<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, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-7537
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 92821
---------------------------------------- ---------------------------
(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
----
Outstanding common stock, par value $.01 per share, at July 31, 1999
- - 128 Shares
----------
<PAGE>
EARLE M. JORGENSEN
COMPANY TABLE OF CONTENTS
<TABLE>
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PAGE
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PART I - FINANCIAL INFORMATION
Item 1 CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets at June 30, 1999 (unaudited) and March 31, 1999 2
Consolidated Statements of Operations and Comprehensive Income
for the Three Months Ended June 30, 1999 and 1998 (unaudited) 3
Consolidated Statements of Cash Flows for the Three Months Ended June 30,
1999 and 1998 (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
</TABLE>
1
<PAGE>
PART I - FINANCIAL INFORMATION
EARLE M. JORGENSEN COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, 1999 MARCH 31, 1999
----------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $15,272 $17,860
Accounts receivable, less allowance for doubtful accounts of $402 and
$335 at June 30, 1999 and March 31, 1999, respectively 91,879 91,356
Inventories 190,132 183,968
Other current assets 6,257 4,890
----------------- -----------------
Total current assets 303,540 298,074
----------------- -----------------
Property, plant and equipment, net of accumulated depreciation of $53,784
and $51,405 at June 30, 1999 and March 31, 1999, respectively 101,289 102,776
Net cash surrender value of life insurance policies 22,609 18,541
Debt issue costs, net of accumulated amortization 5,884 6,255
Other assets 1,071 1,221
----------------- -----------------
Total assets $434,393 $426,867
----------------- -----------------
----------------- -----------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $76,188 $87,108
Accrued employee compensation and related taxes 6,086 9,732
Accrued employee benefits 9,962 9,402
Accrued interest 11,503 7,638
Other accrued liabilities 6,069 5,752
Deferred income taxes 20,251 20,251
Current portion of long-term debt 1,500 1,500
----------------- -----------------
Total current liabilities 131,559 141,383
----------------- -----------------
Long term debt 310,199 295,006
Deferred income taxes 15,182 14,941
Other long-term liabilities 3,717 3,557
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 --- ---
Capital in excess of par value 99,782 102,082
Accumulated other comprehensive loss (1,103) (1,165)
Accumulated deficit (124,943) (128,937)
----------------- -----------------
Total stockholder's equity (26,264) (28,020)
----------------- -----------------
Total liabilities and stockholder's equity $434,393 $426,867
----------------- -----------------
----------------- -----------------
</TABLE>
See accompanying notes.
2
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------
JUNE 30, 1999 JUNE 30, 1998
----------------- -----------------
(UNAUDITED)
<S> <C> <C>
Revenues $220,889 $250,576
Cost of sales 156,858 178,438
----------------- -----------------
Gross profit 64,031 72,138
Expenses:
Warehouse and delivery 29,422 30,493
Selling 8,259 9,194
General and administrative 12,346 13,511
----------------- -----------------
Total expenses 50,027 53,198
----------------- -----------------
Income from operations 14,004 18,940
Interest expense, net 9,698 10,048
----------------- -----------------
Income before income taxes 4,306 8,892
Income tax expense 312 580
----------------- -----------------
Net income 3,994 8,312
Other comprehensive income (loss), net of income tax 62 (67)
----------------- -----------------
Comprehensive income $4,056 $8,245
----------------- -----------------
----------------- -----------------
</TABLE>
See accompanying notes.
3
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------
JUNE 30, 1999 JUNE 30, 1998
------------------- -----------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $3,994 $8,312
Adjustments to reconcile net income to net cash used for operating
activities
Depreciation and amortization 2,442 2,234
Amortization of debt issue costs and discount on senior notes 371 323
(Gain) loss on sale of property, plant and equipment (256) 140
ESOP contribution 886 1,044
Provision for bad debts 231 266
Changes in assets and liabilities:
Accounts receivable (754) 8,394
Inventories (6,164) (36,772)
Increase in cash surrender value of life insurance (3,792) (2,595)
Accounts payable and accrued liabilities and expenses (10,711) (7,184)
Accrued postretirement benefits 120 120
Current and deferred income taxes 241 510
Other (1,180) (1,313)
----------------- -----------------
Net cash used in operating activities (14,572) (26,521)
----------------- -----------------
INVESTING ACTIVITIES
Additions to property, plant and equipment (1,043) (2,387)
Proceeds from the sale of property, plant and equipment 387 1,883
Premiums paid on life insurance policies (276) (12)
Proceeds from redemption of life insurance policies --- 41
----------------- -----------------
Net cash provided by (used in) investing activities (932) (475)
----------------- -----------------
FINANCING ACTIVITIES
Net borrowings under revolving loan agreements 15,943 25,098
Payments on other debt (750) (750)
Cash dividend to parent (2,300) (486)
Payment of debt issue costs --- (1,504)
----------------- -----------------
Net cash provided by financing activities 12,893 22,358
----------------- -----------------
Effect of exchange rate changes on cash 23 (36)
----------------- -----------------
NET DECREASE IN CASH (2,588) (4,674)
Cash at beginning of period 17,860 20,763
----------------- -----------------
CASH AT END OF PERIOD $15,272 $16,089
----------------- -----------------
----------------- -----------------
</TABLE>
See accompanying notes.
