UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended January 31, 2004
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 incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 102 Westside Blvd., N.W., Roanoke, Virginia | 24017 | |
| (Address of principal executive offices) | (Zip Code) |
(540) 342-1831
(Registrant’s telephone number, including area code )
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of January 31, 2004.
10,932,813 Shares outstanding
ROANOKE ELECTRIC STEEL CORPORATION
FORM 10-Q
CONTENTS
| Page | ||||||
| 1. |
Part I | - Financial Information | 3 - 20 | |||
| Item 1. | Financial Statements | |||||
| a. | Consolidated Balance Sheets | 3 | ||||
| b. | Consolidated Statements of Earnings (Loss) | 4 | ||||
| c. | Consolidated Statements of Cash Flows | 5 | ||||
| d. | Notes to Consolidated Financial Statements | 6 - 12 | ||||
| e. | Independent Accountants’ Review Report | 13 | ||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 - 18 | ||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 19 | ||||
| Item 4. | Controls and Procedures | 20 | ||||
| 2. |
Part II | - Other Information | 21 | |||
| Item 1. | Legal Proceedings | 21 | ||||
| Item 6. | Exhibits and Reports on Form 8-K | 21 | ||||
| 3. |
Signatures | 22 | ||||
| 4. |
Exhibit Index pursuant to Regulation S-K | 23 | ||||
| 5. |
Exhibits | 24 - 29 | ||||
2
PART I - FINANCIAL INFORMATION
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Balance Sheets
| (Unaudited) | ||||||||
| January 31, 2004 |
October 31, 2003 |
|||||||
| ASSETS | ||||||||
| CURRENT ASSETS |
||||||||
| Cash and cash equivalents |
$ | 13,882,310 | $ | 13,422,044 | ||||
| Investments |
3,627,061 | 3,778,392 | ||||||
| Accounts receivable, net of allowances of $3,948,086 in 2004 and $3,430,029 in 2003 |
48,123,355 | 46,469,280 | ||||||
| Refundable income taxes |
0 | 608,244 | ||||||
| Inventories |
66,288,612 | 59,565,245 | ||||||
| Prepaid expenses |
1,874,314 | 1,466,176 | ||||||
| Deferred income taxes |
5,476,575 | 5,525,279 | ||||||
| Total current assets |
139,272,227 | 130,834,660 | ||||||
| PROPERTY, PLANT AND EQUIPMENT |
||||||||
| Land |
7,734,589 | 7,734,589 | ||||||
| Buildings |
45,161,225 | 45,099,325 | ||||||
| Manufacturing machinery and equipment |
136,247,243 | 136,053,175 | ||||||
| Trucks and forklifts |
7,262,445 | 7,242,124 | ||||||
| Fabricating plant equipment |
19,800,866 | 19,693,180 | ||||||
| Land improvements |
9,047,924 | 8,993,364 | ||||||
| Office equipment |
2,566,960 | 2,537,117 | ||||||
| Assets under construction |
1,564,108 | 1,375,707 | ||||||
| Total |
229,385,360 | 228,728,581 | ||||||
| Less—accumulated depreciation |
108,961,805 | 105,323,406 | ||||||
| Property, plant and equipment, net |
120,423,555 | 123,405,175 | ||||||
| GOODWILL |
13,868,647 | 13,868,647 | ||||||
| OTHER ASSETS |
2,746,022 | 2,759,004 | ||||||
| TOTAL ASSETS |
$ | 276,310,451 | $ | 270,867,486 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES |
||||||||
| Current portion of long-term debt and capital lease obligation |
$ | 11,299,897 | $ | 7,560,884 | ||||
| Accounts payable |
28,429,662 | 24,540,814 | ||||||
| Dividends payable |
546,641 | 546,641 | ||||||
| Employees’ taxes withheld |
360,983 | 275,112 | ||||||
| Accrued profit sharing contribution |
1,322,815 | 1,339,642 | ||||||
| Accrued wages and expenses |
12,138,606 | 11,289,678 | ||||||
| Accrued income taxes |
86,634 | 0 | ||||||
| Total current liabilities |
54,185,238 | 45,552,771 | ||||||
| LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION |
||||||||
| Notes and capital lease payable |
71,504,040 | 71,519,832 | ||||||
| Less—current portion |
11,299,897 | 7,560,884 | ||||||
| Total long-term debt and capital lease obligation |
60,204,143 | 63,958,948 | ||||||
| DEFERRED INCOME TAXES |
29,474,012 | 29,908,754 | ||||||
| OTHER LIABILITIES |
5,206,956 | 5,381,389 | ||||||
| STOCKHOLDERS’ EQUITY |
||||||||
| Common stock—no par value—authorized 20,000,000 shares, issued 12,205,927 shares |
4,394,889 | 4,394,889 | ||||||
| Retained earnings |
124,223,939 | 123,236,904 | ||||||
