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, 2000
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, 2000.
10,915,063 Shares outstanding
ROANOKE ELECTRIC STEEL CORPORATION
FORM 10-Q
CONTENTS
Page
1. Part I - Financial Information 3 - 14
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 - 9
e. Independent Accountants' Report 10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 11 - 13
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
2. Part II - Other Information 15
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
3. Signatures 16
4. Exhibit Index pursuant to Regulation S-K 17
5. Exhibits
b. Financial Data Schedule 18
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Balance Sheets
ASSETS
(Unaudited)
July 31, October 31,
2000 1999 *
CURRENT ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 11,810,059 $ 33,286,934
Investments 12,157,414 11,772,902
Accounts receivable, net of allowances of
$2,435,095 in 2000 and $2,000,327 in 1999 54,110,896 57,692,504
Inventories 82,069,665 64,525,619
Prepaid expenses 1,714,798 1,476,561
Deferred income taxes 5,879,314 5,879,314
Total current assets 167,742,146 174,633,834
PROPERTY, PLANT AND EQUIPMENT
Land 8,077,943 8,077,943
Buildings 41,359,320 40,816,558
Other property and equipment 195,061,697 189,012,488
Assets under construction 7,746,065 2,135,854
Total 252,245,025 240,042,843
Less--accumulated depreciation 90,502,574 78,530,036
Property, plant and equipment, net 161,742,451 161,512,807
GOODWILL 14,880,957 15,488,343
OTHER ASSETS 1,263,166 1,110,828
TOTAL ASSETS $ 345,628,720 $ 352,745,812
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 15,036,469 $ 15,034,131
Accounts payable 22,273,168 22,821,864
Dividends payable 1,091,506 1,102,579
Employees' taxes withheld 572,217 530,139
Accrued profit sharing contribution 3,747,927 6,353,611
Accrued wages and expenses 10,290,489 11,138,478
Accrued income taxes 676,242 411,874
Total current liabilities 53,688,018 57,392,676
LONG-TERM DEBT
Notes payable 127,669,663 138,944,689
Less--current portion 15,036,469 15,034,131
Total long-term debt 112,633,194 123,910,558
DEFERRED INCOME TAXES 31,313,236 30,902,712
OTHER LIABILITIES 3,577,628 3,381,735
STOCKHOLDERS' EQUITY
Common stock--no par value--authorized 20,000,000 shares,
issued 12,188,177 shares in 2000 and 12,298,902 in 1999 3,968,765 3,699,678
Retained earnings 141,265,747 134,276,321
Total 145,234,512 137,975,999
Less--treasury stock, 1,273,114 shares -- at cost 817,868 817,868
Total stockholders' equity 144,416,644 137,158,131
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 345,628,720 $ 352,745,812
* Restated for change in method of accounting for certain inventories.
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Statements of Earnings
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
2000 1999 * 2000 1999 *
<S> <C> <C> <C> <C> <C> <C>
SALES $ 94,409,174 $ 95,879,063 $ 285,527,043 $ 270,621,431
COST OF SALES 78,098,845 76,760,918 234,411,410 215,846,144
GROSS EARNINGS 16,310,329 19,118,145 51,115,633 54,775,287
OTHER OPERATING EXPENSES (INCOME)
Administrative 6,674,808 6,701,636 19,813,960 19,435,077
Interest, net 1,853,661 2,042,047 5,139,425 5,336,664
Profit sharing 1,417,595 2,082,450 4,963,419 5,732,711
Antitrust litigation settlement --- (1,859,545) --- (1,859,545)
Total 9,946,064 8,966,588 29,916,804 28,644,907
EARNINGS BEFORE INCOME TAXES 6,364,265 10,151,557 21,198,829 26,130,380
INCOME TAX EXPENSE 2,618,224 4,054,900 8,673,046 10,485,828
NET EARNINGS $ 3,746,041 $ 6,096,657 $ 12,525,783 $ 15,644,552
Net earnings per share of common stock:
Basic $ 0.34 $ 0.55 $ 1.14 $ 1.41
Diluted $ 0.34 $ 0.55 $ 1.14 $ 1.40
Cash dividends per share of common stock $ 0.10 $ 0.10 $ 0.30 $ 0.29
Weighted average number of
common shares outstanding:
Basic 10,925,933 11,084,043 10,966,700 11,082,259
Diluted 10,953,745 11,160,008 11,026,282 11,147,889
* Restated for change in method of accounting for certain inventories.
