<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 December 31, 1997
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
----- -----
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
December 31, 1997 - 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 December 31, 1997 (unaudited)
and March 31, 1997 2
Consolidated Statements of Operations for the Three Months
and Nine Months Ended December 31, 1997 and
December 31, 1996 (unaudited) 3
Consolidated Statements of Cash Flows for the Nine Months
Ended December 31, 1997 and
December 31, 1996 (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 10
SIGNATURES 11
<PAGE>
PART I - FINANCIAL INFORMATION
EARLE M. JORGENSEN COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
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(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 14,147 $ 21,477
Accounts receivable, less allowance for doubtful
accounts of $1,409 and $963 at December 31, 1997
and March 31, 1997, respectively 106,738 113,544
Inventories 200,804 174,045
Other current assets 3,922 3,915
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Total current assets 325,611 312,981
Property, plant and equipment, net of accumulated
depreciation of $58,620 and $54,416 at December 31,
1997 and March 31, 1997, respectively 111,139 120,050
Net cash surrender value of life insurance policies 12,297 14,258
Debt issue costs, net of accumulated amortization 3,488 4,806
Other assets 2,247 2,787
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Total assets $ 454,782 $ 454,882
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LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 73,766 $ 87,519
Accrued restructuring expenses 3,649 10,632
Other accrued liabilities 34,683 25,973
Deferred income taxes 20,139 16,919
Current portion of long-term debt 1,450 950
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Total current liabilities 133,687 141,993
Long term debt 296,869 290,336
Deferred income taxes 14,354 17,093
Other long-term liabilities 3,777 3,533
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Total liabilities 448,687 452,955
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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 159,303 171,073
Foreign currency translation adjustment (69) 44
Accumulated deficit (153,139) (169,190)
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Total stockholder's equity 6,095 1,927
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Total liabilities and stockholder's equity $ 454,782 $ 454,882
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</TABLE>
SEE ACCOMPANYING NOTES.
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PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
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DECEMBER 31, December 31, DECEMBER 31, December 31,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenues $ 256,049 $ 250,667 $ 775,483 $ 756,070
Cost of sales 185,268 182,063 559,329 545,285
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Gross profit 70,781 68,604 216,154 210,785
Expenses:
Warehouse and delivery 32,497 34,393 96,443 99,179
Selling 8,890 10,242 27,942 31,130
General and administrative 14,487 17,940 44,056 50,955
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Total expenses 55,874 62,575 168,441 181,264
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Income from operations 14,907 6,029 47,713 29,521
Interest expense, net 9,980 10,764 30,489 30,492
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Income (loss) before income taxes 4,927 (4,735) 17,224 (971)
Income tax expense (benefit) 673 18 1,173 225
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Net income (loss) $ 4,254 $ (4,753) $ 16,051 $ (1,196)
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</TABLE>
SEE ACCOMPANYING NOTES.
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PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
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DECEMBER 31, DECEMBER 31,
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 16,051 $ (1,196)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 7,182 7,949
Amortization of debt issue costs and discount on senior notes 1,420 1,709
Gain on sale of property, plant and equipment, net (341) (1,080)
ESOP contribution 2,183 5,109
Provision for bad debts 934 1,844
Changes in assets and liabilities:
Accounts receivable 4,949 10,272
Inventories (28,890) (10,093)
Decrease in cash surrender value of life insurance over
premiums paid 3,438 294
Accounts payable and accrued liabilities and expenses (13,558) (25,851)
Accrued postretirement benefits 360 270
Current and deferred income taxes 481 200
Other 538 (2,055)
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Net cash used in operating activities (5,253) (12,628)
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INVESTING ACTIVITIES
Additions to property, plant and equipment (4,948) (2,900)
Proceeds from the sale of property, plant and equipment 7,179 4,708
Proceeds from sale of subsidiary 1,700 -
Premiums paid on life insurance policies (1,944) (1,983)
Proceeds from redemption of life insurance policies 467 1,457
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Net cash provided by investing activities 2,454 1,282
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FINANCING ACTIVITIES
Net borrowings under revolving loan agreements 7,644 9,646
Cash dividend to parent (11,463) (4,192)
Other payments (712) (712)
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Net cash (used in) provided by financing activities (4,531) 4,742
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NET DECREASE IN CASH (7,330) (6,604)
Cash at beginning of period 21,477 22,823
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CASH AT END OF PERIOD $ 14,147 $ 16,219
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</TABLE>
SEE ACCOMPANYING NOTES.
