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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1997
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.)
P.O. Box 13948, Roanoke, Virginia 24038-3948
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (540) 342-1831
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (x)
State the aggregate market value of the voting stock held by nonaffiliates
of the Registrant.
Aggregate market value at December 31, 1997: $187,468,036
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of December 31, 1997.
7,474,147 Shares outstanding
Portions of the following documents are incorporated by reference:
(1) 1997 Annual Report to Stockholders in Part II.
(2) Proxy Statement dated December 29, 1997 in Part III.
PART I
ITEM 1. BUSINESS
(a) General Development of Business.
During the fiscal year ended October 31, 1997, the Registrant
continued for the most part to operate its business as it has the past four
years by manufacturing merchant steel bar products, fabricating open-web
steel joists and concrete reinforcing steel, and extracting scrap steel and
other materials from junked automobiles. Roanoke Technical Treatment &
Services, Inc., a Roanoke, Virginia subsidiary, was formed in 1990 to
license a process for the treatment of electric arc furnace dust, and
currently is uncertain as to a specific time for start-up. During fiscal
year 1994, the Registrant's auto shredding subsidiary, Shredded Products
Corporation, completed construction of a modern facility in Rocky Mount,
Virginia, and in November 1994 began operations at this locality, at a
total investment in excess of $8,000,000 for plant and equipment. This
facility, with its own landfill, is providing considerable savings in waste
disposal costs. In addition, cost savings and better metal recoveries are
being achieved through the use of the more technologically advanced
equipment. During the later part of 1996, the Registrant, at its main
plant, completed the installation of a new ladle refining furnace and the
upgrade of an electric arc furnace, for approximately $17,000,000. With
this new state-of-the-art equipment in operation, the Registrant has
increased raw steel production, improved quality, reduced production costs
and improved operating efficiencies. Also in 1996, the Registrant closed
on an unsecured $60,000,000 credit facility with a syndicate of lenders.
The facility was comprised of a $30,000,000 ten-year term loan and a
$30,000,000 five-year revolver. The term loan was used to purchase
additional equipment and refinance debt at much lower interest rates. The
revolver replaced lines of credit that were not legally binding. This
restructuring of debt provided the Registrant with the capital resources
necessary to maintain its competitive position and ensure future growth.
In January 1996, Socar, Inc. , a South Carolina subsidiary, sold its
long-time idle plant in Bucyrus, Ohio to the unaffiliated manufacturer who
had been leasing the facility for several years under a lease-purchase
agreement, for a final settlement price of $130,000. The other
subsidiaries of the Registrant, John W. Hancock, Jr., Inc. and RESCO Steel
Products Corporation, have had no material changes in operations or in the
mode of conducting their business for the past five years. John W.
Hancock, Jr. founded both the Hancock joist subsidiary and its parent,
Roanoke Electric Steel Corporation, and served on the Registrant's Board of
Directors as Chairman of the Executive Committee until his death in March
1994. The Registrant currently anticipates no material changes in
operations during the next fiscal year unless there are unforeseen changes
in market conditions and profitability.
PART I
(con'd.)
(b) Financial Information about Industry Segments.
The Registrant's business consists of one industry segment or
line of business, which is the extracting of scrap metal from discarded
automobiles and the manufacturing, fabricating and marketing of merchant
steel bar products, reinforcing bars, open-web steel joists and billets.
The industry segment consists of three classes of products - merchant steel
products, fabricated bar joists and reinforcing bars and billets.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
AND CLASSES OF PRODUCTS OR SERVICES
1997 1996 1995
Sales to Unaffiliated Customers:
Merchant Steel $113,588,649 $104,180,746 $103,531,770
Bar Joists & Rebar $115,017,371 $112,572,549 $110,370,872
Billets $36,502,619 $29,533,357 $46,065,882
$265,108,639 $246,286,652 $259,968,524
Net Earnings from Operations $16,883,068 $15,414,834 $20,228,902
Identifiable Assets $176,860,219 $167,015,901 $157,774,658
(c) Narrative Description of Business.
(1) (i) The Registrant manufactures merchant steel products
consisting of Angles, Plain Rounds, Flats, Channels and Reinforcing Bars of
various sizes and lengths. The principal markets for the Registrant's
products are steel fabricators and steel service centers. The products are
distributed directly to customers from orders solicited by a paid sales
staff of the Registrant.
The Registrant's subsidiary, Shredded Products Corporation, is
involved in the extraction of scrap iron and steel and other metals from
junked automobiles and other waste materials. Almost all of the ferrous
material is used by the Parent as raw materials. The non-ferrous metals
are sold to unrelated purchasers.
PART I
(con'd.)
