EXHIBIT 99.1
Published on
EXHIBIT 99.1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Directors
Reliance Steel & Aluminum Co.
Reliance Steel & Aluminum Co.
We have audited the accompanying consolidated balance sheets of Reliance Steel & Aluminum Co.
and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of
income, shareholders’ equity and cash flows for each of the three years in the period ended
December 31, 2005. Our audits also included the financial statement schedule listed in the Index at
Item 15(a). These financial statements and schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements and schedule
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Reliance Steel & Aluminum Co. and subsidiaries at
December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 2005, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Reliance Steel & Aluminum Co.’s internal
control over financial reporting as of December 31, 2005, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 10, 2006 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Los Angeles, California
March 10, 2006, except for Note 14, as to which
the date is December 29, 2006
March 10, 2006, except for Note 14, as to which
the date is December 29, 2006
| Note 14. | Condensed Consolidating Financial Statements |
In November 2006, the Company issued senior unsecured notes for an aggregate principal amount of
$600 million at fixed interest rates that are guaranteed by certain of its wholly owned domestic
subsidiaries. The accompanying combined and consolidating financial information has been prepared and
presented pursuant to Rule 3-10 of SEC Regulation S-X “Financial Statements of Guarantors and Issuers of
Guaranteed Securities Registered or being Registered.” The guarantees are full and unconditional and joint
and several obligations of each of the guarantor subsidiaries. There are no significant restrictions on the
ability of the Company to obtain funds from any of the guarantor subsidiaries by dividends or loan. The
supplemental consolidating financial information has been presented in lieu of separate financial statements
of the guarantors as such separate financial statements are not considered meaningful.
Consolidating financial information related to the Company, its guarantor subsidiaries
and non-guarantor subsidiaries as of December 31, 2005, and 2004 and for each of the three years in
the period ended December 31, 2005 is shown below:
Condensed Consolidating Balance Sheet
As of December 31, 2005
(amounts in thousands)
As of December 31, 2005
(amounts in thousands)
| Non- | ||||||||||||||||||||
| Guarantor | Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | (7,912 | ) | $ | 35,717 | $ | 7,217 | $ | — | $ | 35,022 | |||||||||
Accounts receivable, less allowance for doubtful
accounts |
70,533 | 288,372 | 12,640 | (1,614 | ) | 369,931 | ||||||||||||||
Inventories |
58,659 | 304,318 | 24,408 | — | 387,385 | |||||||||||||||
Prepaid expenses and other current assets |
110 | 15,659 | 3,240 | — | 19,009 | |||||||||||||||
Deferred income taxes |
— | 35,868 | 133 | — | 36,001 | |||||||||||||||
Total current assets |
121,390 | 679,934 | 47,638 | (1,614 | ) | 847,348 | ||||||||||||||
Investments in subsidiaries |
571,358 | 989,050 | — | (1,560,408 | ) | — | ||||||||||||||
Property, plant and equipment, net |
66,692 | 403,405 | 9,622 | — | 479,719 | |||||||||||||||
Goodwill |
12,437 | 372,293 | — | — | 384,730 | |||||||||||||||
Intangible assets, net |
906 | 43,442 | 36 | — | 44,384 | |||||||||||||||
Intercompany receivables |
212,919 | — | — | (212,919 | ) | — | ||||||||||||||
Other assets |
552 | 12,653 | 148 | (464 | ) | 12,889 | ||||||||||||||
Total assets |
$ | 986,254 | $ | 2,500,777 | $ | 57,444 | $ | (1,775,405 | ) | $ | 1,769,070 | |||||||||
Liabilities & Shareholders’ Equity |
||||||||||||||||||||
Accounts payable |
$ | 35,241 | $ | 146,322 | $ | 4,494 | $ | (1,614 | ) | $ | 184,443 | |||||||||
Accrued compensation and retirement costs |
8,418 | 42,023 | 1,913 | — | 52,354 | |||||||||||||||
Other current liabilities |
6,310 | 38,657 | 1,994 | — | 46,961 | |||||||||||||||
