UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
________________
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 7, 2005
________________
GIBRALTAR INDUSTRIES, INC.
________________
(Exact name of registrant as specified in its charter)
Delaware 0-22462 16-1445150
________________ ____________________ ________________
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3556 Lake Shore Road
P.O. Box 2028
Buffalo, New York 14219-0228
_________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 826-6500
__________________________
The Registrant filed a Form 8-K on October 7, 2005, reporting, among other
things, the Registrant's acquisition of Alabama Metal Industries
Corporation ("AMICO"). The Registrant did not file financial statements of
AMICO or any pro forma financial information at that time in accordance
with the authority granted by Item 9.01 of Form 8-K. The Registrant is now
filing audited, consolidated financial statements of AMICO as of and for
the years ended December 31, 2003 and 2004 on this Form 8-K/A. The
Registrant expects to file AMICO's unaudited, consolidated financial
statements for the nine months ended September 30, 2004 and 2005 and the
pro forma financial information, respectively required by Items 9.01(a) and
9.01(b), as soon as reasonably practicable, and in any event within 71 days
after the date the initial Form 8-K in the matter was required to be filed.
The Registrant therefore hereby amends the following items of its Form 8-K
filed October 7, 2005 as follows:
Item 9.01. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
1. Alabama Metal Industries Corporation and Subsidiaries Audited
Consolidated Financial Statements
(i) Independent Auditors' Report
(ii) Consolidated balance sheets as of December 31, 2004 and 2003
(iii) Consolidated statements of operations for the years ended
December 31, 2004 and 2003
(iv) Consolidated statements of stockholders' equity for the years
ended December 31, 2004 and 2003
(v) Consolidated statements of cash flows for the years ended
December 31, 2004 and 2003
2. The remaining financial information required to be filed by Item
9.01(a) to Form 8-K shall be filed as soon as practicable, and in any
event within 71 days after the initial Form 8-K in the matter was
required to be filed.
(b) Pro Forma Financial Information. The pro forma financial information
required to be filed by item 9.01(b) to Form 8-K shall be filed as soon as
practicable, and in any event within 71 days after Form 8-K in the matter
was be required to be filed.
(c) Exhibits.
10.1 Term Loan Agreement among Gibraltar Industries, Inc., Gibraltar Steel
Corporation of New York, KeyBank National Association and the lenders
named therein, dated as of October 3, 2005*
99.1 Press Release issued October 3, 2005*
99.2 Alabama Metal Industries Corporation and Subsidiaries Audited
Consolidated Financial Statements
_________________________
* Previously filed
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: November 14, 2005
GIBRALTAR INDUSTRIES, INC.
/S/ David W. Kay
____________________
Name: David W. Kay
Title: Chief Financial Officer
EXHIBIT INDEX.
10.1 Term Loan Agreement among Gibraltar Industries, Inc., Gibraltar Steel
Corporation of New York, KeyBank National Association and the lenders
named therein, dated as of October 3, 2005*
99.1 Press Release issued October 3, 2005*
99.2 Alabama Metal Industries Corporation and Subsidiaries Audited
Consolidated Financial Statements
___________________________
* Previously filed
