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, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-2389
ROANOKE ELECTRIC STEEL CORPORATION
(Exact name of Registrant as specified in its charter)
Virginia 54-0585263
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 Westside Blvd., N.W., Roanoke, Virginia 24017
(Address of principal executive offices) (Zip Code)
(540) 342-1831
(Registrant's telephone number, including area code )
N/A
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of January 31, 2000.
10,982,188 Shares outstanding
ROANOKE ELECTRIC STEEL CORPORATION
FORM 10-Q
CONTENTS
Page
1. Part I - Financial Information 3 - 13
Item 1. Financial Statements
a. Consolidated Balance Sheets 3
b. Consolidated Statements of Earnings 4
c. Consolidated Statements of Cash Flows 5
d. Notes to Consolidated Financial Statements 6 - 9
e. Independent Accountants' Report 10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11 - 12
Item 3. Quantitative and Qualitative
Disclosures About Market Risk 13
2. Part II - Other Information 14
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
3. Signatures 15
4. Exhibit Index pursuant to Regulation S-K 16
5. Exhibits
a. Letter Regarding Change in Accounting Principle 17
b. Financial Data Schedule 18
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Balance Sheets
ASSETS
(Unaudited)
January 31, October 31,
2000 1999 *
CURRENT ASSETS
Cash and cash equivalents $ 28,764,639 $ 33,286,934
Investments 11,965,655 11,772,902
Accounts receivable, net of allowances of
$2,149,868 in 2000 and $2,000,327 in 1999 49,270,917 57,692,504
Inventories 72,412,995 64,525,619
Prepaid expenses 1,395,805 1,476,561
Deferred income taxes 5,879,314 5,879,314
Total current assets 169,689,325 174,633,834
PROPERTY, PLANT AND EQUIPMENT
Land 8,077,943 8,077,943
Buildings 41,084,724 40,816,558
Other property and equipment 190,326,696 189,012,488
Assets under construction 4,177,364 2,135,854
Total 243,666,727 240,042,843
Less--accumulated depreciation 82,473,049 78,530,036
Property, plant and equipment, net 161,193,678 161,512,807
GOODWILL 15,285,882 15,488,343
OTHER ASSETS 1,254,826 1,110,828
TOTAL ASSETS $347,423,711 $352,745,812
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 15,036,469 $ 15,034,131
Accounts payable 24,237,713 22,821,864
Dividends payable 1,098,219 1,102,579
Employees' taxes withheld 503,295 530,139
Accrued profit sharing contribution 1,798,740 6,353,611
Accrued wages and expenses 8,406,721 11,138,478
Accrued income taxes 2,912,126 411,874
Total current liabilities 53,993,283 57,392,676
LONG-TERM DEBT
Notes payable 135,186,500 138,944,689
Less--current portion 15,036,469 15,034,131
Total long-term debt 120,150,031 123,910,558
DEFERRED INCOME TAXES 30,556,236 30,902,712
OTHER LIABILITIES 3,569,717 3,381,735
STOCKHOLDERS' EQUITY
Common stock--no par value--authorized 20,000,000 shares,
issued 12,255,302 shares in 2000 and 12,298,902 in 1999 3,823,077 3,699,678
Retained earnings 136,149,235 134,276,321
Total 139,972,312 137,975,999
Less--treasury stock, 1,273,114 shares -- at cost 817,868 817,868
Total stockholders' equity 139,154,444 137,158,131
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $347,423,711 $352,745,812
* Restated for change in method of accounting for certain inventories.
The accompanying notes to consolidated financial statements are an
integral part of these statements.
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended
January 31,
2000 1999 *
SALES $ 91,405,132 $ 73,403,567
COST OF SALES 74,954,329 58,706,269
GROSS EARNINGS 16,450,803 14,697,298
OTHER OPERATING EXPENSES
Administrative 6,446,297 5,939,850
Interest, net 1,775,841 1,212,943
Profit sharing 1,528,977 1,413,514
Total 9,751,115 8,566,307
EARNINGS BEFORE INCOME TAXES 6,699,688 6,130,991
INCOME TAX EXPENSE 2,745,305 2,452,021
NET EARNINGS $ 3,954,383 $ 3,678,970
Net earnings per share of common stock:
Basic $ 0.36 $ 0.33
Diluted $ 0.36 $ 0.33
Cash dividends per share of common stock $ 0.10 $ 0.095
Weighted average number of common shares outstanding:
Basic 11,007,766 11,075,888
Diluted 11,086,019 11,118,312
* Restated for change in method of accounting for certain inventories.
