FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission File Number 1-13123
METALS USA, INC.
(Exact name of Registrant as Specified in its Charter)
DELAWARE 76-0533626
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
THREE RIVERWAY, SUITE 600
HOUSTON, TEXAS 77056
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 965-0990
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
Number of shares of common stock outstanding at May 10, 1999: 38,156,404
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METALS USA, INC.
INDEX
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<CAPTION>
PART I. - FINANCIAL INFORMATION PAGE
----
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ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at March 31, 1999 (Unaudited) and December 31, 1998.........2
Unaudited Consolidated Statements of Operations for the three months
ended March 31, 1999 and 1998.......................................................3
Unaudited Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998.......................................................4
Condensed Notes to Unaudited Consolidated Financial Statements..........................5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...................................................10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......................16
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings...........................................................17
Item 5. Other Information...........................................................17
Item 6. Exhibits and Reports on Form 8-K............................................17
Signatures.............................................................................18
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1
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METALS USA, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................................................ $ 6.2 $ 9.3
Accounts receivable, net of allowance of $7.5 and $7.1 ............................................... 124.7 189.8
Inventories, net ..................................................................................... 332.7 343.7
Prepaid expenses and other ........................................................................... 12.9 16.2
--------- ------------
Total current assets .............................................................................. 476.5 559.0
Property and equipment, net ............................................................................. 181.3 173.2
Goodwill, net ........................................................................................... 268.3 267.2
Other assets, net ....................................................................................... 18.7 20.1
--------- ------------
Total assets ...................................................................................... $ 944.8 $ 1,019.5
========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ..................................................................................... $ 107.5 $ 107.5
Accrued liabilities .................................................................................. 32.6 40.1
Current portion of long-term debt .................................................................... 4.9 4.0
Income taxes payable ................................................................................. 1.6 --
--------- ------------
Total current liabilities ......................................................................... 146.6 151.6
Long-term debt, less current portion .................................................................... 423.6 502.6
Deferred income tax liability ........................................................................... 15.8 15.8
Other long-term liabilities ............................................................................. 6.5 7.9
--------- ------------
Total liabilities ................................................................................. 592.5 677.9
--------- ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par, 5,000,000 shares authorized, none issued and outstanding ................. -- --
Common stock, $.01 par, 203,122,914 shares authorized, 38,156,404 shares issued and outstanding ..... .4 .4
Additional paid-in capital ........................................................................... 261.2 261.2
Retained earnings .................................................................................... 90.7 80.0
--------- ------------
Total stockholders' equity ........................................................................ 352.3 341.6
--------- ------------
Total liabilities and stockholders' equity ........................................................ $ 944.8 $ 1,019.5
========= ============
</TABLE>
The accompanying notes are an integral part
of these unaudited consolidated financial statements.
2
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METALS USA, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Net sales ................................................... $ 422.4 $ 278.5
Operating costs and expenses:
Cost of sales ............................................. 314.5 214.6
Operating and delivery .................................... 44.4 26.0
Selling, general and administrative ....................... 31.0 18.1
Depreciation and amortization ............................. 4.9 3.0
------- -------
Operating income ............................................ 27.6 16.8
Other (income) expense:
Interest and securitization expense ....................... 9.6 4.8
Other (income) expense, net ............................... (.1) (.1)
------- -------
Income before income taxes .................................. 18.1 12.1
Provision for income taxes .................................. 7.4 4.9
------- -------
Net income .................................................. $ 10.7 $ 7.2
======= =======
Earnings per share ........................................ $ .28 $ .21
======= =======
Earnings per share-- assuming dilution .................... $ .28 $ .21
======= =======
Number of common shares used in the per share calculations:
Earnings per share ...................................... 38.2 33.8
======= =======
Earnings per share-- assuming dilution .................. 38.4 34.5
======= =======
</TABLE>
The accompanying notes are an integral part
of these unaudited consolidated financial statements.
3
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METALS USA, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 1998
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................... $ 10.7 $ 7.2
Adjustments to reconcile net income to net cash provided by (used
in) operating activities --
Provision for bad debts .......................................... 1.0 .6
Depreciation and amortization .................................... 4.9 3.0
Amortization of deferred financing costs ......................... .3 .1
Changes in operating assets and liabilities, net of business
acquisitions --
Accounts receivable ............................................ (21.3) (20.9)
Inventories .................................................... 17.6 (2.6)
Prepaid expenses and other assets .............................. 4.5 (3.8)
Accounts payable and accrued liabilities ....................... (11.2) 7.6
Income taxes payable ........................................... 1.6 1.2
Other ............................................................ .2 (.4)
------- -------
Net cash provided by (used in) operating activities .......... 8.3 (8.0)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets ....................................... .4 .3
Proceeds from securitization of receivables ........................ 87.0 --
Purchases of property and equipment ................................ (6.3) (2.9)
Purchase of businesses, net of acquired cash ....................... (14.3) (33.8)
------- -------
Net cash provided by (used in) investing activities .......... 66.8 (36.4)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of 8 5/8 % Senior Subordinated Notes ...................... -- 200.0
Net repayments on the Credit Facility .............................. (77.5) (139.4)
Net repayments on Industrial Revenue Bonds and other long-term
debt ................................................................. (.5) (1.9)
Deferred financing costs incurred .................................. (.2) (7.0)
Distributions by pooled companies prior to acquisition ............. -- (2.7)
------- -------
Net cash provided by (used in) financing activities .......... (78.2) 49.0
------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ................. (3.1) 4.6
CASH AND CASH EQUIVALENTS, beginning of period ....................... 9.3 7.3
------- -------
CASH AND CASH EQUIVALENTS, end of period ............................. $ 6.2 $ 11.9
======= =======
</TABLE>
The accompanying notes are an integral part
of these unaudited consolidated financial statements.