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PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 Earle
M. Jorgensen (UK) Ltd. (EMJ (UK)) (see Note 2), Kilsby Jorgensen Steel and
Aluminum S.A. de C.V. (EMJ (Mexico)) (see Note 2), 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 December 31, 1997 and the consolidated results of
operations for the three months and nine months ended December 31, 1997 and
December 31, 1996 and consolidated cash flows for the nine months ended
December 31, 1997 and December 31, 1996. The consolidated results of
operations for the three months and nine months ended December 31, 1997 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, 1997.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
2. SALE OF SUBSIDIARIES
On August 29, 1997, the Company sold a subsidiary in Mexico for $3.5
million, including cash of $1.7 million and $1.8 million of retained
accounts receivable. The sale resulted in a loss of approximately
$200,000, which was reflected in the prior years' restructuring plan.
Through the period of sale, this subsidiary had revenues of $2.3 million
and pre-tax losses of $0.1 million, compared to revenues of $5.4 million
and pre-tax losses of $0.2 million during the same period in fiscal 1997.
On January 29, 1998, the Company completed the sale of it's subsidiary in
the United Kingdom for $5.1 million in cash. The sale results in a loss
to the Company of approximately $3.6 million, of which $1.7 million has
been provided for during fiscal 1997. The balance of $1.9 million will
be reported as a non-recurring loss on the sale of a subsidiary in the
fourth quarter of fiscal 1998. Through the period of sale, this
subsidiary had revenues of $21.2 million and pre-tax losses of
approximately $60,000 compared to revenues of $21.6 million and pre-tax
losses of $910,775 during the same period in fiscal 1997.
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<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO NINE
MONTHS ENDED DECEMBER 31, 1996.
REVENUE. Revenues for the first nine months of fiscal 1998 were $775.5 million,
compared to $756.1 million for the same period in fiscal 1997. Revenues from
domestic operations were $732.2 million, compared to $708.9 million for the
fiscal 1997 period. Revenues from international operations for the fiscal 1998
and 1997 periods were $43.3 million and $47.2 million, respectively. Domestic
revenues in fiscal 1998 were favorably impacted by a 10% increase in tonnage
volume but adversely impacted by a 4% reduction in average selling price
(material costs also declined 4%) compared to fiscal 1997. Revenues from
international operations were adversely impacted by the sale of the Company's
subsidiary in Mexico during August 1997 (see Note 2).
GROSS PROFIT. Gross profit for the first nine months of fiscal 1998 was $216.2
million, compared to $210.8 million for the same period in fiscal 1997.
Consolidated gross margin for the fiscal 1998 and 1997 periods was 27.9%. The
first nine months of fiscal 1998 included a LIFO charge of $1.9 million compared
to a credit of $1.2 million in the same period of fiscal 1997, a $3.1 million
change. Gross profit from international operations was $9.1 million and gross
margin was 21.1%, compared to $10.3 million and 21.8%, respectively, for the
fiscal 1997 period. Exclusive of international operations and LIFO adjustments,
the gross margin from domestic operations was 28.5% for the first nine months of
fiscal 1998 compared to 28.1% for the same period in fiscal 1997 primarily due
to product mix resulting from the discontinuance of the coil flat roll
processing center in Tulsa, Oklahoma and an increase in the bar (up 18%) and
tubular (up 3%) tonnage.
EXPENSES. Total operating expenses for the first nine months of fiscal 1998
were $168.4 million, compared to $181.3 million for the same period in fiscal
1997. As a percentage of revenues, these expenses were 21.7% and 24.0% in the
fiscal 1998 and 1997 periods, respectively.
