Exhibit 99.3
Selected historical financial data of Alabama Metal Industries Corporation
The following table sets forth selected historical financial data of Alabama
Metal Industries Corporation ("AMICO").
AMICO's unaudited financial statements have been prepared on the same basis as
its 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.
Fiscal year ended Nine months ended
December 31, September 30,
_______________________ _________________________
(Dollars in thousands) 2003 2004 2004 2005
Statement of income data:
Net sales $ 194,391 $ 288,354 $ 218,708 $ 239,815
Cost of sales 158,982 209,766 157,159 174,331
___________ ___________ ___________ ___________
Gross profit 35,409 78,588 61,549 65,484
Selling, general and administrative expense 24,741 37,462 26,460 23,530
Impairment charge(1) 1,354 57 -- --
___________ ___________ ___________ ___________
Income from operations 9,314 41,069 35,089 41,954
Interest expense 5,778 5,115 3,867 3,478
Other (income) expense -- -- 138 72
___________ ___________ ___________ ___________
Income before taxes 3,536 35,954 31,084 38,404
Provision for income taxes 1,512 13,455 11,549 14,751
___________ ___________ ___________ ___________
Net income $ 2,024 $ 22,499 $ 19,535 $ 23,653
___________ ___________ ___________ ___________
Other data:
Depreciation and amortization $ 6,052 $ 5,752 $ 4,300 $ 4,240
EBITDA(2) 15,366 46,821 39,251 46,122
Ratio of earnings to fixed charges(3) 1.53x 7.03x 7.98x 10.27x
Balance sheet data (at end of period):
Cash $ 1,535 $ 2,520 $ 3,429
Total assets 104,644 123,820 123,420
Working capital(4) 16,944 27,775 37,777
Total debt 53,315 43,244 18,331
Shareholders' equity 23,596 46,716 70,637
___________ ___________ ___________
(1) Impairment charges for 2003 arose primarily because a plant was held for
sale on December 31, 2003 at a price less than book value. Impairment charges
for 2004 consist primarily of a write-off of assets of AMICO's Canadian
subsidiary.
(2) EBITDA represents net income before interest expense, provision for income
taxes, depreciation and amortization. EBITDA should not be considered an
alternative to cash flows from operating activities or net income, as determined
in accordance with GAAP. EBITDA is not necessarily comparable to other similarly
titled financial measures of other companies due to the potential
inconsistencies in the method of calculation. EBITDA has limitations as an
analytical tool, and you should not consider it either in isolation or as a
substitute for analyzing AMICO's cash flows from operating activities and
results as reported under GAAP. Some of these limitations are:
o EBITDA does not reflect historical cash expenditures or future requirements
for capital expenditures or contractual commitments;
o EBITDA does not reflect changes in, or cash requirements for, AMICO's
working capital needs;
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o EBITDA does not reflect AMICO's interest expense or cash requirements
necessary to service interest or principal payments on its debt; and
o EBITDA does not reflect AMICO's tax expense or the cash requirements to pay
its taxes.
The following is a reconciliation of EBITDA to net income, the most directly
comparable GAAP performance measure, and to cash flows from operations, the most
directly attributable GAAP liquidity measure:
Fiscal year ended Nine months ended
December 31, September 30,
_________________________ __________________________
(Dollars in thousands) 2003 2004 2004 2005
Net income $ 2,024 $ 22,499 $ 19,535 $ 23,653
Provision for income taxes 1,512 13,455 11,549 14,751
Interest expense 5,778 5,115 3,867 3,478
Depreciation and amortization 6,052 5,752 4,300 4,240
__________ ___________ ___________ ___________
EBITDA 15,366 46,821 39,251 46,122
Interest expense (5,778) (5,115) (3,867) (3,478)
Provision for income taxes (1,512) (13,455) (11,549) (14,751)
Changes in assets and liabilities 6,420 (12,079) (17,886) 481
Other non-cash adjustments 1,678 429 315 89
Provision for deferred income taxes 52 1,011 528 51
__________ ___________ ___________ ___________
Net cash (used in) provided by operating activities $ 16,227 $ 17,612 $ 6,792 $ 28,514
__________ ___________ ___________ ___________
(3) 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 AMICO management believes is
representative of the interest component of rent expense.
(4) Working capital is current assets minus current liabilities.
