Table of Contents



                    UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                                ...
TABLE OF CONTENTS

Item 8.01. Other Events
Item 9.01 Financial Statements and Exhibits
SIGNATURES
Index to Exhibits
EXHIBI...
Table of Contents

Item 8.01. Other Events.
Reliance Steel & Aluminum Co. (the “Company”) is filing this Current Report on...
Table of Contents

                                                                SIGNATURES
   Pursuant to the requireme...
Table of Contents

                                                 RELIANCE STEEL & ALUMINUM CO.

                       ...
Exhibit 23.1

                                          [Letterhead of Del Conte, Hyde, Anello & Schuch, P.C.]

Reliance S...
Exhibit 23.2

                                         Consent of Independent Registered Public Accounting Firm
We consent...
EXHIBIT 99.1

                             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board ...
Note 14. Condensed Consolidating Financial Statements
   In November 2006, the Company issued senior unsecured notes for a...
Condensed Consolidating Balance Sheet
As of December 31, 2004
(amounts in thousands)

                                    ...
Condensed Consolidating Statement of Income
For the year ended December 31, 2005
(amounts in thousands)

                 ...
Condensed Consolidating Statement of Income
For the year ended December 31, 2003
(amounts in thousands)

                 ...
Condensed Consolidating Cash Flow Statement
For the year ended December 31, 2005
(amounts in thousands)

                 ...
Condensed Consolidating Cash Flow Statement
For the year ended December 31, 2004
(amounts in thousands)

                 ...
Condensed Consolidating Cash Flow Statement
For the year ended December 31, 2003
(amounts in thousands)

                 ...
Unaudited consolidating financial information related to the Company, its guarantor subsidiaries and non-guarantor subsidi...
Unaudited Condensed Consolidating Statement of Income
For the nine months ended September 30, 2006
(amounts in thousands)
...
Unaudited Condensed Consolidating Statement of Income
For the three months ended September 30, 2006
(amounts in thousands)...
Unaudited Condensed Consolidating Cash Flow Statement
For the nine months ended September 30, 2006
(amounts in thousands)
...
Unaudited Condensed Consolidating Cash Flow Statement
For the nine months ended September 30, 2005
(amounts in thousands)
...
EXHIBIT 99.2


Combined Financial Statements
   Yarde Metals, Inc. and
         Affiliates
       June 30, 2006
YARDE METALS, INC. AND AFFILIATES
                                                        CONTENTS
                       ...
[Letterhead of Del Conte, Hyde, Anello & Schuch, P.C.]


To the Board of Directors and Members
Yarde Metals, Inc. and Affi...
Our audit was conducted for the purpose of forming an opinion on the basic combined financial statements taken as a whole....
YARDE METALS, INC. AND AFFILIATES
                                                 COMBINED BALANCE SHEET
                ...
LIABILITIES AND EQUITY

CURRENT LIABILITIES
  Notes payable — Short-term                                        $75,347,40...
YARDE METALS, INC. AND AFFILIATES
                                          COMBINED STATEMENT OF INCOME
                 ...
YARDE METALS, INC. AND AFFILIATES
                                 COMBINED STATEMENT OF COMPREHENSIVE INCOME
            ...
YARDE METALS, INC. AND AFFILIATES
         COMBINED STATEMENT OF CHANGES IN RETAINED EARNINGS AND MEMBERS’/PARTNERS’ EQUIT...
YARDE METALS, INC. AND AFFILIATES
                                             COMBINED STATEMENT OF CASH FLOWS
          ...
YARDE METALS, INC. AND AFFILIATES
                                        NOTES TO COMBINED FINANCIAL STATEMENTS
         ...
YARDE METALS, INC. AND AFFILIATES
                                         NOTES TO COMBINED FINANCIAL STATEMENTS
        ...
YARDE METALS, INC. AND AFFILIATES
                                          NOTES TO COMBINED FINANCIAL STATEMENTS
       ...
YARDE METALS, INC. AND AFFILIATES
                                          NOTES TO COMBINED FINANCIAL STATEMENTS
       ...
YARDE METALS, INC. AND AFFILIATES
                                         NOTES TO COMBINED FINANCIAL STATEMENTS
        ...
YARDE METALS, INC. AND AFFILIATES
                                          NOTES TO COMBINED FINANCIAL STATEMENTS
       ...
YARDE METALS, INC. AND AFFILIATES
                                         NOTES TO COMBINED FINANCIAL STATEMENTS
        ...
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
Form_8-K_2007-01-03reliance steel & aluminum
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Form_8-K_2007-01-03reliance steel & aluminum

