FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 1998
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 No. 0-22416
KENTUCKY ELECTRIC STEEL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 61-1244541
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
P. O. Box 3500, Ashland, Kentucky 41105-3500
(Address of principal executive office, Zip Code)
(606) 929-1222
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES x NO
The number of shares outstanding of each of the issuer's classes of common
stock, as of August 10, 1998, is as follows:
4,626,657 shares of voting common stock, par value $.01 per share.
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets ................ 3
Condensed Consolidated Statements of Operations ...... 4
Condensed Consolidated Statements of Cash Flows ...... 5
Notes to Condensed Consolidated Financial Statements . 6-8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ................ 9-12
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K ..................... 13
SIGNATURES .......................................... 14
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<TABLE>
June 27, Sept. 27,
1998 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 136 $ 127
Accounts receivable, less allowance for doubtful
accounts and claims of $445 at June 27, 1998
and $470 at September 27, 1997 13,612 11,577
Insurance claim receivable - 900
Inventories 21,605 16,538
Operating supplies and other current assets 4,981 4,802
Refundable income taxes - 900
Deferred tax assets 539 457
Total current assets 40,873 35,301
PROPERTY, PLANT AND EQUIPMENT
Land and buildings 4,532 4,448
Machinery and equipment 41,083 40,301
Construction in progress 3,188 2,012
Less - accumulated depreciation (13,856) (11,229)
Net property, plant and equipment 34,947 35,532
DEFERRED TAX ASSETS 6,136 7,159
OTHER ASSETS 1,023 778
Total assets $ 82,979 $ 78,770
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Advances on line of credit $ 11,763 $ 10,635
Accounts payable 9,600 7,977
Capital expenditures payable 829 547
Accrued liabilities 3,377 3,700
Environmental liabilities 982 982
Current portion of long-term debt 125 125
Total current liabilities 26,676 23,966
LONG-TERM DEBT 20,000 20,000
OTHER LIABILITIES 754 593
Total liabilities 47,430 44,559
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000
shares authorized, no shares issued - -
Common stock, $.01 par value, 15,000,000
shares authorized, 4,983,201 and 4,977,988
share issued, respectively 50 50
Additional paid-in capital 15,700 15,665
Less treasury stock - 356,544 and 350,976
shares at cost, respectively (2,675) (2,638)
Deferred compensation (86) (170)
Retained earnings 22,560 21,304
Total shareholders' equity 35,549 34,211
Total liabilities and shareholders' equity $ 82,979 $ 78,770
<FN>
See notes to condensed consolidated financial statements
</TABLE>
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share and Per Share Data)
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
NET SALES $ 27,751 $ 22,724 $ 83,381 $ 69,265
COST OF GOODS SOLD 24,294 20,354 74,161 67,365
Gross profit 3,457 2,370 9,220 1,900
SELLING AND ADMINISTRATIVE
EXPENSES 1,832 1,761 5,421 5,144
Operating income (loss) 1,625 609 3,799 (3,244)
INTEREST INCOME AND OTHER 20 9 44 20
INTEREST EXPENSE (594) (545) (1,816) (1,593)
Income (loss) before
income taxes 1,051 73 2,027 (4,817)
PROVISION (CREDIT) FOR
INCOME TAXES 399 28 771 (1,819)
Net income (loss) $ 652 $ 45 $ 1,256 $ (2,998)
NET INCOME (LOSS) PER COMMON
SHARE - BASIC AND DILUTED $ .14 $ .01 $ .27 $ (.65)
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC 4,626,375 4,622,062 4,626,264 4,636,370
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED 4,630,192 4,622,062 4,632,513 4,636,370
<FN>
See notes to condensed consolidated financial statements
</TABLE>
