<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) JANUARY 27, 1995
COMMERCIAL METALS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-4304 75-0725338
(Commission File Number) (IRS Employer Identification NO.)
7800 Stemmons Freeway, Dallas, Texas 75247
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 689-4300
<PAGE> 2
Item 1. Not Applicable.
Item 2. Acquisition of Assets.
As reported on Form 8-K filed November 30, 1994, Commercial
Metals Company (the "Company") acquired on November 15, 1994, by merger, Owen
Steel Company, Inc. and two affiliated corporations, Owen Miscellaneous Metals,
Inc., and South Carolina Steel Corporation. This Form 8-K is being filed to
include the financial statements and pro forma financial information required
in connection with the acquisition which were not available at the November 30
filing of the Form 8-K reporting the acquisition.
Items 3. and 4. Not Applicable.
Item 5. Other Events.
See Item 3. Legal Proceedings in the Company's Annual Report on Form
10-K for the year ended August 31,1994, filed November 28, 1994, and Form 8-K
filed November 30, 1994, concerning litigation involving the Company's
subsidiary, CMC Oil Company and the Federal Energy Regulatory Commission of the
United States Department of Energy. On January 20, 1995, CMC Oil Company filed
Notice of Appeal of the November 22, 1994, District Court Order granting the
Government's Motion for Summary Judgment and affirming the November 30, 1993,
Remedial Order issued by the Federal Energy Regulatory Commission. Notice of
Appeal was filed in the United States Court of Appeals for the Fifth Circuit
and for the Federal Circuit with respect to issues over which each Court of
Appeals has jurisdiction.
Item 6. Not Applicable.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Audited financial statements:
Owen Steel Company, Inc. - year ended December 31, 1993
Owen Steel Company, Inc. - year ended December 31, 1992
Owen Steel Company, Inc. - year ended December 31, 1991
South Carolina Steel Corporation - year ended December 31,
1993
South Carolina Steel Corporation - year ended December 31,
1992
South Carolina Steel Corporation - year ended December 31,
1991
Owen Miscellaneous Metals, Inc. - year ended December 31, 1993
Owen Miscellaneous Metals, Inc. - year ended December 31, 1992
Owen Miscellaneous Metals, Inc. - year ended December 31, 1991
Unaudited financial statements:
Owen Steel Company, Inc. - Nine months ended September 30,
1994 and 1993
South Carolina Steel Corporation - Nine months ended September
30, 1994 and 1993
Owen Miscellaneous Metals, Inc. - Nine months ended September
30, 1994 and 1993
<PAGE> 3
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
FINANCIAL REPORT
DECEMBER 31, 1993
<PAGE> 4
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
INDEX
YEAR ENDED DECEMBER 31, 1993
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS
EXHIBITS
A CONSOLIDATED BALANCE SHEET
B CONSOLIDATED STATEMENT OF INCOME
C CONSOLIDATED STATEMENT OF RETAINED EARNINGS
D CONSOLIDATED STATEMENT OF CASH FLOWS
E NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 5
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Owen Steel Company, Inc.
Columbia, South Carolina
We have audited the accompanying consolidated balance sheet of Owen Steel
Company, Inc. and its subsidiaries as of December 31, 1993, and the related
consolidated statements of income, retained earnings, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Owen Steel Company,
Inc. and its subsidiaries as of December 31, 1993, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ DERRICK, STUBBS & STITH
Derrick, Stubbs & Stith
March 8, 1994
<PAGE> 6
EXHIBIT A
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
<TABLE>
<CAPTION>
ASSETS
------
<S> <C> <C>
Current Assets:
- --------------
Cash $ 5,086,292
Accounts Receivable - Customers,
Less, Allowance for Doubtful Accounts
of $ 127,055 26,992,171
Accounts Receivable - Other 59,548
Income Tax Refunds Due 5,110,700
Inventories 20,776,721
Prepaid Expenses 104,256
---------------
$ 58,129,688
Long-Term Investments:
- ---------------------
Other Investments (Note 2) 75,000
Property and Equipment:
- ----------------------
Land $ 2,014,145
Offices and Plants 13,694,918
Machinery and Equipment 63,183,294
Furniture and Fixtures 2,582,486
Autos and Trucks 5,849,638
Other 1,404,538
---------------
Total Cost $ 88,729,019
Less, Accumulated Depreciation 48,544,611
---------------
40,184,408
Other Assets:
- ------------
Cash Surrender Value of Life Insurance $ 2,619,440
Fixed Assets Under Construction 412,533
Deferred Charges 342,018
Other Assets 3,490
---------------
3,377,481
--------------
Total Assets $ 101,766,577
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts Payable $ 20,616,521
Notes Payable - Amount Due
Within One Year
(Notes 3 and 4) 15,151,225
Payroll Taxes Payable 165,172
Sales Taxes Payable 295,478
Accrued Expenses 1,683,566
Provision for Waste Removal 418,456
Other Liabilities 7,127
---------------
$ 38,337,545
Long-Term Liabilities:
- ---------------------
Notes and Loans Payable - Amount
Due After One
Year (Notes 3 and 4) $ 19,157,192
Accrued Deferred Compensation Expense
(Note 5) 747,278
---------------
19,904,470
--------------
Total Liabilities $ 58,242,015
Deferred Income Taxes (Note 7) 750,841
- ---------------------
Minority Interests 2,034,479
- ------------------
Stockholders' Equity:
- --------------------
Common Stock:
Class A Voting (1,000,000
shares of $ 1 par
value authorized; 865,500
shares issued) $ 865,500
Class B Non-Voting (4,000,000
shares of $ 1 par
value authorized; 2,820,000
shares issued) 2,820,000
Additional Paid-In Capital 60,000
Retained Earnings - Exhibit C 39,393,415
---------------
$ 43,138,915
Less, Cost of Treasury Stock
(639,654 shares) 2,399,673
--------------
40,739,242
--------------
Total Liabilities and Stockholders' Equity $ 101,766,577
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 7
EXHIBIT B
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
% of
Amount Sales
------------- -------
<S> <C> <C>
Sales $ 211,656,333 100.00
Cost of Sales 195,827,075 92.50
------------- ------
Gross Income $ 15,829,258 7.50
General and Administrative
Expenses 33,391,103 15.77
------------- ------
Net Operating Income $ (17,561,845) (8.27)
Other Income and Expenses - Net (2,822,810) (1.33)
------------- ------
Net Income (Loss) Before Taxes $ (20,384,655) (9.60)
Income Taxes (Refunds) (5,437,829) (2.57)
------------- ------
Net Income (Loss) Before
Minority Interests $ (14,946,826) (7.03)
Minority Interests (1,060,228) (.50)
-------------- ------
Net Income (Loss) - Exhibit C $ (13,886,598) (6.53)
============= ======
</TABLE>
See Notes to Financial Statements.
<PAGE> 8
EXHIBIT C
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
Retained Earnings, Beginning $53,280,013
Net Income (Loss) - Exhibit B (13,886,598)
-----------
Retained Earnings, Ending - Exhibit A $39,393,415
===========
</TABLE>
See Notes to Financial Statements.
<PAGE> 9
EXHIBIT D
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
- ------------------------------------
Net Income (Loss) - Exhibit B $(13,886,598)
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 5,404,178
Deferred Income Taxes (389,122)
Deferred Compensation 17,426
Allowance for Doubtful Accounts 19,826
(Gain) Loss on Disposal of Property and Equipment (94,291)
Minority Interest in Net Income (Loss) (1,060,228)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 12,961,508
(Increase) Decrease in Inventories 6,417,532
(Increase) Decrease in Other Assets (65,391)
Increase (Decrease) in Accounts Payable and
Accrued Expenses (713,770)
------------
Net Cash Provided by Operating Activities $ 8,611,070
------------
Cash Flows from Investing Activities:
- ------------------------------------
Purchase of Property and Equipment $ (1,293,392)
Proceeds from Sale of Property and Equipment 261,895
(Increase) Decrease in Cash Surrender Value of
Life Insurance (201,745)
------------
Net Cash (Used in) Investing Activities $ (1,233,242)
------------
Cash Flows from Financing Activities:
- ------------------------------------
Proceeds from Long-Term Borrowings $ 156,750
Payments on Long-Term Debt (1,778,846)
Increase (Decrease) in Short-Term Borrowings (1,200,000)
------------
Net Cash (Used in) Financing Activities $ (2,822,096)
------------
Net Increase in Cash $ 4,555,732
- --------------------
Cash:
- ----
Beginning 530,560
------------
Ending $ 5,086,292
============
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash Payment for:
Interest $ 2,852,408
============
Income Taxes (Net of Refunds) $ (6,850,691)
============
</TABLE>
See Notes to Financial Statements.
<PAGE> 10
EXHIBIT E
Sheet 1
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1993
1. Significant Accounting Policies:
1.1 These consolidated financial statements include the accounts of
the parent company and all of its subsidiaries. All
significant intercompany balances and transactions have been
eliminated in consolidation.
1.2 Profits on contracts are recorded on the basis of the Company's
estimate of projected revenue and costs on the percentage of
completion method applied to individual contracts. Any
revisions that are required in contract estimates during the
course of the work are reflected in the accounting period in
which the facts that require the revision become known.
1.3 Inventories are stated at the lower of cost or market, using
principally the last-in, first-out method (LIFO).
1.4 Property and Equipment is stated at cost. For financial
reporting purposes, depreciation is computed using principally
the accelerated method (except at the Company's subsidiary,
Owen Electric Steel Company of South Carolina, which uses
principally the straight-line method) over the useful lives of
the assets which are as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Autos and Trucks 3 to 4
Machinery and Equipment 5 to 10
Office Furniture and Fixtures 5 to 10
Computer Hardware and Software 5
Buildings 20
New Melt Shop Equipment at Owen
Electric Steel Company of South Carolina 12
</TABLE>
1.5 The Company participates in a deferred cash [401(k)] plan
covering full time employees who have one year of service and
are age twenty-one or older. Company contributions to the Plan
are determined annually by the Board of Directors.
Participants are immediately one hundred percent (100%) vested.
The Company does not have any unfunded liability under this
Plan. The Company made contributions to the Plan for the year
ended December 31, 1993 of $ 462,054.
1.6 Deferred income taxes are recognized for differences in the
time of recording items of income and expense in the financial
records and their inclusion in or deduction from taxable
income.
1.7 The Company has elected to expense all applicable research and
development expense.
<PAGE> 11
EXHIBIT E
Sheet 2
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1993
2. Other Investments:
Other Investments represent a qualified investment in The Palmetto
Seed Capital Corporation. This is a fund that provides financing to
high growth oriented start-up businesses or prestart-up businesses
in the state of South Carolina. This investment is not anticipated
by the Company to achieve a high rate of return.
3. Notes Payable:
3.1 On July 1, 1992, the Company and each of its subsidiaries
entered into an unsecured credit agreement with South Carolina
National Bank. Under the terms of this agreement, the parent
company could borrow a maximum of $15,000,000 at the prime rate
or, at the Company's option LIBOR plus 2%. This agreement was
effective through June 30, 1993.
This loan agreement, with a maximum borrowing amount of
$10,000,000 and a rate of prime plus 3/4%, was extended through
July 31, 1993. No agreements have been made for the period
after July 31, 1993. Interest payments on this loan balance
have been paid timely. The loan balance at December 31, 1993
was $10,000,000.
3.2 On October 24, 1990, the Company entered into a $27,000,000
unsecured loan agreement with Principal Mutual Life Insurance
Company and Confederation Life Insurance Company. Interest at
a fixed rate of 9.51% is paid quarterly commencing on December
30, 1990.
Principal is due in 32 equal quarterly installments commencing
on March 30, 1992. The loan agreement is quaranteed by each of
the subsidiaries. The remaining five year debt maturities of
this loan are as follows:
<TABLE>
<S> <C>
1994 $ 5,062,500
1995 3,375,000
1996 3,375,000
1997 3,375,000
1998 3,375,000
Remaining 3,375,000
-----------
Total $21,937,500
===========
</TABLE>
3.3 $5,062,500 principal on this loan is due within one year.
Included in the currently due amount is $1,687,500 of principal
which was due, but not paid, in 1993. Interest payments on
these loan balances have been paid timely.
3.4 Both loan agreements contain requirements as to certain
financial ratios, capital expenditures and insurance coverage
along with other usual protective provisions. Owen Steel
Company, Inc. and its subsidiaries have not complied with all
of the provisions of these loan agreements.
<PAGE> 12
EXHIBIT E
Sheet 3
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1993
3. Notes Payable (Continued):
3.4 (Continued):
The subsidiaries of Owen Steel Company, Inc. are:
Owen Steel Company of N. C., Inc., Gastonia, North
Carolina
Owen of Georgia, Inc., Lawrenceville, Georgia
Owen Steel Company of Florida, Jacksonville, Florida
Owen Supply Company, Inc., Columbia, South Carolina
Owen Industrial Products, Inc., Lexington, South Carolina
Owen Electric Steel Company of South Carolina, Cayce,
South Carolina
Owen Joist Corporation, Cayce, South Carolina
Owen Joist of Florida, Inc., Starke, Florida
3.5 Owen Steel Company, Inc. has made loans on certain life
insurance policies owned by the Company. These loans bear
interest at a rate of 5% to 8% per annum and are shown as a
long-term liability since it is anticipated that these loans
will not be repaid within one year. The cash surrender values
and outstanding policy loans at December 31, 1993 are as
follows:
<TABLE>
<S> <C>
Cash Surrender Values $2,619,440
==========
Outstanding Policy Loans $2,201,354
==========
</TABLE>
4. Capital Lease Obligation:
Two subsidiaries of the Company have entered into a lease purchase
agreement for equipment that qualifies as a capital lease
obligation and, accordingly, have been recorded as a purchase of
fixed assets. The future lease payments are as follows:
<TABLE>
<CAPTION>
Total
Year Principal Interest Payment
---------- --------- -------- ----------
<S> <C> <C> <C>
1994 $ 88,725 $12,652 $101,377
1995 42,239 6,265 48,504
1996 38,599 1,821 40,420
-------- ------- --------
$169,563 $20,738 $190,301
======== ======= ========
</TABLE>
<PAGE> 13
EXHIBIT E
Sheet 4
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1993
5. Deferred Compensation Agreements:
The Company has entered into deferred compensation agreements with
certain key employees providing for payments only if the
participant remains continuously in the employ of the Company until
the agreed retirement age of 65, or upon death or disability, if
earlier. The agreements do not require funding and there are no
vested benefits prior to reaching age 65 or the date of death or
disability. Of the total balance of $747,278, at December 31,
1993, $ 243,100 is calculated on the actuarial present value of the
future benefits using an 8% assumed rate of return. The remainder
of the liability, $ 504,178, accrues interest and does not require
any actuarial assumptions.
6. Backlog:
One of the Company's operations consists of the fabrication of
reinforcing steel. Most of its contracts for these products are
fixed price contracts. Scrap steel is a major cost component of
reinforcing steel. During the year 1993, scrap prices increased
substantially. If these scrap prices do not moderate downward, the
Company will likely suffer losses in fulfilling the remaining
portions of most of its fabricated reinforcing steel contracts. As
of December 31, 1993, the Company had approximately 78,411 net tons
remaining to be fabricated on these reinforcing contracts. No
provisions have been made for any future losses that may be
incurred when these contracts are fabricated.
