<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Roanoke Electric Steel Corp
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO]
ROANOKE ELECTRIC STEEL CORPORATION
P.O. BOX 13948
ROANOKE, VIRGINIA 24038-3948
December 27, 2000
Dear Shareholder:
The Annual Meeting of Shareholders of Roanoke Electric Steel
Corporation will be held at 10:00 a.m. on Tuesday, February
20, 2001, in the Auditorium of the American Electric Power
Company Building, 40 Franklin Road, S.W., Roanoke, Virginia.
Enclosed you will find the formal Notice, Proxy and Proxy
Statement detailing the matters which will be acted upon.
We urge you to sign and date the proxy, and return it as
soon as possible in the enclosed postage-paid envelope. Should
you decide to attend the meeting and vote in person, you may
withdraw your proxy.
We appreciate your continued interest and investment in Roa-
noke Electric Steel Corporation.
Sincerely,
/s/ Donald G. Smith
Donald G. Smith
Chairman and CEO
<PAGE>
NOTICE OF 2001 ANNUAL MEETING OF SHAREHOLDERS
To The Shareholders of Roanoke Electric Steel Corporation:
NOTICE is hereby given that the 2001 Annual Meeting of
Shareholders of Roanoke Electric Steel Corporation (the "Com-
pany") will be held in the Auditorium of the American Electric
Power Company Building, 40 Franklin Road, S.W., Roanoke, Vir-
ginia, on Tuesday, February 20, 2001, at 10:00 a.m., local
time, for the following purposes:
1. To elect three Class B directors to serve until the An-
nual Meeting of Shareholders in 2004, and, in the case of each
director, until his successor is duly elected and qualifed;
and
2. To transact such other business as may properly come be-
fore the Meeting, or any adjournments thereof.
Only shareholders of record at the close of business on De-
cember 12, 2000, are entitled to notice of and to vote at the
Annual Meeting, or any adjournments thereof.
To assure that your shares are represented at the Annual
Meeting, please complete, date, sign and mail promptly the en-
closed proxy card in the return envelope provided. Your proxy
is revocable at any time prior to its exercise, and if you are
present at the meeting, you may withdraw your proxy and vote
in person if you so desire.
By Order of the Board of Directors
/s/ Thomas J. Crawford
Thomas J. Crawford
Vice President Administration
And Secretary
December 27, 2000
<PAGE>
[LOGO]
Roanoke Electric Steel Corporation
P.O. Box 13948
Roanoke, Virginia 24038-3948
PROXY STATEMENT
2001 ANNUAL MEETING OF SHAREHOLDERS
The solicitation of the enclosed 2001 proxy is made by and on behalf of the
Board of Directors (the "Board") of Roanoke Electric Steel Corporation (the
"Company") to be used at the 2001 Annual Meeting of Shareholders to be held on
Tuesday, February 20, 2001, at 10:00 a.m., local time, in the Auditorium of
the American Electric Power Company Building, 40 Franklin Road, S.W., Roanoke,
Virginia, and at any adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. The approximate mailing
date of the Proxy Statement and the accompanying proxy is December 27, 2000.
The cost of the solicitation of proxies will be borne by the Company. Solic-
itations will be made only by the use of the mails, except that, if necessary,
officers, directors and regular employees of the Company, or its affiliates,
may make solicitations of proxies by telephone, telegram or personal calls. No
additional compensation will be paid by the Company to such officers, direc-
tors and regular employees for such solicitation assistance. It is contem-
plated that brokerage houses and nominees will be requested to forward the
proxy solicitation material to the beneficial owners of the stock held of rec-
ord by such persons, and the Company will reimburse them for reasonable
charges and expenses in this connection.
All properly executed proxies delivered pursuant to this solicitation will
be voted at the Annual Meeting in accordance with any instructions thereon.
Any person signing and mailing the enclosed proxy may, nevertheless, revoke
the proxy at any time prior to the actual voting thereof by attending the An-
nual Meeting and voting in person, by submitting a signed proxy bearing a
later date or by written notice of revocation of the proxy sent to the Corpo-
rate Secretary of the Company, P.O. Box 13948, Roanoke, Virginia 24038-3948.
The Annual Report to Shareholders, including the financial statements for
the year ended October 31, 2000, reported upon by Deloitte & Touche LLP, is
being mailed concurrently with this Proxy Statement, but should not be consid-
ered proxy solicitation material.
As of December 12, 2000, the Company had outstanding 10,901,063 shares of
common stock, each of which is entitled to one vote at the Annual Meeting.
Only shareholders of record at the close of business on December 12, 2000,
will be entitled to vote at the Annual Meeting or any adjournments thereof.
