eight (8) hours in a day.
2. The work week will be from Monday through Sunday.
3. Schedules showing employees' workdays will be posted by
noon Thursday for the following workweek, including any
known overtime days.
4. When a sixth (6th) day is scheduled in a work week in a
Group for all shifts that day, everyone may be scheduled to
work, subject to the forty-eight (48) hour requirement. If
less than all shifts are scheduled, Supervisors must post or
canvass for volunteers so that senior qualified employee's
can first indicate their desire to work. Should it be
necessary to obtain additional workers to fill the
requirement, the junior qualified employee(s) will be
required to work subject to the forty-eight (48) hour
requirement. Under both above situations, senior qualified
employee's will be allowed off if other qualified employee's
sign up to volunteer to work their overtime schedule.
5. Employee's will not be scheduled to perform extra or
make-up work because of absence for any reason. However,
this subsection is not to be construed to prohibit
employee's from requesting available work to complete their
40 hour schedule, nor to prevent Steel from scheduling
employee's for weekend work in the normal manner.
6-B Reporting Pay
1. Employee's who are scheduled to report to work, and who
do report, will be paid four (4) hours reporting pay if they
are instructed to return home and not assigned to work that
day.
6-C Overtime Pay
1. Steel has a right to require a reasonable amount of
overtime in excess of 40 hours in any workweek. Time and
one-half will be paid for any hours worked in excess of 40
in a workweek.
2. Double time shall be paid for any hours worked on the
7th consecutive day worked in the work week.
6-D Excessive Hours
1. Steel shall not require or allow an employee to work in
excess of sixteen (16) hours in a twenty-four (24) hour
period. Steel shall not require an employee to work in
excess of forty-eight (48) scheduled hours in a workweek.
6-E Holidays
1. The following are holidays:
New Year's Day
Good Friday
Memorial Day
July 4th
Labor Day
December 24th
Christmas Day
Employee's Birthday (the day following, if
birthday coincides with other specified holidays.)
2. All hours actually worked on holidays listed above will
be paid at the rate of time and one-half (1 1/2) the regular
rate of pay, in addition to the weekly wage.
3. Holiday pay, as defined above, will be paid only to
employee's on the active payroll. Active payroll shall mean
those persons currently regularly scheduled to work. It
does not include those on lay-off, on leave of absence for
any reason, or not working on a regular basis.
4. All work performed Labor Day, July 4th, December 24th
and Christmas Day will be performed on a voluntary basis,
with the senior qualified selected first.
5. Hours of work on the following holidays: New Year's
Day, Good Friday, Memorial Day and employees' Birthday will
be staffed and worked in accordance with Section 6-A-4.
Section 7 - SENIORITY, OVERIME, LAYOFFS AND RECALL
7-A Voluntary Quit
1. Any Bargaining Unit employee who voluntarily quits the
Bargaining Unit for any reason, will lose all length of
continuous service accumulated. If reinstated or rehired,
he shall be placed at the bottom of the seniority list.
7-B Groups
1. Groups are defined in Section 21 attached hereto.
7-C Schedules/Drop Days
1. Employee's will be given preference by seniority in
selecting their schedules and/or drop days/scheduled days
off on their assigned shift provided the employee's are
qualified to perform the work in question.
7-D Daily Overtime
1. When daily overtime occurs the senior qualified
employee from the preceding shift will be offered the work.
7-E Call Out
1. If overtime work is not filled in accordance with 7-D
above and it becomes necessary to call an employee(s) to
come to work, the senior qualified employee(s) will be
offered the work. If no one accepts the work, the junior
qualified employee(s) from the preceding shift will be
required to fill the vacancy. If no preceding shift exists,
then force the junior qualified employee from the call out
list.
7-F Lay-Off
1. In the event Steel should decide that a reduction in
force is required, the least senior employee in plant
seniority will be laid off. Layoffs in the Trade and Craft
(Rate Class 1) will be by seniority in the trade or craft
affected. However, it is understood and agreed between the
parties that it may be necessary to retain Trade and Craft
(Rate Class 1) employee's on an out-of-line seniority basis
due to qualifications. Further, for the purpose of
preserving continuity of administration of the provisions of
this Agreement, the Officers of the Local Union; President,
Vice President and Grievance Persons shall not be laid off
in any group regardless as to whether or not their seniority
is greater than the employee replaced.