  1. 1. Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 3, 2007 RELIANCE STEEL & ALUMINUM CO. (Exact name of registrant as specified in its charter) California 001-13122 95-1142616 (State or other jurisdiction of (Commission File Number) (I.R.S. Employer incorporation) Identification Number) 350 S. Grand Ave., Suite 5100 Los Angeles, CA 90071 (Address of principal executive offices) (213) 687-7700 (Registrant’s telephone number, including area code) Not applicable. (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
  2. 2. TABLE OF CONTENTS Item 8.01. Other Events Item 9.01 Financial Statements and Exhibits SIGNATURES Index to Exhibits EXHIBIT 23.1 EXHIBIT 23.2 EXHIBIT 99.1 EXHIBIT 99.2
  3. 3. Table of Contents Item 8.01. Other Events. Reliance Steel & Aluminum Co. (the “Company”) is filing this Current Report on Form 8-K for the purpose of, among other things, incorporating the contents of this report in the Registration Statement on Form S-4 (the “Registration Statement”) that the Company will file on the date hereof. This report contains an additional footnote to the Company’s audited financial statements for the fiscal year ended December 31, 2005 and unaudited financial statements for the fiscal quarter ended September 30 2006. The additional footnote provides condensed consolidating financial information in accordance with Rule 3-10(f) of Regulation S-X promulgated by the Securities and Exchange Commission in order for the subsidiary guarantors that will be additional registrants on the Registration Statement to continue to be exempt from Securities Exchange Act of 1934 (the “Exchange Act”) reporting requirements pursuant to Rule 12h-5 under the Exchange Act. This report also contains Yarde Metals, Inc.’s (“Yarde”) audited financial statements for the fiscal year ended June 30, 2006. Yarde is a subsidiary guarantor that will be an additional registrant on the Registration Statement. These financial statements are provided in accordance with Rule 3-10(g) of Regulation S-X in order that Yarde will also continue to be exempt from Exchange Act reporting requirements pursuant to Rule 12h-5 under the Exchange Act. Item 9.01 Financial Statements and Exhibits. (a) Financial Statements of Businesses Acquired. N/A. (b) Pro Forma Financial Information. N/A. (c) Exhibits. Exhibit No. Description 23.1 Consent of Del Conte, Hyde, Annello & Schuch, P.C. 23.2 Consent of Ernst & Young LLP 99.1 Updated historical financial information of Reliance Steel & Aluminum Co. as required by Rule 3-10 of Regulation S-X. 99.2 Yarde Metals, Inc. and Affiliate’s audited combined balance sheet at June 30, 2006 and audited combined statements of income and retained earnings, and cash flows for the year then ended and notes thereto and Report of Independent Auditors. 2
  4. 4. Table of Contents 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 thereunto duly authorized. RELIANCE STEEL & ALUMINUM CO. By /s/ David H. Hannah Dated: January 3, 2007 David H. Hannah Chief Executive Officer 3
  5. 5. Table of Contents RELIANCE STEEL & ALUMINUM CO. FORM 8-K INDEX TO EXHIBITS Exhibit No. Description 23.1 Consent of Del Conte, Hyde, Annello & Schuch, P.C. 23.2 Consent of Ernst & Young LLP 99.1 Updated historical financial information of Reliance Steel & Aluminum Co. as required by Rule 3-10 of Regulation S-X. 99.2 Yarde Metals, Inc. and Affiliate’s audited combined balance sheet at June 30, 2006 and audited combined statements of income and retained earnings, and cash flows for the year then ended and notes thereto and Report of Independent Auditors.
  6. 6. Exhibit 23.1 [Letterhead of Del Conte, Hyde, Anello & Schuch, P.C.] Reliance Steel & Aluminum Co. Los Angeles, CA CONSENT OF INDEPENDENT PUBLIC ACCOUNTING FIRM We consent to the use in this Current Report of Reliance Steel & Aluminum Co. on Form 8-K of our report dated November 3, 2006 on the combined balance sheet of Yarde Metals, Inc. and Affiliates as of June 30, 2006 and the related combined statements of income, comprehensive income, changes in retained earnings and members’/partners’ equity, cash flows, the combined schedules of cost of revenue and selling, general and administrative expenses, and the combining balance sheet, combining statements of income, comprehensive income, changes in retained earnings and members’/partners equity and cash flows, and combining schedules of cost of revenue and selling, general and administrative expenses for the year then ended (which includes an explanatory paragraph relating to the adoption of Interpretation No. 46R, Consolidation of Variable Interest Entities, issued by the Financial Accounting Standards Board ). /s/ Del Conte, Hyde, Anello & Schuch, P.C. Farmington, Connecticut January 3, 2007
  7. 7. Exhibit 23.2 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statement (Form S-4) and related Prospectus of Reliance Steel & Aluminum Co., for the registration of $350,000,000 of 6.200% Senior Notes due 2016 and $250,000,000 of 6.850% Senior Notes due 2036, of our report dated March 10, 2006 (except for Note 14, as to which the date is December 29, 2006) with respect to the consolidated financial statements and schedule of Reliance Steel & Aluminum Co. included in this Current Report (Form 8-K) which updates Item 8 of Reliance Steel & Aluminum Co.’s Annual Report (Form 10-K) for the year ended December 31, 2005 and of our report dated March 10, 2006 with respect to Reliance Steel & Aluminum Co.’s management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Reliance Steel & Aluminum Co., included in its Annual Report (Form 10-K) for the year ended December 31, 2005, filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP Los Angeles, California January 3, 2007
  8. 8. EXHIBIT 99.1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Board of Directors Reliance Steel & Aluminum Co. We have audited the accompanying consolidated balance sheets of Reliance Steel & Aluminum Co. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Reliance Steel & Aluminum Co. and subsidiaries at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Reliance Steel & Aluminum Co.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 10, 2006 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Los Angeles, California March 10, 2006, except for Note 14, as to which the date is December 29, 2006
  9. 9. Note 14. Condensed Consolidating Financial Statements In November 2006, the Company issued senior unsecured notes for an aggregate principal amount of $600 million at fixed interest rates that are guaranteed by certain of its wholly owned domestic subsidiaries. The accompanying combined and consolidating financial information has been prepared and presented pursuant to Rule 3-10 of SEC Regulation S-X “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or being Registered.” The guarantees are full and unconditional and joint and several obligations of each of the guarantor subsidiaries. There are no significant restrictions on the ability of the Company to obtain funds from any of the guarantor subsidiaries by dividends or loan. The supplemental consolidating financial information has been presented in lieu of separate financial statements of the guarantors as such separate financial statements are not considered meaningful. Consolidating financial information related to the Company, its guarantor subsidiaries and non-guarantor subsidiaries as of December 31, 2005, and 2004 and for each of the three years in the period ended December 31, 2005 is shown below: Condensed Consolidating Balance Sheet As of December 31, 2005 (amounts in thousands) Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Assets Cash and cash