A majority of votes entitled to be cast on matters to be considered at the
Annual Meeting constitutes a quorum. If a share is represented for any purpose
at the Annual Meeting, it is deemed to be present for purposes of establishing
a quorum. Abstentions and shares held of record by a broker or its nominee
("Broker Shares") which are voted on any matter are included in determining
the number of votes present or represented at the Annual Meeting. Conversely,
Broker Shares that are not voted on any matter will not be included in deter-
mining whether a quorum is present. If a quorum is established, directors will
be elected by a plurality of the votes cast by shares entitled to vote at the
Annual Meeting. Votes that are withheld and Broker Shares that are not voted
will not be included in determining the number of votes cast.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of December 12, 2000, information with re-
spect to the known beneficial owners of more than five percent of the out-
standing common stock of the Company. Unless otherwise noted in the footnotes
to the table, the named beneficial owners have sole voting and investment
power with respect to all shares of common stock shown as beneficially owned
by them.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent
of Beneficial Beneficially of
Owner Owned Class
---------------- ---------------- -------
<S> <C> <C>
The Bass Management Trust, 600,000/1/ 5.5%
Wesley Guylay Capital Management, L.P.
and Wesley Guylay Capital Management III, L.P.
c/o W. Robert Cotham
201 Main Street, Suite 2600
Fort Worth, TX 76102
Dimensional Fund Advisors Inc. 839,199/2/ 7.7%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Sarah Hancock McClain 951,969 8.7%
3912 Bosworth Drive, S.W.
Roanoke, VA 24014
</TABLE>
--------
/1/Information is based on a Schedule 13G, dated June 30, 2000, reporting sole
voting and dispositive power as follows: The Bass Management Trust, 117,489
shares; Wesley Guylay Capital Management, L.P., 321,661 shares; and, Wesley
Guylay Capital Management III, L.P., 160,850 shares.
/2/Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor reg-
istered under Section 203 of the Investment Advisors Act of 1940, furnishes
investment advice to four investment companies registered under the Invest-
ment Company Act of 1940, and serves as investment manager to certain other
investment vehicles, including commingled group trusts. (These investment
companies and investment vehicles are the "Portfolios"). In its role as in-
vestment advisor and investment manager, Dimensional possessed both voting
and investment power over 839,199 shares as of September 30, 2000. The
Portfolios own all securities reported in this statement, and Dimensional
disclaims beneficial ownership of such securities.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of December 12, 2000, certain information
regarding the beneficial ownership of the common stock of the Company by each
director and nominee, each named executive officer, and directors, nominees
and executive officers as a group. Unless otherwise noted in the footnotes to
the table, the named persons have sole voting and investment power with re-
spect to all outstanding shares of common stock shown as beneficially owned by
them.
<TABLE>
<CAPTION>
Name of Beneficial
Owner and Number of Shares of Common Stock Percent
Persons in Group Beneficially Owned of Class
------------------- ---------------------- --------
<S> <C> <C>
Frank A. Boxley 155,700/1/ 1.4%
George B. Cartledge, Jr. 103,792/2/ *
Thomas J. Crawford 41,322/3/ *
Timothy R. Duke 16,000/4/ *
Donald R. Higgins 55,302/5/ *
George W. Logan 383,600/6/ 3.5%
Charles I. Lunsford, II 20,245/7/ *
John E. Morris 51,947/8/ *
Thomas L. Robertson 28,225/9/ *
Donald G. Smith 202,861/10/ 1.8%
Paul E. Torgersen 23,500/11/ *
John D. Wilson 4,486/12/ *
All directors, nominees and
executive officers as a group
(12 persons) 1,086,980/13/ 9.8%
</TABLE>
--------
* Less than one percent.
/1/Includes 85,906 shares held in the name of Mr. Boxley's spouse and 3,000
shares which Mr. Boxley has the right to acquire through the exercise of
stock options.
/2/Includes 1,264 shares held in the name of Mr. Cartledge's spouse, 2,528
shares held in custodian accounts for the benefit of Mr. Cartledge's chil-
dren, 50,000 shares held by Grand Home Furnishings, Inc., of which Mr.
Cartledge is Chairman, and 3,000 shares which Mr. Cartledge has the right
to acquire through the exercise of stock options.
/3/Includes 17,000 shares which Mr. Crawford has the right to acquire through
the exercise of stock options.
/4/Includes 12,000 shares which Mr. Duke has the right to acquire through the
exercise of stock options.
/5/Includes 1,350 shares held in the name of Mr. Higgins' spouse and 18,300
shares which Mr. Higgins has the right to acquire through the exercise of
stock options.
/6/Includes 600 shares held in the name of Mr. Logan's spouse, 22,500 shares
held in a custodian account for the benefit of Mr. Logan's son, and 3,000
shares which Mr. Logan has the right to acquire through the exercise of
stock options.
/7/Includes 3,000 shares which Mr. Lunsford has the right to acquire through
the exercise of stock options.
/8/Includes 34,447 shares held in the name of Mr. Morris' spouse and 17,500
shares which Mr. Morris has the right to acquire through the exercise of
stock options.