7-G Recall
1. Recall to work from lay-off will be by seniority
excluding probationary employee's. However, the parties
agree to out-of-line recall for Trade and Craft (Rate Class
1) employee's relative to seniority in the trade or craft
affected. In the event of a lay-off or reduction of a group
the employee's affected will have recall rights back to
their bid-in group. If there are no vacancies in their
group then they have the right to a temporary reassignment
to the other groups by seniority. Recall rights to active
payroll will be maintained on an unlimited basis. However,
it is understood, if a laid-off employee is provided a
recall opportunity and declines, he or she is considered to
have "quit" and employment status is terminated.
2. It is the responsibility of all employee's to provide
the Personnel Department with a current address and
telephone number where they can be contacted. Steel will
not be responsible for failure of the employee to provide
this information if a junior employee is recalled as a
result.
3. If the attempt to recall is not successful due to
Steel's inability to make contact with the effected employee
but the employee makes contact with Steel during that week,
then the employee will be scheduled for work in the
following week.
7-H Permanent Vacancy
1. When an opening occurs within a defined Group, the
employee's currently assigned to that Group will be
permitted to exercise seniority to move to the shift where
the opening exists, provided they are qualified to perform
the work available on that shift. The remaining openings
will be posted plant wide for five (5) consecutive days.
Permanent Openings will be posted at all bath houses and
where work schedules are posted. Awarded Openings will be
posted in the same manner. All Openings will show the
Group; primary area for production workers or primary
expertise required for Trade and Craft workers; rate of pay;
and shift. However, it is clearly understood that permanent
Openings may only occur within a Group as defined in Section
21.
(a) If the Opening pertains to a production Group then the
senior qualified employee indicating his desire will be
awarded the Opening.
(b) If the Opening pertains to a Trade and Craft position
then the best qualified applicant will be selected to fill
the Opening.
7-I Shift Selection
1. Employee's will be allowed to select a shift by
seniority, when an opportunity or vacancy occurs for a
change in shift assignment, providing the employee has the
ability to perform the work.
7-J Job Assignments
1. Work assignments within a Group are made by
supervision. When moving an employee to different work
within the production Groups, the Company will transfer the
least senior qualified employee from the work selected
unless more senior employee's are better qualified for that
work, or it is necessary to retain the junior employee
because they are better qualified for the work they are
performing.
Section 8 - RATE CLASSIFICATIONS AND WAGES
8-A Wages
1. Effective Monday June 7, 1999:
(a) All employee's classified as Trade and Craft (Rate
Class 1) will receive $16.25 per hour base rate.
(b) All employee's classified as skilled production workers
(Rate Class 2) will receive $15.75 per hour base rate.
(c) All employee's classified as production workers (Rate
class 3) will receive $14.75 per hour base rate.
8-B Wages
1. Effective Monday June 5, 2000:
(a) All employee's classified as Trade and Craft (Rate
Class 1) will receive $16.65 per hour base rate.
(b) All employee's classified as skilled production workers
(Rate Class 2) will receive $16.15 per hour base rate.
(c) All employee's classified as production workers (Rate
class 3) will receive $15.15 per hour base rate.
8-C Wages
1. Effective Monday June 4, 2001:
(a) All employee's classified as Trade and Craft (Rate
Class 1) will receive $17.05 per hour base rate.
(b) All employee's classified as skilled production workers
(Rate Class 2) will receive $16.55 per hour base rate.
(c) All employee's classified as production workers (Rate
class 3) will receive $15.55 per hour base rate.
8-D Probationary Rates
1. A probationary employee starts at $3.00 an hour below
the base rate and progresses in $1.00 an hour increments
every 175 hours of actual work performed until he or she
reaches the base rate. In the event he or she does not get
the next rate, he or she is terminated.
(a) Supervisors may increase probationary employee's rate
of pay any time during the probationary period, not to
exceed non-probationary rates.