The accompanying notes to consolidated financial statements are an
integral part of these statements.
ROANOKE ELECTRIC STEEL CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
January 31,
2000 1999 *
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 3,954,383 $ 3,678,970
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Deferred compensation liability 109,504 ---
Postretirement liabilities 78,478 80,112
Depreciation and amortization 4,215,527 3,164,793
Loss on sale of investments and
property, plant and equipment 1,339 2,622
Deferred income taxes (346,476) (156,000)
Changes in assets and liabilities which provided
(used) cash, exclusive of changes shown separately (2,782,404) (2,759,321)
Net cash provided by operating activities 5,230,351 4,011,176
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (3,669,105) (3,274,214)
Proceeds from sale of property, plant and equipment 94 178,814
(Purchase) sale of investments (200,668) 1,304,264
Acquisition of Steel of West Virginia, Inc. --- (67,920,897)
Other (162,348) 13,472
Net cash used in investing activities (4,032,027) (69,698,561)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends (1,098,219) (1,052,210)
Decrease in dividends payable (4,360) ---
Proceeds from exercise of common stock options 123,399 ---
Payment of long-term debt (3,758,189) (81,158,771)
Proceeds from long-term debt --- 150,000,000
Repurchase of common stock (983,250) ---
Loan costs --- (507,567)
Net cash provided by (used in) financing activities (5,720,619) 67,281,452
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,522,295) 1,594,067
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 33,286,934 16,167,025
CASH AND CASH EQUIVALENTS, END OF PERIOD $28,764,639 $ 17,761,092
CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED
(USED) CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY
(Increase) decrease in accounts receivable $ 8,421,587 $ 6,772,169
(Increase) decrease in refundable income taxes --- 2,479,898
(Increase) decrease in inventories (7,887,376) (2,709,621)
(Increase) decrease in prepaid expenses 80,756 (260,691)
Increase (decrease) in accounts payable 1,415,849 (2,563,587)
Increase (decrease) in employees' taxes withheld (26,844) (203,424)
Increase (decrease) in accrued profit sharing contribution (4,554,871) (4,062,690)
Increase (decrease) in accrued wages and expenses (2,731,757) (951,436)
Increase (decrease) in accrued income taxes 2,500,252 (1,259,939)
Total $(2,782,404) $ (2,759,321)
* Restated for change in method of accounting for certain inventories.
The accompanying notes to consolidated financial statements are an
integral part of these statements.
ROANOKE ELECTRIC STEEL CORPORATION
Notes to Consolidated Financial Statements
January 31, 2000
Note 1. In the opinion of the Registrant, the accompanying unaudited
consolidated financial statements contain all adjustments necessary
to present fairly the financial position as of January 31, 2000 and
the results of operations and cash flows for the three months ended
January 31, 2000 and 1999.
Note 2. Effective November 1, 1999, the Company changed its inventory
costing method for a fabricating subsidiary's raw material (steel bar)
inventory from LIFO to FIFO. One reason for the change was to bring
this portion of inventory in line with all other inventories reported
consistently throughout the Company on the FIFO method. Further, due
to fluctuating steel prices, the move to FIFO reporting will provide
for accounting simplification.
The effect of the change in accounting principle was to reduce
net earnings reported for the 2000 first quarter by $103,018,
or $.01 per basic share. The change has been applied to prior
years by retroactively restating the financial statements. The
effect of this restatement was to increase retained earnings as
of October 31, 1999 by $616,590, and to decrease net earnings
for the quarter ended January 31, 1999 by $181,144, or $.02 per
basic share.
Inventories include the following major classifications:
(Unaudited)
January 31, October 31,
2000 1999 *
Scrap steel $ 6,217,888 $ 5,090,322
Melt supplies 4,037,677 3,520,825
Billets 16,725,909 14,477,006
Mill supplies 4,583,202 4,274,660
Work-in-process 4,774,835 4,234,402
Finished steel 36,073,484 32,928,404
Total inventories $ 72,412,995 $ 64,525,619
* Restated for change in method of accounting for certain
inventories.
