<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 000-22715
SCHUFF STEEL COMPANY
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 86-0318760
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification No.)
Organization)
1841 W. Buchanan St. 85009
Phoenix, Arizona (Zip Code)
(Address of Principal Executive Offices)
</TABLE>
(602) 252-7787
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No_____
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practical date: As of August 12, 1998, there were 7,022,300
shares of Common Stock, $.001 par value per share, outstanding.
<PAGE> 2
SCHUFF STEEL COMPANY
TABLE OF CONTENTS
Page
Part I: Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 1
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 1998 and 1997 and
Six Months Ended June 30, 1998 and 1997 2
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1998 and 1997 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II: Other Information
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 6. Exhibits and Reports on Form 8-K 24
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SCHUFF STEEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
-------- --------
(Unaudited) (Note)
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 45,046 $ 197
Restricted funds on deposit 2,853 2,096
Receivables 36,965 24,717
Costs and recognized earnings in excess of billings on uncompleted contracts 10,036 3,982
Inventories 6,872 2,364
Prepaid expenses and other current assets 2,373 1,167
-----------------------
Total current assets 104,145 34,523
Property and equipment, net 16,969 7,415
Goodwill, net 28,210 --
Other assets 5,492 100
-----------------------
$154,816 $ 42,038
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,483 $ 5,749
Accrued payroll and employee benefits 1,499 1,023
Other accrued liabilities 5,919 1,141
Billings in excess of costs and recognized earnings on uncompleted contracts 8,602 3,758
Current portion of long-term debt 1,364 304
-----------------------
Total current liabilities 24,867 11,975
Long-term debt, less current portion 102,620 4,927
Other liabilities 1,204 463
Commitments and contingent liabilities
Stockholders' equity:
Preferred stock, $.001 par value - authorized 1,000,000 shares; none issued
Common stock, $.001 par value - authorized 20,000,000 shares; 7,022,300 and
7,000,000 shares issued and outstanding at June 30,
1998 and December 31, 1997, respectively 7 7
Additional paid-in capital 14,134 14,013
Retained earnings 11,984 10,653
-----------------------
Total stockholders' equity 26,125 24,673
-----------------------
$154,816 $ 42,038
=======================
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to condensed consolidated financial statements.
1
<PAGE> 4
SCHUFF STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
1998 1997 1998 1997
-------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $ 35,733 $ 37,177 $ 63,159 $ 62,684
Cost of revenues 32,446 32,739 54,880 54,394
-------- -------- -------- --------
Gross profit 3,287 4,438 8,279 8,290
General and administrative expenses 3,053 2,094 5,447 4,175
-------- -------- -------- --------
Operating income 234 2,344 2,832 4,115
Interest expense (1,005) (96) (1,103) (191)
Other income 303 172 544 219
-------- -------- -------- --------
Income (loss) before income tax benefit (provision)
(468) 2,420 2,273 4,143
Income tax benefit (provision) 204 156 (942) 156
-------- -------- -------- --------
Net income (loss) $ (264) $ 2,576 $ 1,331 $ 4,299
======== ======== ======== ========
Pro forma net income (loss) data:
Net income (loss), reported above $ (264) $ 2,576 $ 1,331 $ 4,299
Pro forma provision for income taxes related to
operations as S corporation -- (824) -- (1,513)
-------- -------- -------- --------
Pro forma net income (loss) $ (264) $ 1,752 $ 1,331 $ 2,786
======== ======== ======== ========
Pro forma net income (loss) per share:
Basic $ (0.04) $ 0.29 $ 0.19 $ 0.47
======== ======== ======== ========
Diluted $ (0.04) $ 0.29 $ 0.19 $ 0.47
======== ======== ======== ========
Weighted average shares used in computation:
Basic 7,012 5,941 7,006 5,941
======== ======== ======== ========
Diluted 7,012 5,941 7,188 5,941
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
SCHUFF STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30
1998 1997
----------------------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,331 $ 4,299
Adjustment to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,071 745
Gain on disposal of property and equipment (143) (21)
Deferred taxes (146) (300)
Changes in operating assets and liabilities:
Restricted funds on deposit (758) 401
Receivables (1,461) 2,044
Costs and recognized earnings in excess of billings in
uncompleted contracts (2,496) (353)
Inventories (665) 1,256
Prepaid expenses and other assets (1,255) (318)
Accounts payable (2,024) (1,765)
Billings in excess of costs and recognized earnings on
uncompleted contracts 2,879 (2,691)
Accrued payroll and employee benefits 476 1,592
Other accrued liabilities 2,411 1,142
----------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (780) 6,031
INVESTING ACTIVITIES
Acquisitions of property and equipment (1,162) (865)
Proceeds from disposals of property and equipment 3,160 40
Increase in other assets (10) (100)
Purchase of business, net of cash acquired (47,710) (427)
----------------------
NET CASH USED IN INVESTING ACTIVITIES (45,722) (1,352)
FINANCING ACTIVITIES
Proceeds from revolving line of credit and long-term borrowings 33,429 17,712
Proceeds from issuance of senior notes, net of issuance costs 95,700 --
Principal payments on revolving line of credit and long-term debt (37,889) (19,148)
Proceeds from the exercise of options 111 --
Cash distributions to stockholders -- (5,778)
----------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 91,351 (7,214)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 44,849 (2,535)
Cash and cash equivalents at beginning of period 197 7,253
----------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,046 $ 4,718
======================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
Schuff Steel Company
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended June
30, 1998 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1997.
2. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 128, "Earnings Per Share" (SFAS No. 128), adopted by the Company on December
31, 1997. SFAS No. 128 replaced the previously reported primary or fully diluted
pro forma earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants, and convertible securities. Diluted earnings per
share is very similar to the previously reported primary earnings per share. All
earnings per share amounts for all periods have been presented, and where
necessary, restated to conform to the SFAS No. 128 requirements. The impact of
SFAS No. 128 on the calculation of fully diluted earnings per share for each of
the periods presented was not material.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. The adoption of SFAS No. 131 will have no
impact on the Company's consolidated results of operations, financial position
or cash flows. Schuff Steel is a calendar year end company, so it must adopt
SFAS No. 131 in 1998. Because SFAS No. 131 is not required to be applied to
interim financial statements in the initial year of adoption, the Company is not
required to disclose segment information in accordance with SFAS No. 131 until
its 1998 annual report, at which time it will restate prior years' segment
disclosures to conform to the Statement 131
4
<PAGE> 7
Schuff Steel Company
Notes to Condensed Consolidated Financial
Statements (Unaudited) (continued)
2. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
segment presentation, if practicable. In the Company's first quarter 1999
report, and in subsequent quarters, it will present the interim disclosures
required by SFAS No. 131 for both 1999 and 1998.
As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes new rules for the reporting and
display of comprehensive income and stockholders' equity. SFAS No. 130 requires
the Company's changes in unfunded pension losses, which prior to adoption were
reported separately in stockholders' equity, to be included in other
comprehensive income. During the three and six month periods ended June 30,
1998, total comprehensive income (loss) approximated net income (loss).
3. RECEIVABLES
Receivables consist of the following at:
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
--------------------------
(in thousands)
<S> <C> <C>
Contract receivables:
Contracts in progress $30,290 $18,094
Unbilled retentions 6,584 6,520
------- -------
36,874 24,614
Other receivables 91 103
------- -------
$36,965 $24,717
======= =======
</TABLE>
4. INVENTORIES
Inventories consist of the following at:
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
--------------------------
(in thousands)
<S> <C> <C>
Raw materials $ 6,211 $ 1,846
Finished goods 661 518
--------------------------
$ 6,872 $ 2,364
==========================
</TABLE>
5
<PAGE> 8
Schuff Steel Company
Notes to Condensed Consolidated Financial
Statements (Unaudited) (continued)
5. NET INCOME (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted pro forma
net income (loss) per share:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
1998 1997 1998 1997
-----------------------------------------------
(in thousands, except per share date)
<S> <C> <C> <C> <C>
Numerator:
Pro forma net income (loss) $ (264) $ 1,752 $ 1,331 $ 2,786
===============================================
Denominator:
Weighted average shares 7,012 5,000 7,006 5,000
Net effect of shares issued that are attributed to
stockholder distributions made from initial public
offering proceeds -- 941 -- 941
-----------------------------------------------
Denominator for basic pro forma net income (loss)
per share 7,012 5,941 7,006 5,941
Effect of dilutive securities:
Employee and director stock options -- -- 182 --
-----------------------------------------------
Denominator for diluted pro forma net income (loss)
per share - adjusted weighted average shares and
assumed conversions 7,012 5,941 7,188 5,941
===============================================
Pro forma net income (loss) per share:
Basic $ (0.04) $ 0.29 $ 0.19 $ 0.47
===============================================
Diluted $ (0.04) $ 0.29 $ 0.19 $ 0.47
===============================================
</TABLE>
6. INCOME TAXES
For the three and six months ended June 30, 1997, the financial statements of
the Company do not include a provision for income taxes because the taxable
income of the Company was included in the income tax returns of the stockholders
under the S corporation elections.
Pro forma net income reflects the provision for income taxes that would have
been recorded had all of the Company's income been subject to income taxes as a
C corporation for the S corporation period assuming an effective tax rate of 40
percent.
6
<PAGE> 9
Schuff Steel Company
Notes to Condensed Consolidated Financial
Statements (Unaudited) (continued)
7. ACQUISITION
Effective June 4, 1998, and pursuant to a Stock Purchase Agreement dated as of
May 12, 1998 (Purchase Agreement), among the Company, E.C. Addison and The
Addison Structural Services, Inc. leveraged Employee Stock Ownership Plan
f(collectively the Sellers), and Addison Structural Services, Inc. (Addison),
the Company purchased all of the issued and outstanding capital stock of Addison
from the Sellers. As a result of such purchase, the Company acquired indirect
ownership of the assets of Addison's operating subsidiaries, Addison Steel, Inc.
and Quincy Joist Company. The aggregate purchase price was $59.4 million, which
was the price negotiated by the parties to the Purchase Agreement based on
Addison's net worth, cash on hand, and other contractual variables at the date
of closing. The Company obtained the funds for the purchase price through a
private placement of $100 million of 10 1/2 percent Senior Notes due 2008 (see
Note 8).
The acquisition has been accounted for using the purchase method of accounting,
and accordingly, the purchase price has been preliminarily allocated to the
assets and liabilities acquired based on the fair value at the date of the
acquisition. Goodwill is being amortized over 25 years. The operating results of
the acquiree have been included in the Company's consolidated financial
statements from the date of acquisition. The following unaudited pro forma
information presents a summary of consolidated results of operations as if the
acquisition had occurred on January 1, 1997:
<TABLE>
<CAPTION>
Six months ended
June 30
1998 1997
-----------------------
(in thousands, except
per share date)
<S> <C> <C>
Revenues $89,507 $95,130
Net income 850 2,248
Diluted pro forma net income per share $ 0.12 $ 0.38
</TABLE>
The pro forma amounts include a charge for all of the debt costs related to the
issuance of $100 million of 10 1/2 percent Senior Notes, although only
approximately half of such debt was used to finance the acquisition. The pro
forma amounts do not reflect interest income that would have been earned on the
portion of the debt proceeds that were not used to fund the cash portion of the
purchase price of the acquiree, although such funds would have been available to
the Company for investment purposes.