equivalents $ (7,912) $ 35,717 $ 7,217 $ — $ 35,022 Accounts receivable, less allowance for doubtful accounts 70,533 288,372 12,640 (1,614) 369,931 Inventories 58,659 304,318 24,408 — 387,385 Prepaid expenses and other current assets 110 15,659 3,240 — 19,009 Deferred income taxes — 35,868 133 — 36,001 Total current assets 121,390 679,934 47,638 (1,614) 847,348 Investments in subsidiaries 571,358 989,050 — (1,560,408) — Property, plant and equipment, net 66,692 403,405 9,622 — 479,719 Goodwill 12,437 372,293 — — 384,730 Intangible assets, net 906 43,442 36 — 44,384 Intercompany receivables 212,919 — — (212,919) — Other assets 552 12,653 148 (464) 12,889 Total assets $986,254 $2,500,777 $ 57,444 $(1,775,405) $1,769,070 Liabilities & Shareholders’ Equity Accounts payable $ 35,241 $ 146,322 $ 4,494 $ (1,614) $ 184,443 Accrued compensation and retirement costs 8,418 42,023 1,913 — 52,354 Other current liabilities 6,310 38,657 1,994 — 46,961 Current maturities of long-term debt 49,200 325 — — 49,525 Current maturities of capital lease obligations — 536 — — 536 Total current liabilities 99,169 227,863 8,401 (1,614) 333,819 Long-term debt 300,050 1,225 — — 301,275 Intercompany borrowings — 190,264 22,655 (212,919) — Deferred taxes and other long-term liabilities — 104,125 604 (618) 104,111 Total shareholders’ equity 587,035 1,977,300 25,784 (1,560,254) 1,029,865 Total liabilities and shareholders’ equity $986,254 $2,500,777 $ 57,444 $(1,775,405) $1,769,070 1
  10. 10. Condensed Consolidating Balance Sheet As of December 31, 2004 (amounts in thousands) Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Assets Cash and cash equivalents $ (10,638) $ 21,084 $ 1,213 $ — $ 11,659 Accounts receivable, less allowance for doubtful accounts 73,114 247,953 10,463 (1,539) 329,991 Inventories 73,988 256,922 18,869 — 349,779 Prepaid expenses and other current assets 171 11,749 5,296 — 17,216 Deferred income taxes — 24,584 — — 24,584 Total current assets 136,635 562,292 35,841 (1,539) 733,229 Investments in subsidiaries 570,159 877,388 — (1,447,547) — Property, plant and equipment, net 67,181 382,792 8,840 — 458,813 Goodwill 12,436 329,344 — — 341,780 Intangible assets, net 1,245 15,368 60 — 16,673 Intercompany receivables 196,027 — — (196,027) — Other assets 45 12,721 70 — 12,836 Total assets $983,728 $2,179,905 $ 44,811 $(1,645,113) $1,563,331 Liabilities & Shareholders’ Equity Accounts payable $ 28,301 $ 110,700 $ 4,840 $ (1,539) $ 142,302 Accrued compensation and retirement costs 7,628 40,702 1,629 — 49,959 Other current liabilities 8,238 26,716 1,063 — 36,017 Current maturities of long-term debt 46,150 250 — — 46,400 Total current liabilities 90,317 178,368 7,532 (1,539) 274,678 Long-term debt 349,300 31,550 — — 380,850 Intercompany borrowings — 175,118 20,909 (196,027) — Deferred taxes and other long-term liabilities — 85,274 518 (541) 85,251 Total shareholders’ equity 544,111 1,709,595 15,852 (1,447,006) 822,552 Total liabilities and shareholders’ equity $983,728 $2,179,905 $ 44,811 $(1,645,113) $1,563,331 2
  11. 11. Condensed Consolidating Statement of Income For the year ended December 31, 2005 (amounts in thousands) Guarantor Non-Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Net sales $736,804 $2,571,386 $ 77,385 $ (18,524) $3,367,051 Other income, net 435 12,625 (18) (9,371) 3,671 737,239 2,584,011 77,367 (27,895) 3,370,722 Costs and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 538,970 1,874,035 54,601 (18,606) 2,449,000 Warehouse, delivery, selling, general and administrative 112,820 384,945 13,862 (3,722) 507,905 Depreciation and amortization 6,924 39,157 550 — 46,631 Interest 26,513 3,924 352 (5,567) 25,222 685,227 2,302,061 69,365 (27,895) 3,028,758 Income before minority interest and income taxes 52,012 281,950 8,002 — 341,964 Minority interest — (8,666) (86) — (8,752) Equity in earnings of subsidiaries 171,196 2,128 — (173,324) — Income from continuing operations before income taxes 223,208 275,412 7,916 (173,324) 333,212 Provision for income taxes 19,900 105,650 2,225 — 127,775 Net income $203,308 $ 169,762 $ 5,691 $ (173,324) $ 205,437 Condensed Consolidating Statement of Income For the year ended December 31, 2004 (amounts in thousands) Guarantor Non-Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Net sales $711,020 $2,190,330 $ 57,305 $ (15,621) $2,943,034 Other income, net 1,141 13,795 741 (11,509) 4,168 712,161 2,204,125 58,046 (27,130) 2,947,202 Costs and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 514,534 1,572,436 39,581 (15,703) 2,110,848 Warehouse, delivery, selling, general and administrative 115,039 362,699 11,697 (5,548) 483,887 Depreciation and amortization 7,280 36,731 616 — 44,627 Interest 26,869 7,318 382 (5,879) 28,690 663,722 1,979,184 52,276 (27,130) 2,668,052 Income before minority interest and income taxes 48,439 224,941 5,770 — 279,150 Minority interest — (8,193) (989) — (9,182) Equity in earnings of subsidiaries 139,988 (728) — (139,260) — Income from continuing operations before income taxes 188,427 216,020 4,781 (139,260) 269,968 Provision for income taxes 17,971 80,032 2,237 — 100,240 Net income $170,456 $ 135,988 $ 2,544 $ (139,260) $ 169,728 3
  12. 12. Condensed Consolidating Statement of Income For the year ended December 31, 2003 (amounts in thousands) Guarantor Non-Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Net sales $488,411 $1,378,929 $ 26,896 $ (11,303) $1,882,933 Other income, net 1,044 9,952 160 (8,319) 2,837 489,455 1,388,881 27,056 (19,622) 1,885,770 Costs and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 357,680 1,005,136 20,977 (11,483) 1,372,310 Warehouse, delivery, selling, general and administrative 98,175 293,579 7,930 (3,757) 395,927 Depreciation and amortization 7,849 27,493 1,528 — 36,870 Interest 24,520 6,118 489 (4,382) 26,745 488,224 1,332,326 30,924 (19,622) 1,831,852 Income before minority interest and income taxes 1,231 56,555 (3,868) — 53,918 Minority interest — 1,394 (456) — 938 Equity in earnings of subsidiaries 33,715 (466) — (33,249) — Income from continuing operations before income taxes 34,946 57,483 (4,324) (33,249) 54,856 Provision for income taxes 467 22,113 (1,734) — 20,846 Net income $ 34,479 $ 35,370 $ (2,590) $ (33,249) $ 34,010 4
  13. 13. Condensed Consolidating Cash Flow Statement For the year ended December 31, 2005 (amounts in thousands) Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Cash Flows from operating activities: Net income (loss) $ 203,308 $ 169,763 $ 5,690 $ (173,324) $ 205,437 Equity in earnings of subsidiaries (171,196) (2,128) — 173,324 — Adjustments to reconcile net income to cash provided by (used in) operating activities 141,458 (75,778) 1,102 — 66,782 173,570 91,857 6,792 — 272,219 Cash provided by (used in) operating activities Cash Flows from investing activities: Purchases of property, plant and equipment, net (6,229) (45,058) (2,453) — (53,740) Acquisitions of metals service centers and net asset purchases of metals service centers, net of cash acquired (94,377) — — — (94,377) Intercompany loan repayments (advances), net (16,892) — — 16,892 — Other investing activities, net 1,485 — — — 1,485 (116,013) (45,058) (2,453) 16,892 (146,632) Cash provided by (used in) investing activities Cash Flows from financing activities: Net borrowings (repayments) of long-term debt (46,200) (47,311) — — (93,511) Dividends paid (12,530) — — — (12,530) Intercompany borrowings (repayments) — 15,145 1,747 (16,892) — Other financing activities 3,898 — — — 3,898 (54,832) (32,166) 1,747 (16,892) (102,143) Cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash — — (81) — (81) equivalents 2,725 14,633 6,005 — 23,363 Increase (decrease) in cash and cash equivalents (10,637) 21,083 1,213 — 11,659 Cash and cash equivalents at beginning of period $ (7,912) $ 35,716 $ 7,218 $ — $ 35,022 Cash and cash equivalents at end of period 5
