Exhibit 99.2
Certain historical and pro forma financial data
The following table sets forth certain historical and pro forma financial data.
Our unaudited financial statements have been prepared on the same basis as our
audited financial statements and, in our opinion, reflect all adjustments,
consisting only of normal and recurring adjustments, necessary for a fair
presentation of this data in all material respects. The results for any interim
period are not necessarily indicative of the results that may be expected for a
full year.
The unaudited historical statement of income data for the twelve months ended
September 30, 2005 have been calculated by subtracting the applicable unaudited
consolidated statement of income data for the nine months ended September 30,
2005 from the sum of (1) the applicable audited consolidated statement of income
data for the year ended December 31, 2004 and (2) the applicable unaudited
consolidated statement of income data for the nine months ended September 30,
2005.
The unaudited pro forma statement of income data for the twelve months ended
September 30, 2005 has been calculated by subtracting the unaudited pro forma
condensed combined statement of income data for the nine months ended September
30, 2004 from the sum of the (1) unaudited pro forma condensed combined
statement of income data for the year ended December 31, 2004 and (2) the
unaudited pro forma condensed combined statement of income data for the nine
months ended September 30, 2005. The unaudited pro forma condensed combined
statements of income for the nine months ended September 30, 2004 and 2005 and
the year ended December 31, 2004 give effect to the following as if they had
occurred on January 1, 2004:
o the acquisition of AMICO; and
o the incurrence of new long-term debt and the use of proceeds thereof.
The unaudited pro forma condensed combined balance sheet data as of September
30, 2005 give effect to these events as if they had occurred on September 30,
2005.
The unaudited pro forma adjustments are based on available information and
certain assumptions that we believe are reasonable. However, these unaudited pro
forma adjustments do not include an allocation of the purchase price of AMICO
based on fair market value. Therefore, all the acquired assets and liabilities
are reflected at their historical book values with the excess consideration
recorded as goodwill. The allocation of the purchase price to our acquired
assets and liabilities acquired will be completed as soon as reliable
information is available. Preliminary pro forma adjustments have been recorded:
o to record inventory of AMICO under the same accounting method as our
company; and
o to exclude the assets and liabilities not acquired as part of the
transaction from the unaudited pro forma financial data.
3
The adjustments with respect to the new long-term debt we may incur reflect our
estimates of interest rate plus amortization of estimated financing costs. The
final interest rate, financing costs incurred and application of proceeds may
differ.
Our unaudited pro forma financial data do not purport to present what our actual
financial position or results would have been if the events described above had
occurred as of the dates indicated and are not necessarily indicative of our
future financial position or results. For example, we expect our future results
to be affected by the following factors, among others:
o In connection with our acquisition of AMICO in October 2005, we must record
AMICO's inventory on our consolidated balance sheet at fair market value.
Our margins from the AMICO business will be depressed in the fourth quarter
of 2005 as we sell the inventory acquired. Additionally, the recording of
AMICO's acquired inventory at fair market value may result in additional
deferred tax assets or liabilities.
o We will be required to record identifiable intangible assets and property,
plant and equipment acquired in the AMICO acquisition on our consolidated
balance sheet at fair market value. Any resulting write-up of assets will
increase our depreciation and amortization expense when we depreciate or
amortize the acquired assets and will reduce gross profit, operating
income, income from continuing operations and net income, and such
reductions may be significant. Based upon our past acquisitions and the
nature of the assets acquired in the AMICO acquisition, we expect to
recognize, when we complete our fair value calculations, identifiable
intangible assets such as trademarks/patents, unpatented technology and
customer relationships. We will not complete our fair market value
calculations of these assets until early 2006, and we cannot quantify the
amount of the write-up of the acquired assets at this time. Amortization
periods to be used for these identifiable intangible assets and property,
plant and equipment acquired will be based primarily upon the estimated
useful lives of the assets, which at this point are not determinable.
Additionally, the identification of intangible assets and the recording of
the acquired property, plant and equipment at fair market value may give
rise to additional deferred tax assets and liabilities.
o In connection with the transaction, we paid a prepayment premium of $6.7
million to retire our private placement notes. We also wrote off the
deferred financing fees of $0.7 million related to the debt. These charges
are not reflected in the unaudited pro forma condensed combined statements
of income because they are not considered on-going and will not have a
recurring impact on our results of operations. We also will incur charges
in our fourth quarter relating to non-capitalized expenses arising out of
the AMICO acquisition.