4
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
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 consolidated condensed financial statements include the
accounts of the Company and its wholly owned subsidiaries including Earle
M. Jorgensen (Canada) Inc. and Stainless Insurance Ltd., a captive
insurance subsidiary. 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, 1999 and the consolidated results of
operations and comprehensive income and cash flows for the three months
ended June 30, 1999 and 1998. The consolidated results of operations and
comprehensive income for the three months ended June 30, 1999 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, 1999.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
2. COMPREHENSIVE INCOME
Effective April 1, 1998, we adopted SFAS No. 130, "Reporting Comprehensive
Income", which establishes rules for the reporting and disclosure of
comprehensive income and its components. For the three months ended June
30, 1999 and 1998, comprehensive income (loss) included foreign currency
translation adjustments of $62,000 and ($67,000), respectively. Prior to
the adoption of SFAS No. 130, we reported foreign currency translation
adjustments separately in stockholder's equity. The adoption of SFAS No.
130 had no impact on our net income or stockholder's equity.
5
<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: THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS
ENDED JUNE 30, 1998.
REVENUE. Revenues for the first quarter of fiscal 2000 were $220.9 million,
compared to $250.6 million for the same period in fiscal 1999. Revenues from our
domestic operations decreased $30.2 million (12.5%) to $212.2 million in the
first quarter of fiscal 2000 when compared to $242.4 million for the same period
in fiscal 1999. This decrease was attributable to decreases in metal prices and
weakened demand in key industries that we serve, particularly oil services,
agricultural equipment and aerospace. Revenues from domestic stock sales
decreased approximately 14% as the result of a 9% decrease in average prices and
a 5% decrease in tonnage shipped. Revenue from our Canadian operations was $8.7
million in the first quarter of fiscal 2000 compared to $8.2 million in the same
period in fiscal 1999.
GROSS PROFIT. Gross profit for the first quarter of fiscal 2000 was $64.0
million, compared to $72.1 million for the same period in fiscal 1998, while
consolidated gross margins were 29.0% and 28.8%, respectively. Gross profit for
the fiscal 2000 period included a LIFO credit of $1.0 million compared to a LIFO
charge of $0.1 million in the prior year period. Gross profit from our Canadian
operations was $2.0 million and gross margin was 23.0% during the first quarter
of fiscal 2000, compared to $1.8 million and 22.0%, respectively, for the same
period in fiscal 1999. Exclusive of our Canadian operations and LIFO
adjustments, gross margin was 28.8% for the first quarter of fiscal 2000
compared to 29.0% for the same period in fiscal 1999.
EXPENSES. Total operating expenses for the first quarter of fiscal 2000 were
$50.0 million (22.6% of revenues), compared to $53.2 million (21.2% of revenues)
for the same period in fiscal 1999. The lower operating expenses generally
reflect the impact on variable expenses from lower revenue levels and the
results of the ongoing reengineering and cost reduction programs designed to
improve asset and employee productivity and operating profits.
Warehouse and delivery expenses for the first quarter of fiscal 2000 were $29.4
million (13.3% of revenues), compared to $30.5 million (12.2% of revenues) for
the same period in fiscal 1999. The fiscal 2000 period benefited from lower
compensation and related expenses and lower transportation and freight costs
resulting from the decrease in tonnage shipped and reengineering initiatives. As
of June 30, 1999, 1,114 employees were involved in warehouse and delivery
activities, compared to 1,232 as of June 30, 1998.
Selling expenses for the first quarter of fiscal 2000 were $8.3 million (3.8% of
revenues), compared to $9.2 million (3.7% of revenues) for the same period in
fiscal 1999. The decrease resulted from lower accruals for incentive
compensation based on sales and gross profit levels and a 5% decrease in
headcount resulting from efficiencies realized in processing customer orders.