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
Nine Months Ended
June 27, June 28,
1998 1997
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ 1,256 $ (2,998)
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Depreciation and amortization 2,741 2,755
Change in deferred taxes 1,023 (1,397)
Change in other (114) (91)
Change in current assets and current
liabilities:
Accounts receivable (2,035) 2,171
Insurance claim receivable 900 (2,900)
Inventories (5,067) 2,739
Operating supplies and other
current assets (179) (71)
Refundable income taxes 900 (260)
Deferred tax assets (82) 337
Accounts payable 1,623 816
Accrued liabilities (323) (592)
Environmental liabilities - 3,500
Net cash flows from operating
activities 643 4,009
Cash Flows From Investing Activities:
Capital expenditures (2,042) (2,485)
Change in capital expenditures payable 282 (1,712)
Net cash flows from investing
activities (1,760) (4,197)
Cash Flows From Financing Activities:
Net advances on line of credit 1,128 647
Purchases of treasury stock (37) (473)
Issuance of common stock 35 10
Net cash flows from financing
activities 1,126 184
Net increase (decrease) in cash
and cash equivalents 9 (4)
Cash and Cash Equivalents at
Beginning of Period 127 125
Cash and Cash Equivalents at End of Period $ 136 $ 121
Interest Paid, net of amount capitalized $ 1,415 $ 1,213
Income Taxes Paid $ 50 $ -
<FN>
See notes to condensed consolidated financial statements
</TABLE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements represent Kentucky Electric Steel, Inc. and its wholly-
owned subsidiary, KESI Finance Company, (the Company). KESI Finance
Company was formed in October 1996 to finance the Ladle Metallurgy
Project. All significant intercompany accounts and transactions have
been eliminated. These statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been
included. Operating results for the nine-month period ended June 27,
1998, are not necessarily indicative of the results that may be
expected for the year ending September 26, 1998. For further
information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year
ended September 27, 1997.
(2) Accounting Policies
Fiscal Year End
The Company's fiscal year ends on the last Saturday of
September.
Property, Plant, Equipment and Depreciation
Property, plant and equipment is recorded at cost, less
accumulated depreciation. For financial reporting purposes,
depreciation is provided on the straight-line method over the
estimated useful lives of the assets, generally 3 to 12 years for
machinery and equipment and 15 to 30 years for buildings and
improvements. Depreciation for income tax purposes is computed using
accelerated methods. Expenditures for maintenance and repairs are
charged to expense as incurred. Expenditures for equipment renewals
which extend the useful life of any asset are capitalized.
The Company capitalizes interest costs as part of the historical
cost of constructing major capital assets. Interest cost of $11,000
was capitalized for the nine months ended June 28, 1997. No interest
was capitalized for the nine months ended June 27, 1998.
(3) Inventories
Inventories at June 27, 1998 and September 27, 1997 consist of
the following ($000's):
June 27, Sept. 27,
1998 1997
Raw materials $ 3,178 $ 3,280
Semi-finished and finished goods 18,427 13,258
Total inventories $ 21,605 $ 16,538
(4) Earnings Per Share
Statement of Financial Accounting Standards No. 128 (SFAS No.
128) related to earnings per share requires dual presentation of
basic and diluted E.P.S. on the face of the income statement for all
entities with complex capital structures. The Company adopted SFAS
No. 128 during the first quarter of fiscal 1998. The following is the
reconciliation of the numerators and denominators of the basic and
diluted earnings per share computations.
