SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the fiscal quarter ended January 3, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Commission file number: 5-10065
EARLE M. JORGENSEN COMPANY
(Exact name of registrant as specified in its charter)
Delaware 95-0886610
----------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3050 East Birch Street, Brea, California 92621
----------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (714) 579-8823
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. None
Number of shares outstanding of each of the registrant's classes of common
stock, as of the latest practicable date. As of January 31, 1996, 128
shares of the registrant's common stock, par value $.01 per share, were
outstanding.
<PAGE>
Earle M. Jorgensen Company
Table of Contents
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements
Consolidated Balance Sheets at January 3, 1996
(unaudited) and March 31, 1995 2
Consolidated Statements of Operations for the Three and
Nine Months Ended January 3, 1996 and 1995 (unaudited) 3
Consolidated Statements of Cash Flows for the
Nine Months Ended January 3, 1996 and 1995 (unaudited) 4
Notes to Consolidated Financial Statements 5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II - OTHER INFORMATION 11
SIGNATURES 12
Page 1
<PAGE>
<TABLE>
Earle M. Jorgensen Company
Consolidated Balance Sheets
(dollars in thousands, except per share data)
<CAPTION>
January 3, March 31,
1996 1995
---------- ----------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 8,152 $ 10,615
Accounts receivable, less allowance for doubtful
accounts of $1,994 and $1,146 at January 3, 1996
and March 31, 1995, respectively 108,570 155,091
Inventories 237,307 210,089
Other current assets 7,166 7,434
--------- ---------
Total current assets 361,195 383,229
Property, plant and equipment, net of accumulated
depreciation of $53,039 and $48,191 at January 3,
1996 and March 31, 1995, respectively 135,497 139,705
Net cash surrender value of life insurance policies 9,138 9,100
Debt issue costs, net of accumulated amortization 6,524 8,108
Other assets 3,235 3,406
--------- ---------
Total assets $ 515,589 $ 543,548
======== ========
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $ 91,249 $ 99,176
Accrued liabilities 32,901 25,136
Deferred income taxes 13,283 14,169
Current portion of long-term debt 950 1,010
--------- ---------
Total current liabilities 138,383 139,491
Long term debt 296,786 295,264
Deferred income taxes 26,536 28,291
Other long-term liabilities 2,983 4,102
--------- ---------
464,688 467,148
--------- ---------
Stockholder's equity:
Preferred stock, $.01 par value; 200 shares
authorized and unissued -- --
Common stock, $.01 par value; 2,800 shares
authorized;128 shares issued and outstanding -- --
Additional paid in capital 176,520 192,411
Foreign currency translation adjustment (3,714) (2,688)
Accumulated deficit (121,905) (113,323)
--------- ---------
Total stockholder's equity 50,901 76,400
--------- ---------
Total liabilities and stockholder's equity $ 515,589 $ 543,548
======== ========
<FN>
See accompanying notes
</TABLE>
Page 2
<PAGE>
<TABLE>
Earle M. Jorgensen Company
Consolidated Statements of Operations (unaudited)
(dollars in thousands)
<CAPTION>
Three Months Ended Nine Months Ended
January 3, January 3,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 254,743 $ 258,792 $ 764,030 $ 744,289
Cost of sales 183,012 181,268 545,490 523,017
------- ------- ------- -------
Gross profit 71,731 77,524 218,540 221,272
------- ------- ------- -------
Expenses:
Warehouse and delivery 31,926 31,471 96,331 90,470
Selling 10,108 11,299 32,938 32,845
General and administrative 16,376 19,060 55,910 58,602
Charge for workforce reductions
and asset write-downs -- -- 12,776 --
------- ------- ------- -------
Total expenses 58,410 61,830 197,955 181,917
------- ------- ------- -------
Income from operations 13,321 15,694 20,585 39,355
Interest expense, net 10,738 9,298 30,736 25,826
------- ------- ------- -------
Income (loss) before income taxes 2,583 6,396 (10,151) 13,529
Income tax provision (benefit) 3,058 36 (1,569) 183
------- ------- ------- -------
Net income (loss) $ (475) $ 6,360 $ (8,582) $ 13,346
======= ======= ======= =======
<FN>
See accompanying notes.
