SUMITOMO CORPORATION OF AMERICA AND SUBSIDIARIES. Consolidated Financial Statements. March 31, 2009 and 2008

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1 Consolidated Financial Statements (With Independent Auditors Reports Thereon)

2 Independent Auditors Report The Board of Directors and Stockholder Sumitomo Corporation of America: We have audited the accompanying consolidated balance sheets of Sumitomo Corporation of America (an indirect wholly owned subsidiary of Sumitomo Corporation) and subsidiaries (collectively, the Company) as of, and the related consolidated statements of income, stockholder s equity and comprehensive income and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these consolidated 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sumitomo Corporation of America and subsidiaries as of March 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. As discussed in notes 3 and 5, the Company made adjustments to the consolidated financial statements to account for the change in reporting entity and the adjustment for the discontinued operations. June 23, 2009

3 Consolidated Balance Sheets Assets Current assets: Cash and cash equivalents $ 160, ,932 Accounts receivable, net of allowance for doubtful accounts of $30,863 and $14,812, respectively 872, ,537 Finance receivables, net of allowance for doubtful accounts of $6,703 and $7,384, respectively 276, ,484 Inventories, net 1,847,231 1,348,697 Advance payments to suppliers 111,839 58,496 Prepaid expenses and other current assets 159, ,593 Total current assets 3,427,561 2,964,739 Investments in equity securities 32,718 57,553 Long-term receivables: Third party 62,600 54,005 Finance receivables, net of allowance for doubtful accounts of $5,314 and $4,860, respectively 409, ,900 Related parties, net 106, ,864 Property and equipment, net 901, ,078 Investments in associated companies 801, ,479 Goodwill 547, ,526 Other intangible assets, net 559, ,032 Other assets 24,415 19,251 Total assets $ 6,873,692 5,924,427 2 (Continued)

4 Consolidated Balance Sheets Liabilities and Stockholder s Equity Current liabilities: Commercial paper $ 756, ,086 Notes payable: Third party 614, ,483 Related parties 350, ,000 Current portion of long-term debt: Third party 330, ,440 Related party 100, ,000 Accounts payable: Third party 410, ,607 Related parties 209,140 8,973 Advances received 47,066 41,735 Accrued expenses and other current liabilities 316, ,920 Total current liabilities 3,135,596 2,651,244 Long-term liabilities: Long-term debt: Third party 692, ,947 Related party 750, ,000 Other long-term liabilities 134, ,979 Deferred income taxes 198, ,930 Minority interest 533, ,121 Commitments and contingencies Stockholder s equity: Common stock, no par value. Authorized 300,000 shares; issued and outstanding 187,650 shares 411, ,000 Retained earnings 1,055, ,747 Accumulated other comprehensive (loss) income (37,687) 21,459 Total stockholder s equity 1,428,886 1,263,206 Total liabilities and stockholder s equity $ 6,873,692 5,924,427 See accompanying notes to consolidated financial statements. 3

5 Consolidated Statements of Income Years ended Revenues: Gross profit on trading transactions (gross trading volume consists of $3,341,828 and $3,465,131, respectively) $ 201, ,279 Manufacturing and other revenues 6,385,744 5,324,257 Total revenues 6,587,338 5,526,536 Manufacturing and other costs (4,872,411) (4,086,822) Gross profit 1,714,927 1,439,714 Trading and administrative expenses (1,285,449) (1,120,395) Interest expense (net of interest income of $33,331 and $35,708, respectively) (102,507) (128,267) Other income (expense), net 2,287 30,770 Income from continuing operations before income taxes, minority interest and equity in earnings of affiliates 329, ,822 Income taxes (144,624) (101,460) Minority interest (68,811) (42,662) Equity in earnings of affiliates 109,003 77,071 Income from continuing operations 224, ,771 Income from discontinued operations, net of income taxes (including $35,361 of gain on sales in 2008) 35,488 Net income $ 224, ,259 See accompanying notes to consolidated financial statements. 4