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
July 31,
2000 1999 *
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net earnings $ 12,525,783 $ 15,644,552
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Deferred compensation liability 160,458 316,249
Postretirement liabilities 235,435 240,337
Depreciation and amortization 12,797,132 11,235,135
(Gain) loss on sale of investments and property, plant and equipment 15,170 (29,382)
Deferred income taxes 410,524 1,616,000
Changes in assets and liabilities which provided
(used) cash, exclusive of changes shown separately (17,896,598) 6,419,636
Net cash provided by operating activities 8,247,904 35,442,527
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (12,361,927) (9,900,358)
Proceeds from sale of property, plant and equipment 8,144 315,553
(Purchase) sale of investments (410,240) 712,390
Acquisition of Steel of West Virginia, Inc. --- (67,921,073)
Other (207,387) (223,849)
Net cash used in investing activities (12,971,410) (77,017,337)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends (3,286,044) (3,206,486)
Increase (decrease) in dividends payable (11,073) 48,266
Proceeds from exercise of common stock options 269,087 558,438
Payment of long-term debt (11,275,026) (88,674,321)
Proceeds from long-term debt --- 150,000,000
Repurchase of common stock (2,250,313) (2,086,750)
Loan costs --- (513,793)
Interest rate reverse swap settlement from lender (200,000) 1,300,000
Net cash provided by (used in) financing activities (16,753,369) 57,425,354
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (21,476,875) 15,850,544
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 33,286,934 16,167,025
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,810,059 $ 32,017,569
CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED
(USED) CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY
(Increase) decrease in accounts receivable $ 3,581,608 $ 9,902,347
(Increase) decrease in refundable income taxes --- 2,036,144
(Increase) decrease in inventories (17,544,046) 5,801,419
(Increase) decrease in prepaid expenses (238,237) 537,288
Increase (decrease) in accounts payable (548,696) (7,739,160)
Increase (decrease) in employees' taxes withheld 42,078 (230,750)
Increase (decrease) in accrued profit sharing contribution (2,605,684) (1,443,861)
Increase (decrease) in accrued wages and expenses (847,989) (1,183,852)
Increase (decrease) in accrued income taxes 264,368 (1,259,939)
Total $ (17,896,598) $ 6,419,636
*Restated for change in method of accounting for certain inventories.
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
ROANOKE ELECTRIC STEEL CORPORATION
Notes to Consolidated Financial Statements
July 31, 2000
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,
2000 and the results of operations for the three months and nine
months ended July 31, 2000 and 1999 and cash flows for the nine
months ended July 31, 2000 and 1999.
Note 2. Effective November 1, 1999, the Company changed its inventory
costing method for a fabricating subsidiary's raw material (steel
bar) inventory from LIFO to FIFO. One reason for the change was to
bring this portion of inventory in line with all other inventories
reported consistently throughout the Company on the FIFO method.
Further, due to fluctuating steel prices, the move to FIFO reporting
will provide for accounting simplification.
The effect of the change in accounting principle was to increase net
earnings reported for the 2000 third quarter by $114,923, or $.00
per basic share, and to reduce net earnings for the nine months
ended July 31, 2000 by $56,765, or $.01 per basic share. The change
has been applied to prior years by retroactively restating the
financial statements. The effect of this restatement was to
increase retained earnings as of October 31, 1999 by $616,590, and
to increase net earnings for the quarter ended July 31, 1999 by
$248,827, or $.02 per basic share, and to increase net earnings for
the nine months ended July 31, 1999 by $164,923, or $.01 per basic
share.
Inventories include the following major classifications:
(UNAUDITED)
July 31, October 31,
2000 1999 *
Scrap steel $ 7,480,977 $ 5,090,322
Melt supplies 3,832,177 3,520,825
Billets 16,708,279 14,477,006
Mill supplies 3,466,575 4,274,660
Work-in-process 7,449,280 4,234,402
Finished steel 43,132,377 32,928,404
Total inventories $ 82,069,665 $ 64,525,619
* Restated for change in method of accounting for certain
inventories.
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. 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 adopted SFAS No. 131 at the close of fiscal year 1999.
The Company's business consists of one industry segment, which is
the extracting of scrap metal from discarded automobiles and the
manufacturing, fabricating and marketing of merchant steel bar
products, specialty steel sections, reinforcing bars, open-web steel
joists and billets. The industry segment consists of three classes
of products - merchant steel products and specialty steel sections,
fabricated bar joists and reinforcing bars and billets.
<TABLE>
<CAPTION>
Financial Information Relating to Classes of Products
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
July 31 July 31
2000 1999 2000 1999
Sales to unaffiliated
customers:
Merchant steel and
<S> <C> <C> <C> <C>
specialty steel sections $ 57,423,207 $ 56,685,103 $ 174,590,223 $ 155,842,315
Bar joists and rebar 29,316,178 31,073,918 90,501,783 90,725,630
Billets 7,669,789 8,120,042 20,435,037 24,053,486
Total consolidated sales $ 94,409,174 $ 95,879,063 $ 285,527,043 $ 270,621,431
</TABLE>
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) was 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, guardrail posts and mining equipment.