</TABLE>
Page 3
<PAGE>
<TABLE>
Earle M. Jorgensen Company
Consolidated Statements of Cash Flows
(dollars in thousands)
<CAPTION>
Nine Months Ended
January 3,
1996 1995
-------- --------
(unaudited)
<C> <C> <C>
Operating activities
Net income (loss) $ (8,582) $ 13,346
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Depreciation and amortization 9,410 10,662
Asset write-downs 9,205 --
Amortization of debt issue costs and discount
on senior notes 1,754 1,688
Gain on sale of property, plant and equipment (459) (490)
Debt forgiveness charge from prepayment of
note receivable -- 51
ESOP contribution 6,075 5,671
Provision for bad debts 1,547 1,533
Changes in assets and liabilities:
Accounts receivable 44,974 25
Inventories (27,218) (23,724)
Increase in cash surrender value of life
insurance (5,378) (7,992)
Accounts payable and accrued liabilities (10,518) (1,769)
Accrued postretirement benefits (716) (270)
Current and deferred income taxes (2,641) --
Other (1,235) (8,141)
-------- --------
Net cash provided by (used in) operating activities 16,218 (9,410)
-------- --------
Investing activities
Additions to property, plant and equipment (14,800) (7,649)
Proceeds from the sale of property, plant and
equipment 312 1,558
Proceeds from liquidation of life insurance
policies -- 2,940
Collection on note receivable -- 1,695
-------- --------
Net cash used in investing activities (14,488) (1,456)
-------- --------
Financing activities
Payments) under revolving loan
agreements (2,095) (22,440)
Borrowings on cash surrender value of life
insurance policies 10,337 32,187
Proceeds from other borrowings 4,719 4,500
Cash dividend to parent (15,891) (3,653)
Payments on other borrowings (1,263) (1,065)
-------- --------
Net cash provided by (used in) financing
activities (4,193) 9,529
-------- --------
Net change in cash (2,463) (1,337)
Cash at beginning of period 10,615 12,784
-------- --------
Cash at end of period $ 8,152 $ 11,447
======= =======
<FN>
See accompanying notes.
</TABLE>
Page 4
<PAGE>
Earle M. Jorgensen Company
Notes to Consolidated Financial Statements
January 3, 1996
1. Basis of Presentation
The Earle M. Jorgensen Company (the "Company") is a wholly owned
subsidiary of the Earle M. Jorgensen Holding Company, Inc. ("Holding").
The accompanying condensed consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries including
Kilsby Jorgensen Steel and Aluminium Ltd. (Kilsby Jorgensen, Ltd.),
Kilsby Jorgensen S.A. de C.V. and Kilsby Jorgensen Steel and Aluminum,
Inc. (Kilsby Jorgensen, Inc.), operating in the United Kingdom, Mexico
and Canada, respectively. The Company's United States operations are
conducted through divisions doing business under the names of Jorgensen
Steel and Aluminum and Kilsby-Roberts. All significant intercompany
accounts and transactions have been eliminated.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments consisting of
normally recurring accruals necessary for a fair presentation of the
consolidated financial position of the Earle M. Jorgensen Company at
January 3, 1996, consolidated results of operations for the three and
nine months ended January 3, 1996 and 1995 and consolidated cash flows
for the nine months ended January 3, 1996 and 1995. The consolidated
results of operations for the three and nine months ended January 3, 1996
are not necessarily indicative of the results to be expected for the full
year.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
2. Workforce Reductions and Asset Write-downs
During the second fiscal quarter, the Company implemented a plan designed
to enhance operating productivity and efficiencies. As a result, the
Company recognized a charge against earnings consisting primarily of costs
associated with a 7% reduction in the Company's workforce ($3,571,000).
In addition, the Company took write-downs or write-offs of certain
property, plant and equipment ($9,205,000), a portion of which
($3,330,000) was the excess purchase price or "step-up" allocated to the
net book values of such assets at the time of the Company's merger in
1990.
3. Change in Accounting Estimate
The Company determined that the useful lives for the step-up of property,
plant and equipment resulting from the 1990 merger was longer than
originally estimated and, accordingly, extended the remaining amortization
period through fiscal 2006, effective July 1, 1995. As a result,
amortization expense has been reduced by approximately $2.5 million
through January 3, 1996 on a comparative basis, and such reduced
amortization will continue through the end of the year and each of the
fiscal years ending 1997 through 2000.
4. Cash Dividend to Parent
During the third quarter of fiscal 1996, the Company paid a dividend to
Holding in the amount of $15.9 million to provide for the redemption of
Holding's capital stock pursuant to the Company's Employee Stock Ownership
Plan ("ESOP") and Holding's stockholders' agreement.
