<PAGE> 1
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FORM 8-K/A
CURRENT REPORT
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 1, 1996
RELIANCE STEEL & ALUMINUM CO.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
California 001-13122 95-1142616
- --------------------------------- ------------------- ----------------
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
2550 East 25th Street
Los Angeles, California 90058
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(Address of principal executive offices)
(213) 582-2272
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(Telephone number)
N/A
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(Former name or former address, if changed since last report.)
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<PAGE> 2
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS.
Effective October 1, 1996, Reliance Steel & Aluminum Co. ("Reliance")
acquired 100% of the outstanding voting and non-voting common stock (the
"Shares") of Siskin Steel & Supply Company, Inc., a Tennessee corporation
("Siskin"), which is a metals service center company based in Chattanooga,
Tennessee. Siskin also has facilities in Nashville, Tennessee; Spartanburg,
South Carolina; and Birmingham, Alabama. Revenues of Siskin for the fiscal year
ended June 30, 1996 were approximately $151 million. The total purchase price
was based upon the fair market value of the net assets acquired and was $71
million, comprised of $6 million in cash, a portion of which will be retained in
escrow, and promissory notes in the aggregate amount of $65 million. These notes
are secured by letters of credit from Bank of America N.T.& S.A., and are due
and payable on January 2, 1997. The voting Shares were acquired from Mervin
Pregulman and Robert Siskin, and the non-voting Shares were acquired from 22
persons or entities related to either Mr. Pregulman or Mr. Siskin. The purchase
price was determined by negotiation with Messrs. Pregulman and Siskin, on behalf
of the sellers, and the investment banking firm representing the sellers. The
acquisition will be accounted for as a purchase. Siskin will continue to engage
in the metals service center business at the same locations as a wholly-owned
subsidiary of Reliance. For a more complete understanding of the structure of
the transaction, reference should be made to the Purchase Agreement which is
attached to this report as Exhibit 2.01.
Reliance has an agreement whereby, on January 2, 1997, it will issue $75
million in long term private placement notes which bear interest at an average
rate of interest of 7.22% and mature at various dates during the period January
2, 2004 to January 2, 2009. The proceeds of these notes will be used to pay
down the promissory notes issued in connection with the acquisition, which are
due on January 2, 1997.
ITEM 7 (a) Financial Statements of Business Acquired.
Included herein are the historical audited Financial
Statements for Siskin Steel & Supply Company, Inc. listed in
the index below.
INDEX TO FINANCIAL STATEMENTS OF SISKIN STEEL & SUPPLY COMPANY, INC.
Historical Financial Statements of Siskin Steel & Supply Company, Inc.
<TABLE>
<S> <C>
Report of Independent Auditors 3
Balance Sheets as of June 30, 1996 and 1995 4
Statements of Income for the years ended
June 30, 1996, 1995 and 1994 6
Statements of Stockholders' Equity for the years
ended June 30, 1996, 1995 and 1994 7
Statements of Cash Flows for the years ended
June 30, 1996, 1995 and 1994 8
Notes to Financial Statements 10
</TABLE>
<PAGE> 3
[JOSEPH DECOSIMO AND COMPANY LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
SISKIN STEEL & SUPPLY COMPANY, INC.
Chattanooga, Tennessee
We have audited the accompanying balance sheets of SISKIN STEEL & SUPPLY
COMPANY, INC. as of June 30, 1996 and 1995, and the related statements of
income, stockholders' equity and cash flows for each of the three years in the
period ended June 30, 1996. These financial statements are the responsibility
of the company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SISKIN STEEL & SUPPLY COMPANY,
INC. as of June 30, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended June 30, 1996, in
conformity with generally accepted accounting principles.
The company changed its method of accounting for debt securities in 1995 and
its method of accounting for income taxes during 1994.
/s/ JOSEPH DECOSIMO AND COMPANY, LLP
Chattanooga, Tennessee
July 29, 1996
1
<PAGE> 4
SISKIN STEEL & SUPPLY COMPANY, INC.