The acquisition has been accounted for as a purchase. Accordingly,
the results of operations and cash flows are reflected in the
consolidated financial statements from the date of acquisition, and
the acquired assets and liabilities are included in the accompanying
October 31, 1999 consolidated balance sheet at values based on a
purchase price allocation, rendered through appraisals and other
evaluations. The purchase price allocation is summarized below:
December 16, 1998
Accounts and other receivables $ 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)
Net purchase price $ 67,921,073
Unaudited pro forma consolidated results of operations for the nine
month period ended July 31, 1999, assuming the SWVA acquisition had
occurred at the beginning of the period, is as follows:
(UNAUDITED)
Nine Months Ended
July 31, 1999 *
Sales $ 282,780,542
Net earnings $ 14,423,760
Net earnings per share of common stock:
Basic $ 1.30
Diluted $ 1.29
* Restated for change in method of accounting for certain
inventories.
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
period presented or the future results of the combined operations.
Note 7. Supplemental cash flow information:
(UNAUDITED)
Nine Months Ended
July 31,
2000 1999
Cash paid during the period for:
Interest $ 6,828,131 $ 5,917,187
Income taxes $ 7,998,155 $ 8,093,623
Detail of acquisition:
Fair value of assets acquired $ 151,165,819
Liabilities assumed (83,244,746)
Net cash paid for acquisition $ 67,921,073
Note 8. In June 1998, SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", was issued, establishing standards for
accounting and reporting derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. The Company
will be required to adopt SFAS No. 133 in the first quarter of
fiscal year 2001 and based on current evaluations the Company does
not foresee any material impact on its consolidated financial
statements.
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, 2000, and the related consolidated statements of earnings and cash flows
for the three-month and nine-month periods ended July 31, 2000 and 1999.
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 auditing standards generally accepted in
the United States of America, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Roanoke Electric Steel Corporation and subsidiaries as of October 31, 1999,
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 19, 1999, 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, 1999
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
As discussed in Note 2 to the consolidated financial statements, the
Corporation changed its method of accounting for certain inventories.
DELOITTE & TOUCHE LLP
Winston-Salem, North Carolina
September 1, 2000
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:
<TABLE>
<CAPTION>
Comparison of Increases (Decreases)
Three Months Ended Nine Months Ended
July 31, July 31,
2000 1999 * 2000 1999 *
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Sales (1,469,889) (1.5) 14,905,612 5.5
Cost of Sales 1,337,927 1.7 18,565,266 8.6
Administrative Expenses (26,828) (0.4) 378,883 1.9
Interest Expense (188,386) (9.2) (197,239) (3.7)
Profit Sharing Expense (664,855) (31.9) (769,292) (13.4)
Antitrust Settlement Income (1,859,545) ** (1,859,545) **
Earnings before Income Taxes (3,787,292) (37.3) (4,931,551) (18.9)
Income Tax Expense (1,436,676) (35.4) (1,812,782) (17.3)
Net Earnings (2,350,616) (38.6) (3,118,769) (19.9)
** Cannot be calculated
* Restated for change in method of accounting for certain inventories.
</TABLE>
Sales for the nine months increased significantly, due mainly to the
acquisition of Steel of West Virginia, Inc. ("SWVA"), on December 16, 1998.
Sales for the current year included SWVA's revenues for the entire period,
whereas sales for last year included only the portion of SWVA's revenues
from the date of acquisition. Improved selling prices for merchant bar
products and billets favorably impacted sales for the nine months. However,
sales were negatively affected by a substantial decrease in tons shipped of
billets, together with a decline in selling prices for fabricated products
and reduced bar product shipments, while shipment levels for fabricated
products were flat. The decline in sales for the quarter was primarily the
result of significantly lower billet shipments, reduced shipment levels for
fabricated products, and a drop in selling prices for both specialty and
fabricated products; eventhough, selling prices were higher for billets and
merchant bar products, while shipment levels increased for bar and specialty
products. For the quarter, specialty steel shipments increased, in spite of
reduced demand and shipments within a major market due to improvements in
other markets. The reduced shipments of these higher priced products and
price cutting by competitors resulted in the lower average selling prices
for specialty steel products. A dramatic change in market conditions for
billets brought diminished demand and declines in tons shipped of 26% for
the nine months and 16% for the quarter. Billet selling prices increased in
both periods with sharp rises in scrap prices which normally trigger changes
in billet pricing. Average selling prices for bar products increased for
both periods compared due to price increases during prior periods. However,
average selling prices were negatively affected by sharp reductions in list
prices near the end of the quarter as a result of increased foreign and
domestic competition. The increased competition and price uncertainty
reduced order entry, backlogs and shipments for the nine months. The
increased shipments for the quarter resulted from further reducing backlogs.
