<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
AMENDMENT TO REPORT
FILED PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COLD METAL PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Amendment No. 1
The undersigned Registrant hereby amends the following items, financial
statements, exhibits, or other portions of its Current Report on Form 8-K, filed
July 3, 1996 as set forth in the pages attached hereto:
Item 7 (a):
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on it behalf by the
undersigned, hereto duly authorized.
Cold Metal Products, Inc.
August 27, 1996 By /s/ James R. Harpster
__________________________
James R. Harpster
President and Chief Executive Officer
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COLD METAL PRODUCTS, INC.
SEC FORM 8-K/A
INDEX
<TABLE>
<CAPTION>
Page Number
Item 7 - FINANCIAL STATEMENTS AND EXHIBITS
- ------------------------------------------
<S> <C>
(a) Financial Statements - Direct Steel, Inc. and 955404 Ontario Inc.
Independent Auditor's Report 4
Combined Balance Sheet 5
Combined Statement of Earnings and Retained Earnings 6
Combined Statement of Cash Flows 7
Notes to Combined Financial Statements 8
(b) Exhibit 99.1
Consent of Deloitte & Touche 14
</TABLE>
<PAGE> 3
Combined Financial Statements of
DIRECT STEEL INC. AND
955404 ONTARIO INC.
March 31, 1996
3
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
To the Directors of
Direct Steel Inc. and 955404 Ontario Inc.
We have audited the combined balance sheets of Direct Steel Inc. and 955404
Ontario Inc. (the "Companies") as of March 31, 1996 and the combined statements
of earnings and retained earnings and cash flows for the year then ended. These
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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.
In our opinion, these combined financial statements present fairly, in all
material respects, the financial position of the Companies as of March 31, 1996
and the results of their operations and their cash flows for the year then ended
in accordance with accounting principles generally accepted in the United
States.
/s/ Deloitte & Touche
- ---------------------
Chartered Accountants
Hamilton, Ontario Canada
June 24, 1996
4
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<TABLE>
<CAPTION>
DIRECT STEEL INC. AND 955404 ONTARIO INC.
Combined Balance Sheet
(Stated in United States Dollars)
March 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash (Note 3) $ 149,491
Accounts receivable (net of allowance for
doubtful accounts of $508,313) 9,453,960
Inventories 7,651,240
Income taxes recoverable 378,156
Prepaid expenses 32,951
- --------------------------------------------------------------------------------
17,665,798
PROPERTY, PLANT AND EQUIPMENT - NET (Note 4) 2,676,201
- --------------------------------------------------------------------------------
$20,341,999
================================================================================
LIABILITIES
CURRENT
Bank loans (Note 5) $ 9,542,682
Accounts payable 7,040,088
Accrued liabilities 499,785
Current portion of due to shareholders (Note 6) 477,493
Current portion of capital lease obligation (Note 7) 6,084
Current portion long-term debt (Note 8) 1,141,839
- --------------------------------------------------------------------------------
18,707,971
DUE TO SHAREHOLDERS (Note 6) 205,003
- --------------------------------------------------------------------------------
18,912,974
- --------------------------------------------------------------------------------
COMMITTMENTS (Note 10)
SHAREHOLDERS' EQUITY
Share capital (Note 9) 74
Cumulative translation adjustment 14,219
Retained earnings 1,414,732
- --------------------------------------------------------------------------------
1,429,025
- --------------------------------------------------------------------------------
$20,341,999
================================================================================
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
DIRECT STEEL INC. AND 955404 ONTARIO INC.
Combined Statement of Earnings and Retained Earnings
(Stated in United States Dollars)
Year ended March 31,1996
- --------------------------------------------------------------------------------
<S> <C>
SALES $ 46,277,203
COST OF SALES 42,889,263
- --------------------------------------------------------------------------------
GROSS PROFIT 3,387,940
- --------------------------------------------------------------------------------
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 1,901,250
INTEREST EXPENSE 1,445,470
SETTLEMENT OF LAWSUIT 145,146
- --------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES (103,926)
INCOME TAXES 96,197
- --------------------------------------------------------------------------------
NET LOSS (200,123)
RETAINED EARNINGS, BEGINNING OF YEAR 1,614,855
- --------------------------------------------------------------------------------
RETAINED EARNINGS, END OF YEAR $ 1,414,732
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
DIRECT STEEL INC. AND 955404 ONTARIO INC.