</TABLE>
<TABLE>
For the Three For the Three
Months Ended Months Ended
June 27, 1998 June 28, 1997
Per Per
Share Share
Income Shares Amount Income Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Amounts for Basic
Earnings Per Share $652 4,626,375 $.14 $ 45 4,622,062 $ .01
Effect of Dilutive
Securities Options - 3,817 - - - -
Amounts for Diluted
Earnings Per Share $652 4,630,192 $.14 $ 45 4,622,062 $ .01
For the Nine For the Nine
Months Ended Months Ended
June 27, 1998 June 28, 1997
Per Per
Share Share
Income Shares Amount (Loss) Shares Amount
Amounts for Basic
Earnings (Loss) Per Share $ 1,256 4,626,264 $.27 $(2,998) 4,636,370 $(.65)
Effect of Dilutive
Securities Options - 6,249 - - - -
Amounts for Diluted
Earnings (Loss) Per Share $ 1,256 4,632,513 $.27 $(2,998) 4,636,370 $(.65)
</TABLE>
The Company had transition stock options of 137,016 and 158,702
as of June 27, 1998 and June 28, 1997, respectively. The options
have exercise prices ranging from $8.76 to $20.86 per share which
exceeded the average market price as of June 27, 1998 and as of June
28, 1997, and therefore were not included in the computation of
diluted earnings per share. These options expire beginning July 14,
1998 through February 18, 2003.
The Company also had options of 301,976 and 315,976 as of June
27, 1998 and June 28, 1997, respectively. These options have
exercise prices ranging from $7.63 to $12.31 per share which exceeded
the average market price as of June 27, 1998 and June 28, 1997 and
therefore were not included in the computation of diluted earnings
per share. These options expire beginning October 6, 2003 through
May 8, 2006. The Company also had 89,192 options at an exercise
price of $5.56, which exceeded the average market price as of June
28, 1997, and therefore were not included in the computation of
diluted earnings per share for fiscal 1997.
(5) Environmental Liabilities
The Company's melt shop operations were shut down for twelve
days during the third quarter of fiscal 1997 in order to
decontaminate its baghouse facilities after detection of a
radioactive substance in the baghouse dust, a by-product of the
melting process.
The $1.0 million in environmental liabilities recorded as a
current liability on the balance sheet represents final payment due
an environmental services company for treatment and disposal of the
contaminated baghouse dust. Payment for the disposal will occur
within the next twelve months. Although it is possible that the
ultimate disposal costs may change from current estimates, the effect
of the change, if any, is not expected to be material to the
financial statements due to the Company having applicable insurance
coverage.
(6) Commitments and Contingencies
The Company has various commitments for the purchase of
materials, supplies and energy arising in the ordinary course of
business.
The Company is subject to various claims, lawsuits and
administrative proceedings arising in the ordinary course of business
with respect to commercial, product liability and other matters,
which seek remedies or damages. The Company believes that any
liability that may ultimately be determined will not have a material
effect on its financial position or results of operations.
The Company generates both hazardous wastes and non-hazardous
wastes which are subject to various governmental regulations.
Estimated costs to be incurred in connection with environmental
matters are accrued when the prospect of incurring costs for testing
or remedial action is deemed probable. The Company is not aware of
any material asserted or unasserted environmental claims against the
Company and no accruals for such matters have been recorded in the
accompanying balance sheets except as disclosed in Note 5. However,
discovery of unknown conditions could result in the recording of
accruals in the periods in which they become known.
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General. The Company manufactures special bar quality alloy and
carbon steel bar flats to precise customer specifications for sale in
a variety of niche markets. Its primary markets are manufacturers of
leaf-spring suspensions and flat bed truck trailers, cold drawn bar
converters, and steel service centers.
Net Sales. Net sales increased $5.1 million (22.1%) in the
third quarter of fiscal 1998 to $27.8 million, as compared to $22.7
million for the third quarter of fiscal 1997. Net sales for the nine
months ended June 27, 1998 increased $14.1 million (20.4%) to $83.4
million, as compared to $69.3 million for the nine months ended June
28, 1997. The increase in sales is attributed to an increase in
shipments and an increase in average selling price. Tons shipped
increased 18.6% in the third quarter of fiscal 1998 as compared to
the third quarter of fiscal 1997. Tons shipped for the nine months
ended June 27, 1998 increased 14.3% as compared to the nine months
ended June 28, 1997. The increase in shipments resulted from the
strong demand for the Company's products and the increase in tons
available for shipment due to improvements in productivity. Also,
shipments for the quarter and nine months ended June 28, 1997 were
negatively impacted by the effect on production of the melt shop
operations being shut down for twelve days in order to decontaminate
the baghouse facility, after the detection of a radioactive substance
in the baghouse dust. The increase in average selling price is
attributed to the price increases implemented on many products
primarily in the first and second quarters of fiscal 1998.
