Exhibit 99.5
GLOBAL MATERIALS
SERVICES LLC AND
SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<Table>
<Caption>
Page
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Report of Independent Accountants 1
Consolidated Statements of Financial Position
as of December 31, 2001 and 2000 2
Consolidated Statements of Income
for the years ended December 31, 2001 and 2000 3
Consolidated Statements Of Changes In Members' Equity
and Comprehensive Income for the years ended
December 31, 2001 and 2000 4
Consolidated Statements of Cash Flows for the
years ended December 31, 2001 and 2000 5
Notes To Consolidated Financial Statements
December 31, 2001 And 2000 6-16
</Table>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of Global Materials Services LLC
(formerly Mid-South Terminal Company)
In our opinion, based on our audits and the report of other auditors, the
accompanying consolidated statements of financial position and the related
consolidated statements of income, changes in members' equity and comprehensive
income, and cash flows present fairly, in all material respects, the financial
position of Global Materials Services LLC (the Company) and its subsidiaries at
December 31, 2001 and December 31, 2000, and the results of their operations and
their cash flows for the years then ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Arrow Terminals BV,
Vlissingen (Arrow BV), a wholly-owned subsidiary, which statements reflect total
assets of 1 percent and 8 percent of the related consolidated totals as of
December 31, 2001 and December 31, 2000, and total revenues of 7 percent and 6
percent of the related consolidated totals for the years then ended. Those
statements were audited by other auditors whose report thereon has been
furnished to us, and our opinion expressed herein, insofar as it relates to the
amounts included for Arrow BV, is based solely on the report of the other
auditors. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Memphis, Tennessee
February 13, 2002
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2001 AND 2000
2001 2000
----------------- ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 820,661 $ 634,168
Accounts receivable, net of allowance for doubtful accounts
of $328,000 in 2001 and $175,000 in 2000 5,987,424 5,799,259
Other current assets 2,648,110 2,607,131
Deferred income taxes 165,782 79,404
Due from affiliate 524,487 -
----------------- ------------------
Total current assets 10,146,464 9,119,962
Property and equipment, net 38,197,956 32,393,540
Other assets:
Investment in joint ventures 598,920 373,119
Favorable leaseholds, net 3,369,363 3,499,611
Goodwill, net 24,970,170 25,919,743
Deferred financing costs and other, net 589,403 572,571
----------------- ------------------
29,527,856 30,365,044
----------------- ------------------
Total assets $ 77,872,276 $ 71,878,546
================= ==================
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 4,600,388 $ 4,377,630
Current portion of capitalized lease obligation 279,069 297,232
Accounts payable 1,434,084 1,282,753
Accrued expenses 2,986,048 2,976,749
Interest rate swap liability - current 769,163 -
Due to member 74,818 -
Deferred revenue 361,298 500,402
----------------- ------------------
Total current liabilities 10,504,868 9,434,766
Long-term debt, net of current portion 41,168,251 39,702,671
Capitalized lease obligation, net of current portion 1,615,643 1,679,879
Interest rate swap liability 1,382,440 -
Deferred compensation 60,000 -
Deferred revenue, net of current portion 210,648 404,250
Deferred income taxes 1,922,882 2,004,930
----------------- ------------------
Total liabilities 56,864,732 53,226,496
Commitments and Contingencies (Note 9)
Members' equity 21,007,544 18,652,050
----------------- ------------------
Total liabilities and members' equity $ 77,872,276 $ 71,878,546
----------------- ------------------
The accompanying notes are an integral part
of these consolidated financial statements.