Current maturities of long-term debt |
49,200 | 325 | — | — | 49,525 | |||||||||||||||
Current maturities of capital lease obligations |
— | 536 | — | — | 536 | |||||||||||||||
Total current liabilities |
99,169 | 227,863 | 8,401 | (1,614 | ) | 333,819 | ||||||||||||||
Long-term debt |
300,050 | 1,225 | — | — | 301,275 | |||||||||||||||
Intercompany borrowings |
— | 190,264 | 22,655 | (212,919 | ) | — | ||||||||||||||
Deferred taxes and other long-term liabilities |
— | 104,125 | 604 | (618 | ) | 104,111 | ||||||||||||||
Total shareholders’ equity |
587,035 | 1,977,300 | 25,784 | (1,560,254 | ) | 1,029,865 | ||||||||||||||
Total liabilities and shareholders’ equity |
$ | 986,254 | $ | 2,500,777 | $ | 57,444 | $ | (1,775,405 | ) | $ | 1,769,070 | |||||||||
1
Condensed Consolidating Balance Sheet
As of December 31, 2004
(amounts in thousands)
As of December 31, 2004
(amounts in thousands)
| Non- | ||||||||||||||||||||
| Guarantor | Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | (10,638 | ) | $ | 21,084 | $ | 1,213 | $ | — | $ | 11,659 | |||||||||
Accounts receivable, less allowance for doubtful
accounts |
73,114 | 247,953 | 10,463 | (1,539 | ) | 329,991 | ||||||||||||||
Inventories |
73,988 | 256,922 | 18,869 | — | 349,779 | |||||||||||||||
Prepaid expenses and other current assets |
171 | 11,749 | 5,296 | — | 17,216 | |||||||||||||||
Deferred income taxes |
— | 24,584 | — | — | 24,584 | |||||||||||||||
Total current assets |
136,635 | 562,292 | 35,841 | (1,539 | ) | 733,229 | ||||||||||||||
Investments in subsidiaries |
570,159 | 877,388 | — | (1,447,547 | ) | — | ||||||||||||||
Property, plant and equipment, net |
67,181 | 382,792 | 8,840 | — | 458,813 | |||||||||||||||
Goodwill |
12,436 | 329,344 | — | — | 341,780 | |||||||||||||||
Intangible assets, net |
1,245 | 15,368 | 60 | — | 16,673 | |||||||||||||||
Intercompany receivables |
196,027 | — | — | (196,027 | ) | — | ||||||||||||||
Other assets |
45 | 12,721 | 70 | — | 12,836 | |||||||||||||||
Total assets |
$ | 983,728 | $ | 2,179,905 | $ | 44,811 | $ | (1,645,113 | ) | $ | 1,563,331 | |||||||||
Liabilities & Shareholders’ Equity |
||||||||||||||||||||
Accounts payable |
$ | 28,301 | $ | 110,700 | $ | 4,840 | $ | (1,539 | ) | $ | 142,302 | |||||||||
Accrued compensation and retirement costs |
7,628 | 40,702 | 1,629 | — | 49,959 | |||||||||||||||
Other current liabilities |
8,238 | 26,716 | 1,063 | — | 36,017 | |||||||||||||||
Current maturities of long-term debt |
46,150 | 250 | — | — | 46,400 | |||||||||||||||
Total current liabilities |
90,317 | 178,368 | 7,532 | (1,539 | ) | 274,678 | ||||||||||||||
Long-term debt |
349,300 | 31,550 | — | — | 380,850 | |||||||||||||||
Intercompany borrowings |
— | 175,118 | 20,909 | (196,027 | ) | — | ||||||||||||||
Deferred taxes and other long-term liabilities |
— | 85,274 | 518 | (541 | ) | 85,251 | ||||||||||||||
Total shareholders’ equity |
544,111 | 1,709,595 | 15,852 | (1,447,006 | ) | 822,552 | ||||||||||||||
Total liabilities and shareholders’ equity |
$ | 983,728 | $ | 2,179,905 | $ | 44,811 | $ | (1,645,113 | ) | $ | 1,563,331 | |||||||||
2
Condensed Consolidating Statement of Income
For the year ended December 31, 2005
(amounts in thousands)
For the year ended December 31, 2005
(amounts in thousands)
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | 736,804 | $ | 2,571,386 | $ | 77,385 | $ | (18,524 | ) | $ | 3,367,051 | |||||||||
Other income, net |
435 | 12,625 | (18 | ) | (9,371 | ) | 3,671 | |||||||||||||
| 737,239 | 2,584,011 | 77,367 | (27,895 | ) | 3,370,722 | |||||||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales (exclusive of depreciation and
amortization shown below) |
538,970 | 1,874,035 | 54,601 | (18,606 | ) | 2,449,000 | ||||||||||||||
Warehouse, delivery, selling, general and
administrative |
112,820 | 384,945 | 13,862 | (3,722 | ) | 507,905 | ||||||||||||||
Depreciation and amortization |
6,924 | 39,157 | 550 | — | 46,631 | |||||||||||||||
Interest |
26,513 | 3,924 | 352 | (5,567 | ) | 25,222 | ||||||||||||||
| 685,227 | 2,302,061 | 69,365 | (27,895 | ) | 3,028,758 | |||||||||||||||
Income before minority interest and income
taxes |