Page 5
<PAGE>
Earle M. Jorgensen Company
Management's Discussion and Analysis of Financial
Condition and Results of Operations
January 3, 1996
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations: Nine months ended January 3, 1996 compared to nine
months ended January 3, 1995.
Revenues. Revenues for the nine months ended January 3, 1996 increased
$19.7 million, or 2.6%, to $764.0 million as compared to $744.3 million in the
corresponding period of the prior year. Revenues from U.S. operations
increased $10.7 million, or 1.5%, to $714.5 million from $703.3 million last
year. Foreign revenues increased $9.1 million, or 22.5%, to $49.5 million
compared to $40.4 million in the same period of last year. After a strong
first fiscal quarter, demand flattened out during the second quarter and
declined during the third quarter as the U.S. economy weakened.
Gross Profit. Gross profit was $218.5 million, a decrease of $2.7
million, or 1.2%, from $221.3 in the same period of the prior year. Gross
margin for the nine month period was 28.6% compared to 29.7% during the same
period of the prior year. The reduction in gross profit and gross margin was
partially due to a $4.6 million increase in inventory reserve and changes in
product mix impacted by lower sales of higher margin products. In addition,
LIFO charges were $5.2 million during the fiscal 1996 period versus $4.4
million in the same period of fiscal 1995. For the nine months ended January
3, 1996, foreign gross profit rose $2.3 million to $11.4 million and gross
margin was 23.0%, compared to $9.1 million and 22.4%, respectively, in the
corresponding period of the prior year. Exclusive of foreign operations and
LIFO charges, the U.S. gross margin percentage was 29.7% in the first nine
months of fiscal 1996 compared to 30.8% in the same period of fiscal 1995.
Expenses. Total operating expenses in the first nine months of fiscal
1996 included a charge for workforce realignment and asset write-downs or
write-offs of $12.8 million (see Note 2 to Consolidated Financial Statements).
Excluding such charge, total operating expenses increased $3.3 million to
$185.2 million, or 1.8%, over the same period of the prior year, and, as a
percentage of revenues, were 24.2% in the first nine months of fiscal 1996
versus 24.4% in the same period of fiscal 1995.
Warehouse and delivery expenses increased $5.9 million to $96.3 million
during the first nine months of fiscal 1996 as compared to the same period in
the prior year, and, as a percentage of revenues, increased to 12.6% from
12.2%. The increase was primarily due to higher revenues, additional costs
incurred in connection with physical inventory counts, and higher freight
costs resulting from an inventory balancing program implemented during the
third quarter which is designed to reduce inventories and improve returns.
Selling expenses of $32.9 million in the first nine months of fiscal 1996
were relatively flat as compared to the same period in fiscal 1995, and, as a
percentage of revenues, decreased to 4.3% compared to 4.4% in the prior year.
General and administrative expenses decreased $2.7 million, or 4.6%, to $55.9
million during the period, and, as a percentage of revenues, declined to 7.3%
from 7.9% in the prior year. The decrease was primarily due to lower
amortization charges resulting from a change in accounting estimate (see Note
3 to Consolidated Financial Statements) and lower workers compensation
insurance costs.
Interest Expense, net. Net interest expense increased $4.9 million to
$30.7 million in the first nine months of fiscal 1996, or 19.0%, over the same
period in fiscal 1995, primarily as a result of a higher weighted average
interest rate (9.90% versus 9.24% in fiscal 1995), and higher interest costs
associated with increased borrowings against the cash surrender value of life
insurance policies. For the first nine months of fiscal 1996, the average
outstanding indebtedness was $306.0 million compared to $294.6 million in
fiscal 1995.
Page 6
<PAGE>
Earle M. Jorgensen Company
Management's Discussion and Analysis of Financial
Condition and Results of Operations
January 3, 1996
Results of Operations: Nine months ended January 3, 1996 compared to nine
months ended January 3, 1995 (continued).
Interest Expense, net (continued). Most of the interest expense of the
Company is payable in respect of three types of indebtedness: (i) 10.75%
Senior Notes; (ii) the revolving credit facility; and (iii) life insurance
policy borrowings. The interest rates on the 10.75% Senior Notes and the life
insurance policy borrowings (11.8%) are fixed. The interest rate on the
revolving credit facility, representing approximately $123.5 million in
principal amount of the indebtedness of the Company at January 3, 1996, is at
a floating rate (9.26% average versus 7.68% average during the same period of
fiscal 1995).