6 Consolidated Statements of Stockholder s Equity and Comprehensive Income Years ended Accumulated other Total Comprehensive Common Retained comprehensive stockholder s income stock earnings (loss) income equity Balance April 1, 2007 (as previously reported) $ 579, ,622 21,422 1,253,494 Sale of minority interest in TBC to SGMA (168,450) (12,134) (180,584) Balance April 1, 2007 (as adjusted) 411, ,488 21,422 1,072,910 Comprehensive income: Net income $ 190, , ,259 Other comprehensive income (net of tax): Unrealized losses on investments (3,554) (3,554) (3,554) Unrealized losses on derivatives (6,798) (6,798) (6,798) Minimum pension liability adjustment Foreign currency translation adjustment 10,035 10,035 10,035 Comprehensive income $ 190,296 Balance March 31, , ,747 21,459 1,263,206 Comprehensive income: Net income $ 224, , ,826 Other comprehensive income (net of tax): Unrealized losses on investments (10,814) (10,814) (10,814) Unrealized gains on derivatives 1,129 1,129 1,129 Minimum pension liability adjustment 1,369 1,369 1,369 Foreign currency translation adjustment (50,830) (50,830) (50,830) Comprehensive income $ 165,680 Balance March 31, 2009 $ 411,000 1,055,573 (37,687) 1,428,886 See accompanying notes to consolidated financial statements. 5

7 Consolidated Statements of Cash Flows Years ended Cash flows from operating activities: Net income $ 224, ,259 Adjustments to reconcile net income to net cash provided by operating activities Net income from discontinued operations (35,488) Depreciation and amortization 119,430 92,218 Goodwill impairment 35,439 Other asset impairments 29,090 1,364 Deferred income taxes (16,683) 15,062 Undistributed earnings of affiliates (35,112) (6,283) Net realized gains on investments (10,057) (21,926) Minority interest in income of subsidiaries 68,811 50,656 Other noncash items (3,541) 12,705 Changes in operating assets and liabilities: Accounts and notes receivable (4,921) (31,130) Inventories (521,640) 113,730 Advance payments to suppliers (54,923) (8,236) Prepaid expenses and other assets 6,169 27,846 Accounts payable 250,968 (56,061) Advances received 5,637 11,970 Accrued expenses and other liabilities 4,908 29,085 Net cash provided by operating activities discontinued operations 36,391 Net cash provided by operating activities 98, ,162 Cash flows from investing activities: Payments for purchases of: Other investments (12,636) (18,485) Property and equipment (81,672) (183,831) Investments in associated companies (111,741) (93,902) Businesses acquired, net of cash acquired (245,887) (65,426) Proceeds from sales of: Available-for-sale investments 80 25,787 Other investments 38,560 14,940 Property and equipment 8, ,954 Increase in long-term receivables (289,938) (276,274) Principal collections on long-term receivables 235, ,453 Net cash provided by investing activities discontinued operations 86,076 Net cash used in investing activities (458,596) (199,708) Cash flows from financing activities: (Decrease) increase in commercial paper, ne (146,324) 117,247 Increase in short-term notes payable 237, ,308 Issuance of long-term debt 329, ,773 Increase in other long-term liabilities 10,815 Principal payments on long-term debt and other long-term liabilities (197,430) (343,545) Distributions from (to) minority interest 29,883 (36,682) Net cash used in financing activities discontinued operations (103,894) Net cash provided by (used in) financing activities 263,084 (117,793) Effect of changes in exchange rates on cash and cash equivalents (8,630) 598 Net (decrease) increase in cash and cash equivalents (105,741) 105,259 Cash and cash equivalents beginning of year 265, ,673 Cash and cash equivalents end of year $ 160, ,932 Supplemental cash flow information: Interest paid $ 85, ,709 Income taxes paid 165, ,744 See accompanying notes to consolidated financial statements. 6

8 (1) Organization and Description of Business Sumitomo Corporation of America (the Company) is an indirect, wholly owned subsidiary of Sumitomo Corporation, Japan (SC). In March 2009, SC transferred the direct ownership of the Company to Summit Global Management of America, Inc. (SGMA), which is also a wholly owned subsidiary of SC. SGMA owns certain of SC s investments in the United States. The Company, which is headquartered in New York City, is an integrated global trading Company with diversified investments in businesses involved in manufacturing and marketing of consumer products, providing financing for customers and suppliers, coordination and operation of urban and industrial infrastructure products, providing transportation and logistics services, developing natural resources, distribution of steel and other products and developing and managing real estate. The Company s principal business activities are classified into the following reportable segments; Tubular products; Steel and nonferrous metal; Machinery, power and IT; Chemicals and electronics; Living-related business; Mineral resources and energy; and Treasury and corporate. The Company s target markets include North America, South America and Southeast Asia. A significant portion of the Company s transactions are with SC. The Tubular products segment supplies a wide variety of high grade oil country tubular goods, line pipe and specialty tubing to companies in the oil, gas, petrochemical, automobile, and boiler manufacturing industries. The Steel and nonferrous metal segment supplies carbon and specialty steel including a wide spectrum of steel products such as sheets, plates and bars. The Machinery, power and IT segment activities include marketing aerospace and defense products and technologies to government agencies, airlines, and other industries, supplying parts to the automotive industry, providing financing for construction equipment, operating dealerships and distributorships for automobiles and construction equipment, investing in and operating electric generation assets and delivering and installing commuter rail cars and other transportation systems. The Chemicals and electronics segment activities include trade dealings in petrochemicals, plastics, fine/specialty chemicals, functional chemicals, and inorganic chemicals. The Chemicals segment includes The Hartz Mountain Corporation (Hartz), which manufactures, purchases and distributes pet supplies, treats and small animal edibles and accessories. The Living-related business segment includes commodities, concepts and products with industrial, commercial, residential and consumer applications. The Living-related business segment includes commercial and residential real estate and TBC Corporation (TBC), an independent marketer of tires for the automotive replacement market. The Mineral resources and energy segment includes trading and marketing activities of nonferrous metals, petroleum and carbon products, including precious metals, base metals, crude oil and natural gas. The Treasury and corporate segment includes finance-related activities such as derivatives transactions and consumer and business financing and logistics services. Also included, are the Company s interests in Sumitomo Canada Limited, Sumitomo Corporation de Mexico and Sumitomo Corporation do Brazil. 7 (Continued)