INDEPENDENT AUDITORS' REPORT Board of Directors Alabama Metal Industries Corporation We have audited the accompanying consolidated balance sheets of Alabama Metal Industries Corporation and subsidiaries (the "Company") as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2004 and 2003, and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Birmingham, Alabama April 13, 2005ALABAMA METAL INDUSTRIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2004 AND 2003 ASSETS 2004 2003 Current assets: Cash and cash equivalents $ 2,520,031 $ 1,535,383 Accounts receivable, less allowance for doubtful accounts of $207,447 and $523,328 in 2004 and 2003, respectively 30,461,894 22,948,653 Income taxes receivable 5,741,445 Inventories 29,734,740 25,326,074 Prepaid expenses and other assets 557,320 376,436 Deferred income taxes 1,167,247 527,989 Assets held for sale 246,073 1,161,488 ______________ ______________ Total current assets 70,428,750 51,876,023 Property and equipment - net 43,272,737 42,644,249 Goodwill 7,022,400 7,022,400 Other assets 3,096,843 3,101,368 ______________ ______________ Total $ 123,820,730 $ 104,644,040 ______________ ______________ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable - revolver 4,827,086 10,919,181 Current portion of long-term debt 11,517,198 2,305,870 Income taxes payable 1,150,418 Accounts payable 16,099,908 13,293,632 Accrued expenses 10,208,876 7,262,501 ______________ ______________ Total current liabilities 42,653,068 34,931,602 Deferred income taxes 6,062,821 4,412,435 Long-term debt 26,899,657 40,089,976 Other liabilities 1,488,650 1,613,750 ______________ ______________ Total liabilities 77,104,196 81,047,763 ______________ ______________ Commitments and contingencies (Note 7) Stockholders' equity Common stock, $.01 par value; authorized 40,000 shares; issued and outstanding 12,363 shares 124 124 Additional paid-in capital 19,078,281 19,078,281 Retained earnings 49,908,678 27,410,056 Treasury stock, 25,325 shares, at cost (23,546,713) (23,546,713) Accumulated other comprehensive income 1,276,164 654,529 ______________ ______________ Total stockholders' equity 46,716,534 23,596,277 ______________ ______________ TOTAL $ 123,820,730 $ 104,644,040 ______________ ______________ See notes to consolidated financial statements.
ALABAMA METAL INDUSTRIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2004 AND 2003 2004 2003 NET SALES $288,354,096 $194,391,448 COST OF SALES 209,766,110 158,982,640 ______________ ______________ GROSS PROFIT 78,587,986 35,408,808 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 37,461,988 24,740,906 IMPAIRMENT CHARGES 57,023 1,353,476 ______________ ______________ OPERATING INCOME 41,068,975 9,314,426 ______________ ______________ INTEREST EXPENSE 5,115,465 5,778,018 ______________ ______________ INCOME BEFORE INCOME TAXES 35,953,510 3,536,408 INCOME TAXES 13,454,888 1,511,943 ______________ ______________ NET INCOME 22,498,622 2,024,465 ______________ ______________ See notes to consolidated financial statements.
ALABAMA METAL INDUSTRIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2004 AND 2003 Accumulated Additional Other Common Paid-In Retained Treasury Comprehensive Stock (1) Capital Earnings Stock (2) Income (Loss) Total BALANCE--December 31, 2002 $ 124 $19,078,281 $25,385,591 $(23,546,713) $ (331,171) $20,586,112 Comprehensive income: Net income 2,024,465 2,024,465 Foreign currency translation adjustment 985,700 985,700 ___________ Total comprehensive income 3,010,165 __________ ___________ ___________ ____________ __________ ___________ BALANCE--December 31, 2003 124 19,078,281 27,410,056 (23,546,713) 654,529 23,596,277 ___________ Comprehensive income: Net income 22,498,622 22,498,622 Foreign currency translation adjustment 621,635 621,635 ___________ Total comprehensive income 23,120,257 __________ ___________ ___________ ____________ __________ ___________ BALANCE--December 31, 2004 $ 124 $19,078,281 $49,908,678 $(23,546,713) $1,276,164 $46,716,534 __________ ___________ ___________ ____________ __________ ___________ (1) Par value $.01 per share; authorized 40,000 shares; issued and outstanding 12,363 shares, net of treasury shares (2) 25,325 shares, at cost See notes to consolidated financial statements.