/9/Includes 3,000 shares which Mr. Robertson has the right to acquire through
the exercise of stock options.
/10/Includes 134 shares held in the name of Mr. Smith's spouse and 73,125
shares which Mr. Smith has the right to acquire through the exercise of
stock options.
3
<PAGE>
/11/Includes 21,000 shares held in the name of Dr. Torgersen's spouse and
2,500 shares which Dr. Torgersen has the right to acquire through the ex-
ercise of stock options.
/12/Includes 3,000 shares which Dr. Wilson has the right to acquire through
the exercise of stock options.
/13/Includes 158,425 shares which directors and executive officers have the
right to acquire through the exercise of stock options.
Proposal No. 1 ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes (A, B and C)
with staggered three-year terms. The current term of office of the Class B di-
rectors expires at the 2001 Annual Meeting of Shareholders. The terms of the
Class C and A directors will expire in 2002 and 2003, respectively.
There are three Class B directors, Frank A. Boxley, Timothy R. Duke and
George W. Logan, each of whom has been nominated for reelection by the Board
of Directors.
It is the intention of the persons named as proxies, unless instructed oth-
erwise, to vote for the election of each of the three nominees set forth be-
low. Each nominee has agreed to serve if elected. If any nominee shall unex-
pectedly be unable to serve, the shares represented by all valid proxies will
be voted for the remaining nominees and such other person or persons as may be
designated by the Board. At this time, the Board knows of no reason why any
nominee might be unable to serve. The Class B nominees will serve for a three-
year term until the 2004 Annual Meeting and until their successors are elected
and qualified.
The Board of Directors recommends a vote FOR each of the nominees for Direc-
tors.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
The following information, including the principal occupation during the
past five years, is given with respect to the directors and nominees for elec-
tion to the Board at the 2001 Annual Meeting of Shareholders.
<TABLE>
<CAPTION>
Name, Age, Principal Occupation Director
and Certain Other Directorships Since
------------------------------- --------
NOMINEES FOR DIRECTOR
CLASS B
(Serving until 2004 Annual Meeting)
<S> <C>
Frank A. Boxley (67). President, Southwest Construction, Inc., a general 1993
contractor.
Timothy R. Duke (49). President and Chief Executive Officer, Steel of West 1999
Virginia, Inc. ("SWVA"), a wholly-owned subsidiary of the Company, since July
1997; President and Chief Operating Officer, SWVA, from October 1996 to July
1997; prior thereto, Vice President, Treasurer and Chief Financial Officer, SWVA.
George W. Logan (55). Chairman, Valley Financial Corporation, a holding company 1997
for Valley Bank, N.A., a general commercial and retail banking business.
Director, Valley Financial Corporation.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Principal Occupation Director
and Certain Other Directorships Since
------------------------------- --------
DIRECTORS CONTINUING IN OFFICE
CLASS A
(Serving until 2003 Annual Meeting)
<S> <C>
George B. Cartledge, Jr. (59). Chairman, Grand Home Furnishings, Inc. ("Grand"), a 1991
retailer of home and office furniture, since January 1999; prior thereto,
President, Grand.
Thomas L. Robertson (57). President and Chief Executive Officer, Carilion Health 1992
System, a regional provider of healthcare services. Director, RGC Resources, Inc.
Donald G. Smith (65). Chairman of the Board, President, Treasurer and Chief 1984
Executive Officer of the Company. Director, American Electric Power Company, Inc.
DIRECTORS CONTINUING IN OFFICE
CLASS C
(Serving until 2002 Annual Meeting)
Charles I. Lunsford, II (60). Retired since January, 1998. Prior thereto, 1978
Chairman, Chas. Lunsford Sons & Associates, a general insurance brokerage firm
and agency.
Paul E. Torgersen (69). Retired since January 2000. Prior thereto, President, 1986
Virginia Polytechnic Institute and State University.
John D. Wilson (69). Retired since May 1995. Prior thereto, President, Washington 1987
and Lee University.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES
Meetings of the Board
The Board of Directors held twelve meetings during fiscal 2000. All direc-
tors attended 75% or more of the total number of meetings of the Board and the
committees of the Board on which they served.
Director Compensation
Each director of the Company receives a $12,000 annual retainer plus $1,000
for each Board meeting attended. In addition, non-employee directors receive a
fee of $750 for each committee meeting attended. Directors not residing in Ro-
anoke, Virginia, are reimbursed for actual travel expenses to attend Board and
committee meetings.
On February 18, 1997, the Company implemented a Non-Employee Director Stock
Option Plan (the "Director's Plan"). The total underlying shares issuable pur-
suant to options granted to any individual non-employee director under the Di-
rector's Plan is limited to a maximum of 3,000 shares, with a maximum aggre-
gate of 25,000 shares issuable under the Director's Plan. Future non-employee
directors are eligible for participation in the Director's Plan. At October
31, 2000, each current non-employee director has received options to purchase
3,000 shares of Company common stock at the fair market value on date of
grant, with a term of ten years. To date, 24,000 shares of the maximum aggre-
gate shares pursuant to options have been granted to non-employee directors.
