SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) September 15, 2000
ISG RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Utah 87-0327982
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
136 East South Temple, Suite 1300, Salt Lake City, Utah 84111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 236-9700
<PAGE>
Item 2. Acquisition or Disposition of Assets
Effective September 15, 2000, ISG Resources, Inc. ("ISG") acquired
certain fixed and intangible assets from Hanson Aggregates West, Inc.
("Hanson"). Hanson is a subsidiary of Hanson PLC, a leading international
building materials company with operations in North America and Europe. Hanson
PLC's principal businesses include the sale of aggregates, concrete products and
bricks.
ISG established through negotiation a purchase price of $2,100,000 in
cash, for all of the equipment and other fixed assets, as well as contracts with
three Texas and Louisiana power plants. The assets acquired by ISG are located,
based, or utilized at the fly ash operations of Hanson at the following
locations:
1. Welsh Power Plant, near Cason, Texas
2. Rodemacher Power Plant, near Boyce, Louisiana; and
3. Nelson Station Power Plant, near Westlake, Louisiana
ISG will utilize the assets purchased to provide materials management
services for the utility contracts acquired in the asset acquisition.
Approximately 500,000 tons of fly ash and bottom ash will be managed and
marketed under the contracts.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired. The audited financial
statements of Hanson, as of December 31, 1999 and 1998 and for the years ended
December 31, 1999, 1998, and 1997, are attached hereto beginning at page F-1.
(b) Pro Forma Financial Information. The unaudited pro forma financial
information for the nine months ended September 30, 2000 and for the year ended
December 31, 1999 set forth below is presented as if the asset acquisition with
Hanson had occurred on January 1, 1999. This information is presented for
illustrative purposes only and is not necessarily indicative of what the
Company's financial position or results of operations would have been had the
asset acquisition with Hanson occurred on that date. This information reflects
all adjustments, consisting of normal recurring accruals, which in the opinion
of management, are necessary for a presentation of results for the respective
periods in accordance with generally accepted accounting principles.
The purchase price of the acquisition was allocated based on estimated
fair values of the assets at the date of acquisition. Amounts allocated to
intangible assets are being amortized from 8 - 20 years.
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Condensed Statement of Operations
For the Nine Months Ended September 30, 2000
(Dollars in thousands)
ISG Hanson Pre- Pro Forma
Resources Acquisition -------------------------------
Historical Historical Combined Adjustments Combined
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 135,793 $ 6,452 $ 142,245 $ $ 142,245
Cost of sales, excluding depreciation 99,188 4,807 103,995 103,995
Depreciation and amortization 11,022 26 11,048 196 a 11,244
New product development 1,628 - 1,628 1,628
Selling, general and administrative 17,186 320 17,506 17,506
------------------------------------------------------------- ------------
Income (loss) from operations 6,769 1,299 8,068 (196) 7,872
Interest Income 35 35 35
Interest expense (11,488) - (11,488) (158) b (11,646)
Other income, net 435 - 435 435
------------------------------------------------------------- ------------
Income (loss) before income taxes (4,249) 1,299 (2,950) (354) (3,304)
Income tax benefit (expense) 554 (446) 108 124 c 232
------------------------------------------------------------- ------------
Net income (loss) $ (3,695) $ 853 $ (2,842) $ (230) $ (3,072)
============================================================= ============
</TABLE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Condensed Statement of Operations
For the Year Ended December 31, 1999
(Dollars in thousands)
ISG Pro Forma
Resources Hanson -------------------------------
Historical Historical Combined Adjustments Combined
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 156,205 $ 8,965 $ 165,170 $ 165,170
Cost of sales, excluding depreciation 108,664 6,692 115,356 115,356
Depreciation and amortization 13,091 34 13,125 261 a 13,386
New product development 2,166 - 2,166 2,166
Selling, general and administrative 18,962 460 19,422 19,422
------------------------------------------------------------- ------------
Income (loss) from operations 13,322 1,779 15,101 (261) 14,840
Interest income 44 - 44 44
Interest expense (13,392) - (13,392) (189) b (13,581)
Other income, net 312 312
------------------------------------------------------------- ------------
Income (loss) before income taxes 286 1,779 2,065 (450) 1,615
Income tax benefit (expense) (648) (608) (1,256) 158 c (1,098)
------------------------------------------------------------- -------------
Net income (loss) $ (362) $ 1,171 $ 809 $ (292) $ 517
============================================================= =============
</TABLE>
(a) Reflects an increase in amortization expense for intangible assets and an
increase in depreciation expense for fixed assets recorded upon acquisition
(b) Reflects an increase in interest expense resulting from borrowing under the
Secured Credit Facility occurring concurrently with the Hanson asset
acquisition
(c) Reflects the income tax effect of the pro forma adjustments
<PAGE>
(c) Exhibits. The following documents are being filed as exhibits to
this report:
(i) The Asset Purchase Agreement dated September 5, 2000 was
filed as an exhibit to the Company's 8-K filed on September
29, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ISG RESOURCES, INC.