Note 3. In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings per Share", which changed the method of
calculating earnings per share. SFAS No. 128 requires the
presentation of "basic" earnings per share and "diluted" earnings per
share on the face of the income statement. Basic earnings per share
is computed by dividing the net income available to common
shareholders by the weighted average shares of outstanding common
stock. The calculation of diluted earnings per share is similar to
basic earnings per share except that the denominator includes
dilutive common stock equivalents such as stock options and warrants.
Basic earnings per share and diluted earnings per share calculated in
accordance with SFAS No. 128 are presented in the consolidated
statements of earnings.
Note 4. The Registrant retired all of its treasury stock applicable to the
shares recently acquired through its common stock repurchase plan.
Note 5. In June 1997, the Financial Accounting Standards Board issued SFAS
No. 130, "Comprehensive Income", and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 130
establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial
statements. The Company adopted SFAS No. 130 during the 1999 first
quarter, but comprehensive income, and its required disclosure, is
the same as that shown in the consolidated statements of earnings.
SFAS No. 131 establishes disclosure standards regarding information
about operating segments in interim and annual financial statements.
The Company adopted SFAS No. 131 at the close of fiscal year 1999.
The Company's business consists of one industry segment, which is the
extracting of scrap metal from discarded automobiles and the
manufacturing, fabricating and marketing of merchant steel bar
products, 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 Classes of Products
(Unaudited)
Three Months Ended
January 31,
2000 1999
Sales to unaffiliated
customers:
Merchant steel $ 56,338,414 $ 37,400,872
Bar joists and rebar 30,141,613 28,764,142
Billets 4,925,105 7,238,553
Total consolidated sales $ 91,405,132 $ 73,403,567
Note 6. On December 16, 1998, the Registrant acquired all of the
outstanding common shares of Steel of West Virginia, Inc. ("SWVA"), a
Huntington, West Virginia steel manufacturer, upon completion of its
cash tender offer. The consideration given was approximately $117.1
million, including the assumption of approximately $52.3 million of
indebtedness, which translates into $10.75 net per SWVA share, for
approximately 6,028,000 shares on a fully-diluted basis. Upon
merger, SWVA became a wholly-owned subsidiary of Roanoke Electric
Steel Corporation, and each share of SWVA common stock not purchased
in the offer (approximately 3.6% of SWVA's outstanding shares) was
converted, subject to appraisal rights, into the right to receive
$10.75 in cash, without interest. Funding for the acquisition was
provided by a syndicate of four banks, including First Union National
Bank, Agent. SWVA operates a mini-mill in Huntington, West Virginia,
and steel fabrication facilities in Huntington and Memphis,
Tennessee, while custom designing and manufacturing special steel
products principally for use in the construction of truck trailers,
industrial lift trucks, off-highway construction equipment (such as
bulldozers and graders), manufactured housing, guardrail posts and
mining equipment.
The acquisition has been accounted for as a purchase. Accordingly,
the results of operations and cash flows are reflected in the
consolidated financial statements from the date of acquisition, and
the acquired assets and liabilities are included in the accompanying
October 31,1999 consolidated balance sheet at values based on a
purchase price allocation, rendered through appraisals and other
evaluations. The purchase price allocation is summarized below:
December 16, 1998
Accounts and other receivables $ 17,811,730
Inventories 35,089,765
Prepaid expenses and other current assets 1,848,853
Property, plant and equipment 79,914,154
Goodwill 16,196,961
Other assets 304,356
Accounts and other payables (9,596,233)
Accrued expenses and other current liabilities (7,194,079)
Long-term debt (52,804,120)
Other liabilities (13,650,314)
Net purchase price $ 67,921,073
Unaudited pro forma consolidated results of operations for the three
month period ended January 31, 1999, assuming the SWVA acquisition
had occurred at the beginning of the period, is as follows:
(Unaudited)
Three Months Ended
January 31, 1999 *
Sales $ 85,562,678
Net earnings $ 2,458,178
Net earnings per share of common stock:
Basic $ 0.22
Diluted $ 0.22
* Restated for change in method of accounting for certain
inventories.
The pro forma consolidated results of operations include adjustments
to give effect to amortization of goodwill, interest expense on
acquisition debt and certain other adjustments, together with related
income tax effects. The unaudited pro forma information is not
necessarily indicative of the results of operations that would have
occurred had the purchase been made at the beginning of the period
presented or the future results of the combined operations.