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Management's discussion and analysis of financial
condition and results of operations for AMICO
AMICO acquisition
On October 3, 2005, we acquired AMICO, a leading manufacturer of a diverse line
of products for the commercial and industrial building products markets. AMICO's
products and systems are used for a variety of industrial applications and for
residential, multi-family, commercial and high-rise construction applications.
AMICO manufactures products in 15 locations throughout North America with six
distribution centers. For the year ended December 31, 2004, AMICO generated net
sales of $288.4 million, income from operations of $41.1 million and EBITDA of
$46.8 million.
Integration. As in previous acquisitions, we intend to manage AMICO and its
subsidiaries as a stand-alone entity rather than combine AMICO's operations with
those of our other subsidiaries. As a result, we do not currently expect to
incur material integration costs as a result of the AMICO acquisition. However,
as part of our strategy of continuing to increase operating efficiencies, we
will consider AMICO and its subsidiaries as we improve our company-wide supply
chain management, attempt to streamline distribution of our products and explore
further opportunities for sharing administrative services across our company.
Comparability of AMICO financial statements. Before we acquired AMICO, AMICO
determined the cost basis of its inventory on a last-in-first-out (LIFO) basis,
rather than the FIFO accounting we use for our company. Inventories recorded on
the historical balance sheets of AMICO and cost of sales, gross profit, income
from operations and net income recorded on the historical statements of income
of AMICO are therefore not completely comparable to similar line items recorded
in our historical balance sheets and statements of income. As of and for the
year ended December 31, 2004, recording AMICO's inventories on a FIFO basis
would have resulted in a $15.9 million increase in its inventories to $45.6
million, a $13.8 million decrease in its cost of sales to $195.9 million and a
$13.8 million increase in its income before taxes to $49.8 million. As of and
for the nine months ended September 30, 2005, recording AMICO's inventories on a
FIFO basis would have resulted in a $8.5 million increase in its inventories to
$32.8 million, a $7.4 million increase in its cost of sales to $181.7 million
and a $7.4 million decrease in its income before taxes to $31.0 million. From
the date of the AMICO acquisition, we will record AMICO's inventories on a FIFO
basis. This change in AMICO's inventory accounting policy will result in taxable
income to our company, which we will recognize for tax purposes over a four-year
period.
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Results of operations of AMICO
The following table sets forth selected results of operations data for AMICO as
percentages of net sales:
Fiscal year Nine months
ended ended
December 31, September 30,
_________________ _________________
2003 2004 2004 2005
(unaudited)
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 81.8 72.7 71.9 72.7
______ ______ ______ ______
Gross profit 18.2 27.3 28.1 27.3
Selling, general and administrative expense 12.7 13.0 12.1 9.8
Impairment charges 0.7 0.0 -- --
______ ______ ______ ______
Income from operations 4.8 14.2 16.0 17.5
Other expenses -- -- 0.1 0.0
Interest expense 3.0 1.8 1.8 1.5
______ ______ ______ ______
Income before taxes 1.8 12.5 14.2 16.0
Provision for income taxes 0.8 4.7 5.3 6.2
______ ______ ______ ______
Net income 1.0% 7.8% 8.9% 9.9%
______ ______ ______ ______
Nine months ended September 30, 2005 compared to nine months ended
September 30, 2004
Net sales increased by approximately $21.1 million, or 9.7%, to $239.8 million
for the nine months ended 2005 from $218.7 million for the nine months ended
September 30, 2004. This increase was due primarily to significant increases in
sales volumes of bar grating products, particularly in the third quarter of
2005, driven by purchases related to the 2005 storm season and, to a lesser
extent, general increases in construction spending. The increase in net sales
was also due to increases in average selling prices in many of AMICO's product
lines, driven by increases in steel prices that occurred over the course of
2004, as well as increases in sales volumes of expanded metal products. These
increases were partially offset by decreases in average selling prices and
volumes of AMICO's metal lath products.
Cost of sales increased by approximately $17.2 million, or 10.9%, to $174.3
million for the nine months ended September 30, 2005 from $157.2 million for the
nine months ended September 30, 2004. This increase was due primarily to
increases in raw material costs as a percentage of sales. Cost of sales as a
percentage of net sales increased to 72.7% for the nine months ended September
30, 2005 from 71.9%, primarily because AMICO's gross margins had reached higher
than historical levels in 2004 as AMICO was able to increase prices quickly in
response to significant increases in the price of steel.