Combined Statement of Cash Flows
(Stated in United States Dollars)
Year ended March 31, 1996
===================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (200,123)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 237,116
Changes in operating assets and liabilities:
Accounts receivable 1,542,071
Inventories 4,850,976
Accounts payable (2,627,148)
Accrued expenses and other (601,168)
- ----------------------------------------------------------------------------------
Net cash provided by operating activities 3,201,724
- ----------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquistion of property, plant and equipment (1,003,811)
- ----------------------------------------------------------------------------------
Net cash used in investing activities (1,003,811)
- ----------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of bank loans (2,029,237)
Increase in due to shareholders 47,682
Decrease in capital lease obligation (11,024)
Repayment of long-term debt (313,997)
- ----------------------------------------------------------------------------------
Net cash used in financing acitivites (2,306,576)
- ----------------------------------------------------------------------------------
NET INCREASE IN CASH (108,663)
EFFECT OF TRANSLATION ADJUSTMENT 6,130
CASH, BEGINNING OF YEAR 252,024
- ----------------------------------------------------------------------------------
CASH, END OF YEAR $ 149,491
==================================================================================
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
INTEREST PAID $ 1,445,470
==================================================================================
INCOME TAXES PAID $ 819,793
==================================================================================
</TABLE>
7
<PAGE> 8
1. DESCRIPTION OF BUSINESS
Direct Steel Inc. ("Direct Steel") and 955404 Ontario Inc. ("955404
Ontario"), the "Companies", are incorporated under the laws of the
Province of Ontario. Direct Steel in primarily engaged in the slitting of
steel for sale to manufacturers. The primary purpose of 955404 Ontario is
to hold and lease out land and buildings and equipment used by Direct
Steel. The Companies' functional currency is Canadian dollars. The
financial statements have been converted to U.S. dollars using year-end
rates for the balance sheet and average rates for the income statement and
cash flow statement.
During fiscal 1996, approximately 75% of the Companies' sales were with
companies in the automotive industry. The Companies' largest customer, an
automotive systems manufacturer, accounted for approximately 19% of sales
in fiscal 1996. The Company performs ongoing credit evaluations of its
customers' financial condition and generally require no collateral.
2. ACCOUNTING POLICIES
The financial statements are prepared in accordance with generally
accepted accounting principles in the United States and include the
following significant accounting policies:
Basis of presentation
These financial statements include the accounts of Direct Steel and 955404
Ontario for the year ended March 31, 1996. Transactions between these two
companies have been eliminated.
Inventory
Inventory, consisting mainly of raw material, is valued at the lower of
cost and net realizable value. Cost is determined on a specific item
basis.
Fixed assets
Fixed assets are recorded at cost. Depreciation is computed using the
diminishing-balance method at the following annual rates:
Building 4%
Equipment 20%
Truck and trailer 30%
Furniture and fixtures 20%
Computers 30%
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions pending completion of related events. These estimates and
assumptions affect the amounts reported at the date of the financial
statements for assets, liabilities revenues, and expenses and the
disclosure of contingencies. Actual results could differ from those
estimates.
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<PAGE> 9
3. CASH
Cash in Direct Steel includes a term deposit of $146,640 required by the
bank as collateral in conjunction with the granting of an operating line.
4. PLANT, PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Accumulated Net Book
Cost Depreciation Value
---------- ------------ ----------
<S> <C> <C> <C>
Land $ 224,675 $ -- $ 224,675
Building 981,082 164,423 816,659
Equipment 1,822,352 726,021 1,096,331
Truck and trailer 42,496 33,010 9,486
Furniture and fixtures 86,282 23,847 62,435
Computers 77,358 46,997 30,361
Equipment under construction 436,254 -- 436,254
---------------------------------------------------------------------
$3,670,499 $ 994,298 $2,676,201
=====================================================================
</TABLE>
5. BANK LOANS
Bank loans of Direct Steel in the amount of $9,542,682 are collateralized
by a general security agreement, a general assignment of book debts, the
unlimited guarantee of one shareholder, and the unlimited guarantee of
955404 Ontario.
The loan agreements contain the customary restrictions concerning various
ratios. At year end, Direct Steel was in default with respect to the
minimum gross margin and the no losses covenants. Accordingly, the lender
has the right to demand payment of the amount due. The lender has, in
writing, waived its rights in respect of this breach at this time.