(registrant)
November 28, 2000 BY: /s/ J.I. Everest, II
(Date) --------------------------------
J.I. EVEREST, II
CHIEF FINANCIAL OFFICER AND
TREASURER
<PAGE>
Financial Statements
Hanson Fly Ash
(a division of Hanson Aggregates West)
Period from January 2, 2000 to September 15, 2000, and the fiscal
years ended January 1, 2000, December 26, 1998 and December
27, 1997 with Report of Independent Auditors
<PAGE>
Hanson Fly Ash
(a division of Hanson Aggregates West)
Financial Statements
Period from January 2, 2000 to September 15, 2000, and the fiscal years ended
January 1, 2000, December 26, 1998 and December 27, 1997
Contents
Report of Independent Auditors .............................................1
Audited Financial Statements
Statements of Net Assets ...................................................2
Statements of Income........................................................3
Statements of Cash Flows ...................................................4
Notes to Financial Statements ..............................................5
<PAGE>
Report of Independent Auditors
The Board of Directors
Hanson Aggregates West
We have audited the accompanying statements of net assets of Hanson Fly Ash (a
division of Hanson Aggregates West) (the "Division") as of September 15, 2000,
January 1, 2000 and December 26, 1998 and the related statements of income and
cash flows for the period from January 2, 2000 to September 15, 2000, and each
of the three fiscal years in the period ended January 1, 2000. These financial
statements are the responsibility of the Division's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the 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 net assets of Hanson Fly Ash (a division of Hanson
Aggregates West) at September 15, 2000, January 1, 2000 and December 26, 1998,
and the results of its operations and its cash flows for the period from January
2, 2000 to September 15, 2000, and each of the three fiscal years in the period
ended January 1, 2000, in conformity with accounting principles generally
accepted in the United States.
Ernst & Young LLP
November 14, 2000
1
<PAGE>
<TABLE>
<CAPTION>
Hanson Fly Ash
(a division of Hanson Aggregates West)
Statements of Net Assets
September 15 January 1 December 26
2000 2000 1998
---------------------------------------------------
Assets
Current assets:
<S> <C> <C> <C>
Cash $ 7,526 $ 5,028 $ 11,305
Accounts receivable (net of allowance
for doubtful accounts of $31,000,
$22,000 and $19,000 as of September
15, 2000, January 1, 2000 and
December 26, 1998, respectively) 1,153,859 813,116 593,675
Accounts receivable from related party 60,603 44,806 158,829
Deferred income taxes 17,000 13,940 12,920
Other current assets 850 850 850
---------------------------------------------------
Total current assets 1,239,838 877,740 777,579
Property, plant and equipment:
Equipment 1,225,997 1,246,954 1,542,521
Land, buildings and leasehold improvements 226,333 226,333 121,205
---------------------------------------------------
1,452,330 1,473,287 1,663,726
Accumulated depreciation (1,331,627) (1,349,472) (1,512,776)
---------------------------------------------------
120,703 123,815 150,950
---------------------------------------------------
Total assets 1,360,541 1,001,555 928,529
Liabilities
Current liabilities:
Trade accounts payable 453,542 475,486 478,433
Accrued expenses 39,556 49,502 59,897
---------------------------------------------------
Total current liabilities 493,098 524,988 538,330
---------------------------------------------------
Net assets $ 867,443 $ 476,567 $ 390,199
===================================================
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
Hanson Fly Ash
(a division of Hanson Aggregates West)
Statements of Income
Period from Fiscal Year Ended
January 2 to -------------------------------------------------------
September 15 January 1 December 26 December 27
2000 2000 1998 1997
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 6,451,984 $ 8,965,162 $ 8,901,313 $ 8,126,124
Costs and expenses:
Cost of goods sold 4,806,648 6,691,650 7,159,616 6,611,224
Selling, general and administrative
expenses 346,140 494,272 397,235 624,494
-------------------------------------------------------------------------
Operating income 1,299,196 1,779,240 1,344,462 890,406
Income tax expense 446,034 608,465 459,295 306,297
-------------------------------------------------------------------------
Net income $ 853,162 $ 1,170,775 $ 885,167 $ 584,109
=========================================================================
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