52,012 | 281,950 | 8,002 | — | 341,964 | |||||||||||||||
Minority interest |
— | (8,666 | ) | (86 | ) | — | (8,752 | ) | ||||||||||||
Equity in earnings of subsidiaries |
171,196 | 2,128 | — | (173,324 | ) | — | ||||||||||||||
Income from continuing operations before
income taxes |
223,208 | 275,412 | 7,916 | (173,324 | ) | 333,212 | ||||||||||||||
Provision for income taxes |
19,900 | 105,650 | 2,225 | — | 127,775 | |||||||||||||||
Net income |
$ | 203,308 | $ | 169,762 | $ | 5,691 | $ | (173,324 | ) | $ | 205,437 | |||||||||
Condensed Consolidating Statement of Income
For the year ended December 31, 2004
(amounts in thousands)
For the year ended December 31, 2004
(amounts in thousands)
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | 711,020 | $ | 2,190,330 | $ | 57,305 | $ | (15,621 | ) | $ | 2,943,034 | |||||||||
Other income, net |
1,141 | 13,795 | 741 | (11,509 | ) | 4,168 | ||||||||||||||
| 712,161 | 2,204,125 | 58,046 | (27,130 | ) | 2,947,202 | |||||||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales (exclusive of depreciation and
amortization shown below) |
514,534 | 1,572,436 | 39,581 | (15,703 | ) | 2,110,848 | ||||||||||||||
Warehouse, delivery, selling, general and
administrative |
115,039 | 362,699 | 11,697 | (5,548 | ) | 483,887 | ||||||||||||||
Depreciation and amortization |
7,280 | 36,731 | 616 | — | 44,627 | |||||||||||||||
Interest |
26,869 | 7,318 | 382 | (5,879 | ) | 28,690 | ||||||||||||||
| 663,722 | 1,979,184 | 52,276 | (27,130 | ) | 2,668,052 | |||||||||||||||
Income before minority interest and income
taxes |
48,439 | 224,941 | 5,770 | — | 279,150 | |||||||||||||||
Minority interest |
— | (8,193 | ) | (989 | ) | — | (9,182 | ) | ||||||||||||
Equity in earnings of subsidiaries |
139,988 | (728 | ) | — | (139,260 | ) | — | |||||||||||||
Income from continuing operations before
income taxes |
188,427 | 216,020 | 4,781 | (139,260 | ) | 269,968 | ||||||||||||||
Provision for income taxes |
17,971 | 80,032 | 2,237 | — | 100,240 | |||||||||||||||
Net income |
$ | 170,456 | $ | 135,988 | $ | 2,544 | $ | (139,260 | ) | $ | 169,728 | |||||||||
3
Condensed Consolidating Statement of Income
For the year ended December 31, 2003
(amounts in thousands)
For the year ended December 31, 2003
(amounts in thousands)
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | 488,411 | $ | 1,378,929 | $ | 26,896 | $ | (11,303 | ) | $ | 1,882,933 | |||||||||
Other income, net |
1,044 | 9,952 | 160 | (8,319 | ) | 2,837 | ||||||||||||||
| 489,455 | 1,388,881 | 27,056 | (19,622 | ) | 1,885,770 | |||||||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales (exclusive of depreciation and
amortization shown below) |
357,680 | 1,005,136 | 20,977 | (11,483 | ) | 1,372,310 | ||||||||||||||
Warehouse, delivery, selling, general and
administrative |
98,175 | 293,579 | 7,930 | (3,757 | ) | 395,927 | ||||||||||||||
Depreciation and amortization |
7,849 | 27,493 | 1,528 | — | 36,870 | |||||||||||||||
Interest |
24,520 | 6,118 | 489 | (4,382 | ) | 26,745 | ||||||||||||||
| 488,224 | 1,332,326 | 30,924 | (19,622 | ) | 1,831,852 | |||||||||||||||
Income before minority interest and income
taxes |
1,231 | 56,555 | (3,868 | ) | — | 53,918 | ||||||||||||||
Minority interest |
— | 1,394 | (456 | ) | — | 938 | ||||||||||||||
Equity in earnings of subsidiaries |
33,715 | (466 | ) | — | (33,249 | ) | — | |||||||||||||
Income from continuing operations before
income taxes |
34,946 | 57,483 | (4,324 | ) | (33,249 | ) | 54,856 | |||||||||||||
Provision for income taxes |
467 | 22,113 | (1,734 | ) | — | 20,846 | ||||||||||||||
Net income |
$ | 34,479 | $ | 35,370 | $ | (2,590 | ) | $ | (33,249 | ) | $ | 34,010 | ||||||||
4
Condensed Consolidating Cash Flow Statement
For the year ended December 31, 2005
(amounts in thousands)
For the year ended December 31, 2005
(amounts in thousands)
| Non- | ||||||||||||||||||||
| Guarantor | Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Cash Flows from operating activities: |
||||||||||||||||||||
Net income (loss) |
$ | 203,308 | $ | 169,763 | $ | 5,690 | $ | (173,324 | ) | $ | 205,437 | |||||||||
Equity in earnings of subsidiaries |
