<PAGE>
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 June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 5-10065
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EARLE M. JORGENSEN COMPANY
(Exact name of registrant as specified in its charter)
Delaware 95-0886610
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3050 East Birch Street, Brea, California 92621
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (714) 579-8823
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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
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant. None
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Outstanding common stock, par value $.01 per share, at July 31, 1996 -
128 SHARES
- ----------
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EARLE M. JORGENSEN COMPANY
TABLE OF CONTENTS
PAGE
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PART I - FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets at June 30, 1996 (unaudited)
and March 31, 1996 2
Consolidated Statements of Operations for the
Three Months Ended June 30, 1996 and 1995 (unaudited) 3
Consolidated Statements of Cash Flows for the
Three Months Ended June 30, 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 8
SIGNATURES 9
Page 1
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PART I - FINANCIAL INFORMATION
EARLE M. JORGENSEN COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1996
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(unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash $ 14,778 $ 22,823
Accounts receivable, less allowance for doubtful
accounts of $1,193 and $1,017 at June 30, 1996
and March 31, 1996, respectively 114,427 113,664
Inventories 194,506 188,452
Other current assets 5,369 4,513
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Total current assets 329,080 329,452
Property, plant and equipment, net of accumulated
depreciation of $57,440 and $54,826 at June 30,
1996 and March 31, 1996, respectively 132,359 134,259
Net cash surrender value of life insurance policies 15,053 11,599
Debt issue costs, net of accumulated amortization 5,468 5,996
Other assets 3,681 3,605
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Total assets $ 485,641 $ 484,911
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LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 88,432 $ 112,551
Accrued liabilities 37,624 31,002
Deferred income taxes 18,362 18,362
Current portion of long-term debt 950 950
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Total current liabilities 145,368 162,865
Long term debt 291,267 279,002
Deferred income taxes 14,448 14,448
Other long-term liabilities 3,581 3,455
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454,664 459,770
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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 173,523 173,523
Foreign currency translation adjustment (5,604) (5,748)
Accumulated deficit (136,942) (142,634)
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Total stockholder's equity 30,977 25,141
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Total liabilities and stockholder's equity $ 485,641 $ 484,911
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</TABLE>
SEE ACCOMPANYING NOTES.
Page 2
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PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
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JUNE 30, JUNE 30,
1996 1995
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(unaudited)
Revenues $ 258,430 $ 265,891
Cost of sales 184,744 186,162
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Gross profit 73,686 79,729
Expenses:
Warehouse and delivery 31,577 32,030
Selling 10,459 11,914
General and administrative 16,104 21,494
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Total expenses 58,140 65,438
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Income from operations 15,546 14,291
Net interest expense 9,805 9,771
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Income before income taxes 5,741 4,520
Income tax expense 49 1,414
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Net income $ 5,692 $ 3,106
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SEE ACCOMPANYING NOTES.
Page 3
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PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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JUNE 30, JUNE 30,
1996 1995
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(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 5,692 $ 3,106
Adjustments to reconcile net income to net cash provided
by (used in) operations:
Depreciation and amortization 2,627 3,999
Amortization of debt issue costs and discount on senior notes 502 563
Gain on sale of property, plant and equipment (104) (15)
ESOP contribution 1,671 2,422
Provision for bad debts 279 508
Changes in assets and liabilities:
Accounts receivable (1,042) 6,776
Inventories (6,054) (33,783)
Increase in cash surrender value of life insurance (3,454) (2,225)
Accounts payable and accrued liabilities (19,167) 24,362
Accrued postretirement benefits - (135)
Current and deferred income taxes - 955
Other (948) 25
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Net cash provided by (used in) operating activities (19,998) 6,558
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INVESTING ACTIVITIES
Additions to property, plant and equipment (562) (6,198)
Proceeds from the sale of property, plant and equipment 216 15
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Net cash used in investing activities (346) (6,183)
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FINANCING ACTIVITIES
Borrowings (payments) under revolving loan agreements 12,537 (7,418)
Other (payments) borrowings (238) 2,138
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Net cash provided by (used in) financing activities 12,299 (5,280)
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NET DECREASE IN CASH (8,045) (4,905)
Cash at beginning of period 22,823 10,615
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CASH AT END OF PERIOD $ 14,778 $ 5,710
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SEE ACCOMPANYING NOTES.
</TABLE>
Page 4
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PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
1. BASIS OF PRESENTATION
The Earle M. Jorgensen Company is a wholly owned subsidiary of the Earle M.
Jorgensen Holding Company, Inc. ("Holding").
The accompanying consolidated condensed financial statements include the
accounts of the Company and its wholly owned subsidiaries including Kilsby
Jorgensen Steel and Aluminium Ltd. (EMJ (UK)), Kilsby Jorgensen S.A. de
C.V. (EMJ (Mexico)), Earle M. Jorgensen (Canada) Inc. (EMJ (Canada)) and
Stainless Insurance Ltd., a captive insurance subsidiary (EMJ (Bermuda)).