Hanson Fly Ash
(a division of Hanson Aggregates West)
Statements of Cash Flows
Period from Fiscal Year Ended
January 2 to -----------------------------------------------------
September 15 January 1 December 26 December 27
2000 2000 1998 1997
-----------------------------------------------------------------------
Operating activities
<S> <C> <C> <C> <C>
Net income $ 853,162 $ 1,170,775 $ 885,167 $ 584,109
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 26,167 34,354 39,609 42,094
Deferred income taxes (3,060) (1,020) 5,780 -
Gain on disposal of assets 3,220 7,873 - -
Changes in operating assets and
liabilities:
Accounts receivable (340,743) (219,441) 98,532 (124,966)
Accounts receivable from
related party (15,797) 114,023 (119,535) (21,476)
Other current assets - - 4,319 (1,719)
Trade accounts payable and
accrued expenses (31,890) (13,342) (203,472) 135,744
-----------------------------------------------------------------------
Net cash provided by operating
activities 491,059 1,093,222 710,400 613,786
Investing activity
Purchases of property, plant and
equipment (26,275) (15,092) - -
Financing activity
Due from Hanson Aggregates West (462,286) (1,084,407) (722,346) (595,472)
-----------------------------------------------------------------------
Net increase (decrease) in cash 2,498 (6,277) (11,946) 18,314
Cash at beginning of period 5,028 11,305 23,251 4,937
-----------------------------------------------------------------------
Cash at end of period $ 7,526 $ 5,028 $ 11,305 $ 23,251
=======================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
Hanson Fly Ash
(a division of Hanson Aggregates West)
Notes to Financial Statements
September 15, 2000
1. Description of the Business and Significant Accounting Policies
Hanson Fly Ash (the Division) is a division of Hanson Aggregates West (the
Parent), which in turn is a subsidiary of Hanson PLC (PLC). The Division
purchases, removes and sells fly ash and other by-products of coal combustion to
producers and consumers of building materials and construction related products
throughout Texas, Arkansas and Louisiana.
On September 15, 2000, the Parent sold substantially all of the assets of the
Division to an unrelated third party, ISG Resources, Inc. ("ISG").
Basis of Presentation
The historical financial statements do not necessarily reflect the results of
operations or financial position that would have existed had the Division been
an independent entity. Corporate costs incurred related specifically to the
Division (manager salaries, fringe benefits, etc.) have been allocated to the
Division and reflected in the accompanying statements of income in accordance
with Staff Accounting Bulletin (SAB) No. 55, "Allocation of Expenses and Related
Disclosure in Financial Statements of Subsidiaries, Divisions or Lesser Business
Components of Another Entity." However, the Parent and PLC also provide various
legal services, tax compliance and planning services, risk management, treasury,
and other corporate services to the Division. The Division has not been involved
in litigation nor incurred legal expense during the periods under audit nor has
the Division been required to borrow funds given its historical positive cash
flows from operations. Therefore, no legal or interest costs have been allocated
to the Division. Income taxes have been calculated as if the Division filed a
separate income tax return (see Note 4). The Parent and PLC may provide other
incidental services to the Division; however, the incremental cost of these
incidental services and costs is not believed to be material to the Division and
is not included in the financial statements of the Division.
5
<PAGE>
Hanson Fly Ash
(a division of Hanson Aggregates West)
Notes to Financial Statements (continued)
1. Description of the Business and Significant Accounting Policies (continued)
Net Asset Presentation
The following items are included in net assets on the accompanying statements of
net assets:
September 15 January 1 December 26
2000 2000 1998
--------------- ----------------- ----------------
Divisional retained earnings $ 5,701,520 $ 4,848,358 $ 3,677,583
Due from Parent (4,834,077) (4,371,791) (3,287,384)
--------------- ----------------- ----------------
Net assets $ 867,443 $ 476,567 $ 390,199
=============== ================= ================
Revenue Recognition
Revenue from the sale of products is recognized primarily upon passage of title
to the customer, which generally coincides with physical delivery and
acceptance. Product revenue generally includes transportation charges associated
with delivering the material.