(171,196 | ) | (2,128 | ) | — | 173,324 | — | |||||||||||||
Adjustments to reconcile net income to cash
provided by (used in) operating activities |
141,458 | (75,778 | ) | 1,102 | — | 66,782 | ||||||||||||||
Cash provided by (used in) operating
activities |
173,570 | 91,857 | 6,792 | — | 272,219 | |||||||||||||||
Cash Flows from investing activities: |
||||||||||||||||||||
Purchases of property, plant and equipment,
net |
(6,229 | ) | (45,058 | ) | (2,453 | ) | — | (53,740 | ) | |||||||||||
Acquisitions of metals service centers and net
asset purchases of metals service centers,
net
of cash acquired |
(94,377 | ) | — | — | — | (94,377 | ) | |||||||||||||
Intercompany loan repayments (advances), net |
(16,892 | ) | — | — | 16,892 | — | ||||||||||||||
Other investing activities, net |
1,485 | — | — | — | 1,485 | |||||||||||||||
Cash provided by (used in) investing activities |
(116,013 | ) | (45,058 | ) | (2,453 | ) | 16,892 | (146,632 | ) | |||||||||||
Cash Flows from financing activities: |
||||||||||||||||||||
Net borrowings (repayments) of long-term debt |
(46,200 | ) | (47,311 | ) | — | — | (93,511 | ) | ||||||||||||
Dividends paid |
(12,530 | ) | — | — | — | (12,530 | ) | |||||||||||||
Intercompany borrowings (repayments) |
— | 15,145 | 1,747 | (16,892 | ) | — | ||||||||||||||
Other financing activities |
3,898 | — | — | — | 3,898 | |||||||||||||||
Cash provided by (used in) financing activities |
(54,832 | ) | (32,166 | ) | 1,747 | (16,892 | ) | (102,143 | ) | |||||||||||
Effect of exchange rate changes on cash and
cash equivalents |
— | — | (81 | ) | — | (81 | ) | |||||||||||||
Increase (decrease) in cash and cash
equivalents |
2,725 | 14,633 | 6,005 | — | 23,363 | |||||||||||||||
Cash and cash equivalents at beginning of
period |
(10,637 | ) | 21,083 | 1,213 | — | 11,659 | ||||||||||||||
Cash and cash equivalents at end of period |
$ | (7,912 | ) | $ | 35,716 | $ | 7,218 | $ | — | $ | 35,022 | |||||||||
5
Condensed Consolidating Cash Flow Statement
For the year ended December 31, 2004
(amounts in thousands)
For the year ended December 31, 2004
(amounts in thousands)
| Non- | ||||||||||||||||||||
| Guarantor | Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Cash Flows from operating activities: |
||||||||||||||||||||
Net income (loss) |
$ | 170,457 | $ | 135,987 | $ | 2,544 | $ | (139,260 | ) | $ | 169,728 | |||||||||
Equity in earnings of subsidiaries |
(139,988 | ) | 728 | — | 139,260 | — | ||||||||||||||
Adjustments to reconcile net income to cash
provided by (used in) operating activities |
(4,130 | ) | (39,547 | ) | (4,283 | ) | — | (47,960 | ) | |||||||||||
Cash provided by (used in) operating
activities |
26,339 | 97,168 | (1,739 | ) | — | 121,768 | ||||||||||||||
Cash Flows from investing activities: |
||||||||||||||||||||
Purchases of property, plant and equipment,
net |
(4,496 | ) | (30,040 | ) | (1,446 | ) | — | (35,982 | ) | |||||||||||
Tax reimbursements made related to prior
acquisition |
(16,475 | ) | — | — | — | (16,475 | ) | |||||||||||||
Intercompany loan repayments (advances), net |
5,441 | — | — | (5,441 | ) | — | ||||||||||||||
Other investing activities, net |
2,808 | — | — | — | 2,808 | |||||||||||||||
Cash provided by (used in) investing activities |
(12,722 | ) | (30,040 | ) | (1,446 | ) | (5,441 | ) | (49,649 | ) | ||||||||||
Cash Flows from financing activities: |
||||||||||||||||||||
Net borrowings (repayments) of long-term
debt |
(22,150 | ) | (42,250 | ) | — | — | (64,400 | ) | ||||||||||||
Dividends paid |
(8,448 | ) | — | — | — | (8,448 | ) | |||||||||||||
Intercompany borrowings (repayments) |
— | (6,717 | ) | 1,276 | 5,441 | — | ||||||||||||||
Other financing activities |
8,657 | — | — | — | 8,657 | |||||||||||||||
Cash provided by (used in) financing activities |
(21,941 | ) | (48,967 | ) | 1,276 | 5,441 | (64,191 | ) | ||||||||||||
Effect of exchange rate changes on cash and
cash equivalents |
— | — | 1,565 | — | 1,565 | |||||||||||||||
Increase (decrease) in cash and cash
equivalents |
(8,324 | ) | 18,161 | (344 | ) | — | 9,493 | |||||||||||||
Cash and cash equivalents at beginning of
period |