7
<PAGE> 10
Schuff Steel Company
Notes to Condensed Consolidated Financial
Statements (Unaudited) (continued)
8. LONG-TERM DEBT
On June 4, 1998, the Company completed a private placement pursuant to Rule 144A
of the Securities Act of 1933 (Securities Act) for an aggregate of $100.0
million in principal amount of its 10 1/2 percent Senior Notes due 2008 (the
Offering). Net proceeds of the Offering were used to repay certain indebtedness
of the Company and to pay the cash portion of the purchase price for the
Company's acquisition of Addison.
On June 30, 1998, the Company entered into a credit facility with a bank that
replaced the Company's prior $10.0 million facility. The $25.0 million credit
facility matures on June 30, 2001. The credit facility is secured by a first
priority, perfected security interest in all assets of the Company and its
present and future subsidiaries and is available for working capital and general
corporate purposes. Interest payable on borrowings outstanding under the new
credit facility initially is generally equal to either the bank's prime rate or
LIBOR plus 2.50 percent, at the Company's option. The Company will be eligible
for reductions in the initial margins on the new credit facility if the Company
achieves certain performance targets based upon certain financial ratios, as
defined.
The credit facility also requires that the Company maintain specified leverage
ratios, interest coverage ratios, fixed charge coverage ratios and a specified
minimum EBITDA. The credit facility also contains other covenants that, among
other things, limit the Company's ability to pay cash dividends or make other
distributions, change its business or merge, consolidate or dispose of material
portions of its assets. The security agreements pursuant to which the Company's
assets are pledged prohibit any further pledge of such assets without the
written consent of the bank.
The credit facility contains events of default customary for facilities of this
type, including without limitation, the Company's failure to pay principal,
interest, fees or other amounts when due, the breach of any covenant,
representation or warranty, bankruptcy, insolvency or similar events involving
the Company or its subsidiaries, the unenforceability of any of the credit
facility agreements or liens securing payment obligations under the new credit
facility, and the occurrence or existence of any event or circumstance which has
a material adverse effect upon the Company.
8
<PAGE> 11
Schuff Steel Company
Notes to Condensed Consolidated Financial
Statements (Unaudited) (continued)
9. SUBSIDIARY GUARANTORS
The Company's new 10 1/2 percent Senior Notes are guaranteed, fully, jointly and
severally, and unconditionally, on a senior subordinated basis by the Company's
current and future, direct and indirect subsidiaries (Subsidiary Guarantors),
all wholly owned. The following table sets forth the "summarized combined
financial information" of the Subsidiary Guarantors. There are currently no
restrictions on the ability of the Subsidiary Guarantors to transfer funds to
the Company in the form of cash dividends, loans or advances.
<TABLE>
<CAPTION>
June 30
1998
--------
(in thousands)
<S> <C>
Balance sheet data:
Current assets $ 31,939
Noncurrent assets 10,477
Total assets 42,416
Current liabilities 9,068
Noncurrent liabilities 636
Total stockholder's equity 32,712
<CAPTION>
One month ended
June 30, 1998
---------------
(in thousands)
<S> <C>
Operating data:
Revenues $ 6,977
Gross profit 1,476
Net income 561
</TABLE>
The Company has no other subsidiaries other than the Subsidiary Guarantors. The
summarized combined financial information of the Subsidiary Guarantors is
presented only for the month ended June 30, 1998 since prior to June 4, 1998 the
Subsidiary Guarantors were not subsidiaries of the Company.
9
<PAGE> 12
Schuff Steel Company
Notes to Condensed Consolidated Financial
Statements (Unaudited) (continued)
10. CONTINGENT MATTERS
The Company is involved from time to time through the ordinary course of
business in certain claims, litigation and assessments. Due to the nature of the
construction industry, the Company's employees from time to time become subject
to injury, or even death, while employed by the Company. The Company does not
believe there are any such contingencies at December 31, 1997 or June 31, 1998
for which the eventual outcome would have a material adverse impact on the
Company.
During the quarter ended June 30, 1998, the Company filed a claim for $8.6
million for additional reimbursement for work the Company believes is billable
under the terms of the related contract with respect to changes made in
completing certain aspects of the Bank One Ballpark project. The Company has
already incurred and expensed all of the costs related to this claim. While
management believes it has a right to collect the full amount of the claim, no
revenue has been recognized given the uncertainty of the related negotiations
and/or arbitration that will be required to resolve the ultimate payment due the
Company.
10
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion and analysis of financial condition and results of operations
should be read in conjunction with the unaudited condensed consolidated
financial statements and the related disclosures included elsewhere herein and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included as part of the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
Results of Operations
Revenues decreased by 3.9 percent to $35.7 million for the three months ended
June 30, 1998 from $37.2 million for the three months ended June 30, 1997.
Revenues increased by 1.0 percent to $63.2 million for the six months ended June
30, 1998 from $62.7 million for the six months ended June 30, 1997. The decrease
for the three months ended June 30, 1998 was attributable in part to several
large contracts being delayed by customers which deferred the commencement of
revenue recognition and the timing of receipt of new contract awards. In
addition, revenue decreased due to the substantial completion of the Bank One
Ballpark contract in the first quarter of 1998, which resulted in less than $1
million of revenues being recognized in the second quarter of 1998 as compared
to $8.0 million of revenues being recognized in the second quarter of 1997. The
reduction of revenues from the Bank One Ballpark was offset by an additional
$7.0 of revenues recognized during the three months ended June 30, 1998 from the
acquisition of Addison in June of 1998. The average revenues for the Company's
ten largest revenue generating projects in the three and six month periods ended
June 30, 1998 were $2.1 million and $3.8 million, respectively, versus $3.0
million and $4.5 million in the three and six month periods ended June 30, 1997,
respectively. One contract, relating to Bank One Ballpark, produced revenues of
$8.0 million and $11.6 million for the three and six month periods ended June
30, 1997, respectively.