4
<PAGE>
METALS USA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Metals USA, Inc., a Delaware corporation, ("Metals USA") was founded in July
1996 to become a leading national value-added metals processor/service center in
the metals processing industry. Through March 31, 1999, Metals USA has acquired
numerous metal processing companies and businesses. Metals USA, together with
its wholly-owned subsidiaries, is referred to as the "Company."
BASIS OF PRESENTATION
INTERIM FINANCIAL INFORMATION -- The interim consolidated financial
statements included herein are unaudited; however, they include all adjustments
of a normal recurring nature which, in the opinion of management, are necessary
to present fairly the interim consolidated financial information as of and for
the periods indicated. All intercompany transactions and balances have been
eliminated. Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year-end. The results of operations for the
interim periods presented are not necessarily indicative of the results to be
expected for the entire year.
The information contained in the following notes to the accompanying
consolidated financial statements is condensed from that which would appear in
the annual audited financial statements; accordingly, the financial statements
included herein should be reviewed in conjunction with the Company's audited
consolidated financial statements and related notes thereto contained in the
annual report to stockholders filed with the Securities and Exchange Commission
on Form 10-K ("Form 10-K"). Any capitalized terms used but not specifically
defined herein have the same meaning given to them in the Form 10-K.
USE OF ESTIMATES AND ASSUMPTIONS -- The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect (i) the reported amounts of assets
and liabilities, (ii) the disclosure of contingent assets and liabilities known
to exist as of the date the financial statements are published and (iii) the
reported amount of net sales and expenses recognized during the periods
presented. The Company reviews all significant estimates affecting its
consolidated financial statements on a recurring basis and records the effect of
any necessary adjustments prior to their publication. Adjustments made with
respect to the use of estimates often relate to improved information not
previously available. Uncertainties with respect to such estimates and
assumptions are inherent in the preparation of financial statements. The
accompanying consolidated balance sheets include preliminary allocations of the
respective purchase price paid for the companies acquired using the "purchase"
method of accounting and, accordingly, are subject to final adjustment.
2. EARNINGS PER SHARE
The number of shares of common stock used in the computation of Earnings per
Share excludes the potential dilution that could occur if securities and other
contracts to issue common stock were exercised or converted into common stock.
The number of shares of common stock used in the computation of Earnings per
Share -- Assuming Dilution reflects the potential dilution that could occur if
securities and other contracts to issue common stock were exercised or converted
into common stock after taking into account the methodologies prescribed by SFAS
No. 128. In the event the conversion of common stock equivalents is
anti-dilutive, such shares are not included. The computations result from
dividing income available to common stockholders by the applicable weighted
average number of common shares outstanding during the period.
5
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METALS USA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The number of shares used in the per share calculations consists of the
following:
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1999 1998
------------ ------------
(IN MILLIONS)
<S> <C> <C>
Number of shares used in computing earnings per share
(weighted-average shares) ............................ 38.2 33.8
Effect of dilutive securities:
Stock options ........................................ -- .7
Convertible securities ............................... .2 --
------------ ------------
Number of shares used in computing earnings per share --
assuming dilution .................................... 38.4 34.5
============ ============
</TABLE>
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ----------
(UNAUDITED)
<S> <C> <C>
Raw materials --
Aluminum building products segment ................................ $ 12.0 $ 12.3
Flat-rolled segment ............................................... 60.5 69.4
Heavy carbon segment .............................................. 150.4 156.3
Specialty metals segment .......................................... 68.7 68.2
---------- ----------
Total raw materials ............................................. 291.6 306.2
---------- ----------
Work-in-process and finished goods --
Aluminum building products segment ................................ 16.9 16.8
Flat-rolled segment ............................................... 20.9 17.7
Heavy carbon segment .............................................. .4 .4
Specialty metals segment .......................................... 2.9 3.5
---------- ----------
Total work-in-process and finished goods ........................ 41.1 38.4
---------- ----------
Less-- LIFO reserve .................................................. -- (.9)
---------- ----------
Total ............................................................. $ 332.7 $ 343.7
========== ==========
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of the following:
MARCH 31, DECEMBER 31,
1999 1998
------------ ------------
(UNAUDITED)
Borrowings under the Credit Facility ........... $ 192.0 $ 270.0
8 5/8 % Senior Subordinated Notes .............. 200.0 200.0
Industrial Revenue Bonds (various issues) ...... 26.0 26.1
Obligations under capital leases and other ..... 10.5 10.5
------------ ------------
428.5 506.6
Less-- Current portion ......................... (4.9) (4.0)
------------ ------------
$ 423.6 $ 502.6
============ ============
6
<PAGE>
METALS USA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The Notes call for semi-annual interest payments on February 15 and August
15 of each year, beginning August 15, 1998 and mature on February 15, 2008. The
Notes are redeemable at the option of the Company, in whole or in part, at any
time on or after February 15, 2003, at redemption rates stated in the indenture
governing the Notes (the "Indenture") together with accrued and unpaid interest
to the date of redemption. Notwithstanding the foregoing, at any time on or
prior to February 15, 2001, the Company may redeem up to 35% of the aggregate
principal amount of the Notes originally issued with the net proceeds of one or
more offerings of the common stock of the Company, at a redemption price equal
to 108.625% of the principal amount thereof, plus accrued and unpaid interest to
the date of such redemption, provided that at least 65% of the aggregate
principal amount of Notes originally issued remains outstanding immediately
after such redemption. The Notes are guaranteed by substantially all of the
Company's current and future subsidiaries, and contain certain covenants
restricting additional indebtedness, liens, transactions with affiliates, asset
sales, investments and mergers and acquisitions of subsidiaries. The Notes are
subordinate to borrowings under the Credit Facility and will rank pari passu in
right of payment with all other future subordinated debt of the Company and will
rank senior to other indebtedness that expressly provides that it is
subordinated in right of payment to the Notes.