BALANCE SHEETS
June 30, 1996 and 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 66,208 $ 1,032,913
Receivables - less allowance for
doubtful accounts of $35,000 16,266,945 17,248,963
Receivable from Stockholders 426,564 -
Inventories 15,913,081 14,062,322
Prepayments 115,004 117,635
Deferred Income Taxes 100,000 106,100
------------ ------------
Total Current Assets 32,887,802 32,567,933
------------ ------------
PROPERTY AND EQUIPMENT, net 26,223,371 18,937,448
------------ ------------
OTHER ASSETS
Long-Term Investments 25,797 25,781
Cash Value of Life Insurance 553,592 345,756
Deposits 1,445,074 907,124
Other 5,000 5,000
------------ ------------
Total Other Assets 2,029,463 1,283,661
------------ ------------
TOTAL ASSETS $ 61,140,636 $ 52,789,042
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 5
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<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of Credit $ 3,094,861 $ -
Accounts Payable 4,800,476 6,066,565
Accrued Expenses 3,073,973 3,177,419
Income Taxes Payable 236,634 186,155
------------ ------------
Total Current Liabilities 11,205,944 9,430,139
------------ ------------
DEFERRED INCOME TAXES 185,100 109,400
------------ ------------
STOCKHOLDERS' EQUITY
Common Stock -
Voting - $8 stated value -
88,800 shares authorized and issued 710,400 710,400
Nonvoting - $.20 stated value - 3,911,200 shares
authorized; 3,691,116 shares issued for
1996 and 91,196 shares issued for 1995 738,223 729,568
Retained Earnings 48,300,969 41,809,535
------------ ------------
Total Stockholders' Equity 49,749,592 43,249,503
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 61,140,636 $ 52,789,042
============ ============
</TABLE>
<PAGE> 6
SISKIN STEEL & SUPPLY COMPANY, INC.
STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
NET SALES $ 150,640,120 $ 150,016,473 $ 127,806,986
COST OF SALES 111,580,541 115,003,707 97,469,761
------------- ------------- -------------
Gross Profit 39,059,579 35,012,766 30,337,225
OPERATING EXPENSES 30,164,153 30,744,841 25,899,636
------------- ------------- -------------
OPERATING INCOME 8,895,426 4,267,925 4,437,589
------------- ------------- -------------
OTHER INCOME
Investment Income 55,610 218,860 185,516
Other, net 280,653 67,637 81,632
------------- ------------- -------------
386,263 286,497 267,148
------------- ------------- -------------
INCOME BEFORE PROVISION FOR
INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 9,231,689 4,554,422 4,704,737
Provision for Income Taxes 406,600 229,600 229,400
------------- ------------- -------------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING
PRINCIPLE 8,825,089 4,324,822 4,475,337
Cumulative Effect of Change in
Accounting for Income Taxes -- -- (42,900)
------------- ------------- -------------
NET INCOME $ 8,825,089 $ 4,324,822 $ 4,432,437
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 7
SISKIN STEEL & SUPPLY COMPANY, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
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<TABLE>
<CAPTION>
COMMON STOCK
VOTING NONVOTING RETAINED
SHARES AMOUNT SHARES AMOUNT EARNINGS
<S> <C> <C> <C> <C> <C>
BALANCE - June 30, 1993 88,800 $ 710,400 91,196 $ 729,568 $ 35,752,276
Net Income 4,432,437
--------- --------- --------- --------- ------------
BALANCE - June 30, 1994 88,800 710,400 91,196 729,568 40,184,713
Net Income 4,324,822
Dividends Paid (2,700,000)
--------- --------- --------- --------- ------------
BALANCE - June 30, 1995 88,800 710,400 91,196 729,568 41,809,535
Net Income 8,825,089
Dividends Paid (2,325,000)
21-to-1 Stock Split 1,776,000 1,823,920
Reclassification from Voting to Nonvoting (1,776,000) 1,776,000
Recapitalization 8,655 (8,655)
--------- --------- --------- --------- ------------
BALANCE - June 30, 1996 88,000 $ 710,400 3,691,116 $ 738,223 $ 48,300,969
========= ========= ========= ========= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 8