Gross profit decreased by 25.9 percent to $3.3 million for the three month
period ended June 30, 1998 from $4.4 million for the three month period ended
June 30, 1997. Gross profit was approximately $8.3 million for the six month
periods ended June 30, 1998 and 1997. As a percentage of revenues, gross profit
declined to 9.2 percent and 13.1 percent for the three and six month periods
ended June 30, 1998, respectively, from 11.9 percent and 13.2 percent for the
three and six month periods ended June 30, 1997. The decrease in margins during
the three months ended June 30, 1998 was primarily attributable to the
conversion of a major project from a fixed-price contract to a cost-plus
guaranteed arrangement, which increased the anticipated total revenue to be
recognized on the project, but reduced the gross profit to approximately 14
percent from an original estimate of 17 percent to 18 percent; significant
unanticipated cost overruns on two significant projects; and changes in
estimated costs on two of projects where the Company does not act as on-site
erector resulting in increased costs of subcontracted activities for which the
Company may not be reimbursed.
General and administrative expenses increased by 45.8 percent to $3.1 million
for the three months ended June 30, 1998 from $2.1 million for the three months
ended June 30, 1997.
11
<PAGE> 14
General and administrative expenses increased by 30.5 percent to $5.4 million
for the six months ended June 30, 1998 from $4.2 million for the six months
ended June 30, 1997. General and administrative expenses as a percentage of
revenues increased to 8.5 percent for the three months ended June 30, 1998 from
5.6 percent for the three months ended June 30, 1997. General and administrative
expenses as a percentage of revenues increased to 8.6 percent for the six months
ended June 30, 1998 from 6.7 percent. The increase in gross general and
administrative expenses and general and administrative expenses as a percentage
of revenues was primarily due to increased administrative costs associated with
the Addison acquisition.
Interest expense increased to $1.0 million for the three months ended June 30,
1998 from $96,000 for the three months ended June 30, 1997 and to $1.1 million
for the six months ended June 30, 1998 from $191,000 for the six months ended
June 30, 1997. The increases in interest expense were primarily attributable to
the addition of the $100.0 million of 10 1/2 percent senior notes in early June
1998.
Other income increased to $303,000 for the three month period ended June 30,
1998 from $172,000 for the three month period ended June 30, 1997. Other income
increased to $544,000 for the six month period ended June 30, 1998 from $219,000
for the six month period ended June 30, 1997. The increases in other income were
primarily attributable to earnings on funds invested from the cash received from
the $100.0 million private placement not used in the acquisition of Addison.
Income tax benefit (provision) for the three and six months ended June 30, 1998
represents an approximate 42 percent effective tax rate. Income tax benefit for
the three and six month periods ended June 30, 1997 was $156,000 which consisted
of a $300,000 credit to deferred taxes generated upon the revocation of the
Company's S Corporation status on June 26, 1997 and a $144,000 tax expense
related to taxable earnings of B&K Steel, a C Corporation, from the date of
acquisition at January 31, 1997.
Backlog increased 71.1 percent to $113.8 million at June 30, 1998 from $66.5
million at March 31, 1998 and 100.4 percent from $56.8 million at December 31,
1997. The increase was due primarily to the acquisition of Addison with
additional increases related to the impact of delays in certain projects that
resulted in the deferral of revenue during the quarter ended June 30, 1998.
The Company has experienced, and is expected to continue to experience,
variations in quarterly and annual results of operations. Factors that may
affect these results include, among other things, the timing and terms of major
contract awards and the starting and completion dates of projects.
12
<PAGE> 15
Liquidity and Capital Resources
The Company attempts to structure the payment arrangements under its contracts
to match costs incurred under the project. To the extent the Company is able to
bill in advance of costs incurred, it generates working capital through billings
in excess of costs and recognized earnings on uncompleted contracts. To the
extent the Company is not able to bill in advance of costs, it relies on its
credit facilities to meet its working capital needs. At June 30, 1998, the
Company had deminimus borrowings under its line of credit due.
The Company's short term cash needs are primarily for working capital to support
operations including receivables, inventories, and other costs incurred in
performing its contracts. Operating activities required cash flows of $780,000
and generated $6.0 million for the six months ended June 30, 1998 and 1997,
respectively. For the six months ended June 30, 1998, operating cash flows were
less than net income due to increased working capital levels. For the six months
ended June 30, 1997, operating cash flows were greater than net income due to
lowered working capital requirements. Investing activities required $45.7
million and $1.4 million for the six months ended June 30, 1998 and 1997,
respectively, substantially all of which were related to purchases of property
and equipment and the cash portion of the Addison acquisition in 1998. Financing
activities provided $91.4 million for the six months ended June 30, 1998 which
related largely to the net proceeds from the $100.0 million private placement in
June 1998, and consumed $7.2 million for the six months ended June 30, 1997
relating primarily to repayments of long-term debt and line of credit balances.
Also included in financing activities during 1997 were distributions to
stockholders for income taxes related to the operations of the business and
other stockholder distributions. These distributions totaled $5.8 million for
the six months ended June 30, 1997. The Company does not presently anticipate
paying dividends in the future.
On June 4, 1998, the Company completed a private placement for an aggregate of
$100.0 million in principal amount of its 10 1/2 percent Senior Notes due 2008.
Net proceeds of the Offering were used to repay certain indebtedness of the
Company and to pay the cash portion of the purchase price for the Company's
acquisition of Addison.
On June 30, 1998, the Company entered into a credit facility with a bank that
replaced the Company's prior $10.0 million facility. The $25.0 million credit
facility matures on June 30, 2001. The credit facility is secured by a first
priority, perfected security interest in all assets of the Company and its
present and future subsidiaries and is available for working capital and general
corporate purposes. Interest payable on borrowings outstanding under the new
credit facility initially is generally equal to either the bank's prime rate or
LIBOR plus 2.50 percent, at the Company's option. The Company will be eligible
for reductions in the initial margins on the new credit facility if the Company
achieves certain performance targets based upon certain financial ratios, as
defined.
