increase in average selling price in 2000, due to the products sold to these
markets being among the highest priced products sold by the Company.
During the nine months ended September 30, 1999, the Company recorded a one-time
gain of $2,341 from a life insurance policy, which was not taxable to the
Company, in connection with the Company's Supplemental Executive Retirement Plan
In the nine months ended September 30, 2000, total gross profit increased
$54,188, or 18.0%, compared to the first nine months of 1999, primarily due to
the inclusion of the gross profit of the Acquisitions. Gross profit increased to
27.0% in 2000 from 26.4% in 1999 as a percentage of sales. The improvement was
primarily due to strong demand and increasing prices in the first part of 2000,
along with the Company's ability to increase selling prices in advance of
increased metal costs. The Company's sales force was successful in increasing
selling prices at a rate ahead of the receipt of higher cost material for most
products sold by the Company during the early part of 2000.
Warehouse, delivery, selling and general and administrative ("operating")
expenses increased $36,373, or 18.0%, in the 2000 period, as compared to the
1999 period. The dollar increase in expenses reflects the increase in sales
volume for the 2000 period, which includes the sales and related expenses of the
Acquisitions. As a percentage of sales, these operating expenses remained
comparable at 18.1% in 2000 and 17.8% in 1999. Certain of the companies acquired
in 1999 and 2000 operate at higher expense levels than those historically
experienced by the Company on a consolidated basis, which has resulted in a
slight increase in operating expenses as a percentage of sales.
Depreciation and amortization expense increased $2,066, or 10.8%, during the
nine months ended September 30, 2000, compared to the corresponding period of
1999. This increase resulted from the inclusion of depreciation expense related
to the assets of the Acquisitions, the amortization of goodwill resulting from
the Acquisitions, and the depreciation expense for current year fixed asset
Interest expense increased by 5.6% in the nine months ended September 30, 2000,
primarily due to the average borrowings outstanding during the first nine months
of 2000 being higher than the average 1999 level. The 2000 borrowings increased
due to funding the acquisitions made in 2000, repurchases of Company stock, and
general working capital needs.
The effective income tax rate was 40.0% for the nine months ended September 30,
2000, compared to 39.5% for the 1999 period. The 1999 period included the
benefit of the tax free life insurance proceeds discussed above.
Earnings per diluted share of $1.52 for the nine month period ended September
30, 1999 included $.05 related to the tax free gain on the life insurance policy
LIQUIDITY AND CAPITAL RESOURCES (DOLLAR AMOUNTS IN THOUSANDS OTHER THAN SHARE
AND PER SHARE AMOUNTS)
At September 30, 2000, working capital amounted to $362,899 compared to $273,040
at December 31, 1999. The increase was primarily due to increases in receivables
and inventory resulting from the increased sales activity. The Company's capital
requirements are primarily for working capital, acquisitions, and capital
expenditures for continued improvements in plant capacities and material
handling and processing equipment.
The Company's primary sources of liquidity are generally from internally
generated funds from operations and the Company's revolving line of credit. The
unsecured syndicated credit facility has a borrowing limit of $200,000. As of
September 30, 2000, $112,750 was outstanding under this credit facility. The
Company also has agreements with insurance companies for private placements of
senior unsecured notes in the aggregate amount of $290,000. The senior notes
that were issued in the private placements have maturity dates ranging from 2002
to 2010, with an average life of 9.1 years, and bear interest at an average
fixed rate of 6.83% per annum.