7. Income Tax Matters:
Net deferred tax liabilities consist of the following at December
31, 1993:
<TABLE>
<S> <C>
Deferred Tax Assets $2,623,369
Deferred Tax Liabilities 3,374,210
----------
$ 750,841
==========
</TABLE>
During the year ended December 31, 1993, the Company generated
various state and federal net operating loss carryforwards. The
amount of the federal net operating loss carryforward at
December 31, 1993 is $4,090,000. Management has not recorded a
deferred tax asset for any amount of federal tax associated with
the future use of this net operating loss carryforward.
The Company's deferred tax asset at December 31, 1993 includes
$1,713,471 of alternative minimum tax credit carryforward which may
be carried forward indefinitely to reduce future regular federal
income taxes payable.
<PAGE> 14
EXHIBIT E
Sheet 5
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1993
8. Suspended Operations:
The Company has temporarily suspended the structural fabrication
operations at its subsidiary companies' plants in Gastonia, North
Carolina, Lawrenceville, Georgia and Jacksonville, Florida until
the economic outlook in these markets warrants restarting these
operations. To facilitate its re-entry into these markets, the
Company plans on retaining the physical facilities related to
structural fabrication. The Company continues to fabricate
reinforcing steel at these plants.
<PAGE> 15
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
FINANCIAL REPORT
DECEMBER 31, 1992
<PAGE> 16
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
INDEX
YEAR ENDED DECEMBER 31, 1992
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
A CONSOLIDATED BALANCE SHEET
B CONSOLIDATED STATEMENT OF INCOME
C CONSOLIDATED STATEMENT OF RETAINED EARNINGS
D CONSOLIDATED STATEMENT OF CASH FLOWS
E NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE> 17
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Owen Steel Company, Inc.
Columbia, South Carolina
We have audited the accompanying consolidated balance sheet of Owen Steel
Company, Inc. and its subsidiaries as of December 31, 1992, and the related
consolidated statements of income, retained earnings, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Owen Steel Company,
Inc. and its subsidiaries as of December 31, 1992, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ DERRICK, STUBBS & STITH
Derrick, Stubbs & Stith
March 5, 1993
<PAGE> 18
EXHIBIT A
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1992
<TABLE>
<S> <C> <C>
ASSETS
------
Current Assets:
- --------------
Cash $ 530,560
Accounts Receivable - Customers,
Less, Allowance for Doubtful Accounts
of $ 107,229 38,499,412
Accounts Receivable - Other 35,547
Income Tax Refunds Due 6,608,794
Inventories 27,194,253
Prepaid Expenses 87,486
-----------------
$ 72,956,052
Long-Term Investments:
- ---------------------
Other Investments (Note 3) 75,000
Property and Equipment:
- ----------------------
Land $ 1,975,110
Offices and Plants 13,270,926
Machinery and Equipment 62,695,693
Furniture and Fixtures 2,560,067
Autos and Trucks 6,422,358
Other 1,352,147
-----------------
Total Cost $ 88,276,301
Less, Accumulated Depreciation 43,968,001
-----------------
44,308,300
Other Assets:
- ------------
Cash Surrender Value of Life Insurance $ 2,417,695
Fixed Assets Under Construction 567,031
Deferred Charges 287,001
Other Assets 9,886
-----------------
3,281,613
------------
Total Assets $120,620,965
============
Current Liabilities:
- -------------------
Accounts Payable $ 21,872,316
Notes Payable - Amount Due Within One Year
(Notes 4 and 5) 14,660,355
Payroll Taxes Payable 226,954
Sales Taxes Payable 251,725
Accrued Expenses 912,203
Provision for Waste Removal 625,000
Other Liabilities 11,893
-----------------
$38,560,446
Long-Term Liabilities:
- ---------------------
Notes and Loans Payable - Amount Due After
One Year (Notes 4 and 5) $ 22,470,157
Accrued Deferred Compensation Expense
(Note 6) 729,852
-----------------
23,200,009
------------
Total Liabilities $ 61,760,455
Deferred Income Taxes 1,139,963
- ---------------------
Minority Interests 3,094,707
- ------------------
Stockholders' Equity:
- --------------------
Common Stock:
Class A Voting (1,000,000 shares of $ 1 par
value authorized; 865,500 shares issued) $ 865,500
Class B Non-Voting (4,000,000 shares of $ 1 par
value authorized; 2,820,000 shares issued) 2,820,000
Additional Paid-In Capital 60,000
Retained Earnings - Exhibit C 53,280,013
-----------------
$ 57,025,513
Less, Cost of Treasury Stock (639,654 shares) 2,399,673
-----------------
54,625,840
------------
Total Liabilities and Stockholders' Equity $120,620,965
============
</TABLE>
See Notes to Financial Statements.
<PAGE> 19
EXHIBIT B
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
% of
Amount Sales
------------- ------
<S> <C> <<C>
Sales $ 198,707,317 100.00
Cost of Sales 177,367,314 89.26
------------- ------
Gross Income $ 21,340,003 10.74
General and Administrative Expenses 35,616,517 17.92
------------- ------
Net Operating Income $ (14,276,514) (7.18)
Other Income and Expenses - Net (1,633,580) (.83)
------------- ------
Net Income (Loss) Before Taxes $ (15,910,094) (8.01)
Income Taxes (Refunds) (5,481,064) (2.76)
------------- ------
Net Income (Loss) Before Minority
Interests $ (10,429,030) (5.25)
Minority Interests (791,130) (.40)
------------- ------
Net Income (Loss) - Exhibit C $ (9,637,900) (4.85)
============= ======
</TABLE>
See Notes to Financial Statements.
<PAGE> 20
EXHIBIT C
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1992
<TABLE>
<S> <C>
Retained Earnings, Beginning $ 63,527,082
Net Income (Loss) - Exhibit B (9,637,900)
Dividends Paid (609,169)
-------------
Retained Earnings, Ending - Exhibit A $ 53,280,013
=============
</TABLE>
See Notes to Financial Statements.
<PAGE> 21
EXHIBIT D
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1992
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
- ------------------------------------
Net Income (Loss) - Exhibit B $ (9,637,900)
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 4,448,431
Deferred Income Taxes 1,056,165
Deferred Compensation 24,781
Allowance for Doubtful Accounts 3,921
(Gain) Loss on Disposal of Property and Equipment 63,700
Minority Interest in Net Income (Loss) (791,130)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (3,117,909)
(Increase) Decrease in Inventories (3,185,633)
(Increase) Decrease in Other Assets 68,408
Increase (Decrease) in Accounts Payable and
Accrued Expenses 2,582,934
--------------
Net Cash (Used in) Operating Activities $ (8,484,232)
--------------
Cash Flows from Investing Activities:
- ------------------------------------
Purchase of Property and Equipment $ (10,709,294)
Proceeds from Sale of Property and Equipment 26,662
Decrease in Short-Term Investments 9,126,446
(Increase) Decrease in Loans to Affiliates 897,000
(Increase) Decrease in Cash Surrender Value of Life Insurance (393,062)
--------------
Net Cash (Used in) Investing Activities $ (1,052,248)
--------------
Cash Flows from Financing Activities:
- ------------------------------------
Proceeds from Long-Term Borrowings $ 2,323,166
Payments on Long-Term Debt (3,392,653)
Increase (Decrease) in Short-Term Borrowings 11,200,000
Dividends Paid (609,169)
--------------
Net Cash Provided by Financing Activities $ 9,521,344
--------------
Net Increase (Decrease) in Cash $ (15,136)
- -------------------------------
Cash:
- ----
Beginning 545,696
--------------
Ending $ 530,560
==============
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash Payment for:
Interest (Net of Amounts Capitalized) $ 2,515,297
==============
Income Taxes (Net of Refunds) $ (2,360,540)
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 22
EXHIBIT E
Sheet 1
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1992
1. Significant Accounting Policies:
1.1 These consolidated financial statements include the accounts of
the parent company and all of its subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
1.2 Profits on contracts are recorded on the basis of the Company's
estimate of projected revenue and costs on the percentage of
completion method applied to individual contracts. Any revisions
that are required in contract estimates during the course of the
work are reflected in the accounting period in which the facts
that require the revision become known.
1.3 Inventories are stated at the lower of cost or market, using
principally the last-in, first-out method (LIFO).
1.4 Property and Equipment is stated at cost. For financial reporting
purposes, depreciation is computed using principally the
accelerated method (except at the Company's subsidiary, Owen
Electric Steel Company of South Carolina, which uses principally
the straight-line method) over the useful lives of the assets
which are as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Autos and Trucks 3 to 4
Machinery and Equipment 5 to 10
Office Furniture and Fixtures 5 to 10
Computer Hardware and Software 5
Buildings 20
New Melt Shop Equipment at Owen
Electric Steel Company of South Carolina 12
</TABLE>
1.5 The Company participates in a deferred cash [401(k)] plan covering
full time employees who have one year of service and are age
twenty-one or older. Company contributions to the Plan are
determined annually by the Board of Directors. Participants are
immediately one hundred percent (100%) vested. The Company does
not have any unfunded liability under this Plan. The Company made
contributions to the Plan for the year ended December 31, 1992 of
$ 598,129.
1.6 Deferred income taxes are recognized for differences in the time
of recording items of income and expense in the financial records
and their inclusion in or deduction from taxable income.
1.7 For purposes of reporting the statement of cash flows, the Company
considers all commercial paper and tax-exempt bonds, regardless of
maturity, to be short-term investments.
1.8 The Company has elected to expense all applicable research and
development expense.
<PAGE> 23
EXHIBIT E
Sheet 2
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1992
2. Loans Receivable - Affiliates:
Prior to June 30, 1992, the Company had loan agreements with affiliated
companies whereby loans were made bearing interest at prime less 1/4%.
There were no outstanding loans receivable from the affiliates at December
31, 1992.
3. Other Investments:
Other Investments represent a qualified investment in The Palmetto Seed
Capital Corporation. This is a fund that provides financing to high
growth oriented start-up businesses or prestart-up businesses in the state
of South Carolina. This investment is not anticipated by the Company to
achieve a high rate of return.
4. Notes Payable:
4.1 On July 1, 1992, the Company and each of its subsidiaries entered
into an unsecured credit agreement with South Carolina National
Bank. Under the terms of this agreement, the parent company may
borrow a maximum of $15,000,000 at the prime rate or, at the
Company's option LIBOR plus 2%. This agreement is effective
through June 30, 1993. The outstanding balance under this loan at
December 31, 1992 was $11,200,000.
4.2 On October 24, 1990, the Company entered into a $27,000,000
unsecured loan agreement with Principal Mutual Life Insurance
Company and Confederation Life Insurance Company. Interest at a
fixed rate of 9.51% is paid quarterly commencing on December 30,
1990. Principal will be repaid in 32 equal quarterly installments
commencing on March 30, 1992. The loan agreement is guaranteed by
each of the subsidiaries. The outstanding balance under this loan
amounted to $23,625,000 at December 31, 1992.
4.3 Both loan agreements contain requirements as to certain financial
ratios, capital expenditures and insurance coverage along with
other usual protective provisions. Owen Steel Company, Inc. and
its subsidiaries have complied with all of the provisions of these
loan agreements.
The subsidiaries of Owen Steel Company, Inc. are:
Owen Steel Company of N. C., Inc., Gastonia, North Carolina
Owen of Georgia, Inc., Lawrenceville, Georgia
Owen Steel Company of Florida, Jacksonville, Florida
Owen Supply Company, Inc., Columbia, South Carolina
Owen Industrial Products, Inc., Lexington, South Carolina
Owen Electric Steel Company of South Carolina, Cayce,
South Carolina Owen Joist Corporation, Cayce, South
Carolina Owen Joist of Florida, Inc., Starke, Florida
<PAGE> 24
EXHIBIT E
Sheet 3
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1992
4. Notes Payable (Continued):
4.4 Owen Steel Company, Inc. has made loans on certain life insurance
policies owned by the Company. These loans bear interest at a
rate of 5% to 8% per annum and are shown as a long-term liability
since it is anticipated that these loans will not be repaid within
one year. The cash surrender values and outstanding policy loans
at December 31, 1992 are as follows:
<TABLE>
<S> <C>
Cash Surrender Values $ 2,417,695
===========
Outstanding Policy Loans $ 2,169,615
===========
</TABLE>
4.5 Five year debt maturities of long-term debt (excluding capital
leases) are as follows:
<TABLE>
<S> <C>
1993 $ 3,375,000
1994 3,375,000
1995 3,375,000
1996 3,375,000
1997 3,375,000
Remaining 8,919,615
-------------
$ 25,794,615
=============
</TABLE>
5. Capital Lease Obligation:
Two subsidiaries of the Company have entered into a lease purchase
agreement for equipment that qualifies as a capital lease obligation and,
accordingly, have been recorded as a purchase of fixed assets. The
minimum future lease payments are as follows:
<TABLE>
<CAPTION>
Total
Year Principal Interest Payment
---------- --------- ------------ -----------
<S> <C> <C> <C>
1993 $ 85,356 $ 6,355 $ 91,711
1994 50,542 2,333 52,875
------------ ---------- -------------
$ 135,898 $ 8,688 $ 144,586
============ ========== =============
</TABLE>
<PAGE> 25
EXHIBIT E
Sheet 4
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1992
6. Deferred Compensation Agreements:
The Company has entered into deferred compensation agreements with
certain key employees providing for payments only if the participant
remains continuously in the employ of the Company until the agreed
retirement age of 65, or upon death or disability, if earlier. The
agreements do not require funding and there are no vested benefits prior
to reaching age 65 or the date of death or disability. Of the total
balance of $729,852, at December 31, 1992, $ 243,100 is calculated on the
actuarial present value of the future benefits using an 8% assumed rate
of return. The remainder of the liability, $ 486,752, accrues interest
and does not require any actuarial assumptions. The deferred
compensation expense charged to administrative salaries for the year
ended December 31, 1992 was $5,700. The Company has purchased certain
life insurance policies to fund part of its liability under these
agreements.
7. Interest Cost:
The total interest cost incurred during the year ended December 31, 1992
was $3,941,585, of which $1,323,728 was capitalized as part of the cost
of the Company's subsidiary, Owen Electric Steel Company of South
Carolina, new melt shop facility that was placed in service on August 7,
1992.
8. Subsequent Events:
The Company has temporarily suspended the structural fabrication
operations at its subsidiary companies' plants in Gastonia, North
Carolina, Lawrenceville, Georgia and Jacksonville, Florida until the
economic outlook in these markets warrants restarting these operations.
To facilitate its re-entry into these markets, the Company plans on
retaining the entire physical facilities related to structural
fabrication. The Company will continue to fabricate reinforcing steel at
these plants.
<PAGE> 26
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
FINANCIAL REPORT
DECEMBER 31, 1991
<PAGE> 27
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
INDEX
YEAR ENDED DECEMBER 31, 1991
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
A CONSOLIDATED BALANCE SHEET
B CONSOLIDATED STATEMENT OF INCOME
C CONSOLIDATED STATEMENT OF RETAINED EARNINGS
D CONSOLIDATED STATEMENT OF CASH FLOWS
E NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE> 28
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Owen Steel Company, Inc.