  14. 14. Condensed Consolidating Cash Flow Statement For the year ended December 31, 2004 (amounts in thousands) Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Cash Flows from operating activities: Net income (loss) $ 170,457 $ 135,987 $ 2,544 $ (139,260) $ 169,728 Equity in earnings of subsidiaries (139,988) 728 — 139,260 — Adjustments to reconcile net income to cash provided by (used in) operating activities (4,130) (39,547) (4,283) — (47,960) 26,339 97,168 (1,739) — 121,768 Cash provided by (used in) operating activities Cash Flows from investing activities: Purchases of property, plant and equipment, net (4,496) (30,040) (1,446) — (35,982) Tax reimbursements made related to prior acquisition (16,475) — — — (16,475) Intercompany loan repayments (advances), net 5,441 — — (5,441) — Other investing activities, net 2,808 — — — 2,808 (12,722) (30,040) (1,446) (5,441) (49,649) Cash provided by (used in) investing activities Cash Flows from financing activities: Net borrowings (repayments) of long-term debt (22,150) (42,250) — — (64,400) Dividends paid (8,448) — — — (8,448) Intercompany borrowings (repayments) — (6,717) 1,276 5,441 — Other financing activities 8,657 — — — 8,657 (21,941) (48,967) 1,276 5,441 (64,191) Cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash — — 1,565 — 1,565 equivalents (8,324) 18,161 (344) — 9,493 Increase (decrease) in cash and cash equivalents (2,313) 2,922 1,557 — 2,166 Cash and cash equivalents at beginning of period $ (10,637) $ 21,083 $ 1,213 $ — $ 11,659 Cash and cash equivalents at end of period 6
  15. 15. Condensed Consolidating Cash Flow Statement For the year ended December 31, 2003 (amounts in thousands) Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Cash Flows from operating activities: Net income (loss) $ 34,477 $ 35,372 $ (2,590) $ (33,249) $ 34,010 Equity in earnings of subsidiaries (33,715) 466 — 33,249 — Adjustments to reconcile net income to cash provided by (used in) operating activities 255,931 (184,428) 2,307 — 73,810 256,693 (148,590) (283) — 107,820 Cash provided by (used in) operating activities Cash Flows from investing activities: Purchases of property, plant and equipment, net (2,290) (17,292) (1,327) — (20,909) Acquisitions of metals service centers and net asset purchases of metals service centers, net of cash acquired (245,850) — — — (245,850) Intercompany loan repayments (advances), net (147,238) — — 147,238 — Other investing activities, net 3,020 — — — 3,020 (392,358) (17,292) (1,327) 147,238 (263,739) Cash provided by (used in) investing activities Cash Flows from financing activities: Net borrowings (repayments) of long-term debt 134,850 12,395 — — 147,245 Dividends paid (7,643) — — — (7,643) Intercompany borrowings (repayments) — 145,651 1,587 (147,238) — Other financing activities 8,706 — — — 8,706 135,913 158,046 1,587 (147,238) 148,308 Cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash — — 472 — 472 equivalents 248 (7,836) 449 — (7,139) Increase (decrease) in cash and cash equivalents (2,561) 10,759 1,107 — 9,305 Cash and cash equivalents at beginning of period $ (2,313) $ 2,923 $ 1,556 $ — $ 2,166 Cash and cash equivalents at end of period 7
  16. 16. Unaudited consolidating financial information related to the Company, its guarantor subsidiaries and non-guarantor subsidiaries as of September 30, 2006 and for the three and nine-month periods ended September 30, 2006 and 2005, respectively, is reflected below. Unaudited Condensed Consolidating Balance Sheet As of September 30, 2006 (amounts in thousands) Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Assets Cash and cash equivalents $ (17,448) $ 27,695 $ 11,794 $ — $ 22,041 Accounts receivable, less allowance for doubtful accounts 96,243 616,694 36,954 (3,941) 745,950 Inventories 116,178 829,670 41,657 — 987,505 Prepaid expenses and other current assets — 18,885 726 — 19,611 Deferred income taxes — 35,482 142 — 35,624 Total current assets 194,973 1,528,426 91,273 (3,941) 1,810,731 Investments in subsidiaries 590,191 1,986,657 — (2,576,848) — Property, plant and equipment, net 88,065 632,954 15,161 — 736,180 Goodwill 15,328 741,633 2,704 — 759,665 Intangible assets, net 1,120 350,513 26 — 351,659 Intercompany receivables 504,925 — — (504,925) — Other assets 526 72,777 1,611 (464) 74,450 Total assets $1,395,128 $5,312,960 $ 110,775 $(3,086,178) $3,732,685 Liabilities & Shareholders’ Equity Accounts payable $ 47,792 $ 302,446 $ 31,439 $ (3,941) $ 377,736 Accrued compensation and retirement costs 4,958 74,150 3,301 — 82,409 Other current liabilities 15,110 89,745 3,275 — 108,130 Current maturities of long-term debt 44,200 51,040 1,118 — 96,358 Current maturities of capital lease obligations — 553 — — 553 Total current liabilities 112,060 517,934 39,133 (3,941) 665,186 Long-term debt 279,850 873,151 — — 1,153,001 Intercompany borrowings — 493,400 11,525 (504,925) — Deferred taxes and other long-term liabilities — 239,864 1,443 — 241,307 Total shareholders’ equity 1,003,218 3,188,611 58,674 (2,577,312) 1,673,191 Total liabilities and shareholders’ equity $1,395,128 $5,312,960 $ 110,775 $(3,086,178) $3,732,685 8
  17. 17. Unaudited Condensed Consolidating Statement of Income For the nine months ended September 30, 2006 (amounts in thousands) Guarantor Non-Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Net sales $650,784 $3,405,578 $ 145,017 $ (27,963) $4,173,416 Other income, net 833 12,616 1,266 (11,074) 3,641 651,617 3,418,194 146,283 (39,037) 4,177,057 Costs and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 462,988 2,505,950 110,376 (28,025) 3,051,289 Warehouse, delivery, selling, general and administrative 90,514 475,642 23,979 (3,117) 587,018 Depreciation and amortization 5,475 39,000 657 — 45,132 Interest 18,309 31,123 459 (7,895) 41,996 577,286 3,051,715 135,471 (39,037) 3,725,435 Income before minority interest and income taxes 74,331 366,479 10,812 — 451,622 Minority interest — (104) (123) — (227) Equity in earnings of subsidiaries 221,358 3,820 — (225,178) — Income from continuing operations before income taxes 295,689 370,195 10,689 (225,178) 451,395 Provision for income taxes 19,645 148,099 3,786 — 171,530 Net income $276,044 $ 222,096 $ 6,903 $ (225,178) $ 279,865 Unaudited Condensed Consolidating Statement of Income For the nine months ended September 30, 2005 (amounts in thousands) Guarantor Non-Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Net sales $560,049 $1,893,463 $ 57,857 $ (12,996) $2,498,373 Other income, net 359 10,291 (36) (7,905) 2,709 560,408 1,903,754 57,821 (20,901) 2,501,082 Costs and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 408,317 1,395,440 40,774 (13,057) 1,831,474 Warehouse, delivery, selling, general and administrative 83,240 285,254 10,297 (3,178) 375,613 Depreciation and amortization 5,200 29,208 398 — 34,806 Interest 20,197 3,504 255 (4,666) 19,290 516,954 1,713,406 51,724 (20,901) 2,261,183 Income before minority interest and income taxes 43,454 190,348 6,097 — 239,899 Minority interest — (6,271) — — (6,271) Equity in earnings of subsidiaries 109,821 933 — (110,754) — Income from continuing operations before income taxes 153,275 185,010 6,097 (110,754) 233,628 Provision for income taxes 9,359 76,750 2,670 — 88,779 Net income $143,916 $ 108,260 $ 3,427 $ (110,754) $ 144,849 9