Cost of Goods Sold. Cost of goods sold increased $4.0 million
(19.4%) in the third quarter of fiscal 1998 to $24.3 million, as
compared to $20.3 million for the third quarter of fiscal 1997. As
a percentage of net sales, cost of goods sold decreased from 89.6%
for the third quarter of fiscal 1997 to 87.5% for the third quarter
of fiscal 1998. The increase in cost of goods sold is primarily due
to the 18.6% increase in shipments. The third quarter of fiscal 1997
per ton cost were favorably impacted by the inclusion in the
calculation of cost of goods sold of $2.3 million reimbursement from
business interruption related to the decontamination of the baghouse.
The third quarter of fiscal 1998 includes $.2 million in
reimbursement from business interruption in the calculation of cost
of goods sold representing the final settlement on the
decontamination of the baghouse. Excluding the insurance
reimbursements, the per ton cost of shipments in the third quarter of
fiscal 1998 was significantly lower than in the third quarter of
fiscal 1997 reflecting lower conversion costs due to improvements in
productivity from our capital projects.
Cost of goods sold for the nine months ended June 27, 1998
increased $6.8 million (10.1%) to $74.2 million as compared to $67.4
million for the nine months ended June 28, 1997. As a percentage of
net sales, cost of goods sold decreased from 97.3% for the nine
months ended June 28, 1997 to 88.9% for the nine months ended June
27, 1998. The increase in cost of goods sold reflects the increase in
shipments offset by a decrease in the per ton cost of tons shipped.
The decrease in the per ton cost of tons shipped during the first
nine months of fiscal 1998 as compared to the first nine months of
fiscal 1997 resulted from lower conversion costs due to improvements
in productivity from our capital projects, offset somewhat by an
increase in scrap costs.
Gross Profit (Loss). As a result of the above, gross profit for
the third quarter of fiscal 1998 increased by $1.1 million (45.9%) to
$3.5 million from $2.4 million for the third fiscal quarter of 1997.
As a percentage of net sales, gross profit increased from 10.4% for
the third quarter of fiscal 1997 to 12.5% for the third quarter of
fiscal 1998.
As a result of the above, gross profit for the nine months ended
June 27, 1998 increased by $7.3 million to $9.2 million as compared
to $1.9 million for the nine months ended June 28, 1997. As a
percentage of net sales, gross profit increased from 2.7% for the
first nine months of fiscal 1997 to 11.1% for the first nine months
of fiscal 1998.
Selling and Administrative Expenses. Selling and administrative
expenses include salaries and benefits, corporate overhead,
insurance, sales commissions and other expenses incurred in the
executive, sales and marketing, shipping, personnel, and other
administrative departments. Selling and administrative expenses
increased by approximately $71,000 and $277,000 for the three months
and nine months ended June 27, 1998, as compared to the same periods
in fiscal 1997. The increase in selling and administrative expenses
for the nine months is due primarily to an increase in legal and
other professional fees and sales commissions. As a percentage of
net sales, such expenses decreased from 7.7% for the third quarter of
fiscal 1997 to 6.6% for the third quarter of fiscal 1998, and from
7.4% for the nine months ended June 28, 1997 to 6.5% for the nine
months ended June 27, 1998. The decrease, as a percentage of sales,
is primarily the result of an increase in net sales (as discussed
above) for the quarter and nine months ended June 27, 1998.
Operating Income (Loss). For the reasons described above,
operating income increased $1.0 million from $.6 million in the third
quarter of fiscal 1997 to $1.6 million in the third quarter of fiscal
1998. As a percentage of net sales, operating income increased from
2.7% in the third quarter of 1997 to 5.9% in the third quarter of
1998.