8-E Brick Masons
1. The brick Masons are included as Trade and Craft (Rate
Class 1) and will remain in the Melt/Cast Group for all
purposes including overtime.
Section 9 - BENEFITS
9-A Vacations
1. The vacation year will be the calendar year January 1st
through December 31st. All employee's hired prior to June
7, 1999 will be eligible for four (4) weeks vacation in any
vacation year after completing 1,040 hours of work prior to
taking a vacation.
(a) One (1) vacation week will be scheduled during plant
close down or at other times, depending on the needs of the
business.
(b) All employee's will be scheduled off for one week of
vacation for the week in which Thanksgiving Day falls. Any
work performed during this week will be on a voluntary
basis.
(c) All employee's will be allowed to have one floating
week of vacation to be scheduled at any time during the
calendar year without regard to the 1,040 hour requirement
providing that a written request is made fourteen (14) days
prior to the start of such vacation and as long as it is
reasonable to conclude that the eligibility requirements of
1,040 hours will be obtained.
(d) All employee's eligible for vacation based on #1 above
may schedule, at the beginning of the year, by seniority one
(1) week of their vacation subject to the company setting
the maximum number of employee's taking vacation each week
and the time being scheduled prior to February 28th.
2. The vacation year will be the calendar year January 1st
through December 31st. All employee's hired after June 7,
1999 will be eligible for vacation in any vacation year
after completing 1,040 hours of work prior to taking a
vacation based upon the following criteria:
(a) One (1) week after one (1) year of service.
(b) Two (2) weeks after five (5) years of service.
(c) Three (3) weeks after ten (10) years of service.
(d) Four (4) weeks after twenty (20) years of service.
3. A week of vacation shall consist of seven (7)
consecutive days, Monday through Sunday, which means five
(5) work days and two (2) off days, for 40 hours pay.
However, this does not prevent an employee from requesting
vacation one day at a time.
9-B Holiday During Vacation
1. It is agreed if a holiday falls during a vacation week,
employee's will receive eight (8) hours straight time pay in
addition to the weekly wage.
2. If a holiday falls during a vacation week, the employee
may, with supervisory approval, have the option to take off
the last scheduled work day prior to vacation or the first
scheduled day after vacation in lieu of the holiday, for
which he/she shall be paid one day's vacation pay.
9-C Health Care
1. Steel will continue the employee's "Health Insurance Plan".
(a) Effective January 1, 2000, Bargaining Unit employee's
become participants in the existing Management Employee's
Health Care Plan, which will be renamed the SWVA, Inc.
Employee Health Care Plan.
(b) Totally disabled employee's eligibility to continue
under this Plan will cease at the maximum of one year from
their date of disability.
9-D Dental & Vision
1. Steel will continue the employee's "Dental" and
"Vision" Plan's for the term of this Agreement.
(a) Totally disabled employee's eligibility to continue
under these Plans will cease at the maximum of one year from
their date of disability.
2. It is expressly agreed and understood by and between
the parties that during the term of this Agreement, Steel's
only responsibility and it's sole obligation under this
Section is to pay premiums to an insurance company(s) for a
Dental/Vision Insurance Plan for active Bargaining Unit
Employee's.
(a) Steel is not responsible for administration
or claims dispute resolution with respect to
benefits under the Dental/Vision Insurance
Plan(s).
9-E Retiree Medical Premium Reimbursement Plan
1. On July 1, 1993 (effective date) Steel established a
"Voluntary Employees' Beneficiary Association" (VEBA) Trust
entitled "Retiree Medical Premium Reimbursement Plan" (the
"Plan"). Steel shall contribute the sum of $200,000 per
annum for the sole purpose of reimbursing employee's who
resign their employment due to retirement and who meet the
eligibility criteria described in paragraph 9-E-8 of this
Section for insurance premiums paid by such employee's to
purchase medical coverage.
(a) A "Special Rule Retiree" Amendment has been added to
the Plan.
(b) A total "Disabled Retiree" Amendment has been added to
the Plan. (See Plan for details). (See Section 9-E-8-(d)).