(2,313 | ) | 2,922 | 1,557 | — | 2,166 | ||||||||||||||
Cash and cash equivalents at end of period |
$ | (10,637 | ) | $ | 21,083 | $ | 1,213 | $ | — | $ | 11,659 | |||||||||
6
Condensed Consolidating Cash Flow Statement
For the year ended December 31, 2003
(amounts in thousands)
For the year ended December 31, 2003
(amounts in thousands)
| Non- | ||||||||||||||||||||
| Guarantor | Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Cash Flows from operating activities: |
||||||||||||||||||||
Net income (loss) |
$ | 34,477 | $ | 35,372 | $ | (2,590 | ) | $ | (33,249 | ) | $ | 34,010 | ||||||||
Equity in earnings of subsidiaries |
(33,715 | ) | 466 | — | 33,249 | — | ||||||||||||||
Adjustments to reconcile net income to cash
provided by (used in) operating activities |
255,931 | (184,428 | ) | 2,307 | — | 73,810 | ||||||||||||||
Cash provided by (used in) operating
activities |
256,693 | (148,590 | ) | (283 | ) | — | 107,820 | |||||||||||||
Cash Flows from investing activities: |
||||||||||||||||||||
Purchases of property, plant and equipment,
net |
(2,290 | ) | (17,292 | ) | (1,327 | ) | — | (20,909 | ) | |||||||||||
Acquisitions of metals service centers and net
asset purchases of metals service centers,
net
of cash acquired |
(245,850 | ) | — | — | — | (245,850 | ) | |||||||||||||
Intercompany loan repayments (advances), net |
(147,238 | ) | — | — | 147,238 | — | ||||||||||||||
Other investing activities, net |
3,020 | — | — | — | 3,020 | |||||||||||||||
Cash provided by (used in) investing activities |
(392,358 | ) | (17,292 | ) | (1,327 | ) | 147,238 | (263,739 | ) | |||||||||||
Cash Flows from financing activities: |
||||||||||||||||||||
Net borrowings (repayments) of long-term debt |
134,850 | 12,395 | — | — | 147,245 | |||||||||||||||
Dividends paid |
(7,643 | ) | — | — | — | (7,643 | ) | |||||||||||||
Intercompany borrowings (repayments) |
— | 145,651 | 1,587 | (147,238 | ) | — | ||||||||||||||
Other financing activities |
8,706 | — | — | — | 8,706 | |||||||||||||||
Cash provided by (used in) financing activities |
135,913 | 158,046 | 1,587 | (147,238 | ) | 148,308 | ||||||||||||||
Effect of exchange rate changes on cash and
cash equivalents |
— | — | 472 | — | 472 | |||||||||||||||
Increase (decrease) in cash and cash
equivalents |
248 | (7,836 | ) | 449 | — | (7,139 | ) | |||||||||||||
Cash and cash equivalents at beginning of
period |
(2,561 | ) | 10,759 | 1,107 | — | 9,305 | ||||||||||||||
Cash and cash equivalents at end of period |
$ | (2,313 | ) | $ | 2,923 | $ | 1,556 | $ | — | $ | 2,166 | |||||||||
7
Unaudited consolidating financial information related to the Company, its guarantor subsidiaries and
non-guarantor subsidiaries as of September 30, 2006 and for the three and nine-month periods ended
September 30, 2006 and 2005, respectively, is reflected below.
Unaudited Condensed Consolidating Balance Sheet
As of September 30, 2006
(amounts in thousands)
As of September 30, 2006
(amounts in thousands)
| Non- | ||||||||||||||||||||
| Guarantor | Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | (17,448 | ) | $ | 27,695 | $ | 11,794 | $ | — | $ | 22,041 | |||||||||
Accounts receivable, less allowance for doubtful
accounts |
96,243 | 616,694 | 36,954 | (3,941 | ) | 745,950 | ||||||||||||||
Inventories |
116,178 | 829,670 | 41,657 | — | 987,505 | |||||||||||||||
Prepaid expenses and other current assets |
— | 18,885 | 726 | — | 19,611 | |||||||||||||||
Deferred income taxes |
— | 35,482 | 142 | — | 35,624 | |||||||||||||||
Total current assets |
194,973 | 1,528,426 | 91,273 | (3,941 | ) | 1,810,731 | ||||||||||||||
Investments in subsidiaries |
590,191 | 1,986,657 | — | (2,576,848 | ) | — | ||||||||||||||
Property, plant and equipment, net |
88,065 | 632,954 | 15,161 | — | 736,180 | |||||||||||||||
Goodwill |
15,328 | 741,633 | 2,704 | — | 759,665 | |||||||||||||||
Intangible assets, net |
1,120 | 350,513 | 26 | — | 351,659 | |||||||||||||||
Intercompany receivables |
504,925 | — | — | (504,925 | ) | — | ||||||||||||||
Other assets |
526 | 72,777 | 1,611 | (464 | ) | 74,450 | ||||||||||||||
Total assets |
$ | 1,395,128 | $ | 5,312,960 | $ | 110,775 | $ | (3,086,178 | ) | $ | 3,732,685 | |||||||||