2
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
----------------- ------------------
Revenues:
Transfer and handling $23,324,975 $19,571,555
Storage and space rental 11,460,598 10,848,500
Materials processing 6,247,815 6,637,117
Equipment rental and contract labor 1,368,064 1,537,721
Other 4,197,460 7,254,874
----------------- ------------------
Total revenues 46,598,912 45,849,767
----------------- ------------------
COSTS AND EXPENSES:
Cost of sales and services 28,092,517 27,926,010
Selling, general and administrative 6,504,768 5,944,637
Depreciation and amortization 5,331,985 4,730,767
----------------- ------------------
Total costs and expenses 39,929,270 38,601,414
----------------- ------------------
Income from operations 6,669,642 7,248,353
----------------- ------------------
Other income and (expenses):
Interest income 27,343 37,204
Interest expense (4,384,325) (4,297,212)
Equity in earnings of joint ventures 163,383 198,525
Foreign exchange gain 14,102 30,938
Loss on disposal of equipment (28,764) (20,031)
Other 20,523 -
----------------- ------------------
Total other income and (expenses) (4,187,738) (4,050,576)
----------------- ------------------
Income before income taxes 2,481,904 3,197,777
Income taxes 71,118 771,889
----------------- ------------------
Net Income $ 2,410,786 $ 2,425,888
================= ==================
The accompanying notes are an integral part
of these consolidated financial statements.
3
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
MID-SOUTH AMERICAN
Terminal Commercial
Company, Terminals-Memphis, 399 Venture
LP LLC Partners, Inc. Total
------------ ------------ ------------ ------------
Balance, December 31, 1999 6,817,607 6,817,607 -- 13,635,214
Net income 1,212,944 1,212,944 -- 2,425,888
Currency translation adjustment (204,526) (204,526) -- (409,052)
------------ ------------ ------------ ------------
Total comprehensive income 1,008,418 1,008,418 -- 2,016,836
Contributions from members 1,500,000 1,500,000 -- 3,000,000
------------ ------------ ------------ ------------
Balance, December 31, 2000 9,326,025 9,326,025 -- 18,652,050
Transition adjustment for adoption of SFAS 133 (294,038) (329,639) (35,601) (659,278)
Net income 1,075,211 1,205,393 130,182 2,410,786
Currency translation adjustment (161,234) (180,756) (19,522) (361,512)
Net loss on interest rate swaps
designated as cash flow hedges, net of tax (639,788) (717,251) (77,463) (1,434,502)
------------ ------------ ------------ ------------
Total comprehensive loss (19,849) (22,253) (2,404) (44,506)
Contributions from members -- 1,200,000 1,200,000 2,400,000
------------ ------------ ------------ ------------
Balance, December 31, 2001 $ 9,306,176 $ 10,503,772 $ 1,197,596 $ 21,007,544
============ ============ ============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
4
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
-------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,410,786 $ 2,425,888
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,331,985 4,730,767
Provision for bad debts 158,180 99,785
Equity in earnings of joint ventures (163,383) (198,525)
Deferred income tax provision (110,180) 276,154
Loss on disposal of equipment 28,764 20,031
Deferred compensation 60,000 -
Other operating (20,523) -
Changes in:
Accounts receivable (385,088) 62,592
Other current assets (52,692) (525,769)
Due from affiliate (524,487) -
Accounts payable and accrued expenses 170,965 (541,896)
Deferred revenue (332,706) (23,529)
Due to member 74,818 -
-------------- ----------------
Net cash provided by operating activities 6,646,439 6,325,498
-------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,969,781) (1,149,846)
Proceeds from sales of equipment 85,085 5,225
Investment in joint venture (337,418) -
Purchase of terminal assets (7,261,239) -
Purchases of businesses, net of cash acquired - (9,007,459)
Distributions from joint venture 275,000 200,000
-------------- ----------------
Net cash used in investing activities (10,208,353) (9,952,080)
-------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 6,497,317 9,340,394
Principal payments on long-term debt and
capital lease obligations (4,699,026) (7,364,757)
Loan costs paid (185,000) (145,000)
Contributions from members 2,400,000 1,000,000
-------------- ----------------
Net cash (used in) provided by financing activities 4,013,291 2,830,637
-------------- ----------------
Effect of cash rate changes on cash (264,884) (51,086)
Increase (decrease) in cash and cash equivalents 186,493 (847,031)
Cash and cash equivalents:
Beginning of the year 634,168 1,481,199
-------------- ----------------
End of the year $ 820,661 $ 634,168
============== ================
The accompanying notes are an integral part
of these consolidated financial statements.
5
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Global Materials Services LLC (the "Company"), formerly Mid-South Terminal
Company, is a Tennessee Limited Liability Company. The purpose of the Company is
to own, lease and operate river, rail, truck, transfer and storage facilities.