Income Taxes. The income tax benefit for the nine months ended January 3,
1996 was $1.6 million (effective tax rate of 15.5%) compared to an income tax
provision of $0.2 million (effective tax rate of 1.4%) in the corresponding
period of the prior year. The income tax provision for the same period of
fiscal 1995 was significantly reduced by the recognition of tax benefits
associated with the Company's net operating loss carryforwards and a reduction
in the reserve for deferred tax assets.
The Company is currently undergoing an Internal Revenue Service
examination for the fiscal years ended March 31, 1991 through 1994.
Results of Operations: Three months ended January 3, 1996 compared to three
months ended January 3, 1995.
Revenues. Revenues for the three months ended January 3, 1996 were $254.7
million, a decrease of $4.1 million, or 1.6%, as compared to revenues of
$258.8 million in the prior year period. Revenues of $237.8 million from U.S.
operations decreased $4.7 million, or 2.0%, from $242.5 million during last
year which was primarily due to weaknesses in the U.S. economy. Foreign
revenues increased $0.7 million, or 4.2%, to $16.9 million from $16.2 million
in the same period last year.
Gross Profit. Gross profit was $71.7 million, a decrease of $5.8 million,
or 7.5% compared to $77.5 million in the same period of fiscal 1995. Gross
margin for the third quarter of fiscal 1996 was 28.2% compared to 30.0% during
the same period of the prior year. The reduction in gross profit and gross
margin in the current period was primarily due to product mix changes impacted
by lower sales of higher margin products, and a $0.7 million increase in
inventory reserves. Foreign gross profit was $4.3 million and gross margin
was 25.2%, up $0.8 million, compared to $3.5 million and 21.8%, respectively,
in the corresponding period of the prior year. Gross profit and gross margin
increased in all foreign locations. Exclusive of foreign operations and LIFO
charges, the U.S. gross margin was 29.2% and 31.3% for the three months ended
January 3, 1996 and 1995, respectively.
Expenses. Total operating expenses decreased $3.4 million in the third
quarter of fiscal 1996, or 5.5%, to $58.4 million compared to $61.8 million in
the same period of the prior year, and, as a percentage of revenues, were
22.9% in the third quarter of fiscal 1996 versus 23.9% in the same period of
fiscal 1995.
Warehouse and delivery expenses increased $0.5 million to $31.9 million in
the third quarter of fiscal 1996, or 1.4%, compared to $31.5 million in the
same period of the prior year, and, as a percentage of revenues, increased to
12.5% from 12.2% in the prior year. Compensation expenses were $0.8 million
lower than the prior year, but were offset by higher freight costs incurred as
a result of balancing inventory quantities by location.
Page 7
<PAGE>
Earle M. Jorgensen Company
Management's Discussion and Analysis of Financial
Condition and Results of Operations
January 3, 1996
Results of Operations: Three months ended January 3, 1996 compared to three
months ended January 3, 1995 (continued).
Selling expenses decreased $1.2 million to $10.1 million compared to $11.3
million in the third quarter of fiscal 1996, and, as a percentage of revenues,
decreased to 4.0% from 4.4% in the prior year. The decrease primarily resulted
from lower compensation related expenses during the current fiscal quarter.
General and administrative expenses decreased $2.7 million, or 14.1%, to $16.4
million in the third quarter of fiscal 1996 compared to $19.1 million in the
corresponding period of the prior year, and, as a percentage of revenues,
decreased to 6.4% from 7.4%. The decrease primarily resulted from reduced
amortization charges of $1.3 million due to a change in accounting estimate
and lower compensation expenses resulting from the workforce realignment
implemented during the second quarter (see Notes 2 and 3 to the Consolidated
Financial Statements).
Interest Expense, net. Net interest expense increased $1.4 million to
$10.7 million for the three months ended January 3, 1996, or 15.5% over the
corresponding period in fiscal 1995. The increased interest primarily
resulted from higher average outstanding indebtedness ($315.7 million versus
$276.4 million in 1995) and higher interest costs associated with borrowings
against the cash surrender value of life insurance policies. The weighted
average interest rate for the period of 9.68% was lower than the prior year of
9.74%.
Income Taxes. Income tax expense for the three months ended January 3,
1996 was $3.1 million compared to income tax expense of $36,000 in the
corresponding period of the prior year.
