<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- ---------------------
Commission file number: 001-13122
RELIANCE STEEL & ALUMINUM CO.
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(Exact name of registrant as specified in its charter)
California 95-1142616
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2550 East 25th Street
Los Angeles, California 90058
(213) 582-2272
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(Address of principal executive offices and telephone number)
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 the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of October 31, 1998, 18,449,802 shares of the registrant's common
stock, no par value, were outstanding.
<PAGE> 2
INDEX
<TABLE>
<S> <C>
PART I -- FINANCIAL INFORMATION ............................................................ 1
Consolidated Balance Sheets ........................................................ 1
Consolidated Statements of Income (Unaudited) ...................................... 2
Consolidated Statements of Cash Flows (Unaudited) .................................. 4
Notes to Consolidated Financial Statements (Unaudited) ............................. 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .............................................. 9
PART II -- OTHER INFORMATION .............................................................. 13
SIGNATURES ................................................................................ 14
</TABLE>
<PAGE> 3
PART I -- FINANCIAL INFORMATION
RELIANCE STEEL & ALUMINUM CO.
Consolidated Balance Sheets
(In thousands except share amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -------------
(unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,601 $ 34,047
Accounts receivable, less allowance for doubtful accounts
of $6,364 at September 1998 and $4,343 at December 1997 165,337 117,733
Inventories 241,281 158,736
Prepaid expenses and other current assets 2,815 2,472
Deferred income taxes 9,025 9,086
------------- -------------
Total current assets 423,059 322,074
Property, plant and equipment, at cost:
Land 31,346 26,348
Buildings 126,127 95,424
Machinery and equipment 135,146 104,064
Allowances for depreciation (77,035) (64,872)
------------- -------------
215,584 160,964
Investment in 50%-owned company 31,979 28,760
Goodwill 156,595 67,258
Other assets 5,579 4,810
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Total assets $ 832,796 $ 583,866
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 124,117 $ 91,916
Wages and related accruals 7,978 7,658
Deferred income taxes 9,148 9,148
Current maturities of long term debt 100 100
------------- -------------
Total current liabilities 141,343 108,822
Long term debt 325,250 143,350
Deferred income taxes 18,531 18,530
Shareholders' equity:
Preferred stock no par value:
Authorized shares - 5,000,000
None issued or outstanding -- --
Common stock, no par value:
Authorized shares - 100,000,000 at September 30, 1998 and
20,000,000 at December 31, 1997
Issued and outstanding shares - 18,869,352 at September 30,
1998 and 18,831,458 at December 31, 1997, stated capital 155,347 154,761
Retained earnings 192,325 158,403
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Total shareholders' equity 347,672 313,164
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Total liabilities and shareholders' equity $ 832,796 $ 583,866
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
NOTE: The Balance Sheet at December 31, 1997 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
1.
<PAGE> 4
RELIANCE STEEL & ALUMINUM CO.
Consolidated Statements of Income (Unaudited)
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------------------
1998 1997
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<S> <C> <C>
Net sales $ 357,819 $ 254,236
Other income 747 671
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358,566 254,907
Costs and expenses:
Cost of sales 271,486 197,718
Warehouse, delivery, selling, administrative
and general 57,754 37,386
Depreciation and amortization 5,497 3,330
Interest 5,017 3,009
------------- -------------
339,754 241,443
Income before equity in earnings of 50%-owned
company and income taxes 18,812 13,464
Equity in earnings of 50%-owned company 1,423 1,002
------------- -------------
Income before income taxes 20,235 14,466
Income taxes:
Federal 7,082 4,948
State 1,215 1,103
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8,297 6,051
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Net income $ 11,938 $ 8,415
============= =============
Earnings per share - Diluted $ .63 $ .55
============= =============
Weighted average shares outstanding - Diluted 19,027,000 15,346,000
============= =============
Earnings per share - Basic $ .63 $ .56
============= =============
Weighted average shares outstanding - Basic 18,869,000 15,164,000
============= =============
Cash dividends declared $ .06 $ .04
============= =============
</TABLE>
2.
<PAGE> 5
RELIANCE STEEL & ALUMINUM CO.
Consolidated Statements of Income (Unaudited)
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Net sales $ 999,471 $ 699,651
Gain on sale of real estate -- 1,008
Other income 2,555 1,670
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1,002,026 702,329
Costs and expenses:
Cost of sales 761,598 541,094
Warehouse, delivery, selling, administrative
and general 157,304 107,907
Depreciation and amortization 14,195 9,277
Interest 11,684 7,807
------------- -------------
944,781 666,085
Income before equity in earnings of 50%-owned
company and income taxes 57,245 36,244
Equity in earnings of 50%-owned company 4,114 3,675
------------- -------------
Income before income taxes 61,359 39,919
Income taxes:
Federal 21,476 13,093
State 3,682 3,114
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25,158 16,207
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Net income $ 36,201 $ 23,712
============= =============
Earnings per share - Diluted $ 1.90 $ 1.56
============= =============
Weighted average shares outstanding - Diluted 19,031,000 15,403,000
============= =============
Earnings per share - Basic $ 1.92 $ 1.56
============= =============
Weighted average shares outstanding - Basic 18,859,000 15,220,000
============= =============
Cash dividends declared $ .18 $ .13
============= =============
</TABLE>
3.
<PAGE> 6
RELIANCE STEEL & ALUMINUM CO.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------------
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 36,201 $ 23,712
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,195 9,277
Deferred income taxes 64 (110)
Gain on sales of machinery and equipment (223) (362)
Gain on sale of real estate -- (1,008)
Equity in earnings of 50%-owned company (3,719) (3,345)
Changes in operating assets and liabilities:
Accounts receivable (3,467) (32,045)
Inventories (15,965) 345
Prepaid expenses and other assets 679 2,267
Accounts payable and accrued expenses (17,935) 11,148
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Net cash provided by operating activities 9,830 9,879
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INVESTMENT ACTIVITIES
Purchases of property, plant and equipment (17,258) (19,159)
Proceeds from sales of property and equipment 460 1,816
Acquisitions of metals service centers, net of cash acquired (137,436) (44,466)
Dividends received from 50% owned company 500 3,500
------------- -------------
Net cash used in investing activities (153,734) (58,309)
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FINANCING ACTIVITIES
Proceeds from borrowings 193,000 225,000
Principal payments on long-term debt and short-term
borrowings (75,733) (165,510)
Dividends paid (3,395) (1,948)
Issuance of common stock 586 1,037
Repurchase of common stock -- (7,435)
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Net cash provided by financing activities 114,458 51,144
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(Decrease) increase in cash (29,446) 2,714
Cash and cash equivalents at beginning of period 34,047 815
------------- -------------
Cash and cash equivalents at end of period $ 4,601 $ 3,529
============= =============
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Interest paid during the period $ 7,243 $ 7,407
Income taxes paid during the period $ 23,168 $ 15,564
</TABLE>
4.
<PAGE> 7
RELIANCE STEEL & ALUMINUM CO.
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions of Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary for fair presentation, with
respect to the interim financial statements have been included. The results of
operations for the three month and nine month periods ended September 30, 1998
are not necessarily indicative of the results for the full year ending December
31, 1998. For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended December 31, 1997, included
in the Reliance Steel & Aluminum Co.
Form 10-K.
In April 1998, the Company effected a short-form merger whereby Amalco Metals,
Inc. ("Amalco"), a wholly-owned subsidiary of the Company, was merged into the
Company. At that time, Amalco was combined with the existing Reliance
Metalcenter in Santa Clara in its new facility in Union City, California.
Additionally, effective July 1, 1998, MetalCenter, Inc. ("MetalCenter"), a
wholly-owned subsidiary of the Company, was merged into the Company through a
short-form merger. MetalCenter will operate as a Reliance division.
2. ACQUISITIONS
On September 18, 1998, the Company acquired 100% of the stock of Lusk Metals, a
privately-held metals service center with headquarters in Hayward, California
(near San Francisco), for approximately $22,000,000 in cash. The purchase of
Lusk Metals was funded with borrowings under the Company's line of credit. Lusk
Metals had net sales of approximately $30,000,000 for the twelve months ended
February 28, 1998, and processes and distributes primarily precision cut
aluminum plate and aluminum sheet and extrusions.
Effective July 1, 1998, the Company acquired 100% of the stock of Chatham Steel
Corp. ("Chatham"), a privately-held metals service center headquartered in
Savannah, Georgia for $68,000,000 in cash. Chatham has additional facilities in
Columbia, South Carolina; Durham, North Carolina; Orlando, Florida;
Jacksonville, Florida; and Birmingham, Alabama. The purchase of Chatham was
funded with borrowings under the Company's line of credit. Chatham's net sales
for the year ended December 31, 1997, were approximately $166,000,000.