5
<PAGE>
Directors' Retirement Plan
The Board adopted, effective as of January 24, 1989, an unfunded directors'
retirement plan, whereby eligible directors of the Company will receive a
monthly benefit following retirement from the Board. A director is eligible
after five years of service as a director and will be paid an amount equal to
the retainer fee being paid to then current members of the Board for a period
corresponding in duration with the participant's years of service as a direc-
tor of the Company, or such longer or shorter period as the Board may deter-
mine. In all cases, payment of benefits will cease upon the death of the par-
ticipant.
Committees of the Board
The Board of Directors of the Company has standing Executive, Audit, Profit
Sharing Plan and Compensation and Stock Option Committees. The respective mem-
bership on and functions of such committees are set forth below. The Board has
no standing Nominating Committee.
The Executive Committee of the Board is composed of directors Smith (Chair-
man), Cartledge, Robertson and Torgersen. This Committee is authorized to act,
between meetings of the Board, in the place and stead of the Board, except
with respect to matters reserved for the Board by Virginia law or by resolu-
tion of the Board. The Executive Committee met twelve times in fiscal 2000.
The Audit Committee of the Board is composed of directors Robertson (Chair-
man), Logan and Torgersen. The functions of the Audit Committee include re-
viewing the accounting principles and procedures employed by the Company, re-
viewing annual and interim reports of the Company and the independent public
accountants of the Company, reviewing significant financial information, re-
viewing the Company's system of internal controls, reviewing all related party
transactions and recommending the selection of the independent public accoun-
tants. The Audit Committee met twice in fiscal 2000.
The Profit Sharing Plan Committee of the Board is composed of directors
Lunsford (Chairman) and Smith. The Committee meets quarterly to administer the
Employees' Profit Sharing Plan of the Company, including making amendments
thereto and issuing rulings or interpretations thereunder. The Profit Sharing
Plan Committee met four times in fiscal 2000.
The Compensation and Stock Option Committee of the Board is composed of di-
rectors Cartledge (Chairman), Boxley, Lunsford and Wilson. The Committee meets
as necessary to oversee the Company's compensation and benefit practices, rec-
ommend to the full Board the compensation arrangements for the Company's se-
nior officers, administer the Company's executive compensation plans and ad-
minister and consider awards under the Company's Employees' Stock Option Plan.
The Compensation and Stock Option Committee met twice in fiscal 2000.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table provides certain summary information for the fiscal
years ended October 31, 2000, 1999 and 1998 concerning the compensation of the
Company's Chief Executive Officer and each of the other executive officers of
the Company whose total annual compensation and bonus in fiscal 2000 exceeded
$100,000 (hereinafter referred to as the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Annual Compensation/1/ Awards
-------------------------- ------------
Securities
Underlying All Other
Name and Options Compensation
Principal Position Year Salary($) Bonus($)/2/ (#) ($)/4/
------------------------------ ---- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Donald G. Smith 2000 357,333 585,561 24,000 14,475
Chairman, President, 1999 303,083 940,620 24,000 26,627
Treasurer and CEO 1998 256,917 778,849 28,125 26,638
Donald R. Higgins 2000 153,000 182,988 6,000 12,714
Vice President-Sales 1999 138,000 293,944 6,000 24,807
1998 123,000 243,390 7,500 24,818
John E. Morris 2000 152,000 182,988 6,000 12,946
Vice President-Finance 1999 137,000 293,944 6,000 24,995
and Assistant Treasurer 1998 122,000 243,390 7,500 25,006
Thomas J. Crawford 2000 138,000 146,390 6,000 12,239
Vice President Administration 1999 123,000 235,155 6,000 24,244
and Corporate Secretary 1998 108,000 180,303 7,500 24,254
Timothy R. Duke/3/ 2000 265,667 185,319 7,000 8,712
President and CEO, 1999 212,875 217,715 7,000 285,859
Steel of West Virginia, Inc. 1998 -- -- -- --
</TABLE>
--------
/1/None of the Named Executive Officers received perquisites or other personal
benefits in excess of the lesser of $50,000 or 10% of the total of his sal-
ary and bonus reported in the above table.
/2/Represents incentive compensation paid according to the incentive compensa-
tion program, as described in the Compensation and Stock Option Committee
Report on Executive Compensation.
/3/Mr. Duke became executive officer upon his election to the Board of Direc-
tors of the Company on January 19, 1999, pursuant to terms of the acquisi-
tion of Steel of West Virginia, Inc., on December 16, 1998. Figures reflect
compensation since December 16, 1998.