At the end of each interim period, the Company makes its best estimate of
the effective tax rate expected to be applicable for the full fiscal year.
This rate is used to record income tax expense or benefit on a year to date
basis. As a result, the Company is required to make adjustments when there is
a change in the estimated effective tax rate. The fiscal 1996 estimated
effective tax rate has been revised from 36.0% to 15.5%, and the benefit
previously recognized has been adjusted in the three months ended January 3,
1996 to an estimated annual effective rate of 15.5%.
The income tax provision for the same period of fiscal 1995 was
significantly reduced by the recognition of tax benefits associated with the
Company's net operating loss carryforwards and a reduction in the reserve for
deferred tax assets.
Liquidity and Capital Resources
The Company's ongoing cash requirements through the end of fiscal 1996
will consist primarily of interest payments under its revolving credit
facility, interest payments on its 10.75% Senior Notes, dividends to Holding
to redeem capital stock pursuant to the Company's employee stock ownership
plan ("ESOP"), capital expenditures and principal and interest payments on its
purchase money indebtedness. Principal payments required by the Company's
currently outstanding industrial revenue bond and purchase money indebtedness
together amount to $0.2 million in the remainder of fiscal 1996, $0.9 million
in fiscal years 1997 and 1998, and $17.8 million in the aggregate thereafter.
The Company will not be required to make any principal payments against the
10.75% Senior Notes or the revolving credit facility until 2000 and 1998,
respectively. The Company is in compliance with the covenants contained in
the Company's revolving credit facility, and the Company is not in default
under the indenture governing the 10.75% Senior Notes and the Company does not
anticipate any default thereunder for the foreseeable future.
Page 8
<PAGE>
Earle M. Jorgensen Company
Management's Discussion and Analysis of Financial
Condition and Results of Operations
January 3, 1996
Liquidity and Capital Resources (continued)
The Company's primary sources of liquidity are internally generated funds,
funds available to it under its revolving credit facility, and cash is also
available from growth in cash surrender value of life insurance policies.
The indebtedness under the Company's revolving credit facility is secured
by the Company's inventory and accounts receivable, and future availability
under the revolving credit facility is determined by prevailing levels of the
Company's eligible accounts receivable and inventory reduced by outstanding
letters of credit, certain guarantees and other obligations. As of January 3,
1996, the Company's borrowing capacity under the revolving credit facility was
$43.2 million and its total debt was $297.7 million.
During the first nine months of fiscal 1996, the Company redeemed $13.1
million of Holding's capital stock pursuant to the ESOP and $2.8 million from
retiring employees under Holding's stockholders' agreement. The amount of
capital stock redeemed reflects redemptions from several senior employees who
retired with relatively large stock holdings. During the fourth quarter of
fiscal 1996, the Company expects to redeem an additional $7.0 million of
capital stock for ESOP payouts (see Note 2 to Consolidated Financial
Statements).
On March 27, 1995, the Company entered into a purchase money indebtedness
loan agreement providing up to $7.5 million to finance certain capital
expenditures. At the beginning of fiscal 1996, the Company had remaining
availability of $4.7 million under this loan agreement of which the company
used $2.1 million to acquire the Company's Tulsa, Oklahoma facility and the
balance of approximately $2.6 million for purchases of capital equipment in
facilities undergoing physical expansion.
It is expected that in addition to the $4.7 million, other capital
expenditures will be approximately $10.1 million totaling $14.8 million in
fiscal 1996. Approximately $6.1 million will be for routine replacement of
machinery and equipment and $4.0 million for computer systems and other
information technology resources. In addition, the Company expects to enter
into operating leases for machinery and equipment with an aggregate value of
approximately $6.1 million for the fiscal year.
Since March 31, 1995 (the Company's prior fiscal year end), working
capital decreased $20.9 million and total assets decreased by $28.0 million.
Current assets decreased $22.0 million as a result of decreases in accounts
receivable of $46.5 million which was partially offset by an increase in
inventory of $27.2 million. Total liabilities decreased $2.5 million during
the period. Inventory levels rose to a high of $266.6 million during July due
to price increases from mill suppliers, long lead times, and lower than
expected demand, but have been systematically reduced to $237.3 million as of
January 3, 1996. Receivables declined as the result of continued customer
oriented programs implemented during the first fiscal quarter.