Two other subsidiaries, John W. Hancock, Jr., Inc. and Socar,
Inc., are engaged in the manufacturing of long- and short-span steel
joists. Joists are open-web steel horizontal supports for floors and
roofs, used primarily in the construction of commercial and industrial
buildings such as shopping centers, factories, warehouses, hospitals,
schools, office buildings, nursing homes, and the like. Joists are
cheaper and lighter than structural steel or reinforced concrete. The
joists are distributed by these subsidiaries to their customers from orders
solicited by manufacturer's representatives and pursuant to successful bids
placed directly by the companies.
The Registrant's subsidiary, RESCO Steel Products Corporation,
fabricates concrete reinforcing steel by cutting and bending rebars to
contractors' specifications. The rebars are distributed to contractors
from orders solicited by a paid sales staff and pursuant to successful bids
placed directly by the subsidiary.
(ii) The Registrant has not recently introduced a new product or
begun to do business in a new industry segment that will require the
investment of a material amount of assets or that otherwise is material.
(iii) The Registrant's main raw material, scrap steel, is
supplied for the most part by scrap dealers within a 250 mile radius of the
mill. It is purchased through the David J. Joseph Company who are scrap
brokers. The Shredded Products subsidiary supplies 10,000 to 15,000 tons
of scrap per month. Although scrap is generally available to the
Registrant, the price of scrap steel is highly responsive to changes in
demand, including demand in foreign countries as well as in the United
States. The ability to maintain satisfactory profit margins in times when
scrap is relatively high priced is dependent upon the levels of steel
prices, which are determined by market forces. Alloys and other materials
needed for the melting process are provided by various domestic and foreign
companies.
Shredded Products Corporation often experiences difficulty in
purchasing scrap automobiles at a satisfactory level. Competition from an
increasing number of shredding operations and reluctance by dealers to sell
scrap automobiles due to market conditions are the main causes. High
offering prices generally increase the supply; however, the increased cost
to produce sometimes is very competitive with the price of similar scrap
that can be purchased on the outside.
Substantially all of John W. Hancock, Jr., Inc.'s steel
components are purchased from the Parent, which is located conveniently
nearby and, therefore such components are generally available to the
Company as needed.
RESCO Steel Products Corporation purchases most of its steel
components from suppliers within its market area, determined mainly by
freight cost. Such components would be generally available to the Company,
since the Parent could produce and supply this raw material, as needed.
PART I
(con'd.)
Socar, Inc. receives most of its raw steel material from the
Parent and other nearby suppliers, the determinant usually being freight
cost. The availability of raw materials is not of major concern to the
Company, since the Parent could supply most of its needs.
(iv) The Registrant currently holds no patents, trade marks,
licenses, franchises or concessions that are material to its business
operations.
(v) The business of the Registrant is not seasonal.
(vi) The Registrant does not offer extended payment terms to its
customers nor is it normally required to carry significant amounts of
inventory to meet rapid delivery requirements of customers; although, at
times market conditions have required the stockpiling of popular bar
products for rapid delivery. Working capital practices generally remain
constant during the course of business except when the Registrant
determines it to be advantageous to stockpile raw materials due to price
considerations.
(vii) During fiscal year 1997, sales (tons) by the Registrant to
John W. Hancock, Jr., Inc.,
Socar, Inc. and RESCO Steel Products Corporation, wholly-owned
subsidiaries, were approximately 11%, 7% and less than 1% of the
Registrant's total sales (tons), respectively. The largest nonaffiliated
customer purchased approximately 23% of total sales (tons) ---12% of total
sales (dollars). Alternative marketing and production arrangements were
available to the Registrant, so that the loss of this nonaffiliate would
not have had a materially adverse effect on the Registrant and its
subsidiaries taken as a whole.
(viii) The Registrant is of the opinion that the amount of its
backlog is not generally material to an understanding of the business. All
backlog is shipped within the current fiscal year.
(ix) None of the business of the Registrant is subject to
renegotiation of profits or termination of contracts or subcontracts at the
election of the Government.
(x) The Registrant competes with steel-producing mills of
similar size operative within its market region and also larger mills
producing similar products. The market region in which the Registrant
sells its products consists of the majority of states east of the
Mississippi River. Price, including transportation cost, is the major
determinant in securing business. Economic recession began to intensify
competition during 1990, as selling prices dropped due to a softening in
demand. This trend continued through most of 1991 with sharp declines in
selling prices due to poor demand and excess inventories and capacity at
most mills, although by year-end prices rose slightly. In comparison to
the 1991 recession lows, order rates in 1992 showed some improvement while
selling prices remained flat. In 1993, market conditions and demand
improved significantly, while industry-wide selling prices increased to
offset higher raw material costs. Demand in 1994 was fueled by continued
improvement in business conditions and economic growth, with higher raw
material costs again forcing selling prices upward, although some of the
PART I
(con'd.)
increased selling prices were demand driven. Even though market conditions
and backlogs remained strong for much of 1995, shipments were flat due to
customers' inventory reductions, while improved selling prices were
attributable to higher raw material costs and rising demand, although by
year-end prices fell slightly. Demand and backlogs continued high through
1996, allowing for increased bar product shipments, in spite of increased
competition, which forced sharp reductions in selling prices throughout the
industry. As competition eased during 1997, bar product shipments
increased with higher demand, causing improvements in order levels,
backlogs and prices.