The Credit Facility matures in February 2003, bears interest at the bank's
prime rate or LIBOR, at the Company's option, plus an applicable margin based on
the ratio of funded debt to cash flows (as defined). The weighted average
interest rate for the three months ended March 31, 1999 was 7.0%. An annual
commitment fee is payable on any unused portion of the Credit Facility. The
commitment fee varies between 1/2% and 1/4% per annum based upon certain
leverage ratios as defined in the agreement. The Credit Facility is used to fund
acquisitions, make capital expenditures, refinance debt of the companies
acquired and for general working capital requirements. Under the terms of the
Credit Facility, the Company is required to comply with various affirmative and
negative covenants including: (i) the maintenance of certain financial ratios,
(ii) restrictions on additional indebtedness, (iii) restrictions on liens,
guarantees and dividends, (iv) obtaining the lenders' consent with respect to
certain individual acquisitions, and (v) the maintenance of a specified level of
consolidated net worth. In addition, the Company's Credit Facility and the
Indenture include restrictions on the ability of the Company to pay dividends.
Borrowings under the Credit Facility are secured by the pledge of all of the
capital stock of each of the Company's material subsidiaries (as defined).
At March 31, 1999, $158.0 was available to the Company under the Credit
Facility. As of May 10, 1999, the Company had outstanding borrowings of $190.5
and $159.5 was available for use under this facility.
5. ACCOUNTS RECEIVABLE SECURITIZATION FACILITY
On January 21, 1999, the Company entered into a three-year agreement (the
"Receivable Securitization Agreement") to sell, on a revolving basis, through
its wholly-owned subsidiary, Metals Receivable Corporation ("MRC"), an undivided
interest in a designated pool of its trade accounts receivable to a commercial
bank ("Purchaser"). The maximum undivided interest in MRC's receivable portfolio
that may be purchased pursuant to this agreement is $100.0. The Company, as
agent for Purchaser, retains collection and administrative responsibilities for
the participating interests sold. As collections reduce the receivables included
in MRC's receivable portfolio, the Company may sell additional undivided
interests in new receivables to MRC. The amount of the undivided interest in
MRC's receivable portfolio that is sold typically will change monthly depending
upon the level of defined eligible receivables available for sale each month
adjusted by certain defined ratios. From month to month, the amount by which
MRC's receivable portfolio exceeds the undivided interest purchased will vary.
The Company expects such amount will range between $20.0 and $30.0. The
unpurchased portion of the MRC receivable portfolio is a restricted asset and
effectively collateral for the benefit of the Purchaser. At March 31, 1999, the
unpurchased portion of the MRC receivable portfolio is $29.7 million and is
included in accounts receivable on the consolidated balance sheet.
The Company recorded $.9 of expense attributable to the Receivable
Securitization Agreement for the three months ended March 31, 1999.
7
<PAGE>
METALS USA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
6. ACQUISITIONS
During the three months ended March 31, 1999, the Company acquired the
businesses of Southwest Steel in Madison, Illinois and Premier Steel in
Shreveport, Louisiana, with annual net sales of approximately $50.0 and $15.0,
respectively, for cash consideration of approximately $13.2 and the assumption
of indebtedness of approximately $1.1.
7. SEGMENT AND RELATED INFORMATION
The Company has four reportable segments with each segment processing and
distributing distinct products for different customer bases. Each segment is
managed separately by product group teams focused on improving and expanding
each segment's operations. The four operating segments are: the Heavy Carbon
Steel Group, the Flat Rolled Steel Group, the Specialty Metals Group and the
Aluminum Building Products Group.
The following table shows summarized financial information concerning the
Company's reportable segments.
<TABLE>
<CAPTION>
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------------------------
HEAVY ALUMINUM CORPORATE,
CARBON FLAT ROLLED SPECIALTY BUILDING ELIMINATIONS
STEEL STEEL METALS PRODUCTS AND OTHER TOTAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1999:
Net sales ................................. $ 159.8 $ 138.4 $ 104.2 $ 26.0 $ (6.0) $ 422.4
Operating income (loss) ................... 14.2 7.8 6.4 1.3 (2.1) 27.6
Total assets .............................. 300.0 179.8 152.4 83.0 229.6 944.8
Capital expenditures ...................... 3.2 2.1 .5 .4 .1 6.3
Depreciation and amortization ............. 1.8 .9 .7 .5 1.0 4.9
1998:
Net sales ................................. $ 102.9 $ 87.8 $ 72.5 $ 15.3 $ -- $ 278.5
Operating income (loss) ................... 7.2 5.0 5.9 .8 (2.1) 16.8
Total assets .............................. 180.0 137.3 155.9 40.5 160.0 673.7
Capital expenditures ...................... 1.3 1.1 .2 .2 .1 2.9
Depreciation and amortization ............. .9 .5 .6 .2 .8 3.0
</TABLE>
8. SUPPLEMENTAL INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
THREE MONTHS ENDED
MARCH 31,
-------------------
1999 1998
-------- --------
Supplemental cash flow information:
Cash paid for interest ................................. $ 13.0 $ 2.6
Cash paid for income taxes ............................. 2.0 2.8
Non-cash investing and financing activities:
Acquisition of businesses:
Fair value of assets acquired .......................... $ 17.1 $ 145.3
Consideration given:
Cash paid ............................................ 14.9 40.7
Stock issued ......................................... -- 38.5
Notes issued ......................................... -- --
-------- --------
Liabilities assumed .................................... $ 2.2 $ 66.1
======== ========
8
<PAGE>
METALS USA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
9. COMMITMENTS AND CONTINGENCIES
From time to time, certain subsidiaries of the Company may be involved in a
variety of claims, lawsuits and other disputes arising in the ordinary course of
business. The Company believes the resolution of these matters and the
incurrence of their related costs and expenses should not have a material
adverse effect on the Company's consolidated financial position, results of
operations or liquidity.