9 (2) Summary of Significant Accounting Policies (a) Principles of Consolidation The consolidated financial statements include the accounts of all wholly owned and majority-owned subsidiaries. All material intercompany profits, transactions and balances between the Company and its subsidiaries have been eliminated. The equity method of accounting is used for investments in associated companies in which the Company has an interest of 50% or less and has the ability to exercise significant influence over their financial and operating affairs. Consolidation of an entity is also assessed pursuant to Financial Accounting Standards Board (FASB) Interpretation (FIN) No. 46(R), Consolidation of Variable Interest Entities, which requires a variable interest holder to consolidate a variable interest entity (VIE) if that party will absorb a majority of the expected losses of the VIE, receive a majority of the residual returns of the VIE, or both. (b) Revenue Recognition Revenues are recorded when the Company has (a) persuasive evidence of an arrangement, (b) the goods have been delivered or the services have been rendered to the customer, (c) the sales price is fixed or determinable and (d) collection is reasonably assured. Revenues are generated through sales of a variety of products, including tubular products, steel, machinery, chemicals, plastics and mineral resources, and performance of services such as leasing, distribution, project management. Gross profit on trading transactions consists of margins and commissions relating to various trading transactions where the Company is not the primary obligor. Manufacturing and other revenues include activities in which the Company (a) is the primary obligor responsible for fulfillment, (b) changes the product or performs part of the service, (c) takes title to the inventory and/or (d) assumes the risk and rewards of ownership, such as the risk of loss for collection, delivery or returns. Additionally, the Company has presented gross trading volume parenthetically in the consolidated statements of income. Gross trading volume includes only those trading transactions in which the Company is not the primary obligor. For a substantial portion of the transactions in which the Company acts as principal, title to and payment for the goods pass through the Company without physical acquisition and delivery. Gross trading volume is not meant to represent sales or revenues in accordance with accounting principles generally accepted in the United States and should not be construed as equivalent to, or a substitute for, revenues, or as an indicator of liquidity or cash flows generated by operating, investing or financing activities. The Company has included gross trading volume because similar Japanese trading companies have historically used it as an industry benchmark. As such, the Company believes that it is a useful supplement to result of operations information as a measure of its performance. 8 (Continued)

10 (c) (d) (e) (f) (g) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments with an original maturity of three months or less. Investments in Equity Securities The Company s investments in equity securities are classified as available-for-sale. The portion of the portfolio, for which quoted market prices, broker quotations or estimates using present value or other valuation techniques are available, is carried at fair value. Changes in unrealized gains and losses are recorded as a separate component of accumulated other comprehensive income (OCI). The portion of the portfolio, which is not publicly traded and independently determined market values are not available, is carried at cost and underlying Company performance is reviewed periodically for potential impairment. The Company accounts for gains and losses on the sale of investments under the specific identification method. Allowance for Doubtful Accounts and Notes The Company maintains an allowance for doubtful accounts and notes for estimated losses resulting from the inability of its customers to make required payments. The allowance is based on review of the overall condition of receivable balances, both trade and notes receivable, and review of significant past-due accounts. Receivables determined to be uncollectible are charged against the allowance. Inventories Inventories are stated at the lower of cost or market. Cost is determined using specific identification or average cost, using the first-in, first-out (FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excess quantities and other factors in evaluating net realizable value. 9 (Continued)