The joist business is highly competitive. Due to similarity of
product, relatively small price differences are often determinative in
placing business. Ability to meet the customer's time requirements for
delivery also is important in securing business. Competing successfully
becomes more difficult with the distance to point of delivery due to
transportation costs. In 1990, selling prices and order rates declined as
a result of a weakened construction industry, causing increased
competition. The severely depressed activity in the construction industry,
due to overbuilding, again in 1991 resulted in drastic declines in selling
prices and demand. In spite of depressed conditions, 1992 brought improved
shipments due mainly to successful job bidding; however, in order to book a
higher percentage of quotations, selling prices consequently suffered.
Again in 1993, successful job bidding resulted in improved shipment levels,
while higher raw material costs pushed selling prices upward, even though
the construction industry remained depressed and highly competitive. In
1994, an easing of competitive conditions within the construction industry
led to increased shipment levels, while selling prices were again forced
upward by higher raw material costs. Reduced competition and increased
activity in 1995 again led to higher shipment levels within the
construction industry, as demand and increased raw material costs forced
selling prices higher. Generally strong business conditions within the
commercial construction industry continued during 1996 to bring
improvements to selling prices for fabricated products, while shipment
levels were relatively flat, as weather related construction delays offset
otherwise strong demand. Even though market conditions continued to be
favorable during 1997, competition within the industry forced lower selling
prices for fabricated products, and also kept shipment levels flat.
Billets are semi-finished products used by the Registrant in its
rolling mill process to manufacture various merchant bar products. With
the addition of new casting equipment in recent years, the Registrant has
anticipated a growing billet market of nonaffiliated customers who further
fabricate the billets for various end uses. Competition within the
industry caused a drop in selling prices in 1990, with demand slowing. In
1991, selling prices trended further downward, while order rates fell due
to the sagging economy. Billet sales improved significantly in 1992 as a
result of increased domestic demand and entry into the much more
PART I
(con'd.)
competitive export markets, although selling prices still continued to
slump. Again in 1993, increased export business and improved domestic
demand resulted in significantly higher billet shipments. Selling prices
also rose in reaction to higher scrap steel costs. Shipments of billets
declined slightly in 1994 due to a lack of export shipments, although
domestic shipments improved significantly. While the export markets were
much more competitive, domestic demand improved dramatically. Higher
billet prices were also driven by higher scrap steel costs, but the
increased domestic billet shipments, which bring a higher price, also
contributed. Improved market conditions and increased domestic demand
resulted in improved 1995 billet shipments, as export markets remained
highly competitive. Higher scrap steel costs and improved product
mix together caused billet selling prices to climb. A planned melt shop
shutdown during 1996 to install a new ladle furnace and upgrade an electric
arc furnace was unexpectedly prolonged due to problems with construction
and installation, resulting in a sharp decline in billet production and
causing a significant reduction in billet shipments for the year, while the
highly competitive export market remained in effect. Billet selling prices
declined with a downward trend in scrap prices. Increased billet shipments
for 1997 resulted both from increased production, which hampered shipments
last year, and improved domestic demand, as export markets remained very
competitive. Lower scrap prices continued to keep billet prices down.
(xi) During the last three fiscal years, the Registrant was not
involved in any material research and development activities.
(xii) The United States Environmental Protection Agency (EPA)
has notified the Registrant and the County of Roanoke (County) of their
potential liability and responsibility for costs of response to materials
at a County-owned landfill site and adjacent streams near Salem, Virginia.
The Registrant has entered into a cost-sharing agreement with the County
for response action (cleanup) at the landfill site and the streams.
Pursuant to a Consent Decree to which EPA, the County and the Registrant
were parties, the County completed a remedial action at the landfill in
1995. Under a separate consent order with EPA, the Registrant performed a
removal action at the streams, which included removal, treatment and
on-site placement of materials and affected sediment and soil. EPA
confirmed completion of the required work on September 14, 1997. The
Registrant has not received notification of other claims associated with
the landfill or streams. The Registrant does not anticipate significant
future potential liability for response costs associated with the landfill
or streams. The only remaining obligation under either order is
reimbursement of certain EPA oversight costs. Management believes such
costs would not have a materially adverse effect on the consolidated
financial position, results of operations and competitive position of the
Registrant. See Note 7, "Commitments and Contingent Liabilities", in
Notes to Consolidated Financial Statements contained in the Registrant's
1997 Annual Report to Stockholders, filed as an Exhibit to this Form 10-K.
PART I
(con'd.)