9
<PAGE>
METALS USA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS REPORT ON FORM 10-Q CONTAINS STATEMENTS WHICH CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS CAN BE IDENTIFIED BY THE USE OF
FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES," "EXPECTS," "MAY," "ESTIMATES,"
"WILL," "SHOULD," "PLANS" OR "ANTICIPATES" OR THE NEGATIVE THEREOF OR OTHER
VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR BY DISCUSSIONS OF STRATEGY.
READERS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE SIGNIFICANT RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF ANY NUMBER OF FACTORS, MOST OF WHICH
ARE BEYOND THE CONTROL OF MANAGEMENT. THESE FACTORS INCLUDE GENERAL ECONOMIC AND
BUSINESS CONDITIONS, NEW OR MODIFIED STATUTORY OR REGULATORY REQUIREMENTS,
CHANGING PRICES AND MARKET CONDITIONS, AND THE EFFECTIVENESS OF MANAGEMENT'S
STRATEGIES AND DECISIONS. NO ASSURANCE CAN BE GIVEN THAT THESE ARE ALL OF THE
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THE
FORWARD-LOOKING STATEMENTS.
The following should be read in conjunction with the response to Part I,
Item 1 of this Report and the Company's audited consolidated financial
statements contained in the Form 10-K. Any capitalized terms used but not
defined in this Form 10-Q have the same meaning given to them in the Form 10-K.
RESULTS OF OPERATIONS
SEGMENT RESULTS -- THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO MARCH 31, 1998
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------------------------------
OPERATING OPERATING
NET COSTS AND INCOME CAPITAL
SALES % EXPENSES % (LOSS) % EXPENDITURES %
------ ----- --------- ----- --------- ----- ------------ -----
1999: (DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Heavy Carbon .............................. $159.8 37.8% $ 145.6 36.9% $ 14.2 51.4% $ 3.2 50.9%
Flat Rolled ............................... 138.4 32.8% 130.6 33.1% 7.8 28.3% 2.1 33.3%
Specialty Metals .......................... 104.2 24.7% 97.8 24.8% 6.4 23.2% .5 7.9%
Aluminum Building Products ................ 26.0 6.2% 24.7 6.3% 1.3 4.7% .4 6.3%
Corporate, eliminations and other ......... (6.0) (1.5)% (3.9) (1.1)% (2.1) (7.6)% .1 1.6%
====== ===== ========= ===== ========= ===== ============ =====
Total .................................. $422.4 100.0% $ 394.8 100.0% $ 27.6 100.0% $ 6.3 100.0%
====== ===== ========= ===== ========= ===== ============ =====
1998:
Heavy Carbon .............................. $102.9 37.0% $ 95.7 36.6% $ 7.2 42.9% $ 1.3 44.9%
Flat Rolled ............................... 87.8 31.5% 82.8 31.6% 5.0 29.8% 1.1 37.9%
Specialty Metals .......................... 72.5 26.0% 66.6 25.4% 5.9 35.1% .2 6.9%
Aluminum Building Products ................ 15.3 5.5% 14.5 5.5% 0.8 4.8% .2 6.9%
Corporate, eliminations and other ......... -- --% 2.1 .9% (2.1) (12.6)% .1 3.4%
====== ===== ========= ===== ========= ===== ============ =====
Total .................................. $278.5 100.0% $ 261.7 100.0% $ 16.8 100.0% $ 2.9 100.0%
====== ===== ========= ===== ========= ===== ============ =====
</TABLE>
HEAVY CARBON STEEL GROUP. Net sales increased $56.9 million, or 55.3%, from
$102.9 million for the three months ended March 31, 1998 to $159.8 million for
the three months ended March 31, 1999. The net sales attributable to
acquisitions completed after the first quarter of 1998 contributed substantially
all of the increase. Average realized prices for steel products decreased
approximately 11.5% for the three months ended March 31, 1999 compared to the
three months ended March 31, 1998. Material shipments increased 75.5% for the
three months ended March 31, 1999 compared to the three months ended March 31,
1998. Acquisitions completed after the first quarter of 1998 accounted for
substantially all of this increase. Net sales on a "same store" basis decreased
by 11.4%, due in roughly equal parts to lower average realized prices and
shipments, as the Company attempted to maintain its normal product margins at
the expense of lower margin business. Operating costs and expenses increased
$49.9 million, or 52.1%, from $95.7 million for the three months ended March 31,
1998 to $145.6 million for the three months ended March 31, 1999. Operating
costs and expenses as a percentage of net sales decreased from 93.0% for the
three months ended March 31, 1998 to 91.1% for the three months ended March 31,
1999. This percentage decrease was primarily due to lower cost of raw material.
Operating income increased by $7.0 million, or 97.2%, from $7.2 million for the
three months ended March 31, 1998 to $14.2 million for the three months ended
10
<PAGE>
METALS USA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
March 31, 1999. Operating income as a percentage of net sales increased from
7.0% for the three months ended March 31, 1998 to 8.9% for the three months
ended March 31, 1999. This percentage increase was due to increased shipments of
higher margin and processed material, offset by lower average realized prices.
