EX-99.1 4 a26115exv99w1.htm EXHIBIT 99.1 exv99w1
 

EXHIBIT 99.1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Directors
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

 

 

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)
                                         
                    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)
                                         
                    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)
                                         
            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)
                                         
            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)
                                         
            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)
                                         
                    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)
                                         
                    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)
                                         
                    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)
                                         
                    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)
                                         
            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)
                                         
            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)
                                         
            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)
                                         
            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)
                                         
                    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)
                                         
                    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