Near the end of fiscal year 1996, the Registrant began treating a
portion of its electric arc furnace dust, a hazardous substance, utilizing
its own stabilization process. Significant savings are being realized as
this process replaces off-site and more expensive treatment methods that
had been used through a contract with an approved waste disposal firm. The
Registrant believes it is in substantial compliance with applicable
federal, state and local regulations. However, future changes in
regulations may require expenditures which could adversely affect earnings
in subsequent years.
The Registrant has constructed over the years pollution control
equipment at an aggregate cost of over $10,900,000. Annual operating
expenses and depreciation of all pollution control equipment and waste
disposal costs are in excess of $3,800,000 in the aggregate. The
Registrant is expected to spend less than $1,000,000 for additional
pollution control and waste disposal equipment and facilities during
subsequent fiscal years. Adoption of the Clean Air Act Amendments of 1990
is not anticipated to have a materially adverse effect on the Registrant's
operations, capital resources or liquidity, nor should any incremental
increase in capital expenditures occur due to the Act.
(xiii) At October 31, 1997, the Registrant employed 506 persons
at its Roanoke plant, with no employment at its Salem division, idle since
mid-1991. The Registrant's subsidiaries, John W. Hancock, Jr., Inc.,
Socar, Inc., Shredded Products Corporation and RESCO Steel Products
Corporation employed 289, 268, 55 and 43 persons, respectively.
(d) Financial Information about Foreign and Domestic Operations and
Export Sales.
When the Registrant's billet production exceeds its required
needs, this semi-finished product is offered for sale. During past years,
a portion of the excess billets has been sold to brokers who represent
foreign purchasers, although, there were no foreign sales of excess billets
or other products during fiscal years 1995, 1996 and 1997. The information
required by this paragraph by geographical area, as to foreign and domestic
operations, is not provided since it is identical to the table in paragraph
(b) with all information pertaining to the United States.
ITEM 2. PROPERTIES
The Registrant owns 72 acres situated in the City of Roanoke,
Virginia, which comprises its main plant, of which 25 acres are used to
provide 345,000 square feet of manufacturing space with an annual billet
capacity of approximately 650,000 tons. A 30 acre site is owned in Salem,
Virginia, of which 10 acres were used to provide 51,355 square feet of
manufacturing space, until March 1991, when the plant was idled. The
Registrant acquired in 1991 a 447 acre tract of land in Franklin County,
Virginia, 100 acres of which was transferred to Shredded Products
PART I
(con'd.)
Corporation in a move of shredding operations from its Montvale location.
Part of this new Shredded Products property is being used as an approved
industrial landfill. The remaining 337 acres of this land, 51 acres of
which was sold in 1995 and 1997, will be marketed as an industrial park for
Franklin County.
Shredded Products Corporation operates in both Montvale and Rocky
Mount, Virginia. The Montvale plant is situated on a 75 acre site owned by
the Registrant, approximately 20 acres of which are regularly used in its
scrap processing operation, with an annual production capacity of
approximately 18,000 tons. The Rocky Mount facility is located on a 100
acre site owned by Shredded Products Corporation, partially consisting of a
25 acre industrial landfill used for the disposal of its auto fluff, and
another 25 acres of which are regularly used in its shredding operation,
with an annual production capacity of approximately 150,000 tons.
John W. Hancock, Jr., Inc. is located in Roanoke County near
Salem, Virginia. The plant is situated on a 37 acre site owned by Hancock,
Inc., 17 acres of which are regularly used in its operations. Buildings on
the site contain 131,614 square feet of floor space.
Socar, Inc. and its subsidiary are located in Florence, South
Carolina, and in Continental, Ohio. The Florence facility is located on a
28 acre site owned by Socar, Inc., 16 acres of which are regularly used in
its operations. Buildings on the site contain 93,359 square feet of floor
space. The plant located on a 32 acre site in Continental, Ohio, owned by
Socar, Inc., has 86,400 square feet of floor space in manufacturing
buildings, situated on 8 acres regularly used in its operations.
RESCO Steel Products Corporation operates from a building
containing 43,340 square feet of floor space, located in Salem, Virginia,
on a 7 acre site owned by RESCO.
The various buildings are of modern design, well-maintained, and
suitable and adequate for the requirements of the business.
ITEM 3. LEGAL PROCEEDINGS
A County of Roanoke (County) landfill site, where the Registrant
disposed of furnace dust from 1969 until 1976, was placed on the National
Priorities List as a Superfund site in 1989. The United States
Environmental Protection Agency (EPA) notified the Registrant and the
County of their potential liability and responsibility for costs of
response at the landfill site and adjacent streams. The Registrant entered
into a cost-sharing agreement with the County for response action (cleanup)
at the landfill site and sharing of cost reimbursement received from other
potentially responsible parties, if any. The County has filed suit to
recover such costs. Under EPA oversight, the County completed remediation
action there in 1995. The Registrant's costs associated with that work
were reflected in past financial statements or in the accompanying financial
PART I
(con'd.)
statements. Under a consent order and EPA oversight, the Registrant
completed in 1997 a removal action (cleanup) of the streams. While the
cost of future response activities or any future claims associated with the
streams is difficult to project, management believes such costs, if any,
would not have a materially adverse effect on the consolidated financial
position, results of operations and competitive position of the Registrant.