ALABAMA METAL INDUSTRIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2004 AND 2003 2004 2003 OPERATING ACTIVITIES: Net income $ 22,498,622 $2,024,465 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,751,869 6,051,920 Impairment of long-lived assets 57,023 1,353,476 Amortization of debt discount 419,640 361,524 Net recoveries on accounts receivable (87,292) (49,975) Deferred income taxes 1,011,128 52,072 Loss on disposal of property and equipment 39,922 13,354 Changes in assets and liabilities which provided (used) cash: Accounts receivable (6,280,269) (3,980,501) Income taxes receivable/payable (6,987,943) 3,864,808 Inventories (3,732,872) 3,082,477 Prepaid expenses and other assets (166,048) (260,303) Accounts payable 2,317,733 2,966,732 Accrued expenses 2,927,520 427,672 Other (156,788) 319,449 ____________ ____________ Net cash provided by operating activities 17,612,245 16,227,170 ____________ ____________ INVESTING ACTIVITIES: Capital expenditures (4,027,548) (1,926,098) Acquistion of EMCI assets (3,298,265) Proceeds from sale of property and equipment 1,229,069 27,038 ____________ ____________ Net cash used in investing activities (6,096,744) (1,899,060) ____________ ____________ FINANCING ACTIVITIES: Net payments under notes payable - revolver (6,084,128) (10,992,943) Net principal payments on long-term debt (4,510,502) (3,125,391) ____________ ____________ Net cash used in financing activities (10,594,630) (14,118,334) ____________ ____________ EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 63,777 (10,153) ____________ ____________ (Continued)
ALABAMA METAL INDUSTRIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2004 AND 2003 2004 2003 NET INCREASE IN CASH AND CASH EQUIVALENTS $ 984,648 $ 199,623 ___________ ___________ CASH AND CASH EQUIVALENTS - Beginning of year 1,535,383 1,335,760 ___________ ___________ CASH AND CASH EQUIVALENTS - End of year $ 2,520,031 $1,535,383 ___________ ___________ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - Cash paid for: Interest $ 4,362,567 $5,249,595 ___________ ___________ Income taxes $19,800,473 $ 72,797 ___________ ___________ See notes to consolidated financial statements. (Concluded)
ALABAMA METAL INDUSTRIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation - The consolidated financial statements include the accounts of Alabama Metal Industries Corporation ("Amico") and its wholly-owned subsidiaries, AMICO Canada, Inc. ("Amico Canada"), Seasafe, Inc. ("Seasafe"), International Grating, Inc. ("IGI"), Klemp Corporation ("Klemp"), and Diamond Perforated Metals, Inc. ("Diamond") (collectively, the "Company"). All significant intercompany transactions and balances have been eliminated in consolidation. Balances denominated in foreign currencies for Amico Canada are translated using year-end exchange rates for balance sheet items and weighted average exchange rates for the year on income statement items. Nature of Operations - The Company manufactures and sells a variety of metal, fiberglass, and plastic products used primarily in the construction industry and in industrial applications. Sales are concentrated in the continental United States and Canada. As of December 31, 2004, 30% of the Company's hourly labor force was comprised of employees covered under collective bargaining agreements, none of which will expire in 2005. Accounting Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Cash Equivalents - The Company considers all highly liquid investments with original maturities of less than 90 days to be cash equivalents. Inventories - Inventories are stated at the lower of cost or market. The cost of raw materials and the raw material content of work-in-process and finished goods for Amico and Klemp are determined primarily using the last-in, first-out ("LIFO") method. Other inventory components and the inventory of Amico Canada, Seasafe, IGI, and Diamond are determined using the first-in, first-out ("FIFO") method. LIFO inventories comprise 76% and 71% of total inventory at December 31, 2004 and 2003, respectively. Property and Equipment - Property and equipment is recorded at acquisition cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets. Estimated useful lives are as follows: Buildings 15 to 40 years Leasehold improvements Term of lease Machinery and equipment 5 to 12 years Furniture and fixtures 3 to 10 years Vehicles 3 to 5 years Long-Lived Assets Excluding Goodwill - The Company evaluates the carrying value of long-lived assets, excluding goodwill, when events and circumstances warrant such a review. The carrying value of long-lived assets is considered impaired when the anticipated undiscounted cash flows from such assets are less than their carrying value. In that event, a loss is recognized equal to the amount by which the carrying value exceeds the fair value of the long-lived assets. The Company periodically reviews the appropriateness of the estimated useful lives of its long-lived assets.