SISKIN STEEL & SUPPLY COMPANY, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash Received from Customers $ 151,566,461 $ 149,208,100 $ 124,681,429
Cash Paid to Suppliers and
Employees (143,286,137) (142,756,725) (121,287,809)
Interest Received 55,594 263,898 184,579
Interest Paid (net of interest
capitalized) (24,317) (2,164) (2,446)
Income Taxes Paid (820,321) (629,281) (713,056)
------------- ------------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 7,491,280 6,083,828 2,862,697
------------- ------------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of Property and Equipment (9,024,876) (9,710,541) (1,642,688)
Proceeds from Sale of Property
and Equipment 431,430 50,530 275,761
Purchase of Investments -- -- (500,000)
Proceeds from Sale of Investments -- 3,635,000 572,408
Cash Collected on Notes Receivable -- 2,306 1,765
Life Insurance Premiums Paid (207,836) (66,830) (49,661)
Net Repayments from (Advances
to) Stockholders (426,564) 955,744 (955,744)
Decrease in Other Assets -- 20,000 --
------------- ------------- -------------
NET CASH USED BY
INVESTING ACTIVITIES (9,227,846) (5,113,791) (2,298,159)
------------- ------------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Net Borrowings on Line of Credit 3,094,861 -- --
Dividends Paid (2,325,000) (2,700,000) (12,034)
------------- ------------- -------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 769,861 (2,700,000) (12,034)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (966,705) (1,729,963) 552,504
CASH AND CASH EQUIVALENTS --
beginning of year 1,032,913 2,762,876 2,210,372
------------- ------------- -------------
CASH AND CASH EQUIVALENTS --
end of year $ 66,208 $ 1,032,913 $ 2,762,876
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 9
SISKIN STEEL & SUPPLY COMPANY, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED BY OPERATING
ACTIVITIES
Net Income $ 8,825,089 $ 4,324,822 $ 4,432,437
Cumulative Effect of Change in
Accounting Principle -- -- 42,900
Depreciation 1,603,778 1,199,000 1,199,026
Amortization -- 6,597 15,833
Gain on Sale of Property
and Equipment (296,257) (9,533) (78,762)
Bad Debt Expense (Recoveries) 72,441 (16,467) 54,172
Deferred Income Taxes 81,800 (46,600) 7,000
Changes in Operating Assets and
Liabilities -
Decrease (Increase) in-
Trade Receivables 919,753 (833,752) (3,136,471)
Other Receivables (10,191) 10,149 4,661
Income Taxes Refundable (546,000) -- --
Inventories (1,850,759) (175,971) (159,709)
Prepayments 2,631 123,608 (3,119)
Deposits 8,050 (365,359) (533,065)
Increase (Decrease in -
Accounts Payable (1,266,089) (106,833) 1,145,876
Accrued Expenses (103,445) 1,961,889 (170,491)
Income Taxes Payable 50,479 12,278 42,409
------------- ------------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 7,491,280 $ 6,083,828 $ 2,862,697
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES
Recapitalization of Stockholders'
Equity $ 8,655 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 10
SISKIN STEEL & SUPPLY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by the company are
as follows:
DESCRIPTION OF BUSINESS - The company is engaged in the sale and distribution
of structural steel and supplies with sales primarily in Tennessee, Georgia,
Alabama, North Carolina and South Carolina.
CASH AND CASH EQUIVALENTS - The company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents. The company maintains at various financial institutions cash and
cash equivalent accounts which may exceed federally insured amounts at times
and which may at times significantly exceed balance sheet amounts due to
outstanding checks.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method.
INVESTMENTS - Effective July 1, 1994, the company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which requires that investments in debt and equity
securities be designated as held-to-maturity, trading or available-for-sale.