Warehouse and delivery expenses for the first nine months of fiscal 1998 were
$96.4 million (12.4% of revenues) as compared with $99.2 million (13.1% of
revenues) for the same period in fiscal 1997. The decrease resulted from a 7%
reduction in compensation and related expenses resulting from the closure of
four domestic service centers and the sale of the Mexican subsidiary, partially
offset by higher freight costs attributable to the 10% increase in tonnage
volume shipped and repositioning the inventory depots.
Selling expenses for the first nine months of fiscal 1998 were $27.9 million
(3.6% of revenues) compared with $31.1 million (4.1% of revenues) for the same
period in fiscal 1997 as the result of an 8% reduction in compensation and
related expenses resulting from the closure of four domestic service centers and
the sale of the Mexican subsidiary.
General and administrative expenses for the first nine months of fiscal 1998
were $44.1 million (5.7% of revenues) as compared with $51.0 million (6.7% of
revenues) for the same period in fiscal 1997 as the result of 18% lower
compensation and related expenses resulting from the March 1997 restructuring,
which included an administrative workforce reduction.
NET INTEREST EXPENSE. Net interest expense was $30.5 million for the first
nine months of fiscal 1998 and fiscal 1997. Interest expense in the fiscal
1998 period increased as a result of 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 1998 period as
compared to the fiscal 1997 period, but the increase was offset by lower
interest expense on the other outstanding indebtedness during the fiscal 1998
period. The Company's average outstanding indebtedness, which excludes
borrowings against the cash surrender value of certain life insurance
policies, was $302.3 million during the first nine months of fiscal 1998,
compared to $305.3 million for the same period in fiscal 1997, and the
weighted average interest rate on such indebtedness was 9.67% and 9.60%,
respectively. The Company's Revolving Credit Facility borrowings,
representing $125.7 million and $115.5 million in principal amount of total
indebtedness at December 31, 1997 and December 31, 1996, respectively, is at a
floating interest rate (8.69% at December 31, 1997). The average interest
rate on such indebtedness for the first nine months of fiscal 1998 was 8.62%
as compared to 8.51% in fiscal 1997. The interest rates on the 10-3/4% Senior
Notes and on the borrowings under the life insurance policies are fixed.
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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)
RESULTS OF OPERATIONS: NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO NINE
MONTHS ENDED DECEMBER 31, 1996.
(CONTINUED)
INCOME TAXES. Income tax expense for the first nine months of fiscal 1998
represents a provision for state franchise taxes. The remaining tax provisions
for the first nine months of fiscal 1998 were offset by recognition of tax
benefits associated with the Company's loss carryforwards. The income tax
provision of $0.2 million for the first nine months of fiscal 1997 represents a
provision for U.S. taxes (calculated using a projected effective tax rate of
34.0%), adjusted by a $1.3 million reduction in the reserve for deferred tax
assets resulting from the recognition of tax benefits associated with the
Company's loss carry-forwards.
RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THREE
MONTHS ENDED DECEMBER 31, 1996.
REVENUE. Revenues for the third quarter of fiscal 1998 were $256.0 million,
compared to $250.7 million for the same period in fiscal 1997. Revenues from
domestic operations were $242.3 million, compared to $234.4 million for the
third quarter of fiscal 1997. Domestic revenues in fiscal 1998 were favorably
impacted by a 9% increase in tonnage volume but adversely impacted by a 3%
reduction in average selling price (material costs also declined 3%). Revenues
from international operations were adversely impacted by the sale of the
Company's subsidiary in Mexico during August 1997 (see Note 2).
GROSS PROFIT. Gross profit for the third quarter of fiscal 1998 was $70.8
million, compared to $68.6 million for the same period in fiscal 1997.
Consolidated gross margin for the fiscal 1998 and 1997 periods was 27.6% and
27.4%, respectively. The third quarter of fiscal 1998 included a LIFO charge of
$0.6 million compared to a credit of $0.5 million in the same period of fiscal
1997, a $1.1 million change. Gross profit from international operations was
$2.8 million and gross margin was 20.4%, compared to $3.5 million and 21.4%,
respectively, for the fiscal 1997 period. Exclusive of international operations
and LIFO adjustments, the gross margin from domestic operations for the third
quarter of fiscal 1998 improved to 28.3% as compared with 27.5% for the same
period in fiscal 1997 primarily due to shifts in the product mix resulting from
the discontinuance of the coil flat roll processing center in Tulsa, Oklahoma
and a 19% increase in bar tonnage shipped during the third quarter of fiscal
1998.