The Company was formed through contributions from Mid-South Terminal Company,
L.P. ("MSTC LP") and American Commercial Terminals-Memphis, Inc. ("ACT"). ACT is
a wholly owned subsidiary of American Commercial Lines, LLC ("ACL").
On May 18, 2000, the Company purchased substantially all of the operating assets
of Hill Marine Enterprises, Inc. (subsequently renamed GMS of Decatur, Inc.) and
H&L, Inc. for approximately $11.7 million. The purchase was funded by a
$1,137,530 note payable to the former owner and external borrowings.
The components of the net assets purchased were as follows:
Current assets $ 2,544,834
Property and equipment 1,950,680
Goodwill 9,106,549
Current liabilities (567,036)
Other liabilities (734,000)
Deferred taxes (626,383)
-----------
$11,674,644
===========
On May 25, 2001, the Company entered into an agreement to purchase substantially
of all of the terminals of ACT (subsequently renamed Global American Terminals
LLC) from ACL for approximately $8,000,000, including transaction costs. The
purchase was funded through a $1,200,000 contribution from ACL, a $1,200,000
contribution by 399 Venture Partners, Inc. for a 5.4% interest in the Company
and $5,620,523 in external borrowings.
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Global Materials Services LLC and its wholly-owned subsidiaries, River Terminal
Properties, L.P., Global American Terminals LLC, GMS of Decatur, Inc., H&L,
Inc., Arrow Terminals L.P., Arrow Terminals B.V., Arrow Terminal Holdings, Inc.,
Tajon Holdings, Inc., Arrow Terminals Canada Company, and Arrow Terminals Canada
B.V. All significant intercompany balances and transactions have been eliminated
in consolidation.
CASH AND CASH EQUIVALENTS
Temporary investments with an original maturity of three months or less are
treated as cash equivalents and are stated at historical cost, which
approximates fair value.
6
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
REVENUE RECOGNITION
The Company recognizes revenue for transfer and handling and for material
processing activity when the service is complete. The Company recognizes revenue
for storage and space rental and for equipment rental and contract labor when it
is due from customers.
INVESTMENT IN JOINT VENTURES
The Company and Builders Transportation Company ("Builders") operate a joint
venture that provides local trucking services, Mid-South Port Transportation,
LLC ("MSPT"). Profits and losses are allocated to the Company and Builders in
proportion to their respective ownership interests (each partner holds a 50%
interest). During 2001, the Company entered into a joint venture that provided
them a 33% ownership interest in Global Materials Services Venezuela C.A.
("GMSV"). GMSV is still in the start up phase and has not begun operations. The
Company accounts for these investments using the equity method of accounting.
FAVORABLE LEASEHOLDS
Assets contributed or acquired subject to favorable operating leases are
amortized over the life of related lease agreements. Accumulated amortization
was approximately $857,479 and $727,000 at December 31, 2001 and 2000,
respectively.
GOODWILL
Goodwill is the excess of the purchase price over the fair value of assets
acquired through acquisitions. Goodwill is amortized on a straight-line basis
over 30 years. Accumulated amortization totaled approximately $2,344,000 and
$1,358,000 at December 31, 2001 and 2000, respectively.
IMPAIRMENT
Long-lived assets, including goodwill, associated with assets acquired in a
purchase business combination, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If such assets are considered to be impaired, the impairment to
be recognized is measured as the amount by which the carrying value of the
assets exceeds the fair value of the assets.
DEFERRED FINANCING COSTS
Costs incurred in obtaining financing are deferred and amortized over the life
of the related debt. Accumulated amortization was approximately $409,000 and
$262,000 at December 31, 2001 and 2000, respectively.
7
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
DEFERRED COMPENSATION
Effective January 1, 2000, the Company's Members approved a long-term incentive
compensation plan (the "Plan"). The Plan provides for incentive compensation
equal to 5.0% of the increase in enterprise value, as defined in the Plan, to be
allocated to key executives of the Company at the percentages stated in the
Plan. Vesting occurs over five years, with 33.3% of the benefit accruing to
participants at the end of each of years 3, 4, and 5. Participants will receive
payments of their vested benefit in seven equal annual installments beginning
May 1 following the year of the participant's termination of employment with the
Company. Interest will accrue on the unpaid balances at the rate stated in the
Plan to be paid ten days following each quarter.
