-----BEGIN PRIVACY-ENHANCED MESSAGE-----Proc-Type: 2001,MIC-CLEAROriginator-Name: webmaster@www.sec.govOriginator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQABMIC-Info: RSA-MD5,RSA, DTL9/q9UK7CINqtAWT4oH2rHQ/K63UpbyBDAhaveq96jmoERmrFSAZ8prxFOHxCF oYJtkKgPhNElcu3K+yfMYg==

0001193125-04-011133.txt : 200401290001193125-04-011133.hdr.sgml : 2004012920040129135438ACCESSION NUMBER:0001193125-04-011133CONFORMED SUBMISSION TYPE:10-KPUBLIC DOCUMENT COUNT:40CONFORMED PERIOD OF REPORT:20031031FILED AS OF DATE:20040129

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:ROANOKE ELECTRIC STEEL CORPCENTRAL INDEX KEY:0000084278STANDARD INDUSTRIAL CLASSIFICATION:STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312]IRS NUMBER:540585263STATE OF INCORPORATION:VAFISCAL YEAR END:1031

FILING VALUES:FORM TYPE:10-KSEC ACT:1934 ActSEC FILE NUMBER:000-02389FILM NUMBER:04551659

BUSINESS ADDRESS:STREET 1:102 WESTSIDE BLVD N WSTREET 2:P O BOX 13948CITY:ROANOKESTATE:VAZIP:24038-3948BUSINESS PHONE:5403421831

MAIL ADDRESS:STREET 1:P.O. BOX 13948CITY:ROANOKESTATE:VAZIP:24038-3948

10-K1d10k.htmFORM 10-K

Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 2003

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)

Virginia54-0585263

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

P.O. Box 13948, Roanoke, Virginia24038-3948

(Address of principal executive offices)(Zip Code)

Registrantstelephone 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 filedby 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. Yesx 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 Registrants knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

State the aggregate market value of the voting stock held by nonaffiliates of the Registrant.

Aggregate market value at December 31, 2003: $131,490,682

Indicate by check mark whether the Registrant is an accelerated filer (asdefined in Rule 12b-2 of the Exchange Act). Yes x No

Indicate the number of shares outstanding of each of the Registrants classes of commonstock, as of December 31, 2003.

10,932,813 Sharesoutstanding

Portions of the following documents are incorporated by reference:

(1) 2003 Annual Report to Stockholders in Parts II, III andIV.

(2) Proxy Statement dated December 29, 2003 in Part III.

PART I

FORWARD-LOOKING STATEMENTS

From time to time, the Registrant may publish forward-looking statements relating to such matters as anticipated financial performance, businessprospects, 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 theterms of the safe harbor, the Registrant notes that a variety of factors could cause the Registrants actual results and experience to differ materially from the anticipated results or other expectations expressed in the Registrantsforward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Registrants business include economic and industry conditions, availability and prices of supplies, prices ofsteel products, domestic and foreign competition, governmental regulations, interest rates, inflation, labor relations, environmental concerns, and others.

ITEM1.BUSINESS

(a) General Development of Business.

Roanoke Electric Steel Corporation is both an operating company and a holding company with both direct and indirect subsidiaries. A complete list ofRoanoke Electric Steels subsidiaries is set forth on Exhibit No. 21 to this Form 10-K. For purposes of this Form 10-K, the defined term Registrant will, depending on the context, refer to Roanoke Electric Steel Corporation and itssubsidiaries on a combined basis or refer to Roanoke Electric Steel Corporation as an operating company.

During the fiscal year ended October 31, 2003, the Registrant continued for the most part to operate its business as it has the past four years bymanufacturing merchant steel bar products and specialty steel sections, fabricating open-web steel joists and concrete reinforcing steel, and extracting scrap steel and other metals from junked automobiles and other waste materials.

On December 16, 1998, the Registrant acquired all of the outstanding commonshares of Steel of West Virginia, Inc. (SWVA), a Huntington, West Virginia steel manufacturer, for approximately $117.1 million, including the assumption of approximately $52.3 million of indebtedness. Upon merger, SWVA became awholly-owned subsidiary of Roanoke Electric Steel Corporation. On the date of acquisition the Registrant closed on secured credit facilities, which included a $150,000,000 seven year term loan, through a syndicated bank group. The term loan was usedto purchase all of the outstanding capital stock of SWVA, and refinance both the existing term debt of the Registrant and most of SWVAs bank debt assumed through the merger. SWVA operates a mini-mill in Huntington, West Virginia, and steelfabrication 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 (suchas

2

PART I

(cond.)

bulldozers and graders), manufactured housing, guardrail posts and mining equipment. The Registrant and SWVA do not generally compete as regards customersand products. The acquisition was accounted for as a purchase. Accordingly, the results of operations and cash flows were reflected in the consolidated financial statements from the date of acquisition, and the acquired assets and liabilities wereincluded in the 1999 consolidated balance sheet at values based on a purchase price allocation, rendered through appraisals and other evaluations.

The other subsidiaries of the Registrant, Shredded Products Corporation, John W. Hancock, Jr., Inc., Socar, Incorporated and RESCO Steel ProductsCorporation, have had no material changes in operations or in the mode of conducting their business for the past five years.

(b) Financial Information about Industry Segments.

The Registrants business consists of one industry segment or line of business, which is the extracting of scrap metal from discarded automobiles andthe manufacturing, fabricating and marketing of merchant steel bar products and specialty steel sections, reinforcing bars, open-web steel joists and billets. The industry segment consists of three classes of products - merchant steel products andspecialty steel sections, fabricated bar joists and reinforcing bars, and billets.

FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS

AND CLASSES OF PRODUCTS OR SERVICES

2003
2002
2001

Sales to Unaffiliated Customers:

Merchant Steel and Specialty Steel Sections

$211,209,483$172,654,655$190,631,577

Fabricated Bar Joists and Reinforcing Bars

75,449,09373,575,373101,985,847

Billets

25,432,38017,543,68115,057,181

Total Consolidated Sales

$312,090,956$263,773,709$307,674,605

Earnings (Loss) from Operations

$(2,996,543)$(6,008,897)$1,348,022

Cumulative effect of accounting change

(228,410)

Net Earning (Loss)

$(3,224,953)$(6,008,897)$1,348,022

Total Assets

$270,867,486$289,717,573$316,886,778

3

PART I

(cond.)

(c) Narrative Description of Business.

(1) (i) The Registrant manufactures merchant steel products consisting of Angles, Plain Rounds, Flats, Channels andReinforcing Bars of various lengths and sizes. The principal markets for the Registrants products are steel fabricators and steel service centers. The products are distributed directly to customers from orders solicited by a paid sales staffof the Registrant.

The Registrants subsidiary, ShreddedProducts 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 aresold to unrelated purchasers.

Two other subsidiaries, John W.Hancock, Jr., Inc. and Socar, Incorporated, 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 industrialbuildings 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 thesesubsidiaries to their customers from orders solicited by manufacturers representatives and pursuant to successful bids placed directly by the subsidiaries.

The Registrants subsidiary, RESCO Steel Products Corporation, fabricates concrete reinforcing steel by cutting andbending 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.