4
Fiscal year ended Nine months ended Twelve months ended
December 31, September 30, September 30,
__________________________________ _________________________ ____________________________
(Dollars in thousands) 2002 2003 2004 2004 2005 2005 2005
__________________________ _________ ________ __________ __________ ___________ ____________ _____________
(unaudited) (actual) (pro forma)
(unaudited)
Statement of income data:
Net sales $ 602,707 $729,806 $ 976,255 $ 721,045 $ 844,108 $1,099,318 $1,408,779
Cost of sales 484,244 587,128 774,970 563,436 683,504 895,038 1,129,037
_________ ________ ___________ _________ _________ __________ _________
Gross profit 118,463 142,678 201,285 157,609 160,604 204,280 279,742
Selling, general and
administrative expense 71,693 85,802 111,737 84,923 85,353 112,167 146,756
_________ ________ ___________ _________ _________ __________ _________
Income from operations 46,770 56,876 89,548 72,686 75,251 92,113 132,986
Equity in partnerships'
(income) loss(1) (559) (685) (4,846) (3,492) 469 (885) (951)
Interest expense 8,283 13,096 12,915 9,523 11,102 14,494 37,390
_________ ________ ___________ _________ _________ __________ _________
Income before taxes 39,046 44,465 81,479 66,655 63,680 78,504 96,547
Provision for income taxes 15,615 17,562 31,768 26,329 24,395 29,834 36,801
_________ ________ ___________ _________ _________ __________ _________
Income from continuing
operations 23,431 26,903 49,711 40,326 39,285 48,670 $ 59,746
_________
Discontinued operations, net of
taxes(2) 423 50 1,071 683 (1,209) (820)
_________ ________ ___________ _________ _________ ___________
Net income $ 23,854 $ 26,953 $ 50,782 41,009 $ 38,076 $ 47,850
_________ ________ ___________ _________ _________ ___________
Cash flow data:
Net cash provided by (used in)
operating activities(3) $ 12,677 $ 65,257 $ (1,770) $ (74) $ 59,153
Net cash (used in) provided by
investing activities(3) (22,030) (113,667) (88,467) (80,886) 642
Net cash provided by (used in)
financing activities 6,031 74,869 73,190 64,338 (60,805)
Depreciation and amortization 19,547 21,783 24,198 17,774 19,567 25,991 31,683
Other data:
EBITDA from continuing
operations(4)(5) $ 66,876 $ 79,344 $ 118,592 $ 93,952 $ 94,349 $ 118,989 $ 165,620
Total capital expenditures 15,294 22,050 24,330 16,392 14,799
Selected ratios:
Ratio of earnings to fixed
charges(6) 5.05x 3.90x 5.82x 6.30x 5.58x 5.31x 3.29x
Ratio of total debt to EBITDA
from continuing operations(4) 2.50x 3.05x 2.61x 2.13x 3.09x
Ratio of EBITDA from continuing
operations to interest
expense(4) 8.07x 6.06x 9.18x 9.87x 8.50x 8.21x 4.43x
Balance sheet data (at end of period):
Cash and cash equivalents $ 8,149 $ 8,149
Total assets 933,827 1,221,937
Working capital(7) 230,685 293,163
Total debt 252,906 512,306
Shareholders' equity 489,774 485,214
__________________
(1) Equity in partnerships' (income) loss represents our proportional interest
in the income or losses of our cold-rolled strip steel joint venture and
our steel pickling joint venture and other income.
(2) Discontinued operations represents the income (loss), net of income taxes
(benefits), attributable to our subsidiary Milcor, which we sold in January
2005 for approximately $42.6 million.
5
(3) Reflects continuing operations only.
(4) "EBITDA from continuing operations" represents net income before interest
expense, provision for income taxes, depreciation, amortization and loss
(income) from discontinued operations, net of taxes. EBITDA from continuing
operations should not be considered an alternative to cash flows from operating
activities or income from continuing operations, as determined in accordance
with GAAP. We use EBITDA from continuing operations to facilitate comparisons
from period to period. We believe EBITDA from continuing operations facilitates
company to company comparisons by backing out potential differences caused by
variations in capital structures (affecting net interest expense), taxation and
the age and book depreciation of facilities and equipment (affecting relative
depreciation expense), which may vary for different companies for reasons
unrelated to operating performance or liquidity. We further believe that EBITDA
from continuing operations is frequently used by investors, securities analysts
and other interested parties in their evaluation of companies, many of which
present an EBITDA measure when reporting their cash flows from operating
activities and results. EBITDA from continuing operations is not necessarily
comparable to other similarly titled financial measures of other companies due
to the potential inconsistencies in the method of calculation. In addition,
EBITDA, as defined in our senior credit facility, is not calculated in the same
manner as the EBITDA from continuing operations figures presented in this table.