On January 30, 1998, the Company acquired 100% of the outstanding capital stock
of Phoenix Corporation, doing business as Phoenix Metals Company ("Phoenix
Metals"), for $21,000,000 in cash. Phoenix Metals is headquartered in Norcross
(Atlanta), Georgia, with additional metals service centers in Birmingham,
Alabama; Tampa, Florida; and Charlotte, North Carolina. The purchase of Phoenix
Metals was funded with proceeds from the 1997 equity offering and borrowings
under the Company's line of credit. Phoenix Metals' net sales for the twelve
months ended February 28, 1997, were approximately $112,000,000.
Also on January 30, 1998, the Company purchased the assets and business of
Durrett-Sheppard Steel Company, L.L.C. and its subsidiary, Durrett-Sheppard
Steel of Pennsylvania, Inc., through its newly-formed subsidiary, Durrett
Sheppard Steel Co., Inc. ("DSS"), for $30,500,000 in cash. DSS is a metals
service center located in Baltimore, Maryland. This purchase was funded with
proceeds from the 1997 equity offering and borrowings under the Company's line
of credit. Durrett-Sheppard Steel Co., L.L.C. had net sales of approximately
$47,000,000 for the twelve months ended September 30,1997.
5.
<PAGE> 8
RELIANCE STEEL & ALUMINUM CO.
Notes to Consolidated Financial Statements (Unaudited) - (continued)
3. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 132, Employers Disclosures about Pensions and Other
Post-retirement Benefits, which is effective for financial statements for years
beginning after December 15, 1997, and which revises and standardizes disclosure
requirements for pensions and other post-retirement benefits. The Company will
revise its disclosures as necessary upon adoption of Statement 132.
Additionally, in March 1998, Statement of Position (SOP) 98-1 was issued, which
is effective for fiscal years beginning after December 15, 1998. SOP 98-1
requires capitalization and amortization of qualified computer software costs
over their estimated useful life. There will be no impact on the Company's
earnings or financial position due to the adoption of SOP 98-1. In June 1998,
the FASB issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which is required to be adopted in years beginning after
June 15, 1999. Because of the Company's minimal use of derivatives there will be
no impact on the Company's earnings or financial position due to the adoption of
Statement 133.
4. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
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<S> <C> <C>
Revolving lines of credit ($225,000 limit),
interest at variable rates ................... $ 182,000 $ --
Senior unsecured notes due January 2, 2002 to
January 2, 2009, average interest rate
7.12% ........................................ 140,000 140,000
Variable Rate Demand Industrial Development
Revenue Bonds, Series 1989 A, due July 1,
2014, with interest payable quarterly ........ 3,350 3,450
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325,350 143,450
Less amounts due within one year ............... (100) (100)
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$ 325,250 $ 143,350
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</TABLE>
In October 1997, the Company entered into a five year syndicated credit
agreement with five banks. This syndicated credit facility replaced the
Company's existing revolving line of credit, increasing the Company's borrowing
limit to $200,000,000. In October 1997, the Company also entered into a credit
agreement that allows the Company to issue and have outstanding up to
$10,000,000 of letters of credit. In September 1998, this credit agreement was
amended to add a facility for cash advances in the amount of $25,000,000 which
expires December 15, 1998. This amendment was executed to allow temporary
funding for acquisitions until such time as the planned private placement
funding was completed. The Company issued $150,000,000 of senior unsecured notes
in a private placement of debt. The notes mature at various dates over a period
of seven to twelve years, with an average life of 10.3 years, beginning October
15, 2005, to October 15, 2010, at an average interest rate of 6.55%. The
proceeds were funded on November 3, 1998, and were used to pay off bank debt in
connection with recent acquisitions.
6.
<PAGE> 9
RELIANCE STEEL & ALUMINUM CO.
Notes to Consolidated Financial Statements (Unaudited) - (continued)
5. SHAREHOLDERS' EQUITY
In August 1998, the Board of Directors approved the purchase of up to an
additional 2,500,000 shares of the Company's outstanding Common Stock through
its Stock Repurchase Plan, for a total of up to 4,000,000 shares. The Stock
Repurchase Plan was initially established in December 1994 and authorizes the
Company to purchase shares of its Common Stock from time to time in the open
market or in privately-negotiated transactions. Repurchased shares are redeemed
and treated as authorized but unissued shares. As of September 30, 1998, the
Company had repurchased a total of 1,350,750 shares of its Common Stock under
the Stock Repurchase Plan, at an average cost of $11.37 per share. No shares
were repurchased by the Company during the nine month period ended September 30,
1998. During October 1998, the Company repurchased 430,800 shares of its common
stock at an average price of $25.79 per share.
In May 1998, the Company amended its Articles of Incorporation to increase the
number of authorized shares from 20,000,000 to 100,000,000. Additionally in May
1998, the shareholders approved the adoption of a Directors Stock Option Plan
for non-employee directors. 200,000 shares have been reserved for issuance under
the Directors Stock Option Plan. Options to acquire 5,000 shares, with an
exercise price at fair market value at the date of grant, were granted to each
non-employee member effective with the approval of the plan.
In March 1998, 5,685 shares of Common Stock were issued to division managers and
officers of the Company under the 1997 Key-Man Incentive Plan.
In November 1997, the Company issued 3,595,000 new shares of its Common Stock at
an offering price of $27.625 per share in a secondary public offering. The
proceeds of $93,908,000 (net of underwriter commissions and offering costs) were
used to pay down bank debt, to fund the acquisition of Georgia Steel, and to
fund a portion of the acquisitions of DSS and Phoenix Metals.
6. EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings Per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share.
All weighted shares and per share amounts have been adjusted for the 3-for-2
common stock split that occurred in June 1997.
7. EMPLOYEE BENEFITS
Effective April 1, 1998, substantially all 401(k) and profit sharing plans of
the Company and its subsidiaries were combined into one master plan. This master
plan will continue to allow each subsidiary's Board of Directors to determine
independently the annual matching percentage and maximum compensation limit or
annual profit sharing contribution. Eligibility will continue in accordance with
each subsidiary's previous plan, and vesting is based on prior service.
Eligibility occurs after three months of service, and the Company contribution
vests at 25% per year, commencing one year after the employee enters the plan.
7.
<PAGE> 10
RELIANCE STEEL & ALUMINUM CO.
Notes to Consolidated Financial Statements (Unaudited) - (continued)
8. SUBSEQUENT EVENTS
On October 5, 1998, the Company acquired Engbar Pipe & Steel Company ("Engbar"),
a privately-held metals service center company headquartered in Denver,
Colorado. Engbar will operate as a wholly-owned subsidiary of the Company. The
purchase of Engbar was funded with borrowings under the Company's line of
credit. Net sales of Engbar for the twelve months ended December 31, 1997, were
approximately $14,000,000.
On October 1, 1998, the Company acquired Steel Bar Corporation ("Steel Bar"), a
privately-held metals service center in Greensboro, North Carolina. Steel Bar
will operate as a wholly-owned subsidiary of Phoenix Metals, which is a
wholly-owned subsidiary of the Company. The purchase of Steel Bar was funded
with borrowings under the Company's line of credit. Steel Bar's net sales for
the twelve months ended December 31, 1997, were approximately $13,000,000.
Also on October 1, 1998, the Company acquired American Metals Corporation
("American Metals"), based in West Sacramento, California, with additional
service centers in Redding and Fresno, California. American Metals was
previously owned by American Steel, L.L.C., ("American Steel" ) in which the
Company owns a 50%-interest but has operational control. American Metals was
originally organized as a corporate joint venture in 1993 between the Company
and American Industries, Inc. ("Industries"). The Company and Industries each
contributed their ownership of American Metals, along with other assets, to form
American Steel in 1995, which was comprised of the three American Metals service
centers and additional American Steel service centers in Portland, Oregon and
Kent, Washington. The transaction for the Company to acquire 100% of American
Metals was accomplished in two steps. First, American Steel distributed the
stock of American Metals equally to the Company and Industries. Immediately
thereafter, American Metals redeemed its stock owned by Industries for cash and
title to American Metals' real property, which is being leased back from
Industries. American Metals' will operate as a wholly-owned subsidiary of the
Company. The Company will continue to account for its investment in American
Steel using the equity method of accounting. American Metals' net sales for the
twelve month period ended December 31, 1997, were approximately $56,000,000.
8.
<PAGE> 11
RELIANCE STEEL & ALUMINUM CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth certain income statement data for the three month
and nine month periods ended September 30, 1998 and September 30, 1997 (dollars
are shown in thousands and certain amounts may not calculate due to rounding):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------- ---------------------------------------------
1998 1997 1998 1997
--------------------------------------------- ---------------------------------------------
% OF % OF % OF % OF
NET NET $ NET NET
$ SALES $ SALES $ SALES $ SALES
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES .................... $357,819 100.0% $254,236 100.0% $999,471 100.0% $699,651 100.0%
GROSS PROFIT ................. 86,333 24.1 56,518 22.2 237,873 23.8 158,557 22.7
OPERATING EXPENSES ........... 63,251 17.7 40,717 16.0 171,499 17.2 117,183 16.7
-------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM OPERATIONS ....... $ 23,082 6.5% $ 15,801 6.2% $ 66,374 6.6% $ 41,373 5.9%
======== ======== ======== ======== ======== ======== ======== ========
FIFO INCOME FROM OPERATIONS... $ 20,457 5.7% $ 16,412 6.5% $ 64,624 6.5% $ 44,223 6.3%
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Substantially all inventories of the Company have been stated on the last-in,
first-out ("LIFO") method. The Company uses the LIFO method of inventory
valuation for these inventories because it results in a better matching of costs
and revenues. Under the LIFO method, the effect of suppliers' price increases or
decreases is reflected directly in the cost of goods sold. During periods of
increasing prices, LIFO accounting will cause reported income to be lower than
would otherwise result from the use of the first-in, first-out ("FIFO") method
of inventory valuation. The table above includes income from operations and the
discussions that follow also include analyses as if the Company used the FIFO
method. This information is for supplementary purposes only in order to
facilitate a comparison of the Company's results of operations with those of
other similar companies who use the FIFO method.