(c) A "Medicare Supplement" Amendment has been added to the
Plan. This Amendment will allow the Disabled Retiree (or
their spouse), after reaching age 65 and becoming Medicare
eligible, to be reimbursed for premiums paid for Medicare
Supplement Insurance up to a maximum of $150.00 per month
each. (See Plan for details).
2. Such sum shall be payable in a lump sum to the VEBA
Trust established by Steel and administered by the parties
who serve on the "Joint Retirement Plan Committee", which
shall be known as the "VEBA Committee".
3. A $200,000 contribution (as referenced in 9-E-1 above)
will be made on each anniversary date throughout the term of
this Agreement; provided, however, that such sum shall be
payable only so long as this Agreement is in effect, i.e.,
the term of the Agreement or earlier, as provided in Section
13-B-1 of this Agreement or as modified pursuant to
paragraph 9-E-4 below.
(a) In no event shall Steel be liable for any
contribution in excess of $200,000 per annum,
even though the number of employee's covered
by this Section may change subsequent to the
effective date of this Agreement.
(1) For the Plan year's beginning July 1, 2000 and July 1,
2001 a $100,000 additional contribution will be made
to the fund.
(b) Payments made from the Plan may only be used
by the participant to purchase medical
coverage for the participant and if elected
by the participant, his spouse/or any
eligible dependent children (provided that
such spouse or children are not eligible to
receive any benefit or coverage under Title
XVIII of the Social Security Act (Medicare))
under any medical plan other than a plan
maintained by Steel. The Plan shall
reimburse participants' premiums for medical
coverage in an amount which shall be limited
to the lesser of (1) $900 per month per
participant or (2) the actual amount of
monthly premiums billed to and paid by the
participant for medical coverage.
Notwithstanding the foregoing, in no event
shall the total amount payable to
participants under the Plan (whether for
coverage for participants, spouses or
dependent children) exceed the amount of
contributions that Steel is required to pay
to the Plan under paragraphs 9-E-1 and 9-E-3-
(a) of this Section.
4. During the annual VEBA Opener as provided in
Section 13-B-1 of this Agreement, the parties may
seek and agree to make any changes or
modifications to this Section.
(a) Changes or modifications also includes decisions about
distribution of the annual contribution remaining after
offset relative to the "Special Rule Retiree" Amendment.
5. The Plan and the assets thereunder shall be held and
administered under the terms and provisions of the Trust
Agreement between Steel and it's designated trustee(s), any
plan document adopted by Steel and any amendments thereto.
6. The parties intend that the Plan qualify for exemption
from federal income tax under Section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), as a
Voluntary Employee's Beneficiary Association pursuant to
Section 501(c)(9) of the Code.
7. All disputes under the Plan shall be governed by the
ERISA claims procedure as provided in U.S. Department of
Labor Reg. Code Section 2560.503-1.
8. Eligibility Criteria: A retired employee of Steel
shall be eligible to participate in the Plan as a
participant only if he satisfies all of the following
requirements (or modified requirements of the Amendment
referenced in 9-E-1-(b)):
(a) Employee voluntarily resigns employment status with
Steel on or after age fifty eight (58);
(b) Employee is not eligible to receive any benefit or
coverage under Title XVIII of the Social Security Act
(Medicare), except as indicated by amendment referenced
under Section 9-E-1-(c); and
(c) Employee has attained at least age fifty eight (58)
(d) In the absence of health insurance from any other
sources, the Company will continue to provide it's health
insurance coverage for up to a maximum of twelve (12) months
from date of disability for those employee's not otherwise
eligible for VEBA. However, a disabled employee under the
age of fifty eight (58) who retires would become eligible
under VEBA rules and continue health insurance only for a
maximum of twenty nine (29) months from date of disability.
9. Termination of Participation: A retired employee's participation
in the Plan terminates if:
(a) Employee no longer satisfies any one of the eligibility
requirements listed in 9-E-8 above;
(b) Employee elects to cease participation in the Plan;
(c) Employee fails to provide any of the forms,
certifications or other documentation required by the Plan
Administrator;
(d) Employee fails to timely pay his premium to the
insurance carrier providing medical coverage; or
(e) The Plan is terminated.