The Registrants subsidiary, Steel of West Virginia, Inc., operates botha steel mini-mill which produces specialty steel sections, and fabrication facilities which add finishing operations to create custom-designed products placed directly into customers assembly lines. The niche markets supplied with theseproducts include truck trailers, industrial lift trucks, guardrail posts, manufactured housing, off-highway construction equipment, and mining equipment. These products are marketed by senior management and in-house sales representatives of SWVA,whose sales efforts cover all of North America, and to a very small degree, certain other foreign markets.

The Roanoke and SWVA facilities both utilize electricity and natural gas as their power sources, with electric arc furnaces using electricty and withreheat furnaces using natural gas. The arc furnaces are used in the actual melting of scrap steel (to produce billets), while the reheat furnaces are used to reheat the billets which are then rolled into a finished product.

(ii) The Registrant has not in fiscal 2003 introduced a newproduct 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.

4

PART I

(cond.)

(iii) The Registrants main raw material, scrap steel, is supplied for the mostpart by scrap dealers within a 300 mile radius of the mill. The majority of this raw material is purchased through the David J. Joseph Company, a scrap broker. 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 marginsin 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 inpurchasing scrap automobiles at a satisfactory level. Competition from a number of other shredding operations and reluctance by dealers to sell scrap automobiles due to market conditions are the main causes. High offering prices generally increasethe supply; however, the increased cost to produce sometimes is very comparable to 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, thereforesuch components are generally available to the subsidiary 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 subsidiary, since the Parent could produceand supply this raw material, as needed.

Socar, Incorporatedreceives 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 subsidiary, since the Parent could supply most of itsneeds.

Steel of West Virginia, Inc., like the Parent, usesscrap steel as its main raw material. Even though the purchase of steel scrap is subject to market conditions largely beyond its control, the subsidiary is located in a scrap surplus region, and therefore typically maintains less than a one monthsupply of scrap, which keeps inventory costs to a minimum. Although one scrap dealer supplies 25% to 30% of SWVAs requirements, the subsidiary believes that a number of adequate sources of scrap and other raw materials that it uses are readilyavailable. SWVA has historically been successful in passing on scrap cost increases through price increases, however, the effect of market price competition has limited the subsidiarys ability to increase prices.

5

PART I

(cond.)

(iv) The Registrant currently holds no patents, trade marks, licenses, franchises orconcessions 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 ofinventory 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 ofbusiness except when the Registrant determines it to be advantageous to stockpile raw materials due to price considerations.

(vii) During fiscal year 2003, sales (tons) by the Registrant to Steel of West Virginia, Inc., John W. Hancock, Jr., Inc., Socar,Incorporated and RESCO Steel Products Corporation, wholly-owned subsidiaries, were approximately 6%, 8%, 6% and 2% of the Registrants total sales (tons), respectively. During fiscal years 2003, 2002 and 2001, respectively, the largestnonaffiliated customer purchased approximately 4%, 4% and 5% of total sales (tons) 3%, 2% and 3% of total sales (dollars). The 2003 and 2001 customers purchased merchant bar products. The 2002 customer was the temporary return of the samebillet customer from 2000, where poor market conditions in the steel industry contributed to this customers worsened financial condition and eventual bankruptcy. The bankruptcy resulted in a charge to bad debts of $2.6 million and contributedto lower billet production levels. Poor market conditions prevented placing the lost tonnage with alternate sources. However, under normal market conditions, we would not expect the loss of any of these customers to have a materially adverse effecton the Registrant and its subsidiaries taken as a whole. In addition, considerably more billet tons were used internally by SWVA, which helped to mitigate the lost billet sales.

(viii) The Registrant is of the opinion that the amount of its backlog is not generally material to anunderstanding 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 theelection of the Government.

(x) TheRegistrant 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 mainly consists of the majority ofstates east of the Mississippi River. Price, including transportation cost, is the major determinant in securing business. Strong business conditions kept bar prices up during fiscal 1998, in spite of the temporary drop in merchant bar shipments,caused by excess inventories at steel service centers. On December 16, 1998, the Registrant acquired 100% of the capital stock of Steel of West Virginia, Inc. (SWVA), a steel manufacturer, and 1999 results reflect the operations of SWVAfrom the date of acquisition. The 1998 financial statements were not restated to include SWVA because the acquisition was

6

PART I

(cond.)

treated as a purchase for accounting purposes. Consequently, the significant increase in 1999 sales was due, primarily, to the inclusion of SWVAsrevenues in consolidated sales. Increased competition from foreign and domestic producers prompted industry-wide list price reductions for bar products at the beginning of fiscal 1999, and prices had not fully recovered by year end. Excessinventories at steel service centers and a shortage of transportation equipment contributed to the slight reduction in tons shipped of bar products as bar markets were generally good throughout the year. Sales for 2000 were flat due, again, to theacquisition of SWVA. Sales for the current year included SWVAs revenues for the entire period, whereas sales for 1999 included only the portion of SWVAs revenues from the date of acquisition. Average selling prices for bar and specialtyproducts increased slightly for 2000, but list prices had fallen sharply by the end of the year as a result of increased foreign and domestic competition. The increased competition and price uncertainty reduced order entry and backlogs and causeddecreases in both bar and specialty products shipments. Depressed economic conditions within the steel industry and certain niche markets resulted in the decline of 2001 sales. Selling prices for merchant bar and specialty steel products declineddue to heightened foreign and domestic competition. Shipments of specialty products were down, primarily, as a result of depressed economic conditions within major market segments. However, sales were positively affected by an increase in tonsshipped of merchant bar products, due to new product offerings and declining inventory levels at steel service centers. The reduction in 2002 sales was the result of continued poor business conditions and intensified competition. Shipments ofspecialty steel products declined as a result of a further softening in demand within certain niche markets, while heightened competition and product mix brought selling prices for specialty steel lower. Demand for merchant bar products diminishednear year-end, resulting in the decline in bar shipments and contributing to the decline in sales for the year. While the selling price increase for bar products was small, it had a significant impact, in that it represented three increases in thelist prices for bar products during the year, in spite of poor market conditions and was, primarily, the result of rising scrap costs. Sales increased in 2003 as a result of both improved selling prices and increased tons shipped for merchant barproducts and specialty steel sections. The higher selling prices were principally due to continued rising scrap steel costs, which prompted several industry-wide price increases, as well as a strengthening in product demand. An improvement in marketconditions contributed to the higher shipment levels.

Thejoist business is highly competitive. Due to similarity of product, relatively small price differences are often determinative in placing business. Ability to meet the customers time requirements for delivery also is important in securingbusiness. Competing successfully becomes more difficult with the distance to point of delivery due to transportation costs. Continued favorable market conditions in the construction industry during

7

PART I

(cond.)

fiscal 1998 led to the increased shipments and level selling prices for fabricated products. Competitive conditions within the commercial constructionindustry generally impact selling prices and shipment levels of fabricated products and were relatively favorable during 1999 as reflected in the higher selling prices. The reduced shipments were caused by minor factors other than competition asbusiness conditions continued strong and backlogs remained high. In 2000, the decline in fabricated products selling prices and shipments was caused by increased competition within the construction industry, even though business conditions continuedstrong and backlogs were high. The decline in shipments was also affected by shortages of structural steel components. Economic conditions within the construction industry began to slide during 2001, as a result of increased competition, bringingprices lower. Fabricated products shipments decreased as construction activity slowed dramatically during the latter part of the year, as a result of poor business conditions. Increased competitive pressures and much weaker construction activityresulted in the decline in both selling prices and shipments of fabricated products for 2002. The slight increase in 2003 sales for fabricated products was due primarily to improved selling prices, which reacted to higher raw material costs.Shipments of fabricated products decreased due to continued intense competition within the commercial construction industry.