Columbia, South Carolina
We have audited the accompanying consolidated balance sheet of Owen Steel
Company, Inc. and its subsidiaries as of December 31, 1991, and the related
consolidated statements of income, retained earnings, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Owen Steel Company,
Inc. and its subsidiaries as of December 31, 1991, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ DERRICK, STUBBS & STITH
Derrick, Stubbs & Stith
March 11, 1992
<PAGE> 29
EXHIBIT A
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1991
<TABLE>
<S> <C> <C>
ASSETS
------
EQUITY
- ------
Current Assets:
- --------------
Cash $ 545,696
Short-Term Investments (Note 2) 9,126,446
Accounts Receivable - Customers,
Less, Allowance for Doubtful Accounts
of $ 103,308 39,338,901
Accounts Receivable - Other 92,737
Accrued Interest Receivable 149,019
Loans Receivable - Affiliates (Note 3) 897,000
Income Tax Refunds Due 2,449,108
Inventories 24,008,620
Prepaid Expenses 73,169
------------
$ 76,680,696
Long-Term Investments:
- ---------------------
Other Investments (Note 4) 75,000
Property and Equipment:
- ----------------------
Land $ 1,593,275
Offices and Plants 10,154,750
Machinery and Equipment 39,734,986
Furniture and Fixtures 2,510,553
Autos and Trucks 6,808,336
Other 681,465
------------
Total Cost $ 61,483,365
Less, Accumulated Depreciation 45,161,933
------------
16,321,432
Other Assets:
- ------------
Cash Surrender Value of Life Insurance $ 2,024,633
Fixed Assets Under Construction 22,383,398
Deferred Charges 363,848
Other Assets 15,765
------------
24,787,644
--------------
Total Assets $ 117,864,772
==============
LIABILITIES AND STOCKHOLDERS'
-----------------------------
Current Liabilities:
- -------------------
Accounts Payable $ 18,554,887
Notes Payable - Amount Due Within One Year
(Note 5) 3,375,000
Payroll Taxes Payable 214,142
Sales Taxes Payable 175,447
Accrued Expenses 2,001,293
Provision for Waste Removal 277,833
Other Liabilities 15,081
Accrued Income Taxes 78,474
------------
$ 24,692,157
Long-Term Liabilities:
- ---------------------
Notes and Loans Payable - Amount Due After
One Year (Note 5) $ 23,625,000
Accrued Deferred Compensation Expense
(Note 6) 705,071
------------
24,330,071
-----------
Total Liabilities $ 49,022,228
Deferred Income Taxes 83,798
- ---------------------
Minority Interests 3,885,837
- ------------------
Stockholders' Equity:
- --------------------
Common Stock:
Class A Voting (1,000,000 shares of $ 1 par
value authorized; 865,500 shares issued)$ 865,500
Class B Non-Voting (4,000,000 shares of $ 1 par
value authorized; 2,820,000 shares issued) 2,820,000
Additional Paid-In Capital 60,000
Retained Earnings - Exhibit C 63,527,082
------------
$ 67,272,582
Less, Cost of Treasury Stock (639,654 shares) 2,399,673
------------
64,872,909
--------------
Total Liabilities and Stockholders' Equity $ 117,864,772
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 30
EXHIBIT B
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1991
<TABLE>
<CAPTION>
% of
Amount Sales
-------- -------
<S> <C> <C>
Sales $ 216,315,858 100.00
Cost of Sales 182,633,577 84.43
------------- -------
Gross Income $ 33,682,281 15.57
General and Administrative Expenses 37,858,458 17.50
------------- -------
Net Operating Income $ (4,176,177) (1.93)
Other Income and Expenses - Net (240,531) (.11)
------------- -------
Net Income (Loss) Before Taxes $ (4,416,708) (2.04)
Income Taxes (Refunds) (1,424,796) (.66)
------------- -------
Net Income (Loss) Before Minority
Interests $ (2,991,912) (1.38)
Minority Interests (569,456) (.26)
------------- -------
Net Income (Loss) - Exhibit C $ (2,422,456) (1.12)
============= =======
</TABLE>
See Notes to Financial Statements.
<PAGE> 31
EXHIBIT C
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1991
<TABLE>
<S> <C>
Retained Earnings, Beginning $ 66,349,779
Net Income (Loss) - Exhibit B (2,422,456)
Dividends Paid (609,169)
Excess of Book Value Over Purchase Price
of Minority Interest Acquired 208,928
-------------
Retained Earnings, Ending - Exhibit A $ 63,527,082
=============
</TABLE>
See Notes to Financial Statements.
<PAGE> 32
EXHIBIT D
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1991
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
- ------------------------------------
Net Income (Loss) - Exhibit B $ (2,422,456)
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 3,900,881
Deferred Income Taxes (47,311)
Deferred Compensation 62,636
Allowance for Doubtful Accounts 7,434
(Gain) Loss on Disposal of Property and Equipment (20,046)
Minority Interest in Net Income (Loss) (569,456)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 4,017,828
(Increase) Decrease in Inventories 6,889,167
(Increase) Decrease in Other Assets 61,475
Increase (Decrease) in Accounts Payable and
Accrued Expenses (3,432,476)
-------------
Net Cash Provided by Operating Activities $ 8,447,676
-------------
Cash Flows from Investing Activities:
- ------------------------------------
Purchase of Property and Equipment $ (24,282,036)
Proceeds from Sale of Property and Equipment 57,222
Net Change in Short-Term Investments 984,690
(Increase) Decrease in Loans to Affiliates (772,000)
(Increase) Decrease in Cash Surrender Value of Life Insurance (345,164)
Acquisition of Minority Interest (417,857)
-------------
Net Cash (Used in) Investing Activities $ (24,775,145)
-------------
Cash Flows from Financing Activities:
- ------------------------------------
Proceeds from Long-Term Borrowings $ 17,000,000
Payments on Long-Term Debt (117,452)
Dividends Paid (609,169)
-------------
Net Cash Provided by Financing Activities $ 16,273,379
-------------
Net Increase (Decrease) in Cash $ (54,090)
- -------------------------------
Cash:
- ----
Beginning 599,786
-------------
Ending $ 545,696
=============
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash Payment for:
Interest (Net of Amount Capitalized) $ 1,638,737
=============
Income Taxes (Net of Refunds) $ 964,701
=============
</TABLE>
See Notes to Financial Statements.
<PAGE> 33
EXHIBIT E
Sheet 1
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1991
1. Significant Accounting Policies:
1.1 These consolidated financial statements include the accounts of
the parent company and all of its subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
1.2 Profits on contracts are recorded on the basis of the Company's
estimate of projected revenue and costs on the percentage of
completion method applied to individual contracts. Any revisions
that are required in contract estimates during the course of the
work are reflected in the accounting period in which the facts
that require the revision become known.
1.3 Inventories are stated at the lower of cost or market, using
principally the last-in, first-out method (LIFO).
1.4 Property and Equipment is stated at cost. For financial reporting
purposes, depreciation is computed using principally the
accelerated method over the useful lives of the assets which are
as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Autos and Trucks 3 to 4
Machinery and Equipment 5 to 10
Office Furniture and Fixtures 5 to 10
Computer Hardware and Software 5
Buildings 20
</TABLE>
1.5 The Company participates in a deferred cash [401(k)] plan covering
full time employees who have one year of service and are age
twenty-one or older. Company contributions to the Plan are
determined annually by the Board of Directors. Participants are
immediately one hundred percent (100%) vested. The Company does
not have any unfunded liability under this Plan. The Company made
contributions to the Plan for the year ended December 31, 1991 of
$621,141.
1.6 Deferred income taxes are recognized for differences in the time
of recording items of income and expense in the financial records
and their inclusion in or deduction from taxable income.
1.7 For purposes of reporting the statement of cash flows, the Company
considers all commercial paper and tax-exempt bonds, regardless of
maturity, to be short-term investments.
1.8 The Company has elected to expense all applicable research and
development expense.
<PAGE> 34
EXHIBIT E
Sheet 2
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1991
2. Short-Term Investments:
Short-term investments are stated at cost. The balance at December 31,
1991 is summarized as follows:
<TABLE>
<CAPTION>
Date
Investment Face Value Purchased Maturity Cost
---------- ---------- --------- -------- ----
<S> <C> <C> <C> <C>
Commercial Paper:
----------------
South Carolina National Corporation $ 970,000 12/31/91 01/02/92 $ 970,000
----------
Tax-Exempt Securities:
---------------------
State of SC General Obligation Bonds $ 150,000 03/28/91 03/01/92 $ 151,947
Charleston County, SC School District
Bonds 300,000 04/11/91 02/01/92 303,082
Spartanburg School District General
Obligation Bonds 1,355,000 05/21/91 04/01/92 1,366,863
Aiken County, SC Consolidated School
District Bonds 500,000 05/15/91 04/01/92 504,910
Aiken County, SC Public Facility Bonds 165,000 05/13/91 02/01/92 165,000
Spartanburg County, SC School General
Obligation TANS 600,000 07/09/91 04/01/92 601,008
Chesterfield County, SC School District
TANS 1,000,000 07/12/91 03/15/92 1,003,920
Lexington County, SC School District
TANS 1,000,000 07/16/91 03/31/92 1,001,426
Georgetown, SC General Obligation Bonds 50,000 07/19/91 03/01/92 50,837
Anderson County Tax Anticipation Notes 2,000,000 07/22/91 01/15/92 2,005,223
Orangeburg County, SC School District
General Obligation TANS 1,000,000 09/10/91 03/13/92 1,002,230
----------
Total Tax-Exempt Securities $8,156,446
----------
Total Short-Term Investments $9,126,446
==========
</TABLE>
3. Loans Receivable - Affiliates:
The Company has a loan agreement with affiliated companies whereby loans
are made bearing interest at prime less 1/4%. The outstanding loans
receivable from the affiliates amounted to $897,000 at December 31, 1991.
4. Other Investments:
Other Investments represent a qualified investment in The Palmetto Seed
Capital Corporation. This is a fund that provides financing to high
growth oriented start-up businesses or prestart-up businesses in the state
of South Carolina. This investment is not anticipated by the Company to
achieve a high rate of return.
<PAGE> 35
EXHIBIT E
Sheet 3
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1991
5. Notes Payable:
5.1 On July 1, 1990, the Company and each of its subsidiaries entered
into an unsecured credit agreement with South Carolina National
Bank. Under the terms of this agreement, the parent company may
borrow, at the prime rate, a maximum of $15,000,000. This
agreement is effective through June 30, 1992. There was no
outstanding balances under this loan at December 31, 1991.
5.2 On October 24, 1990, the Company entered into a $27,000,000
unsecured loan agreement with Principal Mutual Life Insurance
Company and Confederation Life Insurance Company. Under the terms
of this agreement, the parent company has borrowed $10,000,000 on
October 24, 1990, $10,000,000 on May 28, 1991 and $7,000,000 on
August 29, 1991. Interest at a fixed rate of 9.51% is paid
quarterly commencing on December 30, 1990. Principal will be
repaid in 32 equal quarterly installments commencing on March 30,
1992. The loan agreement is guaranteed by each of the
subsidiaries.
5.3 Both loan agreements contain requirements as to certain financial
ratios, capital expenditures and insurance coverage along with
other usual protective provisions. Owen Steel Company, Inc. and
its subsidiaries have complied with all of the provisions of these
loan agreements.
The subsidiaries of Owen Steel Company, Inc. are:
Owen Steel Company of N. C., Inc., Gastonia, North Carolina
Owen of Georgia, Inc., Lawrenceville, Georgia
Owen Steel Company of Florida, Jacksonville, Florida
Owen Supply Company, Inc., Columbia, South Carolina
Owen Industrial Products, Inc., Lexington, South Carolina
Owen Electric Steel Company of South Carolina, Cayce, South Carolina
Owen Joist Corporation, Cayce, South Carolina
Owen Joist of Florida, Inc., Starke, Florida
5.4 Five year debt maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1992 $ 3,375,000
1993 3,375,000
1994 3,375,000
1995 3,375,000
1996 3,375,000
Remaining 10,125,000
-------------
$ 27,000,000
=============
</TABLE>
<PAGE> 36
EXHIBIT E
Sheet 4
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1991
6. Deferred Compensation Agreements:
The Company has entered into deferred compensation agreements with
certain key employees providing for payments only if the participant
remains continuously in the employ of the Company until the agreed
retirement age of 65, or upon death or disability, if earlier. The
agreements do not require funding and there are no vested benefits prior
to reaching age 65 or the date of death or disability. Of the total
balance of $705,071, at December 31, 1991, $237,400 is calculated on the
actuarial present value of the future benefits using an 8% assumed rate
of return. The remainder of the liability, $467,671, accrues interest and
does not require any actuarial assumptions. The deferred compensation
expense charged to administrative salaries and bonus for the year
ended December 31, 1991 was $32,900. The Company has purchased certain
life insurance policies to fund part of its liability under these
agreements.
<PAGE> 37
SOUTH CAROLINA STEEL CORPORATION
FINANCIAL REPORT
DECEMBER 31, 1993
<PAGE> 38
SOUTH CAROLINA STEEL CORPORATION
INDEX
YEAR ENDED DECEMBER 31, 1993
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
A BALANCE SHEET
B STATEMENT OF INCOME
C STATEMENT OF RETAINED EARNINGS
D STATEMENT OF CASH FLOWS
E NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE> 39
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
South Carolina Steel Corporation
Greenville, South Carolina
We have audited the accompanying balance sheet of South Carolina Steel
Corporation as of December 31, 1993, and the related statements of income,
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Carolina Steel
Corporation as of December 31, 1993, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ DERRICK, STUBBS & STITH
Derrick, Stubbs & Stith
February 3, 1994
<PAGE> 40
EXHIBIT A
SOUTH CAROLINA STEEL CORPORATION
BALANCE SHEET
DECEMBER 31, 1993
<TABLE>
<S> <C> <C>
ASSETS
------
Current Assets:
- --------------
Cash $ 54,061
Accounts Receivable - Customers,
Less, Allowance for Doubtful Accounts
of $38,183 4,958,847
Accounts Receivable - Other 4,273
Inventories 2,278,126
Prepaid Expense 5,127
-----------
$7,300,434
Investments:
- -----------
Common Stock of Owen Electric Steel
Company of South Carolina (12,224 shares
of $10 par value at equity in net
assets - cost $125,295) 1,449,115
Property and Equipment:
- ----------------------
Land $ 82,730
Offices and Plants 1,656,271
Machinery and Equipment 2,407,114
Furniture and Fixtures 276,706
Autos and Trucks 569,853
Other 259,370
-----------
Total Cost $ 5,252,044
Less, Accumulated Depreciation 3,803,308
-----------
1,448,736
Other Assets:
- ------------
Fixed Assets Under Construction $ 58,323
Deferred Charges 1,749
Other Assets 15,000
-----------
75,072
-----------
Total Assets $10,273,357
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
Current Liabilities:
- -------------------
Accounts Payable $ 1,780,805
Notes Payable - Amount Due
Within One Year (Note 2) 1,526,000
Sales Taxes Payable 158,904
Accrued Expenses 91,827
Accrued Income Taxes 85,405
Other Liabilities 10,464
-----------
$3,653,405
Deferred Income Taxes (Note 3) 384,450
- ---------------------
Stockholder's Equity:
- --------------------
Common Stock (2,500 shares of $10 par
value authorized and issued) $ 25,000
Retained Earnings - Exhibit C 7,045,067
-----------
$ 7,070,067
Less, Cost of Treasury Stock (1,000 shares) ( 834,565)
-----------
6,235,502
-----------
Total Liabilities and Stockholder's Equity $10,273,357
===========
</TABLE>
See Notes to Financial Statements.