The nine months ended June 27, 1998 reflected an operating
income of $3.8 million as compared to an operating loss of $3.2
million for the nine months ended June 28, 1997. As a percentage of
net sales, operating income (loss) increased from (4.7%) for the nine
months ended June 28, 1997 to 4.6% for the nine months ended June 27,
1998.
Interest Expense. Interest expense increased by $49,000 for the
three months ended June 27, 1998 from $545,000 for the third quarter
of fiscal 1997 to $594,000 for the third quarter of fiscal 1998.
Interest expense increased by $223,000 for the nine months ended June
27, 1998 from $1.6 million for the nine months ended June 28, 1997 to
$1.8 million for the nine months ended June 27, 1998. The increase
is the result of additional borrowings on the Company's line of
credit.
Net Income (Loss). As a result of the above, net income
increased $607,000 from $45,000 for the third quarter of fiscal 1997
to $652,000 for the third quarter of fiscal 1998.
The nine months ended June 27, 1998 reflected net income of $1.3
million as compared to a net loss of $3.0 million for the nine months
ended June 28, 1997.
Liquidity and Capital Resources
The cash flows provided by operating activities were $.6 million
for the first nine months of fiscal 1998 as compared to $4.0 million
for the first nine months of fiscal 1997. The first nine months of
fiscal 1998 operating cash flows reflect the profitable operations
and an increase in accounts payable partially offset by increases in
accounts receivable and inventories (due primarily to the increased
level of sales and production). The cash flows provided by operating
activities for the first nine months of fiscal 1997 reflect a
reduction in accounts receivable and inventories.
The cash flows used by investing activities were $1.7 million
for the first nine months of fiscal 1998 as compared to $4.2 million
for the first nine months of fiscal 1997. The cash flows used by
investing activities for the first nine months of fiscal 1998
consist of $2.0 million in capital expenditures offset somewhat by an
increase in capital expenditures payable of $.3 million. The cash
flows used by investing activities for the first nine months of
fiscal 1997 consist of capital expenditures of $2.5 million and a
reduction in capital expenditures payable of $1.7 million.
The cash flows provided from financing activities were $1.1
million for the first nine months of fiscal 1998 as compared to $.2
million for the first nine months of fiscal 1997. The cash flows
provided from financing activities for the first nine months of
fiscal 1998 reflect net advances of $1.1 million on the Company's
line of credit which were used primarily for the working capital
needs discussed above. The cash flows provided from financing
activities for the first nine months of fiscal 1997 reflect net
advances of $.7 million on the Company's line of credit offset by $.5
million used for the purchase of treasury stock.
Working capital at June 27, 1998 was $14.2 million as compared
to $11.3 million at September 27, 1997, and the current ratio was 1.5
to 1.0 at the end of both periods.
The Company's primary ongoing cash requirements are for working
capital needs. The two sources for the Company's liquidity are
internally generated funds and its bank credit facility. The Company
has $11.8 million in borrowings outstanding on its line of credit as
of June 27, 1998. The Company believes that the unused portion of
its $24.5 million bank credit facility and internally generated
funds will be sufficient to fund its ongoing cash needs.
Year 2000 Compliance
The Company is currently assessing the issues confronting it
related to the "Year 2000 problem", which is the result of the
inability of many computer systems and electronic equipment to
distinguish the year 2000 from the year 1900. The Company's plan for
addressing the Year 2000 problem encompasses both internal computer
hardware and software and external organizations that may affect the
Company's operations. The Company has conducted an inventory of all
of its manufacturing equipment and computer hardware and software to
determine which are date sensitive and therefore potentially at risk.
Each piece of equipment which is identified as being at risk will be
tested and a determination will be made as to whether it should be
modified or replaced. In addition, the Company's computer programmers
are modifying its internal software to address the Year 2000 problem.
The Company also intends to contact each of its significant external
service providers, vendors, and customers to determine the status of
their respective Year 2000 readiness and to evaluate how their
respective Year 2000 issues might affect the Company.