  18. 18. Unaudited Condensed Consolidating Statement of Income For the three months ended September 30, 2006 (amounts in thousands) Guarantor Non-Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Net sales $225,595 $1,352,067 $ 58,177 $ (9,631) $1,626,208 Other income, net 91 5,768 836 (4,708) 1,987 225,686 1,357,835 59,013 (14,339) 1,628,195 Costs and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 160,017 998,890 44,884 (9,652) 1,194,139 Warehouse, delivery, selling, general and administrative 31,572 183,652 10,568 (1,089) 224,703 Depreciation and amortization 1,893 14,336 282 — 16,511 Interest 6,221 16,580 151 (3,598) 19,354 199,703 1,213,458 55,885 (14,339) 1,454,707 Income before minority interest and income taxes 25,983 144,377 3,128 — 173,488 Minority interest — (33) (62) — (95) Equity in earnings of subsidiaries 87,161 1,145 — (88,306) — Income from continuing operations before income taxes 113,144 145,489 3,066 (88,306) 173,393 Provision for income taxes 6,786 58,251 851 — 65,888 Net income $106,358 $ 87,238 $ 2,215 $ (88,306) $ 107,505 Unaudited Condensed Consolidating Statement of Income For the three months ended September 30, 2005 (amounts in thousands) Guarantor Non-Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Net sales $186,295 $ 668,524 $ 19,927 $ (4,622) $ 870,124 Other income, net 86 3,554 121 (2,416) 1,345 186,381 672,078 20,048 (7,038) 871,469 Costs and expenses: Cost of sales (exclusive of depreciation and amortization shown below) 136,968 494,197 14,873 (4,642) 641,396 Warehouse, delivery, selling, general and administrative 28,031 99,003 4,187 (961) 130,260 Depreciation and amortization 1,716 9,713 108 — 11,537 Interest 6,771 1,352 95 (1,435) 6,783 173,486 604,265 19,263 (7,038) 789,976 Income before minority interest and income taxes 12,895 67,813 785 — 81,493 Minority interest — (1,755) — — (1,755) Equity in earnings of subsidiaries 38,976 96 — (39,072) — Income from continuing operations before income taxes 51,871 66,154 785 (39,072) 79,738 Provision for income taxes 2,529 27,344 428 — 30,301 Net income $ 49,342 $ 38,810 $ 357 $ (39,072) $ 49,437 10
  19. 19. Unaudited Condensed Consolidating Cash Flow Statement For the nine months ended September 30, 2006 (amounts in thousands) Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Cash Flows from operating activities: Net income (loss) $ 276,044 $ 222,097 $ 6,902 $ (225,178) $ 279,865 Equity in earnings of subsidiaries (221,358) (3,820) — 225,178 — Adjustments to reconcile net income to cash provided by (used in) operating activities 815,448 (1,093,787) 10,003 — (268,336) 870,134 (875,510) 16,905 — 11,529 Cash provided by (used in) operating activities Cash Flows from investing activities: Purchases of property, plant and equipment, net (17,966) (64,245) (2,509) — (84,720) Acquisitions of metals service centers and net asset purchases of metals service centers, net of cash acquired (538,714) (20,679) — — (559,393) Intercompany loan repayments (advances), net (292,005) — — 292,005 — Other investing activities, net 2,272 — — — 2,272 (846,413) (84,924) (2,509) 292,005 (641,841) Cash provided by (used in) investing activities Cash Flows from financing activities: Net borrowings (repayments) of long-term debt (25,200) 649,275 1,118 — 625,193 Dividends paid (11,608) — — — (11,608) Intercompany borrowings (repayments) — 303,136 (11,131) (292,005) — Other financing activities 3,552 — — — 3,552 (33,256) 952,411 (10,013) (292,005) 617,137 Cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash — — 194 — 194 equivalents (9,535) (8,023) 4,577 — (12,981) Increase (decrease) in cash and cash equivalents (7,912) 35,717 7,217 — 35,022 Cash and cash equivalents at beginning of period $ (17,447) $ 27,694 $ 11,794 $ — $ 22,041 Cash and cash equivalents at end of period 11
  20. 20. Unaudited Condensed Consolidating Cash Flow Statement For the nine months ended September 30, 2005 (amounts in thousands) Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated Cash Flows from operating activities: Net income (loss) $ 143,916 $ 108,260 $ 3,427 $ (110,754) $ 144,849 Equity in earnings of subsidiaries (109,821) (933) — 110,754 — Adjustments to reconcile net income to cash provided by (used in) operating activities 119,430 (96,251) (2,860) — 20,319 153,525 11,076 567 — 165,168 Cash provided by (used in) operating activities Cash Flows from investing activities: Purchases of property, plant and equipment, net (4,567) (28,548) (1,199) — (34,314) Acquisitions of metals service centers and net asset purchases of metals service centers, net of cash acquired (94,383) — — — (94,383) Intercompany loan repayments (advances), net (24,177) — — 24,177 — Other investing activities, net 1,191 — — — 1,191 (121,936) (28,548) (1,199) 24,177 (127,506) Cash provided by (used in) investing activities Cash Flows from financing activities: Net borrowings (repayments) of long-term debt (23,200) (7,181) — — (30,381) Dividends paid (9,220) — — — (9,220) Intercompany borrowings (repayments) — 21,599 2,578 (24,177) — Other financing activities 835 — — — 835 (31,585) 14,418 2,578 (24,177) (38,766) Cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash — — (136) — (136) equivalents 4 (3,054) 1,810 — (1,240) Increase (decrease) in cash and cash equivalents (10,637) 21,083 1,213 — 11,659 Cash and cash equivalents at beginning of period $ (10,633) $ 18,029 $ 3,023 $ — $ 10,419 Cash and cash equivalents at end of period 12
  21. 21. EXHIBIT 99.2 Combined Financial Statements Yarde Metals, Inc. and Affiliates June 30, 2006
  22. 22. YARDE METALS, INC. AND AFFILIATES CONTENTS JUNE 30, 2006 Independent Auditors’ Report 1 Financial Statements: Combined Balance Sheet 3 Combined Statement of Income 5 Combined Statement of Comprehensive Income 6 Combined Statement of Changes in Retained Earnings and Members’/Partners’ Equity 7 Combined Statement of Cash Flows 8 Notes to Combined Financial Statements 9 Supplementary Financial Information: Combined Schedule of Cost of Revenue 24 Combined Schedule of Selling, General and Administrative Expenses 25 Combining Balance Sheet 26 Combining Statement of Income 28 Combining Statement of Comprehensive Income 29 Combining Statement of Changes in Retained Earnings and Members’/Partners’ Equity 30 Statement of Changes in Retained Earnings – Yarde Metals, Inc. 31 Statement of Changes in Members’ Equity – 10160 Phillipp Parkway, LLC 32 Combining Statement of Cash Flows 33 Combining Schedule of Cost of Revenue 34 Combining Schedule of Selling, General and Administrative Expenses 35
  23. 23. [Letterhead of Del Conte, Hyde, Anello & Schuch, P.C.] To the Board of Directors and Members Yarde Metals, Inc. and Affiliates Southington, Connecticut We have audited the accompanying combined balance sheet of Yarde Metals, Inc. and Affiliates as of June 30, 2006 and the related combined statements of income, comprehensive income, changes in retained earnings and members’/partners’ equity, and cash flows for the year then ended. These combined financial statements are the responsibility of Yarde Metals, Inc. and Affiliates’ management. Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Yarde Metals, Inc. and Affiliates as of June 30, 2006, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. As described in Note 2 to the combined financial statements, Yarde Metals, Inc. leases its corporate offices and certain warehousing and office facilities from entities that are subject to the provisions of Interpretation No. 46R (FIN 46R), Consolidation of Variable Interest Entities, issued by the Financial Accounting Standards Board. Yarde Metals, Inc. adopted the provisions of FIN 46R for these variable interest entities on July 1, 2005, the effect of which is shown as a cumulative effect of a change in accounting principle in the accompanying combined financial statements.
