SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL QUARTER ENDED JANUARY 2, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-7537
EARLE M. JORGENSEN COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-0886610
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3050 EAST BIRCH STREET, BREA, CALIFORNIA 92821
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number: (714) 579-8823
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. NONE
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Outstanding common stock, par value $.01 per share, at
January 31, 2001 - 128 SHARES
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EARLE M. JORGENSEN COMPANY
TABLE OF CONTENTS
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets at January 2, 2001 (unaudited) and 2
March 31, 2000
Consolidated Statements of Income and Comprehensive Income for
the Three Months and Nine Months Ended January 2, 2001 and
January 4, 2000 (unaudited) 3
Consolidated Statements of Cash Flows for the Nine Months Ended
January 2, 2001 and January 4, 2000 (unaudited) 4
Condensed Notes to Consolidated Financial Statements 5
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 6
PART II - OTHER INFORMATION 10
SIGNATURES 11
1
PART I - FINANCIAL INFORMATION
EARLE M. JORGENSEN COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
JANUARY 2, MARCH 31,
2001 2000
--------- ---------
(UNAUDITED)
ASSETS
Current assets:
Cash $ 18,532 $ 21,660
Accounts receivable, less allowance for doubtful accounts of $525
and $416 at January 2, 2001 and March 31, 2000, respectively 107,860 108,247
Inventories 243,824 205,016
Other current assets 8,746 5,622
--------- ---------
Total current assets 378,962 340,545
--------- ---------
Property, plant and equipment, net of accumulated depreciation of $62,686
and $56,651 at January 2, 2001 and March 31, 2000, respectively 96,709 95,041
Net cash surrender value of life insurance policies 21,981 22,894
Debt issue costs, net of accumulated amortization 3,662 4,773
Other assets 708 1,121
--------- ---------
Total assets $ 502,022 $ 464,374
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 85,547 $ 119,499
Accrued employee compensation and related taxes 10,427 12,411
Accrued interest 6,947 7,031
Accrued employee benefits 10,090 8,927
Other accrued liabilities 5,581 5,939
Deferred income taxes 18,986 18,986
Current portion of long-term debt 3,451 2,604
--------- ---------
Total current liabilities 141,029 175,397
--------- ---------
Long term debt 342,772 282,943
Deferred income taxes 17,448 16,400
Other long-term liabilities 3,576 3,999
Commitments and contingencies
Stockholder's equity:
Preferred stock, $.01 par value; 200 shares authorized and unissued -- --
Common stock, $.01 par value; 2,800 shares authorized; 128 shares issued
and outstanding -- --
Capital in excess of par value 86,552 91,348
Accumulated other comprehensive loss
(1,132) (763)
Accumulated deficit (88,223) (104,950)
--------- ---------
Total stockholder's equity (2,803) (14,365)
--------- ---------
Total liabilities and stockholder's equity $ 502,022 $ 464,374
========= =========
SEE ACCOMPANYING NOTES.
2
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- -----------------------
JANUARY 2, JANUARY 4, JANUARY 2, JANUARY 4,
2001 2000 2001 2000
--------- --------- --------- ---------
Revenues $ 259,507 $ 229,161 $ 788,758 $ 669,441
Cost of sales 187,500 162,633 569,085 474,199
--------- --------- --------- ---------
Gross profit 72,007 66,528 219,673 195,242
Expenses:
Warehouse and delivery 34,948 30,599 102,257 89,825
Selling 8,386 8,252 27,500 24,597
General and administrative 12,420 14,651 37,752 39,327
--------- --------- --------- ---------
Total expenses 55,754 53,502 167,509 153,749
--------- --------- --------- ---------
Income from operations 16,253 13,026 52,164 41,493
Interest expense, net 12,409 11,251 34,382 31,367
--------- --------- --------- ---------
Income before income taxes 3,844 1,775 17,782 10,126
Income tax expense 246 225 1,055 827
--------- --------- --------- ---------
Net income 3,598 1,550 16,727 9,299
Other comprehensive income (loss), net of
income tax 73 28 (369) 75
--------- --------- --------- ---------
Comprehensive income $ 3,671 $ 1,578 $ 16,358 $ 9,374
========= ========= ========= =========
SEE ACCOMPANYING NOTES.