EXPENSES. Total operating expenses for the third quarter of fiscal 1998 were
$55.9 million, compared to $62.6 million for the same period in fiscal 1997. As
a percentage of revenues, these expenses were 21.8% in the fiscal 1998 period
and 25.0% in the fiscal 1997 period.
Warehouse and delivery expenses for the third quarter of fiscal 1998 were $32.5
million (12.7% of revenues) as compared with $34.4 million (13.7% of revenues)
for the same period in fiscal 1997 reflecting principally a 9% reduction in
compensation and related expenses resulting from the closure of four domestic
service centers, and the sale of the Mexican subsidiary.
Selling expenses for the third quarter of fiscal 1998 were $8.9 million (3.5% of
revenues) as compared with $10.2 million (4.1% of revenues) for the same period
in fiscal 1997 as a result of a 10% reduction in compensation and related
expenses resulting from the closure of four domestic service centers and the
sale of tbe Mexican subsidiary.
General and administrative expenses for the third quarter of fiscal 1998 were
$14.5 million (5.7% of revenues) as compared with $17.9 million (7.2% of
revenues) for the same period in fiscal 1997. The decrease was primarily the
result of 27% lower compensation and related expenses resulting from the March
1997 restructuring, which included an administrative workforce reduction.
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<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THREE
MONTHS ENDED DECEMBER 31, 1996. (CONTINUED)
NET INTEREST EXPENSE. Net interest expense was $10.0 million and $10.8 million
for the third quarter of fiscal 1998 and fiscal 1997, respectively. The
Company's average outstanding indebtedness during the third quarter of fiscal
1998 was $307.7 million, compared to $309.9 million for the same period in
fiscal 1997, and the weighted average interest rate on such indebtedness was
9.66% and 9.56%, respectively.
INCOME TAXES. Income tax expense for the third quarter of fiscal 1998 represents
a provision for state taxes. The remaining tax provisions for the third quarter
were offset by recognition of tax benefits associated with the Company's loss
carryforwards. The income tax provision for the third quarter of fiscal 1997
represents a provision for Canadian taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements for debt service and related obligations through
the end of fiscal 1998 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
December 31, 1997, principal payments required by the Company's currently
outstanding industrial revenue bond and purchase money indebtedness amount to
$0.3 million in fiscal 1998, $1.5 million in fiscal 1999 and 2000, and $14.7
million in the aggregate thereafter through 2010. The Company will not be
required to make any principal payments against the Revolving Credit Facility or
the Senior Notes until 1999 and 2000, 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.
At December 31, 1997, the Company's primary sources of liquidity were available
borrowings of $42.3 million under the Revolving Credit Facility, $2.1 million
against certain life insurance policies, and internally generated funds.
Borrowings under the Revolving Credit Facility are secured by the Company's
domestic inventory and accounts receivable, and future availability under the
facility is determined by prevailing levels of the Company's accounts receivable
and inventory. The life insurance policy loans are secured by the cash
surrender value of the policies and are non-recourse to the Company. The
interest rate on the loans is 0.5% greater than the dividend income rate on the
policies. As of December 31, 1997, there was approximately $12.3 million of
cash surrender value in all life insurance policies maintained by the Company,
net of borrowings.
For fiscal 1998, the Company has a planned investment of approximately $10.0
million for capital expenditures. Approximately $7.6 million is for routine
replacement of machinery and equipment and facility improvements, and $2.4
million is for further additions to the Company's information technology
systems. The Company expects to finance such expenditures from internal cash
flow. During the fiscal nine months, the Company spent $5 million for planned
capital expenditures. Certain planned expenditures may be deferred to the next
fiscal year, the amount of which is not determined at this time.
The Company's working capital at December 31, 1997 increased $20.9 million to
$191.9 million when compared to $171.0 million at March 31, 1997.