See Note 7, "Commitments and Contingent Liabilities", in Notes to
Consolidated Financial Statements contained in the Registrant's 1997 Annual
Report to Stockholders, filed as an Exhibit to this Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of stockholders during
the fourth quarter of the fiscal year covered.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following
list is included as an unnumbered Item in Part I of this report in lieu of
being included in the Proxy Statement for the Annual Meeting of
Shareholders to be held on February 17, 1998.
The names, ages and positions of all of the executive officers of
the Registrant as of October 31, 1997 are listed below with their business
experience with the Registrant for the past five years. Officers are
elected annually by the Board of Directors at the first meeting of
directors following the annual meeting of shareholders. There are no family
relationships among these officers, nor any agreement or understanding
between any officer and any other person pursuant to which the officer was
selected.
Thomas J. Crawford, 42, has served as Secretary of the Registrant
since January 1985 and as Assistant Vice President since January 1993;
prior thereto, he had served as Manager of Inside Sales since 1984 and as a
Sales Representative since 1977. He has 20 years of service with the
Registrant.
Donald R. Higgins, 52, has served as Vice President - Sales of
the Registrant since January 1986; prior thereto, he had served as General
Sales Manager since 1984 and Assistant Sales Manager since 1978. He has 32
years of service with the Registrant.
John E. Morris, 56, has served as Vice President - Finance of the
Registrant since October 1988 and as Assistant Treasurer since 1985; prior
thereto, he had served as Controller since 1971. He has 26 years of
service with the Registrant.
Donald G. Smith, 62, has served as Chairman of the Board of the
Registrant since February 1989, as Chief Executive Officer since November
1986, as President and Treasurer since January 1985 and as Director of the
Registrant since April 1984; prior thereto, he had served as Vice President
- - Administration since September 1980 and as Secretary since January 1967.
He has 40 years of service with the Registrant.
PART I
(con'd.)
FORWARD-LOOKING STATEMENTS
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.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The specified information required by this item is incorporated by
reference to the information under the heading "Stock Activity" in the 1997
Annual Report to Stockholders. The Registrant did not during fiscal year
1997 make any sale of securities not registered under the Securities Act of
1993.
ITEM 6. SELECTED FINANCIAL DATA
The specified information required by this item is incorporated
by reference to the information under the heading "Selected Financial Data"
in the 1997 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The specified information required by this item is incorporated
by reference to the information under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the 1997
Annual Report to Stockholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The specific information required by this item is incorporated
by reference to the information under the headings "Notes to Consolidated
Financial Statements" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the 1997 Annual Report to
Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The specified information required by this item is incorporated
by reference to the information under the headings "Independent Auditors'
Report", "Consolidated Financial Statements" and "Notes to Consolidated
Financial Statements" in the 1997 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The specified information required by this item is incorporated
by reference to the information under the heading "Information Concerning
Directors and Nominees" in the Proxy Statement dated December 29, 1997, as
filed with the Commission, or is included under the heading "Executive
Officers of the Registrant" in Part I of this 10-K filing. The disclosure
required by Item 405 of Regulation S-K is not applicable.
ITEM 11. EXECUTIVE COMPENSATION
The specified information required by this item is incorporated
by reference to the information under the headings "Executive
Compensation", "Compensation and Stock Option Committee Report on Executive
Compensation", "Compensation Committee Interlocks and Insider
Participation", "Certain Relationships and Related Transactions",
"Performance Graph" and "Board of Directors and Committees -- Director
Compensation" in the Proxy Statement dated December 29, 1997, as filed
with the Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The specified information required by this item is incorporated
by reference to the information under the headings "Security Ownership of
Certain Beneficial Owners" and "Security Ownership of Management" in the
Proxy Statement dated December 29, 1997, as filed with the Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The specified information required by this item is incorporated
by reference to the information under the heading "Compensation Committee
Interlocks and Insider Participation" and "Certain Relationships and
Related Transactions" in the Proxy Statement dated December 29, 1997, as
filed with the Commission.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) The following financial statements are filed as part of
the 1997 Annual Report to Stockholders which is incorporated by reference:
(a) Consolidated Balance Sheets
(b) Consolidated Statements of Stockholders' Equity
(c) Consolidated Statements of Earnings
(d) Consolidated Statements of Cash Flows
(e) Notes to Consolidated Financial Statements
(f) Independent Auditors' Report
Individual financial statements of the Registrant are not being
filed because the Registrant is primarily an operating company and its
subsidiaries do not have minority equity interests and/or long-term
indebtedness (including current portions) to any person outside the
consolidated group (excluding long-term indebtedness which is
collateralized by the Registrant by guarantee, pledge, assignment or
otherwise), in amounts which together exceed 5 percent of the total
consolidated assets.