All significant intercompany accounts and transactions have been
eliminated.
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements have been prepared in accordance with the
instructions to Form 10-Q and include all adjustments (consisting of
normally recurring accruals) and disclosures considered necessary for a
fair presentation of the consolidated financial position of the Earle M.
Jorgensen Company at June 30, 1996 and the consolidated results of
operations and cash flows for the three months ended June 30, 1996 and
1995. The consolidated results of operations for the three months ended
June 30, 1996 are not necessarily indicative of the results to be expected
for the full year. For further information, refer to the consolidated
financial statements and footnotes included in the Company's Annual Report
on Form 10-K for the year ended March 31, 1996.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
Page 5
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PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE
MONTHS ENDED JUNE 30, 1995.
REVENUE. Revenues for the first quarter of fiscal 1997 were $258.4 million,
compared to $265.9 million for the same period in fiscal 1996. Revenues from
U.S. and foreign operations were $242.8 million and $15.6 million, compared to
$249.1 million and $16.8 million, respectively, for the first quarter of fiscal
1996. For the first quarter of fiscal 1997, revenues from U.S. operations were
generally impacted by lower demand and competitive pricing. Foreign revenues
were adversely impacted primarily by local economic and competitive conditions
in the UK and Canada, partially offset by increased revenues in Mexico.
GROSS PROFIT. Gross profit for the first quarter of fiscal 1997 was $73.7
million, compared to $79.7 million for the same period in fiscal 1996.
Consolidated gross margin for the fiscal 1997 and 1996 periods was 28.5% and
30.0%, respectively. The first three months of fiscal 1997 included a LIFO
credit of $0.2 million compared to a charge of $1.2 million in the same period
of fiscal 1996. Foreign gross profits were $3.7 million and gross margin was
23.5%, compared to $3.8 million and 22.6%, respectively, for the comparable
period in fiscal 1996. Exclusive of foreign operations and LIFO charges, the
U.S. gross margin was 28.8% for the first quarter of fiscal 1997 compared to
30.6% for the comparable period in fiscal 1996. The 1.8% decrease primarily
resulted from changes in sales mix, lower commodity costs and competitive
pricing pressures.
EXPENSES. Total operating expenses for the first quarter of fiscal 1997 were
$58.1 million, compared to $65.4 million for the same period in fiscal 1996. As
a percentage of revenues, these expenses were 22.5% and 24.6% in the fiscal 1997
and 1996 periods, respectively.
Warehouse and delivery expenses for the first quarter of fiscal 1997 were $31.6
million (12.2% of revenues), compared to $32.0 million (12.1% of revenues) for
the same period in fiscal 1996. The fiscal 1997 period included lower
compensation expense, resulting primarily from a decrease in manpower
attributable to the workforce realignment completed in the second half of fiscal
1996, partially offset by expenses related to certain contracted shipping
management services.
Selling expenses for the first quarter of fiscal 1997 were $10.5 million (4.1%
of revenues), compared to $11.9 million (4.5% of revenues) for the same period
in fiscal 1996. The improvements were primarily the result of lower
compensation expenses.
General and administrative expenses were $16.1 million (6.2% of revenues) during
the first quarter of 1997 compared to $21.5 million (8.1% of revenues) for the
same period in fiscal 1996. The fiscal 1997 period benefited from lower
amortization of step-up of property, plant and equipment, lower compensation
expenses, and higher dividend income earned from life insurance contracts
maintained by the Company.
NET INTEREST EXPENSE. Net interest expense was $9.8 million for the first
quarter of both fiscal 1997 and 1996. The fiscal 1997 period was impacted
primarily by lower interest expense related to the Company's Revolving Credit
Facility as compared to the fiscal 1996 period, offset by higher interest
expense associated with increased levels of borrowings against the cash
surrender value of certain life insurance policies maintained by the Company in
the fiscal 1997 period. The average outstanding indebtedness during the first
quarter of fiscal 1997 was $300.2 million, compared to $292.9 million for the
same period in fiscal 1996, and the weighted average interest rate on such
indebtedness was 9.63% and 10.13%, respectively. The Company's Revolving Credit
Facility borrowings, representing $118.4 million and $118.2 million in principal
amount of total indebtedness at June 30, 1996 and 1995, respectively, is at a
floating interest rate (8.51% at June 30, 1996). The average interest rate on
such indebtedness for the first quarter of fiscal 1997 was 8.50% as compared to
9.66% in fiscal 1996. The interest rates on the 10-3/4% Senior Notes and on the
borrowings under the life insurance policies are fixed.
INCOME TAXES. Income tax expense for the first quarter of fiscal 1997 was
virtually eliminated by the recognition of tax benefits associated with the
Company's loss carryforwards. No such benefits were available for the fiscal
1996 period.
