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Kentucky Electric Steel announces fiscal 1997 first quarter results.

ASHLAND, Ky.--(BUSINESS WIRE)--Feb. 4, 1997--Kentucky Electric Steel Inc. (NASDAQ NM: KESI) announced today the results for its fiscal 1997 first quarter.

Net loss for the quarter ended Dec. 28, 1996 was $1.4 million or ($.30) per share, vs. net income of $162,000, or $.03 per share for the comparable quarter of fiscal 1996.

Net sales for the first quarter of fiscal 1997 were $23.4 million, down 1.3 percent from fiscal 1996 first quarter sales of $23.7 million. The decrease in sales is primarily attributed to a decrease in selling prices due to market conditions, offset somewhat by a 3.8 percent increase in shipments.

Charles C. Hanebuth, president and chief executive officer of Kentucky Electric Steel Inc., commented, "First quarter operating results were negatively impacted by downward pricing pressures, higher conversion costs, additional depreciation related to the ladle metallurgy facility (LMF) start-up and caster problems, offset somewhat by lower scrap costs." Hanebuth continued, "Conversion cost increases reflect lower production related to the start-up, and the effect of the December melt shop shutdown to repair the caster superstructure and to convert an additional caster strand for increased production of the thicker, wider products. Although productivity improved in the rolling mill, lower production in the melt shop and the depletion of billet inventory reduced finished goods production."

As previously reported, the melt shop was shut down for ten days from Dec. 24, 1996 through Jan. 3, 1997 for equipment installation and repairs. Hanebuth commented, "We believe that the major modifications to the new equipment are complete." Hanebuth further commented, "Although the melt shop outage negatively impacts near-term earnings, we believe these improvements resolved some of our recent productivity problems and, in the long run, will help facilitate our market entry into the new thicker, wider products."

Hanebuth further stated, "Although the spring market is somewhat soft, our backlog remains firm, and we are cautiously optimistic about the future strength of the markets we serve. Also, our new thicker, wider products continue to be well received by the marketplace."

The company's unsecured senior notes and bank credit facility agreements were amended, effective Dec. 28, 1996, to reduce the required fixed charge coverage ratio, increase the minimum net worth requirement and revise other miscellaneous provisions of the agreements. In connection with the amendment, the amount of its unsecured bank credit facility agreements has been reduced from $24.5 million to $17.5 million. Hanebuth stated, "We believe that these agreements provide the company with adequate liquidity to fund its operations for the foreseeable future."

The company continues to acquire its common stock under the repurchase plan approved by the board of directors in fiscal 1995. As of the end of the first quarter of fiscal 1997, the company had repurchased 346,000 shares of common stock.

In accordance with the recently enacted safe harbor provisions of the securities law regarding forward-looking statements, except for the historical information contained herein, the above discussion contains forward-looking statements that involve risks and uncertainties. KESI's actual results could differ materially from those projected or implied by such forward-looking statements. These risks and uncertainties include but are not limited to the reliance on truck and utility vehicle industry; excess industry capacity; product demand and industry pricing; volatility of raw material costs, especially steel scrap; intense foreign and domestic competition; management's estimate of niche market data; the cyclical and capital-intensive nature of the industry; and cost of compliance with environmental regulations.

Kentucky Electric Steel Inc. is a publicly held company which operates a specialty steel mini-mill manufacturing special quality steel bar flats for the leaf-spring suspension, cold drawn bar conversion, truck trailer support beam and steel service center markets. Kentucky Electric Steel Inc.'s common stock (symbol: KESI) is traded on the NASDAQ National Market. -0-
 Kentucky Electric Steel, Inc.
 Condensed Consolidated Interim Report
 (Dollars in Thousands, Except Per Share Data)

 Condensed Consolidated Statements of Operations

 Three Months Ended
 Dec. 28, Dec. 30,
 1996 1995

Net sales $ 23,382 $ 23,688
Cost of goods sold 23,396 21,112
 Gross profit (loss) (14) 2,576
Selling and administrative expenses 1,725 1,963
 Operating income (loss) (1,739) 613
Interest income and other 5 5
Interest expense (494) (358)
 Income (loss) before income taxes (2,228) 260
Provision (credit) for income taxes (844) 98
 Net income (loss) $ (1,384) $ 162
Net income per common share $ (.30) $ .03
Weighted average shares outstanding 4,658,691 4,871,140

 Condensed Consolidated Balance Sheets

 Dec. 28, Sept. 28,
 1996 1996

Current assets $33,521 $35,891
Property, plant and equipment - net 35,788 35,687
Deferred tax assets 7,511 6,263
Other assets 658 592
 Total assets $77,478 $78,433
Current liabilities $21,679 $20,928
Long-term debt 20,000 20,000
Other liabilities 445 395
Shareholders' equity 35,354 37,110
 Total liabilities and shareholders'
 equity $77,478 $78,433

 Condensed Consolidated Statements of Cash Flows
 (Dollars in Thousands)

 Three Months Ended
 Dec. 28, Dec. 30,
 1996 1995
Cash Flows From Operating Activities:
 Net income (loss) $ (1,384) $ 162
 Adjustments to reconcile net income
 (loss) to net cash flows from
 operating activities:
 Depreciation and amortization 894 641
 Deferred taxes (1,248) 224
 Change in other (20) (213)
 Change in current assets and
 current liabilities 1,532 (3,642)
 Net cash flows from operating
 activities (226) (2,828)

Cash Flows From Investing Activities:
 Capital expenditures (920) (997)
 Decrease in capital expenditures
 payable (514) (813)
 Net cash flows from investing
 activities (1,434) (1,810)

Cash Flows From Financing Activities:
 Net advances (repayments) on line
 of credit 2,106 (6,346)
 Repayments on long-term debt - (9,001)
 Proceeds from long-term debt
 borrowings - 20,000
Purchases of treasury stock (443) (159)
 Net cash flows from financing
 activities 1,663 4,494
 Net increase (decrease) in cash
 and cash equivalents 3 (144)

Cash and cash equivalents at beginning
 of period 124 327
Cash and cash equivalents at end of
 period $ 127 $ 183
Interest paid, net of amount
 capitalized $ 870 $ 284
Income taxes paid $ - $ 11

CONTACT: Kentucky Electric Steel, Inc. Ashland

Charles C. Hanebuth or William J. Jessie, 606/929-1222
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Publication:Business Wire
Date:Feb 4, 1997
Next Article:Bernard Chaus, Inc. Announces Results For Fiscal Second Quarter 1997.

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