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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)
Net cash used in operating activities during the first nine months of fiscal
1998 was $5.3 million, compared to $12.6 million during the same period in
fiscal 1997. Funds provided increased primarily due to the impact of net
profitability, versus a net loss in the prior year, and a decrease in accounts
receivables. This was offset by an increase in inventories and a reduction in
trade accounts payable and other accrued liabilities and expenses.
Net cash provided by investing activities was $2.5 million during the first nine
months of fiscal 1998, compared to $1.3 million during the same period in fiscal
1997. In fiscal 1998, the major expenditures were $4.9 million in additions to
property, plant and equipment (compared to $2.9 million last year), offset by
proceeds from the sale of the Mexican subsidiary ($1.7 million), sales of
property plant and equipment (totaling $7.2 million in fiscal 1998 versus $4.7
million in fiscal 1997). During fiscal 1998 the company disposed of excess
facilities in Hartford, Connecticut; Birmingham, Alabama; and Grand Prairie,
Texas, while in fiscal 1997 excess facilities located in Bristol, Pennsylvania
and Oakland, California were sold.
Net cash used in financing activities was $4.5 million during the first nine
months of fiscal 1998 compared to net cash provided of $4.7 million during the
same period in fiscal 1997. The fiscal 1998 period included higher dividends
to Holding for the redemption of Holding's capital stock from departing
stockholders.
As of December 31, 1997, the Company believes its sources of liquidity and
capital resources are sufficient to meet all currently anticipated operating
cash requirements, including debt service payments on the revolving loans and
the Senior Notes prior to their respective maturities. However, the Company
anticipates that it will be necessary to replace the Revolving Credit Facility
on or prior to its maturity in September 1999 and to refinance the Senior Notes
on or prior to their maturity in March 2000, although there can be no assurance
on what terms, if any, the Company would be able to obtain such refinancing.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
Exhibit 10.62 Earle M. Jorgensen Company Management Incentive
Compensation Plan.
Exhibit 27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K
The Registrant was not required to file a Form 8-K during the
quarter ended December 31, 1997.
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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/ Maurice S. Nelson, Jr.
--------------------------
Date: February 17, 1998 Maurice S. Nelson, Jr.
President, Chief Executive Officer
/s/ Charles P. Gallopo
--------------------------
Date: February 17, 1998 Charles P. Gallopo
Vice President, Chief Financial Officer
and Secretary (Principal Financial and
Accounting Officer)
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EHXIBIT 10.62
EARLE M. JORGENSEN COMPANY
MANAGEMENT INCENTIVE COMPENSATION PLAN
1. HISTORY, PURPOSE AND EFFECTIVE DATE. Earle M. Jorgensen Company, a
Delaware corporation (the "Company"), has established this Management
Incentive Compensation Plan (the "Plan") to aid the Company in attracting
and retaining senior executives and other key management employees of
outstanding ability, motivating superior effort and performance levels by
plan Participants, providing the Company with an effective tool for
directing and focusing senior executives on longer-term challenges,
reinforcing a desired management culture of teamwork and cooperation, and
rewarding achievement of increases in shareholder value superior to those
of United States industry. The effective date of the Plan is April 1,
1997.
2. ADMINISTRATION. The Plan shall be administered and interpreted by the
Executive Committee of the Company's Board of Directors (the "Committee").
Any interpretation of the Plan and any decision on any matter within the
Committee's discretion made by it in good faith shall be binding on all
persons.
3. PARTICIPATION AND AWARD PERCENTAGES. The Committee shall establish the
categories of the senior executives and key management employees of the
Company who shall be Participants in the Plan and shall establish operating
profit, cash flow and other targets and award percentages for all
Participants.
4. ELIGIBILITY. Senior executives and key management employees in the
categories designated by the Committee shall be eligible for incentive
compensation awards, provided, further, that to be eligible for incentive
compensation hereunder a Participant (i) shall have been employed by the
Company for at least six months prior to the end of the fiscal year, (ii)
shall be employed by the Company at the end of the fiscal year and (iii)
shall be in good standing (I.E., must not have been the subject of an
unsatisfactory performance review in the past twelve months).