FLAT ROLLED STEEL GROUP. Net sales increased $50.6 million, or 57.6%, from
$87.8 million for the three months ended March 31, 1998 to $138.4 million for
the three months ended March 31, 1999. The net sales attributable to
acquisitions completed after the first quarter of 1998 contributed 69.1% of the
increase. Average realized prices for steel products decreased approximately
5.3% for the three months ended March 31, 1999 compared to the three months
ended March 31, 1998. Material shipments increased 48.8% for the three months
ended March 31, 1999 compared to the three months ended March 31, 1998.
Acquisitions completed after the first quarter of 1998 accounted for 49.9% of
this increase. Net sales on a "same store" basis increased by 17.8%, due
primarily to a 24.4% increase in shipments, partially offset by lower average
realized prices. Costs and expenses increased $47.8 million, or 57.7%, from
$82.8 million for the three months ended March 31, 1998 to $130.6 million for
the three months ended March 31, 1999. Operating costs and expenses were stable
as a percentage of net sales, increasing marginally from 94.3% for the three
months ended March 31, 1998 to 94.4% for the three months ended March 31, 1999.
Operating income increased by $2.8 million, or 56.0%, from $5.0 million for the
three months ended March 31, 1998 to $7.8 million for the three months ended
March 31, 1999. Operating income as a percentage of net sales decreased
marginally from 5.7% for the three months ended March 31, 1998 to 5.6% for the
three months ended March 31, 1999.
SPECIALTY METALS GROUP. Net sales increased $31.7 million, or 43.7%, from
$72.5 million for the three months ended March 31, 1998 to $104.2 million for
the three months ended March 31, 1999. The net sales attributable to
acquisitions completed after the first quarter of 1998 contributed substantially
all of the increase. Net sales on a "same store" basis increased 1.9%, due
primarily to increased shipments of non-aerospace products. Costs and expenses
increased $31.2 million, or 46.8%, from $66.6 million for the three months ended
March 31, 1998 to $97.8 million for the three months ended March 31, 1999.
Operating costs and expenses as a percentage of net sales increased from 91.9%
for the three months ended March 31, 1998 to 93.9% for the three months ended
March 31, 1999. This percentage increase was primarily due to lower realized
prices and shipments primarily attributable to aerospace products such as
titanium and aluminum. Operating income increased by $.5 million, or 8.5%, from
$5.9 million for the three months ended March 31, 1998 to $6.4 million for the
three months ended March 31, 1999. This increase was principally due to the
acquisitions completed after the first quarter of 1998. Operating income as a
percentage of net sales decreased from 8.1% for the three months ended March 31,
1998 to 6.1% for the three months ended March 31, 1999. This percentage decrease
was due to lower realized prices and shipments as described above.
ALUMINUM BUILDING PRODUCTS. Net sales increased $10.7 million, or 69.9%,
from $15.3 million for the three months ended March 31, 1998 to $26.0 million
for the three months ended March 31, 1999. The increase in net sales is
principally due to the acquisitions completed after the first quarter of 1998.
Net sales on a "same store" basis increased approximately 10.0%, due primarily
to increased shipments. Operating costs and expenses increased $10.2 million, or
70.3%, from $14.5 million for the three months ended March 31, 1998 to $24.7
million for the three months ended March 31, 1999. Operating costs and expenses
as a percentage of net sales were stable, increasing marginally from 94.8% for
the three months ended March 31, 1998 to 95.0% for the three months ended March
31, 1999. Operating income increased by $.5 million, or 62.5%, from $.8 million
for the three months ended March 31, 1998 to $1.3 million for the three months
ended March 31, 1999. This increase was principally due to the contributions of
the acquisitions completed after the first quarter of 1998. Operating income as
a percentage of net sales decreased from 5.2% for the three months ended March
31, 1998 to 5.0% for the three months ended March 31, 1999.
CORPORATE AND OTHER. This category reflects certain administrative costs and
expenses management has not allocated to its industry segments. The negative net
sales amount represents the elimination of intercompany sales. Operating loss
was unchanged at $2.1 million for the three months ended March 31, 1998 and
1999.
11
<PAGE>
METALS USA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE
MONTHS ENDED MARCH 31, 1998
THREE MONTHS ENDED MARCH 31,
-----------------------------------
1999 % 1998 %
------ ------ ------ ------
(IN MILLIONS, EXCEPT PERCENTAGES)
Net sales ............................... $422.4 100.0% $278.5 100.0%
Cost of sales .......................... 314.5 74.5% 214.6 77.1%
Operating and delivery ................. 44.4 10.5% 26.0 9.3%
Selling, general and administrative .... 31.0 7.3% 18.1 6.5%
Depreciation and amortization .......... 4.9 1.2% 3.0 1.1%
------ ------ ------ ------
Operating income ........................ 27.6 6.5% 16.8 6.0%
Interest and securitization expense .... 9.6 2.3% 4.8 1.7%
Other (income) expense, net ............ (.1) -- % (.1) --%
------ ------ ------ ------
Income before income taxes .............. $ 18.1 4.2% $ 12.1 4.3%
====== ====== ====== ======
NET SALES. Net sales increased $143.9 million, or 51.7%, from $278.5 million
for the three months ended March 31, 1998 to $422.4 million for the three months
ended March 31, 1999. The increase in net sales was principally due to
acquisitions completed after the first quarter of 1998.