10. Notwithstanding anything contained herein to the
contrary, any coverage purchased under the "Plan"
by an eligible employee shall be secondary to all
other plans under which the employee is eligible
to participate or that are otherwise available to
the employee.
9-F Profit Sharing
1. Steel agrees to have a Profit Sharing Plan. Seventeen
percent (17%) of the pre-tax profits will be divided equally
by all Bargaining Unit employee's and will continue the
current calculation of the amount due the Bargaining Unit.
The Profit Sharing Plan will provide funding for the Pension
Plan at paragraph G and bonus. Two semi-annual share
payments will be made. The first installment will be
payable no later than the last pay period in June and the
second installment no later than the last pay period in
November.
9-G Retirement Plan
1. Steel agrees to continue the Collective Bargaining Unit
Retirement Plan which will be funded out of the Profit Share
Amount. Steel shall contribute to the Retirement Plan on a
semi-annual basis $200.00 for each eligible employee for
each eligible month, however, if the Profit Share Amount
calculated by Steel is less than the aggregate total of all
eligible months at $200.00, then Steel will contribute to
the Retirement Plan such lessor Profit Share Amount prorated
to each employee based upon eligible months worked.
2. A 401k Plan will be continued for the Bargaining Unit
employee's of Steel.
(a) An amendment will be adopted which permits employee's
to increase their voluntary 401k contribution from 10% to
15% with each employee having the option to increase their
contribution up to the maximum limit allowed by Federal
Regulations.
3. The Retirement Plan includes a hardship provision which
allows an employee to make a withdrawal on the employer's
contribution as defined by applicable Federal law.
9-H Boot Allowance
1. All employee's will receive an annual $125 work boot
allowance. This allowance will be paid once annually to
current active and laid-off employee's at the time the
annual allowance is paid.
2. The annual boot allowance will be paid on the payroll
for the period ending the first full week in August during
each year of this Agreement.
9-I Disability Plans
1. Effective July 1, 1999 the Company will provide a Long
Term Disability (LTD) Plan for employee's with five (5)
years of service or more. (See Plan for details).
(a) 65% of straight time monthly base pay until age 65 if
disability begins prior to age 60. If date of disability
occurs after age 60, see Plan's sliding scale.
2. Effective July 1, 1999, Company Short Term Disability
(STD) Plan to provide:
(a) Total disability - maximum of twenty six (26) weeks at
$400 per week.
(b) Two (2) day waiting period (waived if hospitalized on
day one).
9-J FMLA
1. If FMLA time off is elected, the employee will not be
required to concurrently take vacation or personal days.
Section 10 - GRIEVANCE PROCEDURE
10-A Dispute resolution
1. Should any difference arise as to the meaning and
application to this Agreement, the following procedure will
be used to settle such difference.
2. The parties have agreed to utilize a new form entitled
"Record of Request or Complaint Proceedings." This document
is to be utilized to record facts and information that is
relevant and necessary for both parties to effectively
resolve issues or complaints that may arise.
3. This form must be signed and dated by each and every
effected employee(s) who desires to use the "Grievance
Procedure". The Grievance Committeeman will present this
form to Supervision at the First Step level. The
Committeeman and Supervision will indicate their comments
and sign and date the form.
4. If the issue is not resolved during this First or
Second oral Step(s) then the form(s) must accompany the
normal written "Grievance Report" document at the time it is
presented to be numbered and received into the Third (3rd)
Step of the Procedure.
5. This form is established and intended to be "NON-
PRECEDENT", including any resolution therefrom, and will not
be used by either party for any legal or grievance purpose
at any time. It is created as an internal record to assist
the parties with grievance resolution by recording factual
information needed to accomplish that goal.
10-B Step One
1. An employee will have the right to request a meeting
with his Supervisor and Grievance Person, within seven (7)
days, excluding Saturday, Sunday and holidays, of the
occurrence or discovery of the alleged violation, who will
schedule such meeting to take place within ten (10) hours
after the end of the next scheduled workday after the
request is made.
10-C Step Two
1. If the employee is not satisfied as a result of the
First Step Meeting, then the employee will be granted a
meeting with the Steelworkers Grievance Person, the
Superintendent and the Employee's Supervisor. This meeting
will take place within five (5) days excluding Saturday,
Sunday and holidays, from the conclusion of the above
mentioned First Step Meeting.