<PAGE> 41
EXHIBIT B
SOUTH CAROLINA STEEL CORPORATION
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
% of
Amount Sales
-------- -------
<S> <C> <C>
Sales 29,673,564 100.00
Cost of Sales 20,018,888 67.46
------------ -------
Gross Income 9,654,676 32.54
Manufacturing Expenses 5,123,877 17.27
------------ -------
Manufacturing Income 4,530,799 15.27
General and Administrative Expenses 3,741,596 12.61
------------ -------
Net Operating Income $ 789,203 2.66
Other Income and Expenses - Net (18,523) (.06)
------------ -------
Net Income Before Taxes $ 770,680 2.60
Income Taxes 292,994 .99
------------ -------
Net Income Before Equity in Net
Income of Affiliated Company $ 477,686 1.61
Equity in Net Income (Loss) of
Affiliated Company (402,636) (1.36)
------------ -------
Net Income - Exhibit C $ 75,050 .25
============ =======
</TABLE>
See Notes to Financial Statements.
<PAGE> 42
EXHIBIT C
SOUTH CAROLINA STEEL CORPORATION
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
Retained Earnings, Beginning $ 6,970,017
Net Income - Exhibit B 75,050
----------------
Retained Earnings, Ending - Exhibit A $ 7,045,067
================
</TABLE>
See Notes to Financial Statements.
<PAGE> 43
EXHIBIT D
SOUTH CAROLINA STEEL CORPORATION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
- ------------------------------------
Net Income - Exhibit B $ 75,050
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 291,948
Deferred Income Taxes (270,207)
Allowance for Doubtful Accounts 20,181
Gain on Disposal of Property and Equipment (4,405)
Undistributed Loss of Affiliated Company 642,162
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (1,303,222)
(Increase) Decrease in Inventories 212,845
(Increase) Decrease in Other Assets 1,131
Increase (Decrease) in Accounts Payable and
Accrued Expenses 455,107
-----------
Net Cash Provided by Operating Activities $ 120,590
-----------
Cash Flows from Investing Activities:
- ------------------------------------
Purchases of Property and Equipment (633,562)
Proceeds from Sale of Property and Equipment 12,191
-----------
Net Cash (Used in) Investing Activities $ (621,371)
-----------
Cash Flows from Financing Activities:
- ------------------------------------
Payment on Long-Term Debt $ (100,000)
Increase in Short-Term Borrowings 150,000
-----------
Net Cash Provided by Financing Activities $ 50,000
-----------
Net (Decrease) in Cash (450,781)
- ----------------------
Cash:
- ----
Beginning 504,842
-----------
Ending $ 54,061
===========
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash Payments for:
Interest $ 69,812
===========
Income Taxes (Net of Refunds) $ 234,621
===========
</TABLE>
See Notes to Financial Statements.
<PAGE> 44
EXHIBIT E
Sheet 1
SOUTH CAROLINA STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1993
1. Significant Accounting Policies:
1.1 Profits on contracts are recorded on the basis of the Company's
estimates of projected revenue and costs on the percentage of
completion method applied to individual contracts. Any
revisions that are required in contract estimates during the
course of the work are reflected in the accounting period in
which the facts that require the revision become known.
1.2 Inventories are stated at the lower of cost or market, using
principally the last-in, first-out method (LIFO).
1.3 The Company uses the equity method of accounting for its
investment in its affiliated company and includes in income its
equity in the earnings of the affiliated company.
1.4 Property and Equipment is stated at cost. For financial
reporting purposes, depreciation is computed using principally
the accelerated method over the useful lives of the assets which
are as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Autos and Trucks 3 to 4
Machinery and Equipment 5 to 10
Office Furniture and Fixtures 5 to 10
Computer Hardware and Software 5
Buildings 20
</TABLE>
1.5 The Company participates in a deferred cash [401(k)] plan
covering full time employees who have one year of service and
are age twenty-one or older. Company contributions to the Plan
are determined annually by the Board of Directors. Participants
are immediately one hundred percent (100%) vested. The Company
does not have any unfunded liability under this Plan. The
Company made contributions to the Plan for the year ended
December 31, 1993 of $ 63,308.
1.6 Deferred income taxes are recognized for differences in the time
of recording items of income and expense in the financial
records and their inclusion in or deduction from taxable income.
2. Notes Payable:
2.1 The Company has entered into a loan agreement for the issuance
of a $1,000,000 Industrial Revenue Bond. In accordance with
the agreement, the bond was assigned to and purchased by First
Citizens Bank and Trust Company of S. C., Greenville, S. C.
The bond is due in annual installments of principal and
quarterly installments of interest at sixty-five (65%) percent
of the bank's prime rate on the unpaid balance. The bond is
collateralized by a mortgage on the real estate and improvements
owned by the Company plus all machinery purchased with the bond
proceeds. At December 31, 1993, the outstanding balance on this
loan was $100,000, maturing in one principal payment of $100,000
through 1994.
<PAGE> 45
EXHIBIT E
Sheet 2
SOUTH CAROLINA STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1993
2. Notes Payable (Continued):
2.2 The Company has unsecured demand loans with First Citizens Bank
and Trust Company of S. C., Greenville, S. C. and they bear
interest at the bank's prime interest rate. The outstanding
balance of these loans was $1,426,000 at December 31, 1993.
3. Income Tax Matters:
Net deferred tax liabilities consist of the following at December 31, 1993:
<TABLE>
<S> <C>
Deferred Tax Assets $ 109,335
Deferred Tax Liabilities 493,785
------------
$ 384,450
============
</TABLE>
<PAGE> 46
SOUTH CAROLINA STEEL CORPORATION
FINANCIAL REPORT
DECEMBER 31, 1992
<PAGE> 47
SOUTH CAROLINA STEEL CORPORATION
INDEX
YEAR ENDED DECEMBER 31, 1992
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
A BALANCE SHEET
B STATEMENT OF INCOME
C STATEMENT OF RETAINED EARNINGS
D STATEMENT OF CASH FLOWS
E NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE> 48
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
South Carolina Steel Corporation
Greenville, South Carolina
We have audited the accompanying balance sheet of South Carolina Steel
Corporation as of December 31, 1992, and the related statements of income,
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Carolina Steel
Corporation as of December 31, 1992, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ DERRICK, STUBBS & STITH
Derrick, Stubbs & Stith
March 4, 1993
<PAGE> 49
EXHIBIT A
SOUTH CAROLINA STEEL CORPORATION
BALANCE SHEET
DECEMBER 31, 1992
<TABLE>
<S> <C> <C>
ASSETS
------
Current Assets:
- --------------
Cash $ 504,842
Accounts Receivable - Customers,
Less, Allowance for Doubtful Accounts
of $18,002 3,676,857
Accounts Receivable - Other 3,222
Inventories 2,490,971
Prepaid Expense 4,159
-------------
$ 6,680,051
Investments:
- -----------
Common Stock of Owen Electric Steel
Company of South Carolina (12,224 shares
of $10 par value at equity in net
assets - cost $125,295) 2,091,277
Property and Equipment:
- ----------------------
Land $ 82,730
Offices and Plants 1,396,133
Machinery and Equipment 2,245,033
Furniture and Fixtures 262,197
Autos and Trucks 630,058
Other 110,071
-------------
Total Cost $ 4,726,222
Less, Accumulated Depreciation 3,589,683
-------------
1,136,539
Other Assets:
- ------------
Fixed Assets Under Construction $ 7,409
Deferred Charges 33,131
Other Assets 15,000
-------------
55,540
-------------
Total Assets $ 9,963,407
=============
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
Current Liabilities:
- -------------------
Accounts Payable $ 1,556,238
Notes Payable - Amount Due
Within One Year (Note 3) 1,376,000
Sales Taxes Payable 70,832
Accrued Expenses 775
Accrued Income Taxes 44,453
-------------
$ 3,048,298
Long-Term Liabilities:
- ---------------------
Notes Payable - Amount Due After One Year
(Note 3) 100,000
------------
Total Liabilities $ 3,148,298
Deferred Income Taxes 654,657
- ---------------------
Stockholder's Equity:
- --------------------
Common Stock (2,500 shares of $10 par
value authorized and issued) $ 25,000
Retained Earnings - Exhibit C 6,970,017
-------------
$ 6,995,017
Less, Cost of Treasury Stock (1,000 shares) (834,565)
-------------
6,160,452
-------------
Total Liabilities and Stockholder's Equity $ 9,963,407
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 50
EXHIBIT B
SOUTH CAROLINA STEEL CORPORATION
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
% of
Amount Sales
-------- -------
<S> <C> <C>
Sales $ 23,060,855 100.00
Cost of Sales 15,454,822 67.02
------------- -------
Gross Income $ 7,606,033 32.98
Manufacturing Expenses 4,036,127 17.50
------------- -------
Manufacturing Income $ 3,569,906 15.48
General and Administrative Expenses 2,849,932 12.36
------------- -------
Net Operating Income $ 719,974 3.12
Other Income and Expenses - Net 39,343 .17
------------- -------
Net Income Before Taxes $ 759,317 3.29
Income Taxes 273,608 1.18
------------- -------
Net Income Before Equity in Net
Income of Affiliated Company $ 485,709 2.11
Equity in Net Income (Loss) of
Affiliated Company (270,734) (1.18)
------------- -------
Net Income - Exhibit C $ 214,975 .93
============= =======
</TABLE>
See Notes to Financial Statements.
<PAGE> 51
EXHIBIT C
SOUTH CAROLINA STEEL CORPORATION
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1992
<TABLE>
<S> <C>
Retained Earnings, Beginning $ 6,755,042
Net Income - Exhibit B 214,975
-----------
Retained Earnings, Ending - Exhibit A $ 6,970,017
===========
</TABLE>
See Notes to Financial Statements.
<PAGE> 52
EXHIBIT D
SOUTH CAROLINA STEEL CORPORATION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1992
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
- ------------------------------------
Net Income - Exhibit B $ 214,975
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 350,320
Deferred Income Taxes (200,670)
Allowance for Doubtful Accounts (5,855)
Gain on Disposal of Property and Equipment (14,362)
Undistributed Loss of Affiliated Company 431,793
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (175,217)
(Increase) Decrease in Inventories (979,658)
(Increase) Decrease in Other Assets (12,543)
Increase (Decrease) in Accounts Payable and
Accrued Expenses (43,872)
--------------
Net Cash (Used in) Operating Activities $ (435,089)
--------------
Cash Flows from Investing Activities:
- ------------------------------------
Purchases of Property and Equipment $ (80,150)
Proceeds from Sale of Property and Equipment 27,138
--------------
Net Cash (Used in) Investing Activities $ (53,012)
--------------
Cash Flows from Financing Activities:
- ------------------------------------
Payment on Long-Term Debt $ (100,000)
Increase in Short-Term Borrowings 1,025,000
--------------
Net Cash Provided by Financing Activities $ 925,000
--------------
Net Increase in Cash $ 436,899
- --------------------
Cash:
- ----
Beginning 67,943
--------------
Ending $ 504,842
==============
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash Payments for:
Interest $ 45,537
==============
Income Taxes (Net of Refunds) $ 23,106
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 53
EXHIBIT E
Sheet 1
SOUTH CAROLINA STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1992
1. Significant Accounting Policies:
1.1 Profits on contracts are recorded on the basis of the Company's
estimates of projected revenue and costs on the percentage of
completion method applied to individual contracts. Any
revisions that are required in contract estimates during the
course of the work are reflected in the accounting period in
which the facts that require the revision become known.
1.2 Inventories are stated at the lower of cost or market, using
principally the last-in, first-out method (LIFO).
1.3 The Company uses the equity method of accounting for its
investment in its affiliated company and includes in income its
equity in the earnings of the affiliated company.
1.4 Property and Equipment is stated at cost. For financial
reporting purposes, depreciation is computed using principally
the accelerated method over the useful lives of the assets which
are as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Autos and Trucks 3 to 4
Machinery and Equipment 5 to 10
Office Furniture and Fixtures 5 to 10
Computer Hardware and Software 5
Buildings 20
</TABLE>
1.5 The Company participates in a deferred cash [401(k)] plan
covering full time employees who have one year of service and
are age twenty-one or older. Company contributions to the Plan
are determined annually by the Board of Directors. Participants
are immediately one hundred percent (100%) vested. The Company
does not have any unfunded liability under this Plan. The
Company made contributions to the Plan for the year ended
December 31, 1992 of $53,617.
1.6 Deferred income taxes are recognized for differences in the time
of recording items of income and expense in the financial
records and their inclusion in or deduction from taxable income.
2. Loans Payable - Affiliate:
Prior to June 30, 1992, the Company had a loan agreement with an
affiliated company, Owen Steel Company, Inc., whereby loans were made
bearing interest at prime less 1/4%. There were no outstanding loans
payable at December 31, 1992.
3. Notes Payable:
3.1 The Company has entered into a loan agreement for the issuance
of a $1,000,000 Industrial Revenue Bond. In accordance with the
agreement, the bond was assigned to and purchased by First
Citizens Bank and Trust Company
<PAGE> 54
EXHIBIT E
Sheet 2
SOUTH CAROLINA STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1992
3. Notes Payable (Continued):
3.1 (Continued):
of S. C., Greenville, S. C. The bond is due in annual
installments of principal and quarterly installments of interest
at sixty-five (65%) percent of the bank's prime rate on the
unpaid balance. The bond is collateralized by a mortgage on
the real estate and improvements owned by the Company plus all
machinery purchased with the bond proceeds. At December 31,
1992, the outstanding balance on this loan was $200,000,
maturing in two (2) principal payments of $100,000 through 1994.
3.2 The Company has unsecured demand loans with First Citizens Bank
and Trust Company of S. C., Greenville, S. C. and they bear
interest at the bank's prime interest rate. The outstanding
balance of these loans was $1,276,000 at December 31, 1992.