/4/Includes for 2000 (i) vested contributions from the Profit Sharing Plan of
the Company and its subsidiaries, and (ii) employer paid insurance premi-
ums, respectively, for the Named Executive Officers as follows: Mr. Smith,
$11,707 and $2,768; Mr. Higgins, $11,650 and $1,064; Mr. Morris, $11,607
and $1,339; Mr. Crawford, $11,564 and $675; and Mr. Duke, $8,250 and $462.
7
<PAGE>
The following table sets forth information regarding stock options granted
to each of the Named Executive Officers during the fiscal year ended October
31, 2000.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Grant Date
Individual Grants Value
---------------------------------------------------- -----------
% of Total
Number of Options Market
Securities Granted to Exercise Price on
Underlying Employees or Base Date of Grant Date
Options in Fiscal Price/1/ Grant Expiration Present
Name Granted(#) Year ($/Share) ($/Share) Date Value($)/2/
---- ---------- ---------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Donald G. Smith 24,000 21.3 14.45 17.00 2/03/05 165,468
Donald R. Higgins 6,000 5.3 14.45 17.00 2/03/05 41,367
John E. Morris 6,000 5.3 14.45 17.00 2/03/05 41,367
Thomas J. Crawford 6,000 5.3 14.45 17.00 2/03/05 41,367
Timothy R. Duke 7,000 6.2 14.45 17.00 2/03/05 48,262
</TABLE>
--------
/1/The exercise price of the options granted is equal to 85% of the closing
sales price of the Company's common stock on the Nasdaq National Market on
the date of grant. Options generally expire five years from the date of
grant.
/2/Based on a grant date present value of $6.89 per option share, which was
derived using the Black-Scholes option pricing model in accordance with the
rules and regulations of the Securities and Exchange Commission and is not
intended to forecast future appreciation of the Company's stock price. The
Black-Scholes model was used with the following assumptions: market price
on grant date of $17.00 per share; an option exercise date of February 3,
2005; a risk-free rate of return of 5.81%; a dividend yield of 2.59%; and
expected volatility of 41.41%. No adjustments are made for risk of forfei-
ture or non-transferability.
The following table sets forth information regarding stock options exercised
by each of the Named Executive Officers during the fiscal year ended October
31, 2000 and the value of unexercised options held by such persons on October
31, 2000.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of
Securites Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
----------- ------------
Shares
Acquired on
Exercise Value Exercisable/ Exercisable/
Name (#) Realized ($) Unexercisable Unexercisable
---- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Donald G. Smith -- -- 73,125/0 0/0
Donald R. Higgins -- -- 18,300/0 0/0
John E. Morris -- -- 17,500/0 0/0
Thomas J. Crawford -- -- 17,000/0 0/0
Timothy R. Duke -- -- 12,000/0 0/0
</TABLE>
8
<PAGE>
Change in Control Arrangements
On August 20, 1996, the Board of Directors adopted executive severance
agreements designed to serve the best interests of the Company and its share-
holders. The purpose of the agreements is (i) to insure that the shareholders'
interest is protected during negotiations relating to possible business combi-
nation transactions by placing the executives responsible for negotiations in
an objective, impartial position; and (ii) to encourage key managers to remain
with the Company to run the Company's business. All of the persons named in
the Summary Compensation Table, except Mr. Duke, have executed executive sev-
erance agreements, and, upon termination of their employment with the Company
for any reason (other than death, retirement, cause, disability or voluntary
termination for other than good reason) within three years of that change in
control, would be entitled to benefits from the Company, including, but not
limited to, (i) a cash payment in an amount equal to 2.99 times their respec-
tive annual compensation; and (ii) continuation of their usual executive bene-
fits for up to three years after termination.
The executive severance agreements define a "change in control" as a trans-
action that would be required to be reported in response to Item 1(a) of the
Current Report on Form 8-K under the Securities Exchange Act of 1934, includ-
ing, without limitation, (i) any person, entity or group becoming the benefi-
cial owner, directly or indirectly, of the securities of the Company repre-
senting 20% or more of the combined voting power of the Company, or (ii) the
individuals who on the date of the executive severance agreement constitute
the Board of Directors ceasing for any reason to constitute at least a major-
ity of the Board unless the election or the nomination for election by the
Company's shareholders of each new director was approved by a vote of at least
75% of the incumbent directors then still in office.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee (the "Committee") of the Board
of Directors is comprised of four non-employee directors, none of whom are el-
igible to participate in any of the compensation plans administered by the
Committee. The Committee is generally charged with overseeing the Company's
compensation and benefit practices, making determinations regarding the award
of stock options to the Company's executive officers and other employees under
the Company's Employees' Stock Option Plan (the "Option Plan") and providing
recommendations to the full Board on the salary, incentives and other compen-
sation of the Company's senior officers.