| Accumulated other comprehensive loss |
(560,858 | ) | (748,301 | ) | ||||
| Total |
128,057,970 | 126,883,492 | ||||||
| Less—treasury stock, 1,273,114 shares at cost |
817,868 | 817,868 | ||||||
| Total stockholders’ equity |
127,240,102 | 126,065,624 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 276,310,451 | $ | 270,867,486 | ||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
3
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Statements of Earnings (Loss)
| (Unaudited) Three Months Ended January 31, |
||||||||
| 2004 |
2003 |
|||||||
| SALES |
$ | 87,255,510 | $ | 61,129,954 | ||||
| COST OF SALES |
78,403,653 | 58,056,795 | ||||||
| GROSS EARNINGS |
8,851,857 | 3,073,159 | ||||||
| OTHER OPERATING EXPENSES (INCOME) |
||||||||
| Administrative |
7,359,859 | 5,225,018 | ||||||
| Interest, net |
1,047,682 | 1,462,984 | ||||||
| Profit sharing |
956,488 | 80,400 | ||||||
| Antitrust litigation settlement |
(3,061,820 | ) | (520,960 | ) | ||||
| Total |
6,302,209 | 6,247,442 | ||||||
| EARNINGS (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE |
2,549,648 | (3,174,283 | ) | |||||
| INCOME TAX EXPENSE (BENEFIT) |
1,015,972 | (1,272,821 | ) | |||||
| EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE |
1,533,676 | (1,901,462 | ) | |||||
| CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE |
0 | (228,410 | ) | |||||
| NET EARNINGS (LOSS) |
$ | 1,533,676 | $ | (2,129,872 | ) | |||
| Earnings (loss) per share (basic and diluted) of common stock: |
||||||||
| Earnings (loss) before cumulative effect of change in accounting principle |
$ | 0.14 | $ | (0.17 | ) | |||
| Cumulative effect of change in accounting principle |
0.00 | (0.02 | ) | |||||
| Net earnings (loss) per share of common stock |
$ | 0.14 | $ | (0.19 | ) | |||
| Cash dividends per share of common stock |
$ | 0.05 | $ | 0.05 | ||||
| Weighted average number of common shares outstanding : |
||||||||
| Basic |
10,932,813 | 10,942,813 | ||||||
| Diluted |
10,970,133 | 10,958,945 | ||||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
4
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Statements of Cash Flows
| (Unaudited) Three Months Ended January 31, |
||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Net earnings (loss) |
$ | 1,533,676 | $ | (2,129,872 | ) | |||
| Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: |
||||||||
| Cumulative effect of change in accounting principle, net of tax |
0 | 228,410 | ||||||
| Deferred compensation liability |
51,239 | 7,269 | ||||||
| Postretirement liabilities |
(38,212 | ) | 102,669 | |||||
| Landfill closure obligation |
8,409 | 0 | ||||||
| Depreciation and amortization |
3,931,937 | 4,039,182 | ||||||
| (Gain) loss on sale of investments and property, plant and equipment |
(854 | ) | 70,223 | |||||
| Deferred income taxes |
(511,000 | ) | (331,000 | ) | ||||
| Changes in assets and liabilities which provided (used) cash, exclusive of changes shown separately |
(3,162,122 | ) | 1,005,007 | |||||
| Net cash provided by operating activities |
1,813,073 | 2,991,888 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Expenditures for property, plant and equipment |
(664,478 | ) | (569,515 | ) | ||||
| Proceeds from sale of property, plant and equipment |
660 | 330 | ||||||
| (Purchase) sale of investments |
143,013 | 10,388,643 | ||||||
| Other |
(73,700 | ) | (49,695 | ) | ||||
| Net cash provided by (used in) investing activities |
(594,505 | ) | 9,769,763 | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Cash dividends |
(546,641 | ) | (547,141 | ) | ||||
| Payment of long-term debt |
(11,231 | ) | (18,760,372 | ) | ||||
| Loan costs |
0 | (285,000 | ) | |||||
| Interest rate swap termination fee |
(195,869 | ) | (234,515 | ) | ||||
| Payment of capital lease principal |
(4,561 | ) | 0 | |||||
| Net cash used in financing activities |
(758,302 | ) | (19,827,028 | ) | ||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
460,266 | (7,065,377 | ) | |||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
13,422,044 | 12,051,362 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 13,882,310 | $ | 4,985,985 | ||||