Assets held for sale are those that meet the criteria established by Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and are reflected in the accompanying consolidated balance sheets at the lower of their carrying value or estimated fair value less costs to dispose (see Note 3). Goodwill - Goodwill represents the excess of the cost of net assets acquired in business combinations over their fair value. Effective January 1, 2002, goodwill is no longer amortized but reviewed for impairment annually or more frequently if certain indicators arise. Additional information regarding the Company's adoption of SFAS No. 142, Goodwill and Other Intangible Assets, is presented in Note 4. Income Taxes - In accordance with SFAS No. 109, Accounting for Income Taxes, the Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets represent items to be used as a tax deduction or credit in future tax returns for which the Company has already properly recorded the tax benefit in the statement of operations. To the extent the inability to realize a deferred tax asset is assessed as more likely than not, a valuation allowance is established against the deferred tax asset. In December 2004, the Financial Accounting Standards Board ("FASB") issued Staff Position No. 109-1, Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction of Qualified Production Activities Provided by the American Jobs Creation Act of 2004 ("FSP FAS 109-1"). FSP FAS 109-1 states that the qualified production activities deduction should be accounted for as a special deduction and the special deduction should be considered in measuring deferred taxes when graduated tax rates are a significant factor and assessing whether a valuation allowance is necessary. The Company is currently evaluating the effects FSP FAS 109-1 will have on its consolidated financial statements. In December 2004, the FASB issued Staff Position No. 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004 ("FSP FAS 109-2"). FSP FAS 109-2 provides for a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer (repatriation provision), provided certain criteria are met. The Company is currently evaluating the effects FSP FAS 109-2 will have on its consolidated financial statements and expects to complete its assessment during 2005. The Company has undistributed earnings in its Canadian subsidiary totaling approximately $4,942,000 for which taxes have not been provided pursuant to Accounting Principles Board Opinion No. 23, Accounting for Income Taxes - Special Areas ("APB 23"). The Company considers all of the investments to be permanently reinvested as the funds will be utilized for ongoing operations of its Canadian subsidiary. The Company has the ability to keep the profits in Canada as it is generating sufficient operating cash flow in the United States. Workers' Compensation Claims - The Company maintains self-insurance programs for claims for employee health and workers' compensation and records reserves for expected claims, including an actuarially determined estimate of incurred but not reported claims, on a discounted basis (see Note 7). Fair Value of Financial Instruments - The Company's financial instruments consist of cash equivalents, accounts receivable, accounts payable, accrued expenses, and interest-bearing debt. The fair value of the Company's fixed rate debt as of December 31, 2004 and 2003 approximates its carrying value given the interest rate environment and the Company's risk profile. The fair value of the remaining debt approximates its carrying value due to the variable nature of the associated interest rates. The fair value of the Company's other financial instruments approximates the carrying values reflected in the accompanying consolidated balance sheets at December 31, 2004 and 2003, primarily because of the short-term nature of these instruments.
Recently Issued Accounting Pronouncements - In November 2004, the FASB issued SFAS No. 151, Inventory Costs. SFAS No. 151 provides guidance to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). SFAS No. 151 requires that those items be recognized as current-period charges. In addition, SFAS No. 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS No. 151 are effective for inventory costs incurred during fiscal years beginning after June 15, 2005, and should be applied prospectively. The Company is currently evaluating the impact of adopting SFAS No. 151 on its consolidated financial statements. In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets (an amendment of APB Opinion No. 29). SFAS No. 153 requires that exchange transactions that lack commercial substance be measured based on the recorded amount less impairment and not on the fair value of the exchanged assets. Exchange transactions that lack commercial substance are transactions that are not expected to result in significant changes in the cash flows of the reporting entity. This statement becomes effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not expect the adoption of this statement to have a material effect on the Company's consolidated financial statements. Revenue Recognition - Revenue from sales of the Company's products is recognized upon shipment to the customer when there is persuasive evidence of an arrangement, the product price is fixed or determinable, and collection of the resulting receivable is reasonably assured. The Company has no postdelivery obligations, and product returns are reasonably estimable. The Company records amounts billed to customers for shipment of goods as a component of net sales. The related costs associated with shipping and handling are recorded as cost of sales. Sales returns, discounts and allowances are treated as reductions to sales in the period the related sales are recorded. Comprehensive Income - Comprehensive income is computed in accordance with SFAS No. 130, Reporting Comprehensive Income. During 2004 and 2003, comprehensive income consists of the Company's gain (loss) on foreign currency translation and net income. 2. INVENTORIES Inventories at December 31, 2004 and 2003 consist of the following: 2004 2003 Raw materials $ 6,266,275 $ 9,359,403 Work-in-process 629,972 611,512 Finished goods 22,838,493 15,355,159 ____________ ____________ Total 29,734,740 25,326,074 ____________ ____________ If the FIFO method of inventory accounting had been used for inventory valuation purposes instead of the LIFO method, inventories would have increased by $15,855,170 and $2,019,942 at December 31, 2004 and 2003, respectively.