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997 (DOLLAR AMOUNTS IN THOUSANDS OTHER THAN SHARE AND PER SHARE AMOUNTS)
Consolidated net sales increased $103,583, or 40.7%, for the three months ended
September 30, 1998, compared to the same period of 1997, which reflects an
increase of 60.5% in tons sold and a decrease in the average sales price per ton
of 12.1%. The increase in tons sold during the 1998 period was primarily due to
the inclusion of the sales of AMI Metals, Inc. ("AMI"), acquired April 2, 1997;
Amalco Metals, Inc. ("Amalco"), acquired April 30, 1997; Service Steel Aerospace
Corp. ("SSA"), acquired October 1, 1997; Georgia Steel Supply Company ("Georgia
Steel"), acquired December 1, 1997; Phoenix Corporation ("Phoenix Metals"),
acquired January 30, 1998; Durrett Sheppard Steel Co., Inc. ("DSS"), acquired
January 30, 1998; Chatham Steel Corporation ("Chatham"), acquired July 1, 1998;
and Lusk Metals ("Lusk"), acquired September 18, 1998 (collectively, the
"Acquisitions"). The average selling prices decreased for the 1998 period due
mainly to a reduction in the costs of most of the Company's products and to the
change in product mix from the 1997 period resulting from the inclusion in 1998
of the net sales of DSS, Chatham and Georgia Steel. These operations primarily
sell carbon steel products, which generally have lower prices than certain other
products sold by the Company, such as aluminum and stainless steel products.
Excluding the Acquisitions, the tons sold by the Company remained consistent.
However, on a same-store basis, the average selling price per ton decreased by
5.6% during the 1998 period, which is primarily due to a decline in the selling
prices of most of the Company's products, which resulted from lower costs of
these products, including prices for electropolished stainless steel tubing and
fittings, where the average sales price per ton has dropped approximately 20.3%
due to the slowdown in the semiconductor manufacturing industry.
9.
<PAGE> 12
Total gross profit increased $29,815, or 52.8%, in the three months ended
September 30, 1998, compared to the three months ended September 30, 1997.
Expressed as a percentage of sales, gross profit increased from 22.2% in 1997 to
24.1% in 1998. The improvement was due in part to a decrease in LIFO costs of
$2,625 in the 1998 period, which resulted primarily from decreased costs of most
of the Company's products, as compared to increased LIFO costs of $611 during
the corresponding 1997 period. On a FIFO basis, gross profit increased to 23.4%
of sales for the three month period ended September 30, 1998, compared to 22.5%
for the three months ended September 30, 1997. This increase was primarily due
to higher margins attained by certain of the Acquisitions included in the 1998
period, primarily from DSS, SSA and Georgia Steel.
Warehouse, delivery, selling and general and administrative ("G&A") expenses
increased $20,368, or 54.5%, in the three month period ended September 30, 1998
compared to the corresponding period of 1997 and amounted to 16.1% and 14.7% of
sales, respectively. The dollar increase in expenses reflects the increase in
sales volume for the 1998 period, which includes the sales and related expenses
of the Acquisitions. The increase in G&A expenses as a percentage of sales was
primarily due to increased G&A expenses as a percentage of sales for certain
companies acquired since the 1997 period.
Depreciation and amortization expense increased 65.1% during the three months
ended September 30, 1998, compared to the corresponding period of 1997. This
increase is primarily due to the inclusion of depreciation expense related to
the assets of the Acquisitions, along with the amortization of the related
goodwill.
Interest expense increased by 66.7% due to increased borrowings during the three
months ended September 30, 1998, as compared to the corresponding period of
1997. These borrowings were used primarily to fund the Acquisitions.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997 (DOLLAR AMOUNTS IN THOUSANDS OTHER THAN SHARE AND PER SHARE AMOUNTS)
Consolidated net sales increased $299,820, or 42.9%, for the nine months ended
September 30, 1998, compared to the same period of 1997. This increase in sales
reflects an increase of 40.0% in tons sold and an increase in the average sales
price per ton of 2.0%. The increase in tons sold was primarily due to the
inclusion of the sales of the Acquisitions during the nine month period ended
September 30, 1998. The average selling prices increased for the 1998 period due
mainly to the change in product mix from the 1997 period; the product mix
shifted toward higher sales of heat-treated aluminum and stainless steel
products from carbon steel products because of the acquisitions of AMI and
Amalco. Heat-treated aluminum and stainless steel products generally have higher
selling prices than carbon steel products. Excluding the Acquisitions, the
Company reported an increase of 1.9% in tons sold, and a decrease in the average
selling price per ton of 2.6%. The increase in tons sold is primarily due to
general economic improvements and an increased market share in the Company's
market areas experienced during the beginning of the 1998 period. The decrease
in the average selling price per ton for the 1998 period compared to the 1997
period resulted primarily due to lower selling prices of electropolished
stainless steel tubing and fittings sold to the semiconductor manufacturing
industry.
Total gross profit increased $79,316, or 50.0%, in the nine months ended
September 30, 1998, compared to the nine months ended September 30, 1997.
Expressed as a percentage of sales, gross profit increased from 22.7% in 1997 to
23.8% in 1998. This increase was primarily due to the change in LIFO costs.
During the 1998 period, LIFO cost decreases of $1,750 were recorded, which
resulted primarily from decreased costs of most of the Company's products, as
compared to increased LIFO costs of $2,850 during the 1997 period. On a FIFO
basis, gross profit increased to 23.6% of sales for the nine month period ended
September 30, 1998, from 23.1% for the nine months ended September 30, 1997. The
slight improvement was primarily due to the shift in product mix to higher
margin products, resulting primarily from the inclusion of the sales of products
sold by AMI, Amalco, SSA and DSS during the 1998 period.
10.
<PAGE> 13
Warehouse, delivery, selling and general and administrative ("G&A") expenses
increased $49,397, or 45.8%, in the nine month period ended September 30, 1998,
compared to the corresponding period of 1997 and amounted to 15.7% and 15.4% of
sales, respectively. The dollar increase in expenses reflects the increase in
sales volume for the 1998 period, which includes the sales and related expenses
of the Acquisitions.
Depreciation and amortization expense increased 53.0% during the nine months
ended September 30, 1998, compared to the corresponding period of 1997. This
increase is primarily due to the inclusion of depreciation expense and the
amortization of goodwill related to the Acquisitions.
Interest expense increased by 49.7% due to increased borrowings during the nine
months ended September 30, 1998, as compared to the corresponding period of
1997, to fund the Acquisitions.
LIQUIDITY AND CAPITAL RESOURCES (DOLLAR AMOUNTS IN THOUSANDS OTHER THAN SHARE
AND PER SHARE AMOUNTS)
At September 30, 1998, working capital amounted to $281,716 compared to $213,252
at December 31, 1997. The slight increase was primarily due to the working
capital of companies acquired in 1998. The Company's capital requirements are
primarily for working capital, acquisitions, and capital expenditures for
continued improvements in plant capacities and material handling and processing
equipment.
The Company's primary sources of liquidity are from internally generated funds
from operations and the Company's revolving line of credit. On October 22, 1997,
the Company entered into a syndicated credit facility with five banks. The
Company's borrowing limit under the revolving line of credit established under
this agreement was increased to $200,000. In September 1998, the Company amended
its existing credit agreement to allow for short-term borrowing of up to
$25,000. The Company also received commitments during September 1998 for the
private placement of debt in the aggregate amount of $150,000 which was funded
on November 3, 1998. The proceeds from these notes were used to pay down the
revolving line of credit. The senior notes that were issued in the private
placements have maturity dates ranging from 2002 to 2010 and bear interest at
rates ranging from 6.23% to 7.37% per annum.
Cash provided by operations remained consistent for the nine month period ended
September 30, 1998, as compared to the corresponding 1997 period.
Net capital expenditures, excluding acquisitions, were $17,258 for the nine
months ended September 30, 1998. The Company had no material commitments for
capital expenditures as of September 30, 1998. The Company anticipates that
funds generated from operations and funds available under its line of credit
will be sufficient to meet its working capital needs for the foreseeable future,
and the expansion of its facilities at certain of its metals service centers
currently in progress.