PART IV
(con'd.)
(2) Pursuant to Regulation S-K the following Exhibit Index is
added immediately preceding the exhibits filed as part of the subject Form
10-K:
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT PAGE
(3) (a) Articles of Incorporation, as amended 19
Incorporated by
Reference
(b) By-Laws, as amended 20
Incorporated by
Reference
(4) Instruments Defining the Rights of
Security Holders 21
(10) * (a) Executive Officer Incentive Arrangement 22
Incorporated by
Reference
* (b) Roanoke Electric Steel Corporation
Employees' Stock Option Plan 22
Incorporated by
Reference
* (c) Roanoke Electric Steel Corporation
Non-Employee Directors' Stock Option Plan 22
* (d) Roanoke Electric Steel Corporation
Consulting Arrangement 22
* (e) Roanoke Electric Steel Corporation
Severance Agreements 22
Incorporated by
Reference
(13) 1997 Annual Report to Stockholders 23
(21) Subsidiaries of the Registrant 24
(23) Consent of Independent Auditors 25
(27) Financial Data Schedule 26
PART IV
(con'd.)
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Registrant during
the last quarter of the fiscal period covered by the Annual Report.
* Management contract, or compensatory plan or agreement, required to be
filed as an Exhibit to this Form 10-K pursuant to Item 14 (c).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: Donald G. Smith
Donald G. Smith, Chairman, President,
Treasurer and Chief Executive Officer
(Principal Executive Officer, Principal
Financial Officer and Director)
Date: January 20, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Name and Title Date
Donald G. Smith January 20, 1998
Donald G. Smith, Chairman, President,
Treasurer and Chief Executive Officer
(Principal Executive Officer, Principal
Financial Officer and Director)
John E. Morris January 20, 1998
John E. Morris, Vice President - Finance
and Assistant Treasurer (Principal
Accounting Officer)
George B. Cartledge, Jr. January 20, 1998
George B. Cartledge, Jr. Director
Paul E. Torgersen January 20, 1998
Paul E. Torgersen Director
William L. Neal January 20, 1998
William L. Neal Director
Thomas L. Robertson January 20, 1998
Thomas L. Robertson Director
John D. Wilson January 20, 1998
John D. Wilson Director
EXHIBIT NO. 3 (a)
ARTICLES OF INCORPORATION, AS AMENDED
Incorporated by reference to the previously filed Form 10-K for
October 31, 1996 on file in the Commission office.
EXHIBIT NO. 3 (b)
BY-LAWS, AS AMENDED
Incorporated by reference to the previously filed Form 10-Q for
April 30, 1997 on file in the Commission office.
EXHIBIT NO. 4
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
Pursuant to Item 601(b) (4) (iii) of Regulation S-K, the
Registrant hereby undertakes to furnish to the Commission, upon request,
copies of the instruments defining the rights of holders of the long-term
debt of Roanoke Electric Steel Corporation and its subsidiaries described
in its 1997 Annual Report to Stockholders and Form 10-K.
EXHIBIT NO. 10
* (a)
EXECUTIVE OFFICER INCENTIVE ARRANGEMENT
Incorporated by reference to the previously filed Form 10-K for
October 31, 1993 on file in the Commission office.
* (b)
ROANOKE ELECTRIC STEEL CORPORATION
EMPLOYEES' STOCK OPTION PLAN
Incorporated by reference to the previously filed Form 10-K for
October 31, 1992 on file in the Commission office.
* (c)
ROANOKE ELECTRIC STEEL CORPORATION
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. Purpose. The purpose of the Roanoke Electric Steel
Corporation Non-Employee Directors' Stock Option Plan (the
"Plan") is to encourage ownership in the Company by non-employee
members of the Board of Directors, in order to promote long-term
shareholder value and to provide non-employee members of the
Board with an incentive to continue as directors of the Company.
2. Definitions. As used in the Plan, the following terms
have the meanings indicated:
A. "Board" means the Board of Directors of the Company.
B. "Company" means Roanoke Electric Steel Corporation, a
Virginia corporation.
C. "Committee" means Compensation and Stock Option Committee
of the Board.
D. "Company Stock" means the Common Stock of the Company
(including, but not limited to, rights, options or warrants for the
purchase of common or preferred stock of the Company issued to
shareholders generally). If the par value of the Company Stock is
changed, or in the event of a change in the capital structure of the
Company (as provided in Section 9), the shares resulting from such a
change shall be deemed to be the Company Stock within the meaning
of the Plan.
E. "Date of Grant" means the date as of which a director is
awarded an Option pursuant to Section 7.