Note 7. Supplemental cash flow information:
(Unaudited)
Three Months Ended
January 31,
2000 1999
Cash paid during the period for:
Interest $ 2,501,240 $ 1,045,230
Income taxes $ 591,530 $ 1,388,062
Detail of acquisition:
Fair value of assets acquire $ 151,165,819
Liabilities assumed $ (83,244,746)
Net cash paid for acquisition $ 67,921,073
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Roanoke Electric Steel Corporation
We have reviewed the accompanying consolidated balance sheet of Roanoke
Electric Steel Corporation (the "Corporation") and subsidiaries as of
January 31, 2000, and the related consolidated statements of earnings and
cash flows for the three-month periods ended January 31, 2000 and 1999.
These financial statements are the responsibility of the Corporation's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with auditing standards generally accepted in
the United States of America, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Roanoke Electric Steel Corporation and subsidiaries as of October 31, 1999,
and the related consolidated statements of earnings, stockholders' equity,
and cash flows for the year then ended (not presented herein); and in our
report dated November 19, 1999, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of October 31, 1999
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for certain inventories.
Deloitte & Touche LLP
Winston-Salem, North Carolina
March 8, 2000
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's earnings during the periods
included in the accompanying consolidated statements of earnings.
A summary of the period to period changes in the principal items included in
the consolidated statements of earnings is shown below:
Comparison of Increases(Decreases)
Three Months Ended
January 31,
2000 and 1999*
Amount Percent
Sales 18,001,565 24.5
Cost of Sales 16,248,060 27.7
Administrative Expenses 506,447 8.5
Interest Expense 562,898 46.4
Profit Sharing Expense 115,463 8.2
Earnings before Income Taxes 568,697 9.3
Income Tax Expense 293,284 12.0
Net Earnings 275,413 7.5
* Restated for change in method of accounting for certain inventories.
Sales for the quarter increased significantly, due mainly to the acquisition
of Steel of West Virginia, Inc., ("SWVA") on December 16, 1998. Sales for
the current year included SWVA's revenues for the entire quarter, whereas
sales for last year included only the portion of SWVA's revenues from the
date of acquisition. Increased tons shipped of fabricated products,
together with improved selling prices for merchant bar products and billets,
favorably impacted sales for the quarter. However, sales were negatively
affected by a substantial decrease in tons shipped of billets, together with
a decline in fabricated product selling prices and reduced bar product
shipments. The increase in shipments of fabricated products was due both to
continued strong construction activity and last year's construction delays
caused by severe winter weather. The improvement in bar product selling
prices was due mainly to rising scrap steel costs which allowed for a number
of industry-wide price increases in recent months. Scrap price changes
normally trigger changes in billet pricing; therefore, rising scrap prices
during the quarter brought about higher billet selling prices. A dramatic
change in market conditions for billets brought diminished demand and a 39%
decline in tons shipped. The decline in fabricated product selling prices
was caused by increased competition within the commercial construction
industry, even though business conditions continued strong and backlogs
remained high. More cautious buying patterns at steel service centers, due
to rising prices, contributed to the decreased tons shipped of bar products.
Cost of sales increased mainly due to the impact of SWVA costs, the
increased fabricated product shipments and an increase in the cost of scrap
steel, our main raw material. Gross profit as a percentage of sales
declined from 20% to 18%, primarily as a result of the higher scrap costs,
lower fabricated product selling prices and the effects of reduced raw steel
production levels on costs. Volume increases more than offset the margin
decline and contributed sufficient gross earnings to more than cover higher
administrative, interest and profit sharing expenses. Administrative
expenses increased mainly as a result of the inclusion of SWVA's expenses in
2000 results; however, other expenses such as insurance and executive and
other compensation increased as well. Administrative expenses, as a
percentage of sales, dropped from 8.1% in 1999 to 7.1% in 2000. Interest
expense increased primarily due to substantially higher average borrowings,
related to the SWVA acquisition, in spite of slightly lower interest rates
and increased capitalized interest and interest income. Profit sharing
expense is based on earnings before income taxes in accordance with the
provisions of various plans. For the quarter, profit sharing expense
increased as a result of the improvement in earnings. The effective income
tax rate is higher in 2000 due to nondeductible amortization of the excess
investment in SWVA net assets over book value.