INCOME TAXES
Certain of the Company's subsidiaries are corporations and therefore are subject
to income taxes. Deferred income taxes are recorded to reflect the tax effect of
temporary differences between the tax basis of assets and liabilities and their
reported amounts in the financial statements.
FINANCIAL INSTRUMENTS
The Company has certain financial instruments, which include cash and cash
equivalents, accounts receivable and accounts payable. The carrying amounts of
these financial instruments approximate their fair value.
CONCENTRATION OF CREDIT RISK
Accounts receivable as of December 31, 2001 and 2000 are primarily (74% and 84%)
concentrated with customers in the metals industry. Credit is extended based
upon an evaluation of the customer's financial condition, and generally,
collateral is not required; however, the Company maintains a warehousing lien on
most customer inventory.
The Company recognized revenue of approximately $4,621,000 and $4,591,000 in
2001 and 2000, respectively, on services provided to one customer.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
8
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
COMPREHENSIVE INCOME
Accumulated other comprehensive loss consists of the following at December 31,
2001 and 2000:
2001 2000
---------------- ---------------
Transition adjustment for adoption of SFAS 133 $ (659,278) $ -
Cumulative translation adjustment (1,444,997) (1,083,485)
Net loss on interest rate swaps
designated as cash flows hedges, net of tax (1,434,502) -
---------------- ---------------
$ (3,538,777) $ (1,083,485)
================ ===============
RECLASSIFICATIONS
Certain reclassifications have been made to the 2000 financial statements to
conform to the 2001 presentation with no effect on previously reported net
income, assets, liabilities or members' equity.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment are stated at historical cost, net of accumulated
depreciation. Depreciation is computed using the straight-line method over the
estimated useful lives. Leasehold improvements are depreciated over the lesser
of the lease term or estimated useful lives. Normal repairs and maintenance
costs are expensed; major expenditures which extend the estimated useful lives
of the assets are capitalized. Property and equipment consisted of the following
at December 31, 2001 and 2000:
USEFUL LIVES 2001 2000
------------------- ----------------- -----------------
Land $ 4,269,779 $ 2,718,599
Buildings 10-40 years 21,441,053 19,121,918
Machinery and equipment 1-20 years 18,395,629 15,148,376
Leasehold improvements 7-20 years 4,522,900 3,698,599
Furniture, fixtures and automobiles 5 years 1,994,466 1,109,405
Construction in progress 1,325,461 550,446
----------------- -----------------
51,949,288 42,347,343
Less accumulated depreciation (13,751,332) (9,953,803)
----------------- -----------------
Property and equipment, net $ 38,197,956 $32,393,540
================= =================
9
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 and 2000
- --------------------------------------------------------------------------------
NOTE 3 -- DEBT
Long-term debt consisted of the following as of December 31, 2001 and 2000:
2001 2000
----------------- ------------------
Bonds payable:
Series 1990A and 1990B Illinois Development Finance Authority Adjustable
Rate Industrial Development Revenue Bonds, interest payable quarterly at
the BMA municipal swap index (1.61% and 4.84% at December 31, 2001 and
2000, respectively), principal due January 1, 2010, collateralized by
first mortgage on assets of the Chicago operation and third mortgage on
assets of the Pennsylvania operation. $ 5,325,000 $ 5,325,000
Note payable to Warehouse Plus:
Note bears interest at 8.5%, interest and principal amounts due monthly in
the amount of $2,281 commencing January 1, 2000 and continuing to maturity
at December 1, 2010, collateralized by a mortgage on land. 157,735 171,082
Notes payable to bank:
Interest due monthly at LIBOR plus a percentage ranging from 2.0% to 3.25%
based on the Company's performance (weighted average interest of 7.68% and
9.21% during 2001 and 2000, respectively) payable quarterly in escalating
amounts until maturity at May 1, 2005, collateralized by all assets of
the Company. 38,052,375 36,702,375
Revolving Credit Facility:
$6,000,000 revolving line of credit, interest on used and unused
portion due monthly at the prime rate plus 1.25% (6.09% and 10.75% at
December 31, 2001 and 2000, respectively), continuing until May 1, 1,397,066 744,314
2005, collateralized by all assets of the Company.