Securities classified as held-to-maturity are securities for which the company
has demonstrated the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at cost and no adjustment is
made in the financial statements for unrealized gains and losses. For 1996,
the long-term investments are classified as held-to-maturity.
Trading securities are securities bought and held principally for the purpose
of selling them in the near future. Securities classified as trading are
stated at fair value and unrealized holding gains and losses are included in
income.
Securities that are not classified as held-to-maturity or trading are
classified as available-for-sale and are carried at fair value with the
unrealized gains and losses, net of tax, reported as a separate component of
stockholders' equity.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Additions,
improvements and expenditures for repairs and maintenance that significantly
extend the lives of assets are capitalized. Other expenditures for repairs and
maintenance are charged to income. Upon sale or other retirement of
depreciable property, the cost and accumulated depreciation are removed from
the related accounts and any gain or loss is reflected in operations. When
assets become fully depreciated, the cost and accumulated depreciation are
eliminated from the related accounts even though the asset may still be in
service.
Depreciation is provided on the straight-line and accelerated methods based on
the estimated useful lives of the depreciable assets.
7
<PAGE> 11
SISKIN STEEL & SUPPLY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
INCOME TAXES - The company, with the consent of its stockholders, has elected
to be taxed as an S corporation under the provisions of Section 1362 of the
Internal Revenue Code. The stockholders are personally liable for their
proportionate share of the company's federal and certain state taxable income.
For the other states in which the company files, the company is a taxable
entity and makes provision for state income taxes at statutory rates.
State income taxes are computed based on the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Deferred tax assets and liabilities, if significant, are recognized for the
estimated future tax effects attributed to temporary differences between the
book and tax bases of assets and liabilities and for carryforward items. The
measurement of current and deferred tax assets and liabilities is based on
enacted law. Deferred tax assets are reduced, if necessary, by a valuation
allowance for the amount of tax benefits that may not be realized.
ESTIMATES AND UNCERTAINTIES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
ADVERTISING - Advertising costs are charged to operations when incurred.
Advertising costs totaled $128,577 for 1996, $102,607 for 1995 and $94,614 for
1994.
INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Steel $ 15,694,239 $ 13,869,954
Steel Store 218,842 192,368
------------ ------------
$ 15,913,081 $ 14,062,322
============ ============
</TABLE>
If inventories had been valued using average cost instead of the last-in,
first-out method of valuation, they would have been greater by $14,000,479 as
of June 30, 1996, and $14,491,966 as of June 30, 1995. The effect on net
income of valuing inventories using the average cost method would have been a
decrease of $461,998 for 1996 and increases of $3,200,079 for 1995 and
$1,700,422 for 1994.
8
<PAGE> 12
SISKIN STEEL & SUPPLY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
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PROPERTY AND EQUIPMENT
Property and equipment consist of the following major classifications:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Land $ 1,447,847 $ 1,522,344
Buildings and Improvements 16,728,664 8,608,872
Equipment -
Operating 14,757,823 5,161,493
Vehicles 735,554 689,031
Office 1,577,023 1,390,456
Construction in Progress - 9,209,253
------------ ------------
35,246,911 26,581,449
Accumulated Depreciation (9,023,540) (7,644,001)
------------ ------------
$ 26,223,371 $ 18,937,448
============ ============
</TABLE>
LINE OF CREDIT
The company has a $10,000,000 line of credit agreement with a financial
institution. Interest on the line is at a variable rate which, as of June 30,
1996, was 6.125%. The line of credit agreement expires October 31, 1996, and
is renewable at both parties' option. The outstanding balance totaled
$3,094,861 as of June 30, 1996. There was no outstanding balance as of
June 30, 1995.
Net interest costs incurred were $29,221 for 1996, of which $4,904 was
capitalized as construction period interest. Interest expense totaled $24,317
for 1996, $2,164 for 1995 and $2,446 for 1994.