In November 1997, the Company issued 3,595,000 new shares of its Common Stock in
a public equity offering, resulting in net proceeds of $93,908. The proceeds
from this offering were used to pay down outstanding bank debt, including the
debt incurred to fund acquisitions. At December 31, 1997, the balance of the
proceeds was invested in high quality short-term investments (classified as cash
equivalents), which, along with bank debt, was then used to fund the
acquisitions of DSS and Phoenix Metals on January 30, 1998. In May 1998, the
Company increased the number of authorized shares outstanding of its common
stock from 20,000,000 to 100,000,000 shares. This increase allows the Company to
fund future acquisitions with stock, if desired, and also allows the Company to
issue additional shares in the public market, if desired.
On August 31, 1998, the Board of Directors of the Company approved the purchase
of up to an additional 2,500,000 shares of the Company's outstanding common
stock through its Stock Repurchase Plan, for a total of 4,000,000 shares. During
October 1998, the Company repurchased 430,800 shares of its common stock at an
average price of $25.79 per share.
11.
<PAGE> 14
SEASONALITY
The Company recognizes that some of its customers may be in seasonal businesses,
especially customers in the construction industry. As a result of the Company's
geographic, product and customer diversity, however, the Company's operations
have not shown any material seasonal trends, although the months of November and
December traditionally have been less profitable because of a reduced number of
working days for shipments of the Company's products and holiday closures for
some of its customers. There can be no assurance that period-to-period
fluctuations will not occur in the future. Results of any one or more quarters
are therefore not necessarily indicative of annual results.
IMPACT OF YEAR 2000
The Company does not anticipate that there will be a material impact on the
results of operations or cash flows of the Company related to the Year 2000
Issue. The Year 2000 Issue addresses computer programs which have time-sensitive
software that recognizes a date using "00" as the year 1900 rather than the year
2000. Most of the Company's locations were converting to a new computer system
to obtain additional functionality. The software has since been certified Year
2000 compliant by the Company's software vendor. In addition to the vendor's
certification, the Company has an ongoing program to test its systems for such
compliance. This conversion began in 1994 and has been progressing on schedule.
The final conversions are scheduled to occur in November 1999. A training staff
was hired in 1996 and has been solely dedicated to this conversion project. At
the Company's locations that are not being converted to this system, assessments
of the existing systems have occurred. The Company, working with its respective
software vendors, has adopted plans to make the minor modifications required to
address the Year 2000 Issue at these locations. Management believes that the
major business systems of the Company are not vulnerable to third parties'
failure to remediate their own Year 2000 Issues, as the Company's interface with
third parties, including customers and vendors, does not involve heavily
automated computer dependent communications. The Company believes that, with the
conversions to new software and modifications to existing software, the Year
2000 Issue will not pose significant operational problems for its computer
system. In the event the remaining conversions and modifications are not made,
or are not completed timely, the Year 2000 Issue is not expected to have a
material impact on the operations of the Company, as the products sold by the
Company and the processing and delivery equipment used are not date dependent,
minimizing the impact of any Year 2000 Issues related to meeting customer
requirements.
As the Company has been incurring costs related to this project since 1994 and
no significant additional costs have been identified, the Company does not
anticipate a material impact on the results of operations or cash flows related
to the Year 2000 Issue.
12.
<PAGE> 15
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
(a) Not applicable.
(b) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
(a) Not applicable.
(b) Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.01 Amendment No. Two to Credit Agreement dated October 22, 1997.
10.02 Amendment No. Three to Credit Agreement dated October 22, 1997.
(b) Registrant filed a Report on Form 8-K dated July 1, 1998, reporting the
acquisition of Chatham Steel Corporation.
13.
<PAGE> 16
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 thereunto duly authorized.
RELIANCE STEEL & ALUMINUM CO.
Dated: November 13, 1998 By: /s/ David H. Hannah
------------------------
David H. Hannah
President
By: /s/ Steven S. Weis
------------------------
Steven S. Weis
Senior Vice President and
Chief Financial Officer
14.
<PAGE> 1
EXHIBIT 10.01
AMENDMENT NO. TWO TO CREDIT AGREEMENT
This Amendment No. Two to Credit Agreement (this "Amendment") dated as
of September 8, 1998, is entered into between Reliance Steel & Aluminum Co.
("Borrower") and Bank of America National Trust and Savings Association
("Bank").
RECITALS
A. The Bank and Borrower are parties to a certain Credit Agreement dated
as of October 22, 1997, as modified by an amendment dated as of April 16, 1998
(as amended, the "Agreement").
B. The Bank and Borrower desire to amend the Agreement for the purpose
of, among other things, adding a facility for cash advances in the commitment
amount of $25,000,000.
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this Amendment
shall have the meanings given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
2.1 The following definitions are added to Section 1.1 of the
Agreement in alphabetical order:
"`Base Rate Loan' means a Loan which bears interest based on the
Base Rate.
"`Borrowing' and `Borrow' each mean a borrowing hereunder
consisting of Loans of the same type made on the same day and, other
than in the case of Base Rate Loans, having the same Interest Period.
"`Borrowing Date' means the date that a Loan is made by the
Bank, which shall be a Business Day.
"`Commitments' means the Loan Commitment and the L/C Commitment.
"`Continuation' and `Continue' each mean, with respect to any
Loan other than a Base Rate Loan, the continuation of such Loan as the
same type of Loan in the same principal amount, but with a new Interest
Period and an interest rate determined as of the first day of such new
Interest Period. Continuations must occur on the last day of the
Interest Period for such Loan.
"`Conversion' and `Convert' each mean, with respect to any Loan,
the conversion of one type of Loan into another type of Loan. With
respect to Loans other than Base Rate Loans, Conversions must occur on
the last day of the Interest Period for such Loan.
"`Interest Payment Date' means, (a) with respect to any Base
Rate Loan, the last Business day of each month and the Loan Maturity
Date, and (b) with respect to
1
<PAGE> 2
any other type of Loan, (i) any date that such Loan is prepaid in whole
or in part, (ii) the last day of each Interest Period applicable to, or
the maturity of, such Loan; provided, however, that if any Interest
Period or the maturity of any such Loan exceeds one month, the date that
falls on the last Business Day of each month within such Interest Period
shall also be an Interest Payment Date, and (iii) the Loan Maturity
Date.
"'Interest Period' means, as to any Loans other than Base Rate
Loans, the period commencing on the date specified by Borrower in its
Request for Extension of Credit and ending one, two, or three months
thereafter, as selected by Borrower in the Request for Extension of
Credit relating thereto; provided that:
(a) The first day of any Interest Period shall be a Business
Day;
(b) Any Interest Period that would otherwise end on a day
that is not a Business Day shall be extended to the next
succeeding Business Day unless, in the case of an Offshore Rate
Loan, such Business Day falls in another calendar month, in
which case such Interest Period shall end on the immediately
preceding Business Day;
(c) No Interest Period shall extend beyond the Loan Maturity
Date.
"'L/C Commitment' means, for the Bank, the amount of
$10,000,000.
"'L/C Maturity Date' means the date that is five years after the
Closing Date, but not later than December 31, 2002.
"'Loan' means any advance made or to be made by the Bank to
Borrower as provided in Section 2.
"'Loan Commitment' means, for the Bank, the amount of
$25,000,000.
"'Loan Maturity Date' means December 15, 1998.
"'Minimum Amount' means, with respect to each of the following
actions, the following amounts set forth opposite such action (a
reference to "Minimum Amount" shall also be deemed a reference to the
multiples in excess thereof set forth below):
<TABLE>
<CAPTION>
Minimum
Multiples
Minimum in excess of
Type of Action Amount Minimum Amount
- -------------- ------- --------------
<S> <C> <C>
Borrowing of, prepayment of or $5,000,000 $100,000
Conversion into, Base Rate Loans
Borrowing of, prepayment of, $5,000,000 $100,000
Continuation of, or Conversion
into, Offshore Rate Loans
</TABLE>
"'Offshore Rate' means, for any Interest Period with respect to
Offshore Rate Loans comprising part of the same Borrowing, the per annum
rate of interest
2
<PAGE> 3
(rounded upward to the next 1/16th of 1%) determined by the Bank (whose
determination shall be conclusive in the absence of manifest error) as
follows:
Offshore Rate = Offshore Base Rate
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
'Eurodollar Reserve Percentage' means for any day for any
Interest Period the maximum reserve percentage (expressed as a decimal,
rounded upward to the next 1/100th of 1%) in effect on such day (whether
or not applicable to the Bank) under regulations issued from time to
time by the FRB for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred to
as `Eurocurrency liabilities'). The Offshore Rate for any outstanding
Offshore Rate Loans shall be adjusted automatically as of the effective
date of any change in the Eurodollar Reserve Percentage.