Selling, general and administrative expense decreased $2.9 million, or 11.1%, to
$23.5 million for the nine months ended September 30, 2005 from $26.5 million in
the nine months ended September 30, 2004. This decrease occurred primarily
because AMICO's management incentive compensation was unusually high for the
nine months ended September 30, 2004 due to AMICO's financial performance in
that period. The terms of AMICO's management incentive compensation plan were
changed in 2005, resulting in lower compensation payments for the nine months
ended September 30, 2005. As a percentage of net sales, selling, general and
administrative expense decreased to 9.8% for the nine months ended September 30,
2005 from 12.1% for the nine months ended September 30, 2004, primarily due to
lower incentive compensation payments in the nine months ended September 30,
2005.
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As a result of the above, income from operations as a percentage of net sales
increased to 17.5% for the nine months ended September 30, 2005 from 16.0% for
the nine months ended September 30, 2004.
Interest expense decreased $0.4 million, or 10.1%, to $3.5 million for the nine
months ended September 30, 2005 from $3.9 million for the nine months ended
September 30, 2004. This decrease was due to significant debt repayments
throughout the nine months ended September 30, 2005 using cash generated from
operations.
As a result of the above, income before income taxes increased $7.3 million, or
23.5%, to $38.4 million for the nine months ended September 30, 2005 from $31.1
million for the nine months ended September 30, 2004.
Income taxes were $14.8 million for the nine months ended September 30, 2005,
based upon an effective tax rate of 38.4% for the nine months ended September
30, 2005. Income taxes were $11.5 million for the nine months ended September
30, 2004, based upon an effective tax rate of 37.2% for the nine months ended
September 30, 2004. The effective tax rate was lower in 2004 as AMICO utilized
previously reserved state net operating loss carryforwards.
Net income increased to $23.7 million in the nine months ended September 30,
2005 from $19.5 million in the nine months ended September 30, 2004.
Year ended December 31, 2004 compared to year ended December 31, 2003
Net sales increased $93.9 million, or 48.3%, to $288.4 million in 2004 from
$194.4 million in 2003. This increase was due primarily to significant increases
in selling prices for AMICO's steel-related products, resulting primarily from
the significant increases in steel prices over the course of 2004. This increase
was partially offset by a moderate decrease in sales volumes of AMICO's expanded
metal products due to continuing recovery in the industrial construction market.
Cost of sales increased by approximately $50.8 million, or 31.9%, to $209.8
million in 2004 from $159.0 million in 2003, primarily due to the increases in
raw material costs described above. Cost of sales as a percentage of net sales
decreased to 72.7% in 2004 from 81.8% in 2003. This decrease occurred primarily
because AMICO was able in many cases to increase its selling prices ahead of
anticipated increases in costs of raw materials, as well as because of
efficiency improvements in AMICO's operations in the second half of 2003 that
positively affected AMICO's 2004 cost of sales. These efficiency improvements
included consolidating production of bar grating products by closing two
facilities and moving their production to other facilities and cost reductions
in material and labor inputs to AMICO's metal lath products.
Selling, general and administrative expense increased $12.7 million, or 51.4%,
to $37.5 million in 2004 from $24.7 million in 2003. This increase occurred
primarily because of significant incentive compensation paid to management and
other employees in 2004 due to AMICO's financial performance in that year, as
well as increases in brokerage commissions paid to manufacturers'
representatives due to increased net sales. As a percentage of net sales,
selling, general and administrative expense increased to 13.0% in 2004 from
12.7% in 2003, due primarily to the increase in incentive compensation.
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AMICO recorded impairment charges of $57,023 in 2004 relating to the write-off
of assets of its Canadian subsidiary. In 2003, AMICO recorded impairment charges
of $1.4 million, primarily because a plant was held for sale at December 31,
2003 at a price less than book value.
As a result of the above, income from operations as a percentage of net sales
increased to 14.2% in 2004 from 4.8% in 2003.
Interest expense decreased $0.7 million, or 11.5%, to $5.1 million in 2004 from
$5.8 million in 2003 due to lower average borrowings in 2004.
As a result of the above, income before income taxes increased to $36.0 million
in 2004 from $3.5 million in 2003.
Income taxes increased to $13.5 million in 2004 from $1.5 million in 2003, based
on an effective rate of 37.4% in 2004, compared to 42.8% in 2003. The decrease
in AMICO's effective tax rate was due to the use of previously reserved net
operating losses against state income taxes in 2004, as well as the increase in
valuation allowances to provide for state net operating losses that it did not
expect to realize.
Net income increased to $22.5 million in 2004 from $2.0 million in 2003.
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