3
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
NINE MONTHS ENDED
-------------------------
JANUARY 2, January 4,
2001 2000
---------- ----------
OPERATING ACTIVITIES
Net income $ 16,727 $ 9,299
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 8,213 7,418
Amortization of debt issue costs and discount on senior notes 1,111 1,111
Accrued postretirement benefits -- 360
ESOP contribution 2,485 1,954
Deferred income taxes 1,069 556
Loss on sale of property, plant and equipment 132 2,291
Provision for bad debts 1,130 886
Increase in cash surrender value of life insurance 1,384 2,640
Changes in assets and liabilities:
Accounts receivable (743) (5,614)
Inventories (38,808) (25,890)
Accounts payable and accrued liabilities and expenses (37,720) (3,503)
Non-trade receivable (1,247) (2,174)
Other (2,230) (1,019)
-------- --------
Net cash used in operating activities (48,497) (11,685)
-------- --------
INVESTING ACTIVITIES
Additions to property, plant and equipment (10,051) (5,521)
Proceeds from the sale of property, plant and equipment 16 6,765
Premiums paid on life insurance policies (1,144) (1,881)
Proceeds from redemption of life insurance policies 673 --
-------- --------
Net cash used in investing activities (10,506) (637)
-------- --------
FINANCING ACTIVITIES
Net borrowings under revolving loan agreements 62,826 22,490
Payments on other debt (2,150) (1,250)
Cash dividend to parent (4,795) (12,876)
-------- --------
Net cash provided by financing activities 55,881 8,364
-------- --------
Effect of exchange rate changes on cash (6) 35
-------- --------
NET DECREASE IN CASH (3,128) (3,923)
Cash at beginning of period 21,660 17,860
-------- --------
CASH AT END OF PERIOD $ 18,532 $ 13,937
======== ========
SEE ACCOMPANYING NOTES.
4
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2001
1. BASIS OF PRESENTATION
The Earle M. Jorgensen Company (the "Company") is a wholly owned subsidiary
of the Earle M. Jorgensen Holding Company, Inc. ("Holding").
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries including
Earle M. Jorgensen (Canada) Inc. and Stainless Insurance Ltd., a captive
insurance subsidiary. All significant intercompany accounts and
transactions have been eliminated.
In the opinion of management, the accompanying unaudited consolidated
financial statements and related condensed notes have been prepared in
accordance with the instructions to Form 10-Q and include all adjustments
(consisting of normal recurring accruals) and disclosures considered
necessary for a fair presentation of the consolidated financial position of
the Earle M. Jorgensen Company at January 2, 2001, the consolidated results
of income and comprehensive income for the three months and nine months
ended January 2, 2001 and January 4, 2000, and consolidated cash flows for
the nine months ended January 2, 2001 and January 4, 2000. The consolidated
results of income and comprehensive income for the three months and nine
months ended January 2, 2001 are not necessarily indicative of the results
to be expected for the full year. For further information, refer to the
consolidated financial statements and footnotes included in the Company's
Annual Report on Form 10-K for the year ended March 31, 2000.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
2. COMPREHENSIVE INCOME
Comprehensive income (loss) included foreign currency translation
adjustments of $73,000 and $28,000 for the comparative three months and
($369,000) and $75,000 for the comparative nine months ended January 2,
2001 and January 4, 2000, respectively.
5
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: NINE MONTHS ENDED JANUARY 2, 2001 COMPARED TO NINE MONTHS
ENDED JANUARY 4, 2000.
