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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
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) March 16, 2000
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Commission File Number 33-64325
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REUNION INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 06-1439715
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(State of Incorporation) (I.R.S. Employer Identification No.)
300 WEYMAN PLAZA, SUITE 340
PITTSBURGH, PENNSYLVANIA 15236
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(Address of principal executive offices, including zip code)
(412) 885-5501
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(Registrant's telephone number, including area code)
62 SOUTHFIELD AVENUE
ONE STAMFORD LANDING, SUITE 208
STAMFORD, CT 06902
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(Address of former principal executive offices)
Page 1 of 5 pages.
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FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Current Report on Form 8-K contains forward-looking statements
as defined by Section 21E of the Securities Act of 1934, as amended,
concerning, but not limited to, the potential for the future issuance of
Reunion Industries, Inc. common stock, the application of purchase
accounting to and future amortization of any resulting goodwill from the
merger and acquisition described herein, the repayment terms of credit
facilities and management's beliefs regarding the adequacy of funds for
operating requirements and debt service over the next twelve months.
These forward-looking statements are dependent on future events, including
results of operations and market forces beyond the control of Reunion.
Note that all forward-looking statements involve risks and uncertainties
including, without limitation, factors which could cause the future
results and shareholder values to differ significantly from those
expressed in the forward-looking statements. In light of the risks and
uncertainties inherent in the forward-looking statements included herein,
the inclusion of such information should not be regarded as a
representation by Reunion or any other person that the forward-looking
statements will occur.
ITEM 2. Acquisition or Disposition of Assets.
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On March 16, 2000, Reunion Industries, Inc. (Reunion) and Chatwins
Group, Inc. (Chatwins) merged. Prior to the merger, Chatwins owned
approximately 37% of Reunion's issued and outstanding common stock. The
merger was approved by Reunion's board of directors in July 1999 and by
its stockholders in December 1999. Prior to the merger, Reunion was
primarily engaged in manufacturing high volume precision plastic products
and providing engineered plastic services. Chatwins manufactured and
marketed a broad range of fabricated and machined industrial parts and
products, including seamless steel pressure vessels, fluid power
cylinders, industrial cranes, leaf springs and storage racks. Such
manufacturing and marketing will be continued by Reunion.
In the merger, Reunion issued 9,500,000 shares of common stock to
holders of Chatwins' common stock. Cash was paid in lieu of issuing
fractional shares. The 1,450,000 shares of Reunion common stock
previously owned by Chatwins were retired in the merger, as were the
previously issued shares of Chatwins common stock. The merger agreement
also provides that up to an additional 500,000 shares of Reunion common
stock will be issued to former Chatwins common stockholders if the former
Chatwins businesses achieve specified performance levels in 2000.
Reunion will account for the merger as a purchase pursuant to APB 16,
"Business Combinations." Chatwins will be the acquirer for purposes of
applying purchase accounting to the merger. Therefore, Chatwins' assets
and liabilities will continue to be carried at their historical book
values after the merger, and approximately 63% of Reunion's assets and
liabilities, representing the percentage of Reunion common stock not
previously owned by Chatwins, will be revalued. The excess of the
purchase price over the fair value of the 63% of Reunion's assets and
liabilities to be revalued will be designated as goodwill to be amortized
over fifteen years.
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Reunion also acquired Stanwich Acquisition Corp. (d/b/a Kingway
Material Handling Company) (Kingway). Kingway manufactures gravity flow
storage racks and computer-assisted picking systems, primarily for
warehouse material handling applications. Reunion will continue such
manufacturing activities. Reunion will account for the merger as a
purchase pursuant to APB 16, "Business Combinations." The excess of the
purchase price over the fair value of Kingway's assets and liabilities, if
any, will be designated as goodwill to be amortized over fifteen years.