10-D Written Grievance
1. If the Union believes the grievance still exists, it
shall be reduced to writing on proper grievance forms and
presented to the Vice President, Human Resources of Steel
within five (5) days, excluding Saturday, Sunday and
holidays, from conclusion of the above mentioned Second Step
Meeting.
10-E Step three
1. Providing no satisfactory agreement is reached in Step
Two, a meeting will be arranged within thirty (30) days
between the Vice President, Human Resources of Steel and the
Staff Representative of the Union. Steel's decision will be
submitted to the Union Staff Representative in writing
within thirty (30) working days of the meeting.
10-F Step Four/Arbitration
1. If the Union Staff Representative does not accept
Steel's Vice President, Human Resources answer to the
grievance as a satisfactory settlement, then the Staff
Representative will notify the Vice President, Human
Resources within thirty (30) days of the postmark on the
envelope in which contained the Third Step Answer.
2. The parties may jointly or separately petition the
Federal Mediation Service to submit a panel from which an
Arbitrator will be selected by the parties either by
mutually agreeing or by alternately striking names from the
list, and the last remaining name being the Arbitrator to
hear the case.
3. The decision of the Arbitrator will be final and
binding on matters properly before him and he shall render
his decision within thirty (30) days of the close of the
arbitration hearing unless otherwise agreed on by Steel and
Steelworkers. Steel and Steelworkers agree to share equally
the cost and expenses of the Arbitrator, but fees and
expenses, if any, of representatives and witnesses shall be
borne by the party engaging or calling the same.
10-G Grievance Person
1. For purposes of this Section, a Grievance Person will
be an employee of Steel selected by the Steelworkers. The
Local Union may approve not less than five (5) and not more
than seven (7) Grievance Committeemen.
10-H Time Limits
1. Time limits may be extended by mutual Agreement between
the Union and Steel.
10-I Out-of-Line Exception
1. The parties agree to make an out-of-line exception for
discharge grievances, if after ninety (90) days from date of
discharge, no resolution has occurred. The next Arbitrator
selected at that point will be for the out-of-line discharge
case. However, should the Union decide not to make the out-
of-line exception it will waive rights to any potential back-
pay award beyond the day a discharge is bypassed in favor of
a non-discharge case.
Section 11 - NO STRIKE - NO LOCK-OUT
11-A No Strike
1. Steelworkers agree there shall be no strikes, work
stoppages or slow downs during the life of this Agreement or
any extension thereof.
11-B No Lock-out
1. Steel will not lock-out any employee during the terms
of this Agreement.
11-C Remedy for Violation
1. Steel shall have the right to discipline up to and
including discharge any employee who violates paragraph A.
Any disciplinary action meted out or imposed by Steel
hereunder shall be subject to the grievance or arbitration
procedure of this Agreement, including arbitration to the
extent only of determining the fact as to whether an
employee violated paragraph A. A grievance against
disciplinary action taken by Steel hereunder must be filed
in writing with Steel within forty-eight (48) hours after
such discipline is imposed.
2. The parties further agree that in the event of an
alleged violation of paragraph A above, Steel (in addition
to seeking any other legal, equitable, administrative,
judicial or contract remedies available to it) may if it
desires immediately submit the issue arising therefrom to an
Arbitrator to be furnished and chosen by Steel's Attorney
and the Union from the Huntington area to constitute the
arbitration panel and the third member appointed by mutual
agreement of the parties. The arbitration hearing shall be
conducted within twenty-four (24) hours (or as soon
thereafter as is possible) after the occurrence of the
alleged violation. If a majority of the arbitration panel
finds that the Agreement has been violated, the arbitration
panel shall order that the party or parties in violation
cease and desist from such conduct and said order shall
issue at the conclusion of the arbitration hearing.
Section 12 - LETTERS OF AGREEMENTS
12-A Letters
The following letters of agreement are to be
incorporated and made part of this working Agreement
for it's term:
1. Steel will provide the Union with written
communications when it pertains to the hiring, lay-off,
recall, termination or promotions to a non-Bargaining Unit
position of a Bargaining Unit employee.