Compensation Program. The Company's executive compensation program is de-
signed to attract and retain qualified executives, to support a longstanding
internal culture of loyalty and dedication to the interests of the Company and
to reward its executives for short and long-term operating results and indi-
vidual contributions which enhance the value of shareholders' investment in
the Company. Compensation of the executive officers, including the Chief Exec-
utive Officer, has been structured and administered so that a substantial com-
ponent of total compensation is dependent upon, and directly related to, the
Company's earnings, growth and profitability. Salaries are set at levels which
in general are less than amounts paid by competitors, with the incentive com-
pensation program (described below) providing an opportunity for executives to
earn competitive levels of total cash compensation. The Company's executive
compensation program encourages executives to increase profitability and
shareholder value.
9
<PAGE>
Base Salary. Base salaries for executive officers for 2000 were recommended
by the Committee and approved by the Board of Directors. The amount of base
salary for executive officers other than the Chief Executive Officer is recom-
mended to the Committee by the Chief Executive Officer, based on his evalua-
tion of the executive's performance and contribution to the Company's overall
results and current and projected economic conditions. The base salary recom-
mendation for the Chief Executive Officer is determined separately by the Com-
mittee after reviewing the Chief Executive Officer's performance, the overall
results of the Company and the economic climate. In recommending the base sal-
aries for both the Chief Executive Officer and the other executive officers,
the Committee also considers the salaries paid to the chief executive officers
and executive officers of other companies, as well as inflation and cost of
living factors. The salaries of the Named Executive Officers are listed in the
Summary Compensation Table. The following Named Executive Officers received
increases in base salary in March 2000: Mr. Smith, $50,000; Mr. Higgins,
$15,000; Mr. Morris, $15,000; Mr. Crawford, $15,000; and Mr. Duke, $25,000.
Incentive Compensation Program. The Company's incentive compensation pro-
gram, which was established in 1958, has insured that a portion of the total
compensation of the executive officers is at risk with respect to the profit-
ability of the Company. The purpose of the incentive program is to directly
link a significant portion of executive compensation to Company profitability,
which will motivate executives to increase profitability and will reward exec-
utives with respect to the Company's success. The emphasis on incentive com-
pensation for executives is consistent with the pay-for-performance policy ap-
plied throughout the Company. The Committee believes this approach provides
competitive compensation and is in the best interests of the Company and its
shareholders. Under the program, a percentage of the consolidated monthly
gross profits, before profit sharing and taxes, of the Company or of Steel of
West Virginia, Inc. ("SWVA"), may be distributed to Company officers. At Octo-
ber 31, 2000, the incentive percentages being paid to Messrs. Smith, Higgins,
Morris and Crawford totaled 3.75% of the consolidated monthly gross profits,
before profit sharing and taxes, of the Company, and the incentive percentage
being paid to Mr. Duke was 2.0% of the consolidated monthly gross profits, be-
fore profit sharing and taxes, of SWVA. The percentage of incentive compensa-
tion to be received by each executive officer, if any, is approved annually by
the Board, upon recommendation of the Committee, using the same procedures and
criteria that are applied in determining base salary. The Committee determines
the percentage to be awarded to the Chief Executive Officer. The percentages
for the other executive officers are recommended by the Chief Executive Offi-
cer and are reviewed and approved by the Committee. Incentives earned by the
Named Executive Officers are listed in the Summary Compensation Table. The
Named Executive Officers received no increase in incentive compensation per-
centage in 2000.
Stock Options. Stock options awarded under the Option Plan are used as in-
centives for individual and Company performance and to foster stock ownership
by Company executives and other employees. The Compensation and Stock Option
Committee has sole responsibility for determining all awards of stock options
under the Option Plan, including awards to the Company's executive officers,
and for establishing the terms and exercise periods (not to exceed five years)
of such options, the requisite conditions for exercise and the amounts of the
awards. Under the Option Plan, the option price is 85% of the closing per
share sales price of the Company's common stock on the date of grant. In
awarding options to executive officers, the Compensation and Stock Option Com-
mittee considers the factors set forth above, as well as the individual's cur-
rent shareholdings in the Company. The Compensation and Stock Option Committee
currently reviews and determines each year the frequency, timing, number, or
size of option grants to executive officers and other employees of the
Company.
10
<PAGE>
Compensation of the Chief Executive Officer. In determining the compensation
of the Chief Executive Officer, the Committee is guided by the policies and
programs described above, Company performance and competitive practices. The
primary factor underlying this arrangement is the Company's emphasis on tying
a substantial portion of executives' total compensation to the Company's per-
formance. The amount of total cash compensation of the Chief Executive Officer
fluctuates depending on the profitability of the Company. As mentioned previ-
ously, the base salary for the Chief Executive Officer increased by $50,000 in
March, 2000, and the incentive compensation percentage did not change in 2000.