The credit facility also requires that the Company maintain specified leverage
ratios, interest coverage ratios, fixed charge coverage ratios and a specified
minimum EBITDA. The credit
13
<PAGE> 16
facility also contains other covenants that, among other things, limit the
Company's ability to pay cash dividends or make other distributions, change its
business or merge, consolidate or dispose of material portions of its assets.
The security agreements pursuant to which the Company's assets are pledged
prohibit any further pledge of such assets without the written consent of the
bank.
The credit facility contains events of default customary for facilities of this
type, including without limitation, the Company's failure to pay principal,
interest, fees or other amounts when due, the breach of any covenant,
representation or warranty, bankruptcy, insolvency or similar events involving
the Company or its subsidiaries, the unenforceability of any of the credit
facility agreements or liens securing payment obligations under the new credit
facility, and the occurrence or existence of any event or circumstance which has
a material adverse effect upon the Company.
The Company estimates that its capital expenditures for 1998 will be
approximately $3.0 million of which approximately $1.2 million had been expended
as of June 30, 1998. The Company estimates that its available funds, cash
generated by operating activities and funds available under its bank credit
facility will be sufficient to fund these capital expenditures and its working
capital needs. However, the Company may expand its operations through future
acquisitions and may require additional equity or debt financing.
Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 128, "Earnings Per Share" (SFAS No. 128), adopted by the Company on December
31, 1997. SFAS No. 128 replaced the previously reported primary or fully diluted
pro forma earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants, and convertible securities. Diluted earnings per
share is very similar to the previously reported primary earnings per share. All
earnings per share amounts for all periods have been presented, and where
necessary, restated to conform to the SFAS No. 128 requirements. The impact of
SFAS No. 128 on the calculation of fully diluted earnings per share for each of
the periods presented was not material.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. The adoption of SFAS No. 131 will have no
impact on the Company's consolidated results of operations, financial position
or cash flows. Schuff Steel is a calendar year end company, so it must adopt
SFAS No. 131 in 1998. Because SFAS No. 131 is not required to be applied to
interim financial statements in the initial year of adoption, the Company is not
required to disclose segment information in accordance with SFAS No. 131 until
its 1998 annual report, at
14
<PAGE> 17
which time it will restate prior years' segment disclosures to conform to the
Statement 131 segment presentation, if practicable. In the Company's first
quarter 1999 report, and in subsequent quarters, it will present the interim
disclosures required by SFAS No. 131 for both 1999 and 1998.
As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes new rules for the reporting and
display of comprehensive income and its shareholders' equity. SFAS No. 130
requires the Company's changes in unfunded pension losses, which prior to
adoption were reported separately in stockholders' equity, to be included in
other comprehensive income.
Year 2000
Schuff has determined that it will need to modify or replace portions of its
software so that its computer systems will function properly with respect to
dates in the year 2000 and beyond. Schuff also has initiated discussions with
its significant suppliers, large customers and financial institutions to ensure
that those parties have appropriate plans to remediate year 2000 issues where
their systems interface with the Company's systems or otherwise impact its
operations. Schuff is assessing the extent to which its operations are
vulnerable should those organizations fail to remediate properly their computer
systems.
Schuff's assessment of and necessary modifications for the year 2000 issue are
estimated to be completed in early 1999. Schuff believes that with current
systems and anticipated modifications, the year 2000 issue will not pose
significant operational problems for its computer systems. However, if such
modifications and necessary conversions are not made or are not completed in a
timely manner, the year 2000 issue could have a material impact on the
operations of Schuff. There can also be no assurance that the systems of any
other companies on which the Company's systems and operations rely will be
converted on a timely basis and will not have a material effect on Schuff. Any
remaining costs of year 2000 initiatives are not expected to be material to
Schuff's results of operation or financial position.
Addison has determined that the majority of its financial accounting, inventory
and other software and its computer systems are not year 2000 compliant. Addison
has not assessed the necessary modifications and costs associated with the year
2000 issue and has not assessed the compliance of its customers' and suppliers'
software and computer systems or the steps, if any, taken or expected to be
taken by them to remediate potential year 2000 issues where their systems
interface with Addison's systems. Following the Acquisition, Schuff began to
plan for the upgrade of Addison's software and computer systems to plan for the
integration of such software and systems with those utilized by Schuff.
Special Note Concerning Forward Looking Statements
This Quarterly Report on Form 10-Q, including the Notes to the Condensed
Consolidated Financial Statements and this "Management's Discussion and Analysis
of Financial Condition and Results of Operations," contain forward looking
statements. Additional written or oral
15
<PAGE> 18
forward looking statements may be made by the Company from time to time in
filings with the Securities and Exchange Commission, in its press releases, or
otherwise. The words "believe," "expect," "anticipate," "intends," "forecast,"
"project," and similar expressions identify forward looking statements. Such
statements may include, but not be limited to, the anticipated outcome of
contingent events, including litigation, projections of revenues, income or
loss, capital expenditures, plans for future operations, growth and
acquisitions, financing needs or plans and the availability of financing, and
plans relating to services of the Company, as well as assumptions relating to
the foregoing. Such forward looking statements are within the meaning of that
term in Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended.
Forward looking statements reflect the Company's current views with respect to
future events and financial performance and speak only as of the date the
statements are made. Such forward looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or quantified. Future
events and actual results could differ materially from those set forth in,
contemplated by, or underlying the forward looking statements. Statements in
this Quarterly Report, including the Notes to the Condensed Consolidated
Financial Statements and in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations," describe factors, among others,
that could contribute to or cause such differences. Other factors that could
cause actual results to differ materially from those expressed in such forward
looking statements are set forth below under the caption "Factors That May
Affect Future Operating Results and Financial Condition." In addition, new
factors emerge from time to time and it is not possible for management to
predict all of such factors, nor can it assess the impact of each such factor on
the business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from forward looking statements. The
Company undertakes no obligation to publicly update or review any forward
looking statements as a result of new information, future events, or any other
reason.