REVENUE. Revenues for the first nine months of fiscal 2001 were $788.8 million,
compared to $669.4 million for the same period in fiscal 2000. Revenues from our
domestic operations increased $115.8 million (18.0%) to $758.7 million in the
first nine months of fiscal 2001 when compared to $642.9 million for the same
period in fiscal 2000. This increase resulted from an 18% increase in tonnage
shipped attributable to strong demand of our core products throughout key
industries we serve. Revenues from our Canadian operations increased $3.5
million (13.2%) to $30.1 million in the first nine months of fiscal 2001 when
compared to $26.6 million for the same period in fiscal 2000 as the result of
strong local economic conditions and expansion into new markets.
GROSS PROFIT. Gross profit for first nine months of fiscal 2001 was $219.7
million, compared to $195.2 million for the same period in fiscal 2000.
Consolidated gross margin for the first nine months of fiscal 2001 decreased to
27.9% when compared to 29.2% for the same period in fiscal 2000. Gross profit
for the fiscal 2001 period included a LIFO credit of $0.1 million compared to a
corresponding LIFO credit of $4.1 million in the fiscal 2000 period. Gross
profit from our Canadian operations was $7.1 million and gross margin was 23.6%
during the first nine months of fiscal 2001, compared to $6.1 million and 22.9%,
respectively, for the same period in fiscal 2000. Exclusive of Canadian
operations and LIFO adjustments, our gross margin was 28.0% for the first nine
months of fiscal 2001 compared to 28.8% for the same period in fiscal 2000.
EXPENSES. Total operating expenses for the first nine months of fiscal 2001 were
$167.5 million (21.2% of revenues), compared to $153.7 million (23.0% of
revenues) for the same period in fiscal 2000. Excluding losses from the sale of
fixed assets, our operating expenses were $167.4 million during the first nine
months of fiscal 2001, compared to $151.4 million for the same period in fiscal
2000. The higher operating expenses generally reflect variable expenses incurred
to support increased tonnage shipped and costs associated with new or expanded
facilities.
Warehouse and delivery expenses for the first nine months of fiscal 2001 were
$102.3 million (13.0% of revenues), compared to $89.8 million (13.4% of
revenues) for the same period in fiscal 2000. The fiscal 2001 period included
higher compensation, lease, fuel, maintenance, tooling and supplies expenses
resulting from increased tonnage shipped and new or expanded facilities. As
of January 2, 2001, 1,260 employees were involved in warehouse and delivery
activities, compared to 1,135 as of January 4, 2000.
Selling expenses for the first nine months of fiscal 2001 were $27.5 million
(3.5% of revenues), compared to $24.6 million (3.7% of revenues) for the same
period in fiscal 2000. The fiscal 2001 period included higher accruals for
incentive compensation based on revenue and gross profit levels.
General and administrative expenses for the first nine months of fiscal 2001,
excluding losses from the sale of fixed assets, were $37.6 million (4.8% of
revenues), compared to $37.0 million (5.5% of revenues) for the same period
in fiscal 2000. The fiscal 2001 period included higher accruals for
management incentives and lower purchase discounts offset by higher income
recognized in connection with life insurance policies. Losses from the sale
of fixed assets totaled $0.1 million and $2.3 million during the fiscal 2001
and 2000 periods, respectively.
NET INTEREST EXPENSE. Net interest expense was $34.4 million for the first nine
months of fiscal 2001 compared to $31.4 million in the same period in fiscal
2000. Such amounts include interest and amortization of debt issue costs related
to our revolving credit facility ("Revolving Credit Facility"), our 9-1/2%
senior notes ("Senior Notes"), our variable rate term loan ("Term Loan") and
interest on borrowings against the cash surrender value of certain life
insurance policies we maintain.