COST OF SALES. Cost of sales increased $99.9 million, or 46.6%, from $214.6
million for the three months ended March 31, 1998, to $314.5 million for the
three months ended March 31, 1999. The increase in cost of sales was principally
due to the acquisitions described above. As a percentage of net sales, cost of
sales decreased from 77.1% for the three months ended March 31, 1998 to 74.5%
for the three months ended March 31, 1999. This percentage decrease was
primarily due to lower cost of raw materials.
OPERATING AND DELIVERY. Operating and delivery expenses increased $18.4
million, or 70.8%, from $26.0 million for the three months ended March 31, 1998
to $44.4 million for the three months ended March 31, 1999. The increase in
operating and delivery expenses was principally due to the acquisitions
described above. As a percentage of net sales, operating and delivery expenses
increased from 9.3% for the three months ended March 31, 1998 to 10.5% for the
three months ended March 31, 1999. This percentage increase was primarily due to
costs being spread over lower net sales primarily due to lower average realized
prices.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased $12.9 million, or 71.3%, from $18.1 million for the three
months ended March 31, 1998 to $31.0 million for the three months ended March
31, 1999. This increase in selling, general and administrative expenses was
primarily attributable to the acquisitions described above and, to a lesser
extent, increased volumes of product shipments. As a percentage of net sales,
selling, general and administrative expenses increased from 6.5% for the three
months ended March 31, 1998 to 7.3% for the three months ended March 31, 1999.
This percentage increase was primarily due to costs being spread over lower net
sales primarily due to lower average realized prices.
OPERATING INCOME. Operating income increased $10.8 million, or 64.3%, from
$16.8 million for the three months ended March 31, 1998 to $27.6 million for the
three months ended March 31, 1999. The increase in operating income was
attributable to the acquisitions completed after the first quarter of 1998. As a
percentage of net sales, operating income increased from 6.0% for the three
months ended March 31, 1998 to 6.5% for the three months ended March 31, 1999.
This percentage increase was primarily due to lower cost of raw materials during
the three months ended March 31, 1999.
INTEREST AND SECURITIZATION EXPENSE. Interest and securitization expense
increased $4.8 million, from $4.8 million for the three months ended March 31,
1998 to $9.6 million for the three months ended March 31, 1999. The increase in
interest expense was primarily due to increased borrowings attributable to the
debt assumed and the cash portion of the purchase price paid in connection with
acquisitions.
12
<PAGE>
METALS USA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OTHER (INCOME) EXPENSE. Other (income) expense was unchanged at $.1 million
for the three months ended March 31, 1998 and 1999.
PROVISION FOR INCOME TAXES. The Company's provision for income taxes differs
from the federal statutory rate principally due to state income taxes (net of
federal income tax benefit) and the non-deductibility of the amortization of
goodwill attributable to certain acquisitions.
FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES
The Company generated $8.3 million in net cash from operating activities and
used $8.0 million in net cash for operating activities for the three months
ended March 31, 1999 and 1998, respectively. Net cash provided by investing
activities was $66.8 million and net cash used for investing activities was
$36.4 million for the three months ended March 31, 1999 and 1998, respectively.
The cash provided from investing activities during the three months ended March
31, 1999 included $87.0 million from the securitization of accounts receivable
offset by cash used for acquisitions and capital expenditures. Net cash used for
financing activities was $78.2 million and net cash provided by financing
activities was $49.0 million for the three months ended March 31, 1999 and 1998,
respectively. For the three months ended March 31, 1999, the cash used for
financing activities consisted primarily of the repayment of $77.5 million of
borrowings on the Credit Facility. At December 31, 1998, the Company had cash of
$9.3 million, working capital of $407.4 million and total debt of $506.6
million. At March 31, 1999, the Company had cash of $6.2 million, working
capital of $329.9 million and total debt of $428.5 million. The decline in
working capital and total indebtedness is principally due to the accounts
receivable securitization transaction described below. As of May 10, 1999, the
Company had outstanding borrowings under the Credit Facility of $190.5 million,
leaving $159.5 million available for use.
The Company anticipates that its cash flow from operations (excluding
acquisition requirements) will be sufficient to meet the Company's normal
working capital and debt service requirements for at least the next several
years. The Company intends to retain all of its earnings to finance the
expansion of its existing business and for general corporate purposes, including
future acquisitions, and does not anticipate paying any cash dividends on its
common stock for the next several years. In addition, the Company's Credit
Facility and the Indenture include restrictions on the ability of the Company to
pay dividends.
INVESTING ACTIVITIES
During the three months ended March 31, 1999, the Company acquired the
businesses of Southwest Steel in Madison, Illinois and Premier Steel in
Shreveport, Louisiana, with annual net sales of approximately $50.0 million and
$15.0 million, respectively, for cash consideration of approximately $13.2
million and the assumption of indebtedness of approximately $1.1 million.
On January 21, 1999, the Company entered into a three-year agreement (the
"Receivable Securitization Agreement") to sell, on a revolving basis, through
its wholly-owned subsidiary, Metals Receivable Corporation ("MRC"), an undivided
interest in a designated pool of its trade accounts receivable to a commercial
bank ("Purchaser"). The maximum undivided interest in MRC's receivable portfolio
that may be purchased pursuant to this agreement is $100.0. The Company, as
agent for Purchaser, retains collection and administrative responsibilities for
the participating interests sold. As collections reduce the receivables included
in MRC's receivable portfolio, the Company may sell additional undivided
interests in new receivables to MRC. The amount of the undivided interest in
MRC's receivable portfolio that is sold typically will change monthly depending
upon the level of defined eligible receivables available for sale each month
adjusted by certain defined ratios. From month to month, the amount by which
MRC's receivable portfolio exceeds the undivided interest purchased will vary.