Factors That May Affect Future Operating Results and Financial Condition.
The Company's future operating results and financial condition are dependent on
a number of factors that the Company must successfully manage in order to
achieve favorable future operating results and financial condition. The
following potential risks and uncertainties, together with those mentioned
elsewhere herein, could affect the Company's future operating results, financial
condition, and the market price of its Common Stock.
Fluctuating Quarterly Results of Operations
The Company has experienced, and in the future is expected to continue to
experience, substantial variations in its results of operations as a result of a
number of factors, many of which are outside the Company's control. In
particular, the Company's operating results may vary because of downturns in one
or more segments of the building construction industry, changes in economic
conditions, the Company's failure to obtain, or delays in awards of, major
projects, the cancellation of major projects, or the Company's failure to timely
replace projects that have been completed or are nearing completion. Any of
these factors could result in the periodic inefficient
16
<PAGE> 19
use or underutilization of the Company's resources and could cause the Company's
operating results to fluctuate significantly from period to period, including on
a quarterly basis.
Fixed Price Contracts
A substantial portion of the Company's backlog consists of projects being
performed on a fixed price basis. In bidding on projects, the Company estimates
its costs, including projected increases in costs of labor, material and
services. Despite these estimates, costs and gross profit realized on a fixed
price contract may vary from estimated amounts because of unforeseen conditions
or changes in job conditions, variations in labor and equipment productivity
over the terms of contracts, increases in labor or material costs and other
factors. These variations could have a material adverse effect on the Company's
business, financial condition and results of operations for any period.
Dependence On Construction Industry
The Company earns virtually all of its revenues in the building construction
industry, which is subject to local, regional and national economic cycles. The
Company's revenues and cash flows depend to a significant degree on major
construction projects in various industries, including the hotel and casino,
retail shopping, health care, mining, computer chip manufacturing, public works
and other industries, each of which industries may be adversely affected by
general or specific economic conditions. If construction activity declines
significantly in the Company's principal markets, the Company's business,
financial condition and results of operations would be adversely affected.
Capacity Constraints, Dependence On Subcontractors
The Company routinely relies on subcontractors to perform a significant portion
of its fabrication and project detailing to fulfill projects that the Company
cannot fulfill in-house due to capacity constraints or that are in markets in
which the Company has not established a strong local presence. Addison currently
subcontracts to others all of its erection services and most of its project
detailing. With respect to these projects, the Company's success depends on its
ability to retain and successfully manage these subcontractors. Any difficulty
in attracting and retaining qualified subcontractors on terms and conditions
favorable to the Company could have an adverse effect on the Company's ability
to complete these projects in a timely and cost effective manner.
Operating Risks; Litigation
Construction and heavy steel plate weldments involve a high degree of
operational risk. Natural disasters, adverse weather conditions, design,
fabrication and erection errors and work environment accidents can cause death
or personal injury, property damage and suspension of operations. The occurrence
of any of these events could result in loss of revenues, increased costs, and
liability to third parties. The Company is subject to litigation claims in the
ordinary course of business, including lawsuits asserting substantial claims.
Currently, the Company does
17
<PAGE> 20
not maintain any reserves for its ongoing litigation, and expenses litigation
costs as incurred. The Company periodically reviews the need to maintain a
litigation reserve. The Company maintains risk management, insurance, and safety
programs intended to prevent or mitigate losses. There can be no assurance that
any of these programs will be adequate or that the Company will be able to
maintain adequate insurance in the future at rates that it considers reasonable.
Union Contracts
The Company currently is a party to a number of collective bargaining agreements
with various unions representing the Company's fabrication and erection
employees. These contracts expire or are subject to expiration at various times
in the future. The inability of the Company to renew such contracts could result
in work stoppages and other labor disturbances, which could disrupt the
Company's business and adversely affect the Company's results of operations.
Revenue Recognition Estimates
The Company recognizes revenues using the percentage of completion accounting
method. Under this method, revenues are recognized based on the ratio that costs
incurred to date bear to the total estimated costs to complete the project.
Estimated losses on contracts are recognized in full when the Company determines
that a loss will be incurred. The Company frequently reviews and revises revenue
and total cost estimates as work progresses on a contract and as contracts are
modified. Accordingly, revenue adjustments based upon the revised completion
percentage are reflected in the period that estimates are revised. Although
revenue estimates are based upon management assumptions supported by historical
experience, these estimates could vary materially from actual results. To the
extent percentage of completion adjustments reduce previously reported revenues,
the Company would recognize a charge against operating results, which could have
a material adverse effect on the Company's results of operations for the
applicable period.
Geographic Concentration
The Company's fabrication and erection operations currently are conducted
primarily in Arizona, Nevada, Florida, and Georgia, states in which the
construction industry has experienced substantial growth during recent years.
Because of this concentration, future construction activity and the Company's
business may be adversely affected in the event of a downturn in economic
conditions existing in these states and in the southwestern and southeastern
United States generally. Factors that may affect economic conditions include
increases in interest rates or limitations in the availability of financing for
construction projects, decreases in the amount of funds budgeted for
governmental projects, decreases in capital expenditures devoted to the
construction of plants, distribution centers, retail shopping centers,
industrial facilities, hotels and casinos, convention centers and other
facilities, the prevailing market prices of copper, gold and other metals that
impact related mining activity, and downturns in occupancy rates, office space
demand, tourism and convention related activity and population growth.
18
<PAGE> 21
Variations In Backlog; Dependence on Large Contracts
The Company's backlog can be significantly affected by the receipt, or loss, of
individual contracts. In the event one or more large contracts were terminated
or their scope reduced, the Company's backlog would decrease substantially. The
Company's future business and results of operations may be adversely affected if
it is unable to replace significant contracts when lost or completed, or if it
otherwise fails to maintain a sufficient level of backlog.