Note payable to third-party:
Interest due monthly at 8.5%, principal of $114,284 payable annually
beginning May 18, 2001 and escalating $114,284 per year with all remaining
principal due at maturity on May 18, 2004. 836,463 1,137,530
----------------- ------------------
Total long-term debt 45,768,639 44,080,301
Less current portion (4,600,388) (4,377,630)
----------------- ------------------
Total long-term debt, net of current portion $ 41,168,251 $ 39,702,671
================= ==================
10
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
The scheduled annual maturities of bonds and notes payable subsequent to 2001
are as follows:
YEAR AMOUNT
- ---- ------------------
2002 $ 4,600,388
2003 5,094,603
2004 5,589,014
2005 25,068,169
2006 20,384
Thereafter 5,396,081
------------------
$45,768,639
------------------
The notes payable to the bank cause the Company to be subject to certain
financial covenants, the most restrictive of which requires the Company to
maintain minimum levels of tangible net worth and certain financial ratios. The
Company was in compliance with all debt covenants at December 31, 2001.
NOTE 4 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During 2001, 2000 and 1999, the Company paid $4,492,650, $4,354,400 and
$2,991,000 in interest expense, respectively. During 2001, the Company paid
$152,950 for income taxes. During 2000, the Company paid $1,490,000 for income
taxes relating to the 1999 and 2000 tax years. These tax payments were
associated with taxes payable on the Hill Marine Enterprises, Inc. acquisition,
taxable income at Tajon Holdings, Inc., Arrow Terminals Holdings, Inc., Arrow
Terminals L.P., Global Materials Services LLC, Arrow Terminals Canada Company,
and Arrow Terminals B.V.
Also, during 2000, the Company charged the deferred compensation balance of
$240,000 against goodwill related to the Arrow acquisition since these amounts
are to be paid out of an escrow account and the Company converted $2,000,000 of
notes payable to members' equity.
NOTE 5 - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
RISKS
Credit risk represents the maximum potential loss due to possible
non-performance by counterparties under the terms of the contracts. The Company
manages credit risk by entering into financial instrument transactions with
approved counterparties to limit potential exposure. Credit risk may occur when
there is a gain in the fair value of the financial instrument and the
counterparty fails to perform according to the terms of the contract and/or when
the collateral proves to be of insufficient value.
Market risk is the possibility that future changes in markets or prices might
decrease the value of the Company's position. The measurement of market risk
associated with financial instruments is meaningful only when all related and
offsetting on and off-balance sheet hedges or positions are aggregated, and the
resulting net positions are identified.
11
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
INTEREST RATE SWAP AGREEMENTS
The Company has certain interest rate swap agreements, which are hedge
instruments accounted for under Statement of Financial Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," adopted by the
Company on January 1, 2001. SFAS No. 133, as amended, requires the recognition
of all derivative instruments on the balance sheet at fair value. The Company's
interest rate swap agreements have been designated as cash-flow hedges used to
convert a portion of the Company's variable-rate bank debt to fixed rates and
thereby minimize earnings fluctuations caused by interest rate volatility.
Changes in fair vale of interest-rate swaps are recorded in other comprehensive
loss, until earnings are affected by the variability of actual cash flows. The
Company has four interest rate swaps with a total notional amount of $35,625,869
at December 31, 2001. As of December 31, 2001, deferred losses on interest rate
swaps, net of $57,823 in deferred taxes, totaled $2,093,780 and were included in
other comprehensive loss. At the end of 2001, amounts to be included in the
statement of income within the next twelve months associated with the provisions
of SFAS No. 133 are not expected to be material.