During 2004 and 2003, the liquidation of LIFO inventory layers decreased cost of sales by $1,020,268 and $322,854, respectively. 3. PROPERTY AND EQUIPMENT Property and equipment at December 31, 2004 and 2003 consists of the following 2004 2003 Land $ 2,155,210 $ 2,431,955 Buildings and leasehold improvements 15,485,273 15,682,826 Machinery and equipment 70,335,891 68,750,706 Furniture and fixtures 4,118,541 3,806,816 Vehicles 872,057 779,721 Construction-in-progress 5,132,370 1,366,440 _____________ ____________ Total 98,099,342 92,818,464 Less accumulated depreciation and amortization 54,826,605 50,174,215 _____________ ____________ Property and equipment - net $ 43,272,737 $ 42,644,249 _____________ ____________ During the year ended December 31, 2003, the Company recorded pretax impairment charges in accordance with SFAS No. 144 of $1,353,476. Impairment charges of $1,276,303 related to property and equipment used in the Company's Klemp operations that were classified as held for sale in the accompanying 2003 consolidated balance sheet. The balance of the impairment charges related to property and equipment that are no longer of use to the Company's Seasafe operations or any other operations of the Company. Impairment charges recorded in 2004 relate to certain assets of Amico Canada. In 2004, the Klemp assets classified as held for sale were sold with no additional loss realized. As of December 31, 2004, certain other assets of the Amico operations have been classified as held for sale. 4. GOODWILL On January 1, 2002, the Company adopted SFAS No. 142 and, accordingly, discontinued goodwill amortization. In accordance with SFAS No. 142, the Company is required to complete an annual impairment test. The Company determined fair value as of January 1, 2004 and 2003, by averaging the results of a discounted cash flow model, a guideline company model, and a transaction model. The estimated fair value from this evaluation exceeded the carrying value of the net assets indicating goodwill was not impaired. 5. NOTES PAYABLE - REVOLVER AND LONG-TERM DEBT Notes Payable - Revolver - In September 1999, the Company executed a $69.25 million revolving and term loan agreement, which expires in September 2005. The revolving line of credit provides for borrowings (including letters of credit) up to 50% to 85% of the Company's eligible receivables and inventories, as defined, not to exceed $36 million ($28.6 million in borrowing capacity at December 31, 2004). Interest is payable under the revolving line of credit at a variable rate, as defined in the agreement (ranging from 3.10% to 4.41% and 3.65% to 4.75% at December 31, 2004 and 2003, respectively). The revolving line of credit outstanding as of December 31, 2004 and 2003 is secured by eligible receivables and inventories referred to above. The term loan is included in long-term debt at December 31, 2004 and 2003.