Page 6
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PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are internally generated funds, funds
available to it under its Revolving Credit Facility and borrowings against
certain life insurance policies. At June 30, 1996, the Company had available
borrowings of $54.1 million under the Revolving Credit Facility and
approximately $5.6 million of available borrowings against the cash surrender
value of life insurance policies. The indebtedness under the Revolving Credit
Agreement 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
offset by outstanding letters of credit, certain guarantees and other
obligations.
The Company's cash requirements for debt service and related obligations through
the end of fiscal 1997 will consist primarily of interest payments under its
Revolving Credit Facility, interest payments on the Senior Notes, dividends to
Holding to provide for the repurchase of capital stock from departing
stockholders pursuant to Holding's Stockholder Agreement and the Company's
employee stock ownership plan ("ESOP"), and principal and interest payments on
the Company's industrial revenue bond and purchase money indebtedness. As of
June 30, 1996, principal payments required by the Company's currently
outstanding industrial revenue bond and purchase money indebtedness amount to
$0.7 million in fiscal 1997, $1.0 million in fiscal 1998, $1.5 million in fiscal
1999, and $16.1 million in the aggregate thereafter through 2010. The Company
will not be required to make any principal payments against the Senior Notes or
the Revolving Credit Facility until 2000 and 1998, respectively. The Company is
in compliance with the covenants contained in the Revolving Credit Facility, and
the Company is not in default under the indenture governing the Senior Notes and
the Company does not anticipate any default thereunder for the foreseeable
future.
In fiscal 1997, approximately $4.8 million has been budgeted for capital
expenditures. Approximately $3.2 million is for routine replacement of
machinery and equipment and $1.6 million is for completing the implementation of
the Company's information technology system. The Company expects to finance
such expenditures from internal cash flows.
The Company's working capital at June 30, 1996 increased $17.1 million to $183.7
million when compared to $166.6 million at March 31, 1996. The increase was
primarily attributable to higher inventory levels resulting from the
establishment of additional regional depots and lower accounts payable resulting
from the acceleration of discounting supplier invoices. This was partially
offset by higher accruals for operating expenses.
Net cash used in operating activities during the first quarter of fiscal 1997
was $20.0 million, compared to net cash generated of $6.6 million in the same
period of fiscal 1996. The cash flows for the fiscal 1997 period were impacted
by the reduction of accounts payable resulting from discounting supplier
invoices, and lower levels of collections of accounts receivable resulting from
lower sales in the first quarter of fiscal 1997 when compared to the same period
in fiscal 1996. Net cash flows from operations during the first three months of
fiscal 1997 were also impacted by lower inventory growth and higher earnings
when compared to the same period in fiscal 1996.
Net cash used in investing activities was $0.3 million during the first quarter
of fiscal 1997, compared to $6.2 million in the same period of fiscal 1996. The
decrease was primarily attributable to a reduction in the Company's 1997 capital
expenditures budget. Capital expenditures in the first three months of the
prior year included the acquisition of the Company's Tulsa, Oklahoma facility
and expansions or enhancements to the Charlotte, Indianapolis, Detroit and
Cincinnati facilities.
Net cash provided by financing activities during the first quarter of fiscal
1997 was $12.3 million, compared to net cash used of $5.3 million in the same
period of fiscal 1996. The cash flows for the fiscal 1997 period were primarily
impacted by higher borrowings under the Company's Revolving Credit Facility
resulting from the acceleration of discounting supplier invoices, and the
establishment of additional regional inventory depots.
Page 7
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PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
As of June 30, 1996, the Company believes that its sources of liquidity and
capital resources are sufficient to meet all current and foreseeable working
capital and capital expenditures requirements.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
Exhibit 27. Financial Data Schedule.
(b) REPORTS
The Registrant was not required to file a Form 8-K during the
quarter ended June 30, 1996.
Page 8
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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/ Neven C. Hulsey
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Date: August 5, 1996 Neven C. Hulsey
President, Chief Executive Officer
/s/ Charles P. Gallopo
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Date: August 5, 1996 Charles P. Gallopo
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Page 9
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AND THE UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
AS OF AND FOR THE PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 14,778
<SECURITIES> 0
<RECEIVABLES> 115,620
<ALLOWANCES> 1,193
<INVENTORY> 194,506
<CURRENT-ASSETS> 329,080
<PP&E> 189,799
<DEPRECIATION> 57,440
<TOTAL-ASSETS> 485,641
<CURRENT-LIABILITIES> 145,368
<BONDS> 291,267
0
0
<COMMON> 0
<OTHER-SE> 30,977
<TOTAL-LIABILITY-AND-EQUITY> 485,641
<SALES> 258,430
<TOTAL-REVENUES> 258,430
<CGS> 184,744
<TOTAL-COSTS> 184,744
<OTHER-EXPENSES> 31,577
<LOSS-PROVISION> 291
<INTEREST-EXPENSE> 9,805
<INCOME-PRETAX> 5,741
<INCOME-TAX> 49
<INCOME-CONTINUING> 5,692
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,692
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