NOTE 6 - CAPITALIZED LEASE OBLIGATION
The Company leases its Memphis port facility under an agreement accounted for as
a capital lease. The lease is for 24 years and expires in 2017. Future minimum
capital lease payments for this lease and six equipment leases as of December
31, 2001 are as follows:
YEAR AMOUNT
- ---- ----------------
2002 $ 442,281
2003 388,306
2004 255,164
2005 197,312
2006 170,822
Thereafter 1,830,581
----------------
3,284,466
Less amounts representing interest (1,389,754)
----------------
Present value of minimum capital lease payments 1,894,712
Less current portion of capital lease obligation (279,069)
----------------
$1,615,643
----------------
12
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
NOTE 7 - INCOME TAXES
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes" for the Company's subsidiaries that are
corporations. SFAS No. 109 requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
The components of the Company's income tax expense (benefit) are as follows:
2001 2000
---------------- --------------
CURRENTLY PAYABLE:
Federal $ (298,692) $101,330
State 165,125 157,792
Foreign 315,288 172,392
---------------- --------------
181,721 431,514
---------------- --------------
DEFERRED:
Federal (98,093) 201,930
State (12,510) 138,445
---------------- --------------
(110,603) $ 340,375
---------------- --------------
Total $ 71,118 $771,889
---------------- --------------
Income tax expense (benefit) computed at the federal statutory rate reconciled
to income tax expense (benefit) is as follows:
2001 2000
---------------- ----------------
Tax at federal statutory rate $ - $ -
State income taxes, net 165,125 157,792
Foreign operations, net 315,288 172,392
Income tax expense (benefit) for domestic corporate subsidiaries (409,295) 441,705
---------------- ----------------
$ 71,118 $ 771,889
---------------- ----------------
The significant components of the Company's deferred tax asset and liability are
as follows:
2001 2000
---------------- ----------------
Accounts receivable $ 129,395 $ 48,396
Other current assets (165,645) (193,017)
Accrued expenses 202,032 224,025
---------------- ----------------
Current deferred tax asset 165,782 79,404
---------------- ----------------
Property and equipment 2,088,479 2,004,930
Goodwill 87,234 -
Minimum tax credit carryforward (99,332) -
Other comprehensive loss (57,823) -
Net operating loss carryforward (95,676) -
---------------- ----------------
Noncurrent deferred tax liability 1,922,882 2,004,930
---------------- ----------------
Net deferred tax (liability) asset $ (1,757,100) $ (1,925,526)
---------------- ----------------
13
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
At December 31, 2001, the Company has $256,204 in net operating loss
carryforwards that expire in various amounts through 2021.
NOTE 8 - EMPLOYEE BENEFIT PLANS
The Company has two defined contribution plans, the Mid-South Terminal Company
401(k) Plan through (the "Rivterm Plan") and the Arrow Terminals 401(k) Plan
(the "Arrow Plan"). Under the Rivterm Plan, all Global Material Services LLC
employees are eligible to participate in the plan on the first day of each plan
quarter following the completion of one year of service. Participants may
contribute up to 15% of annual pre-tax compensation. Effective January 1, 2001,
the Company matched 50% of up to the first 6% of contributed compensation. In
2000, the Company matched 50% of each participant's contribution up to the first
4% of contributed compensation. The Company also makes additional discretionary
contributions to the plan. Participants vest in Company contributions ratably
over four years of service. The Company made contributions to the Plan of
approximately $59,000 and $85,000 in 2001 and 2000, respectively.
The Arrow Plan covers all Arrow Terminals L.P. full-time employees with one or
more years of service, who work more than one thousand hours per year.
Contributions are made at the rate of $55 per month for each full-time employee.
Vesting begins at 20% after one year and increases by 20% each succeeding year
until full vesting occurs. The Company made contributions to the Arrow Plan of
approximately $67,000 and $71,000 in 2001 and 2000, respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
COMMITMENTS
The Company leases four port facilities in Arkansas under noncancellable
operating lease agreements. The lease terms range from 15 to 42 years. The
leases require contingent rental payments based on defined rates per ton of
commodity handled.