General and administrative expenses were $12.3 million (5.6% of revenues) during
the first quarter of 2000 compared to $13.5 million (5.4% of revenues) for the
same period in fiscal 1999. The decrease resulted from lower expenses associated
with maintaining our management information systems, lower consulting charges
and other expenses related to reengineering and cost reduction projects
implemented in fiscal 1999, gains (versus losses in the fiscal 1999 period) from
sale of fixed assets, and lower compensation expenses resulting from a 14%
decrease in headcount.
NET INTEREST EXPENSE. Net interest expense was $9.7 million for the first
quarter of fiscal 2000 compared to $10.0 million in the same period in fiscal
1999. Such amounts include interest and amortization of debt issue costs related
to our revolving credit facility ("Revolving Credit Facility"), our 9-1/2%
senior notes ("Senior Notes"), our variable rate term loan ("Term Loan") and
interest on borrowings against the cash surrender value of certain life
insurance policies we maintain.
6
<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: THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS
ENDED JUNE 30, 1998. (CONTINUED)
Interest expense and amortization of debt issue costs related to the our
outstanding indebtedness (excluding those borrowings against the cash surrender
value of certain life insurance policies) totaled $6.7 million for the first
quarter of fiscal 2000 compared to $7.4 million for the same period in fiscal
1999. The average outstanding indebtedness during the first quarter of fiscal
2000 was $308.5 million, compared to $324.3 million for the same period in
fiscal 1999. The weighted average interest rate on such indebtedness was 7.72%
during the first quarter of fiscal 2000 versus 8.68% during the same period in
fiscal 1999. During the three months ended June 30, 1999 and 1998, borrowings
under the Revolving Credit Facility averaged $92.4 million and $106.7 million
and the average interest rate on such borrowings was 6.88% and 7.73%,
respectively.
Interest expense associated with borrowings against the cash surrender value of
certain life insurance policies maintained was $3.0 million for the fiscal 2000
period compared to $2.6 million for the same period in fiscal 1999.
The interest rates on our 9 1/2% Senior Notes and on the borrowings under the
life insurance policies are fixed at 9.50% and 11.76%, respectively. The
interest rates on our Revolving Credit Facility and Term Loan are floating
(6.87% and 8.22%, respectively, as of June 30, 1999). Pursuant to an interest
rate swap agreement entered into with Bankers Trust Company in June 1998, the
interest rate on the Term Loans was fixed at approximately 9.05% through June
2003. The agreement requires Bankers Trust Company to make payments to us each
quarter in an amount equal to the product of the notional amount of $95 million
and the difference between the sum of the three month London Interbank Offered
Rate plus 3.25% ("Floating LIBOR") and the Fixed Rate, if the Floating LIBOR is
greater than the Fixed Rate, on a per diem basis. If Floating LIBOR is lower
than the Fixed Rate, we are required to pay Bankers Trust Company an amount
equal to the product of the notional amount and the difference between the Fixed
Rate and Floating LIBOR on a per diem basis. During the three months ended June
30, 1999, we paid Bankers Trust Company $0.2 million of interest as calculated
under the provisions described above.
INCOME TAXES. Income tax expense for the first quarter of fiscal 2000 and 1999
included provisions for state franchise and foreign income taxes. Federal tax
provisions for the first quarter of fiscal 2000 and 1999 were offset by
recognition of tax benefits associated with our loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased to $172.0 million at June 30, 1999 when compared to
$156.7 million at March 31, 1999 primarily as the result of lower accounts
payable and accrued liabilities and higher inventories. Our primary sources of
cash during the first quarter of fiscal 2000 consisted of funds provided by
borrowings under our Revolving Credit Facility, $15.9 million while the primary
uses of cash consisted of: (i) cash used in operations, $14.5 million; (ii)
dividends to Holding, $2.3 million; and (iii) capital expenditures, $1.0
million.
Cash used in operating activities was $14.5 million (6.6% of revenues) in the
first quarter of fiscal 2000 compared to $26.5 million (10.6% of revenues) in
the same period of fiscal 1999. The improvement primarily resulted from
maintaining lower levels of inventory and a reduction in accounts receivable in
respect to lower revenues.
During the first quarter of fiscal 2000, we redeemed $2.3 million of capital
stock from retiring and terminated employees, as required by the terms of our
ESOP and Holding's Stockholders Agreement. We expect that total redemptions
during fiscal 2000 will be approximately $11 million, although the timing of
such expenditures is not within our control and there can be no assurance in
this regard.