11 (h) Property and Equipment Property and equipment consist primarily of commercial office buildings and manufacturing, distribution and administrative facilities, which are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are determined by applying the straight-line method over the estimated useful lives of the related assets. The approximate range of estimated useful lives is as follows: Buildings Leasehold improvements Machinery and equipment Office fixtures and equipment Automobiles and trucks 40 years Lesser of useful life of asset or lease term 2 15 years 3 10 years 3 8 years Property and equipment are evaluated for impairment when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Upon the occurrence of a triggering event, the asset is reviewed to assess whether the estimated undiscounted cash flows expected from the use of the asset plus residual value from the ultimate disposal exceeds the carrying value. If the carrying value exceeds the estimated recoverable amounts, the asset is written down to its estimated fair value: generally, the estimated present value of the expected future cash flows from using the asset. (i) Goodwill and Other Intangible Assets Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business acquisitions. Under SFAS No. 142, Goodwill and Other intangible Assets (SFAS 142), goodwill is not amortized and goodwill attributable to each of reporting unit is tested for impairment at least annually. The Company performs these impairment tests annually as of September 30th to permit adequate time to complete the impairment tests and related analyses prior to its fiscal year end. If a potential triggering event occurs after the September 30 test date, an additional impairment test may be required. Evaluating goodwill for impairment involves a two-step process. The first step is to estimate the fair value of the reporting unit by (1) estimating the present value of the expected future cash flows of the reporting unit, (2) estimating the reporting unit value by applying market multiples of comparable public companies and/or (3) examining sales values of companies which are similar to the reporting unit. If the carrying value of the reporting unit, including goodwill, exceeds the estimated fair value, a second step is performed. Under the second step, the identifiable assets and liabilities of the reporting unit are estimated at fair value as of the testing date. The excess of the estimated fair value of the reporting unit over the estimated fair value of net assets establishes the implied value of goodwill. The excess of the recorded goodwill over the implied value is charged to earnings as an impairment loss. A significant amount of judgment is required in estimating the fair value of the reporting unit and performing goodwill impairment tests. 10 (Continued)

12 Other intangible assets of the Company with finite lives are amortized over their estimated useful lives, while intangible assets of the Company with indefinite lives are no longer amortized. Additionally, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, intangible assets with finite useful lives are reviewed for impairment based on the comparison of undiscounted cash flows to carrying amounts and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Intangible assets with indefinite useful lives are tested for impairment annually or more frequently if events and circumstances indicate that the assets may be impaired. (j) Income Taxes The Company and eligible subsidiaries file a consolidated Federal income tax return in the United States. Certain subsidiaries file separate Federal income tax returns in the United States. In addition, the Company and subsidiaries also file income tax returns in state, local and foreign jurisdictions as applicable. Provisions for current income tax liabilities are calculated on income and expense amounts expected to be included in the income tax returns for the current year. Deferred income taxes are calculated under the liability method in accordance with SFAS No. 109, Accounting for Income Taxes (SFAS 109). Deferred income tax assets and liabilities are calculated based on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Changes in deferred tax assets and liabilities that are associated with components of OCI are charged or credited directly to OCI. A valuation allowance is provided for certain deferred tax assets when, in assessing the realization of the deferred tax assets, management considers it more likely than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Effective April 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainties in income taxes recognized in an enterprise s financial statements in accordance with SFAS 109. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. Under FIN 48, the tax effects of a position are recognized only if it is more likely than-not to be sustained on examination by the taxing authorities, based on its technical merits as of the reporting date. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. 11 (Continued)

13 (k) Derivative Financial Instruments All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in OCI and are recognized in the consolidated statements of income when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings. The Company does not hold or issue any significant amount of derivative instruments for speculative purposes. (l) (m) (n) Foreign Currency Translation Financial statements of foreign subsidiaries are translated into U.S. dollars at current rates, except for revenues, costs and expenses, which are translated at average current rates during each reporting period. Gains and losses resulting from the translation of financial statements are excluded from the consolidated statements of income and are charged or credited to a separate component of OCI. Comprehensive Income Comprehensive income includes unrealized gains and losses on equity securities classified as available-for-sale, unrealized gains and losses on certain derivative transactions designated as cash flow hedges, minimum pension liability adjustments and foreign currency translation adjustments. Supplemental Cash Flow Information Upon acquisition, the businesses acquired during the year ended March 31, 2009 resulted in an increase in the Company s consolidated balance sheet of $467,185 in noncash assets and an increase of $221,298 in accounts payable, long-term debt and other long-term liabilities. Upon acquisition, the businesses acquired during the year ended March 31, 2008 resulted in an increase in the Company s consolidated balance sheet of $90,666 in noncash assets and an increase of $25,240 in accounts payable, minority interest and other liabilities. 12 (Continued)