Net cash outflows from financing activities were $4.2 million compared to
net inflows of $9.5 million in the prior year. Cash outflows in fiscal 1996
resulted from a cash dividend to Holding in connection with the redemption of
Holding's capital stock totaling $15.9 million, as discussed above, payments
against the revolving credit facility of $2.1 million, and payments of $1.3
million on IRB and purchase money indebtedness. This was offset by proceeds
from a purchase money indebtedness loan of $4.7 million and borrowings of
$10.3 million from the cash surrender value of life insurance policies.
As of January 3, 1996, the Company's sources of liquidity and capital
resources are sufficient to meet all currently anticipated operating cash
requirements, including capital expenditures and debt service payments on the
revolving credit facility and the 10.75% Senior Notes.
Page 9
<PAGE>
Earle M. Jorgensen Company
Management's Discussion and Analysis of Financial
Condition and Results of Operations
January 3, 1996
Environmental Matters
The Company is currently involved with remediation efforts at several
current and formerly-owned facilities. As of January 3, 1996, reserves of
$1.7 million exist to cover future environmental costs which are either known
or can be reasonably estimated based on findings and recommendations of
independent environmental consultants. No significant changes in
environmental matters have occurred since the Company filed its Annual Report
on Form 10-K for the year ended March 31, 1995.
Although it is possible that new information or future developments could
require the Company to reassess its potential exposure relating to all
pending environmental matters, management believes that, based upon all
currently available information, the resolution of such environmental matters
will not have a material adverse effect on the Company's financial condition,
results of operations or liquidity. The possibility exists, however, that
new environmental legislation and/or environmental regulations may be
adopted, or other environmental conditions may be found to exist, that may
require expenditures not currently anticipated and that may be material.
Foreign Exchange Exposure
The functional currency for the Company's foreign subsidiaries is the
applicable local currency. Exchange adjustments resulting from foreign
currency transactions are recognized in net earnings, whereas adjustments
resulting from the translation of financial statements are reflected as a
separate component of stockholder's equity. The Company does not hedge its
exposure to foreign currency fluctuations. Net foreign currency transaction
gains or losses have not been material in any of the periods presented.
Inflation
The Company's operations have not been, nor are they expected to be,
materially affected by inflation.
Page 10
<PAGE>
Earle M. Jorgensen Company
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.57 Form of Sixth Amendment dated as of January 30, 1996
to the revolving credit facility among the Company,
Holding, certain financial institutions named therein
and BT Commercial Corporation and Chemical Bank, as
agents.
27 Financial Data Schedule
(b) Reports
The Registrant was not required to file a Form 8-K during the
quarter ended January 3, 1996.
Page 11
<PAGE>
Earle M. Jorgensen Company
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.
Earle M. Jorgensen Company
/s/Charles P. Gallopo
----------------------
Date: February 5, 1996 Charles P. Gallopo
Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
Page 12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JAN-03-1996
<CASH> 8,152
<SECURITIES> 0
<RECEIVABLES> 110,564
<ALLOWANCES> (1,994)
<INVENTORY> 237,307
<CURRENT-ASSETS> 361,195
<PP&E> 188,536
<DEPRECIATION> (53,039)
<TOTAL-ASSETS> 515,589
<CURRENT-LIABILITIES> 138,383
<BONDS> 296,786
0
0
<COMMON> 0
<OTHER-SE> 50,901
<TOTAL-LIABILITY-AND-EQUITY> 515,589
<SALES> 764,030
<TOTAL-REVENUES> 764,030
<CGS> 545,490
<TOTAL-COSTS> 545,490
<OTHER-EXPENSES> 196,408
<LOSS-PROVISION> 1,547
<INTEREST-EXPENSE> 30,736
<INCOME-PRETAX> (10,151)
<INCOME-TAX> (1,569)
<INCOME-CONTINUING> (8,582)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,582)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
SIXTH AMENDMENT
SIXTH AMENDMENT (this "Amendment"), dated as of January 30, 1996, among
EARLE M. JORGENSEN HOLDING COMPANY, INC., a Delaware corporation
("Holding"), EARLE M. JORGENSEN COMPANY, a Delaware corporation (the
"Borrower"), the financial institutions party to the Credit Agreement
referred to below (the "Lenders") and BT COMMERCIAL CORPORATION and CHEMICAL
BANK, as Agents. All capitalized terms used herein and not otherwise
defined herein shall have the respective meanings provided such terms in the
Credit Agreement referred to below.