6
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS: NINE MONTHS ENDED JANUARY 2, 2001 COMPARED TO NINE MONTHS
ENDED JANUARY 4, 2000. (CONTINUED)
Interest expense and amortization of debt issue costs related to the our
outstanding indebtedness (excluding those borrowings against the cash surrender
value of certain life insurance policies) totaled $23.9 million for the first
nine months of fiscal 2001 compared to $22.2 million for the same period in
fiscal 2000. The average outstanding indebtedness during the fiscal 2001 period
was $328.0 million, compared to $314.8 million for the same period in fiscal
2000. The weighted-average interest rate on such indebtedness was 9.21% during
the first nine months of fiscal 2001 versus 8.40% during the same period in
fiscal 2000. During the nine months ended January 2, 2001 and January 4, 2000,
borrowings under the Revolving Credit Facility averaged $114.3 million and $99.0
million and the average interest rate on such borrowings was 8.63% and 7.22%,
respectively. Interest expense on borrowings against the cash surrender value of
certain life insurance policies maintained was $10.5 million for the first nine
months of fiscal 2001 period compared to $9.2 million for the same period in
fiscal 2000.
The interest rates on our 9 1/2% Senior Notes and on the borrowings under the
life insurance policies are fixed at 9.50% and 11.76%, respectively. The
interest rates on our Revolving Credit Facility and Term Loan are floating
(8.77% and 9.94%, respectively, as of January 2, 2001).
Pursuant to our interest rate swap agreement with Bankers Trust Company covering
a notional amount of $95.0 million under the Term Loan, we received $0.5 million
during the first nine months of fiscal 2001 versus paying $0.4 million in
interest during the same period in fiscal 2000.
INCOME TAXES. Income tax expense for the first nine months of fiscal 2001 and
2000 included provisions for state and foreign income taxes. Federal tax
provisions for the first nine months of fiscal 2001 and 2000 were offset by
recognition of tax benefits associated with our loss carryforwards.
7
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS: THREE MONTHS ENDED JANUARY 2, 2001 COMPARED TO THREE
MONTHS ENDED JANUARY 4, 2000.
REVENUE. Revenues for the third quarter of fiscal 2001 were $259.5 million,
compared to $229.2 million for the same period in fiscal 2000. Revenues from
our domestic operations increased $29.8 million (13.6%) to $249.4 million in
the third quarter of fiscal 2001 when compared to $219.6 million for the same
period in fiscal 2000. This increase resulted from a 10% increase in tonnage
shipped and was attributable to strong demand of our core products throughout
key industries we serve. Revenue from our Canadian operations increased $0.5
million to $10.1 million (5.2%) in the third quarter of fiscal 2001 when
compared to $9.6 million in the same period in fiscal 2000 as the result of
strong local economic conditions.
GROSS PROFIT. Gross profit for the third quarter of fiscal 2001 was $72.0
million, compared to $66.5 million for the same period in fiscal 2000, while
consolidated gross margins were 27.7% and 29.0%, respectively. Gross profit for
the fiscal 2001 period included a LIFO charge of $0.1 million compared to a
corresponding LIFO credit of $1.6 million in the fiscal 2000 period. Gross
profit from our Canadian operations was $2.3 million and gross margin was 22.8%
during the third quarter of fiscal 2001, compared to $2.1 million and 21.9%,
respectively, for the same period in fiscal 2000. Exclusive of our Canadian
operations and LIFO adjustments, gross margin decreased to 27.9% for the third
quarter of fiscal 2001 when compared to 28.8% for the same period in fiscal 2000
due to changes in product mix and weaker prices.
EXPENSES. Total operating expenses for the third quarter of fiscal 2001 were
$55.8 million (21.5% of revenues), compared to $53.5 million (23.3% of revenues)
for the same period in fiscal 2000. Excluding losses from the sale of fixed
assets, our operating expenses were $55.7 million during the third quarter of
fiscal 2001, compared to $51.3 million for the same period in fiscal 2000. The
higher operating expenses generally reflect variable expenses incurred to
support increased tonnage shipped and costs associated with new or expanded
facilities.
Warehouse and delivery expenses for the third quarter of fiscal 2001 were $34.9
million (13.4% of revenues), compared to $30.6 million (13.4% of revenues) for
the same period in fiscal 2000. The fiscal 2001 period included higher
compensation, lease, fuel, tooling, maintenance and supplies expenses resulting
from increased tonnage shipped and new or expanded facilities.