`Offshore Base Rate' means, as Borrower may elect in its Request
for Extension of Credit, either (a) the interest rate per annum (rounded
upward to the next 1/16 of 1%) at which deposits in Dollars are offered
by the Bank's applicable Lending Office to major banks in the Offshore
Rate Designated Market at or about 11:00 a.m. local time in the Offshore
Rate Designated Market, two Business Days before the first day of the
applicable Interest Period in an aggregate amount approximately equal to
the amount of the Loan made by Bank with respect to such Offshore Rate
Loan and for a period of time comparable to the number of days in the
applicable Interest Period or (b) the interest rate per annum (rounded
upward, if necessary to the next 1/16 of 1%) at which deposits in
Dollars are offered by the Bank to major banks in the Cayman Islands
offshore interbank market at or about 11:00 a.m. local time, on the
first day of the applicable Interest Period in an aggregate amount
approximately equal to the amount of the Loan and for a period of time
comparable to the number of days in the applicable Interest Period.
The determination of the Eurodollar Reserve Percentage and the Offshore
Base Rate by the Bank shall be conclusive in the absence of manifest
error.
"`Offshore Rate Designated Market' means, with respect to any
Offshore Rate Loan, (a) the London eurodollar market or the Cayman
Islands offshore Dollar interbank market, as elected by Borrower, (b) if
major banks in the London eurodollar market are at the relevant time not
accepting deposits of Dollars or if the Bank determines in good faith
that the London eurodollar market does not represent at the relevant
time the effective pricing to the Bank for deposits of Dollars in the
London eurodollar market, the Cayman Islands offshore Dollar interbank
market or (c) if major banks in the Cayman Islands offshore Dollar
interbank market are at the relevant time not accepting deposits of
Dollars or if the Bank determines in good faith that the Cayman Islands
offshore Dollar interbank market does not represent at the relevant time
the effective pricing to the Bank for deposits of Dollars in the Cayman
Islands offshore Dollar interbank market, such other Offshore Market as
may from time to time be selected by the Bank with the approval of
Borrower.
3
<PAGE> 4
"`Offshore Rate Loan' means a Loan that bears interest based on
the Offshore Rate.
"`Request for Extension of Credit' means a written request
substantially in the form of Exhibit D or telephonic request followed by
such written request, duly completed and signed by a Responsible
Officer, in each case delivered to the Bank by Requisite Notice.
"`type' of Loan means (a) a Base Rate Loan or (b) an Offshore
Rate Loan with an Interest Period of one, two, or three months
thereafter, as selected by Borrower in the Request for Extension of
Credit relating thereto."
2.2 The definition of "Applicable Amount" in Section 1.1 of the
Agreement is amended in full to read as follows:
"`Applicable Amount' means, for any Pricing Period, the per
annum amounts set forth below under Applicable Amount opposite the
applicable Pricing Level; provided, however, that until the Bank's
receipt of the second quarterly Compliance Certificate after the Closing
Date required under Section 6.2(a), such interest rates, fees and
commissions shall be those indicated for Pricing Level 3:
<TABLE>
<CAPTION>
Applicable Amount
(in basis points per annum)
Pricing --------------------------------------------------------------
Level Standby Letters of Credit Offshore Rate + Base Rate +
----- ------------------------- --------------- -----------
<S> <C> <C> <C>
1 27.50 35.00 0
2 32.50 35.00 0
3 37.50 35.00 0
4 45.00 35.00 0
5 62.50 35.00 0"
</TABLE>
2.3 The definition of "Commitment" in Section 1.1 of the
Agreement is deleted in its entirety.
2.4 The definition of "Extension of Credit" in Section 1.1 of the
Agreement is amended in full to read as follows:
"`Extension of Credit' means (a) the Borrowing of any Loans, (b)
the Conversion or Continuation of any Loans or (c) the issuance,
renewal, increase, continuation, amendment or other credit action with
respect to any Letter of Credit (collectively, the `Extensions of
Credit')."
4
<PAGE> 5
2.5 The definition of "Maturity Date" in Section 1.1 of the
Agreement is deleted in its entirety.
2.6 The definition of "Outstanding Obligations" in Section 1.1 of
the Agreement is amended in full to read as follows:
"`Outstanding Obligations' means, as of any date, and giving
effect to making any Extensions of Credit requested on such date and all
payments, repayment and prepayments made on such date, the sum of (a)
the aggregate outstanding principal of all Loans, and (b) all Letter of
Credit Usage."
2.7 The definition of "Requisite Time" in Section 1.1 of the
Agreement is amended in full to read as follows:
"`Requisite Time' means, with respect to any of the actions
listed below, the time set forth opposite such action (all times are
California time) on or prior to the date (the "relevant date") of such
action:
<TABLE>
<CAPTION>
Action Time Date
------ ---- ----
<S> <C> <C>
Borrowing or prepayment
of Base Rate Loans 9:00 a.m. Relevant date
Borrowing of, continuation 10:00 a.m. If the Offshore Base Rate
of, prepayment of or is based on the London
conversion into eurodollar market, 3
Offshore Rate Loans Business Days prior to
relevant date; if the
Offshore Base Rate is
based on the Cayman
Islands offshore
interbank market, the
relevant date
Letter of Credit action 10:00 a.m. 5 Business Days
prior to relevant date
Funds made available by 11:00 a.m. Relevant date"
Borrower to Bank
</TABLE>
2.8 Sections 2 and 3 of the Agreement are amended in full to read
as follows:
"Section 2
"COMMITMENTS; INTEREST, FEES, PAYMENT PROCEDURES
"2.1 Loans.
"(a) Subject to the terms and conditions set forth in this
Agreement, the Bank agrees to make, Convert and Continue Loans during
the Availability Period as Borrower may request; provided, however, that
the Outstanding Loans of the Bank shall not exceed the Bank's Loan
Commitment. Subject to the foregoing and other terms and
5
<PAGE> 6
conditions hereof, Borrower may borrow, Convert, Continue, prepay and
reborrow Loans as set forth herein without premium or penalty.
"(b) Loans made by the Bank shall be evidenced by one or
more loan accounts or records maintained by the Bank in the ordinary
course of business. Upon the request of the Bank, the Bank's Loans may
be evidenced by one or more promissory notes, instead of or in addition
to loan accounts. (The Bank may endorse on the schedules annexed to its
promissory note(s) the date, amount and maturity of its Loans and
payments with respect thereto.) Such loan accounts, records or
promissory notes shall be conclusive absent manifest error of the amount
of such Loans and payments thereon. Any failure so to record or any
error in doing so shall not, however, limit or otherwise affect the
obligation of Borrower to pay any amount owing with respect to the
Loans.
"(c) Borrower shall use the proceeds of Loans for general
corporate purposes, including without limitation financing working
capital and acquisitions.
"2.2 Borrowings, Conversions and Continuations of Committed
Loans.
"(a) Borrower may irrevocably request a Borrowing,
Conversion or Continuation of Loans in a Minimum Amount therefor by
delivering a duly completed Request for Extension of Credit therefor by
Requisite Notice to the Bank not later than the Requisite Time therefor.
All Borrowings, Conversions or Continuations shall constitute Base Rate
Loans unless properly and timely otherwise designated as set forth in
the preceding sentence.
"(b) Promptly following receipt of a Request for Extension
of Credit, the Bank shall make the funds for its Loan available to the
Borrower not later than the Requisite Time therefor on the Business Day
specified in such Request for Extension of Credit upon satisfaction or
waiver of the applicable conditions set forth in Section 4.
"(c) Unless the Bank otherwise consents, Loans with no
more than 5 different Interest Periods shall be outstanding at any one
time.
"(d) No Loans other than Base Rate Loans may be requested
or continued during the existence of an Event of Default. During the
existence of an Event of Default, the Bank may determine that any or all
of the then outstanding Loans other than Base Rate Loans shall be
Converted to Base Rate Loans. Such Conversion shall be effective upon
notice to Borrower from the Bank and shall continue so long as such
Event of Default continues to exist.
"(e) If a Loan is to be made on the same date that another
Loan is due and payable, Borrower or the Bank, as the case may be, shall
make available to the other the net amount of funds giving effect to
both such Loans and the effect for purposes of this Agreement shall be
the same as if separate transfers of funds had been made with respect to
each such Loan.
"2.3 Letters of Credit.
"(a) Subject to the terms and conditions hereof, at any
time and from time to time from the Closing Date through the L/C
Maturity Date, the Bank shall issue, supplement, modify, amend, renew,
or extend such commercial and standby Letters of
6
<PAGE> 7
Credit as Borrower may request; provided, however, that the aggregate
outstanding Letter of Credit Usage shall not exceed the L/C Commitment
at any time. Each Letter of Credit shall be in a form reasonably
acceptable to the Bank. Unless the Bank otherwise consents in writing
and subject to permitting "evergreen" Letters of Credit as provided in
subsection (b) below, the term of any Letter of Credit shall not exceed
the earlier of 12 months from the date of issuance or the L/C Maturity
Date.