14 (o) (p) (q) (r) (s) Fair Value Measurements As defined under SFAS No. 157, Fair Value Measurements, (SFAS 157), fair value is the price that would be received to sell an asset or paid to transfer a liability between market participants in the principal market or most advantageous market when no principal market exists. Market participants are assumed to be independent, knowledgeable, able and willing to transact an exchange and not under duress, SFAS 157 also establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. The SFAS 157 fair value hierarchy consists of three levels: Level 1 fair values are valuations based on quoted market prices in active markets for identical assets or liabilities that the Company has the ability to access; Level 2 fair values are those valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities; and Level 3 fair values are valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The April 1, 2008 adoption of SFAS 157 as it applies to financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis did not have an impact on the Company s consolidated financial position, results of operations or cash flows. Long-Term Business Contracts Sales on long-term business contracts are recorded when products are shipped or customer acceptance has occurred and all other significant customer obligations have been met, per the terms of individual agreements. For contracts where relatively few deliverable units are produced over a period of more than two years, revenue and income are recognized at the completion of measurable tasks, rather than upon delivery of the individual units. Concentration of Credit Risk The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. Cash balances are held with financial institutions that have high credit ratings. The Company has not experienced any losses with respect to bank balances in excess of government-provided insurance. Operating Leases Some of the Company s operating leases contain predetermined fixed escalations of the minimum rentals during the term of the lease. For these leases, the Company recognizes the related rental expense on a straight-line basis over the life of the lease. Advertising Expense Advertising costs are charged to expense when incurred. Advertising expense recognized was $61,745 and $57,552 for the years ended, respectively. 13 (Continued)

15 (t) (u) Defined Benefit Pension Plans In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132R (SFAS 158). This statement requires companies to recognize the overfunded or underfunded status of its benefit plans, measured as the difference between the fair value of plan assets and the benefit obligation, as an asset or liability in its statement of financial position and to recognize changes in that funded status in OCI in the year in which the changes occur. SFAS 158 also requires the measurement date for plan assets and liabilities to coincide with the sponsor s year end. The recognition of an asset and liability related to the funded status provision was effective for the fiscal year ended March 31, The Company was also required to move its measurement date from December 31 to March 31 effective for the fiscal year ended March 31, The adoption of SFAS 158 did not have a material effect on the Company s consolidated financial statements. Recently Issued Accounting Standards In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities (SFAS 159), which provides a fair value option election that allows companies to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and liabilities, with changes in fair value recognized in earnings as they occur. SFAS 159 permits the fair value option election on an instrument by instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. The Company adopted SFAS 159 on April 1, 2008 but did not elect the fair value option for any qualifying financial instruments presented in the consolidated financial statements. In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R). This statement requires fair value measurement of all the assets acquired and liabilities assumed in a business combination, fair value measurement of consideration and contingent consideration, expense recognition for transaction and certain integration costs, recognition of the fair value of contingencies, and adjustments to income tax expense for changes in an acquirer s existing valuation allowances or uncertain tax positions that result from the business combination. SFAS 141R is effective for the Company with respect to business combination transactions completed after March 31, In April 2009, the FASB issued Staff Position FAS 141R-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (FSP FAS 141R-1), which amends SFAS 141R. Under FSP FAS 141R-1, an acquirer is required to recognize at fair value an asset acquired or a liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If the acquisition-date fair value cannot be determined, then the acquirer follows the recognition criteria in SFAS No. 5, Accounting for Contingencies. FSP FAS 141R-1 is effective as of the adoption date of SFAS 141R. 14 (Continued)