<PAGE> 55
SOUTH CAROLINA STEEL CORPORATION
FINANCIAL REPORT
DECEMBER 31, 1991
<PAGE> 56
SOUTH CAROLINA STEEL CORPORATION
INDEX
YEAR ENDED DECEMBER 31, 1991
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
EXHIBITS
A BALANCE SHEET
B STATEMENT OF INCOME
C STATEMENT OF RETAINED EARNINGS
D STATEMENT OF CASH FLOWS
E NOTES TO FINANCIAL STATEMENTS
<PAGE> 57
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
South Carolina Steel Corporation
Greenville, South Carolina
We have audited the accompanying balance sheet of South Carolina Steel
Corporation as of December 31, 1991, and the related statements of income,
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Carolina Steel
Corporation as of December 31, 1991, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ DERRICK, STUBBS & STITH
Derrick, Stubbs & Stith
February 6, 1992
<PAGE> 58
EXHIBIT A
SOUTH CAROLINA STEEL CORPORATION
BALANCE SHEET
DECEMBER 31, 1991
<TABLE>
<CAPTION>
ASSETS
------
<S> <C> <C>
Current Assets:
- --------------
Cash $ 67,943
Accounts Receivable - Customers,
Less, Allowance for Doubtful Accounts
of $23,857 3,246,935
Accounts Receivable - Other 4,832
Income Tax Refunds Due 247,240
Inventories 1,511,313
Prepaid Expense 4,346
---------------
$ 5,082,609
Investments:
- -----------
Common Stock of Owen Electric Steel
Company of South Carolina (12,224 shares
of $10 par value at equity in net
assets - cost $125,295) 2,523,070
Property and Equipment:
- ----------------------
Land $ 82,730
Offices and Plants 1,382,697
Machinery and Equipment 2,227,754
Furniture and Fixtures 297,843
Autos and Trucks 727,080
Other 110,071
---------------
Total Cost $ 4,828,175
Less, Accumulated Depreciation 3,424,466
---------------
1,403,709
Other Assets:
- ------------
Fixed Assets Under Construction $ 3,995
Deferred Charges 39,590
Other Assets 15,000
---------------
58,585
----------------
Total Assets $ 9,067,973
================
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current Liabilities:
- -------------------
Accounts Payable $ 1,585,487
Notes Payable - Amount Due
Within One Year (Note 3) 101,000
Loans Payable - Affiliate (Note 2) 250,000
Sales Taxes Payable 44,551
Accrued Expenses 82,733
Other Liabilities 3,398
---------------
2,067,169
Long-Term Liabilities:
- ---------------------
Notes Payable - Amount Due After One Year
(Note 3) 200,000
--------------
Total Liabilities $ 2,267,169
Deferred Income Taxes 855,327
- ---------------------
Stockholder's Equity:
- --------------------
Common Stock (2,500 shares of $10 par
value authorized and issued) $ 25,000
Retained Earnings - Exhibit C 6,755,042
--------------
6,780,042
Less, Cost of Treasury Stock
(1,000 shares) (834,565)
--------------
5,945,477
--------------
Total Liabilities and Stockholder's
Equity $ 9,067,973
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 59
EXHIBIT B
SOUTH CAROLINA STEEL CORPORATION
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1991
<TABLE>
<CAPTION>
% of
Amount Sales
-------- -------
<S> <C> <C>
Sales $21,020,594 100.00
Cost of Sales 14,099,516 67.07
----------- -------
Gross Income $ 6,921,078 32.93
Manufacturing Expenses 4,484,409 21.34
----------- -------
Manufacturing Income 2,436,669 11.59
General and Administrative Expenses 3,044,034 14.48
----------- -------
Net Operating Income (Loss) $ (607,365) (2.89)
Other Income and Expenses - Net 150,392 .72
----------- -------
Net Income (Loss) Before Taxes $ (456,973) (2.17)
Income Taxes (Refunds) (95,157) (.45)
----------- -------
Net Income (Loss) Before Equity in Net
Income of Affiliated Company $ (361,816) (1.72)
Equity in Net Income (Loss) of
Affiliated Company (157,892) (.75)
----------- ------
Net Income (Loss) - Exhibit C $ (519,708) (2.47)
=========== =======
</TABLE>
See Notes to Financial Statements.
<PAGE> 60
EXHIBIT C
SOUTH CAROLINA STEEL CORPORATION
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1991
<TABLE>
<S> <C>
Retained Earnings, Beginning $7,274,750
Net Income (Loss) - Exhibit B (519,708)
----------
Retained Earnings, Ending - Exhibit A $6,755,042
==========
</TABLE>
See Notes to Financial Statements.
<PAGE> 61
EXHIBIT D
SOUTH CAROLINA STEEL CORPORATION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1991
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
- ------------------------------------
Net Income (Loss) - Exhibit B $ (519,708)
Adjustments to Reconcile Net Income
(Loss) to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 439,913
Deferred Income Taxes (85,930)
Allowance for Doubtful Accounts (6,926)
Gain on Disposal of Property and
Equipment (36,204)
Undistributed Loss of Affiliated Company 251,821
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 829,418
(Increase) Decrease in Inventories (204,132)
(Increase) Decrease in Other Assets 2,859
Increase (Decrease) in Accounts
Payable and Accrued Expenses (722,033)
--------------
Net Cash (Used in) Operating
Activities $ (50,922)
--------------
Cash Flows from Investing Activities:
- ------------------------------------
Purchases of Property and Equipment $ (352,002)
Proceeds from Sale of Property and Equipment 36,856
--------------
Net Cash (Used in) Investing Activities $ (315,146)
--------------
Cash Flows from Financing Activities:
- ------------------------------------
Payment on Long-Term Debt $ (100,000)
Increase in Short-Term Borrowings 250,000
--------------
Net Cash Provided by Financing Activities $ 150,000
--------------
Net (Decrease) in Cash $ (216,068)
- ----------------------
Cash:
- ----
Beginning 284,011
--------------
Ending $ 67,943
==============
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash Payments for:
Interest $ 32,154
==============
Income Taxes (Net of Refunds) $ 89,348
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 62
EXHIBIT E
Sheet 1
SOUTH CAROLINA STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1991
1. Significant Accounting Policies:
1.1 Profits on contracts are recorded on the basis of the
Company's estimates of projected revenue and costs on the
percentage of completion method applied to individual
contracts. Any revisions that are required in contract
estimates during the course of the work are reflected in the
accounting period in which the facts that require the
revision become known.
1.2 Inventories are stated at the lower of cost or market, using
principally the last-in, first-out method (LIFO).
1.3 The Company uses the equity method of accounting for its
investment in its affiliated company and includes in income
its equity in the earnings of the affiliated company.
1.4 Property and Equipment is stated at cost. For financial
reporting purposes, depreciation is computed using
principally the accelerated method over the useful lives of
the assets which are as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Autos and Trucks 3 to 4
Machinery and Equipment 5 to 10
Office Furniture and Fixtures 5 to 10
Computer Hardware and Software 5
Buildings 20
</TABLE>
1.5 The Company participates in a deferred cash [401(k)] plan
covering full time employees who have one year of service
and are age twenty-one or older. Company contributions to
the Plan are determined annually by the Board of Directors.
Participants are immediately one hundred percent (100%)
vested. The Company does not have any unfunded liability
under this Plan. The Company made contributions to the Plan
for the year ended December 31, 1991 of $60,733.
1.6 Deferred income taxes are recognized for differences in the
time of recording items of income and expense in the
financial records and their inclusion in or deduction from
taxable income.
2. Loans Payable - Affiliate:
The Company has a loan agreement with an affiliated company, Owen
Steel Company, Inc., whereby loans are made bearing interest at prime
less 1/4%. The outstanding loan payable to the affiliated company
amounted to $250,000 at December 31, 1991.
3. Notes Payable:
3.1 The Company has entered into a loan agreement for the
issuance of a $1,000,000 Industrial Revenue Bond. In
accordance with the agreement, the bond was assigned to and
purchased by First Citizens Bank and Trust Company
<PAGE> 63
EXHIBIT E
Sheet 2
SOUTH CAROLINA STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1991
3. Notes Payable (Continued):
3.1 (Continued):
of S. C., Greenville, S. C. The bond is due in annual
installments of principal and quarterly installments of
interest at sixty-five (65%) percent of the bank's prime
rate on the unpaid balance. The bond is collateralized by a
mortgage on the real estate and improvements owned by the
Company plus all machinery purchased with the bond proceeds.
At December 31, 1991, the outstanding balance on this loan
was $300,000, maturing in three (3) principal payments of
$100,000 through 1994.
3.2 The Company has unsecured demand loans with First Citizens
Bank and Trust Company of S. C., Greenville, S. C. and they
bear interest at the bank's prime interest rate. The
outstanding balance of these loans was $1,000 at December
31, 1991.
<PAGE> 64
OWEN MISCELLANEOUS METALS, INC.
FINANCIAL REPORT
DECEMBER 31, 1993
<PAGE> 65
OWEN MISCELLANEOUS METALS, INC.
INDEX
YEAR ENDED DECEMBER 31, 1993
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
EXHIBITS
A BALANCE SHEET
B STATEMENT OF INCOME
C STATEMENT OF RETAINED EARNINGS
D STATEMENT OF CASH FLOWS
E NOTES TO FINANCIAL STATEMENTS
<PAGE> 66
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Owen Miscellaneous Metals, Inc.
Cayce, South Carolina
We have audited the accompanying balance sheet of Owen Miscellaneous Metals,
Inc. as of December 31, 1993, and the related statements of income, retained
earnings, and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Owen Miscellaneous Metals,
Inc. as of December 31, 1993, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ DERRICK, STUBBS & STITH
Derrick, Stubbs & Stith
March 14, 1994
<PAGE> 67
EXHIBIT A
OWEN MISCELLANEOUS METALS, INC.
BALANCE SHEET
DECEMBER 31, 1993
<TABLE>
<S> <C> <C>
ASSETS
------
Current Assets:
- --------------
Cash $ 605,044
Accounts Receivable - Customers,
Less, Allowance for Doubtful Accounts
of $ 4,732 579,520
Accounts Receivable - Other 2,220
Inventories 534,766
Assets Purchased for Resale 615,981
Prepaid Expense 1,524
-------------
$ 2,339,055
Property and Equipment:
- ----------------------
Land $ 140,568
Offices and Plants 371,199
Machinery and Equipment 611,024
Furniture and Fixtures 96,464
Autos and Trucks 193,738
Other 11,822
-------------
Total Cost $ 1,424,815
Less, Accumulated Depreciation 1,135,221
-------------
289,594
--------------
Other Assets:
- ------------
Fixed Assets Under Construction $ 14,831
Deferred Charges 10,067
Other Assets 87
-------------
24,985
--------------
Total Assets $ 2,653,634
==============
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
Current Liabilities
- -------------------
Accounts Payable $ 413,254
Notes Payable - Amount Due Within One Year
(Note 2) 590,000
Payroll Taxes Payable 8,076
Sales Taxes Payable 3,294
Accrued Expenses 43,044
Other Liabilities 718
-------------
$ 1,058,386
Long-Term Liabilities:
- ---------------------
Notes Payable - Amount Due After One Year
(Note 2) 10,000
--------------
Total Liabilities $ 1,068,386
Stockholder's Equity:
- --------------------
Common Stock (10,000 shares of $ 10 par
value authorized; 3,600 shares
issued and outstanding) $ 36,000
Retained Earnings - Exhibit C 1,549,248
-------------
1,585,248
--------------
Total Liabilities and Stockholder's Equity $ 2,653,634
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 68
EXHIBIT B
OWEN MISCELLANEOUS METALS, INC.
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
% of
Amount Sales
------------------- ------
<S> <C> <C>
Sales $ 8,366,975 100.00
Cost of Sales 4,821,487 57.63
------------------- ------
Gross Income $ 3,545,488 42.37
Manufacturing Expenses 2,320,556 27.73
------------------- ------
Manufacturing Income $ 1,224,932 14.64
General and Administrative Expenses 1,391,835 16.64
------------------- ------
Net Operating Income (Loss) $ (166,903) (2.00)
Other Income and Expenses - Net 196,238 2.35
------------------- ------
Net Income - Exhibit C $ 29,335 .35
=================== ======
</TABLE>
See Notes to Financial Statements.
<PAGE> 69
EXHIBIT C
OWEN MISCELLANEOUS METALS, INC.
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
Retained Earnings, Beginning $ 1,546,373
Net Income - Exhibit B 29,335
Dividends Paid (26,460)
--------------
Retained Earnings, Ending - Exhibit A $ 1,549,248
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 70
EXHIBIT D
OWEN MISCELLANEOUS METALS, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
- ------------------------------------
Net Income - Exhibit B $ 29,335
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used-in) Operating Activities:
Depreciation and Amortization 53,368
Allowance for Doubtful Accounts 598
Gain on Sale of Purchased Assets (260,001)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 609,831
(Increase) Decrease in Inventories 177,062
(Increase) Decrease in Other Assets 260
Increase (Decrease) in Accounts Payable and Accrued Expenses (282,229)
--------------
Net Cash Provided by Operating Activities $ 328,224
--------------
Cash Flows from Investing Activities:
- ------------------------------------
Purchases of Property and Equipment $ (961,845)
Proceeds from Sale of Property and Equipment 1,495,000
--------------
Net Cash Provided by Investing Activities $ 533,155
--------------
Cash Flows from Financing Activities:
- ------------------------------------
Payments on Long-Term Debt $ (5,000)
Payments on Short-Term Debt (265,000)
Dividends Paid (26,460)
--------------
Net Cash (Used-in) Financing Activities $ (296,460)
--------------
Net Increase in Cash $ 564,919
- --------------------
Cash:
- ----
Beginning 40,125
--------------
Ending $ 605,044
==============
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash Payments for:
Interest $ 47,415
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 71
EXHIBIT E
Sheet 1
OWEN MISCELLANEOUS METALS, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1993
1. Significant Accounting Policies:
1.1 Profits on contracts are recorded on the basis of the Company's
estimate of projected revenue and costs on the percentage of
completion method applied to individual contracts. Any
revisions that are required in contract estimates during the
course of the work are reflected in the accounting period in
which the facts that require the revision become known.
1.2 The Company regularly buys and sells used metal fabricating
equipment for profit. Sales on these transactions are
recognized when deliveries are made.
1.3 Inventories are stated at the lower of cost or market, using
principally the last-in, first-out method (LIFO).
1.4 Property and Equipment is stated at cost. For financial
reporting purposes, depreciation is computed using principally
the accelerated method over the useful lives of the assets which
are as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Autos and Trucks 3 to 4
Machinery and Equipment 5 to 10
Office Furniture and Fixtures 5 to 10
Computer Hardware and Software 5
Buildings 20
</TABLE>
1.5 The Company participates in a deferred cash [401(k)] plan
covering full time employees who have one year of service and
are age twenty-one or older. Company contributions to the Plan
are determined annually by the Board of Directors. Participants
are immediately one hundred percent (100%) vested. The Company
does not have any unfunded liability under this Plan. The
Company made contributions to the Plan for the year ended
December 31, 1993 of $ 32,405.
2. Notes Payable:
2.1 On January 17, 1986, Owen Miscellaneous Metals, Inc. entered
into an agreement with Beatrice Parker to purchase approximately
4 acres of land near its plant site in Cayce, S. C. In addition
to a cash down payment, the Company issued a note in the amount
of $ 50,000 payable in ten (10) annual payments beginning
January 17, 1987 of principal plus interest at the rate of nine
percent (9%). At December 31, 1993, the outstanding balance on
this loan was $15,000 maturing in three (3) annual principal
payments of $5,000 through 1996.
2.2 On July 1, 1992, the Company entered into a demand note
agreement with The South Carolina National Bank whereby loans up
to $1,000,000 were made bearing interest at the bank's prime
rate. This note was reduced to $585,000 on November 23, 1993.
The outstanding unpaid principal and accrued interest are
payable on demand. The outstanding balance on this loan was
$585,000 at December 31, 1993.