"(b) Borrower may irrevocably request the issuance,
supplement, modification, amendment, renewal, or extension of a Letter
of Credit by delivering a duly completed Letter of Credit Application
therefor to the Bank by Requisite Notice not later than the Requisite
Time therefor; provided, however, that for such requests the Required
Notice must be in writing. Standby Letters of Credit may have automatic
extension or renewal provisions ("evergreen" Letters of Credit) so long
as the Bank has the right to terminate such evergreen Letters of Credit
no less frequently than annually within a notice period (the "Letter of
Credit Evergreen Notice Period") to be agreed upon at the time each such
Letter of Credit is issued. This Agreement shall control in the event of
any conflict with any Letter of Credit Application.
"(c) Borrower agrees to pay to the Bank an amount equal to
any payment made by the Bank with respect to each Letter of Credit
within one Business Day after demand made by the Bank therefor, together
with interest on such amount from the date of any payment made by the
Bank at the Default Rate. The principal amount of any such payment shall
be used to reimburse the Bank for the payment made by it under the
Letter of Credit.
"(d) Once an evergreen Letter of Credit is issued,
Borrower shall not be required to request that the Bank permit the
renewal thereof. If such Letter of Credit could be issued within the
Letter of Credit Evergreen Notice Period, the Bank shall permit the
renewal such evergreen Letter of Credit at such time.
"(e) The obligation of Borrower to pay to the Bank the
amount of any payment made by the Bank under any Letter of Credit shall
be absolute, unconditional, and irrevocable. Without limiting the
foregoing, Borrower's obligations shall not be affected by any of the
following circumstances:
"(i) any lack of validity or enforceability of the
Letter of Credit, this Agreement, or any other agreement or
instrument relating thereto;
"(ii) any amendment or waiver of or any consent to
departure from the Letter of Credit, this Agreement, or any
other agreement or instrument relating thereto, with the
consent of Borrower;
"(iii) the existence of any claim, setoff, defense, or
other rights which Borrower may have at any time against the
Bank, any beneficiary of the Letter of Credit (or any
persons or entities for whom any such beneficiary may be
acting) or any other Person, whether in connection with the
Letter of Credit, this Agreement, or any other agreement or
instrument relating thereto, or any unrelated transactions;
"(iv) any demand, statement, or any other document
presented under the Letter of Credit proving to be forged,
fraudulent, invalid, or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect
7
<PAGE> 8
whatsoever so long as any such document appeared to comply
with the terms of the Letter of Credit;
"(v) payment by the Bank in good faith under the Letter
of Credit against presentation of a draft or any
accompanying document which does not strictly comply with
the terms of the Letter of Credit;
"(vi) the existence, character, quality, quantity,
condition, packing, value or delivery of any Property
purported to be represented by documents presented in
connection with any Letter of Credit or for any difference
between any such Property and the character, quality,
quantity, condition, or value of such Property as described
in such documents;
"(vii) the time, place, manner, order or contents of
shipments or deliveries of Property as described in
documents presented in connection with any Letter of Credit
or the existence, nature and extent of any insurance
relative thereto;
"(viii)the solvency or financial responsibility of any
party issuing any documents in connection with a Letter of
Credit;
"(ix) any failure or delay in notice of shipments or
arrival of any Property;
"(x) any error in the transmission of any message
relating to a Letter of Credit not caused by the Bank, or
any delay or interruption in any such message;
"(xi) any error, neglect or default of any
correspondent of the Bank in connection with a Letter of
Credit;
"(xii) any consequence arising from acts of God, wars,
insurrections, civil unrest, disturbances, labor disputes,
emergency conditions or other causes beyond the control of
the Bank;
"(xiii)so long as the Bank in good faith determines
that the document appears to comply with the terms of the
Letter of Credit, the form, accuracy, genuineness or legal
effect of any contract or document referred to in any
document submitted to the Bank in connection with a Letter
of Credit; and
"(xiv) where the Bank has acted in good faith and
observed general banking usage, any other circumstances
whatsoever.
"(h) The Uniform Customs and Practice for Documentary
Credits, as published in its most current version by the International
Chamber of Commerce, shall be deemed a part of this Section and shall
apply to all Letters of Credit to the extent permitted by applicable
Laws.
"(i) With respect to each standby Letter of Credit,
Borrower shall pay to the Bank a per annum standby letter of credit fee
in an amount equal to the Applicable Amount times the average daily
maximum amount available to be drawn on such outstanding standby Letter
of Credit, computed and payable in arrears on each Quarterly
8
<PAGE> 9
Payment Date, commencing December 31, 1997, through the date upon which
the outstanding Letter of Credit shall expire, with the final payment to
be made on such expiration date (provided that the minimum fee for each
standby Letter of Credit shall be $500 per annum). Borrower shall also
pay to the Bank, from time to time on demand, the Bank's standard
processing fees, costs and charges with respect to each standby Letter
of Credit. The Letter of Credit issuance fee and the standby letter of
credit fee are nonrefundable.
"(j) With respect to each commercial Letter of Credit,
Borrower shall pay to the Bank from time to time, on demand, the Bank's
normal issuance, negotiation, presentation, amendment and other
processing fees, and other standard costs and charges, relating to
commercial Letters of Credit as from time to time in effect.
"(k) As of the Closing Date, the Bank has issued for the
account of Borrower the following standby letters of credit (the
"Existing Letters of Credit"):
<TABLE>
<CAPTION>
Letter of
Credit Number Face Amount Expiration Date
------------- ----------- ---------------
<S> <C> <C>
214833 $375,000 April 1, 1998
216483 $188,570.90 April 1, 1998
217917 $2,247,000 April 1, 1998
217918 $1,350,000 April 1, 1998
</TABLE>
With respect to the Existing Letter of Credit, from and after the
Closing Date the Letter of Credit fee for the account of the Bank will
accrue and the undrawn amount thereof shall constitute Letter of Credit
Usage.
"2.4 Prepayments.
"(a) Upon Requisite Notice to the Bank not later than the
Requisite Time therefor, Borrower may at any time and from time to time
voluntarily prepay Committed Loans in the Minimum Amount therefor.
"(b) If for any reason the Outstanding Loan Obligations
exceed the Loan Commitment as in effect or as reduced or because of any
limitation set forth in this Agreement or otherwise, Borrower shall
immediately prepay Loans and/or deposit cash to be held by the Bank in
an interest-bearing cash collateral account as collateral for Letter of
Credit Usage hereunder in an aggregate amount equal to such excess.
"(c) Any prepayment of a Loan other than a Base Rate Loan
shall be accompanied by all accrued interest thereon, together with the
costs set forth in Section 3.6.
"2.5 Voluntary Reduction or Termination of Commitments. Upon
Requisite Notice to the Bank not later than the Requisite Time therefor,
Borrower shall have the right, at any time and from time to time,
without penalty or charge, to permanently and irrevocably reduce the
Commitments in a Minimum Amount therefor, or terminate the then unused
portion of the Commitments, provided, that any such reduction or
termination shall be accompanied by payment of all accrued and unpaid
commitment fees with respect to the portion of the Commitments being
reduced or terminated.
9
<PAGE> 10
"2.6 Principal and Interest.
"(a) If not sooner paid, Borrower shall pay, and promises
to pay, the outstanding principal amount of each Loan on the Loan
Maturity Date.
"(b) Subject to subsection (c), Borrower shall pay
interest on the unpaid principal amount of the Loans (before and after
default, before and after maturity, before and after judgment, and
before and after the commencement of any proceeding under any Debtor
Relief Law) from the date borrowed until paid in full (whether by
acceleration or otherwise) on each Interest Payment Date for each type
of Loan at a rate per annum equal to the applicable interest rate
determined in accordance with the definition thereof, plus, if
applicable, the Applicable Amount.
"(c) If any amount payable by Borrower under any Loan
Document is not paid when due (without regard to any applicable grace
periods), it shall thereafter bear interest at a fluctuating interest
rate per annum at all times equal to the Default Rate. Accrued and
unpaid interest on past due amounts including, without limitation,
interest on past due interest) shall be compounded monthly, on the last
day of each calendar month, to the fullest extent permitted by
applicable Laws and payable upon demand.
"2.7 Computation of Interest and Fees. Computation of interest
on Base Rate Loans shall be calculated on the basis of a year of 365 or
366 days, as the case may be, and the actual number of days elapsed;
computation of interest on all other types of Loans and all fees under
this Agreement shall be calculated on the basis of a year of 360 days
and the actual number of days elapsed, which results in a higher yield
to the Bank than a method based on a year of 365 or 366 days. Interest
shall accrue on each Loan for the day on which the Loan is made;
interest shall not accrue on a Loan, or any portion thereof, for the day
on which the Loan or such portion is paid. Any Loan that is repaid on
the same day on which it is made shall bear interest for one day.
Notwithstanding anything in this Agreement to the contrary, interest in
excess of the maximum amount permitted by applicable Laws shall not
accrue or be payable hereunder, and any amount paid as interest
hereunder which would otherwise be in excess of such maximum permitted
amount shall instead be treated as a payment of principal.
"2.8 Manner and Treatment of Payments Between the Bank and
Borrower.
"(a) Unless otherwise provided herein, all payments by
Borrower hereunder shall be made to the Bank not later than the
Requisite Time for such type of payment. All payments received after
such Requisite Time shall be deemed received on the next succeeding
Business Day. All payments shall be made in immediately available funds
in lawful money of the United States of America.