EBITDA from continuing operations has limitations as an analytical tool, and you
should not consider it either in isolation or as a substitute for analyzing our
cash flows from operating activities and results as reported under GAAP. Some of
these limitations are:
o EBITDA from continuing operations does not reflect historical cash
expenditures or future requirements for capital expenditures or contractual
commitments;
o EBITDA from continuing operations does not reflect changes in, or cash
requirements for, our working capital needs;
o EBITDA from continuing operations does not reflect our interest expense or
cash requirements necessary to service interest or principal payments on
our debt; and
o EBITDA from continuing operations does not reflect our tax expense or the
cash requirements to pay our taxes.
The following is a reconciliation of EBITDA from continuing operations to income
from continuing operations, the most directly comparable GAAP performance
measure, and, for our reported historical periods, to cash flows from operating
activities, the most directly comparable GAAP liquidity measure:
Fiscal Nine
year months
ended Nine months ended ended Twelve months ended
Fiscal year ended December 31, December 31, September 30, September 30, September 30,
______________________________ ____________ __________________ _____________ ____________________
(Dollars in thousands) 2002 2003 2004 2004 2004 2005 2005 2005 2005
______________________ _______ ______ _______ ________ ______ ________ ______ _______ _______
(actual) (pro forma) (actual) (pro forma)
(actual) (pro forma) (unaudited) (unaudited) (unaudited)
Income from
continuing operations $23,431 $26,903 $ 49,711 $ 68,827 $40,326 $ 39,285 $ 50,080 $ 48,670 $ 59,746
Provision for income taxes 15,615 17,562 31,768 37,410 26,529 24,395 28,056 29,834 36,801
Interest expense 8,283 13,096 12,915 43,061 9,523 11,102 31,161 14,494 37,390
Depreciation
and amortization 19,547 21,783 24,198 29,950 17,774 19,567 23,807 25,991 31,683
________ _______ ________ ________ ________ ________ ________ ________ ________
EBITDA from
continuing operations(a) $66,876 $79,344 $118,592 $179,248 $93,952 $ 94,349 $133,104 $118,989 $165,620
Interest expense (8,283) (13,096) (12,915) (11,102)
Provision for
income taxes (15,615) (17,562) (31,768) (24,395)
Changes in assets
and liabilities (37,057) 8,478 (81,082) (2,200)
Other non-cash
adjustments 9 114 394 158
Unearned
compensation 258 212 153 900
Tax benefit from exercise
of stock options(b) 349 949 1,249 90
Undistributed equity in
partnerships' loss
(income) 340 316 (3,166) 1,404
Provision for deferred
income taxes 5,800 6,502 6,773 (51)
_______ _______ ________ _________
Net cash provided by
(used in) operating
activities from
continuing operations $12,677 $65,257 $ (1,770) $ 59,153
_______ _______ ________ _________
(a) EBITDA from continuing operations includes the effect of equity in
partnerships' loss (income). However, the agreements governing one of
our joint ventures restrict the amount of cash that may be distributed
to our company by the joint venture, and a credit agreement entered
into by our other joint venture also restricts the amount of cash that
may be distributed to our company from that joint venture.
6
(b) Represents the tax benefit resulting from the disqualifying
dispositions of incentive stock options that are recorded as a
reduction of income for tax purposes and as a reduction of equity for
book purposes.
(5) In calculating pro forma EBITDA from continuing operations for the twelve
months ended September 30, 2005, we included adjustments to the historical
financial data of AMICO to record AMICO's inventories on the first-in-first-out
(FIFO) basis used by our company, rather than the last-in-first-out basis
historically used by AMICO. The FIFO adjustments include an increase in AMICO's
cost of sales of $7.7 million for the twelve months ended September 30, 2005.
For this reason, pro forma EBITDA from continuing operations is lower than the
sum of our EBITDA from continuing operations and AMICO's EBITDA for the same
period.
(6) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income before taxes minus net undistributed equity earnings minus
capitalized interest plus fixed charges. Fixed charges include interest expense
(including amortization of debt issuance costs), capitalized interest and the
portion of operating rental expense that management believes is representative
of the interest component of rent expense.
(7) Working capital is current assets minus current liabilities.
7