INCOME TAXES
During 1994, the company adopted Statement of Financial Accounting Standards
Number 109, "Accounting for Income Taxes." The statement requires the use of
the asset and liability approach for financial accounting and reporting for
income taxes. Financial statements for prior years have not been restated and
the cumulative effect of the accounting change as disclosed on the statement of
income is $42,900.
The provision for state income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current Provision $ 324,800 $ 276,200 $ 222,400
Deferred Provision 81,800 (46,600) 7,000
--------- --------- ---------
$ 406,600 $ 229,600 $ 229,400
========= ========= =========
</TABLE>
9
<PAGE> 13
SISKIN STEEL & SUPPLY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INCOME TAXES - continued
As an S corporation with a fiscal year end, the company is required to maintain
a deposit with the Internal Revenue Service. This deposit of $1,444,574 for
1996 and $898,574 for 1995 is adjusted annually based on taxable income and is
refundable in certain circumstances, including adoption of a calendar year or
revocation of the S election.
The following is a summary of the significant components of the company's
deferred tax assets and liabilities as of June 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
DEFERRED TAX ASSETS
Reserve for Bad Debts $ 2,000 $ 2,000
Accrued Liabilities 94,400 103,800
Other 3,600 300
---------- ----------
100,000 106,100
DEFERRED TAX LIABILITIES
Property and Equipment (185,100) (109,400)
---------- ----------
NET DEFERRED TAX LIABILITIES $ (85,100) $ (3,300)
========== ==========
</TABLE>
RETIREMENT PLAN
The company has a 401(k) pension plan covering substantially all full-time
employees with a minimum of six months of service. The plan provides for
contributions by the employees of an amount not to exceed the maximum amount
allowed under the Internal Revenue Code. Pension plan expense totaled $379,879
for 1996, $377,800 for 1995 and $390,000 for 1994.
VOLUNTARY EMPLOYEES' BENEFIT ASSOCIATION
The company maintains a medical expense plan and a related trust constituting a
Voluntary Employees' Benefit Association. Effective December 31, 1995, the
company terminated the plan's self-insured arrangement in favor of a fully
insured arrangement. As of the date of the audit report, no decision has been
made regarding termination of the Plan or Trust. Contributions to the plan
totaled $399,518 for 1996, $809,535 for 1995 and $766,104 for 1994.
10
<PAGE> 14
SISKIN STEEL & SUPPLY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
LEASE COMMITMENTS
Vehicles are leased under a contract which is cancelable by either the company
or the lessor. The contract stipulates that the company will purchase the
vehicles at a price equal to their original value less depreciation which has
accrued if the company terminates the lease prior to expiration of the lease
term. After expiration of the lease term, the company has no obligation to
purchase the vehicles. If the lessor terminates the lease, the company has the
right, but not the obligation, to purchase the vehicles. The minimum purchase
price as of June 30, 1996, is calculated as follows:
<TABLE>
<S> <C>
Original Value on Delivery $ 5,002,942
Depreciation, as Established by Contract,
through June 30, 1996 2,051,674
-----------
Minimum Purchase Price as of June 30, 1996 $ 2,951,268
===========
</TABLE>
Rental and mileage charges are adjusted each year, based on the Consumer Price
Index. A mileage charge ranging from $.077 to $.115 per mile was in effect as
of June 30, 1996.