16 In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51 (SFAS 160), which establishes accounting and reporting standards for noncontrolling interests in consolidated subsidiaries (formerly minority interest). SFAS 160 also amends certain consolidation procedures for consistency with SFAS 141R. Under SFAS 160, noncontrolling interests are reported in the consolidated balance sheet as a separate component of equity. Changes in ownership interests where the parent retains a controlling interest are to be reported as transactions affecting equity. Prior to the effective date of SFAS 160, such transaction were reported as additional investment purchases (potentially resulting in recognition of additional assets) or as sales (potentially resulting in realized gains or losses). SFAS 160 is effective for the Company on April 1, 2009 and is applied prospectively, except that the presentation and disclosure requirements are applied retrospectively for all periods presented. In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities an amendment of SFAS No. 133 (SFAS 161), which requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for, and how derivative instruments and related hedge items affect an entity s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years beginning on or after November 15, 2008 and as such, the Company will adopt SFAS 161 on April 1, In May 2008, the FASB issued SFAS No The Hierarchy of Generally Accepted Accounting Principles (SFAS 162). This standard identifies sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. The Company does not believe SFAS 162 will change its current practices and thereby will not impact preparation of the consolidated financial statements. (3) Change in Reporting Entity On March 31, 2009, the Company sold 40% of its ownership in TBC to SGMA in exchange for 10 shares of the Company s common stock, effectively reducing the Company s ownership interest in TBC to 60%. The sale was recorded at historical cost. The Company and TBC are considered entities under the common control of SC as defined in Emerging Issues Task Force 02-5 Definition of Common Control in Relation to Financial Accounting Standards Board Statement No Therefore, the financial statements of the Company have been presented as if 60% of TBC was owned by the Company as of the beginning of the earliest period presented. As a result, common stock and beginning retained earnings were decreased as of April 1, 2007 by $168,450 and $12,134, respectively, and minority interest on the consolidated balance sheet increased by $180,584. In addition, minority interest expense increased and net income decreased by $13,388 for the year ended March 31, (4) Acquisitions On April 25, 2008, the Company acquired an office building with approximately 152,470 rentable square footage located in Washington, D.C. for approximately $76,000, including direct acquisition expenses of approximately $229, plus assumed other long-term liabilities of approximately $8, (Continued)

17 On June 25, 2008, the Company acquired an office building with approximately 299,540 rentable square footage located in Tempe, AZ for approximately $91,000, including direct acquisition expenses of approximately $302. On September 30, 2008, the Company acquired an office building with approximately 782,210 rentable square footage located in Miami, FL for approximately $75,000, including direct acquisition expenses of approximately $466, plus assumed long-term debt and other long-term liabilities of approximately $195,000. During 2008, TBC acquired two wholesale warehouses, as well as, seven franchise locations and two lube centers through an asset purchase program for approximately $4,000. On May 31, 2007, the Company acquired 32.5% of a business engaged in the manufacture and sale of wind turbine towers based in the state of Washington, with SC acquiring 17.5%, for approximately $1,600, including direct acquisition expenses of approximately $350. On August 17, 2007, the Company acquired 80% of a railcar leasing business based in Illinois, with SC acquiring 20%, for approximately $50,000, including direct acquisition expenses of approximately $950. During 2007, TBC acquired a wholesale distributor and 14 franchise locations through an asset purchase for approximately $13,800, including direct acquisition expenses of approximately $229. The acquisitions by the Company fit the strategic objective of the Company to grow its business. In accordance with SFAS No. 141, Business Combinations, the Company has applied purchase accounting to all of its acquisitions. The results of operations of the Company s business acquisitions have been included in the consolidated statements of income from their acquisition dates. The determination of the purchase prices for the Company s business acquisitions were made on the basis of, among other things, the revenues, profitability and projected growth rates of the acquired companies. The Company is in the process of finalizing purchase price adjustments related to the current year acquisitions. The net purchase price of all of the Company s acquisitions during the years ended March 31, 2009 and 2008, including direct acquisition costs, was $245,887 and $65,426, respectively. The Company allocated these amounts as follows: Working capital (deficiency), other than cash $ (8,576) (3,199) Property and equipment acquired 401,502 65,763 Identifiable intangible assets 55,553 2,422 Goodwill 290 9,408 Other noncurrent assets 145 Long-term debt and other long-term liabilities (202,882) (247) Minority interest liabilities (8,866) Purchase price, net of cash received $ 245,887 65, (Continued)

18 (5) Discontinued Operations In November 2007, the Company sold a wholly owned subsidiary that provided financing for insurance premiums for a gain of approximately $3,000, net of income taxes of $991. In March 2008, the Company sold a commercial office building located in Phoenix, AZ for a gain of approximately $32,000, net of income taxes of $21,512. The sales of these operations have been accounted for as discontinued operations. A summary of the operating results of the discontinued operations for the year ended March 31, 2008 is as follows: Manufacturing and other revenues $ 15,094 Income from operations before income taxes $ 225 Income taxes 98 Income from operations, net of income taxes 127 Gain on sales, net of income taxes 35,361 Income from discontinued operations, net of income taxes $ 35,488 (6) Inventories Inventories consist of the following: Raw materials $ 57,319 48,840 Work in process 5,713 6,837 Finished goods 1,784,199 1,293,020 Total $ 1,847,231 1,348,697 The Company reports inventories net of allowances for slow-moving and obsolete inventory of $21,493 and $2,499 at, respectively. In addition, the Company reduced inventory to the lower of cost or market by recording reductions in inventory values of $18,639 and $9,123 at March 31, 2009 and 2008, respectively. 17 (Continued)