SUBMITTED BY THE COMPENSATION AND STOCK OPTION COMMITTEE:
George B. Cartledge, Jr., Chairman
Frank A. Boxley
Charles I. Lunsford, II
John D. Wilson
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of three indepen-
dent directors and operates under a written charter first adopted by the Board
of Directors in December 1999. A copy of the Audit Committee Charter, as
amended, is attached to this proxy statement as Appendix A. The Committee re-
views the Company's financial reporting process on behalf of the Board of Di-
rectors. Management is responsible for the financial statements and the re-
porting process, including the system of internal controls. The independent
auditors are responsible for expressing an opinion on the conformity of the
financial statements with generally accepted accounting principles. The Com-
mittee monitors and oversees these processes. In fulfilling its responsibili-
ties, the Committee has reviewed and discussed the audited financial state-
ments with management and the independent auditors.
The Committee has discussed with the independent auditors the matters re-
quired to be discussed by Statement on Auditing Standards No. 61 (Communica-
tion with Audit Committees). In addition, the Committee has discussed with the
independent auditors the auditor's independence from the Company and its man-
agement, including the matters in the written disclosures required by the In-
dependence Standards Board Standard No.1 (Independence Discussions with Audit
Committees), which have been received by the Committee.
The Committee meets with the independent auditors, with and without manage-
ment present, to discuss the results of their examination, the evaluation of
the Company's internal controls and the overall quality of the Company's fi-
nancial reporting.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the audited financials be included
in the Company's Annual Report on Form 10-K for the year ended October 31,
2000, for filing with the Securities and Exchange Commission.
SUBMITTED BY THE AUDIT COMMITTEE:
Thomas L. Robertson, Chairman
George W. Logan
Paul E. Torgersen
11
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PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Company's common stock with the cumulative to-
tal returns on the Standard & Poor's 500 Composite Stock Index (the "S&P 500")
and the Standard & Poor's Iron and Steel Index (the "S&P Iron and Steel") for
the five year period commencing on October 31, 1995 and ending on October 31,
2000. These comparisons assume the investment of $100 in the Company's common
stock and each of the indices on October 31, 1995 and the reinvestment of div-
idends.
[GRAPH]
10/95 10/96 10/97 10/98 10/99 10/00
ROANOKE 100 95 136 155 176 113
S&P 500 100 124 164 200 251 167
S&P IRON & STEEL 100 93 111 92 91 61
12
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountants are selected annually by the
Board upon recommendation of the Audit Committee. The public accounting firm
of Deloitte & Touche LLP has been retained by the Company as the independent
public accountants for fiscal year 2001. It is expected that a representative
of that firm will be present at the shareholders' meeting and will have the
opportunity to make a statement and respond to appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended for inclusion in the Company's proxy
statement for the 2002 Annual Meeting of Shareholders must be received by the
Company, addressed to the attention of the Corporate Secretary, at its princi-
pal executive offices, 102 Westside Boulevard, N.W., Roanoke, Virginia 24017,
no later thanAugust 29, 2001. The Company's Bylaws limit the business to be
transacted at a meeting of shareholders to that specified in the notice of the
meeting, those otherwise properly presented by the Board of Directors and
those presented by a shareholder of record of the Company so long as the
shareholder gives the President of the Company written notice of the matter
not less than sixty nor more than ninety days prior to the meeting. However,
if less than seventy days notice or prior public disclosure of the date of the
meeting is given or made, notice by the shareholders will be considered timely
if it is received by the close of business on the tenth day following the day
on which such notice of the meeting was given or the public disclosure was
made. Notice is deemed to have been given more than seventy days in advance of
an annual meeting of shareholders if the annual meeting is called on the third
Tuesday of February. The shareholder's written notice under this Bylaw provi-
sion must include certain specified information concerning the proposal, and
information as to the proponent's ownership of the Company common stock. Pro-
posals not meeting these requirements will not be entertained at a sharehold-
er's meeting.
MISCELLANEOUS
All properly executed proxies received by the Company will be voted at the
Annual Meeting in accordance with the specifications contained thereon.
The Board knows of no other matter which may properly come before the Annual
Meeting for action. However, if any other matter does properly come before the
Annual Meeting, the persons named in the enclosed proxy intend to vote in ac-
cordance with their judgment upon such matter.
By Order of the Board of Directors
/s/ THOMAS J. CRAWFORD
Thomas J. Crawford
Vice President Administration
and Secretary
13
<PAGE>
APPENDIX A
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
ROANOKE ELECTRIC STEEL CORPORATION
CHARTER
Organization. There shall be a committee appointed by the Board of Directors
to be known as the Audit Committee. The Audit Committee shall be composed of
directors who are independent of the management of the corporation and are
free of any relationship that, in the opinion of the Board of Directors, would
interfere with their exercise of independent judgment as a committee member.
The members of the Audit Committee shall meet the independence and experience
requirements of the NASDAQ Stock Market, Inc.
Purpose. The Audit Committee shall provide assistance to the corporate di-
rectors in fulfilling their responsibility to the shareholders, potential
shareholders, and investment community relating to corporate accounting, re-
porting practices of the corporation, and the quality and integrity of the fi-
nancial reports of the corporation. In so doing, it is the responsibility of
the Audit Committee to maintain free and open means of communication between
the directors, the independent auditors and the financial management of the
corporation.