2. All current employees seniority has been ranked in
accordance with their I.D. Number. Employee's I.D. Numbers
have been established, agreed to by the parties and made
part of the Agreement, and shall be known and referred to as
the "Employee's Seniority List". This seniority list cannot
be changed unless mutually agreed to by the parties or as a
result of a grievance or arbitration settlement.
(a) This list is to be used for seniority purposes only and
will have no bearing on Steel"s accounting records.
3. Any disciplinary action procedures taken against all
current active employee's prior to June 7, 1993, will not be
held or raised against them in any future disciplinary
action or procedure.
4. The parties agree to the contents of their joint letter
dated 6/17/88, pertaining to the Melt Shop "Onerous
Scheduling" Agreement. The only change is the $1.00 an hour
additive to a $1.00 an hour base rate change during the time
that rate is being paid.
5. Effective June 7, 1999, employee's assigned to a
rotating shift schedule (20 turn operation) shall receive an
additive of $1.00 per hour base rate change.
6. Effective June 21, 1999 each employee may take two (2)
personal days with pay per year (June 21 to June 21) at
their base wage rate, provided they give their Supervisor at
least twenty-four (24) hours advance notice, and it is
approved.
7. Effective July 1, 1999 employee's who have perfect
attendance during a calendar year shall receive Special
Perfect Attendance Awards as follows:
1st Qtr $50.00
2nd Qtr $50.00
3rd Qtr $50.00
4th Qtr $50.00
All 4 Quarters + $300.00
(a) For the 1999 year, it will be possible to earn
a total of 2 quarters of $50.00 awards. Perfect
attendance for both quarters will earn an
additional $150.00 bonus added, for a possible
total for 1999 of $250.00
(b) Perfect attendance shall be maintained even
though time is missed for the following:
Approved Union business
Approved vacations
Unscheduled contractual holidays
Jury duty
Bereavement of funeral leave
Mandatory Military Reserve Duty
Subpoenaed Witness
Personal Day
FMLA
Section 13 - TERMINATION DATES
13-A Length of Agreement
1. This Agreement dated June 7, 1999, shall supersede that
Agreement between the parties made and entered into June 10,
1996 which expired, by joint Agreement, at 4:00 p.m. on June
4, 1999. This Agreement shall continue in full force and
effect until June 7, 2002, at 4:00 p.m., inclusive, and
thereafter it shall be considered automatically renewed for
successive periods of twelve (12) months unless at least
sixty (60) days prior to the end of the expiration date or
any twelve (12) month effective period either party shall
serve written notice upon the other that it desires
cancellation, revision or modification of any provision or
provisions of this Agreement. In the event, the parties
shall attempt to reach an agreement with respect to the
proposed change or changes, and at least forty-five (45)
days prior to the expiration date of the Agreement, meetings
to consider such changes shall be held by the parties. In
the event the parties do not reach a written agreement by
the expiration date in the particular year, as provided for
herein, then this Agreement shall in all respects be deemed
void and terminated. The parties hereto by written
agreement may extend said period for the purpose of reaching
a new Agreement.
2. The USWA will not strike and Steel will not Lockout
during the term of this Agreement or any extension thereof.
13-B VEBA
1. The parties agree to an annual VEBA Opener during the
second and third year of this Agreement. The purpose of the
opener is for the parties to make decisions pertaining to
the VEBA contribution (however, in no event will the total
contribution exceed the VEBA limitations described in
Section 9-E) or, in the alternative, a special non-VEBA
employee distribution.
Section 14 - LIGHT DUTY
14-A Light Duty Assignment
1. Any employee who becomes incapacitated may be assigned
the duties or modified duties of any position that he or she
can perform within the restrictions that has been placed
upon him or her by the Medical Community. If Steel should
elect, at their expense, to have an employee evaluated to
determine the extent of injury or illness, and/or to
determine what restrictions if any may apply to his/her
ability to return to work, a specialist within the field of
the employee's treating physician will be utilized.
2. Also, it must be noted that an employee can be assigned
on certain excluded positions, such as: telephone operator,
messenger, guards, watchmen and etc. while employee is
incapacitated on light duty.