5. ESTABLISHMENT OF TARGETS. Corporate operating profit and cash flow
(revolver) performance targets shall be determined each year by the Board
of Directors at the beginning of the fiscal year. Regional operating
profit performance targets will be determined by the Company's Chief
Executive Officer at the beginning of the fiscal year. District operating
profit and cash flow performance targets and program/product manager
performance targets shall be recommended by the responsible Regional Vice
President and determined by the Company's Chief Executive Officer at the
beginning of each fiscal year.
6. AWARDS. Incentive compensation will be paid by applying the applicable
award percentage to the Participant's base pay as of the end of the fiscal
year. Incentive compensation on the corporate portion of the program will
not be paid unless the Company achieves 80% or more of the board approved
corporate operating profit and revolver targets and maximum incentive
compensation will be achieved at 150% of the established target.
Regardless of corporate results, if a district achieves 80% or more of its
respective operating profit and cash flow targets or a program/product
manager achieves 80% or more of the program/product manager targets, the
Participants from the District or the program/product manager will receive
the applicable district portion of their incentive compensation. Award
percentages will be determined on a sliding scale based on the percentage
to the targets achieved.
7. DISCRETIONARY POOL. The Chief Executive Officer shall have a discretionary
pool available to recognize exemplary performance above the targets or
otherwise outside the parameters established for the Plan.
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8. CALCULATION OF AWARDS; ADJUSTMENTS. Awards will be calculated annually
after publication of the audited financial accounts. Corporate results
will be based on operating profit excluding UFO restructuring changes and
unusual items related to restructuring or reengineering or fixed asset
sales. In the event of any corporate change which would materially and
unjustly affect the attainment of the target percentages for any fiscal
year, the Committee shall make such equitable adjustments under the Plan as
it determines are consistent with the purpose of the Plan, and will fairly
preserve the benefits of the Plan to the Participant and the Company.
Corporate changes for purposes of the preceding sentence shall include, but
are not limited to, changes in the Company accounting policies,
restructuring or reengineering, acquisitions and divestitures.
9. PAYMENT OF AWARDS. A Participant's Award for any Performance Cycle shall
be payable as soon as practicable after the end of the fiscal year but in
no event later than 30 days after publication of the annual audited
financial statements.
10. WITHHOLDING. Any payment under the Plan is subject to withholding for
payment of all applicable taxes. In the discretion of the Committee, the
Company shall retain that portion of any Award which is equal to the amount
required for withholding of income taxes.
11. NONTRANSFERABILITY. The interests of Participants under the Plan are not
subject to the claims of their creditors and may not be voluntarily or
involuntarily assigned, alienated or encumbered.
12. APPLICABLE LAW. The Plan shall be construed and administered in accordance
with the internal laws of the State of California.
13. SUCCESSORS. The Plan shall be binding upon any assignee or successor in
interest to the Company whether by merger, consolidation or the sale of all
or substantially all of the Company's assets.
14. AMENDMENT AND TERMINATION. The Plan may be altered, modified, amended,
reduced, eliminated or terminated at any time and without notice by
resolution of the Company's Board of Directors or its Executive Committee.
-16-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AND THE UNAUDITED CONSOLIDATED STATEMENT OF
OPERATIONS AS OF AND FOR THE PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 14,147
<SECURITIES> 0
<RECEIVABLES> 108,147
<ALLOWANCES> 1,409
<INVENTORY> 200,804
<CURRENT-ASSETS> 325,611
<PP&E> 169,759
<DEPRECIATION> 58,620
<TOTAL-ASSETS> 454,782
<CURRENT-LIABILITIES> 133,687
<BONDS> 296,896
0
0
<COMMON> 0
<OTHER-SE> 6,095
<TOTAL-LIABILITY-AND-EQUITY> 454,782
<SALES> 775,483
<TOTAL-REVENUES> 775,483
<CGS> 559,329
<TOTAL-COSTS> 559,329
<OTHER-EXPENSES> 96,443
<LOSS-PROVISION> 934
<INTEREST-EXPENSE> 30,489
<INCOME-PRETAX> 17,224
<INCOME-TAX> 1,173
<INCOME-CONTINUING> 16,051
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,051
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