  24. 24. Our audit was conducted for the purpose of forming an opinion on the basic combined financial statements taken as a whole. The combined schedules of cost of revenue and selling, general and administrative expenses, and the combining balance sheet, combining statements of income, comprehensive income, changes in retained earnings and members’/partners’ equity and cash flows, and combining schedules of cost of revenue and selling, general and administrative expenses, on pages 24 through 35, are presented only for purposes of additional analysis and are not a required part of the basic combined financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic combined financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic combined financial statements taken as a whole. /s/ Del Conte, Hyde, Anello & Schuch, P.C. Farmington, Connecticut November 3, 2006
  25. 25. YARDE METALS, INC. AND AFFILIATES COMBINED BALANCE SHEET JUNE 30, 2006 ASSETS CURRENT ASSETS Cash and cash equivalents $ 8,847,642 Trade receivables 56,602,791 Employee loans receivable 23,572 Inventory 81,782,552 Prepaid expenses 1,465,464 $148,722,021 Total Current Assets PROPERTY AND EQUIPMENT Land 2,905,251 Buildings 22,775,390 Machinery and equipment 23,488,523 Office furnishings and equipment 5,693,517 Motor vehicles 2,329,145 Leasehold improvements 1,052,295 58,244,121 Less accumulated depreciation 19,619,358 38,624,763 Total Property and Equipment OTHER ASSETS Employee loans receivable, net of current portion 132,267 Federal tax deposit to retain fiscal year 2,184,517 Derivative swap obligation 1,143,955 Deposits 388,448 Loan closing costs, net of amortization 129,470 3,978,657 Total Other Assets $191,325,441 Total Assets The accompanying notes are an integral part of these financial statements. -3-
  26. 26. LIABILITIES AND EQUITY CURRENT LIABILITIES Notes payable — Short-term $75,347,402 Current maturities of long-term debt 9,451,453 Notes payable — Related parties 14,774,809 Accounts payable 23,349,161 Accrued compensation 8,789,568 Accrued taxes and expenses 9,101,232 $140,813,625 Total Current Liabilities LONG-TERM DEBT, NET OF CURRENT PORTION 12,744,150 153,557,775 Total Liabilities EQUITY Common stock 1,500 Additional paid-in capital 10,028,500 Retained earnings 17,925,477 Members’/Partners’ equity 8,668,234 Accumulated other comprehensive income 1,143,955 37,767,666 Total Equity $191,325,441 Total Liabilities and Equity -4-
  27. 27. YARDE METALS, INC. AND AFFILIATES COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED JUNE 30, 2006 REVENUE Net sales $386,104,556 Rental income 30,000 $386,134,556 Total Revenue COST OF REVENUE 317,678,299 68,456,257 Gross Profit SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 33,992,726 34,463,531 Income from Operations OTHER INCOME (EXPENSE) Interest and dividend income 5,679 Gain on sale of assets 15,164 Other income 45,753 Shareholder compensation (17,221,000) Compensation related to the sale (9,137,005) Interest expense (5,472,160) (31,763,569) 2,699,962 Income before Provision for Income and Other Taxes PROVISION FOR INCOME AND OTHER TAXES 90,357 $ 2,609,605 Net Income The accompanying notes are an integral part of these financial statements. -5-
  28. 28. YARDE METALS, INC. AND AFFILIATES COMBINED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED JUNE 30, 2006 NET INCOME $2,609,605 OTHER COMPREHENSIVE INCOME Interest rate swap adjustment 837,174 $3,446,779 Total Comprehensive Income The accompanying notes are an integral part of these financial statements. -6-
  29. 29. YARDE METALS, INC. AND AFFILIATES COMBINED STATEMENT OF CHANGES IN RETAINED EARNINGS AND MEMBERS’/PARTNERS’ EQUITY FOR THE YEAR ENDED JUNE 30, 2006 Accumulated Additional Other Common Paid-in Retained Members’/ Comprehensive Stock Capital Earnings Partners’ Equity Income Total Balance, June 30, 2005, as $ 1,500 $10,028,500 $16,861,753 $ 8,175,233 $ 306,781 $35,373,767 previously reported Adjustment for understatement of accrued compensation — — (684,198) — — (684,198) 1,500 10,028,500 16,177,555 8,175,233 306,781 34,689,569 Balance, June 30, 2005 Cumulative effect of change in accounting principle due to adoption of FIN 46R on July 1, 2005 — — 512,580 — — 512,580 Net income — — 1,242,452 1,367,153 — 2,609,605 Dividends paid — — (7,110) — — (7,110) Members’/Partners’ draw — — — (874,152) — (874,152) Other comprehensive income — — — — 837,174 837,174 $ 1,500 $10,028,500 $17,925,477 $ 8,668,234 $ 1,143,955 $37,767,666 Balance, June 30, 2006 The accompanying notes are an integral part of these financial statements. -7-
  30. 30. YARDE METALS, INC. AND AFFILIATES COMBINED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2006 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,609,605 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,409,182 Gain on sale of assets (15,164) Increase in allowance for doubtful accounts 91,594 (Increase) decrease in operating assets: Trade receivables (10,621,002) Inventory (91,553) Prepaid expenses (797,054) Federal tax deposit (151,188) Deposits (137,904) Loan closing costs, net of amortization (41,867) Increase (decrease) in operating liabilities: Accounts payable 1,074,913 Accrued compensation 2,023,545 Accrued taxes and expenses 7,525,615 $ 4,878,722 Net Cash Provided by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES Repayments from employees, net 15,841 Proceeds from sale of assets 227,191 Purchases of property and equipment (4,474,901) (4,231,869) Net Cash Used in Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from notes payable — Short-term 17,267,000 Proceeds from long-term borrowing 3,182,173 Repayment of long-term debt (4,549,198) Repayment of related party notes (9,092,037) Dividends paid (7,110) Members’/Partners’ draw (874,102) 5,926,726 Net Cash Provided by Financing Activities Net increase in cash and cash equivalents 6,573,579 Cash and cash equivalents at beginning of year 2,274,063 $ 8,847,642 Cash and Cash Equivalents at End of Year The accompanying notes are an integral part of these financial statements. -8-
  31. 31. YARDE METALS, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2006 NOTE 1 — NATURE OF BUSINESS AND PRINCIPLES OF COMBINATION The accompanying combined financial statements include the operations of Yarde Metals, Inc., 10160 Phillipp Parkway, LLC, Route 38 Associates, LLC, 45 Newell Street, LLC, Yarde Realty Company and Yarde Lot, LLC, collectively referred to as the “Company”. All inter- company accounts, transactions, and profits are eliminated in the combination. Yarde Metals, Inc. (“Yarde Metals”) is a Connecticut corporation which commenced operations in 1977. Yarde Metals is primarily engaged in the wholesale distribution of metal alloys to a broad range of customers operating in various industries throughout the world. The majority of Yarde Metals’ customers are concentrated in the New England, Mid-Atlantic and Ohio Regions. 10160 Phillipp Parkway, LLC (“10160 Phillipp”) is an Ohio limited liability company whose members are also some of the shareholders/officers of Yarde Metals. This entity was formed in December 2003 to acquire and hold warehousing facilities for Yarde Metals in Ohio. 10160 Phillipp leases the office and warehouse facilities in Streetsboro, Ohio to Yarde Metals. The financial success of 10160 Phillipp is dependent upon the financial success of Yarde Metals. Route 38 Associates, LLC (“Route 38”) is a New Hampshire limited liability company whose members are also some of the shareholders/officers of Yarde Metals. This entity was formed to construct warehousing facilities for Yarde Metals in New Hampshire. Route 38 leases the office and warehouse facilities in Pelham, New Hampshire to Yarde Metals. The financial success of Route 38 is dependent upon the financial success of Yarde Metals. 