Billets are semi-finished products used by the Registrant in its rolling mill process to manufacture various merchant bar products and specialty steelsections. Excess billet production is sold to nonaffiliated customers who further fabricate the billets for various end uses. The significant increase in billet shipments for fiscal 1998 was attributable to record raw steel production, coupled withunprecedented demand. Billet prices, which are normally triggered by price changes for scrap steel, our main raw material, were flat due to relatively unchanged scrap prices. A dramatic change in our market for billets during 1999 brought diminisheddemand and a significant decline in tons shipped. Billet selling prices declined with sharp reductions in scrap prices. The dramatic reduction in billet shipments, again in 2000, and the continued drop in market conditions was attributable to thefinancial condition and eventual bankruptcy of a major customer. Shipments to this customer were purposely curtailed to reduce our exposure to bad debts. Due to market conditions, we were not able to place the lost tonnage with alternate sources,other than the tons used internally by SWVA. Billet selling prices were higher due to increased scrap prices. In 2001, billet shipments declined, due to poor market conditions and the loss of the major customer referred to earlier. Selling pricesfor billets were lower, mostly attributable to falling scrap steel costs. Billet selling prices declined further in 2002, in spite of rising scrap costs, due to changes in the mix of products and customers. Billet shipments spiked during the yearwith the temporary return of the major customer referred to above. Billet sales increased in 2003, as higher scrap steel costs brought improvements in billet pricing. Favorable market conditions also contributed to the increased billet shipmentsduring the year.

8

PART I

(cond.)

(xi) During the last three fiscal years, the Registrant was not involved in anymaterial research and development activities.

(xii) The Registrant, Shredded Products and SWVA are subject to federal, state and local environmental laws and regulations concerning, among other matters, wastewater discharge, air emissions, furnace dust disposal and disposal of autofluff and other wastes. As with similar mills in the industry, the Registrants and SWVAs furnaces are classified as generating hazardous waste because they produce certain types of dust containing lead, zinc and cadmium. The Registrantnow treats its electric arc furnace dust, a hazardous substance, utilizing its own stabilization process. Significant savings have been realized as this process replaced off-site and more expensive treatment methods that had been used through acontract with an approved waste disposal firm. SWVA currently collects and handles its furnace waste through contracts with a company which reclaims, from the waste dust, certain materials and recycles or disposes of the remainder. Shredded Productsoperates an approved landfill for use in disposal of its waste products associated with its auto shredding operations. The Registrant believes it is in substantial compliance with applicable federal, state and local regulations. However, futurechanges in regulations may require expenditures which could adversely affect earnings in subsequent years.

The Registrant has constructed over the years pollution control equipment at a net aggregate cost of over $10,200,000. Annual operating expenses anddepreciation of all pollution control equipment and waste disposal costs are in excess of $2,700,000 in the aggregate. Additional future capital expenditures, for pollution control and waste disposal equipment, are presently estimated to be lessthan $10,000,000, and is in connection with future expansion, and not to address any current circumstances or issues. This expansion and, thus, the expenditures have been delayed for both economic and financial reasons, and will be completed andfunded, as the Registrants financial resources permit. Adoption of the Clean Air Act Amendments of 1990, or any other environmental concerns, is not anticipated to have a materially adverse effect on the Registrants operations, capitalresources or liquidity, nor should any incremental increase in capital expenditures occur due to the Act.

See Note 8, Commitments and Contingent Liabilities, in Notes to Consolidated Financial Statements contained in the Registrants 2003Annual Report to Stockholders, filed as an Exhibit to this Form 10-K.

(xiii) At October 31, 2003, the Registrant employed 454 persons at its Roanoke plant. The Registrants subsidiaries, Steel of West Virginia, Inc., John W. Hancock, Jr., Inc., Socar, Incorporated, ShreddedProducts Corporation and RESCO Steel Products Corporation employed 475, 234, 233, 57 and 43 persons, respectively.

9

PART I

(cond.)

(d) Financial Information about Foreign and Domestic Operations and Export Sales.

When the Registrants billet production exceeds its required needs, thissemi-finished product is offered for sale. During past years, a portion of the excess billets has been sold to brokers who represent foreign purchasers. In 2003, export (billet) sales to China amounted to $4,276,000 at slightly below break-evenmargins. During fiscal years 2002 and 2001, the Registrant did not make any foreign sales of excess billets. However, the SWVA subsidiary sold a small percentage of its rolled products to foreign markets during these years. The information requiredby 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 virtually all information pertaining to the United States.

ITEM2.PROPERTIES

The Registrant owns 82 acres situated in the City of Roanoke, Virginia, which comprises its main plant, of which 25 acres are used to provide 364,500square feet of manufacturing space with an annual billet capacity of approximately 650,000 tons and rolling mill capacity of 400,000 tons. A 30 acre site is owned in Salem, Virginia, of which 10 acres were used to provide 51,355 square feet ofmanufacturing 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 were transferred to Shredded Products Corporation in a move of shreddingoperations from its Montvale location. Part of this new Shredded Products property is being used as an approved industrial landfill. The remaining 347 acres of this land, 138 acres of which were sold between 1995 and 2002, is being marketed as anindustrial park for Franklin County.

Shredded ProductsCorporation 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 annualproduction capacity of approximately 24,000 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, andanother 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 ofwhich are regularly used in its operations, with an annual production capacity of approximately 62,000 tons. Buildings on the site contain 160,904 square feet of floor space.

10

PART I

(cond.)

Socar, Incorporated 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, Incorporated, 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 inContinental, Ohio, owned by Socar, Incorporated, has 94,400 square feet of floor space in manufacturing buildings, situated on 8 acres regularly used in its operations. Both operations have a combined annual production capacity of approximately50,000 tons.

RESCO Steel Products Corporation operates from abuilding containing 43,340 square feet of floor space, with an annual production capacity of approximately 25,000 tons. The plant is located in Salem, Virginia, on a 7 acre site owned by RESCO.

Steel of West Virginia, Inc. and its subsidiaries are located in Huntington,West Virginia and in Memphis, Tennessee. The Huntington facility is located on a 42 acre site owned by SWVA, most of which are regularly used in its operations. Buildings on the site contain 558,175 square feet of manufacturing space with an annualbillet capacity of approximately 280,000 tons and rolling mill capacity of 300,000 tons. The plant located in Memphis, Tennessee owned by SWVA operates in 41,000 square feet of manufacturing space on approximately 4 acres.

The following information relates to the productive capacity utilization,based on estimated full production, for the facilities operated by the Registrant and each of its subsidiaries for the year ended October 31, 2003:

Roanoke Electric Steel Corporation

Melt Shop (Percentage of Utilization 68%)

Rolling Mill (89%)

Shredded Products Corporation

Montvale (84%)

Rocky Mount (60%)

John W. Hancock, Jr., Inc. (63%)

Socar, Inc. SC & OH (67%)

RESCO Steel Products Corporation (66%)

SWVA, Inc.

Melt Shop (98%)

Rolling Mill (75%)

11

PART I

(cond.)

The various buildings are of modern design, well-maintained, and suitable and adequate for therequirements of the business. The Registrant believes that its facilities are being adequately used, that it does not have any excess capacity and that it has no excess or obsolete facilities.