"(b) Upon satisfaction of any applicable terms and
conditions set forth herein, the Bank shall promptly make any amounts
payable to Borrower, by crediting the Designated Deposit Account. The
Bank's determination of any amount payable hereunder shall be conclusive
in the absence of manifest error.
"(c) Subject to the definition of "Interest Period," if
any payment to be made by Borrower or any other Borrower Party shall
come due on a day other than a Business Day, payment shall instead be
considered due on the next succeeding
10
<PAGE> 11
Business Day and the extension of time shall be reflected in computing
interest and fees.
"2.9 Funding Sources. Nothing in this Agreement shall be deemed
to obligate the Bank to obtain the funds for any Loan in any particular
place or manner or to constitute a representation by the Bank that it
has obtained or will obtain the funds for any Loan in any particular
place or manner.
"2.10 Extension of L/C Maturity Date. At the request of Borrower
and with the written consent of the Bank (which may be given or withheld
in the sole and absolute discretion of the Bank) pursuant to this
Section the L/C Maturity Date may be extended for one-year periods,
provided no Default or Event of Default has occurred and is continuing
at the time of such request. Not earlier than three months prior to the
each anniversary of the Closing Date, nor later than any anniversary of
the Closing Date, Borrower may request by Requisite Notice made to the
Bank a one year extension of the L/C Maturity Date. Such request shall
include a certificate signed by a Responsible Officer stating that (a)
the representations and warranties contained in Section 5 shall be true
and correct on and as of the date of such certificate and (b) no Default
or Event of Default has occurred and is continuing. The Bank shall,
within 15 Business days of its receipt of such notice, notify Borrower
whether it consents to or declines such request. If the Bank has
consented, then the L/C Maturity Date shall be extended for one year.
"Section 3
"TAXES, YIELD PROTECTION AND ILLEGALITY
"3.1 Taxes. Each payment of any amount payable by Borrower or
any other Borrower Party under this Agreement or any other Loan Document
shall be made free and clear of, and without reduction by reason of, any
Applicable Taxes. To the extent that Borrower is obligated by applicable
Laws to make any deduction or withholding on account of Applicable Taxes
from any amount payable to the Bank under this Agreement, Borrower shall
promptly notify the Bank of such fact and (a) make such deduction or
withholding and pay the same to the relevant Governmental Authority and
(b) pay such additional amount directly to the Bank as is necessary to
result in the Bank receiving a net after-Applicable Tax amount equal to
the amount to which the Bank would have been entitled under this
Agreement absent such deduction or withholding. Within 30 days after the
date of any payment by Borrower of any amounts pursuant to this section,
Borrower shall furnish to the Bank the original or a certified copy of a
receipt evidencing payment thereof, or other evidence of payment
satisfactory to the Bank.
"3.2 Increased Costs. If the Bank determines that any Laws or
guidelines (whether or not having the force of law), or compliance
therewith, have the effect of increasing its cost of agreeing to make or
making, to issue or participating in, funding or maintaining any Loans
or Letters of Credit, then Borrower shall, upon demand by the Bank, pay
to the Bank additional amounts sufficient to compensate the Bank for
such increased cost.
"3.3 Capital Adequacy. If the Bank determines that any Laws
regarding capital adequacy, or compliance by the Bank (or its Lending
Office) or any corporation controlling the Bank, with any request,
guideline or directive regarding capital adequacy (whether or not having
the force of law) of any Governmental Authority not imposed as a result
of the Bank's or such corporation's failure to comply with any other
Laws, affects or would affect the amount of capital required or expected
to be maintained by the Bank
11
<PAGE> 12
or any corporation controlling the Bank or the Issuing Bank and (taking
into consideration the Bank's or such corporation's policies with
respect to capital adequacy and the Bank's desired return on capital)
determines in good faith that the amount of such capital is increased,
or the rate of return on capital is reduced, as a consequence of its
obligations under this Agreement, then upon demand of the Bank, Borrower
shall pay to the Bank, from time to time as specified in good faith by
the Bank, additional amounts sufficient to compensate the Bank in light
of such circumstances, to the extent reasonably allocable to such
obligations under this Agreement.
"3.4 Illegality. If the Bank determines that any Laws has made
it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for the Bank or its applicable Lending Office to make,
maintain or fund Offshore Rate Loans, or materially restricts the
authority of the Bank to purchase or sell, or to take deposits of,
Dollars in the Offshore Rate Designated Market, or to determine or
charge interest rates based upon the Offshore Rate, then, on notice
thereof by the Bank to Borrower, any obligation of the Bank to make
Offshore Rate Loans shall be suspended until the Bank notifies the
Borrower that the circumstances giving rise to such determination no
longer exist. Upon receipt of such notice, Borrower shall, upon demand
from the Bank, prepay or Convert all Offshore Rate Loans, either on the
last day of the Interest Period thereof, if the Bank may lawfully
continue to maintain such Offshore Rate Loans to such day, or
immediately, if the Bank may not lawfully continue to maintain such
Offshore Rate Loan. The Bank agrees to designate a different Lending
Office if such designation will avoid the need for such notice and will
not, in the good faith judgment of the Bank, otherwise be materially
disadvantageous to the Bank.
"3.5 Inability to Determine Rates. If, in connection with any
Request for Extension of Credit, the Bank determines that (a) Dollar
deposits are not being offered to the Bank in the Offshore Rate
Designated Market for the applicable amount and Interest Period of the
requested Loan, (b) adequate and reasonable means do not exist for
determining the underlying interest rate (other than the Base Rate) for
the Loans requested therein, or (c) such underlying interest rates do
not adequately and fairly reflect the cost to the Bank of funding the
Loan, the Bank will promptly so notify Borrower. Thereafter, the
obligation of the Bank to make or maintain Loans based upon such
affected interest rate shall be suspended until the Bank revokes such
notice. Upon receipt of such notice, Borrower may revoke any pending
Request for Extension of Credit for such type of Loan or, failing that,
be deemed to have converted such Request for Extension of Credit into a
request for Base Rate Loans in the amount specified in therein.
"3.6 Breakfunding Costs. Upon Continuation, Conversion, payment
or prepayment of any Loan other than a Base Rate Loan on a day other
than the last day in the applicable Interest Period (whether voluntary,
mandatory, automatic, by reason of acceleration, or otherwise and
including any such action required under this Section 3), or upon the
failure of Borrower (for a reason other than the failure of the Bank to
make a Loan) to borrow, Continue or Convert any Loan other than a Base
Rate Loan on the date or in the amount specified in any Request for
Extension of Credit, then Borrower shall, upon demand made by the Bank,
reimburse the Bank and hold the Bank harmless from any loss or expense
which the Bank may sustain or incur as a consequence thereof, including
any such loss or expense arising from the liquidation or reemployment of
funds obtained by it to maintain such Loan or from fees payable to
terminate the deposits from which such funds were obtained.
12
<PAGE> 13
"3.7 Matters Applicable to all Requests for Compensation.
"(a) The Bank shall provide reasonable detail to Borrower
regarding the manner in which the amount of any payment to the Bank
under this Section 3 has been determined, concurrently with demand for
such payment. The Bank's determination of any amount payable under this
Section 3 shall be conclusive in the absence of manifest error.
"(b) For purposes of calculating amounts payable under
this Section 3 any Loan shall be deemed to have been funded at the
applicable interest rate set forth in the definition thereof whether or
not such Loan was, in fact, so funded.
"(c) All of Borrower's obligations under this Section 3
shall survive termination of the Commitments and payment in full of all
Outstanding Obligations."
2.9 The form of Request for Extension of credit attached hereto
as Exhibit D is added to the Agreement as Exhibit D thereto.
2.10 Schedule 5.16 attached to the Agreement is amended to read
as set forth on Schedule 5.16 attached hereto.
3. Representations and Warranties. Borrower represents and warrants to
the Bank that: (a) there is no event which is, or with notice or lapse of time
or both would be, a default under the Agreement, (b) the representations and
warranties in the Agreement are true as of the date of this Amendment as if made
on the date of this Amendment, except with respect to the Schedule 5.16, a
revised copy of which is attached to this Amendment, (c) this Amendment is
within Borrower's powers, has been duly authorized, and does not conflict with
any of Borrower's organizational papers, and (d) this Amendment does not
conflict with any law, agreement, or obligation by which Borrower is bound.
4. Conditions. This Amendment will be effective when the Bank receives
the following items, in form and content acceptable to the Bank:
4.1 A duly executed counterpart of this Amendment signed by
Borrower and the Bank.
4.2 A copy of resolutions adopted by Borrower's board of
directors authorizing the obligations to be incurred by Borrower under the
Agreement, as modified by this Amendment, duly certified by a Responsible
Officer of Borrower.
4.3 A reaffirmation of the Master Subsidiary Guaranty, executed
by each guarantor thereunder.