19 (7) Finance Receivables Finance receivables, which include loans to public and private companies and consumer financing consist of the following: Finance receivables $ 698, ,628 Allowance for bad debts (12,017) (12,244) Less current portion (276,672) (285,484) $ 409, ,900 Finance receivables generally mature in three to four years and accrue interest at fixed rates ranging from 3.4% to 15.0%. Future minimum payments related to finance receivables in each of the five succeeding years are as follows: Year: 2009 $ 276, , , , ,595 Thereafter 105 $ 686,155 (8) Investments in Equity Securities Investments in equity securities as of include of the following: Marketable equity investments $ 9,778 31,876 Nonmarketable equity investments 22,940 25,677 $ 32,718 57,553 The cost basis of marketable equity securities amounted to $4,415 and $11,278 at March 31, 2009 and 2008, respectively. For the years ended, realized gains on marketable equity securities were $86 and $22,616, respectively, and realized losses on marketable equity securities were $0 and $6, respectively. The Company recorded changes in unrealized gains (losses) on available-for-sale marketable equity securities for the years ended were $(9,141) and $(3,554), net of $6,094 and $2,415 for income tax benefits, respectively. 18 (Continued)

20 In addition, the Company has certain investments in nonmarketable securities, representing interests in companies which are not publicly traded and independently determined market values are not available. These investments are recorded at cost and are adjusted for any other-than-temporary impairment. During the year ended March 31, 2009, the Company recorded other-than-temporary impairments on marketable equity securities of $4,080, net of income tax benefits of $2,720 and on nonmarketable equity securities of $2,566, net of income tax benefits of $2,043 and minority interest benefits of $1,011. No impairments were recorded during the year ended March 31, (9) Investments in Associated Companies and Related Parties (a) Investments in Associated Companies The Company has investments in associated companies that are accounted for using the equity method of accounting. As of, the carrying amount of investments in associated companies amounted to $801,990 and $709,479, respectively. The Company s share of income from associated companies amounted to $109,003 and $77,071, for the years ended, respectively. For the years ended, the Company received dividends from affiliates of $73,891 and $70,788, respectively. At March 31, 2009 and 2008, accounts payable to related parties, net includes amounts payable to associated companies aggregating $13,728 and $70,586, respectively. The summarized combined financial information of associated companies accounted for by the equity method at and for the years ended is presented below. Current assets $ 3,518,735 3,770,735 Noncurrent assets 2,079,583 2,238,310 Total assets $ 5,598,318 6,009,045 Current liabilities $ 2,463,561 2,864,779 Noncurrent liabilities 536, ,749 Total liabilities 2,999,637 3,587,528 Total stockholders equity 2,598,681 2,421,517 Total liabilities and stockholder s equity $ 5,598,318 6,009,045 Net sales $ 9,975,599 9,709,538 Gross profit 1,290,443 1,247,184 Net income 458, , (Continued)

21 The ten major associated companies accounted for by the equity method, which are included in the above summarized combined financial information, are Summit Stainless Steel, LLC (50% owned), Perennial Power Holdings, Inc. (49.99% owned), Cantex, Inc. (45% owned), Eryngium Limited (ownership increased from 32% in December 2007 to 35.64% in January 2008 to 36% in December 2008), SMS Construction and Mining Systems Ind. (21.84% owned), Arkansas Steel Associates, LLC (20% owned), V&M Star Partnership (13.629% owned), Pyramid Tubular Products, L.P. (51.8% owned as limited partnership interests), Leavitt Tube Company, LLC (40% owned) and SC Minerals America, Inc. (15.25% owned). (b) Related Parties The Company is involved in a significant number of sales and purchase transactions with SC and its affiliates. Included in total revenues are sales to SC and its affiliates for the years ended March 31, 2009 and 2008 of $1,324,167 and $1,407,609, respectively. The Company made approximately $1,261,000 and $1,056,000 in purchases from SC and its affiliates during the years ended March 31, 2009 and 2008, respectively. As of accounts payable to related parties, net consists of the following: Accounts receivable from: SC $ 43,851 91,495 SC subsidiaries 455, ,091 Associated companies of SC and the Company 17,985 11,456 Accounts payable to: SC (387,689) (243,761) SC subsidiaries (313,032) (256,446) Associated companies of SC and the Company (25,925) (23,808) $ (209,140) (8,973) 20 (Continued)