<PAGE> 72
EXHIBIT E
Sheet 2
OWEN MISCELLANEOUS METALS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993
3. Income Taxes:
Beginning with the year 1982, the stockholders elected, under Section 1372
of the Internal Revenue Code, to be taxed as a small business corporation
and have the Corporation's taxable income taxed to the shareholders
individually rather than to the Corporation. Beginning with the year
1984, this election was made for State purposes.
4. Major Customer:
The Company regularly buys and sells used metal fabricating equipment for
profit. The majority of these transactions are with a single company.
Sales of this equipment, along with their related costs, are netted and
reported in the Statement of Income under the caption "Gain on Sale of
Purchased Assets". Inventories of these assets are reported in the
Balance Sheet under the caption "Assets Purchased for Resale". No
overhead or other costs other than the purchase price of the assets has
been applied to these operations in calculating gains on sales.
Sales of purchased assets for the year ended December 31, 1993 were
$1,494,999. These sales comprised 15% of total revenue for the year
ended December 31, 1993.
<PAGE> 73
OWEN MISCELLANEOUS METALS, INC.
FINANCIAL REPORT
DECEMBER 31, 1992
<PAGE> 74
OWEN MISCELLANEOUS METALS, INC.
INDEX
YEAR ENDED DECEMBER 31, 1992
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
EXHIBITS
A BALANCE SHEET
B STATEMENT OF INCOME
C STATEMENT OF RETAINED EARNINGS
D STATEMENT OF CASH FLOWS
E NOTES TO FINANCIAL STATEMENTS
<PAGE> 75
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Owen Miscellaneous Metals, Inc.
Cayce, South Carolina
We have audited the accompanying balance sheet of Owen Miscellaneous Metals,
Inc. as of December 31, 1992, and the related statements of income, retained
earnings, and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Owen Miscellaneous Metals,
Inc. as of December 31, 1992, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ DERRICK, STUBBS & STITH
Derrick, Stubbs & Stith
March 11, 1993
<PAGE> 76
EXHIBIT A
OWEN MISCELLANEOUS METALS, INC.
BALANCE SHEET
DECEMBER 31, 1992
<TABLE>
<S> <C> <C>
ASSETS
------
Current Assets:
- --------------
Cash $ 40,125
Accounts Receivable - Customers,
Less, Allowance for Doubtful Accounts
of $ 4,134 1,187,618
Accounts Receivable - Other 4,552
Inventories 711,828
Prepaid Expense 1,784
-------------
$ 1,945,907
Property and Equipment:
- ----------------------
Land $ 140,568
Offices and Plants 371,199
Machinery and Equipment 570,771
Furniture and Fixtures 93,549
Autos and Trucks 193,738
Other 11,822
-------------
Total Cost $ 1,381,647
Less, Accumulated Depreciation 1,085,140
-------------
296,507
Other Assets:
- ------------
Fixed Assets Under Construction $ 14,519
Assets Purchased for Resale 932,614
Deferred Charges 13,354
Other Assets 87
-------------
960,574
--------------
Total Assets $ 3,202,988
==============
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
Current Liabilities
- -------------------
Accounts Payable $ 700,264
Notes Payable - Amount Due Within One Year
(Note 3) 855,000
Payroll Taxes Payable 9,119
Sales Taxes Payable 5,613
Accrued Expenses 34,813
Other Liabilities 806
-------------
$ 1,605,615
Long-Term Liabilities:
- ---------------------
Notes Payable - Amount Due After One Year
(Note 3) 15,000
--------------
Total Liabilities $ 1,620,615
Stockholder's Equity:
- --------------------
Common Stock (4,000 shares of $ 10 par
value authorized; 3,600 shares
issued and outstanding) $ 36,000
Retained Earnings - Exhibit C 1,546,373
-------------
1,582,373
--------------
Total Liabilities and Stockholder's Equity $ 3,202,988
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 77
EXHIBIT B
OWEN MISCELLANEOUS METALS, INC.
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
% of
Amount Sales
------------------- ------
<S> <C> <C>
Sales $ 7,480,050 100.00
Cost of Sales 4,088,981 54.66
------------------- ------
Gross Income $ 3,391,069 45.34
Manufacturing Expenses 2,295,356 30.69
------------------- ------
Manufacturing Income $ 1,095,713 14.65
General and Administrative Expenses 1,303,914 17.43
------------------- ------
Net Operating Income (Loss) $ (208,201) (2.78)
Other Income and Expenses - Net 228,293 3.05
------------------- ------
Net Income - Exhibit C $ 20,092 .27
=================== =======
</TABLE>
See Notes to Financial Statements.
<PAGE> 78
EXHIBIT C
OWEN MISCELLANEOUS METALS, INC.
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1992
<TABLE>
<S> <C>
Retained Earnings, Beginning $ 1,625,281
Net Income - Exhibit B 20,092
Dividends Paid (99,000)
--------------
Retained Earnings, Ending - Exhibit A $ 1,546,373
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 79
EXHIBIT D
OWEN MISCELLANEOUS METALS, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1992
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
- ------------------------------------
Net Income - Exhibit B $ 20,092
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used-in) Operating Activities:
Depreciation and Amortization 60,462
Allowance for Doubtful Accounts (2,657)
Loss on Disposal of Property and Equipment 392
Gain on Sale of Purchased Assets (265,663)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 326,733
(Increase) Decrease in Inventories (136,031)
(Increase) Decrease in Other Assets (762)
Increase (Decrease) in Accounts Payable and Accrued Expenses 98,539
----------------
Net Cash Provided by Operating Activities $ 101,105
----------------
Cash Flows from Investing Activities:
- ------------------------------------
Purchases of Property and Equipment $ (1,377,739)
Proceeds from Sale of Property and Equipment 1,168,339
----------------
Net Cash (Used in) Investing Activities $ (209,400)
----------------
Cash Flows from Financing Activities:
- ------------------------------------
Payments on Long-Term Debt $ (5,000)
Payments on Short-Term Debt 203,000
Dividends Paid (99,000)
----------------
Net Cash Provided by Financing Activities $ 99,000
----------------
Net (Decrease) in Cash $ (9,295)
- ----------------------
Cash:
- ----
Beginning 49,420
----------------
Ending $ 40,125
================
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash Payments for:
Interest $ 45,736
================
</TABLE>
See Notes to Financial Statements.
<PAGE> 80
EXHIBIT E
Sheet 1
OWEN MISCELLANEOUS METALS, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1992
1. Significant Accounting Policies:
1.1 Profits on contracts are recorded on the basis of the Company's
estimate of projected revenue and costs on the percentage of
completion method applied to individual contracts. Any
revisions that are required in contract estimates during the
course of the work are reflected in the accounting period in
which the facts that require the revision become known.
1.2 The Company regularly buys and sells used metal fabricating
equipment for profit. Sales on these transactions are
recognized when deliveries are made.
1.3 Inventories are stated at the lower of cost or market, using
principally the last-in, first-out method (LIFO).
1.4 Property and Equipment is stated at cost. For financial
reporting purposes, depreciation is computed using principally
the accelerated method over the useful lives of the assets which
are as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Autos and Trucks 3 to 4
Machinery and Equipment 5 to 10
Office Furniture and Fixtures 5 to 10
Computer Hardware and Software 5
Buildings 20
</TABLE>
1.5 The Company participates in a deferred cash [401(k)] plan
covering full time employees who have one year of service and
are age twenty-one or older. Company contributions to the Plan
are determined annually by the Board of Directors. Participants
are immediately one hundred percent (100%) vested. The Company
does not have any unfunded liability under this Plan. The
Company made contributions to the Plan for the year ended
December 31, 1992 of $ 35,058.
2. Loans Payable - Affiliate:
Prior to June 30, 1992, the Company had a loan agreement with an
affiliated company, Owen Steel Company, Inc., whereby loans are made
bearing interest at prime less 1/4%. There was no outstanding loan
balance due affiliate at December 31, 1992.
3. Notes Payable:
2.1 On January 17, 1986, Owen Miscellaneous Metals, Inc. entered
into an agreement with Beatrice Parker to purchase approximately
4 acres of land near its plant site in Cayce, S. C. In addition
to a cash down payment, the Company issued a note in the amount
of $ 50,000 payable in ten (10) annual payments beginning
January 17, 1987 of principal plus interest at the rate of nine
percent (9%). At December 31, 1992, the outstanding balance on
this loan was $20,000 maturing in four (4) annual principal
payments of $5,000 through 1996.
<PAGE> 81
EXHIBIT E
Sheet 2
OWEN MISCELLANEOUS METALS, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1992
2.2 On July 1, 1992, the Company entered into an unsecured revolving
commercial loan agreement with The South Carolina National Bank
whereby loans up to $1,000,000 are made bearing interest at the
bank's prime rate. The outstanding unpaid principal and accrued
interest are payable on demand. At December 31, 1992, the
outstanding balance on this loan was $850,000.
4. Income Taxes:
Beginning with the year 1982, the stockholders elected, under Section 1372
of the Internal Revenue Code, to be taxed as a small business corporation
and have the Corporation's taxable income taxed to the shareholders
individually rather than to the Corporation. Beginning with the year
1984, this election was made for State purposes.
5. Major Customer:
The Company regularly buys and sells used metal fabricating equipment for
profit. The majority of these transactions are with a single company.
Sales of this equipment, along with their related costs, are netted and
reported in the Statement of Income under the caption "Gain on Sale of
Purchased Assets". Inventories of these assets are reported in the
Balance Sheet under the caption "Assets Purchased for Resale". No
overhead or other costs other than the purchase price of the assets has
been applied to these operations in calculating gains on sales.
Sales of purchased assets for the year ended December 31, 1992 were
$1,168,339. These sales comprised 14% of total revenue for the year ended
December 31, 1992.
<PAGE> 82
OWEN MISCELLANEOUS METALS, INC.
FINANCIAL REPORT
DECEMBER 31, 1991
<PAGE> 83
OWEN MISCELLANEOUS METALS, INC.
INDEX
YEAR ENDED DECEMBER 31, 1991
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
EXHIBITS
A BALANCE SHEET
B STATEMENT OF INCOME
C STATEMENT OF RETAINED EARNINGS
D STATEMENT OF CASH FLOWS
E NOTES TO FINANCIAL STATEMENTS
<PAGE> 84
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Owen Miscellaneous Metals, Inc.
Cayce, South Carolina
We have audited the accompanying balance sheet of Owen Miscellaneous Metals,
Inc. as of December 31, 1991, and the related statements of income, retained
earnings, and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Owen Miscellaneous Metals,
Inc. as of December 31, 1991, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ DERRICK, STUBBS & STITH
Derrick, Stubbs & Stith
February 19, 1992
<PAGE> 85
EXHIBIT A
OWEN MISCELLANEOUS METALS, INC.
BALANCE SHEET
DECEMBER 31, 1991
<TABLE>
<S> <C> <C>
ASSETS
------
Current Assets:
- --------------
Cash $ 49,420
Accounts Receivable - Customers,
Less, Allowance for Doubtful Accounts
of $ 6,791 1,512,985
Accounts Receivable - Other 3,260
Inventories 575,797
Prepaid Expense 1,023 $ 2,142,485
-------------
Property and Equipment:
- ----------------------
Land $ 140,568
Offices and Plants 368,099
Machinery and Equipment 539,143
Furniture and Fixtures 82,940
Autos and Trucks 193,738
Other 11,822
-------------
Total Cost $ 1,336,310
Less, Accumulated Depreciation 1,029,226
-------------
307,084
Other Assets:
- ------------
Fixed Assets Under Construction $ 18,659
Assets Purchased for Resale 513,278
Deferred Charges 3,763
Other Assets 87
-------------
535,787
-------------
Total Assets $ 2,985,356
=============
LIABILITIES AND STOCKHOLDER'S EQUITY
- -------------------------------------
Current Liabilities:
- --------------------
Accounts Payable $ 570,278
Notes Payable - Amount Due Within One Year
(Note 3) 5,000
Loans Payable - Affiliate (Note 2) 647,000
Payroll Taxes Payable 11,908
Sales Taxes Payable 4,632
Accrued Expenses 64,294
Other Liabilities 963
-------------
$ 1,304,075
Long-Term Liabilities:
- ---------------------
Notes Payable - Amount Due After One Year
(Note 3) 20,000
-------------
Total Liabilities $ 1,324,075
Stockholder's Equity:
- --------------------
Common Stock (4,000 shares of $ 10 par
value authorized; 3,600 shares
issued and outstanding) $ 36,000
Retained Earnings - Exhibit C 1,625,281
-------------
1,661,281
-------------
Total Liabilities and Stockholder's Equity $ 2,985,356
=============
</TABLE>
See Notes to Financial Statements.
<PAGE> 86
EXHIBIT B
OWEN MISCELLANEOUS METALS, INC.
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1991
<TABLE>
<CAPTION>
% of
Amount Sales
------------------- ------
<S> <C> <C>
Sales $ 8,691,894 100.00
Cost of Sales 5,180,164 59.60
------------------- ------
Gross Income $ 3,511,730 40.40
Manufacturing Expenses 2,093,068 24.08
------------------- ------
Manufacturing Income $ 1,418,662 16.32
General and Administrative Expenses 1,421,698 16.35
------------------- ------
Net Operating Income (Loss) $ (3,036) (.03)
Other Income and Expenses - Net 103,826 1.19
------------------- ------
Net Income - Exhibit C $ 100,790 1.16
=================== ======
</TABLE>
See Notes to Financial Statements.
<PAGE> 87
EXHIBIT C
OWEN MISCELLANEOUS METALS, INC.
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1991
<TABLE>
<S> <C>
Retained Earnings, Beginning $ 1,589,291
Net Income - Exhibit B 100,790
Dividends Paid (64,800)
Retained Earnings, Ending - Exhibit A $ 1,625,281
===============
</TABLE>
See Notes to Financial Statements.
<PAGE> 88
EXHIBIT D
OWEN MISCELLANEOUS METALS, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1991
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
- ------------------------------------
Net Income - Exhibit B $ 100,790
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used-in) Operating Activities:
Depreciation and Amortization 73,969
Allowance for Doubtful Accounts 357
Gain on Sale of Purchased Assets (113,012)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (781,769)
(Increase) Decrease in Inventories 291,045
(Increase) Decrease in Other Assets (439)
Increase (Decrease) in Accounts Payable and Accrued Expenses 323,104
--------------
Net Cash (Used in) Operating Activities $ (105,955)
--------------
Cash Flows from Investing Activities:
- ------------------------------------
Purchases of Property and Equipment $ (766,948)
Proceeds from Sale of Property and Equipment 437,465
--------------
Net Cash (Used in) Investing Activities $ (329,483)
--------------
Cash Flows from Financing Activities:
- ------------------------------------
Payments on Long-Term Debt $ (5,000)
Loans from Affiliate 522,000
Dividends Paid (64,800)
--------------
Net Cash Provided by Financing Activities $ 452,200
--------------
Net Increase in Cash $ 16,762
- --------------------
Cash:
- ----
Beginning 32,658
--------------
Ending $ 49,420
==============
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash Payments for:
Interest $ 8,352
==============
</TABLE>
See Notes to Financial Statements.