Cost of products sold are primarily amounts paid to utility companies to
purchase product, generally through royalties on amounts sold to customers, and
transportation costs of delivering the product to the customer.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Major renewals and
improvements are capitalized, while maintenance and repairs are expensed as
incurred. Depreciation is computed using the straight-line method at rates
adequate to recover costs over the assets' useful lives. Estimated useful lives
are generally 3 to 12 years for vehicles, machinery and equipment, and furniture
and fixtures, and 5 to 22 years for buildings and improvements.
As required by Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," management evaluates the carrying value of all long-lived
assets to determine recoverability when indicators of impairment are present
based generally on an analysis of undiscounted cash flows. Management believes
no material impairment in the value of long-lived assets exists at September 15,
2000.
6
<PAGE>
Hanson Fly Ash
(a division of Hanson Aggregates West)
Notes to Financial Statements (continued)
1. Description of the Business and Significant Accounting Policies (continued)
Pension and Post-Retirement Benefits
The Division participates in a pension and post-retirement plan managed by PLC
for the benefit of substantially all of the Division's employees. The Division's
portion of the total benefit obligations has not been actuarially determined.
Total expense recorded by the Division for the Plan was approximately $22,000,
$28,000, $48,000 and $95,000 for the period from January 2 to September 15, 2000
and the fiscal years ended January 1, 2000, December 26, 1998 and December 27,
1997, respectively.
Income Taxes
Income taxes are recorded based on the liability method which requires
recognition of deferred tax assets and liabilities measured using enacted tax
rates and laws that are expected to be in effect when the differences are
expected to reverse.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2. Related-Party Transactions
The Division periodically sells certain of its products to related parties
(other divisions and subsidiaries of the Parent and/or PLC). Sales to related
parties totaled approximately $461,000, $771,000, $656,000 and $579,000 for the
period from January 2, 2000 to September 15, 2000, and the fiscal years ended
January 1, 2000, December 26, 1998 and December 27, 1997, respectively.
7
<PAGE>
Hanson Fly Ash
(a division of Hanson Aggregates West)
Notes to Financial Statements (continued)
2. Related-Party Transactions (continued)
The Division purchases certain items from related parties. Purchases from
related parties totaled approximately $1,060,000 for the period from January 2,
2000 to September 15, 2000, and $1,500,000 for each of the fiscal years ended
January 1, 2000, December 26, 1998 and December 27, 1997. No amounts were due to
related parties for such purchases as of September 15, 2000, January 1, 2000 and
December 26, 1998.
The Division participates in a cash management program with its Parent. Cash
received on behalf of the Division is recorded as an intercompany receivable,
and cash paid on behalf of the Division is recorded as an intercompany payable.
Additionally, the income tax payable, calculated as if the Division filed a
separate income tax return, is included within this balance. The accumulated net
balance is included within net assets and totals $4,834,077, $4,371,791 and
$3,287,384 as of September 15, 2000, January 1, 2000 and December 26, 1998,
respectively.
3. Concentration of Credit Risk
Generally, the Division does not require collateral or other security to support
trade accounts receivable. The Division's five largest customers accounted for
approximately 49% of the revenues for the period from January 1 to September 15,
2000 and 45%, 40% and 33% for the fiscal years ended January 1, 2000, December
26, 1998 and December 27, 1997, respectively. Amounts included in accounts
receivable for these customers totaled approximately $585,000, $351,000 and
$477,000 as of September 15, 2000, January 1, 2000 and December 26, 1998,
respectively. Historically, the Division has not had significant uncollectable
accounts.
4. Income Taxes
The Division's operations are included in the Parent's and PLC's combined tax
returns and the Division presently does not have a formal tax-sharing
arrangement. However, the income tax expense included in the accompanying
statements of income has been computed as if the Division filed a separate
income tax return.
8
<PAGE>
Hanson Fly Ash
(a division of Hanson Aggregates West)
Notes to Financial Statements (continued)
4. Income Taxes (continued)
Income tax expense consists of the following:
Period from Fiscal Year Ended
January 2 to ------------------------------------------------
September 15 January 1 December 26 December 27
2000 2000 1998 1997
---------------- --------------- -------------- -----------------
Current $449,094 $609,485 $453,515 $306,297
Deferred (3,060) (1,020) 5,780 -
---------------- --------------- -------------- -----------------
Total $446,034 $608,465 $459,295 $306,297
================ =============== ============== =================
Differences between tax at the statutory rate of 34% and the actual tax expense
is due to permanent differences. Deferred tax assets primarily consist of the
effect of the allowance for doubtful accounts and accruals not currently
deductible for tax purposes.
9