Working capital decreased $1,545,116 during the period to $115,696,042
mainly as a result of capital expenditures, dividends, debt maturities and
repurchases of common stock amounting to $3,669,105, $1,098,219, $3,758,189
and $983,250, respectively, which exceeded working capital provided from
operations. The current ratio of 3.1 to 1 and the quick ratio of 1.7 to 1
both indicate very strong liquidity and a healthy financial condition. In
addition, cash, cash equivalents and investments total $40,730,294. Due to
the new credit facilities in conjunction with the SWVA acquisition, current
debt maturities are approximately $15,000,000 annually, which will affect
working capital and future liquidity. Our unused $30,000,000 revolving
credit facility combined with strong earnings and the cash and investments
mentioned above should provide the liquidity and capital resources necessary
to remain competitive, fund operations and meet required debt retirement.
At January 31, 2000, there were commitments for the purchase of property,
plant and equipment of approximately $8,000,000. These commitments will
also affect working capital and future liquidity and will be financed from
internally generated funds, the revolving credit facility and existing cash
reserves.
During the quarter, the ratio of debt to equity decreased to 1.5 to 1, and
the percentage of long-term debt to total capitalization declined to 46.3%,
due to current maturities of $3,758,189 reducing long-term debt to
$120,150,031. Stockholders' equity increased to $139,154,444 mainly due to
net earnings of $3,954,383 exceeding dividends of $1,098,219 and common
stock repurchases of $983,250.
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and
development activities and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the
Company notes that a variety of factors could cause the Company's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the Company's forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development and results of the Company's business include economic and
industry conditions, availability and prices of supplies, prices of steel
products, competition, governmental regulations, interest rates, inflation,
labor relations, environmental concerns, and others.
The Company successfully completed its efforts to ensure Year 2000 readiness
for all of its critical systems. As a result, the Company experienced no
interruption in its operations during the transition to the Year 2000. The
cost of the Company's Year 2000 efforts totaled approximately $590,000.
PART I - ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Quantitative and qualitative information about market risk was addressed in
Form 10-K for fiscal year ended October 31,1999, as previously filed with
the commission. There has been no material changes to that information
required to be disclosed in this 1st quarter 10-Q filing.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
To the best of Registrant's information and belief no new legal
proceedings were instituted against Registrant or any of its
wholly-owned subsidiaries during the period covered by this report
and there was no material development in or termination of the
legal proceedings reported earlier by the Registrant on Form 10-K
for fiscal year ended October 31, 1999, as previously filed with
the Commission.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
(18) Letter Regarding Change in Accounting Principle
(27) Financial Data Schedule
b. Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
Items 2, 3, 4 and 5 are omitted because the information required by these
items is not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROANOKE ELECTRIC STEEL CORPORATION
Registrant
Date 3/8/00 Donald G. Smith
Donald G. Smith, Chairman, President,
Treasurer and Chief Executive Officer
(Principal Financial Officer)
Date 3/8/00 John E. Morris
John E. Morris, Vice President-Finance
and Assistant Treasurer
(Chief Accounting Officer)
EXHIBIT INDEX
Exhibit No. Exhibit Page
(18) Letter Regarding Change in Accounting Principle 17
(27) Financial Data Schedule 18
EXHIBIT NO. 18
LETTER REGARDING CHANGE IN ACCOUNTING PRINCIPLE
March 8, 2000
Roanoke Electric Steel Corporation
P.O. Box 13948
Roanoke, Virginia 24038
Dear Sirs/Madams:
At your request, we have read the description included in your Quarterly
Report on Form 10-Q to the Securities and Exchange Commission for the
quarter ended January 31, 2000, of the facts relating to the change in
method of accounting for inventory from the last-in, first-out method to the
first-in, first-out method at a wholly-owned subsidiary of Roanoke Electric
Steel Corporation. We believe, on the basis of the facts so set forth and
other information furnished to us by appropriate officials of the Company,
that the accounting change described in your Form 10-Q is to an alternative
accounting principle that is preferable under the circumstances.
We have not audited any consolidated financial statements of Roanoke
Electric Steel Corporation and its consolidated subsidiaries as of any date
or for any period subsequent to October 31, 1999. Therefore, we are unable
to express, and we do not express, an opinion on the facts set forth in the
above-mentioned Form 10-Q, on the related information furnished to us by
officials of the Company, or on the financial position, results of
operations, or cash flows of Roanoke Electric Steel Corporation and its
consolidated subsidiaries as of any date or for any period subsequent to
October 31, 1999.
Yours truly,
Deloitte & Touche, LLP
Winston-Salem, North Carolina
EXHIBIT NO. 27
FINANCIAL DATA SCHEDULE