Selling expenses for the third quarter of fiscal 2001 were $8.4 million (3.2% of
revenues), compared to $8.3 million (3.6% of revenues) for the same period in
fiscal 2000.
General and administrative expenses, excluding losses from sale of fixed
assets, were $12.3 million (4.7% of revenues) during the third quarter of
2001 compared to $12.5 million (5.5% of revenues) for the same period in
fiscal 2000. The fiscal 2001 period included higher income recognized in
connection with life insurance policies and lower network communication and
professional services expenses offset by higher accruals for management
incentives and lower purchase discounts. Losses from the sale of fixed assets
totaled $0.1 million and $2.2 million during the third quarter of fiscal 2001
and 2000, respectively.
NET INTEREST EXPENSE. Net interest expense was $12.4 million for the third
quarter of fiscal 2001 compared to $11.3 million in the same period in fiscal
2000. Such amounts include interest and amortization of debt issue costs related
to our Revolving Credit Facility, our Senior Notes, our Term Loan and interest
on borrowings against the cash surrender value of certain life insurance
policies we maintain.
Interest expense and amortization of debt issue costs related to the our
outstanding indebtedness (excluding those borrowings against the cash surrender
value of certain life insurance policies) totaled $8.8 million for the third
quarter of fiscal 2001 compared to $8.0 million for the same period in fiscal
2000. The average outstanding indebtedness during the third quarter of fiscal
2001 was $347.9 million, compared to $320.0 million for the same period in
fiscal 2000. The weighted average interest rate on such indebtedness was 9.26%
during the third quarter of fiscal 2001 versus 8.91% during the same period in
fiscal 2000. During the three months ended January 2, 2001 and January 4, 2000,
borrowings under the Revolving Credit Facility averaged $135.1 million and
$104.7 million and the average interest rate on such borrowings was 8.80% and
7.55%, respectively.
8
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: THREE MONTHS ENDED JANUARY 2, 2001 COMPARED TO THREE
MONTHS ENDED JANUARY 4, 2000. (CONTINUED)
Interest expense on borrowings against the cash surrender value of certain life
insurance policies maintained was $3.6 million during the third quarter of
fiscal 2001 period compared to $3.2 million for the same period in fiscal 2000.
Pursuant to our interest rate swap agreement, we received $0.2 million from
Bankers Trust Company during the three months ended January 2, 2001, versus
paying Bankers Trust Company $0.1 million for the same period in fiscal 2000.
INCOME TAXES. Income tax expense for the third quarter of fiscal 2001 and
2000 included provisions for state and foreign income taxes. Federal tax
provisions for the third quarter of fiscal 2001 and 2000 were offset by
recognition of tax benefits associated with our loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased to $237.9 million at January 2, 2001 from $165.1
million at March 31, 2000 primarily as the result of higher inventories. Our
primary cash flows during the first nine months of fiscal 2001 consisted of
funds provided by borrowings under our Revolving Credit Facility totalling $62.8
million, while the primary uses of cash consisted of: (i) cash used in
operations, $48.5 million; (ii) capital expenditures, $10.1 million; and (iii)
dividends to Holding, $4.8 million.
Cash used in operating activities was $48.5 million during the first nine
months of fiscal 2001 compared to $11.7 million for the same period of fiscal
2000. The increase primarily resulted from maintaining higher levels of
inventory in respect to higher revenues and the timing of payments to vendors.
For fiscal 2001, we have planned approximately $14.0 million of capital
expenditures to be financed from internally generated funds. Approximately $11.3
million is for routine replacement of machinery and equipment and facility
improvements and expansions, and $2.7 million is for further additions to our
management information systems. During the first nine months of fiscal 2001, we
spent $10.1 million for planned capital expenditures.