Liabilities & Shareholders’ Equity |
||||||||||||||||||||
Accounts payable |
$ | 47,792 | $ | 302,446 | $ | 31,439 | $ | (3,941 | ) | $ | 377,736 | |||||||||
Accrued compensation and retirement costs |
4,958 | 74,150 | 3,301 | — | 82,409 | |||||||||||||||
Other current liabilities |
15,110 | 89,745 | 3,275 | — | 108,130 | |||||||||||||||
Current maturities of long-term debt |
44,200 | 51,040 | 1,118 | — | 96,358 | |||||||||||||||
Current maturities of capital lease obligations |
— | 553 | — | — | 553 | |||||||||||||||
Total current liabilities |
112,060 | 517,934 | 39,133 | (3,941 | ) | 665,186 | ||||||||||||||
Long-term debt |
279,850 | 873,151 | — | — | 1,153,001 | |||||||||||||||
Intercompany borrowings |
— | 493,400 | 11,525 | (504,925 | ) | — | ||||||||||||||
Deferred taxes and other long-term liabilities |
— | 239,864 | 1,443 | — | 241,307 | |||||||||||||||
Total shareholders’ equity |
1,003,218 | 3,188,611 | 58,674 | (2,577,312 | ) | 1,673,191 | ||||||||||||||
Total liabilities and shareholders’ equity |
$ | 1,395,128 | $ | 5,312,960 | $ | 110,775 | $ | (3,086,178 | ) | $ | 3,732,685 | |||||||||
8
Unaudited Condensed Consolidating Statement of Income
For the nine months ended September 30, 2006
(amounts in thousands)
For the nine months ended September 30, 2006
(amounts in thousands)
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | 650,784 | $ | 3,405,578 | $ | 145,017 | $ | (27,963 | ) | $ | 4,173,416 | |||||||||
Other income, net |
833 | 12,616 | 1,266 | (11,074 | ) | 3,641 | ||||||||||||||
| 651,617 | 3,418,194 | 146,283 | (39,037 | ) | 4,177,057 | |||||||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales (exclusive of depreciation and
amortization shown below) |
462,988 | 2,505,950 | 110,376 | (28,025 | ) | 3,051,289 | ||||||||||||||
Warehouse, delivery, selling, general and
administrative |
90,514 | 475,642 | 23,979 | (3,117 | ) | 587,018 | ||||||||||||||
Depreciation and amortization |
5,475 | 39,000 | 657 | — | 45,132 | |||||||||||||||
Interest |
18,309 | 31,123 | 459 | (7,895 | ) | 41,996 | ||||||||||||||
| 577,286 | 3,051,715 | 135,471 | (39,037 | ) | 3,725,435 | |||||||||||||||
Income before minority interest and income
taxes |
74,331 | 366,479 | 10,812 | — | 451,622 | |||||||||||||||
Minority interest |
— | (104 | ) | (123 | ) | — | (227 | ) | ||||||||||||
Equity in earnings of subsidiaries |
221,358 | 3,820 | — | (225,178 | ) | — | ||||||||||||||
Income from continuing operations before
income taxes |
295,689 | 370,195 | 10,689 | (225,178 | ) | 451,395 | ||||||||||||||
Provision for income taxes |
19,645 | 148,099 | 3,786 | — | 171,530 | |||||||||||||||
Net income |
$ | 276,044 | $ | 222,096 | $ | 6,903 | $ | (225,178 | ) | $ | 279,865 | |||||||||
Unaudited Condensed Consolidating Statement of Income
For the nine months ended September 30, 2005
(amounts in thousands)
For the nine months ended September 30, 2005
(amounts in thousands)
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | 560,049 | $ | 1,893,463 | $ | 57,857 | $ | (12,996 | ) | $ | 2,498,373 | |||||||||
Other income, net |
359 | 10,291 | (36 | ) | (7,905 | ) | 2,709 | |||||||||||||
| 560,408 | 1,903,754 | 57,821 | (20,901 | ) | 2,501,082 | |||||||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales (exclusive of depreciation and
amortization shown below) |
408,317 | 1,395,440 | 40,774 | (13,057 | ) | 1,831,474 | ||||||||||||||
Warehouse, delivery, selling, general and
administrative |
83,240 | 285,254 | 10,297 | (3,178 | ) | 375,613 | ||||||||||||||
Depreciation and amortization |
5,200 | 29,208 | 398 | — | 34,806 | |||||||||||||||
Interest |
20,197 | 3,504 | 255 | (4,666 | ) | 19,290 | ||||||||||||||
| 516,954 | 1,713,406 | 51,724 | (20,901 | ) | 2,261,183 | |||||||||||||||
Income before minority interest and income
taxes |
43,454 | 190,348 | 6,097 | — | 239,899 | |||||||||||||||
Minority interest |
— | (6,271 | ) | — | — | (6,271 | ) | |||||||||||||
Equity in earnings of subsidiaries |
109,821 | 933 | — | (110,754 | ) | — | ||||||||||||||
Income from continuing operations before
income taxes |
153,275 | 185,010 | 6,097 | (110,754 | ) | 233,628 | ||||||||||||||