WITNESSETH:
WHEREAS, Holding, the Borrower, the Agents and the Lenders are parties
to a Credit Agreement, dated as of March 3, 1993, as amended, modified and
supplemented to the date hereof (as so amended, modified and supplemented,
the "Credit Agreement"); and
WHEREAS, the parties to the Credit Agreement wish to amend the Credit
Agreement as herein provided;
NOW, THEREFORE, it is agreed:
1. Section 1.1 of the Credit Agreement is hereby amended by inserting
the following new definitions in appropriate alphabetical order:
Insurance Sub shall mean a Wholly-Owned Subsidiary of the Borrower
organized under the laws of Bermuda.
2. The definition "Permitted Transactions" contained Section 1.1 of
the Credit Agreement is hereby amended by (a) deleting the word "and"
appearing at the end of clause (iv) contained therein and (b) inserting the
following immediately after clause (v) contained therein:
"; and (vi) transactions between Holding, the Borrower or its
Subsidiaries (other than Insurance Sub) and Insurance Sub in connection
with compliance by the Borrower with Section 7.10".
3. Section 7.10 of the Credit Agreement is hereby amended by inserting
the phrase "and/or Insurance Sub" immediately after the phrase "insurance
companies" appearing in said Section 7.10.
4. Section 8.1 of the Credit Agreement is hereby amended by inserting
the phrase "(other than Insurance Sub)" immediately after the word
"Subsidiary" each time such word appears in clause (c) contained therein.
5. Section 8.5 of the Credit Agreement is hereby amended by (a)
Inserting the phrase "(other than Insurance Sub)" immediately after the word
"Subsidiary" the first time such word appears in clause (e) contained
therein, (b) deleting the word "and" appearing at the end of clause (j)
contained therein, (c) deleting clause (k) contained therein in its entirety
and (d) inserting the following new clauses (k) and (l) immediately after
clause (j) contained therein:
"(k) the Borrower may make capital contributions to Insurance Sub in an
aggregate amount not to exceed $1,000,000; and
"(l) any Investments in addition to those contemplated by the foregoing
clauses (a) through (k), provided that all Investments made pursuant to
this clause (l) shall be permitted by the Senior Notes and shall not
exceed $5,000,000 at any time outstanding.".
6. Section 8.8 of the Credit Agreement is hereby amended by (a)
inserting the phrase "and clause (c) of this Section 8.8: immediately after
the phrase "and 8.1" appearing in clause (a) contained therein and (b)
inserting the following new clause (c):
(c) Insurance Sub shall not engage in any business other than the
performance of insurance services for Holding, the Borrower and its
Subsidiaries and the investment of its assets in cash and/or Cash
Equivalents.".
7. Section 8.15 of the Credit Agreement is hereby amended by inserting
the phrase "(other than Insurance Sub)" immediately after the word
"Subsidiaries" contained therein.
8. Section 8.16 of the Credit Agreement is hereby amended by inserting
the phrase "(other than Insurance Sub)" immediately after the word
"Subsidiaries" each time such word appears therein.
9. In order to induce the Lenders to enter into this Amendment each
Credit Party hereby:
(a) makes each of the representations, warranties and agreements
contained in Section 6 of the Credit Agreement on the Sixth Amendment
Effective Date (as defined in Section 13 below), both before and after
giving effect to this Amendment; and
(b) represents and warrants that no Default or Event of Default is in
existence on the Sixth Amendment Effective Date, both before and after
giving effect to this Amendment.
10. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
11. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with Holding and the Payments Administrator.
12. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE
OF NEW YORK.
13. This Amendment shall become effective on the date (the "Sixth
Amendment Effective Date") when Holding, the Borrower, the Agents, the
Issuing Bank and all the Lenders shall have signed a copy hereof (whether
the same or different copies) and shall have delivered (including by way of
facsimile transmission) the same to the Payments Administrator at the
Payment Office.
14. From and after the Sixth Amendment Effective Date, all references
in the Credit Agreement and each of the credit Documents to the Credit
Agreement shall be deemed to be references to such Credit Agreement as
amended hereby.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed and delivered as of the date first
above written.
EARLE M. JORGENSEN HOLDING COMPANY, INC.
By /s/Charles P. Gallopo
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Title: Vice President & CFO
EARLE M. JORGENSEN COMPANY
By /s/Charles P. Gallopo
---------------------
Title: Vice President & CFO