Lease expense consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Minimum Equipment Rentals $ 1,659,958 $ 1,376,544 $ 1,134,096
Contingent Rentals 154,995 370,612 488,885
Other Short-Term Leases 40,241 33,968 9,786
----------- ----------- -----------
$ 1,855,194 $ 1,781,124 $ 1,632,767
=========== =========== ===========
</TABLE>
The company leases certain real estate from a related partnership under
noncancelable operating leases. Future minimum lease payments under leases
with initial or remaining noncancelable lease terms in excess of one year as of
June 30, 1996, are as follows:
<TABLE>
<CAPTION>
Year Ending
<S> <C>
June 30, 1997 $ 280,440
June 30, 1998 280,440
June 30, 1999 280,440
June 30, 2000 280,440
June 30, 2001 280,440
Later Years 1,218,960
-----------
$ 2,621,160
===========
</TABLE>
11
<PAGE> 15
SISKIN STEEL & SUPPLY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
RELATED PARTY TRANSACTIONS
Transactions and outstanding balances with related parties are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
STOCKHOLDERS
Receivable $ 426,564 $ - $ 955,744
Interest Income $ 6,094 $ 34,458 $ 11,287
Gain on Sale of Vehicles $ 7,100 $ - $ -
PARTNERSHIP OF STOCKHOLDERS
Rent Expense $ 241,740 $ 234,000 $ 229,000
Gain on Sale of Land and Buildings $ 230,104 $ - $ -
</TABLE>
During 1994, land and stock were sold to the partnership at cost and no gain or
loss was recognized on these transactions.
RECAPITALIZATION
On December 14, 1995, under a plan of recapitalization, the company amended its
charter to increase the authorized shares of non-par value common stock from
200,000 shares to 4,000,000 shares. Of the shares authorized, 88,800 shares
are voting and 3,911,200 shares are nonvoting.
On December 14, 1995, the company completed a 21 to 1 stock split of voting and
nonvoting shares, reclassified 1,776,000 shares of voting stock to nonvoting
and recapitalized $8,655 of retained earnings to nonvoting common stock. All
references to shares of common stock and stated values in the financial
statements have been adjusted to give effect to the split.
FAIR VALUE OF FINANCIAL INSTRUMENTS
RECEIVABLES FROM STOCKHOLDERS - The carrying amount of receivables from
stockholders approximates fair value due to the short duration of the
instruments.
LINE OF CREDIT - Based on the borrowing rates currently available to the
company for lines of credit with similar terms, the fair value of the line of
credit approximates the carrying amount as of June 30, 1996.
12
<PAGE> 16
ITEM 7. (B) PRO FORMA FINANCIAL INFORMATION
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Effective October 1, 1996, Reliance Steel & Aluminum Co. ("Reliance")
acquired 100% of the outstanding voting and non-voting common stock of Siskin
Steel & Supply Company, Inc., a Tennessee corporation ("Siskin"), which is a
metals service center company based in Chattanooga, Tennessee. Siskin also has
facilities in Nashville, Tennessee; Spartanburg, South Carolina; and Birmingham,
Alabama. Revenues of Siskin for the fiscal year ended June 30, 1996 were
approximately $151 million. The total purchase price was $71 million, comprised
of $6 million in cash, a portion of which will be retained in escrow, and
promissory notes in the aggregate amount of $65 million which were secured by
letters of credit from Bank of America N.T.&S.A. The notes are due and payable
on January 2, 1997. The total purchase price was based upon the fair market
values of the net assets acquired. The transaction will be accounted for as a
purchase.
Reliance has an agreement whereby, on January 2, 1997, it will issue
$75 million in long term private placement notes which bear interest at an
average rate of interest of 7.22% and mature at various dates during the period
from January 2, 2004 to January 2, 2009. The proceeds of these notes will be
used to pay down the promissory notes issued in connection with the acquisition,
which are due on January 2, 1997.
The following Reliance unaudited pro forma combined financial
statements and related notes give effect to the acquisition of Siskin as a
purchase. The Reliance unaudited pro forma combined balance sheet assumes that
the acquisition was completed as of September 30, 1996 and the unaudited pro
forma combined statements of income as of September 30, 1996 and December 31,
1995 assumes that the acquisition was completed at the beginning of each
respective period.
The Reliance unaudited pro forma combined financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the consolidated financial position or consolidated results of operations of
Reliance that would have been reported had the acquisition occurred on the date
indicated, nor do they represent a forecast of the consolidated financial
position of Reliance at any future date or the consolidated results of
operations of Reliance for any future period. Furthermore, no effect has been
given in the Reliance unaudited pro forma combined statements of income for
operating benefits that may be realized through the combination of the entities.