4.4 A copy of resolutions adopted by the board of directors of
each guarantor under the Master Subsidiary Guaranty authorizing the obligations
thereunder as increased under the terms of this Amendment, duly certified by a
Responsible Officer of each such guarantor.
5. Effect of Amendment. Except as provided in this Amendment, all of the
terms and conditions of the Agreement shall remain in full force and effect.
13
<PAGE> 14
6. Counterparts. This Amendment may be executed in as many counterparts
as necessary or convenient, and by the different parties on separate
counterparts each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
This Amendment is executed as of the date first above written.
RELIANCE STEEL & ALUMINUM CO., a
California corporation
By:________________________________
Title:_______________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:________________________________
Donald G. Farris
Title: Vice President
14
<PAGE> 15
EXHIBIT D
REQUEST FOR EXTENSION OF CREDIT
Date:____________
To: Bank of America National Trust
and Savings Association
Ladies and Gentlemen:
Reference is being made to that certain Credit Agreement dated as of
October 22, 1997, between Reliance Steel & Aluminum Co., a California
corporation (the "Borrower") and Bank of America National Trust and Savings
Association (as extended, renewed, amended or restated from time to time, the
"Agreement;" the terms defined therein being used herein as therein defined).
The undersigned hereby requests (select one):
____ A Borrowing of Loans
____ A Conversion or Continuation of Loans
1. On ____________________, ______
2. In the amount of $_____________
3. Comprised of ______________________________________________________
[type of Loan requested and, if an Offshore Rate Loan,
whether the Offshore Rate Designated Market is to be
the London eurodollar market or the Cayman Islands
offshore Dollar interbank market]
4. If applicable: with an Interest Period of ____ months/days.
The foregoing request complies with the requirements of Section 2.1 of the
Agreement. The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the above date, before and after
giving effect and to the application of the proceeds therefrom:
(a) the representations and warranties of Borrower contained in
Section 5 of the Agreement are true and correct in all material respects as
though made on and as of the above date (except to the extent such
representations and warranties expressly refer to an earlier date, in which
case they are true and correct as of such earlier date); and
1
<PAGE> 16
(b) no Default or Event of Default has occurred and is continuing, or
would result from such proposed Extension of Credit.
RELIANCE STEEL & ALUMINUM CO.
By:
---------------------------
Title:
------------------------
2
<PAGE> 17
REAFFIRMATION OF MASTER SUBSIDIARY GUARANTY
Each of the undersigned (individually a "Guarantor" and, collectively,
"Guarantors") hereby unconditionally reaffirms all of its obligations under
that certain Master Subsidiary Guaranty dated October 22, 1997 (the
"Guaranty"), executed by the undersigned in favor of Bank of America National
Trust and Savings Association ("Bank"), pursuant to which Guarantors guaranteed
all of the obligations of Reliance Steel & Aluminum Co. ("Borrower") owing to
Bank under that certain Credit Agreement dated October 22, 1997, as amended
from time to time, including without limitation that certain Amendment No. Two
to Credit Agreement dated as of September 8, 1998, under which, among other
things, the total amount of loan and letter of credit commitments were
increased to $35,000,000. Each Guarantor further acknowledges and agrees that
the Guaranty is in full force and effect, remains valid and binding against each
Guarantor, and is enforceable against each Guarantor in accordance with its
terms.
Dated: _____________________
CCC STEEL, INC., SISKIN STEEL & SUPPLY
COMPANY, INC., SERVICE STEEL AEROSPACE
CORP., VALEX CORP., AMI METALS, INC.,
GEORGIA STEEL SUPPLY COMPANY, PHOENIX
CORPORATION, DURRETT SHEPPARD STEEL
CO., INC., AND CHATHAM STEEL CORPORATION
By: _______________________
Steven S. Weis
Title: Vice President of CCC Steel Inc., Siskin
Steel & Supply Company, Inc., Phoenix
Corporation, Durrett Sheppard Steel Co.,
Inc. and Chatham Steel Corporation and
Chief Financial Officer of Service Steel
Aerospace Corp., Valex Corp., AMI Metals,
Inc., and Georgia Steel Supply Company
<PAGE> 18
SCHEDULE 5.16
SUBSIDIARIES
<TABLE>
<CAPTION>
# OF SHARES
JURISDICTION FORM OF # OF SHARES OWNED AND
NAME OF ORGANIZATION LEGAL ENTITY OUTSTANDING BY WHOM
---- --------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
AMI Metals, Inc. TN Corporation 1,400 1,400
by Borrower
CCC Steel, Inc. DL Corporation 3,625.8 3,625.8
by Borrower
MetalCenter, Inc. CA Corporation 2,965,812 2,965,812
Service Steel DL Corporation 100 100
Aerospace Corp. by Borrower
Siskin Steel & TN Corporation 88,000 88,800
Supply voting common by Borrower
Company, Inc.
3,691,116 3,691,116
non-voting by Borrower
common
Valex Corp. CA Corporation 187,500 (a) 3,000
by Dan Mangan
(b) 184,500
by Borrower
Georgia Steel GA Corporation 16,000 16,000
Supply Company Class A Class A
500 500
Class B Class B
64,000 64,000
Class C Class C
by Siskin Steel &
Supply
Company, Inc.
Durrett Sheppard CA Corporation 100 100
Steel Co., Inc. by Borrower
Phoenix GA Corporation 6,229 6,229
Corporation by Borrower
</TABLE>
<PAGE> 1
EXHIBIT 10.02
AMENDMENT NO. THREE TO CREDIT AGREEMENT
This Amendment No. Three to Credit Agreement (this "Amendment") dated as
of _______________, 1998, is entered into between Reliance Steel & Aluminum Co.
("Borrower") and Bank of America National Trust and Savings Association
("Bank").
RECITALS
A. The Bank and Borrower are parties to a certain Credit Agreement dated
as of October 22, 1997, as modified by amendments dated April 16, 1998, and
September 8, 1998 (as amended, the "Agreement").
B. The Bank and Borrower desire to amend the Agreement for the purpose
of deleting (i) the restriction in Section 7.2 of the Agreement on incurring
unsecured Indebtedness, (ii) a component of one of the limitations on making
Acquisitions in Section 7.8 of the Agreement, and (iii) the restriction on
making Distributions in Section 7.9 of the Agreement.
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this Amendment
shall have the meanings given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
2.1 Section 7.2 of the Agreement is amended in full to read as
follows:
"7.2 Intentionally deleted."
2.2 Section 7.8 of the Agreement is amended by deleting the words
"and the sum of the Borrower's and its Subsidiaries' Cash plus the amount by
which the `combined Commitments' under and as defined in the Syndicated Credit
Agreement exceeds the `Outstanding Obligations' (excluding `Swing Line
Outstandings') under and as defined in the Syndicated Credit Agreement would be
at least $25,000,000."
2.3 Section 7.9 of the Agreement is amended in full to read as
follows:
"7.9 Intentionally deleted."
2.4 Schedule 5.16 attached to the Agreement is amended to read as
set forth on Schedule 5.16 attached hereto.
3. Representations and Warranties. Borrower represents and warrants to
the Bank that: (a) there is no event which is, or with notice or lapse of time
or both would be, a default under the Agreement, (b) the representations and
warranties in the Agreement are true as of the date of this Amendment as if made
on the date of this Amendment, except with respect to Schedule 5.16, a revised
copy of which is attached to this Amendment, (c) this Amendment is within
Borrower's powers, has been duly authorized, and does not conflict with any of
1
<PAGE> 2
Borrower's organizational papers, and (d) this Amendment does not conflict with
any law, agreement, or obligation by which Borrower is bound.
4. Conditions. This Amendment will be effective when the Bank receives
the following items, in form and content acceptable to the Bank:
4.1 A duly executed counterpart of this Amendment signed by
Borrower and the Bank.
5. Effect of Amendment. Except as provided in this Amendment, all of the
terms and conditions of the Agreement shall remain in full force and effect.
6. Counterparts. This Amendment may be executed in as many counterparts
as necessary or convenient, and by the different parties on separate
counterparts each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
This Amendment is executed as of the date first above written.
RELIANCE STEEL & ALUMINUM CO., a
California corporation
By:________________________________
Title:_______________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:________________________________
Paul F. Sutherlen
Title: Vice President
2
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,601
<SECURITIES> 0
<RECEIVABLES> 171,701
<ALLOWANCES> (6,364)
<INVENTORY> 241,281
<CURRENT-ASSETS> 423,059
<PP&E> 292,619
<DEPRECIATION> (77,035)
<TOTAL-ASSETS> 832,796
<CURRENT-LIABILITIES> 141,343
<BONDS> 0
0
0
<COMMON> 155,347
<OTHER-SE> 192,325
<TOTAL-LIABILITY-AND-EQUITY> 832,796
<SALES> 357,819
<TOTAL-REVENUES> 358,566
<CGS> 271,486
<TOTAL-COSTS> 271,486
<OTHER-EXPENSES> 63,251
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,017
<INCOME-PRETAX> 20,235
<INCOME-TAX> 8,297
<INCOME-CONTINUING> 11,938
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,938
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.63
</TABLE>