F. "Effective Date" means February 18, 1997.
G. "Eligible Director" means a director described in Section 4.
H. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
I. "Fair Market Value" means on a specific date the closing sales
price of Company Stock on a nationally recognized stock exchange or, if
not traded on such an exchange, the Nasdaq Stock Market, on the date
involved if that is the trading day, and if not, the first trading day
prior to such day. If the Company Stock is not quoted on the Nasdaq
Stock Market, then Fair Market Value shall mean the average between the
bid and asked prices of the Company Stock on the date involved if that
is a trading day, or if not, the first trading day prior to such day.
J. "IRC" means the Internal Revenue Code of 1986, as amended.
K. "Option" or "Options" means the right to purchase Company
Stock subject to the terms and conditions set forth in Section 7.
L. "Subsidiary" means, with respect to any corporation, a
corporation more than 50% of whose voting shares are owned directly or
indirectly by the Company.
3. Administration. The Plan shall be administered by the Committee.
The award of Options under the Plan shall be automatic as described in
Section 7. However, the Committee shall have all powers vested in it by the
terms of the Plan, including, without limitation, the authority (within the
limitations described herein) to prescribe the form of the agreement
applicable to evidence the award of Options under the Plan, to construe the
Plan, to determine all questions arising under the Plan, and to adopt and
amend rules and regulations for the administration of the Plan as it may
deem desirable. Any decision of the Committee in the administration of the
Plan, as described herein, shall be final and conclusive. No member of
the Committee shall be liable for anything done or omitted to be done by him
or any other member of the Committee in connection with the Plan, except for
his own willful misconduct or as expressly provided by statute.
4. Participation in the Plan. Each director of the Company who is not
otherwise an employee of the Company or any Subsidiary, shall be eligible to
participate in the Plan.
5. Stock Subject to the Plan. The maximum number of shares of Company
Stock that may be issued pursuant to the exercise of Options granted pursuant
to the Plan shall be 25,000. The maximum number of Shares of Company Stock
that may be issued to any Eligible Director under the Plan shall be 2,000.
Shares that have not been issued under the Plan allocable to Options and
portions of options that expire or terminate unexercised may again be subject
to the award of a new Option. For purposes of determining the number of
shares that are available under the Plan, such number shall include the
number of shares surrendered by an optionee in connection with the exercise
of an Option.
6. Non-Statutory Stock Options. All Options granted under the Plan
shall be non-statutory in nature and shall not be entitled to special tax
treatment under Code Section 422.
7. Terms, Conditions and Awards of Options. Each award of an Option
shall be evidenced by a written agreement in such form as the Committee shall
from time to time approve, which agreement shall comply with and be subject
to the following terms and conditions:
(a) Awards of Options. Options for the purchase of shares of
Company Stock shall be awarded at the times and for the number of
shares as follows:
(i) Each person who is an Eligible Director on the Effective
Date of the Plan shall automatically receive: (i) on the Effective
Date of the Plan, an Option to purchase 1,000 shares of Company
Stock; and (ii) on the one-year anniversary of the Effective Date
of the Plan, an option to purchase an additional 1,000 shares of
Company Stock; and
(ii) A director who first becomes an Eligible Director after
the Effective Date of the Plan may, upon action of the
Committee, be granted an Option or Options to purchase shares
of Company Stock under the Plan.
(b) Option Exercise Price. The Option exercise price shall be
the Fair Market Value of the shares of Company Stock subject to such
Option on the Date of Grant.
(c) Options Not Transferable. An Option shall not be transferable
by the optionee otherwise than by will, or by the laws of descent and
distribution, and shall be exercised during the lifetime of the optionee
only by him. An Option transferred by will or by the laws of descent
and distribution may be exercised by the optionee's personal
representative as provided in Section 7(e). No Option or interest
therein may be transferred, assigned, pledged or hypothecated by the
optionee during his lifetime, whether by operation of law or otherwise,
or be made subject to execution, attachment or similar process.
(d) Exercise of Options. An Option shall be exercisable on the
Date of Grant, provided, however, that no Option may be exercised:
(i) before all applicable federal and state securities laws
have been complied with;
(ii) if the optionee was not an Eligible Director on the
Date of Grant;
(iii) if sooner terminated in accordance with the terms
of the Plan or the Option, or later than ten (10) years from the
Date of Grant; and
(iv) except by written notice to the Company (as provided in
the Option) at its principal office, stating the number of shares
of Company Stock the optionee has elected to purchase, accompanied
by payment in cash and/or by delivery to the Company of shares of
Company Stock owned by the optionee (valued at Fair Market Value
on the date of exercise) in the amount of the full Option exercise
price for the shares of Company Stock being acquired thereunder.
No Option may be exercised for a fraction of a share, and no partial
exercise of any Option may be for less than 100 shares.
(e) Death of Optionee. In the event of the optionee's death within
the period the optionee could have exercised the Option, the Option
may be exercised by the optionee's personal representative within
one year from the date of death to the extent and in the manner the
optionee could have exercised the Option on the date of death;
provided that no Option may be exercised later than ten years from
the Date of Grant.