Provision for income taxes |
9,359 | 76,750 | 2,670 | — | 88,779 | |||||||||||||||
Net income |
$ | 143,916 | $ | 108,260 | $ | 3,427 | $ | (110,754 | ) | $ | 144,849 | |||||||||
9
Unaudited Condensed Consolidating Statement of Income
For the three months ended September 30, 2006
(amounts in thousands)
For the three months ended September 30, 2006
(amounts in thousands)
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | 225,595 | $ | 1,352,067 | $ | 58,177 | $ | (9,631 | ) | $ | 1,626,208 | |||||||||
Other income, net |
91 | 5,768 | 836 | (4,708 | ) | 1,987 | ||||||||||||||
| 225,686 | 1,357,835 | 59,013 | (14,339 | ) | 1,628,195 | |||||||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales (exclusive of depreciation and
amortization shown below) |
160,017 | 998,890 | 44,884 | (9,652 | ) | 1,194,139 | ||||||||||||||
Warehouse, delivery, selling, general and
administrative |
31,572 | 183,652 | 10,568 | (1,089 | ) | 224,703 | ||||||||||||||
Depreciation and amortization |
1,893 | 14,336 | 282 | — | 16,511 | |||||||||||||||
Interest |
6,221 | 16,580 | 151 | (3,598 | ) | 19,354 | ||||||||||||||
| 199,703 | 1,213,458 | 55,885 | (14,339 | ) | 1,454,707 | |||||||||||||||
Income before minority interest and income
taxes |
25,983 | 144,377 | 3,128 | — | 173,488 | |||||||||||||||
Minority interest |
— | (33 | ) | (62 | ) | — | (95 | ) | ||||||||||||
Equity in earnings of subsidiaries |
87,161 | 1,145 | — | (88,306 | ) | — | ||||||||||||||
Income from continuing operations before
income taxes |
113,144 | 145,489 | 3,066 | (88,306 | ) | 173,393 | ||||||||||||||
Provision for income taxes |
6,786 | 58,251 | 851 | — | 65,888 | |||||||||||||||
Net income |
$ | 106,358 | $ | 87,238 | $ | 2,215 | $ | (88,306 | ) | $ | 107,505 | |||||||||
Unaudited Condensed Consolidating Statement of Income
For the three months ended September 30, 2005
(amounts in thousands)
For the three months ended September 30, 2005
(amounts in thousands)
| Guarantor | Non-Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales |
$ | 186,295 | $ | 668,524 | $ | 19,927 | $ | (4,622 | ) | $ | 870,124 | |||||||||
Other income, net |
86 | 3,554 | 121 | (2,416 | ) | 1,345 | ||||||||||||||
| 186,381 | 672,078 | 20,048 | (7,038 | ) | 871,469 | |||||||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of sales (exclusive of depreciation and
amortization shown below) |
136,968 | 494,197 | 14,873 | (4,642 | ) | 641,396 | ||||||||||||||
Warehouse, delivery, selling, general and
administrative |
28,031 | 99,003 | 4,187 | (961 | ) | 130,260 | ||||||||||||||
Depreciation and amortization |
1,716 | 9,713 | 108 | — | 11,537 | |||||||||||||||
Interest |
6,771 | 1,352 | 95 | (1,435 | ) | 6,783 | ||||||||||||||
| 173,486 | 604,265 | 19,263 | (7,038 | ) | 789,976 | |||||||||||||||
Income before minority interest and income
taxes |
12,895 | 67,813 | 785 | — | 81,493 | |||||||||||||||
Minority interest |
— | (1,755 | ) | — | — | (1,755 | ) | |||||||||||||
Equity in earnings of subsidiaries |
38,976 | 96 | — | (39,072 | ) | — | ||||||||||||||
Income from continuing operations before
income taxes |
51,871 | 66,154 | 785 | (39,072 | ) | 79,738 | ||||||||||||||
Provision for income taxes |
2,529 | 27,344 | 428 | — | 30,301 | |||||||||||||||
Net income |
$ | 49,342 | $ | 38,810 | $ | 357 | $ | (39,072 | ) | $ | 49,437 | |||||||||
10
Unaudited Condensed Consolidating Cash Flow Statement
For the nine months ended September 30, 2006
(amounts in thousands)
For the nine months ended September 30, 2006
(amounts in thousands)
| Non- | ||||||||||||||||||||
| Guarantor | Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Cash Flows from operating activities: |
||||||||||||||||||||
Net income (loss) |
$ | 276,044 | $ | 222,097 | $ | 6,902 | $ | (225,178 | ) | $ | 279,865 | |||||||||
Equity in earnings of subsidiaries |
(221,358 | ) | (3,820 | ) | — | 225,178 | — | |||||||||||||
Adjustments to reconcile net income to cash
provided by (used in) operating activities |
815,448 | (1,093,787 | ) | 10,003 | — | (268,336 | ) | |||||||||||||
Cash provided by (used in) operating
activities |