Amounts allocated to the assets and liabilities of Siskin are based on their
estimated fair market values as of the acquisition closing date. The Reliance
unaudited pro forma combined financial statements, including the notes thereto,
should be read in conjunction with the historical financial statements and
related notes of Siskin, included herein, and the Company's historical
consolidated financial statements and related notes.
<PAGE> 17
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Reliance Siskin Steel
Steel & & Supply Pro Forma Pro Forma
Aluminum Co. Company, Inc. Adjustments Combined
---------------------------------------------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash & cash equivalents 2,698 62 2,760
Accounts receivable, net 67,047 15,930 82,977
Inventories 84,257 17,183 12,614 (1) 114,054
Prepaid expenses and other current assets 4,070 97 4,167
Deferred income taxes 1,163 111 44 (1) 1,318
---------------------------------------------------- --------------
Total current assets 159,235 33,383 12,658 205,276
Property, plant & equipment, at cost:
Land 16,383 1,448 2,751 (1) 20,582
Buildings 51,017 16,729 10,377 (1) 78,123
Machinery & equipment 73,947 16,880 (3,869)(1) 86,958
Allowances for depreciation (54,557) (9,313) 9,313 (1) (54,557)
---------------------------------------------------- --------------
86,790 25,744 18,572 131,106
Investments in 50% owned-company
and joint venture 27,890 27,890
Other assets 10,715 2,028 2,942 (2) 15,685
---------------------------------------------------- --------------
Total assets 284,630 61,155 34,172 379,957
==================================================== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 51,469 $8,776 60,245
Accrued expenses 0 1,212 1,212
Wages and related accruals 3,898 1,232 5,130
Income taxes payable 1,163 5 1,168
Current deferred tax liability 5,171 (1) 5,171
Current maturities of long-term debt 1,900 1,900
---------------------------------------------------- --------------
Total current liabilities 58,430 11,225 5,171 74,826
Long-term debt 40,450 71,000 (3) 111,450
Long-term deferred tax liability 226 90 (1) 7,931
7,615 (1)
Common stock, no par value:
Authorized shares-20,000,000
Issued and outstanding shares-10,326,287 61,131 1,449 (1,449)(4) 61,131
Retained earnings 124,619 48,255 (48,255)(4) 124,619
---------------------------------------------------- --------------
Total shareholders' equity 185,750 49,704 (49,704) 185,750
---------------------------------------------------- --------------
Total liabilities and shareholders' equity 284,630 61,155 34,172 379,957
==================================================== ==============
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statments
<PAGE> 18
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Reliance Siskin Steel
Steel & & Supply Pro Forma Pro Forma
Aluminum Co. Company, Inc. Adjustments Combined
----------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $475,657 $113,473 $589,130
Other income 3,768 345 4,113
----------------------------------------------------------
479,425 113,818 593,243
Costs and expenses:
Cost of sales 361,858 85,948 447,806
Warehouse, delivery, selling,
administrative and general 74,976 22,118 97,094
Depreciation & amortization 5,773 1,373 165(7) 7,366
55(5)
Interest 2,045 44 3,845(6) 5,934
----------------------------------------------------------
444,652 109,483 4,065 558,200
----------------------------------------------------------
Income before equity in earnings
of 50%-owned company and joint
venture and income taxes 34,773 4,335 (4,065) 35,043
Equity in earnings of 50%-owned company
and joint venture 3,532 3,532
----------------------------------------------------------
Income before income taxes 38,305 4,335 (4,065) 38,575
Income taxes 15,722 195 (101)(8) 15,816
----------------------------------------------------------
Net income $22,583 $4,140 ($3,964) $22,759
==========================================================
Earnings per share $2.16 (9) $2.18
============= =============
Weighted average shares outstanding 10,446,000 (9) 10,446,000
============= =============
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
<PAGE> 19
RELIANCE STEEL & ALUMINUM CO.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Reliance Siskin Steel
Steel & & Supply Pro Forma Pro Forma