Long-Term Debt--Long-term debt at December 31, 2004 and 2003 consists of the following: 2004 2003 Term loan to bank, due in six quarterly installments of $500,000 (plus interest ranging from 3.93% to 5.25%), with a final installment of $10,188,513 due December 2005 $ 11,188,503 $ 15,350,000 Subordinated note payable to bank, bearing interest at a fixed rate of 12%, net of an unamortized discount of $761,758 and $1,181,401 at December 31, 2004 and 2003, respectively (interest payable quarterly, principal due December 2008) 26,238,241 25,818,598 Installment loan, bearing interest at prime plus 1.75% per annum, due in monthly payments of $27,400 through May 2007, plus interest 990,111 1,227,248 _____________ ____________ Total 38,416,855 42,395,846 Less current portion 11,517,198 2,305,870 _____________ ____________ Total long-term debt $ 26,899,657 $ 40,089,976 _____________ ____________ Borrowings under the revolving and term loan agreement are collateralized by substantially all of the assets of the Company. As part of the Company's financing agreement with one of its lenders, the Company granted the bank 585 common stock warrants in 1999 and 1,171 common stock warrants in 1998. Each warrant is exercisable for a period of ten years. Upon exercise, each warrant may be exchanged for one share of the Company's common stock for $1 per share. These warrants were recorded at their estimated fair value at the date of issue and are reflected as a debt discount and additional paid-in capital in the accompanying consolidated financial statements. Covenants under certain credit arrangements require the Company to maintain specified levels of tangible net worth, fixed charge coverage, capital expenditures and consolidated debt to earnings before interest, taxes, depreciation and amortization. At December 31, 2004, the Company was not in compliance with the covenant limiting annual capital expenditures. The Company has obtained waivers of this noncompliance from its lenders. Scheduled maturities of long-term debt at December 31, 2004 are as follows: Year Ending December 31 2005 $ 11,517,198 2006 328,685 2007 332,730 2008 27,000,000 2009 ____________ Total 39,178,613 Less unamortized discount 761,758 ____________ Total $ 38,416,855 ____________
6. INCOME TAXES Provision for income taxes for the years ended December 31, 2004 and 2003 consist of the following: 2004 Total Federal State Foreign Current $ 12,443,760 $ 9,490,612 $ 1,699,738 $ 1,253,410 Deferred 1,011,128 1,357,808 (236,708) (109,972) ____________ ____________ ___________ ___________ Total $ 13,454,888 $ 10,848,420 $ 1,463,030 $ 1,143,438 ____________ ____________ ___________ ___________ 2003 Total Federal State Foreign Current $ 1,459,871 $ 1,206,893 $ 287,851 $ (34,873) Deferred 52,072 (26,940) (13,489) 92,501 ____________ ____________ ___________ ___________ Total $ 1,511,943 $ 1,179,953 $ 274,362 $ 57,628 ____________ ____________ ___________ ___________ Income tax expense exceeds the amount computed by applying the statutory rate of 35% as follows: 2004 2003 Federal tax at statutory rate $ 12,562,354 $ 1,201,342 State tax - net of federal benefit 768,337 226,716 Foreign tax in excess of domestic rate 210 151 Nondeductible items: Meals and entertainment 61,461 46,730 Other 62,526 37,004 ____________ ___________ $ 13,454,888 $ 1,511,943 ____________ ___________ Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred income tax assets and liabilities at December 31, 2004 and 2003 are as follows:
2004 2003 Deferred tax assets: Allowance for doubtful accounts $ 65,899 $ 126,033 Vacation accrual 413,848 248,662 Inventory overhead capitalization 673,354 428,252 Reserve for insurance claims 779,649 683,060 Deferred financing costs 315,102 444,858 Net operating loss carryforwards 313,415 594,784 Other 298,396 626,886 ____________ ____________ Total deferred tax assets 2,859,663 3,152,535 Valuation allowance (313,415) (594,784) ____________ ____________ Deferred tax assets, net of valuation allowance 2,546,248 2,557,751 ____________ ____________ Deferred tax liabilities: Property and equipment 6,866,778 5,745,779 Intangible amortization 575,044 696,418 ____________ ____________ Total deferred tax liabilities 7,441,822 6,442,197 ____________ ____________ Net deferred tax liability $ (4,895,574) $ (3,884,446) ____________ ____________ At December 31, 2004, the Company had state net operating loss carryforwards of approximately $8,036,272, which if not utilized, will begin expiring at various dates through 2017. The tax benefit of these loss carryforwards has been fully reserved with a valuation allowance of $313,415 at December 31, 2004. At December 31, 2003, the valuation allowance was $594,784. During 2004, the Company decreased the valuation allowance by $281,369 due to the utilization of state net operating loss carryforwards. During 2003, the Company increased the valuation allowance by $40,187 to provide for state net operating loss carryforwards that will more likely than not expire unrealized. The valuation allowance can be adjusted in future periods as the probability of realization of the net operating loss carryforward asset changes. The above amounts are reflected in the accompanying consolidated balance sheets as: 2004 2003 Current assets $ 1,167,247 $ 527,989 Noncurrent liabilities (6,062,821) (4,412,435) ____________ _____________ Net deferred tax liability $ (4,895,574) $ (3,884,446) ____________ _____________ 7. COMMITMENTS AND CONTINGENCIES Leases - The Company leases certain vehicles, equipment, and buildings under long-term lease agreements.