The Company expects such amount will range between $20.0 and $30.0. The
unpurchased portion of the MRC receivable portfolio is a restricted assets and
effectively collateral for the benefit of the Purchaser. At March 31, 1999, the
unpurchased portion of the MRC portfolio is $29.7 million.
The Company intends to continue to pursue acquisition opportunities. The
Company expects to fund future acquisitions through the issuance of additional
common stock, borrowings, including use of amounts available under
13
<PAGE>
METALS USA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
the Credit Facility, and cash flow from operations. Capital expenditures for
equipment and expansion of facilities are expected to be funded from cash flow
from operations and supplemented as necessary by borrowings from the Credit
Facility or other sources of financing. To the extent the Company funds a
significant portion of the consideration for future acquisitions with cash, it
may have to increase the amount of the Credit Facility or obtain other sources
of financing, as discussed above.
The Company has an effective Shelf Registration Statement relating to the
issuance of up to 10,000,000 shares of common stock to be issued in connection
with future acquisitions. Approximately 7,231,423 shares are available under
this registration statement for use in connection with future acquisitions.
FINANCING ACTIVITIES
The Company repaid approximately $77.5 million of outstanding borrowings on
the Credit Facility in the three months ended March 31, 1999 utilizing proceeds
from the securitization of accounts receivable.
TRENDS
The Company expects that depressed domestic steel prices will not improve
until the second half of 1999. Should domestic steel producers institute
"dumping" suits against the foreign steel importers the expected price increases
could be accelerated. The realization of any such price increases is dependent
upon the continued strength of the domestic economy in order to reduce
industry-wide inventory levels.
Although the Company's net sales for certain of its subsidiaries are
influenced by steel prices, its results of operations are primarily dependent
upon the volume and mix of value-added services and products provided to its
customers. The Company expects approximately 40% of its net sales to be affected
by the anticipated decline in steel prices. With respect to flat-rolled steel
products, a majority of the net sales are made pursuant to advance pricing
arrangements that range from six to twelve months, which effectively mitigate
the adverse impact of short-term price declines on those products. Additionally,
approximately 30% of the Company's net sales are attributable to aluminum,
titanium and other specialty metals, which have also experienced price
reductions. In general, however, the price reductions for these other metals
have been much less than for steel.
The Company purchases the majority of its raw materials, including steel,
from domestic suppliers, however, the Company has increased its purchases of
steel from foreign suppliers in the past twelve months to take advantage of
lower cost imported steel. Accordingly, for the reasons stated in the preceding
paragraph, together with the diversity of its product mix, customer and industry
base, and a pro active monitoring of its raw material inventories with the goal
of significantly improving its current inventory turnover ratios, the Company
does not expect the depressed domestic steel prices to have a material adverse
effect on its consolidated results of operations, financial position or
liquidity.
YEAR 2000 ISSUE
IMPACT OF YEAR 2000. As the century date occurs, computer programs,
computers and embedded microprocessors controlling equipment with date-sensitive
systems may recognize Year 2000 as 1900 or not at all. This inability to
recognize or properly handle the year 2000 date may result in computer system
failures or miscalculations of critical information as well as failures of
equipment using date-sensitive microprocessors. The Company's various financial
and operational information systems and, in some cases, embedded microprocessors
in certain machinery and equipment that have computer systems and applications
could be affected by the Year 2000 issue.
STATE OF READINESS. In early 1998, the Company formulated a plan to address
the Year 2000 issue. To date, the Company's primary focus has been on its own
internal systems, including all types of systems used by its subsidiaries in
their operations, dealing with the most critical systems first. The Company has
expanded this plan to included third parties to help complete this Year 2000
plan.
14
<PAGE>
METALS USA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Company is nearing completion of an assessment of its own systems,
including embedded microprocessors in certain machinery and equipment.
Currently, the Company is establishing timetables for the renovation of its
information systems, including modifying and upgrading software and developing
and purchasing new software, as necessary. The Company's goal is to complete the
testing and implementation phases by September 30, 1999.
During 1998, the Company began sending questionnaires to its customers,
vendors and other third parties with which the Company has material
relationships and expects to complete the assessment of such parties by the end
of September 1999. The Company is unable to estimate the costs that it may incur
to remedy the Year 2000 issues relating to such parties.
COSTS TO ADDRESS THE YEAR 2000 ISSUE. The Company's preliminary estimate is
that the cost of assessment, renovation and implementation of its internal
systems will range from approximately $.2 million to $.5 million, of which
approximately $.2 million has been incurred. These costs will consist primarily
of consultants and additional personnel costs. In addition, the Company expects
to incur capital expenditures of approximately $6.0 million for new hardware and
software to integrate and upgrade certain of its existing management information
systems. The Company expects that such costs will be funded through operating
cash flows. These estimates, based on currently available information, will be
updated as the Company continues its assessment and proceeds with renovation,
testing and implementation of its systems. These estimates may be adjusted upon
receipt of more information from the Company's vendors, customers and third
parties and upon design and implementation of the Company's contingency plan. In
addition, the availability and cost of consultants and other personnel trained
in this area could materially affect the estimated costs.
RISKS TO THE COMPANY. Many of the larger operations of the Company have
upgraded their primary operating systems to be Year 2000 compliant; however,
there can be no assurance that the Company will succeed in eliminating all Year
2000 issues. The following disclosure illustrates the Company's "most reasonably
likely, worst-case scenario," given current uncertainties. If the Company's
renovated or replaced information technology systems fail the testing phase, or
any software applications central to the Company's operations are overlooked in
the assessment or implementation phases, the Company could incur higher
administrative costs as a result of having to process financial information,
such as payroll, accounts payable and billings, manually or through alternative
microcomputer systems. If the Company's embedded microprocessors in certain
machinery and equipment are not made Year 2000 compliant, the Company could
experience additional costs by having to outsource certain metal processing for
its customers. If suppliers of commercial infrastructure such as electrical
power, natural gas, telecommunications, rail and marine transportation fail to
provide the Company with such services, the Company may be unable to provide its
normal full complement of services to its customers. If any one or a combination
of the foregoing uncertainties were to occur, the Company's business and
consolidated results of operations, financial condition and liquidity could be
adversely affected.