45 Newell Street Associates, LLC (“45 Newell”) is a Connecticut limited liability company whose members are also some of the shareholders/officers of Yarde Metals. 45 Newell leases the office and warehouse facilities, acquired in March 2001, in Southington, Connecticut to Yarde Metals. The financial success of 45 Newell is dependent upon the financial success of Yarde Metals. Yarde Realty Company (“Yarde Realty”) is a Connecticut partnership whose partners are also some of the shareholders/officers of Yarde Metals. This entity was formed in 1980 to acquire and hold warehousing facilities for Yarde Metals in Bristol, Connecticut. Yarde Realty leases the warehouse facilities in Bristol, Connecticut to Yarde Metals. The financial success of Yarde Realty is dependent upon the financial success of Yarde Metals. Yarde Lot, LLC (“Yarde Lot”) is a Connecticut limited liability company whose members are also some of the shareholders/officers of Yarde Metals. Yarde Lot leases the parking lot across from the office and warehouse facilities in Southington, Connecticut to Yarde Metals. The financial success of Yarde Lot is dependent upon the financial success of Yarde Metals. -9-
  32. 32. YARDE METALS, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2006 NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of combined 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 combined financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, requires a full set of general purpose financial statements to be expanded to include the reporting of “comprehensive income”. Comprehensive income is comprised of two components, net income and other comprehensive income. For the year ended June 30, 2006, the only items qualifying as other comprehensive income were the interest rate swap agreement adjustments. For purposes of the financial statements, the Company considers all highly liquid investments with original maturities of three months or less as the equivalent of cash. There were no cash equivalents at June 30, 2006. The Company carries its accounts receivable at cost less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based upon an estimate of collectibility of the accounts receivable, prior bad debt history and current credit conditions. Generally, the Company does not charge or accrue interest/finance charges on past due trade receivables unless the account is turned over for collections. A receivable is considered past due based upon management’s knowledge of the customer, past experience and current conditions. Management periodically reviews its receivable balances and determines which customers are to be turned over for collections. Accounts are written off as uncollectible when collection procedures are unsuccessful. Inventory, which consists primarily of metal alloys purchased for resale, is valued at the lower of cost or market, which is determined on the specific identification method. Property and equipment are stated at cost. Major renewals and betterments are capitalized, while maintenance and repairs that do not improve or extend the lives of the respective assets are charged against income. Depreciation and amortization are recorded using straight- line methods over the estimated useful lives of the related assets. The estimated useful lives of assets are as follows: Buildings 15-40 years Machinery and equipment 7-10 years Office furnishings and equipment 5-10 years Motor vehicles 3-10 years Leasehold improvements 5-40 years - 10 -
  33. 33. YARDE METALS, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2006 NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Depreciation expense for the year ended June 30, 2006 was $3,380,283. Rentals pertaining to noncapitalized lease agreements, which merely convey the right to use property, are expensed as incurred. Intangible assets for the Company consist of loan acquisition costs that are being amortized on the straight-line basis over 5-20 years. Amortization expense for the year ended June 30, 2006 was $28,899. Yarde Metals has elected, by consent of its stockholders, to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under these provisions, Yarde Metals does not pay Federal corporate income taxes on its taxable income. Instead, the stockholders are liable for individual Federal income taxes on their respective shares of Yarde Metals’ taxable income. Accordingly, the financial statements reflect no provision or liability for Federal income taxes. Yarde Metals is liable for state income taxes only in certain states that do not follow the federal pass-thru treatment. Income tax expense includes state taxes currently payable and deferred. When material, Yarde Metals provides for deferred taxes on temporary differences arising from assets and liabilities whose bases are different for financial reporting and income tax purposes. These differences relate primarily to inventory costs capitalized for income tax purposes, but expensed for financial reporting purposes, bad debt expense reported in different periods for financial reporting and income tax purposes, and different depreciation methods and lives used for financial reporting and income tax purposes. In addition, because Yarde Metals reports on a fiscal year basis, it must represent to the Internal Revenue Service that either the fiscal year is its natural year or it must pay a deposit. The deposit is calculated as the product of the highest individual tax rate plus 1%, the percentage of the deferral period to a total year, and the entity’s taxable income for the prior year. 10160 Phillipp, Route 38, 45 Newell, Yarde Realty and Yarde Lot are not taxpaying entities for income tax purposes, and thus, no Federal income tax expense has been recorded in the statements. Income from the limited liability companies and the partnership are taxed to the members/partners on their individual returns. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables, trade sales and trade purchases. The Company has limited concentration of credit risk regarding trade receivables and trade sales due to the large number of customers comprising the Company’s base and their dispersion across different industries. As of June 30, 2006, the Company had no significant concentration of credit risk regarding trade receivables and trade sales. The Company has significant concentration of -11-
  34. 34. YARDE METALS, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2006 NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) credit risk regarding trade purchases. Purchases from one vendor accounted for 18% of total purchases in the year ended June 30, 2006. Interest rate swap contracts designated and qualifying as cash flow hedges are reported at fair value. The gain or loss on the effective portion of the hedge initially is included as a component of other comprehensive income and subsequently reclassified into earnings when interest on the related debt is paid. Advertising costs are charged to operations when incurred. For the year ended June 30, 2006, advertising expense was $331,474. In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46) with the objective of improving financial reporting by companies involved with variable interest entities. FIN 46 clarifies the application of Accounting Research Bulletin No. 51 to certain entities, defined as variable interest entities, in which equity investors do not have characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated support from other parties. In December 2003, the FASB issued a revision to FIN 46 (FIN 46R) to clarify some of the provisions of FIN 46. On July 1, 2005, Yarde Metals, Inc. adopted FIN 46R related to 10160 Phillipp Parkway, LLC, Route 38 Associates, LLC, 45 Newell Street Associates, LLC, Yarde Realty Company and Yarde Lot, LLC, which resulted in the combining of these entities with Yarde Metals, Inc. for financial reporting purposes. The effect of Yarde Metals, Inc. adopting FIN 46R related to 10160 Phillipp Parkway, LLC, Route 38 Associates, LLC, 45 Newell Street Associates, LLC, Yarde Realty Company and Yarde Lot, LLC as of July 1, 2005, is recorded as a cumulative effect of a change in accounting principle of $512,580 in the accompanying combined statement of changes in retained earnings and members’ equity as of June 30, 2006. NOTE 3 — TRADE RECEIVABLES Trade receivables at June 30, 2006 consist of the following: Open accounts receivable $58,306,347 Less: Allowance for doubtful accounts 1,703,556 Total Trade Receivables $56,602,791 - 12 -