For fiscal 2000, we have planned approximately $10.0 million of capital to be
financed from internally generated funds. Approximately $7.2 million is for
routine replacement of machinery and equipment and facility improvements and
expansions, and $2.8 million is for further additions to our management
information systems. During the first three months of fiscal 2000, we spent $1.0
million for planned capital expenditures.
7
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Our cash requirements for debt service and related obligations through the end
of fiscal 2000 are expected to consist primarily of interest payments under the
Revolving Credit Facility, interest and principal payments on the Term Loan,
interest payments on the 9 1/2% Senior Notes, dividend payments to Holding in
connection with the required repurchase of its capital stock from departing
stockholders pursuant to Holding's Stockholders' Agreement and the ESOP, capital
expenditures and principal and interest payments on our industrial revenue
bonds. As of June 30, 1999, principal payments required by our outstanding
industrial revenue bond indebtedness amount to $1.4 million in fiscal years 2001
through 2004 and $6.2 million in the aggregate thereafter through 2010. We will
not be required to make any principal payments on our 9 1/2% Senior Notes until
2005. Our Revolving Credit Facility will mature in 2003 and our Term Loan will
mature in 2004. The Term Loan requires principal payments to be made in equal
quarterly installments of $250,000. The final installment due at maturity will
repay in full all outstanding principal. As of June 30, 1999, we were in
compliance with all covenants under the Revolving Credit Facility, the Term Loan
and the 9 1/2% Senior Notes. Although compliance with such covenants in the
future is largely dependent on our future performance and general economic
conditions, for which there can be no assurance, we expect to be in compliance
with all of our debt covenants for the foreseeable future.
At June 30, 1999, our primary sources of liquidity were available borrowings of
$75.0 million under the Revolving Credit Facility, available borrowings of
approximately $8.8 million against certain life insurance policies and
internally generated funds. Borrowings under our Revolving Credit Facility are
secured by domestic inventory and accounts receivable, and future availability
is determined by prevailing levels of those assets. Our Term Loan is secured by
a first priority lien on a substantial portion of current and future acquired
unencumbered property, plant and equipment. The life insurance policy loans are
secured by the cash surrender value of the policies, are non-recourse, and bear
interest at a rate 0.5% greater than the dividend income rate on the policies.
For the first quarter of fiscal 2000, dividend income earned under the policies
totaled $2.9 million, compared to $2.5 million for the same period in fiscal
1999 and is reported as an offset to general and administrative expenses in the
accompanying statements of operations. As of June 30, 1999, there was
approximately $22.6 million of cash surrender value in all life insurance
policies we maintained, net of borrowings.
We believe our sources of liquidity and capital resources are sufficient to meet
all currently anticipated operating cash requirements, including debt service
payments on the Revolving Credit Facility, the Term Loan and the 9 1/2% Senior
Notes prior to their maturities in 2003, 2004 and 2005, respectively; however,
we anticipate that it will be necessary to replace or to refinance all or a
portion of the Revolving Credit Facility, the Term Loan and the 9 1/2% Senior
Notes prior to their respective maturities, although there can be no assurance
on what terms, if any, we would be able to obtain such refinancing or additional
financing. Our ability to make interest payments on the Revolving Credit
Facility and the 9 1/2% Senior Notes and principal and interest payments on the
Term Loan will be dependent on maintaining the level of performance reflected in
the last twelve months, which will be dependent on a number of factors, many of
which are beyond our control, and the continued availability of revolving credit
borrowings.
YEAR 2000 COMPLIANCE
IMPACT OF YEAR 2000 -The Year 2000 issue exists because many computer systems,
applications and embedded microprocessors use two rather than four digit years
to define the applicable year. Because this issue has the potential to disrupt
our business operations, a company wide Year 2000 project was initiated to
identify and resolve the potential issues surrounding the Year 2000 problem. The
Year 2000 project addresses the problems that may arise in computer
technologies, which include both information technology ("IT") and non-IT
systems, and those Year 2000 issues related to third parties that are considered
significant to our business operations.
8
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
YEAR 2000 COMPLIANCE (continued)
We named a project manager to coordinate Year 2000 issues and compliance. The
project manager's principal responsibilities include identifying, assessing,
remediating, testing, implementing and planning for contingencies related to
Year 2000 issues that could materially impact our results of operations,
liquidity, or capital resources if failure occurs.