Section 15 - LABOR/MANAGEMENT
15-A The parties agree to establish a joint Labor/Management
Committee for the purpose of discussing and resolving
issues brought before it by any member of the
committee. It is agreed that Steel's Plant Manager and
the USWA District #8's Director are members of the
joint committee.
15-B It is understood that the committee may not make
decisions or resolutions contrary to specific contract
language unless it is reduced to writing and signed by
the appropriate Steel and USWA Representatives.
Section 16 - EDUCATION AND/OR TRAINING PROGRAMS
16-A Training Program
1. It is Steel's intent and desire, and hereby obligates
itself, to develop and implement a training program for
employee's so they can increase their knowledge, ability and
expertise to enhance their performance of duties within
their assigned group.
16-B Education
1. Steel will pay for pre-authorized job related
training/education that supports an employee's performance
in his work related duties.
Section 17 - DRUG AND ALCOHOL PROCEDURE
17-A Procedure
1. When a member of Supervision and the Director of Safety
and Environmental health agree to send an employee who is
impaired for a drug and alcohol test and the result is
positive, the employee will be offered the opportunity for
treatment. Before an employee is sent for a drug and
alcohol test, the member of Supervision and the Director of
Safety and Environmental health along with the alleged
impaired employee and a Union Committeeman will meet prior
to the employee being sent for the drug and alcohol test.
An employee who refuses treatment shall be terminated. An
employee who returns from treatment shall sign a one year
last chance agreement written by the Company.
Section 18 - UNION SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized
Representatives on the 7th day of June 1999.
SIGNATURE PAGE
FOR
UNITED STEELWORKERS OF AMERICA
INTERNATIONAL UNION:
___________________________________
Dallas Elswick-Staff Representative
Section 19 - STEEL SIGNATURES
SIGNATURE PAGE
FOR
STEEL OF WEST VIRGINIA, INC.
______________________________________ June 7, 1999
Bruce Groff
Vice President, Human Resources
______________________________________ June 7, 1999
Richard J. Shaw
Melt Shop Superintendent
Section 20
A. Plant Rules
1. Report for work physically and mentally capable of
performing the job.
2. Report to work regularly and on time for your assigned
work schedule.
3. Follow the assignments and directions of your
Supervisor and perform your share of the team's work in an
acceptable and cooperative manner.
4. Treat all equipment, tools and plant facilities used in
a careful and proper manner.
5. Respect the rights of others, be truthful and treat
fellow employees and all visitors with human dignity.
6. Obey all safety rules and wear or use proper safety
apparel and devices.
Section 21
A. Groups
1. Melt/Cast Group
2. #1 Mill Group
3. #1 Finish Group
4. #2 Mill/Finish Group
5. Fabricating Group
6. Cut-to-length Group (#11, #12 and #13 buildings only)
7. Maintenance/Machine Shop Group
8. Roll Turning Group
EXHIBIT NO. 27
FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary information extracted from the 3rd Quarter
Consolidated Balance Sheet and Statement of Earnings and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 32,017,569
<SECURITIES> 10,985,409
<RECEIVABLES> 48,288,300
<ALLOWANCES> 0
<INVENTORY> 60,910,323
<CURRENT-ASSETS> 156,708,461
<PP&E> 241,447,772
<DEPRECIATION> 78,907,852
<TOTAL-ASSETS> 336,073,434
<CURRENT-LIABILITIES> 46,223,953
<BONDS> 127,668,568
0
0
<COMMON> 3,416,566
<OTHER-SE> 126,776,152
<TOTAL-LIABILITY-AND-EQUITY> 336,073,434
<SALES> 270,621,431
<TOTAL-REVENUES> 270,621,431
<CGS> 216,127,067
<TOTAL-COSTS> 216,127,067
<OTHER-EXPENSES> 23,308,243
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,336,664
<INCOME-PRETAX> 25,849,457
<INCOME-TAX> 10,369,828
<INCOME-CONTINUING> 15,479,629
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,479,629
<EPS-BASIC> 1.40
<EPS-DILUTED> 1.39
</TABLE>