Risks Of International Operations
The Company currently operates in selected international markets and is seeking
to further expand its presence in these markets. The Company's international
operations are subject to certain political, economic and other uncertainties,
including risks of war, nationalization of assets, renegotiation or
nullification of existing contracts, changing political conditions, changing
laws and policies affecting trade and investment, and overlap of different tax
structures. Although the Company currently attempts to limit its exposure to
currency fluctuations by dealing solely in United States dollars, there can be
no assurance that the Company's international operations will escape the risks
of fluctuating currency values, hard currency shortages, or controls on currency
exchange.
Competition
Many small and various large companies offer fabrication, erection and related
services that compete with those provided by the Company. Local and regional
companies offer competition in one or more of the Company's geographic markets
or product segments. Out of state or international companies may provide
competition in any market. The Company competes for every project it obtains.
Although the Company believes customers consider, among other things, the
availability and technical capabilities of equipment and personnel, efficiency,
safety record and reputation, price competition usually is the primary factor in
determining which qualified contractor is awarded a contract. Competition has
resulted in pressure on pricing and operating margins, and the effects of
competitive pressure in the industry may continue. Some of the Company's
competitors have greater capital and other resources and are less leveraged than
the Company and are well established in their respective markets. There can be
no assurance that the Company's competitors will not substantially increase
their commitment of resources devoted to competing aggressively with the Company
or that the Company will be able to compete profitably with its competitors.
Substantial Liquidity Requirements
The Company's operations require significant amounts of working capital to
procure materials for contracts to be performed over relatively long periods,
and for purchases and modifications of heavy-duty and specialized fabrication
equipment. In addition, the Company's contract arrangements with customers
sometimes require the Company to provide payment and performance bonds and, in
selected cases, letters of credit, to partially secure the Company's obligations
under its contracts, which may require the Company to incur significant
expenditures
19
<PAGE> 22
prior to receipt of payments. Furthermore, the Company's customers often will
retain a portion of amounts otherwise payable to the Company during the course
of a project as a guarantee of completion of that project. To the extent the
Company is unable to receive project payments in the early stages of a project,
the Company's cash flow would be reduced, which could have a material adverse
effect on the Company's business, financial condition and results of operations.
No Assurance Of Successful Acquisitions
In addition to the acquisition of Addison, the Company intends to consider, and
is currently pursuing, acquisitions of and alliances with other companies in its
industry that could complement the Company's business, including the acquisition
of entities in diverse geographic regions and entities offering greater access
to industries and markets not currently served by the Company. There can be no
assurance that suitable acquisition or alliance candidates can be identified or,
if identified, that the Company will be able to consummate such transactions or
obtain the necessary funding for such acquisitions. Further, there can be no
assurance that the Company will be able to integrate successfully any acquired
companies into its existing operations or to retain key customers and employees
of acquired businesses. If the costs of such integration exceed expectations or
if the Company experiences unexpected costs or liabilities in the acquired
business, the Company's operating results and financial condition could be
materially and adversely affected. In addition, any acquisition may result in
incurrence of additional debt and assumption of additional liabilities,
including contingent liabilities, all of which could adversely affect the
Company's cash flow. Acquisitions involve numerous risks, such as diverting
attention of the Company's management from other business concerns, the entrance
of the Company into markets in which it has had no or only limited experience,
and the potential loss of key employees of the acquired company, any of which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The acquisition of Addison has consumed and will continue to consume substantial
management attention and resources of the Company, and will require substantial
efforts and entail certain risks in the integration of its operations. There can
be no assurance that anticipated cost savings or synergies will be achieved. The
Company will be dependent on the retention and performance of Addison's existing
management and employees for the day-to-day management and future operating
results of Addison.
Dependence Upon Key Personnel
The Company's success depends on the continued services of the Company's senior
management and key employees as well as the Company's ability to attract
additional members to its management team with experience in the steel
fabrication and erection industry. The unexpected loss of the services of any of
the Company's management or other key personnel, or its inability to attract new
management when necessary, could have a material adverse effect upon the
Company.
20
<PAGE> 23
Potential Environmental Liability
The Company's operations and properties are affected by numerous federal, state
and local environmental protection laws and regulations, such as those governing
discharges to air and water and the handling and disposal of solid and hazardous
wastes. Compliance with these laws and regulations has become increasingly
stringent, complex and costly. There can be no assurance that such laws and
regulations or their interpretation will not change in a manner that could
materially and adversely affect the Company. Certain environmental laws, such as
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") and its state law counterparts, provide for strict and joint and
several liability for investigation and remediation of spills and other releases
of toxic and hazardous substances. These laws may apply to conditions at
properties currently or formerly owned or operated by an entity or its
predecessors, as well as to conditions at properties at which wastes or other
contamination attributable to an entity or its predecessors come to be located.
Although the Company has not incurred any material environmental related
liability in the past and believes that it is in material compliance with
environmental laws, there can be no assurance that the Company, or entities for
which it may be responsible, will not incur such liability in connection with
the investigation and remediation of facilities it currently operates (or
formerly owned or operated) or other locations in a manner that could materially
and adversely affect the Company.
Governmental Regulation
Many aspects of the Company's operations are subject to governmental regulations
in the United States and in other countries in which the Company operates,
including regulations relating to occupational health and workplace safety,
principally the Occupational Safety and Health Act and regulations thereunder.
In addition, the Company is subject to licensure and holds or has applied for
licenses in each of the states in the United States in which it operates and in
certain local jurisdictions within such states. Although the Company believes
that it is in material compliance with applicable laws and permitting
requirements, there can be no assurance that it will be able to maintain this
status. Further, the Company cannot determine to what extent future operations
and earnings of the Company may be affected by new legislation, new regulations
or changes in or new interpretations of existing regulations.
Year 2000
The Company has determined that it will need to modify or replace portions of
its software so that its computer systems will function properly with respect to
dates in the year 2000 and beyond. The Company also has initiated discussion
with its significant suppliers, large customers and financial institutions to
ensure that those parties have appropriate plans to remediate year 2000 issues
where their systems interface with the Company's systems or otherwise impact its
operations. The Company is assessing the extent to which its operations are
vulnerable should those organizations fail to remediate properly their computer
systems.