<PAGE> 89
EXHIBIT E
OWEN MISCELLANEOUS METALS, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1991
1. Significant Accounting Policies:
1.1 Profits on contracts are recorded on the basis of the Company's
estimate of projected revenue and costs on the percentage of
completion method applied to individual contracts. Any
revisions that are required in contract estimates during the
course of the work are reflected in the accounting period in
which the facts that require the revision become known.
1.2 Inventories are stated at the lower of cost or market, using
principally the last-in, first-out method (LIFO).
1.3 Property and Equipment is stated at cost. For financial
reporting purposes, depreciation is computed using principally
the accelerated method over the useful lives of the assets which
are as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Autos and Trucks 3 to 4
Machinery and Equipment 5 to 10
Office Furniture and Fixtures 5 to 10
Computer Hardware and Software 5
Buildings 20
</TABLE>
1.4 The Company participates in a deferred cash [401(k)] plan
covering full time employees who have one year of service and
are age twenty-one or older. Company contributions to the Plan
are determined annually by the Board of Directors. Participants
are immediately one hundred percent (100%) vested. The Company
does not have any unfunded liability under this Plan. The
Company made contributions to the Plan for the year ended
December 31, 1991 of $ 34,896.
2. Loans Payable - Affiliate:
The Company has a loan agreement with an affiliated company, Owen Steel
Company, Inc., whereby loans are made bearing interest at prime less 1/4%.
The outstanding loan payable to the affiliated company amounted to
$647,000 at December 31, 1991.
3. Notes Payable:
On January 17, 1986, Owen Miscellaneous Metals, Inc. entered into an
agreement with Beatrice Parker to purchase approximately 4 acres of land
near its plant site in Cayce, S. C. In addition to a cash down payment,
the Company issued a note in the amount of $ 50,000 payable in ten (10)
annual payments beginning January 17, 1987 of principal plus interest at
the rate of nine percent (9%). At December 31, 1991, the outstanding
balance on this loan was $25,000 maturing in five (5) annual principal
payments of $5,000 through 1996.
4. Income Taxes:
Beginning with the year 1982, the stockholders elected, under Section 1372
of the Internal Revenue Code, to be taxed as a small business corporation
and have the Corporation's taxable income taxed to the shareholders
individually rather than to the Corporation. Beginning with the year
1984, this election was made for State purposes.
<PAGE> 90
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED COMPARATIVE BALANCE SHEETS
SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
September 30,
Assets 1994 1993
------ ---------------- ----------------
<S> <C> <C>
Current Assets:
Cash on Hand and In Banks $4,745,703 $3,160,267
Accounts Receivable - Customers 27,854,286 33,147,697
Accounts Receivable - Other 90,659 93,529
Inventories 15,978,083 21,202,419
Prepaid Expenses 413,923 112,807
Income Tax Refunds Due 137,996 5,332,300
---------------- ----------------
Total Current Assets 49,220,650 63,049,019
---------------- ----------------
Long-Term Investments:
Other Investments 75,000 75,000
---------------- ----------------
Property and Equipment:
Land 2,014,145 2,009,145
Offices and Plants 13,752,959 13,674,499
Machinery and Equipment 63,678,706 62,930,565
Furniture and Fixtures 2,773,504 2,577,112
Autos and Trucks 5,581,270 5,916,632
Other 1,404,141 1,405,138
---------------- ----------------
Total 89,204,725 88,513,091
Less, Accumulated Depreciation 51,955,484 47,226,248
---------------- ----------------
Total Property and Equipment 37,249,241 41,286,843
---------------- ----------------
Other Assets:
Cash Surrender Value of Life Insurance 2,762,771 2,699,674
Fixed Assets Under Construction 502,283 395,174
Deferred Charges 373,216 331,251
Other Assets 3,340 9,130
---------------- ----------------
Total Other Assets 3,641,610 3,435,229
---------------- ----------------
---------------- ----------------
Total Assets $90,186,501 $107,846,091
================ ================
</TABLE>
<TABLE>
<CAPTION>
September 30,
Liabilities 1994 1993
----------- ---------------- ----------------
<S> <C> <C>
Current Liabilities:
Accounts Payable $18,269,635 $22,589,875
Short-Term Notes Payable 10,000,000 10,000,000
Loans Payable-Due in One Year 22,051,597 4,278,851
Other Payables and Accrued Expenses 8,412,555 2,338,169
Provision for Waste Removal 5,085,669 625,000
---------------- ----------------
Total Current Liabilities 63,819,456 39,831,895
---------------- ----------------
Long-Term Liabilities:
Loans Payable-Due After One Year 17,730,894
Insurance Loans Payable 2,278,921
Other Long-Term Liabilities 760,853 742,921
---------------- ----------------
Total Long-Term Liabilities 760,853 20,752,736
---------------- ----------------
Total Liabilities 64,580,309 60,584,631
---------------- ----------------
Deferred Income Taxes 1,320,012 699,967
---------------- ----------------
Minority Interests 1,406,512 2,212,240
---------------- ----------------
Stockholders' Equity:
Capital Stock:
Class A Voting Common 865,500 865,500
Class B Non-Voting Common 2,820,000 2,820,000
Additional Paid In Capital 60,000 60,000
Retained Earnings 21,533,841 43,003,426
---------------- ----------------
25,279,341 46,748,926
Less, Treasury Stock 2,399,673 2,399,673
---------------- ----------------
Total Stockholders' Equity 22,879,668 44,349,253
---------------- ----------------
Total Liabilities and
Stockholders' Equity $90,186,501 $107,846,091
================ ================
</TABLE>
<PAGE> 91
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------------ ------------------------
% of % of
Amount Sales Amount Sales
--------------- -------- --------------- --------
<S> <C> <C> <C> <C>
Sales $146,110,569 100.00 $157,051,631 100.00
Cost of Sales 135,562,766 92.78 146,306,816 93.16
---------------- -------- ---------------- --------
Gross Income 10,547,803 7.22 10,744,815 6.84
General and Administrative Expenses 26,290,741 17.99 25,603,626 16.30
---------------- -------- ---------------- --------
Net Operating Income (Loss) (15,742,938) (10.77) (14,858,811) (9.46)
Other Income and (Expenses) - Net (2,277,287) (1.56) (2,011,446) (1.28)
---------------- -------- ---------------- --------
Net Income (Loss) Before Income Taxes (18,020,225) (12.33) (16,870,257) (10.74)
Income Tax Expense (Benefit) 467,314 0.32 (5,711,204) (3.64)
---------------- -------- ---------------- --------
Net Income (Loss) Before Minority Interests (18,487,539) (12.65) (11,159,053) (7.11)
Minority Interests (627,965) (0.43) (882,466) (0.56)
---------------- -------- ---------------- --------
Net Income (Loss) ($17,859,574) (12.22) ($10,276,587) (6.54)
========================= =========================
</TABLE>
<PAGE> 92
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
SEPTEMBER 30, 1994 AND 1993
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1994 September 30, 1993
------------------ ------------------
<S> <C> <C>
Retained Earnings - Beginning $39,393,415 $53,280,013
Add, Net Income (Loss) (17,859,574) (10,276,587)
------------------ ------------------
Retained earnings - Ending $21,533,841 $43,003,426
================== ==================
</TABLE>
<PAGE> 93
OWEN STEEL COMPANY, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
9/30/94 9/30/93
OPERATING ACTIVITIES: ----------------- -----------------
<S> <C> <C>
Net Income (Loss) ($17,859,574) ($10,276,587)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 3,878,073 4,075,874
Deferred Income Taxes 569,171 (439,996)
Deferred Compensation 13,575 13,069
(Gain) Loss on Disposal of Property and Equipment (53,019) 1,503
Minority Interest in Net Income (627,965) (882,466)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (893,225) 5,293,734
(Increase) Decrease in Income Tax Refunds Due 4,972,704
(Increase) Decrease in Inventories 4,798,636 5,991,834
(Increase) Decrease in Other Assets (309,517) 1,207,678
Increase (Decrease) in Accounts Payable and Accrued Expenses 8,581,540 1,652,952
----------------- -----------------
Net Cash Provided by (Used in) Operating
Activities 3,070,399 6,637,595
----------------- -----------------
INVESTING ACTIVITIES:
Purchase of Property and Equipment (1,032,657) (990,848)
Proceeds from Sale of Property and Equipment 21,820 106,785
(Increase) Decrease in Cash Surrender Value of Life Insurance (143,331) (281,979)
----------------- -----------------
Net Cash Provided by (Used in) Investing Activities (1,154,168) (1,166,042)
----------------- -----------------
FINANCING ACTIVITIES:
Increase (Decrease) in Short-Term Borrowings (381,504)
Increase (Decrease) in Long-Term Borrowings (2,460,342)
Payments on Long-Term Debt (2,256,820)
----------------- -----------------
Net Cash Provided by (Used in) Financing Activities (2,256,820) (2,841,846)
----------------- -----------------
Increase (Decrease) in Cash and Cash Equivalents (340,589) 2,629,707
Cash and Cash Equivalents at Beginning of Period 5,086,292 530,560
----------------- -----------------
Cash and Cash Equivalents at End of Period $4,745,703 $3,160,267
================= =================
</TABLE>
<PAGE> 94
SOUTH CAROLINA STEEL CORPORATION
GREENVILLE, SOUTH CAROLINA
COMPARATIVE BALANCE SHEETS
SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
September 30,
Assets 1994 1993
------ ---------------- ----------------
<S> <C> <C>
Current Assets:
Cash on Hand and In Banks $1,263,904 $400,816
Accounts Receivable - Customers 4,194,112 5,914,423
Accounts Receivable - Other 13,666 3,830
Inventories 2,209,278 1,571,633
Prepaid Expenses 5,792 4,159
Prepaid Income Taxes 98,163
---------------- ----------------
Total Current Assets 7,686,752 7,993,024
---------------- ----------------
Investments and Long-Term Receivables:
Investment in Subsidiaries and
Affiliated Company 1,069,606 1,537,848
---------------- ----------------
Property and Equipment:
Land 82,729 82,730
Offices and Plants 1,606,414 1,656,271
Machinery and Equipment 2,577,303 2,350,223
Furniture and Fixtures 319,612 262,816
Autos and Trucks 602,835 601,498
Other 272,600 214,918
---------------- ----------------
Total 5,461,493 5,168,456
Less, Accumulated Depreciation 3,958,489 3,757,630
---------------- ----------------
Total Property and Equipment 1,503,004 1,410,826
---------------- ----------------
Other Assets:
Fixed Assets Under Construction 318,731 47,754
Deferred Income Taxes 112,217 75,452
Deferred Charges 86 3,849
Other Assets 15,000 15,000
---------------- ----------------
446,034 142,055
---------------- ----------------
Total Assets $10,705,396 $11,083,753
================ ================
</TABLE>
<TABLE>
<CAPTION>
September 30,
Liabilities 1994 1993
----------- ---------------- ----------------
<S> <C> <C>
Current Liabilities:
Accounts Payable $2,092,725 $2,069,412
Short-Term Loans Payable 1,000 1,951,000
Notes Payable-Amount Due Within One Year 100,000 100,000
Other Payables and Accrued Expenses 1,281,339 895,273
---------------- ----------------
Total Current Liabilities 3,475,064 5,015,685
---------------- ----------------
Long-Term Liabilities:
Notes Payable-Amount Due After One Year 100,000
---------------- ----------------
Total Liabilities 3,475,064 5,115,685
---------------- ----------------
Stockholders' Equity:
Capital Stock 25,000 25,000
Retained Earnings 8,039,897 6,777,633
---------------- ----------------
8,064,897 6,802,633
Less, Treasury Stock 834,565 834,565
---------------- ----------------
Total Stockholders' Equity 7,230,332 5,968,068
---------------- ----------------
Total Liabilities and
Stockholders' Equity $10,705,396 $11,083,753
================ ================
</TABLE>
<PAGE> 95
SOUTH CAROLINA STEEL CORPORATION
GREENVILLE, SOUTH CAROLINA
COMPARATIVE STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1994 1993
----------------------- -----------------------
% of % of
Amount Sales Amount Sales
-------------- -------- -------------- --------
<S> <C> <C> <C> <C>
Sales $20,425,929 100.00 $22,074,243 100.00
Cost of Sales 15,997,938 78.32 19,059,671 86.34
--------------- -------- --------------- --------
Gross Income 4,427,991 21.68 3,014,572 13.66
General and Administrative Expenses 2,486,922 12.18 2,755,725 12.48
--------------- -------- --------------- --------
Net Operating Income 1,941,069 9.50 258,847 1.17
Other Income and (Expenses) - Net 31,840 0.16 (10,166) (0.05)
--------------- -------- --------------- --------
Net Income Before Income Taxes 1,972,909 9.66 248,681 1.13
Income Taxes 740,127 3.62 94,065 0.43
--------------- -------- --------------- --------
Net Income Before Equity in Net
Income (Loss) of Affiliated Company 1,232,782 6.04 154,616 0.70
Equity in Net Income (Loss) of
Affiliated Company (237,952) (1.16) (347,000) (1.57)
--------------- -------- --------------- --------
Net Income (Loss) $994,830 4.87 ($192,384) (0.87)
=============== ======== =============== ========
</TABLE>
<PAGE> 96
SOUTH CAROLINA STEEL CORPORATION
GREENVILLE, SOUTH CAROLINA
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1994 September 30, 1993
------------------ ------------------
<S> <C> <C>
Retained Earnings - Beginning $7,045,067 $6,970,017
Add, Net Income (Loss) 994,830 (192,384)
------------------ ------------------
Retained earnings - Ending $8,039,897 $6,777,633
================== ==================
</TABLE>
<PAGE> 97
SOUTH CAROLINA STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(UNAUDITED)
<TABLE>
<CAPTION>
9 Months Ended 9 Months Ended
9/30/94 9/30/93
OPERATING ACTIVITIES: ---------------- ----------------
<S> <C> <C>
Net Income (Loss) $994,830 ($192,384)
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 222,894 209,740
Deferred Income Taxes (272,233) 3,201
(Gain) Loss on Disposal of Property and Equipment (4,405) (718)
Undistributed Loss of Affiliated Company 237,952 347,000
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable 755,342 (2,238,184)
(Increase) Decrease in Inventories 68,848 919,338
(Increase) Decrease in Other Assets (666)
Increase (Decrease) in Accounts Payable and Accrued Expenses 1,268,106 765,504
---------------- ----------------
Net Cash Provided by (Used in) Operating
Activities 3,270,668 (186,503)
---------------- ----------------
INVESTING ACTIVITIES:
Purchase of Property and Equipment (541,975) (525,091)
Proceeds from Sale of Property and Equipment 6,150 32,567
---------------- ----------------
Net Cash Provided by (Used in) Investing Activities (535,825) (492,524)
---------------- ----------------
FINANCING ACTIVITIES:
Increase (Decrease) in Short-Term Borrowings (1,425,000) 675,000
Payments on Long-Term Debt (100,000) (100,000)
---------------- ----------------
Net Cash Provided by (Used in) Financing Activities (1,525,000) 575,000
---------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents 1,209,843 (104,027)
Cash and Cash Equivalents at Beginning of Period 54,061 504,843
---------------- ----------------
Cash and Cash Equivalents at End of Period $1,263,904 $400,816
================ ================
</TABLE>
<PAGE> 98
OWEN MISCELLANEOUS METALS, INC.