During the first nine months of fiscal 2001, we redeemed $4.8 million of our
capital stock from retiring and terminated employees, as required by the terms
of our ESOP and by Holding's Stockholders' Agreement. We expect that such
redemptions for fiscal 2001 will be lower than those paid in fiscal 2000,
although the amount or timing of such expenditures is not within our control and
there can be no assurance in this regard.
Our cash requirements for debt service and related obligations through the end
of fiscal 2001 are expected to consist primarily of interest payments under the
Revolving Credit Facility, interest and principal payments on the Term Loan,
interest payments on the 9 1/2% Senior Notes, dividend payments to Holding in
connection with the required repurchase of its capital stock from departing
stockholders pursuant to Holding's Stockholders' Agreement and the ESOP, capital
expenditures and principal and interest payments on our industrial revenue
bonds. As of January 2, 2001, principal payments required by our outstanding
industrial revenue bond indebtedness amount to $1.4 million in fiscal years 2002
through 2004 and $6.2 million in the aggregate thereafter through 2010. We will
not be required to make any principal payments on our Senior Notes until 2005.
Our Revolving Credit Facility will mature in 2003 and our Term Loan will mature
in 2004. The Term Loan requires principal payments to be made in equal quarterly
installments of $250,000. The final installment due at maturity will repay in
full all outstanding principal. As of January 2, 2001, we were in compliance
with all covenants under the Revolving Credit Facility, the Term Loan and the
Senior Notes. Although compliance with such covenants in the future is largely
dependent on our future performance and general economic conditions, for which
there can be no assurance, we expect to be in compliance with all of our debt
covenants for the foreseeable future.
9
PART I - FINANCIAL INFORMATION (CONTINUED)
EARLE M. JORGENSEN COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (continued)
At January 2, 2001, our primary sources of liquidity were available borrowings
of $76.1 million under the Revolving Credit Facility, available borrowings of
approximately $2.6 million against certain life insurance policies and
internally generated funds. Borrowings under our Revolving Credit Facility are
secured by domestic inventory and accounts receivable, and future availability
is determined by prevailing levels of those assets. Our Term Loan is secured by
a first priority lien on a substantial portion of current and future acquired
unencumbered property, plant and equipment. The life insurance policy loans are
secured by the cash surrender value of the policies, are non-recourse, and bear
interest at a rate 0.5% greater than the dividend income rate on the policies.
For the first nine months of fiscal 2001, dividend income earned under the
policies totaled $10.1 million, compared to $8.9 million for the same period in
fiscal 2000 and is reported as an offset to general and administrative expenses
in the accompanying statements of operations. As of January 2, 2001, there was
approximately $22.0 million of cash surrender value in the life insurance
policies we maintain, net of borrowings.
We believe our sources of liquidity and capital resources are sufficient to meet
all currently anticipated operating cash requirements, including debt service
payments on the Revolving Credit Facility, the Term Loan and the Senior Notes
prior to their maturities in 2003, 2004 and 2005, respectively; however, we
anticipate that it will be necessary to replace or to refinance all or a portion
of the Revolving Credit Facility, the Term Loan and the Senior Notes prior to
their respective maturities, although there can be no assurance on what terms,
if any, we would be able to obtain such refinancing or additional financing. Our
ability to make interest payments on the Revolving Credit Facility and the
Senior Notes and principal and interest payments on the Term Loan will be
dependent on maintaining the level of performance reflected in the last twelve
months, which will be dependent on a number of factors, many of which are beyond
our control, and the continued availability of revolving credit borrowings.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
None.
(b) REPORTS ON FORM 8-K
The Registrant was not required to file a Form 8-K during the
quarter ended January 2, 2001.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EARLE M. JORGENSEN COMPANY
/s/ Maurice S. Nelson, Jr.
--------------------------
Date: February 12, 2001 Maurice S. Nelson, Jr.
President, Chief Executive Officer
/s/ William S. Johnson
--------------------------
Date: February 12, 2001 William S. Johnson
Vice President, Chief Financial Officer
and Secretary (Principal Financial and
Accounting Officer)
11