870,134 | (875,510 | ) | 16,905 | — | 11,529 | ||||||||||||||
Cash Flows from investing activities: |
||||||||||||||||||||
Purchases of property, plant and equipment,
net |
(17,966 | ) | (64,245 | ) | (2,509 | ) | — | (84,720 | ) | |||||||||||
Acquisitions of metals service centers and net
asset purchases of metals service centers,
net
of cash acquired |
(538,714 | ) | (20,679 | ) | — | — | (559,393 | ) | ||||||||||||
Intercompany loan repayments (advances), net |
(292,005 | ) | — | — | 292,005 | — | ||||||||||||||
Other investing activities, net |
2,272 | — | — | — | 2,272 | |||||||||||||||
Cash provided by (used in) investing activities |
(846,413 | ) | (84,924 | ) | (2,509 | ) | 292,005 | (641,841 | ) | |||||||||||
Cash Flows from financing activities: |
||||||||||||||||||||
Net borrowings (repayments) of long-term debt |
(25,200 | ) | 649,275 | 1,118 | — | 625,193 | ||||||||||||||
Dividends paid |
(11,608 | ) | — | — | — | (11,608 | ) | |||||||||||||
Intercompany borrowings (repayments) |
— | 303,136 | (11,131 | ) | (292,005 | ) | — | |||||||||||||
Other financing activities |
3,552 | — | — | — | 3,552 | |||||||||||||||
Cash provided by (used in) financing activities |
(33,256 | ) | 952,411 | (10,013 | ) | (292,005 | ) | 617,137 | ||||||||||||
Effect of exchange rate changes on cash and
cash equivalents |
— | — | 194 | — | 194 | |||||||||||||||
Increase (decrease) in cash and cash
equivalents |
(9,535 | ) | (8,023 | ) | 4,577 | — | (12,981 | ) | ||||||||||||
Cash and cash equivalents at beginning of
period |
(7,912 | ) | 35,717 | 7,217 | — | 35,022 | ||||||||||||||
Cash and cash equivalents at end of period |
$ | (17,447 | ) | $ | 27,694 | $ | 11,794 | $ | — | $ | 22,041 | |||||||||
11
Unaudited Condensed Consolidating Cash Flow Statement
For the nine months ended September 30, 2005
(amounts in thousands)
For the nine months ended September 30, 2005
(amounts in thousands)
| Non- | ||||||||||||||||||||
| Guarantor | Guarantor | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Cash Flows from operating activities: |
||||||||||||||||||||
Net income (loss) |
$ | 143,916 | $ | 108,260 | $ | 3,427 | $ | (110,754 | ) | $ | 144,849 | |||||||||
Equity in earnings of subsidiaries |
(109,821 | ) | (933 | ) | — | 110,754 | — | |||||||||||||
Adjustments to reconcile net income to cash
provided by (used in) operating activities |
119,430 | (96,251 | ) | (2,860 | ) | — | 20,319 | |||||||||||||
Cash provided by (used in) operating
activities |
153,525 | 11,076 | 567 | — | 165,168 | |||||||||||||||
Cash Flows from investing activities: |
||||||||||||||||||||
Purchases of property, plant and equipment,
net |
(4,567 | ) | (28,548 | ) | (1,199 | ) | — | (34,314 | ) | |||||||||||
Acquisitions of metals service centers and net
asset purchases of metals service centers,
net
of cash acquired |
(94,383 | ) | — | — | — | (94,383 | ) | |||||||||||||
Intercompany loan repayments (advances), net |
(24,177 | ) | — | — | 24,177 | — | ||||||||||||||
Other investing activities, net |
1,191 | — | — | — | 1,191 | |||||||||||||||
Cash provided by (used in) investing activities |
(121,936 | ) | (28,548 | ) | (1,199 | ) | 24,177 | (127,506 | ) | |||||||||||
Cash Flows from financing activities: |
||||||||||||||||||||
Net borrowings (repayments) of long-term debt |
(23,200 | ) | (7,181 | ) | — | — | (30,381 | ) | ||||||||||||
Dividends paid |
(9,220 | ) | — | — | — | (9,220 | ) | |||||||||||||
Intercompany borrowings (repayments) |
— | 21,599 | 2,578 | (24,177 | ) | — | ||||||||||||||
Other financing activities |
835 | — | — | — | 835 | |||||||||||||||
Cash provided by (used in) financing activities |
(31,585 | ) | 14,418 | 2,578 | (24,177 | ) | (38,766 | ) | ||||||||||||
Effect of exchange rate changes on cash and
cash equivalents |
— | — | (136 | ) | — | (136 | ) | |||||||||||||
Increase (decrease) in cash and cash
equivalents |
4 | (3,054 | ) | 1,810 | — | (1,240 | ) | |||||||||||||
Cash and cash equivalents at beginning of
period |
(10,637 | ) | 21,083 | 1,213 | — | 11,659 | ||||||||||||||
Cash and cash equivalents at end of period |
$ | (10,633 | ) | $ | 18,029 | $ | 3,023 | $ | — | $ | 10,419 | |||||||||
12