The decline in fabricated product selling prices, for both periods compared,
was caused by increased competition within the commercial construction
industry; eventhough, business conditions continued strong and backlogs
remained high. Fabricated product shipments decreased for the quarter,
hampered both by shortages of structural steel components and by wet weather
at construction sites. Cost of sales increased for the nine months
compared, due mainly to the impact of SWVA costs and an increase in the cost
of scrap steel, our main raw material. Cost of sales increased for the
three months compared, primarily as a result of higher scrap steel and other
raw material costs, together with the increased shipments of merchant bar
and specialty products. Gross profit as a percentage of sales declined from
20.2% to 17.9% and from 19.9% to 17.3% for the nine month and three month
periods, respectively. These lower margins, for both periods compared,
resulted primarily from higher scrap costs and lower specialty product
selling prices, which more than offset higher bar and billet selling prices
and the effects of increased production levels on costs. Both gross profit
and net earnings declined for both periods compared, due mainly to reduced
margins for all product classes. Administrative expenses increased for the
nine months, mainly as a result of the inclusion of SWVA's expenses in 2000
covering a longer period than in the 1999 results. For the three months,
administrative expenses declined, mainly as a result of reductions in
expenses such as insurance, executive an other compensation, and computer
costs. Administrative expenses, as a percentage of sales, dropped from 7.2%
to 6.9% for the nine month period, but during the three month period
increased from 7.0% to 7.1%. Interest expense decreased in both periods
compared, primarily due to higher interest income, reduced average
borrowings and lower average interest rates, which more than offset lower
capitalized interest. 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 declined as a result of lower
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 is higher in both 2000 periods compared due to
nondeductible amortization of the excess investment in SWVA net assets.
Working capital decreased $3,187,030 during the period to $114,054,128
mainly as a result of capital expenditures, dividends, debt maturities and
repurchases of common stock amounting to $12,361,927, $3,286,044,
$11,275,026 and $2,250,313, respectively, which exceeded working capital
provided from operations. The current ratio of 3.1 to 1 and the quick ratio
of 1.5 to 1 both indicate very strong liquidity and a healthy financial
condition. In addition, cash, cash equivalents and investments total
$23,967,473. Due to the new credit facilities in conjunction with the SWVA
acquisition, current debt maturities are approximately $15,000,000 annually,
which will affect working capital and future liquidity. Our unused
$30,000,000 revolving credit facility combined with earnings and the cash
and investments mentioned above should provide the liquidity and capital
resources necessary to remain competitive, fund operations and meet required
debt retirement.
At July 31, 2000, there were commitments for the purchase of property, plant
and equipment approximating $4,800,000, a significant portion of which is
for final payments and retainage's on SWVA's #2 mill state-of-the art
shearing and gauging equipment and finishing stands, in operation as the
fourth quarter began, with anticipated improvements in rolling mill
productivity and efficiency. These commitments will also affect working
capital and future liquidity and will be financed from internally generated
funds, the revolving credit facility and existing cash reserves.
During the period, the ratio of debt to equity decreased to 1.4 to 1, and
the percentage of long-term debt to total capitalization declined to 43.8%,
due to current maturities of $11,275,026 reducing long-term debt to
$112,633,194. Stockholders' equity increased to $144,416,644 mainly due to
net earnings of $12,525,783 exceeding dividends of $3,286,044 and common
stock repurchases of $2,250,313.
Near the end of the quarter, a major billet customer filed for
reorganization under the bankruptcy code. There was insufficient
information to assess the magnitude of the potential bad debt expense;
however, reserves were adequate to cover losses. Amounts due from the
customer were $2.6 million before various recoveries.
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and
development activities and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the
Company notes that a variety of factors could cause the Company's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the Company's forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development and results of the Company's business include economic and
industry conditions, availability and prices of supplies, prices of steel
products, competition, governmental regulations, interest rates, inflation,
labor relations, environmental concerns, and others.
The Company successfully completed its efforts to ensure Year 2000 readiness
for all of its critical systems. As a result, the Company experienced no
interruption in its operations during the transition to the Year 2000. The
cost of the Company's Year 2000 efforts totaled approximately $590,000.
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 31,1999, 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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
To the best of Registrant's information and belief no new legal
proceedings were instituted against Registrant or any of its
wholly-owned subsidiaries during the period covered by this report
and there was no material development in or termination of the
legal proceedings reported earlier by the Registrant on Form 10-K
for fiscal year ended October 31, 1999 and Forms 10-Q for the
quarters ended January 31, 2000 and April 30, 2000, as previously
filed with the Commission.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
(27) Financial Data Schedule
b. Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
Items 2, 3, 4 and 5 are omitted because the information required by these
items is not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROANOKE ELECTRIC STEEL CORPORATION
Registrant
Date September 1, 2000 Donald G. Smith
Donald G. Smith, Chairman, President,
Treasurer and Chief Executive Officer
(Principal Financial Officer)
Date September 1, 2000 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