6. DUE TO SHAREHOLDERS
<TABLE>
<S> <C>
Demand promissory notes, unsecured, interest at the same
rate as the $146,640 term deposit of the company,
payable monthly with no fixed terms of repayment for the
principal $ 73,320
Shareholder loans with subordinated promissory notes,
unsecured, interest at prime plus 1 - 1/2%, payable in
five annual payments of $43,992 plus interest, beginning
March 23, 1995, two principal payments in arrears 219,960
------------------------------------------------------------------------
Balance forward 293,280
------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
6. DUE TO SHAREHOLDERS (CONTINUED)
<TABLE>
<S> <C>
Balance forward $ 293,280
Shareholder loan with a subordinated promissory note,
unsecured, interest at prime plus 1-1/2%, payable
monthly with five annual principal payments of $58,509,
beginning March 23, 1995, two principal payments
in arrears 292,547
Unpaid interest accrual 96,669
------------------------------------------------------------------------
682,496
Current portion 477,493
------------------------------------------------------------------------
$ 205,003
========================================================================
</TABLE>
Amounts due in each of the next three years, are as follows:
1997 $ 477,493
1998 102,501
1999 102,502
7. CAPITAL LEASE OBLIGATION
The following is the future minimum annual lease payments required under
the capital lease:
<TABLE>
<S> <C>
1997 $ 6,297
----------------------------------------------------------------------
Total minimum lease payments 6,297
Amount representing interest at 13.8% (213)
----------------------------------------------------------------------
Present value of imimum lease payments 6,084
Less current portion $ 6,084
----------------------------------------------------------------------
$ --
======================================================================
</TABLE>
10
<PAGE> 11
8. LONG-TERM DEBT
<TABLE>
<S> <C>
Term loan, bearing interest at Canadian bank prime
lending rate plus 1-1/4%, collateralized by a charge on
all fixed assets of the company. The loan is repayable
in monthly principal payments of $7,128 plus interest,
begining April 1, 1995, maturing March 1, 1998. $ 171,082
Mortgage payable, bearing interest at Canadian bank
prime lending rate plus 1-1/4%, collateralized by a
$1,466,400 demand debenture providing for a first charge
on all assets, the limited guarantee of Direct Steel to
a maximum of $329,940, and the guarantee of a
shareholder to a maximum of $219,960. The loan is
repayable in monthly principal payments of $7,699 to
January 1, 1997 and $8,432 to January 1, 1998, maturing
February 1, 1998. 824,117
Shareholder loan, bearing interest at 12%, payable
monthly, collateralized by a charge on the land and
building of 955404 Ontario. There are no fixed terms of
repayment for the principal, due Mav 1, 1996. 146,640
------------------------------------------------------------------------
1,141,839
Current portion 1,141,839
------------------------------------------------------------------------
$ --
========================================================================
</TABLE>
The term loan of 955404 Ontario and the $824,117 mortgage payable of
955404 Ontario contain restrictions concerning working capital, current
ratio, tangible net worth, interest coverage, capital expenditures, loans
to others and ownership changes. As of year end, the companies were in
default with respect to the working capital and current ratio, the
interest coverage ratio and the capital expenditures limit. Accordingly,
the lender has the right to demand payment of the amount due and
therefore, for purposes of these financial statements, it has been
classified as current.
9. SHARE CAPITAL
Authorized
Direct Steel
Unlimited number of Class A common shares
Unlimited number of Class B common shares
955404 Ontario
Unlimited number of common shares
11
<PAGE> 12
9. SHARE CAPITAL (CONTINUED)
<TABLE>
<S> <C>
Issued
Direct Steel
100 Class B common shares $ 1
955404 Ontario
100 common shares 73
-----------------------------------------------------------------------
$ 74
=======================================================================
</TABLE>
10. COMMITMENTS
The minimum future lease commitments under existing operating leases are:
1997 $ 179,685
1998 9,596
----------
$ 189,281
==========
11. RELATED PARTY TRANSACTIONS
Starting in fiscal 1995, Direct Steel purchased the majority of its raw
material and related costs from third parties through its 50% corporate
shareholder under a cost sharing arrangement. Accounts payable includes
a balance of $6,901,952 owing to 50% corporate shareholder.
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<PAGE> 13
12. INCOME TAXES
The Companies follow the tax allocation method of accounting for income
taxes. Under this method, timing differences between reported and taxable
income, principally permanent timing differences, resulted in no deferred
taxes. This method did not result in material differences from generally
accepted accounting principles in the United States for the year ended
March 31, 1996.
The difference between the Canadian statutory rate of approximately 39%
and the effective tax rate is due to permanent timing differences and the
operating loss of 955404 Ontario Inc.
955404 Ontario Inc. has losses of $110,674 available to reduce future
taxable income. These losses expire as follows:
2000 $ 76,927
2001 11,612
2002 22,135
----------
$ 110,674
==========
These loss carry forwards have not been recognized in these financial
statements as it is more likely than not that these benefits will not be
realized.
13. SUBSEQUENT EVENT
Effective June 18, 1996, the 50% shareholder of the Companies, Cold Metal
Products Company, Ltd. (CMP), acquired the remaining outstanding shares of
the Companies to become 100% shareholder. CMP subsequently amalgamated the
businesses into one company which CMP will continue to operate as a
subsidiary, accounting for the transaction as a purchase with results
consolidated in its fiscal 1997 financial statements from the effective
date of the acquisition.
13
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Exhibit 99.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
No. 33-82818 and No. 33-82992 of Cold Metal Products, Inc. on Form S-8 of
our report dated June 24, 1996 on the combined financial statements of
Direct Steel Inc. and 955404 Ontario Inc. for the year ended March 31,
1996 appearing in this Report on Form 8-K of Cold Metal Products, Inc.
/s/ Deloitte & Touche
---------------------
Chartered Accountants
Hamilton, Ontario Canada
August 27, 1996
14