Future minimum lease payments under all operating leases with initial or remaining noncancelable lease terms of more than one year are as follows: Year ending December 31 2005 $ 1,736,248 2006 1,404,042 2007 1,062,444 2008 778,051 2009 662,834 Thereafter 4,439,568 ____________ Total payments $ 10,083,187 ____________ Total rent expense was approximately $2,553,717 and $2,542,275 for the years ended December 31, 2004 and 2003, respectively. Self-Insurance - The Company maintains self-insurance programs for claims for employee health and workers' compensation. The Company has re-insurance which limits its liability to $250,000 per occurrence and to $2,200,000 and $2,100,000, respectively, in the aggregate annually for 2004 and 2003 for workers' compensation. At December 31, 2004 and 2003, the Company has accrued $2,004,240 and $1,800,000, respectively, for its actuarially estimated workers' compensation liability. The recorded reserves have been discounted at 3% as of December 31, 2004 and 2003. In addition, the Company has funded an $850,000 certificate of deposit to the benefit of the insurance company to cover workers' compensation claims which is reflected as a component of other long-term assets in the accompanying consolidated balance sheets. Litigation - The Company is subject to legal proceedings and claims which have arisen in the ordinary course of business. In the opinion of management and legal counsel, the amount of the ultimate liabilities with respect to these actions will not materially affect the consolidated financial statements of the Company. 8. EMPLOYEE BENEFIT PLANS The Company sponsors a profit sharing 401(k) plan covering substantially all employees with the exception of employees covered by a collective bargaining agreement with the Iron and Steel Workers Union. Employer contributions are made each year out of the Company's current or accumulated net profits at the discretion of the Board of Directors. The employer profit-sharing contribution was approximately $861,000 and $87,000 in 2004 and 2003, respectively. The Company makes contributions to a multi-employer qualified defined benefit fund for certain employees covered by union agreements at the Birmingham plant. Contributions of forty-three cents per hour worked are required for the defined benefit plan. The Company's liability is limited to the required contribution. Employer contributions were approximately $204,000 and $187,000 for this plan in 2004 and 2003, respectively.
Pursuant to the Company's Stock Incentive Plan, options to purchase 1,956 shares of common stock were granted to certain key employees in 1996. The options vested over a two year period and expire fifteen years from the grant date. The Company applied the provisions of APB No. 25, Accounting for Stock Issued to Employees, and did not recognize any compensation expense for these awards over the vesting period as the exercise price ($1,127.40) at the date of grant was equal to the estimated fair value of a share of the Company's common stock. Under the Plan, there are no additional options available for grant. 9. ACQUISITION In 2004, the Company purchased certain assets of Expanded Metal Company of Indiana ("EMCI"), an expanded metal manufacturer. The total cost of the acquisition was $3,298,265 and consisted of machinery and equipment, inventories, and accounts receivable. The Company has incorporated these assets into its existing manufacturing facilities. ******