COMPARATIVE BALANCE SHEETS
SEPTEMBER 30, 1994 AND SEPTEMBER 30, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
September 30,
Assets 1994 1993
------ ---------------- ----------------
<S> <C> <C>
Current Assets:
Cash on Hand and In Banks $677,938 $26,759
Accounts Receivable - Customers 1,017,836 1,582,455
Accounts Receivable - Other 2,068 4,719
Inventories 336,661 622,060
Prepaid Expenses 1,524 1,785
Assets Held for Resale 546,189 512,947
---------------- ----------------
Total Current Assets 2,582,216 2,750,725
---------------- ----------------
Property and Equipment:
Land 140,568 140,568
Offices and Plants 379,806 371,199
Machinery and Equipment 614,076 611,023
Furniture and Fixtures 100,246 95,387
Autos and Trucks 212,796 193,738
Other 11,822 30,880
---------------- ----------------
Total 1,459,314 1,442,795
Less, Accumulated Depreciation 1,178,639 1,129,338
---------------- ----------------
Total Property and Equipment 280,675 313,457
---------------- ----------------
Other Assets:
Fixed Assets Under Construction 36,469 14,831
Other Assets 87 87
---------------- ----------------
Total Other Assets 36,556 14,918
---------------- ----------------
Total Assets $2,899,447 $3,079,100
================ ================
</TABLE>
<TABLE>
<CAPTION>
September 30,
Liabilities 1994 1993
----------- ---------------- ----------------
<S> <C> <C>
Current Liabilities:
Accounts Payable $725,210 $709,961
Short-Term Notes Payable 5,000 890,000
Payroll Taxes Payable 9,142
Sales Taxes Payable 2,961 13,200
Accrued Expenses 53,077 95,774
Other Liabilities 834 802
---------------- ----------------
Total Current Liabilities 796,224 1,709,737
Long-Term Liabilities:
Loans Payable-Due After One Year 5,000 10,000
---------------- ----------------
Total Liabilities 801,224 1,719,737
---------------- ----------------
Stockholders' Equity:
Capital Stock 36,000 36,000
Retained Earnings 2,062,223 1,323,363
---------------- ----------------
2,098,223 1,359,363
---------------- ----------------
Total Liabilities and
Stockholders' Equity $2,899,447 $3,079,100
================ ================
</TABLE>
<PAGE> 99
OWEN MISCELLANEOUS METALS, INC.
COLUMBIA, SOUTH CAROLINA
COMPARATIVE STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1994 1993
----------------------- -----------------------
% of % of
Amount Sales Amount Sales
-------------- -------- -------------- --------
<S> <C> <C> <C> <C>
Sales $8,396,235 100.00 $6,378,973 100.00
Cost of Sales 6,968,020 82.99 5,692,751 89.24
--------------- -------- --------------- --------
Gross Income 1,428,215 17.01 686,222 10.76
General and Administrative Expenses 921,613 10.98 1,046,199 16.40
--------------- -------- --------------- --------
Net Operating Income 506,602 6.03 (359,977) (5.64)
Other Income and (Expenses) - Net 60,374 0.72 163,428 2.56
--------------- -------- --------------- --------
Net Income (Loss) $566,976 6.75 ($196,549) (3.08)
======================== ========================
</TABLE>
<PAGE> 100
OWEN MISCELLANEOUS METALS, INC.
CAYCE, SOUTH CAROLINA
STATEMENTS OF RETAINED EARNINGS
SEPTEMBER 30, 1994 AND 1993
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1994 September 30, 1993
------------------- -------------------
<S> <C> <C>
Retained Earnings - Beginning $1,549,247 $1,546,372
Add, Net Income (Loss) 566,976 (196,549)
Less, Dividends Paid (54,000) (26,460)
------------------- -------------------
Retained earnings - Ending $2,062,223 $1,323,363
=================== ===================
</TABLE>
<PAGE> 101
OWEN MISCELLANEOUS METALS, INC
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(UNAUDITED)
<TABLE>
<CAPTION>
9 Months Ended 9 Months Ended
9/30/94 9/30/93
OPERATING ACTIVITIES: ---------------- ----------------
<S> <C> <C>
Net Income (Loss) $566,976 ($196,549)
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 59,358 38,493
(Gain) Loss on Disposal of Property and Equipment (87,020) (215,904)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (505,320) (424,657)
(Increase) Decrease in Inventories 248,105 89,767
(Increase) Decrease in Other Assets 69,791 419,666
Increase (Decrease) in Accounts Payable and Accrued Expenses (349,838) 69,713
---------------- ----------------
Net Cash Provided by (Used in) Operating
Activities 2,052 (219,471)
---------------- ----------------
INVESTING ACTIVITIES:
Purchase of Property and Equipment (147,030) (42,402)
Proceeds from Sale of Property and Equipment 861,872 239,967
---------------- ----------------
Net Cash Provided by (Used in) Investing Activities 714,842 197,565
---------------- ----------------
FINANCING ACTIVITIES:
Increase (Decrease) in Short-Term Borrowings (585,000) 40,000
Payments on Long-Term Debt (5,000) (5,000)
Dividends Paid (54,000) (26,460)
---------------- ----------------
Net Cash Provided by (Used in) Financing Activities (644,000) 8,540
---------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents 72,894 (13,366)
Cash and Cash Equivalents at Beginning of Period 605,044 40,125
---------------- ----------------
Cash and Cash Equivalents at End of Period $677,938 $26,759
================ ================
</TABLE>
<PAGE> 102
(b) Pro forma financial information
On November 15, 1994, the Company acquired all the outstanding common
stock of three privately owned companies - Owen Steel Company, Inc. and two
affiliated corporations, Owen Miscellaneous Metals, Inc. and South Carolina
Steel Corporation (all three combined referred to as "Owen"). The Company paid
approximately $50 million consisting of $25 million in cash and the issuance of
932,301 shares, valued at $26.875 per share, of the Company's common stock. The
Company also provided funds for the retirement of approximately $32 million of
Owen debt at the closing. Approximately $9 million of the acquisition price is
presently maintained in an escrow account, subject to final determination of
the net worth of Owen at the closing date and certain other post-closing
adjustments. The transaction is accounted for by the purchase method of
accounting.
The following unaudited pro forma statements of earnings have been derived
from historical financial statements of the Company (for the fiscal year ended
August 31, 1994 and the three months ended November 30, 1994) and Owen (for the
twelve months ended September 30, 1994 and the three months ended September 30,
1994). The information is adjusted to give effect to the acquisition of Owen by
the Company as if it had occurred on September 1, 1993. The pro forma
statements of earnings are presented for informational purposes only and do not
purport to be indicative of the results of operations that actually would have
resulted if the acquisition had been consummated on September 1, 1993.
Both the Company and Owen operate in cyclical businesses. Accordingly,
results during the first quarter of a fiscal year are not necessarily
indicative of results which may be expected for an entire fiscal year. The pro
forma statements of operations should be read in conjunction with the related
notes and Owen's financial statements and related notes contained elsewhere in
this filing.
The following unaudited pro forma balance sheet has been derived from
the historical balance sheet of the Company as of November 30, 1994. The
information is adjusted to give effect to the acquisition of Owen by the
Company as if it had occurred on November 30, 1994. As the actual date of
acquisition was November 15, 1994, the November 30 balance sheet already
reflects a summary accounting of the transaction. The adjustments represent a
further refinement of the allocation of the purchase price to the fair value of
assets acquired and liabilities assumed. The allocation is still preliminary
and subject to possible material change as more information becomes available
and contingencies are resolved. The pro forma balance sheet is presented for
informational purposes only and does not purport to be indicative of the
financial condition that actually would have resulted if the acquisition had
occurred on November 30, 1994. The pro forma balance sheet should be read in
conjunction with the related notes and the Company's consolidated financial
statements and related notes previously filed November 28, 1994 on Form 10-K
for the year ended August 31, 1994 and Form 10-Q filed January 13, 1995, for
the quarter ended November 30, 1994.
<PAGE> 103
PRO FORMA STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Year ended August 31,1994
(in thousands except share data) CMC Owen Pro forma Adj
Historical Historical Adjustments # Pro forma
<S> <C> <C> <C> <C> <C>
Revenues $1,666,234 $234,910 $1,901,144
Cost of goods sold 1,504,566 211,357 3,454 2 1,719,377
Selling, general and administrative expenses 111,490 38,491 1,296 3 151,277
Interest expense 9,271 3,281 (978) 4 11,574
1,625,327 253,129 3,772 1,882,228
Earnings (loss) before income taxes 40,907 (18,219) (3,772) 18,916
Income taxes 14,737 1,629 (6,068) 5 10,298
Net earnings (loss) $26,170 ($19,848) 2,296 $8,618
Net earnings per share - primary and
fully diluted $1.75 - - 6 $0.54
Weighted average shares outstanding 14,956,479 - - 6 15,888,780
</TABLE>
<TABLE>
Quarter ended November 30,1994
CMC Owen Pro forma
Historical Historical Adjustments Pro forma
<S> <C> <C> <C> <C> <C>
Revenues $413,738 $65,646 $479,384
Cost of goods sold 365,683 53,343 863 2 419,889
Selling, general and administrative expenses 29,678 10,117 297 3 40,092
Interest expense 3,029 820 (130) 4 3,719
Litigation accrual 6,650 0 6,650
405,040 64,280 1,030 470,350
Earnings before income taxes 8,698 1,366 (1,030) 9,034
Income taxes 2,326 797 (361) 5 2,763
Net earnings $6,372 $569 (670) $6,272
Net earnings per share - primary and
fully diluted $0.44 - - 6 $0.41
Weighted average shares outstanding 14,537,716 - - 6 15,470,017
</TABLE>
See notes to pro forma statements of operations
<PAGE> 104
Notes to pro forma statements of operations
1. The fiscal year end of CMC is August 31; of Owen, December 31. These pro
forma statements of operations combine CMC's fiscal year ended August
31,1994 results with twelve months to September 30,1994 of Owen. CMC's
fiscal quarter ended November 30,1994 is combined with Owen's fiscal quarter
ended September 30,1994.
<TABLE>
<CAPTION>
2. Adjustments to cost of goods sold: Year Quarter
<S> <C> <C> <C>
Owen historical depreciation and amortization (5,635) (1,409)
Depreciation and amortization based on purchase cost allocation and
asset lives in accordance with CMC accounting policy 9,089 2,272
NET 3,454 863
3. Adjustments to selling, general and administrative expenses:
Eliminate salaries/benefits of officers and employees of Owen not
continuing with CMC (729) (182)
Salaries and benefits of planned increase in workforce 1,365 341
Reduction of professional fees incurred on standalone basis (690) (166)
Professional fees to be incurred as part of consolidated group 100 25
Eliminate expenses related to acquisition (50) (46)
Startup costs - computer setup, training, travel, etc. 800 200
Increase level of maintenance expenditures 500 125
NET 1,296 297
4. Adjustments to interest expense:
Eliminate interest expense on Owen debt retired at acquisition (3,281) (820)
Interest expense on debt incurred by CMC for Owen acquisition 2,303 690
NET (978) (130)
</TABLE>
5. Income tax effects of pro forma adjustments are calculated at the
35% marginal statutory rate. Amount represents the tax effect of the
Owen loss plus the pro forma adjustments ($18,219 + $3,772 at 35%) less
1,629 taxes incurred.
6. Weighted average shares outstanding
As part of the acquisition agreement, approximately 164,000 shares (of
the 932,301 shares issued at acquisition) of CMC stock are held in an
escrow account subject to the resolution of contingencies over a two
year period. The disposition of these shares in the first year of
operations is unknown; for purposes of calculating earnings per share
maximum dilution is assumed.
<PAGE> 105
<TABLE>
<CAPTION>
PRO FORMA BALANCE SHEET (UNAUDITED) November 30,1994
(in thousands) CMC Pro forma Adj Pro forma
Historical Adjustments #
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary investments $22,385 $22,385
Accounts receivable 239,239 31,364 2 270,603
Financial services loans and advances 500 500
Inventories 138,635 33,541 2 172,176
Net working capital - SMI Owen Steel 20,065 (20,065) 2 0
Other 31,980 1,782 33,762
Total current assets 452,804 46,622 499,426
Other assets 2,229 2,229
Property,plant,and equipment:
Land 10,747 6,345 2 17,092
Buildings 32,367 9,143 2 41,510
Equipment 361,521 (762) 2 360,759
Leasehold improvements 15,730 15,730
Construction in process 9,124 9,124
Less accumulated depreciation and amortization (220,620) (220,620)
208,869 14,726 223,595
Total assets $663,902 61,348 $725,250
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Commercial paper $10,000 $10,000
Notes payable 40,000 40,000
Financial services notes payable 25,659 25,659
Accounts payable 83,584 20,963 2 104,547
Other payables and accrued expenses 74,850 27,851 2 102,701
Income taxes payable 3,498 3,498
Current maturities of long-term debt 4,855 4,855
Total current liabilities 242,446 48,814 291,260
Deferred income taxes 19,077 12,534 2,3 31,611
Long-term debt 129,877 129,877
Stockholders' equity:
Preferred stock 0 0
Common stock 80,663 80,663
Additional paid-in-capital 11,016 11,016
Retained earnings 197,654 197,654
Less treasury stock (16,831) (16,831)
Total liabilities and equity $663,902 61,348 $725,250
</TABLE>
See notes to pro forma balance sheet
<PAGE> 106
Notes to pro forma balance sheet
<TABLE>
<S> <C>
1. The purchase price is as follows:
Cash paid to Owen shareholders $25,055
Value of stock issued to Owen shareholders 25,055
Owen debt retired at acquisition 31,937
Transaction costs paid by CMC 1,220
Total $83,267
This was reflected in CMC's historical November 30,1994 statements as follows:
Cash 5,518
Net working capital - SMI Owen Steel 20,065
Other current assets 1,220
Equipment 55,245
Long-term debt (56,993)
Stockholders' equity (25,055)
</TABLE>
<TABLE>
<CAPTION>
2. Allocation of purchase price to assets acquired and liabilities asssumed: CMC Pro forma
Historical
11/30/94
<S> <C> <C>
Cash 5,518 5,518
Accounts receivable 31,364
Inventories 33,541
Other current assets 1,220 3,002
Net working capital - SMI Owen Steel 20,065
Land 6,345
Buildings 9,143
Equipment 55,245 54,483
Accounts payable (20,963)
Other payables and accrued expenses (27,851)
Deferred income taxes (12,534)
Long-term debt (56,993) (56,993)
Stockholders' equity (25,055) (25,055)
</TABLE>
3. Deferred income taxes arise from the difference between the fair value of
property, plant, and equipment and their respective tax basis at the
acquisition date. Taxes are calculated at the 35% marginal statutory rate.
<PAGE> 107
Item 8. Not Applicable.
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 hereunto duly authorized.
COMMERCIAL METALS COMPANY
Date January 27, 1995 By: /s/ STANLEY A. RABIN
Stanley A. Rabin,
President & Chief Executive
Officer