Responsibilities. In carrying out its responsibilities, the Audit Committee
believes its policies and procedures should remain flexible, in order to best
react to changing conditions and to ensure to the directors and shareholders
that the corporate accounting and reporting practices of the corporation are
in accordance with all requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will hold meet-
ings as may be necessary to:
1. Confirm and assure the independence of the independent auditor, including
review and discussion of matters in the written disclosures required by the
Independence Standards Board Standard No. 1 (Independence Discussions with Au-
dit Committees).
2. Discuss with the independent auditors the matters required to be dis-
cussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees), relating to the conduct of the audit.
3. Meet with the independent auditors and financial management of the corpo-
ration to review the scope of the proposed audit for the current year and the
audit procedures to be utilized, and at the conclusion thereof, review such
audit, including any comments or recommendations of the independent auditors.
4. Review with the independent auditors and financial and accounting person-
nel, the adequacy and effectiveness of the accounting and financial controls
of the corporation, and elicit any recommendations for the improvement of such
internal control procedures or particular areas where new or more detailed
controls or procedures are desirable. Particular emphasis should be given to
the adequacy of such internal controls to expose any payments, transactions,
or procedures that might be deemed illegal or otherwise improper.
5. Review and approve interim financial information on Form 10-Q for filing
with the Securities and Exchange Commission.
6. Review the financial statements contained in the annual report to share-
holders with management and the independent auditors to determine that the in-
dependent auditors are satisfied with the disclosure and content of the finan-
cial statements to be presented to the shareholders and recommend to the Board
of Directors inclusion of the audited financials in the Annual Report on form
10-K for filing with the Securities and Exchange Commission. Any changes in
accounting principles should be reviewed.
A-1
<PAGE>
7. Consider such matters in relation to the financial affairs of the corpo-
ration and its accounts, and in relation to the external audit of the corpora-
tion as the Audit Committee may, in its discretion, determine to be advisable.
8. Provide sufficient opportunity for the independent auditors to meet with
the members of the Audit Committee without members of management present.
Among the items to be discussed in these meetings are the independent audi-
tors' evaluation of the corporation's financial and accounting personnel, and
the cooperation that the independent auditors received during the course of
the audit.
9. Inquire of management and the independent auditors about significant
risks or exposures and assess the steps management has taken to minimize such
risk to the corporation.
10. Submit the minutes of all meetings of the Audit Committee to, or discuss
the matters discussed at each meeting with, the Board of Directors.
11. Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in its
judgment, that is appropriate.
12. Recommend to the Board the appointment of the independent auditor.
13. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the corporation's annual proxy statement.
14. Review and update the Committee's Charter annually.
A-2
<PAGE>
ROANOKE ELECTRIC STEEL CORPORATION
Proxy for Annual Meeting of Shareholders
February 20, 2001
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Donald G. Smith, John E. Morris and Thomas J.
Crawford, or any of them who shall act, proxies for and with all the powers of
the undersigned, each with powers of substitution, to vote all shares of the
common stock of Roanoke Electric Steel Corporation registered in the name of the
undersigned at the Annual Meeting of Shareholders of said Corporation to be held
in the auditorium of the American Electric Power Company Building, 40 Franklin
Road, S.W., Roanoke, Virginia, on February 20, 2001, at 10:00 a.m., local time,
and at all adjournments thereof, on all matters set forth in the Notice and
accompanying Proxy Statement for said meeting, a copy of which has been received
by the undersigned, as follows on the reverse side of this card.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
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Please sign exactly as your name(s) appear(s) on the books of the Company. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign. If a corporation, this signature
should be that of an authorized officer who should state his or her title.
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HAS YOUR ADDRESS CHANGED? If so, print new address below:
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<PAGE>
[X] Please mark votes as in this example.
----------------------------------
ROANOKE ELECTRIC STEEL CORPORATION
----------------------------------
1. To elect all Class B directors to serve until the Annual Meeting of
Shareholders in 2004 and, in the case of each director, until his
successor is duly elected and qualified.
(01) Frank A. Boxley, (02) Timothy R. Duke, (03) George W. Logan
FOR ALL NOMINEES [ ] [ ] WITHHELD FROM ALL NOMINEES
[ ] ___________________________________________________________________
Instructions: To withhold authority to vote for any individual nominee,
mark the above box and write that nominee's name on the line above.
Signature: __________________________ Date: __________
2. In their discretion, upon such other matters as may properly come before
the meeting and any adjournments thereof.
The undersigned hereby acknowledges receipt of the Notice of Meeting
and Proxy Statement dated December 27, 2000.
Mark box at right if an address change has been noted on the
reverse side of this card. [ ]
Please be sure to sign and date this Proxy.
Signature: _________________________ Date: _________