  35. 35. YARDE METALS, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2006 NOTE 4 — NOTES PAYABLE — SHORT-TERM On August 16, 2005, Yarde Metals refinanced its revolving line of credit, which was to expire on December 31, 2007. Yarde Metals may borrow up to the sum of 85% of eligible trade receivables and 65% of eligible inventory, to a maximum of $100,000,000. Interest for the year ended June 30, 2006 was payable at the current LIBOR Market Index rate or the bank’s one-month, three-month or six-month LIBOR plus 1% (the LIBOR rate plus the applicable margin at June 30, 2006 was 6.33%). The line of credit also has an optional hedge that allows Yarde Metals to enter into an interest rate swap agreement (see Note 6). This interest rate swap agreement was subsequently terminated on July 19, 2006. The lines are secured by substantially all assets of Yarde Metals and are personally guaranteed by the majority stockholders. The balance due on the line of credit at June 30, 2006 was $75,347,402. As disclosed in Note 16, Yarde Metals was acquired by Reliance Steel & Aluminum Co. on August 1, 2006. As a result of this transaction, the revolving line of credit became due and payable on August 1, 2006. NOTE 5 — LONG-TERM DEBT Long-term debt at June 30, 2006 is summarized below: Mortgage loan payable to Connecticut Development Authority in monthly installments of $28,121 including interest at 5.00% through March 2020, secured by property and all improvements, a first priority lien and security interest in all of the personal property and fixtures, an assignment of leases and rentals with respect to the premises, and assignment of all contracts, permits, approvals and UCC filings of the property in Southington, CT held by 45 Newell Street Associates, LLC. The note contains personal guarantees by the members and a corporate officer and a corporate guarantee by Yarde Metals, Inc. $3,516,013 Second mortgage loan payable to Banknorth, N.A. in monthly installments of $43,229 including interest until the maturity date of April 1, 2016, the interest rate was fixed at 6.00% through April 2004, at which time the interest rate was adjusted to the Three Year Federal Home Loan Bank of Boston Classic Advance Rate plus the applicable margin. As of June 30, 2006, the interest rate was 4.90% and is scheduled for adjustment on April 1, 2007, and every three years thereafter until maturity. The mortgage is secured by property and all improvements, a first priority lien and security interest in all of the personal property and - 13 -
  36. 36. YARDE METALS, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2006 NOTE 5 — LONG-TERM DEBT (Continued) fixtures, an assignment of leases and rentals with respect to the premises, and assignment of all contracts, permits, approvals and UCC filings of property in Southington, CT held by 45 Newell Street Associates, LLC. The note contains personal guarantees by the members and a corporate officer. 4,021,636 First mortgage loan payable to Banknorth, N.A. in monthly installments of $17,034 including interest until the maturity date of April 1, 2016, the interest rate was fixed at 6.00% through April 2004, at which time the interest rate was adjusted to the Three Year Federal Home Loan Bank of Boston Classic Advance Rate plus the applicable margin. As of June 30, 2006 the interest was 4.90% and is scheduled for adjustment on April 1, 2007, and every three years thereafter until maturity. The mortgage is secured by property and all improvements, a first priority lien and security interest in all of the personal property and fixtures, an assignment of leases and rentals with respect to the premises, and assignment of all contracts, permits, approvals and UCC filings of property in Southington, CT held by 45 Newell Street, LLC. The note contains personal guarantees by the members and a corporate officer. 1,575,153 First mortgage loan payable to Wachovia in monthly installments, through April 2016, of $12,685 plus interest at a rate of the bank’s one-month LIBOR plus 1.16% (6.33% at June 30, 2006), secured by property and all improvements, a first priority lien and security interest in all of the personal property and fixtures, an assignment of leases and rentals with respect to the premises, and assignment of all contracts, permits, approvals and UCC filings of property in Streetsboro, OH held by 10160 Phillipp Parkway, LLC. The note contains personal guarantees by the members and a corporate officer and a corporate guarantee by Yarde Metals, Inc. 1,416,765 - 14 -
  37. 37. YARDE METALS, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS JUNE 30, 2006 NOTE 5 — LONG-TERM DEBT (Continued) Note payable to GE Capital Public Finance in monthly installments of $26,687 including interest at 5.83% through December 2014, secured by property and all improvements, a first priority lien and security interest in all of the personal property and fixtures, an assignment of leases and rentals with respect to the premises, and assignment of all contracts, permits, approvals and UCC filings of property in Pelham, NH held by Route 38 Associates, LLC. The note contains personal guarantees by the members and a corporate officer and a corporate guarantee by Yarde Metals, Inc. 2,142,445 $2,500,000 equipment line of credit payable to Wachovia with advances made at 80% of the invoice cost of the equipment purchased over a draw period ending December 31, 2006. At that point this converts to a five-year term loan. Interest only is paid during the draw period. Once converted, 1/60th of the principal balance plus interest at a rate of the bank’s one- month, three-month or six-month LIBOR plus 1.00% or the current LIBOR Market Index Rate plus 1.00% (6.33% at June 30, 2006) will be payable monthly. The note is secured by substantially all the assets of Yarde Metals, Inc. and is personally guaranteed by the majority stockholders. 1,213,420 Note payable to GE Capital Public Finance at 5.83% with monthly payments of interest only until June 2001, and monthly payments of $9,890, including principal and interest from June 2001 to June 2011. The note is secured by equipment of Yarde Metals, Inc. 366,860 Term loan for $8,500,000 payable to Wachovia used to refinance certain existing term debt with forty-eight equal monthly principal payments, through August 2009, of $177,083 plus interest at a rate of the bank’s one-month, three-month or six- month LIBOR plus 1.00% or at Yarde Metals’ discretion the current LIBOR Market Index Rate plus 1.00% (6.33% at June 30, 2006). The note is secured by substantially all the assets of Yarde Metals, Inc. and is personally guaranteed by the majority stockholders. 6,729,167 - 15 -

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