The Company also leases vehicles, equipment, buildings and land under operating
leases with remaining noncancellable lease terms in excess of one year at
December 31, 2001. Future minimum payments under these leases and the Company's
Arkansas port facility leases are as follows:
YEAR AMOUNT
- ---- ------
2002 $ 1,723,738
2003 1,427,003
2004 1,278,169
2005 947,918
2006 879,497
Thereafter 6,237,553
------------------
$12,493,878
------------------
The Company recorded approximately $1,736,000 and $1,423,000 of rent expense
under operating leases during 2001 and 2000, respectively.
14
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
During October of 1998, Arrow entered into a five-year agreement with a customer
to provide services in connection with the unloading of iron ore pellets at the
customer's facility. As part of Arrow's obligation under the terms of the
agreement, Arrow agreed to construct and install at its own cost and expense the
necessary machinery and equipment to perform the agreed upon unloading
activities. Additionally, Arrow agreed to provide certain managerial and
supervisory services in connection with the operation of the equipment. In
return for these services, Arrow received an advanced payment in the amount of
$990,000, which was recorded as deferred revenue and is being amortized into
income over the life of the agreement. Arrow has capitalized approximately
$2,655,000 of costs associated with the construction of the machinery and
equipment discussed above.
CONTINGENCIES
The Company is subject to certain claims, assessments and litigation arising in
the normal course of business. Management believes that the ultimate outcome of
all such matters will not have a materially adverse effect on the Company's
consolidated financial position or consolidated results of operations.
NOTE 10 - RELATED PARTY TRANSACTIONS
Rivergate Terminals Company, L.P. is owned by the partners of MSTC LP. The
Company provides administrative services to Rivergate Terminal Company, L.P.,
for which it receives a management fee. Fees received from Rivergate
approximated $30,000 and $32,500 in 2001 and 2000, respectively.
In connection with the MSPT joint venture, the Company leases assets and
provides administrative services to MSPT, for which the Company is reimbursed
the cost of these services. During 2001 and 2000, the Company received
approximately $24,000 and $28,000, respectively, for services provided to MSPT
by the Company.
At December 31, 2001, the Company has a receivable from the GMSV joint venture
totaling $524,487 that relates to expenditures for startup costs.
The compensation and responsibilities of the Company's president/chief executive
officer and executive vice president/chief financial officer are shared between
the Company and another company in which certain owners of MSTC LP have an
interest. These compensation expenses are charged to the Company at actual cost.
The Company has a relationship with one of its owners whereby the Company shares
costs of certain software licensing and maintenance. The Company makes payments
for these costs and subsequently bills those owners for their portion of such
fees. At December 31, 2001 and 2000, approximately $13,000 and $48,000,
respectively, in receivables were outstanding at year-end as a result of this
relationship.
At December 31, 2001, the Company has a liability of approximately $75,000 to
ACL. ACL is the parent company of ACT.
15
GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
NOTE 11 - RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141, Business Combinations. SFAS
No. 141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. Goodwill and certain intangible
assets will remain on the balance sheet and not be amortized. On an annual
basis, and when there is reason to suspect that their values have been
diminished or impaired, these assets must be tested for impairment, and
write-downs my be necessary. The Company will apply the provisions of SFAS No.
141 to any future business combinations.
In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142 changes the accounting for goodwill and other
indefinite-lived intangible assets from an amortization method to an
impairment-only approach. Amortization of goodwill and other indefinite-lived
intangible assets will cease upon adoption of this statement. Management of the
Company is currently analyzing the impact of SFAS No. 142 and cannot estimate
the impact of adoption at this time.
In October 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets effective for years beginning after December 15,
2001. This Statement supersedes SFAS 121, Accounting for the Impairment of
Long-Lived Assets to Be Disposed of, but retains the fundamental provision of
SFAS 121 for recognition and measurement of the impairment of long-lived assets
to be held and used and measurement of long-lived assets to be held for sale.
The statement requires that whenever events or changes in circumstances indicate
that a long-lived asset's carrying value may not be recoverable, the asset
should be tested for recoverability. The statement also requires that a
long-lived asset classified as held for sale should be carried at the lower of
its carrying value or fair value, less cost to sell. Management of the Company
is currently analyzing the impact of SFAS No. 121 and cannot estimate the impact
of adoption at this time.
16