ITEM3.LEGAL PROCEEDINGS

The Registrant is a participant with other steel producers in class action litigation against manufacturers of graphite electrodes, which are used in themelting phase of steel production. The suit alleges that the defendant manufactures violated the antitrust laws by fixing prices during the period July 1, 1992 through June 30, 1998. The Registrant is not one of the lead plaintiffs or otherwise arepresentative of the class in this litigation. As a member of the class, the Registrant receives only that information forwarded to it by the class representatives or counsel.

Certain of the defendants have entered into court approved settlements, resulting in partial distributions received by theRegistrant during the period 1999 through 2003 of $4,251,088. The Registrant recognized the revenue upon realization.

Two cases remain unsettled and class counsel holds an unspecified amount of undistributed settlement funds. The Registrant expects to receive additionaldistributions, but does not anticipate the mounts to be material and does not know the precise timing of such future distributions. Because the Registrant does not expect any future amounts to be material, it does not believe that disclosure of thegain contingency is warranted. As under its existing policy, the Registrant will recognize the revenue upon realization. If the Registrant determines that future distributions might be material, it will disclose the gaincontingency while exercising the caution provided in paragraph 17 of SFAS 5.

See Note 8, Commitments and Contingent Liabilities, in Notes to Consolidated Financial Statements contained in the Registrants 2003 Annual Report to Stockholders, filed as an Exhibit to this Form10-K.

ITEM4.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 isincluded 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, 2004.

12

PART I

(cond.)

The names, ages and positions of all of the executive officers of the Registrant as of October 31,2003 are listed below with their business experience with the Registrant for the past five years. Officers are elected by the Board of Directors at the first meeting of directors following the annual meeting of shareholders. There are no familyrelationships 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, 48, has served as Secretary of the Registrant since January 1985 and as Vice President-Administration since February 1998; priorthereto, he had served as Assistant Vice President since January 1993, as Manager of Inside Sales since 1984 and as a Sales Representative since 1977. He has 26 years of service with the Registrant.

Timothy R. Duke, 52, has served as President and Chief Executive Officer ofSteel of West Virginia, Inc. (SWVA), a wholly-owned subsidiary of the Registrant, since July 1997, and as Treasurer since February 1988; prior thereto, he had served as Chief Operating Officer of SWVA since October 1996 and as VicePresident and Chief Financial Officer of SWVA since February 1988. He has 16 years of service with SWVA.

Donald R. Higgins, 58, has served as Vice PresidentSales of the Registrant since January 1986; prior thereto, he had served as General Sales Managersince 1984 and Assistant Sales Manager since 1978. He has 38 years of service with the Registrant.

Mark G. Meikle, 39, joined the Registrant on October 21, 2003 as newly elected Vice President -Finance, Assistant Treasurer and Chief Financial Officer;prior thereto, he had served as Assistant Controller, Corporate Controller, Vice President, Treasurer and/or Chief Financial Officer with SWVA from 1989 through 1998. He has 10 years of service with SWVA.

John E. Morris, 62, retired on November 30, 2003. Until October 21, 2003, hehad 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 had 32 years of service with the Registrant.

Donald G. Smith, 68, has served as Chairman of the Board of the Registrantsince 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 September1980 and as Secretary since January 1967. He has 46 years of service with the Registrant.

13

PART II

ITEM5.MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The specific information required by this item is incorporated by reference to the information under the heading StockActivity in the 2003 Annual Report to Stockholders. The Registrant did not, during fiscal year 2003, make any sale of securities not registered under the Securities Act of 1933.

ITEM6.SELECTED FINANCIAL DATA

The specific information required by this item is incorporated by reference to the information under the heading Selected Financial Data inthe 2003 Annual Report to Stockholders.

ITEM7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The specific information required by this item is incorporated by reference to the information under the headingManagements Discussion and Analysis of Financial Condition and Results of Operations in the 2003 Annual Report to Stockholders.

The Registrant has no material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on theRegistrants financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM7A.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 FinancialStatements and Managements Discussion and Analysis of Financial Condition and Results of Operations in the 2003 Annual Report to Stockholders.

As disclosed in Note 7 to the Notes to Consolidated Financial Statements, the Registrant engages in transactions in variousderivative financial instruments and derivative commodity from time to time, when appropriate. At October 31, 2003, the Registrants financial instruments were not exposed to significant market risk due to foreign currency exchange risk,commodity price risk, equity price risk, or interest rate risk. However, interest rates and various commodity prices could pose future risks in certain market conditions. As to interest rate risk, the Registrant performed a materiality assessment asof October 31, 2003, and assumed a 10% adverse change in interest rates applied to its floating rate debt. The analysis indicated that such a change would not have a material effect on the Registrants consolidated results of operations or onthe fair value of its risk-sensitive financial instruments. As to commodity price risk, a hypothetical 10% drop in the market price of natural gas would not have a materially adverse effect on the Registrants consolidated results of operationsor on the fair value of its natural gas derivative contracts at October 31, 2003.

14

PART II

(cond.)

ITEM8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The specific information required by this item is incorporated by reference to the information under the headings Independent AuditorsReport, Consolidated Financial Statements and Notes to Consolidated Financial Statements in the 2003 Annual Report to Stockholders.

ITEM9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM9A.CONTROLS AND PROCEDURES

Management, including the Principal Executive Officer and the Principal Financial Officer and Chief Accounting Officer, performed an evaluation of theeffectiveness of the Registrants disclosure controls and procedures (as defined in Rules 13a - 15(e) and 15d - 15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this annual report on Form 10-K.Based on that evaluation, the Registrants Principal Executive Officer and the Principal Financial Officer and Chief Accounting Officer, have concluded that the Registrants disclosure controls and procedures were effective. There havebeen no changes during the quarter ended October 31, 2003 in the Registrants internal control over financial reporting (as defined in Rules 13a - 15(f) and 15d - 15(e)) or in other factors that has materially affected, or is reasonably likelyto materially affect, the Registrants internal control over financial reporting.

15

PART III

ITEM10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The specific information required by this item, about the Registrants directors and executive officers, is incorporated by reference to theinformation under the heading Information Concerning Directors and Nominees in the Proxy Statement dated December 29, 2003, for the Annual Meeting of Shareholders to be held on February 17, 2004 (the Proxy Statement), asfiled with the Securities and Exchange Commission (the Commission), or is included under the heading Executive Officers of the Registrant in Part I of this filing on Form 10-K.

The specific information required by this item, concerning compliance withSection 16(a) of the Securities Exchange Act of 1934 by the Registrants directors, executive officers and 10 percent shareholders, is incorporated by reference to the information under the heading Section 16(a) Beneficial OwnershipReporting Compliance in the Proxy Statement dated December 29, 2003, as filed with the Commission.

The Registrants Board of Directors has determined the Thomas L. Robertson and George W. Logan, are each an audit committee financialexpert and independent as these terms are defined in Rule 4200(a)(15) of The Nasdaq Stock Market, Inc.

The Registrant has adopted a code of conduct which applies to all directors, officers and employees, including the principal executive officer, principalfinancial officer, principal accounting officer or controller and other officers who perform similar functions (the Designated Officers). A copy of the code of conduct is posed on the Registrants website,www.roanokesteel.com. The Registrant intends to disclose any changes in or waivers from its code of conduct applicable to directors, executive officers, and any Designated Officer on its website or by filing a current report on Form 8-K.