The Company expects to complete its software revisions and
hardware and equipment testing, as well as the solicitation of the
applicable information from vendors and customers, by the first
quarter of calendar year 1999. Based on the results of those efforts,
the Company will determine the nature and extent of its contingency
plan. The costs incurred to date in connection with the Company's
Year 2000 project have not been material, and the Company likewise
does not expect future costs to be material to its financial
statements or results of its operations.
Collective Bargaining Agreement
As of June 27, 1998 the Company employed 437 people,
approximately 78% of whom are members of The United Steelworkers of
America. The Company and The United Steelworkers of America have
agreed to a one year extension of the current contract, which was to
expire on September 10, 1998, and are continuing multi-year contract
negotiations.
Outlook
Third quarter shipments were somewhat lower than anticipated
reflecting some weaknesses in the steel service center and cold drawn
bar converter markets due to customer inventory adjustments, combined
with a work stoppage at major customer, the effect of the General
Motors strike, and production interruptions relating to weather
conditions. In recent weeks shipments have increased but management
continues to monitor the Company's major markets for the effect of
the General Motors strike and changes in general economic conditions.
Forward-Looking Statements
The matters discussed or incorporated by reference in this
Report on Form 10-Q that are forward-looking statements (as defined
in the Private Securities Litigation Reform Act of 1995) involve
risks and uncertainities. These risks and uncertainities include,
but are not limited to, reliance on the truck and utility vehicle
industry; excess industry capacity; product demand and industry
pricing; volatility of raw material costs, especially steel scrap;
intense foreign and domestic competition; management's estimate of
niche market data; the cyclical and capital intensive nature of the
industry; and cost of compliance with environmental regulations.
These risks and uncertainities could cause actual results of the
Company to differ materially from those projected or implied by such
forward-looking statements.
<PAGE>
PART II. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
A) Exhibits
3.1 - Certificate of Incorporation of Kentucky Electric
Steel, Inc., filed as Exhibit 3.1 to Registrant's
Registration Statement on Form S-1 (No. 33-
67140), and incorporated by reference herein.
3.2 - By-Laws of Kentucky Electric Steel, Inc., filed
as Exhibit 3.2 to Registrant's Registration
Statement on Form S-1 (No. 33-67140), and
incorporated by reference herein.
27 - Financial Data Schedule
B) Reports on Form 8-K - None.
<PAGE>
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.
DATED: August 10, 1998 KENTUCKY ELECTRIC STEEL, INC.
(Registrant)
William J. Jessie
William J. Jessie, Vice President,
Secretary, Treasurer, and
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Kentucky Electric Steel, Inc.'s condensed consolidated financial
statements as of and for the nine month period ended June 27, 1998
included in this Company's quarterly report on Form 10-Q and is
qualified in its entirety by reference to such condensed consolidated
financial statements.
</LEGEND>
<CIK> 0000910394
<NAME> KENTUCKY ELECTRIC STEEL, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-26-1998
<PERIOD-START> SEP-28-1997
<PERIOD-END> JUN-27-1998
<EXCHANGE-RATE> 1
<CASH> 136
<SECURITIES> 0
<RECEIVABLES> 14,057
<ALLOWANCES> 445
<INVENTORY> 21,605
<CURRENT-ASSETS> 40,873
<PP&E> 48,803
<DEPRECIATION> 13,856
<TOTAL-ASSETS> 82,979
<CURRENT-LIABILITIES> 26,676
<BONDS> 20,000
<COMMON> 50
0
0
<OTHER-SE> 35,499
<TOTAL-LIABILITY-AND-EQUITY> 82,979
<SALES> 83,381
<TOTAL-REVENUES> 83,381
<CGS> 74,161
<TOTAL-COSTS> 74,161
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,816
<INCOME-PRETAX> 2,027
<INCOME-TAX> 771
<INCOME-CONTINUING> 1,256
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,256
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