STATE OF READINESS -Our systems principally consist of business information
systems (such as mainframe computers and distributed servers and associated
business application software) and infrastructure (such as personal
computers, operating systems, networks and devices such as hubs, switches,
routers, and phone systems). We have completed a review of our business
information systems and have identified "business critical" systems. We have
tested our business critical systems, including those that required upgrading
or replacement, and have determined such systems are Year 2000 compliant. We
expect to complete final testing of our business information systems by
September 1999.
Non-IT systems are those business tools that may contain embedded
microprocessors, such as elevators, security systems, production equipment, and
climate control systems. Our branch operations management has been directed to
identify non-IT systems related to their respective facilities and to determine
the level of Year 2000 compliance or remediation required. This process is
currently underway and is expected to be completed by October 1999.
EXTERNAL RELATIONSHIPS - We also face a potential risk should one or more of our
principal suppliers, service providers or other parties with whom we have a
material business relationship suffer from a Year 2000 related problem. We have
identified key vendors whose Year 2000 compliance may be critical to us,
including those providing metal products, metal processing services and
transportation related services.
Surveys assessing Year 2000 compliance have been distributed to these key
vendors and their responses have been compiled and reviewed. We will perform
additional selected follow-up surveys and assessment during the balance of 1999.
We will use the results of these surveys to aid in contingency planning.
CONTINGENCY PLANNING - We recognize the need for contingency planning in those
areas where it is known, or is reasonably likely that an event or an uncertainty
will create a Year 2000 system related failure with a significant negative
impact on our business operations. Contingency planning is expected to be
completed for IT and non-IT systems, and for principal suppliers or service
providers no later than October 1999, and will include among other actions,
manual workarounds and staffing reassignments.
COSTS - We have incurred less than $100,000 of costs through June 1999 to
address Year 2000 issues. We currently estimate that the total cost of
addressing our Year 2000 issues will be approximately $700,000. This estimate
was based on the known costs to upgrade Year 2000 deficient business information
systems and infrastructure components, such as time and attendance applications
and phone systems.
9
<PAGE>
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
YEAR 2000 COMPLIANCE (continued)
RISKS - We anticipate that we will complete the risk assessment, remediation and
contingency planning for our internal IT and non-IT systems, and for those
parties with whom we have a material business relationship by October 1999.
Although we believe it is unlikely, it is possible our results of operations or
financial position could be materially adversely impacted if we and our major
customers or suppliers do not adequately address Year 2000 issues. We believe
our "reasonable likely worst case scenario" would involve a partial failure in
one or more of our systems, or systems maintained by principal suppliers,
service providers or other parties with whom we have a material business
relationship, which would require particular transactions or processes to be
handled manually, thereby causing delays and resulting in additional costs being
incurred until the problem is corrected. Furthermore, the price of metal
products purchased by us may increase if primary suppliers could not provide
product and we were forced to purchase from alternative sources. In addition,
interruptions in telecommunications, energy and transportation services could
also have an adverse impact on our results of operations or financial position.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) On July 22, 1999, our sole stockholder executed and delivered a
written consent of stockholder.
(b) The consent provided for the re-election of our Board of Directors
in its entirety and the election of Mr. G. Robert Durham to our
Board of Directors pursuant to the rights of the holders of
Holding's Series A 13% Cumulative Preferred Stock. The consent
also provided for the appointment of Ernst & Young LLP as our
auditors for the fiscal year ending March 31, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
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 June 30, 1999.
10
<PAGE>
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: August 6, 1999 Maurice S. Nelson, Jr.
President, Chief Executive Officer
/s/ William S. Johnson
----------------------
Date: August 6, 1999 William S. Johnson
Vice President, Chief Financial
Officer and Secretary (Principal
Financial and Accounting Officer)
11
<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 JUNE 30, 1999 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-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 15,272
<SECURITIES> 0
<RECEIVABLES> 92,281
<ALLOWANCES> 402
<INVENTORY> 190,132
<CURRENT-ASSETS> 303,540
<PP&E> 155,073
<DEPRECIATION> 53,784
<TOTAL-ASSETS> 434,393
<CURRENT-LIABILITIES> 131,559
<BONDS> 310,199
0
0
<COMMON> 0
<OTHER-SE> (26,264)
<TOTAL-LIABILITY-AND-EQUITY> 434,393
<SALES> 220,889
<TOTAL-REVENUES> 220,889
<CGS> 156,858
<TOTAL-COSTS> 156,858
<OTHER-EXPENSES> 29,422
<LOSS-PROVISION> 231
<INTEREST-EXPENSE> 9,698
<INCOME-PRETAX> 4,306
<INCOME-TAX> 312
<INCOME-CONTINUING> 3,994
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,994
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