ITEM11.EXECUTIVE COMPENSATION

The specific 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, Performance Graph and Board of Directors and Committees Director Compensation in the Proxy Statement dated December 29, 2003, asfiled with the Commission.

ITEM12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The specific information required by this item is incorporated by reference to the information under the headings Security Ownership of CertainBeneficial Owners and Security Ownership of Directors and Executive Officers in the Proxy Statement dated December 29, 2003, as filed with the Commission, and under the heading Notes to Consolidated Financial Statementsin the 2003 Annual Report to Stockholders.

ITEM13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

16

PART III

(cond.)

ITEM14.PRINCIPAL ACCOUNTING FEES AND SERVICES

The specific information required by this item, concerning the principal accounting fees paid by the Registrant and the Audit Committeespre-approval policies and procedures, is incorporated by reference to the information under the heading Audit Committee and Other Audit Matters in the Proxy Statement dated December 29, 2003, as filed with the Commission.

17

PART IV

ITEM15.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 filed as part of the 2003 Annual Report to Stockholders are incorporated herein by reference:

(a) Consolidated Balance Sheets

(b) Consolidated Statements of Stockholders Equityand Comprehensive Loss

(c) ConsolidatedStatements of Earnings (Loss)

(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 currentportions) 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 consolidatedassets.

(2) Financial Statement Schedules

Report of Independent Auditors

INDEPENDENT AUDITORS REPORT

To the Stockholders and Board of Directors of

Roanoke Electric Steel Corporation

102 Westside Blvd., NW

Roanoke, VA 24017

We have audited the consolidated financial statements of Roanoke Electirc Steel Corporation and its wholly-owned subsidiaries (the Company) as of October 31, 2003 and 2002, and for each of the three yearsin the period ended October 31, 2003, and have issued our report thereon dated December 8, 2003 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of Statement of Financial AccountingStandards No. 143, Accounting for Asset Retirement Obligations, on November 1, 2002); such consolidated financial statements and report are included in your 2003 Annual Report to Stockholders and are incorporated herein by reference. Ouraudits also included the consolidated financial statement schedule of the Company, listed in Item 15. This consolidated financial statement schedule is the responsibility of the Companys management. Our responsibility is to express an opinionbased on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forththerein.

/s/ DELOITTE & TOUCHE LLP

Raleigh, North Carolina

December 8,2003

18

PART IV

(cond.)

The financial statement schedule should be read in conjunction with the consolidated financialstatements. The financial statement schedules not included in this annual report on Form 10-K have been omitted because they are not applicable or the required information is shown in the financial statements or included in the notes thereto.

Set forth below is Schedule II - Valuation andQualifying Accounts for the Registrant as required by Rule 5-04 of Regulation S-X:

Description

Beginning
Balance
Charged to
Cost &
Expenses
Chargedto
Other
Accounts
(A/RCharged
Against
Allowance)
Deductions
Ending
Balance

Y/E 10/31/01:

Allowance for:

Bad debts

$1,332,848$286,115$$520,485$1,098,478

Sales returns

1,190,082353,00090,5601,452,522

2,522,930639,115611,0452,551,000

Y/E 10/31/02:

Allowance for:

Bad debts

1,098,4781,046,099963,7621,180,815

Sales returns

1,452,522769,591682,931

2,551,0001,046,0991,733,3531,863,746

Y/E 10/31/03:

Allowance for:

Bad debts

1,180,8154,976,2433,328,4652,828,593

Sales returns

682,93181,495601,436

$1,863,746$4,976,243$$3,409,960$3,430,029

19

PART IV

(cond.)

(3) Pursuant to Regulation S-K, the following Exhibit Index is added immediatelypreceding the exhibits filed as part of the subject Form 10-K:

EXHIBIT INDEX

EXHIBITNO.

EXHIBIT

PAGE

(3)

(a) Articles of Incorporation, as amended

24

Incorporated
by reference

(b) By-Laws, as amended

25

Incorporated
by reference

(4)

Instruments Defining the Rights of Security Holders

26

(10)

*(a) Executive Officer Incentive Arrangement

27

Incorporated
by reference

*(b) Roanoke Electric Steel Corporation

Employees Stock Option Plan

27

Incorporated
by reference

*(c) Amendment to Roanoke Electric Steel Corporation

Employees Stock Option Plan

27

*(d) Roanoke Electric Steel Corporation

Non-Employee Directors Stock Option Plan

27

*(e) Roanoke Electric Steel Corporation

Severance Agreements

27

Incorporated
by reference

*(f) SWVA Collective Bargaining Agreement

27

Incorporated
by reference

20

PART IV

(cond.)

EXHIBIT INDEX (cond)

EXHIBIT
NO.

EXHIBIT

PAGE

(13)

2003 Annual Report to Stockholders

28

(21)

Subsidiaries of the Registrant

29

(23)

Independent Auditors Consent

30

(31.1)

Rule 13a-14(a)/ 15d-14(a) Certification of Principal

Executive Officer

31

(31.2)

Rule 13a-14(a)/ 15d-14(a) Certification of Principal

Financial Officer and Chief Accounting Officer

32

(32.1)

Section 1350 Certification of Principal Executive Officer

33

(32.2)

Section 1350 Certification of Principal Financial Officer

and Chief Accounting Officer

34

(b)Reports on Form 8-K.

Form 8-K dated September 2, 2003 and filed September 5, 2003, furnishing under Item 12 a news release announcing financial condition and results ofoperations for the quarter ended July 31, 2003.

*Management contract, or compensatory plan or agreement, required to be filed as an Exhibit to this Form 10-K pursuant to Item 15 (c).

21

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 onits behalf by the undersigned, thereunto duly authorized.

ROANOKE ELECTRIC STEEL CORPORATION

Registrant

By:

/s/ Donald G. Smith

Donald G. Smith, Chairman, President,

Treasurer andChief Executive Officer

(Principal Executive Officer and Director)

Date: January 20, 2004

Pursuant to the requirements of the Securities Exchange Act of1934, 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

/s/ Donald G. Smith

January 20, 2004

Donald G. Smith, Chairman, President, Treasurer and

Chief Executive Officer (Principal Executive Officer

and Director)

/s/ Mark G. Meikle

January 20, 2004

Mark G. Meikle, Vice President - Finance, Assistant

Treasurer and Chief Financial Officer (Principal

Financial Officer and Chief Accounting Officer)

/s/ George B. Cartledge, Jr.

January 20, 2004

George B. Cartledge, Jr.

Director

/s/ Charles W. Steger

January 20, 2004

Charles W. Steger

Director

/s/ Frank A. Boxley

January 20, 2004

Frank A. Boxley

Director

/s/ Charles I. Lunsford, II

January 20, 2004

Charles I. Lunsford, II

Director

/s/ Timothy R. Duke

January 20, 2004

Timothy R. Duke

Director

/s/ George W. Logan

January 20, 2004

George W. Logan

Director

/s/ Thomas L. Robertson

January 20, 2004

Thomas L. Robertson

Director

22

EX-3.A3dex3a.htmEXHIBIT 3.A

Exhibit 3.a

EXHIBIT NO. 3 (a)

ARTICLES OF INCORPORATION, AS AMENDED

Incorporated by reference to the previously filed Form 10-K for October 31,2002 on file in the Commission office.

24

EX-3.B4dex3b.htmEXHIBIT 3.B

Exhibit 3.b

EXHIBIT NO. 3 (b)

BY-LAWS, AS AMENDED

Incorporated by reference to the previously filed Form 10-K for October 31,2001 on file in the Commission office.