22 (10) Property and Equipment Property and equipment consist of the following at : Land $ 115,704 46,116 Buildings and improvements 580, ,169 Machinery and equipment 370, ,201 Office furniture and fixtures 51,683 46,318 Automobiles and trucks 10,700 10,419 Construction in progress 25,800 30,189 1,154, ,412 Less accumulated depreciation and amortization (253,455) (193,334) $ 901, ,078 The Company had assets under capital leases with a cost basis of $10,408 and $11,284 at March 31, 2009 and 2008, respectively. The accumulated deprecation related to these assets amounted to $5,200 and $4,298 at, respectively. The assets under capital lease were substantially all classified as buildings and improvements. Depreciation and amortization expense from continuing operations for property and equipment amounted to $72,130 and $52,359 for the years ended, respectively. For the years ended, subsidiaries of the Company recorded noncash impairment losses of $1,227 and $1,364, respectively, which related to buildings and improvements and machinery and equipment. The Company is a lessor of office space within buildings located in Arizona, California, Florida and Washington D.C. and of railcars under long-term operating leases. Assets under these agreements are included in property and equipment as buildings and improvements with cost and accumulated depreciation of $353,190 and $15,283, respectively, and as machinery and equipment with cost and accumulated depreciation of $66,192 and $4,692, respectively, at March 31, The minimum annual rentals for the next five years and thereafter are as follows: Year: 2009 $ 49, , , , ,602 Thereafter 109,838 $ 309, (Continued)

23 (11) Intangible Assets and Goodwill Intangible assets as of consist of the following: 2009 Useful Accumulated lives years Gross amortization Net Tradenames 5 30 $ 335,122 (40,252) 294,870 Customer relationships ,360 (32,773) 105,587 Franchise agreements 18 94,000 (17,647) 76,353 Vendor relationships ,306 (26,125) 12,181 Software ,180 (23,883) 7,297 In-place leases ,251 (9,449) 31,802 Above-market leases ,982 (13,517) 14,465 Leasing commissions ,241 (2,955) 10,286 Other ,025 (9,031) 6,994 $ 735,467 (175,632) 559, Useful Accumulated lives years Gross amortization Net Tradenames 5 30 $ 335,118 (27,809) 307,309 Customer relationships ,125 (22,894) 114,231 Franchise agreements 18 94,000 (12,425) 81,575 Vendor relationships ,306 (10,439) 27,867 Software ,006 (18,949) 7,057 In-place leases 5 2,054 (1,293) 761 Above-market leases ,530 (12,202) 13,328 Leasing commissions 3 5 1,826 (585) 1,241 Other ,879 (7,216) 7,663 $ 674,844 (113,812) 561,032 Amortization expense of intangible assets from continuing operations for the years ended March 31, 2009 and 2008 was $41,300 and $39,859, respectively. In addition, Hartz recorded a $15,443 impairment of intangible assets related to a vendor supply agreement in (Continued)

24 Annual amortization expense, which is based on the values of intangibles and their useful lives, for the next five years, is expected to be as follows: Year ending March 31: 2009 $ 40, , , , ,024 Goodwill changed during the years ended as follows: Balance at April 1 $ 571, ,860 TBC acquisitions adjustment of purchase price allocation (17,709) Hartz impairment (35,439) Acquisition earnout 28,448 TBC acquisitions wholesale distributor and franchise locations 3,884 Company acquisition wind turbine tower business 2,704 Company acquisition railcar leasing business 2,658 Other net changes 448 (1,580) Balance at March 31 $ 547, ,526 In 2008, Hartz performed its annual step one goodwill impairment test, which indicated that the carrying value of Hartz exceeded its estimated fair value. After completing the fair value estimates required under step two of the goodwill test procedures, Hartz recorded an impairment related to its goodwill in the amount of $35,439. As part of an acquisition made by the Company and SC in 2006, an interest purchase agreement was entered into which contained a contingent earnout payment that was based on annual earnings through March 31, Due to the performance of the acquired Company during 2008, an earnout liability, and corresponding increase in goodwill, was recorded in the amount of $28,448. (12) Commercial Paper and Notes Payable Commercial paper borrowings outstanding at had weighted average maturities of 25 and 30 days and interest rates averaging 1.19% and 3.14%, respectively. Under a support agreement between SC and SCOA, so long as any of the commercial paper is outstanding and unpaid, SC has agreed to advance the sums in the form of capital contributions such that the Company s shareholders equity shall not fall below a specified amount. 23 (Continued)