(f) Withholding. Upon the exercise of Options issued hereunder,
the Company shall have the right to require the optionee to pay the
Company the amount of taxes, if any, which the Company may be
required to withhold with respect to such shares.
8. Limitation of Rights.
(a) No Right to Continue as a Director. Neither the Plan nor the
grant of an Option, nor any other action taken pursuant to the
Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the Company will retain
any person as a director for any period of time.
(b) No Shareholders Rights Under Options. An optionee shall have
no rights as a shareholder with respect to shares of Company Stock
covered by his Options until the date of exercise of the Option,
and, except as permitted in Section 9, no adjustment will be made
for dividends or other rights for which the record date is prior
to the date of such exercise.
9. Changes in Capital Structure.
(a) If the number of outstanding shares of Company Stock is
increased or decreased as a result of a subdivision or consolidation
of shares, the payment of a stock dividend, stock split, spin-off,
or any other change in capitalization effected without receipt of
consideration by the Company (including, but not limited to, the
creation or issuance to shareholders generally of rights, options
or warrants for the purchase of common or preferred stock of the
Company), the number and kind of shares of stock or securities of
the Company to be subject to the Plan, the maximum number of shares
or securities which may be delivered under the Plan, and other
relevant provisions may, in its discretion, be appropriately
adjusted by the Committee, whose determination shall be binding and
conclusive on all persons, provided that in no event shall the
rights or value of the Options be enhanced as a result of any such
adjustment.
(b) Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without consent of any
optionee, and the Committee's determination shall be conclusive and
binding on all persons for all purposes.
10. Duration and Amendment of the Plan. There is no express limitation
upon the duration of the Plan. The Board may terminate the Plan or amend the
Plan in any respect; provided that any termination of the Plan will not have
the effect of terminating Options then outstanding under the Plan. Such
outstanding Options shall continue in effect pursuant to their terms and the
terms of the Plan in effect on the date of termination of the Plan. The Plan
shall not be amended more than once every six months other than an amendment
required to comply with changes in the Internal Revenue Code or regulations
thereunder.
11. Notice. All notices and other communications required or permitted
to be given under this Plan shall be in writing and shall be deemed to have
been duly given if delivered personally or mailed first class, postage
prepaid, as follows: (a) if to the Company - at its principal business
address to the attention of the Secretary; (b) if to any optionee - at the
last address of the optionee known to the sender at the time the notice or
other communication is sent.
12. Construction. The terms of this Plan shall be governed by the laws
of the Commonwealth of Virginia.
As evidence of its adoption of the Plan, the Company has caused this
document to be signed by its officer duly authorized this 18th day of
February, 1997.
ROANOKE ELECTRIC STEEL CORPORATION
By Donald G. Smith
President
*(d)
ROANOKE ELECTRIC STEEL CORPORATION
CONSULTING ARRANGEMENT
In January 1996, the Company entered into an arrangement with
William L. Neal, a director of the Company and former President of John W.
Hancock, Jr., Inc., whereby Mr. Neal has agreed to provide consultation and
advisory services to the Company and its subsidiaries. The arrangement
will continue in effect until terminated by either party. The Company has
agreed to pay Mr. Neal a retainer fee of $2,000 per month and an hourly
project rate of $100, plus expenses.
* (e)
ROANOKE ELECTRIC STEEL CORPORATION
SEVERANCE AGREEMENTS
Incorporated by reference to the previously filed Form 10-K for
October 31, 1996 on file in the Commission office.
* Management contract, or compensatory plan or agreement, required to
be filed as an Exhibit to this Form 10-K pursuant to Item 14 (c).
EXHIBIT NO. 13
1997 ANNUAL REPORT TO STOCKHOLDERS
EXHIBIT NO. 21
SUBSIDIARIES OF THE REGISTRANT
Registrant: Roanoke Electric Steel Corporation
Organized Under
Subsidiary of Registrant Jurisdiction of
Shredded Products Corporation Virginia
John W. Hancock, Jr., Inc. Virginia
Socar, Incorporated South Carolina
RESCO Steel Products Corporation Virginia
Roanoke Technical Treatment and Services, Inc. Virginia
EXHIBIT NO. 23
DELOITTE & TOUCHE LLP
Suite 1401 Telephone: (910) 721-2300
500 West Fifth Street Facsimile: (910) 721-2301
P.O. Box 20129
Winston-Salem, North Carolina 27120-0129
CONSENT OF INDEPENDENT AUDITORS
Roanoke Electric Steel Corporation:
We consent to the incorporation by reference in Registration Statement Nos.
33-27359, 33-35243 and 333-25299 on Form S-8 of our report dated November
18, 1997, incorporated by reference in this Annual Report on Form 10-K of
Roanoke Electric Steel Corporation for the year ended October 31, 1997.
Deloitte & Touche LLP
Winston-Salem, North Carolina
January 20, 1998
Deloitte Touche
Tohmatsu
International
EXHIBIT NO. 27
FINANCIAL DATA SCHEDULE