25

EX-45dex4.htmEXHIBIT 4

Exhibit 4

EXHIBIT NO. 4

INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS

Pursuant to Item 601(b) (4) (iii) of Regulation S-K, the Registrant herebyundertakes 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 2003 Annual Report to Stockholders andForm 10-K.

26

EX-106dex10.htmEXHIBIT 10

Exhibit 10

EXHIBIT NO. 10

* (a)

EXECUTIVE OFFICER INCENTIVE ARRANGEMENT

Incorporated by reference to the previously filed Form 10-K for October 31, 1999 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, 1998 on file in the Commission office.

* (c)

AMENDMENT TO ROANOKE ELECTRIC STEEL CORPORATION

EMPLOYEES STOCK OPTION PLAN

(Attached)

* (d)

ROANOKE ELECTRIC STEEL CORPORATION

NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

(Attached)

* (e)

ROANOKE ELECTRIC STEEL CORPORATION SEVERANCE AGREEMENTS

Incorporated by reference to the previously filed Form 10-K for October 31, 2002 on file in the Commission office.

* (f)

SWVA COLLECTIVE BARGAINING AGREEMENT

Incorporated by reference to the previously filed Form 10-Q for July 31, 2002 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 15 (c).

27

EX-10.C7dex10c.htmEXHIBIT 10.C

Exhibit 10.c

EXHIBIT NO. 10(c)

AMENDMENT NO. 4

TO THE

ROANOKE ELECTRIC STEELCORPORATION

EMPLOYEES STOCK OPTION PLAN

WHEREAS, the Board of Directors of Roanoke Electric Steel Corporation (RESCO) adopted the Roanoke Electric SteelCorporation Employees Stock Option Plan (the Plan) on November 15, 1988, the shareholders of RESCO approved the Plan on January 16, 1989, and the Compensation and Stock Option Committee of the Board of Directors approved amendmentsto the Plan in 1991, 1995 and 1998 to reflect three-for-two stock splits of RESCOs common stock; and

WHEREAS, effective as of June 30, 2003, The Nasdaq Stock Market, Inc. (Nasdaq) amended its rules (the Amended Rules) relating toshareholder approval of equity compensation plans, and, based on such amended rules, the Board of Directors believed that it was advisable to amend the terms of the Plan to comply with the terms of the Amended Rules and, on October 21, 2003,approved an amendment to the Plan in the form set forth herein (the Amendment), subject to interpretative guidance from Nasdaq that the Plan, as amended by the Amendment, would be in compliance with the Amended Rules; and

WHEREAS, by a letter dated November 12, 2003, Nasdaq provided interpretativeguidance that the Amendment would not be considered a material amendment under the Amended Rules and that the Plan, as amended by the Amendment, would be grandfathered plan in compliance with the Amended Rules;

NOW, THEREFORE, BE IT RESOLVED, that:

1.Paragraph 6 of the Plan is amended and restated as follows:

6.Shares Available.

(a) From and after June 30, 2003 (the Effective Date), there shall be reserved for issuance under the Plan an aggregate of112,500 shares of the Companys Common Stock with respect to Options granted from and after the Effective Date, subject to the provisions in paragraph 6(c) and 7 of this Plan.

(b) As to Options granted prior to the Effective Date, the aggregate number of shares of the CompanysCommon Stock which may be issued upon the exercise of Options granted under the Plan shall not exceed 112,500 per Plan Year, subject to adjustment under the provisions of paragraph 7.

(c) Shares of Common Stock to be issued upon the exercise of options may be authorized but unissued sharesor shares issued or reacquired by the Company. In the event any Options shall, for any reason, terminate or expire or be surrendered without having been exercised in full, the shares subject to such Option but not purchased thereunder shall again beavailable for Options granted under the Plan.

2.In all other respects, the Plan is ratified and affirmed.

WITNESS the following signature, this 1st day of December, 2003.

ROANOKE ELECTRIC STEEL CORPORATION

By:

/s/ George B. Cartledge, Jr.

Chairman, Compensation and

Stock OptionCommittee

EX-10.D8dex10d.htmEXHIBIT 10.D

Exhibit 10.d

EXHIBIT NO. 10(d)

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 toencourage 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, thefollowing 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 the Compensation and Stock Option Committee of the Board.

D. Company Stock means the Common Stock of theCompany (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 thecapital structure of the Company (as provided in Section 10), 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 automatically awarded an Optionpursuant to Section 7.

F. EffectiveDate 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 stockexchange 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 FairMarket 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.

1

K. Option or Options means the right to purchase Company Stocksubject 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 theCommittee. 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 limitationsdescribed 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 theadministration 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 bedone 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 beeligible to participate in the Plan.

5. Stock Subject tothe 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. Shares that have not been issued under the Plan allocable to Options and portions ofOptions 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 anoptionee 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 agreementin 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 ofshares as follows:

(i) Each person who is anEligible 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, anoption to purchase an additional 1,000 shares of Company Stock; and

2

(ii) A Director who first becomes an Eligible Director after the Effective Date of thePlan 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 suchOption on the Date of Grant.

(c) OptionsNot 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 bythe laws of descent and distribution may be exercised by the optionees personal representative as provided in Section 7(e). No Option or interest therein may be transferred, assigned, pledged or hypothecated by the optionee during hislifetime, 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 statesecurities laws have been complied with;

(ii)if the optionee is 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, statingthe 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) inthe 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 theoptionees death within the period the optionee could have exercised the Option, the Option may be exercised by the optionees personal representative within one year from the date of death to the extent and in the manner the optioneecould 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 theCompany the amount of taxes, if any, which the Company may be required to withhold with respect to such shares.

3

8. Limitation of Rights.

(a) No Right to Continue as a Director. Neither the Plan nor the grant of an Option, nor any otheraction 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 optioneeshall 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 11, no adjustment will be made for dividends or other rights for whichthe 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 capitalizationeffected 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 andkind 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 theCommittee, 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 the consent of any optionee, and the Committees 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. TheBoard 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 totheir 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 regulationsthereunder.

11. Notice. All notices and othercommunications 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 Companyat its principalbusiness address to the attention of the Secretary; (b) if to any optioneeat 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 bythe laws of the Commonwealth of Virginia.

4

As evidence of its adoption of the Plan, the Company has caused this document to be signed by its officerduly authorized this 18th day of February, 1997.

ROANOKE ELECTRIC STEEL CORPORATION

By

/s/ Donald G. Smith

President

5

EX-139dex13.htmEXHIBIT 13

Exhibit 13

EXHIBIT NO. 13

RoanokeElectricSteel.

Conservingnaturalresources,reducing pollution and saving energy.

For the majority of Americans who would not normally think of a steelmill operation as being environmentally friendly, we offerthis bit of food for thought.

Roanoke Electric Steelproduces its

products from 100% recycled steel, primarily scrapped automobiles, many of which are processed at our own shredder facilities.

Obviously, economics is the primary

motivator of steel recycling in the manufacture of steel. It will always be more cost efficient to recycle steel than to mine virgin ore and move it through the processof making new steel. Seldom, if ever, has a recycling process that makes so much sense economically, make so much sense environmentally as well.

Each ton of new steel we produce conserves approximately 2,500 pounds of iron ore and 1,400 pounds of coal.