The Company's assessment of and necessary modifications for the year 2000 issue
are estimated to be completed in early 1999. The Company believes that with
current systems and anticipated
21
<PAGE> 24
modifications, the year 2000 issue will not pose significant operational
problems for its computer systems. However, if such modifications and necessary
conversions are not made or are not completed in a timely manner, the year 2000
issue could have a material impact on the operations of the Company. There can
also be no guarantee that the systems of any other companies on which the
Company's systems and operations rely will be converted on a timely basis and
will not have a material effect on the Company. Any remaining costs of year 2000
initiatives are not expected to be material to the Company's results of
operation or financial position.
Addison has determined that the majority of its financial accounting, inventory
and other software and its computer systems are not year 2000 compliant. Addison
has not assessed the necessary modifications and costs associated with the year
2000 issue and has not assessed the compliance of its customers' and suppliers'
software and computer systems or the steps, if any, taken or expected to be
taken by them to remediate potential year 2000 issues where their systems
interface with Addison's systems. Following the acquisition, the Company began
to plan for the upgrade of Addison's software and computer systems to plan for
the integration of such software and systems with those utilized by the Company.
Possible Volatility Of Stock Price
In recent years, the stock market has experienced significant price and volume
fluctuations that have had a substantial effect on the market prices for many
companies and have often been unrelated to the operating performance of such
companies. Such market fluctuations could materially adversely affect the market
price for the Company's Common Stock. The market price of the Common Stock could
also be subject to significant fluctuations in response to variations in the
Company's quarterly operating results, analyst reports, announcements concerning
the Company, legislative or regulatory changes or the interpretation of existing
statutes or regulations affecting the Company's business, litigation, general
trends in the industry and other events or factors.
22
<PAGE> 25
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders was held on June 16, 1998
(b) The following individuals were elected to the Board of Directors:
David A Schuff, Scott A. Schuff, Kenneth F. Zylstra, Edward M. Carson, and
Dennis DeConcini. Their terms will expire at the Company's 1999 Annual Meeting
of Stockholders
(c) The matters submitted for vote at the Annual Meeting were as
follows:
(c) (1) Election of five directors to the Board of Directors to serve
until the 1999 Annual Meeting of Stockholders. See Item 4(b) above. The shares
were voted as follows:
Nominee Number of Shares
------- ----------------
David A. Schuff For: 6,804,697
Against: 0
Abstentions: 300
Broker Non-votes: 0
Scott A. Schuff For: 6,804,697
Against: 0
Abstentions: 300
Broker Non-votes: 0
Kenneth F. Zylstra For: 6,804,697
Against: 0
Abstentions: 300
Broker Non-votes: 0
Edward M. Carson For: 6,804,697
Against: 0
Abstentions: 300
Broker Non-votes: 0
Dennis Deconcini For: 6,804,419
Against: 0
Abstentions: 578
Broker Non-votes: 0
(c) (2) Approval of Amendments to Schuff Steel Company 1997 Stock
Option Plan. The shares were voted as follows:
For: 5,514,947
23
<PAGE> 26
Against: 627,970
Abstentions: 4,617
Broker Non-votes: 657,463
(c) (3) Approval of Schuff Steel Company 1998 Director Compensation
Plan. The shares were voted as follows:
For: 5,780,105
Against: 364,964
Abstentions: 2,465
Broker Non-votes: 657,463
(c) (4) Ratification of the selection of Ernst & Young LLP as
independent auditors of the Company for its year ending December 31, 1998:
For: 6,802,507
Against: 1,790
Abstentions: 700
Broker Non-votes: 0
(d) None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
------ ----------------------
27 Financial Data Schedule
(b) During the quarter ended June 30, 1998, the Company filed: (i)
Current Report on Form 8-K dated May 12, 1998, pursuant to Items 5 and 7, to
file a copy of the Company's press release entitled, "Schuff Steel Announces
Definitive Agreement To Acquire Addison Structural Services, Inc.," and (ii)
Current Report on Form 8-K, as amended, dated June 4, 1998, pursuant to Items 2,
5, and 7, to disclose the completion of the Company's acquisition of Addison
Structural Services, Inc. ("Addison"), the completion of the Company's private
placement pursuant to Rule 144A of an aggregate of $100 million in principal
amount of its 10 1/2 percent Senior Notes due 2008, the letter of commitment
with Wells Fargo Bank, N.A., relating to a replacement credit facility, and to
file copies of the Company's press releases relating to the foregoing. The
Company also filed Pro Forma financial information of the Company and Addison
and audited historical Financial Statements of Addison, the notes related
thereto, and the report of independent auditors of Addison.
24
<PAGE> 27
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SCHUFF STEEL COMPANY
Date: August 14, 1998 By: /s/ Kenneth F. Zylstra
----------------------------
Kenneth F. Zylstra
Vice President and Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
25
<PAGE> 28
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
------ ----------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1,000
<CASH> 47,899
<SECURITIES> 0
<RECEIVABLES> 36,965
<ALLOWANCES> 0
<INVENTORY> 6,872
<CURRENT-ASSETS> 104,145
<PP&E> 28,222
<DEPRECIATION> 11,253
<TOTAL-ASSETS> 154,816
<CURRENT-LIABILITIES> 24,867
<BONDS> 102,620
0
0
<COMMON> 7
<OTHER-SE> 26,118
<TOTAL-LIABILITY-AND-EQUITY> 26,125
<SALES> 63,159
<TOTAL-REVENUES> 63,159
<CGS> 54,880
<TOTAL-COSTS> 54,880
<OTHER-EXPENSES> 5,447
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,103
<INCOME-PRETAX> 2,273
<INCOME-TAX> 942
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,331
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