Furthermore, as a result of the Company's ongoing acquisition program, the
Company's assessment of its Year 2000 issue may change. As such, there can be no
assurance that the systems of newly acquired companies, vendors and other third
party relationships on which the Company's future acquisitions may rely will be
made Year 2000 compliant in a timely manner.
CONTINGENCY PLAN. The Company is developing a comprehensive contingency plan
to address Year 2000 issues with respect to the Company's internal information
technology systems and those of its customers, vendors and other third parties.
The Company's contingency plans will include the use of vendors and other third
parties that are Year 2000 compliant and the use of alternative data processing
systems or temporary manual information systems as necessary. The contingency
plan is expected to be completed and approved by management within the next
three months.
15
<PAGE>
ITEM 3. QUANTTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the Company is exposed to market risk,
primarily from changes in interest rates. The Company continually monitors
exposure to market risk and develops appropriate strategies to manage this risk.
Accordingly, the Company may enter into certain derivative financial instruments
such as interest rate swap agreements. The Company does not use derivative
financial instruments for trading or to speculate on changes in interest rates.
INTEREST RATE EXPOSURE
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's long-term debt. At March 31, 1999, approximately
44.8% ($192.0 million) of the long-term debt was subject to variable interest
rates. The Company entered into two interest rate swap agreements in 1998 to
reduce exposure to interest rate changes. These agreements fixed interest rates
for two years on $125.0 million of the $192.0 million of variable interest
long-term debt. The effect of these agreements was to decrease the Company's
exposure to variable interest rates to $67.0 million of long-term debt. The
detrimental effect of a hypothetical 100 basis point increase in interest rates
would be to reduce income before taxes by $.7 million. At March 31, 1999, the
fair value of the Company's fixed rate debt is approximately $232.5 million
based upon discounted future cash flows using current market prices and the fair
value of the interest rate swap agreements was $.1 million.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any litigation that management considers to be
of a material nature.
ITEM 5. OTHER INFORMATION
On April 22, 1999, the Company announced that the Board of Directors had
approved a stock repurchase plan for up to $25.0 million of the Company's Common
Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
21 List of Subsidiaries of the Company
27 Financial Data Schedule
B. REPORTS ON FORM 8-K:
None.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, who has signed this report on behalf of
the Registrant and as the principal accounting officer of the Registrant.
METALS USA, INC.
By:\s\ TERRY L. FREEMAN
Terry L. Freeman
Vice President, Corporate Controller
Date: May 13, 1999 and Chief Accounting Officer
18
EXHIBIT 21
METALS USA, INC.
SUBSIDIARY LIST
Aerospace Specification Metals, Inc.
Affiliated Metals Company
Aluminum Building Systems
Faitoute Steel Corporation
Federal Bronze Alloys Inc.
Flagg Steel Co.
Forest Manufacturing, Inc.
Fullerton Industries, Inc.
GSBC, Inc. (dba Geneva Steel Blanking)
Harvey Titanium, Ltd.
Industrial Metals, Inc.
Independent Metals Co.
Interstate Steel Supply Company
Interstate Steel Supply Company of Maryland
Intsel Steel
Jeffreys Steel Company, Inc.
Krohn Steel Service Center, Inc.
The Levinson Steel Company
Meier Metal Servicenters, Inc.
Metalmart, Inc.
Metals USA Management Co., L.P.
MUSA GP, Inc.
MUSA LP, Inc.
Metals USA Services Corporation
Metals Receivables Corporation
Metals USA Finance Corporation
National Manufacturing, Inc.
Pacific Metal Company
Professional Metals, Inc.
Queensboro Steel Corporation
Royal Aluminum, Inc.
R.J. Fabricating, Inc.
Sierra Pacific Steel, Inc.
Southern Alloy of America, Inc.
Steel Manufacturing and Warehouse Company
Steel Service Systems, Inc.
Texas Aluminum Industries, Inc.
Cornerstone Metals Corporation
Cornerstone Building Products, Inc.
Cornerstone Aluminum Company, Inc.
Cornerstone Patio Concepts, L.L.C.
Uni-Steel, Inc.
Valley Aluminum Co.
Wayne Steel, Inc.
Western Awning Company, Inc.
Wilkof-Morris Steel Corporation
Williams Steel & Supply Co., Inc.
WSS Transportation, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,200
<SECURITIES> 0
<RECEIVABLES> 132,200
<ALLOWANCES> (7,500)
<INVENTORY> 332,700
<CURRENT-ASSETS> 476,500
<PP&E> 214,800
<DEPRECIATION> (33,500)
<TOTAL-ASSETS> 944,800
<CURRENT-LIABILITIES> 146,600
<BONDS> 0
0
0
<COMMON> 400
<OTHER-SE> 351,900
<TOTAL-LIABILITY-AND-EQUITY> 944,800
<SALES> 422,400
<TOTAL-REVENUES> 422,400
<CGS> 314,500
<TOTAL-COSTS> 394,800
<OTHER-EXPENSES> (100)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,600
<INCOME-PRETAX> 18,100
<INCOME-TAX> 7,400
<INCOME-CONTINUING> 10,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,700
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