Compared to other steel making processes, Roanoke Electric Steels highly efficient electric arc furnace reduces airpollution by 75%, water pollution by 76% and water consumption by 50%.

Industry wide, the recycling of steel saves enough energy annually to provide electricity to 18 million U.S. homes.

Over 123 million passenger cars are currently in use in North America with approximately 14 million being recycled each year. The volume of recycledsteel yielded by these scrapped automobiles equals nearly 100% of the volume of steel required annually in the production of new cars.

The high quality steel products produced by Roanoke Electric are not used directly in the manufacture of automobiles. But rather as structural beams, merchantsteel and

specialty steel products. Products whose major required characteristic is strength. However, the products we produce today from old,melted down cars, could, at the end of their usefulness, be remelted into new cars.

Roanoke Electric Steel Corporation encourages the recycling of any material to conserve natural resources, decrease energyconsumption and minimize waste. And respectively suggests that the next time you toss a soup can into the recycle bin, think about this. One typical family vehicle, recycled, yields the equivalent volume of steel required to make approximately30,000 new soup cans.

Roanoke Electric Steel, economics, recycling and the environment. All working together for a better America.

6

RoanokeElectricSteelCorporationandits wholly-owned subsidiaries are engaged in the manufacturing,fabricating and marketing of merchant steel products, specialty steel sections, billets, open-web steel joists and reinforcing bars.

Each subsidiary is either a supplier to the parent company or a purchaser of its finished product and billets.

The main plant of Roanoke Electric Steel Corporationis a state-of-the-art steel mini-mill located in Roanoke, Virginia. This facility melts scrap steel in electric furnaces and continuously casts the molten steel into billets. These billets are rolled into merchant steel products consisting ofangles, plain rounds, flats, channels and reinforcing bars of various lengths and sizes. Excess steel billet production is sold to mills without melting facilities.

Roanoke Electric Steel Corporation markets its products to steel service centers and fabricators in22 states east of the Mississippi River.

Like the main plant, Steel of West Virginia, Inc., is a steel mini-mill operating in Huntington, West Virginia. A steel fabricating subsidiary, Marshall Steel, Inc., is located in Memphis, Tennessee.

These locations produce specialty steel sections andcustom-finished products and serve niche markets throughout the continental United States.

ShreddedProductsCorporation,asubsidiary with operations in Rocky Mount and Montvale, Virginia, extractsscrap steel and other metals from junked automobiles and other waste materials.

These facilities supply the main plant with a substantial amount of its raw materials. Nonferrous metals generated in the process are sold to unrelated customers.

John W. Hancock, Jr., Inc. and Socar, Inc. are steel fabricationsubsidiaries located in Salem, Virginia, Florence, South Carolina and Continental, Ohio. All three operations purchase rounds and angles from the main plant to fabricate long- and short-span open-web steel joists. These joists are used as horizontalsupports for floors and roofs in commercial and industrial buildings.

RESCO Steel Products Corporation, a Salem, Virginia based subsidiary, fabricates concrete reinforcing steel by cutting and bending it to contractor specifications.

7

2003 Results

Roanoke Electric Steel Corporation achievedsignificantly improved results in a very challenging year. We were not satisfied with the overall results for the year, but were encouraged by the continual progress made during the year. In fact, your company was able to achieve significantquarterly improvements throughout the fiscal year, as shown below:

1st Qtr
2nd Qtr
3rd Qtr
4th Qtr

Sales

$61,129,954$77,075,724$82,825,245$91,600,033

Per Share

$(.19)$(.13)$(.03)$.06

Overall, the companys results for 2003 were better than those for 2002. In 2003 our loss was $3,224,953 compared to a loss of $6,008,897 last year. Basic loss per share was $.29 in 2003, compared to a basic loss per share of $.55 in2002, or an improvement of 47%.

Many externalfactors contributed to the continued improvement of your company. A general upturn in our overall markets led to an increase in the number of tons both produced and shipped during the year, resulting in a sales increase of 18.3% in 2003 over 2002.Selling prices for our products increased initially due to rising scrap costs, which prompted several industry-wide price increases. Recently, demand has improved, further augmenting the rise of selling prices. In fact, selling prices during theyear for merchant bar products increased 18.8%, specialty steel products increased 8.8%, and billets increased 11.3%.

Your company continued to improve internally as well. The rolling mill in Virginia had its best mill yield in 6 years. Our West Virginiafacilitys #1 mill had its best mill yield in 8 years, and the #2 mill had its best yield in more than 11 years.

8

Economic downturns are never easy or pleasant. Nevertheless, your companys officers have a combined294 years of experience to help them navigate through the difficult period of the last few years, and we intend to emerge from this industry downturn stronger than ever.

Financial Condition

Historically, a major Roanoke Electric Steel Corporation strength has been the philosophy of maintaining a solid balance sheet. You could see thatphilosophy at work in 2003.

At year-end, cash and investments were $17,200,436; working capital was $85,281,889, and stockholders equity amounted to $126,065,624.

The current ratio was 2.9 to 1, and the quick ratio was 1.4 to 1.

We curtailed debt by $22,315,201, and long-term debt as a percentage of total capital improved to 33.7% from 37.6% last year.

After subtracting cash and investments from long-term debt, net long-term debt as a percentage of total capital was 27.1%.

The ratio of debt to equity was 1.1 to 1.

We also kept tight reins on capital spending, keeping it aligned with the wobbling economy. Capital expenditures were held to just under $2,700,000 during2003 to preserve cash, but we will not overlook the need to spend and continually upgrade our facilities to remain competitive and provide future growth.

Shareholder Value

Our mission as managers is to create value for our shareholders; we know that we work for you. Among investors, your company has a well-known philosophyof paying dividends and

9

providing shareholders with a return on which they can rely, regardless of the ups or downs of economicand business cyclicality. In October 2003, the Board of Directors declared the 180th consecutive quarterly dividend (45 years). Our dividend for the year amounted to $.20 per share, and dividends paid to shareholders were $2,187,563. I would like tothank you, as a Roanoke Electric Steel Corporation shareholder, for your commitment to your company.

Outlook for 2004

Business conditions appear to be improving in certain markets, as many of our customers are busier than they have been in the recent past. Prices continueto increase; in fact, another round of price increases was announced effective for both November and December 2003 for many of the products your company manufactures. We hope the momentum we achieved in 2003 continues in 2004.

Over the years one of the reasons for your companys success has beenits core values. During the last few years many companies have experienced accounting irregularities and conflicts of interests. It was comforting to know that Roanoke Electric Steel Corporation continues to work to the highest level of ethics andintegrity.

Thanks

We are very grateful for the contributions John E. Morris has made to ourcompany over the past 32 years. John is retiring at the end of 2003 as Vice President-Finance. We know John has been looking forward to this time, and we wish him the very best.

We appreciate our dedicated employees, and extend our gratitude to customers and shareholders for their confidence andinvestment.