Simultaneously with the merger, Reunion entered into $72.5 million of
senior secured credit facilities with Bank of America and other lenders
(credit facilities). These credit facilities consist of a $39.0 million
revolving credit facility, a $25.8 million term loan A facility amortizing
in 84 equal monthly principal payments, a $5.0 million term loan B
facility amortizing in 36 equal monthly principal payments, and a $2.7
million capital expenditures facility. These facilities have a three-year
initial term and automatically renew for additional one-year increments
unless either party gives the other notice of termination at least 60 days
prior to the beginning of the next one-year term.
Proceeds from initial borrowings under the credit facilities totalled
$59.5 million. In the merger, $50.7 million of proceeds were used to
repay Reunion's credit facilities with The CIT Group/Business Credit, Inc.
totalling $19.3 million, repay Chatwins' existing credit facilities with
Bank of America totalling $5.2 million and retire $25.0 million of
Chatwins' 13% senior notes plus $1.2 million of related accrued interest.
Reunion used $7.4 million of proceeds in the Kingway acquisition which
included $0.1 million for Kingway's issued and outstanding common stock
and $7.3 million to partially repay Kingway's debt. Proceeds of $1.4
million were used to pay various merger fees and expenses, including
approximately $1.0 million paid to Bank of America. Reunion had
approximately $3.8 million of borrowing availability after the initial
borrowings. Reunion's management believes that its cash flow from
operations, together with these credit facilities, will be sufficient for
operating requirements, including capital expenditures and debt services,
over the next 12 months.
The credit facilities are collateralized by a first priority lien on
substantially all of the current and after-acquired assets of Reunion
including, without limitation, all accounts receivable, inventory,
property, plant and equipment, chattel paper, documents, instruments,
deposit accounts, contract rights and general intangibles.
The credit facilities require Reunion to comply with certain
affirmative and negative covenants and financial covenants, including
interest expense and indebtedness coverages. In addition, the facilities
contain limitations on stockholder and related party distributions. The
facilities require Reunion to pay the reasonable expenses incurred by the
lenders in connection with the facilities. Available borrowings under the
revolving credit facility are based upon a percentage of eligible
receivables and inventories.
In the merger, Reunion also assumed the obligations of Chatwins under
the indenture governing its approximately $25.0 million of remaining
senior notes. In the acquisition, Reunion also assumed approximately $3.0
million of Kingway's remaining debt.
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Holders of Chatwins preferred stock received Reunion 10% Series A
preferred stock in the merger with an initial aggregate redemption value
of approximately $9.0 million. Holders of Kingway preferred stock
received Reunion 15% Series B preferred stock in the acquisition with an
initial aggregate redemption value of approximately $6.8 million.
Dividends on the Reunion Series A preferred stock are senior to dividends
on its common stock but junior to dividends on its Series B preferred
stock.
ITEM 5. Other Events.
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On March 22, 2000, Reunion announced that, effective Thursday, March
23, 2000 at 9:30AM eastern time, its stock would begin trading on the
American Stock Exchange (AMEX) under the symbol RUN. Reunion moved to the
AMEX from the NASDAQ Small Cap (RUNI).
Reunion has relocated its corporate headquarters from Stamford,
Connecticut to Pittsburgh, Pennsylvania. Reunion also added Joseph C.
Lawyer and Kimball J. Bradley to its board of directors, increasing the
board to eight members.
ITEM 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
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(a) Financial Statements of Businesses Acquired
It is impractical at this time to provide the financial statements
required under this item for Chatwins Group, Inc. and Stanwich Acquisition
Corp. (d/b/a Kingway Material Handling Company). This information will be
filed by an amendment to this Current Report on Form 8-K as soon as
practicable but by no later than the required 75 days from March 16, 2000.
(b) Pro Forma Financial Information
It is impractical at this time to provide the pro forma financial
information required under this item for the events detailed in Item 2.
above. This information will be filed by an amendment to this Current
Report on Form 8-K as soon as practicable but by no later than the
required 75 days from March 16, 2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned, thereto duly authorized.
Date: March 30, 2000 REUNION INDUSTRIES, INC.
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By: /s/Joseph C. Lawyer
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Joseph C. Lawyer
President and Chief
Operating Officer