Aluminum Co. Company, Inc. Adjustments Combined
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 561,341 $ 152,523 $ 713,864
Other income 2,318 204 2,522
---------------------------------------------------------------------
563,659 152,727 716,386
Costs and expenses:
Cost of sales 432,059 113,307 545,366
Warehouse, delivery, selling,
administrative and general 89,401 28,907 118,308
Depreciation & Amortization 5,208 1,344 617(7) 7,243
74(5)
Interest 1,595 5,126(6) 6,721
---------------------------------------------------------------------
528,263 143,558 5,817 677,638
---------------------------------------------------------------------
Income before equity in earnings
of 50%-owned company and joint
venture and income taxes 35,396 9,169 (5,817) 38,748
Equity in earnings of 50%-owned
company and joint venture 3,199 3,199
---------------------------------------------------------------------
Income before income taxes 38,595 9,169 (5,817) 41,947
Income taxes 15,893 413 893(8) 17,198
---------------------------------------------------------------------
Net income $ 22,702 $ 8,756 ($ 6,710) $ 24,749
============================================== ===========
Earnings per share $ 2.18 (9) $ 2.38
=========== ===========
Weighted average shares
outstanding 10,394,000 (9) 10,394,000
=========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
<PAGE> 20
RELIANCE STEEL & ALUMINUM CO.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(1) This adjustment allocates the purchase price based upon fair market values
of Siskin's net assets. The allocation included establishing deferred
taxes for the difference in book basis and tax basis of the net assets
acquired in accordance with APB Opinion No. 16. The effective date of the
transaction is October 1, 1996.
(2) This adjustment reflects the pro forma goodwill amount at September 30,
1996. The goodwill amount is a result of allocation of the purchase price
in accordance with APB Opinon No. 16 and amounted to $2.9 million.
(3) In connection with the acquisition, Reliance amended its existing domestic
unsecured revolving credit agreement to increase the borrowing capacity
thereunder by $40 million. Reliance funded the acquisition through a
payment of cash of $6 million and $65 million of promissory notes. These
promissory notes are due January 2, 1997. Reliance will pay down these
notes on January 2, 1997 through the use of proceeds from a private
placement of long-term debt. This pro forma adjustment reflects the effect
of that long-term financing to replace the promissory notes as if it had
occurred as of the September 30, 1996 balance sheet.
(4) This adjustment eliminates the equity of the business acquired as of the
date of acquisition.
(5) This adjustment reflects the pro forma amortization of goodwill (which
is assumed to be amortized over a forty year period).
(6) This adjustment reflects the pro forma effect on interest expense of the
financing obtained for the acquisition for purposes of determining the pro
forma effect on interest expense, the average rate of the long-term
private placement of 7.22 percent was used.
(7) This adjustment reflects the pro forma effect on depreciation expense of
property plant and equipment based on their fair market values.
(8) This adjustment reflects the pro forma effect on consolidated income tax
expense due to the results of operations of Siskin, which was historically
taxed as an S-Corp, the pro forma amortization of goodwill, the pro forma
interest expense associated with the acquisition indebtedness, and the pro
forma depreciation expense on property, plant and equipment.
(9) The pro forma combined earnings per share is based on the weighted average
number of common and common equivalent shares of Reliance.
<PAGE> 21
Item 7. (c) Exhibits
2.01* Stock Purchase Agreement dated August 30, 1996 among
the persons and entities listed on Exhibit "A"
attached thereto, Siskin Steel & Supply Company, Inc.
and the Registrant.
20.01* Press release dated September 30, 1996.
20.02* Press release dated October 2, 1996.
* Filed on October 8, 1996 with original Form 8-K.
<PAGE> 22
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.
RELIANCE STEEL & ALUMINUM CO.
Dated: December 13, 1996 By: /s/ Steven S. Weis
-------------------------------
Steven S. Weis
Chief Financial Officer