Donald G. Smith

Chairman of the Board

Chief Executive Officer

10

Year Ended October 31,20032002200120001999

Operations

Sales

$312,090,956$263,773,709$307,674,605$372,728,108$372,962,950

Gross earnings

24,090,35117,601,05534,931,30062,461,06275,191,805

Interest expense-net

5,001,9065,497,7617,152,1417,049,3426,964,578

Income tax expense (benefit)

(1,988,676)(4,459,535)904,0728,744,30114,176,230

Earnings (loss) before cumulative effect of change in accounting principle

(2,996,543)(6,008,897)1,348,02214,061,44922,479,179

Net earnings (loss)

(3,224,953)(6,008,897)1,348,02214,061,44922,479,179

Financial Position

Working capital

$85,281,889$94,675,819$104,919,632$111,444,079$117,241,158

Total assets

270,867,486289,717,573316,886,778339,678,909352,045,812

Long-term debt and capital lease obligation

63,958,94878,792,27893,835,033108,874,521123,910,558

Stockholders equity

126,065,624130,988,698138,606,184144,721,829137,158,131

Selected Ratios

Gross profit margin

7.7 %6.7%11.4%16.8%20.2 %

Operating income (loss) margin

(1.0 %)(2.3 %)0.4%3.8%6.0 %

Effective tax (benefit) rate

(39.9 %)(42.6 %)40.1 %38.3 %38.7%

Current ratio

2.93.23.23.23.1

Quick ratio

1.41.61.81.61.8

Funded debt as a percentage of total capital

36.2 %41.7 %44.0 %46.1 %50.3%

Return on average stockholders equity

(2.5 %)(4.5 %)1.0%10.0%17.5 %

Per Share Data

Earnings (loss) before cumulative effect of accounting change:

Basic

$(0.27)$(0.55)$0.12$1.28$2.02

Diluted

(0.27)(0.55)0.121.282.02

Net earnings (loss):

Basic

(0.29)(0.55)0.121.282.03

Diluted

(0.29)(0.55)0.121.282.02

Cash dividends

0.200.350.400.400.39

Stockholders equity

11.5311.9712.7013.2812.44

Weighted average common shares outstanding

10,938,99910,934,38010,908,58410,952,52911,065,531

11

Consolidated Statements Of Earnings (Loss)

Year Ended October 31,

2003
2002
2001

SALES

$312,090,956$263,773,709$307,674,605

COST OF SALES

288,000,605246,172,654272,743,305

GROSS EARNINGS

24,090,35117,601,05534,931,300

OTHER OPERATING EXPENSES (INCOME)

Administrative

23,285,53322,543,02725,405,447

Interest, net

5,001,9065,497,7617,152,141

Profit sharing

1,309,091658,699822,609

Antitrust litigation settlement

(520,960)(700,991)

Officer life insurance proceeds

(630,000)

Total

29,075,57028,069,48732,679,206

EARNINGS (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

(4,985,219)(10,468,432)2,252,094

INCOME TAX EXPENSE (BENEFIT)

(1,988,676)(4,459,535)904,072

EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

(2,996,543)(6,008,897)1,348,022

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

(228,410)

NET EARNINGS (LOSS)

$(3,224,953)$(6,008,897)$1,348,022

EARNINGS (LOSS) PER SHARE (BASIC AND DILUTED) OF COMMON STOCK

Earnings (loss) before cumulative effect of accounting change

$(0.27)$(0.55)$0.12

Cumulative effect of accounting change

(0.02)

Net earnings (loss) per share of common stock

$(0.29)$(0.55)$0.12

CASH DIVIDENDS PER SHARE OF COMMON STOCK

$0.20$0.35$0.40

ConsolidatedStatements Of Stockholders Equity And Comprehensive Loss

Common Stock

Retained
Earnings

Accumulated
Other
Comprehensive
Loss
Treasury Stock
(At Cost)

Comprehensive
Loss

Shares
Amount
Shares
Amount

BALANCE, NOVEMBER 1, 2000

12,174,177$3,968,765$141,570,9321,273,114$817,868

Stock options exercised

10,50098,000

Net earnings

1,348,022$1,348,022

Cash dividends

(4,363,575)

Cumulative effect of change in accounting for derivative financial instruments

$1,663,5161,663,516

Change in derivative financial instruments

(4,861,608)(4,861,608)

Total comprehensive loss

$(1,850,070)

BALANCE, OCTOBER 31, 2001

12,184,6774,066,765138,555,379(3,198,092)1,273,114817,868

Stock options exercised

31,250328,124

Net loss

(6,008,897)$(6,008,897)

Cash dividends

(3,826,922)

Change in derivative financial instruments

1,397,9851,397,985

Accretion of past hedging relationships

492,224492,224

Total comprehensive loss

$(4,118,688)

BALANCE, OCTOBER 31, 2002

12,215,9274,394,889128,719,560(1,307,883)1,273,114817,868

Repurchase and retirement of common stock

(10,000)(70,140)

Net loss

(3,224,953)$(3,224,953)

Cash dividends

(2,187,563)

Unrealized gain on available for sale securities

67,68867,688

Accretion of past hedging relationships

510,419510,419

Change in derivative financial instruments

(18,525)(18,525)

Total comprehensive loss

$(2,665,371)

BALANCE, OCTOBER 31, 2003

12,205,927$4,394,889$123,236,904$(748,301)1,273,114$817,868

See notes to consolidated financial statements and independent auditors report.

12

Consolidated Balance Sheets

October 31,

ASSETS2003
2002

CURRENT ASSETS

Cash and cash equivalents

$13,422,044$12,051,362

Investments

3,778,39214,104,019

Accounts receivable, net of allowances of $3,430,029 in 2003 and $1,863,746 in 2002

46,469,28040,301,324

Refundable income taxes

608,2444,178,418

Inventories

59,565,24562,362,602

Prepaid expenses

1,466,1761,118,692

Deferred income taxes

5,525,2794,330,671

Total current assets

130,834,660138,447,088

PROPERTY, PLANT AND EQUIPMENT

Land

7,734,5897,977,522

Buildings

45,099,32544,466,848

Manufacturing machinery and equipment

136,053,175137,910,429

Other property and equipment

38,465,78537,065,211

Assets under construction

1,375,7072,023,915

Total

228,728,581229,443,925

Less-accumulated depreciation

105,323,40693,518,440

Property, plant and equipment, net

123,405,175135,925,485

GOODWILL

13,868,64713,868,647

OTHER ASSETS

2,759,0041,476,353

TOTAL

$270,867,486$289,717,573

LIABILITIES AND STOCKHOLDERS EQUITY

CURRENT LIABILITIES

Current portion of long-term debt and capital lease obligation

$7,560,884$15,042,755

Accounts payable

24,540,81416,892,695

Dividends payable

546,641547,141

Employees taxes withheld

275,112329,926

Accrued profit sharing contribution

1,339,642604,723

Accrued wages and expenses

11,289,67810,354,029

Total current liabilities

45,552,77143,771,269

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION

63,958,94878,792,278

DEFERRED INCOME TAXES

29,908,75430,481,620

OTHER LIABILITIES

5,381,3895,683,708

COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 8)

STOCKHOLDERS EQUITY

Common stock-no par value-authorized 20,000,000 shares, issued 12,205,927 shares in 2003 and 12,215,927 in 2002

4,394,8894,394,889

Retained earnings

123,236,904128,719,560

Accumulated other comprehensive loss

(748,301)(1,307,883)

Total

126,883,492131,806,566

Less-treasury stock, 1,273,114 shares at cost

817,868817,868

Total stockholders equity

126,065,624130,988,698

TOTAL

$270,867,486$289,717,573

See notes toconsolidated financial statements and independent auditors report.

13

Consolidated Statements of Cash Flows

Year Ended October31,

2003
2002
2001

CASH FLOWS FROM OPERATING ACTIVITIES

Net Earnings (loss)

$(3,224,953)$(6,008,