================================================================================
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 June 30, 2000
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 August 1, 2000: 36,509,972
================================================================================
<PAGE>
METALS USA, INC.
INDEX
PART I. - FINANCIAL PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets of Metals USA, Inc. and Subsidiaries
at June 30, 2000 (unaudited) and December 31, 1999 ................. 2
Unaudited Consolidated Statements of Operations of Metals USA, Inc.
and Subsidiaries for the three and six months ended
June 30, 2000 and 1999 ............................................. 3
Unaudited Consolidated Statements of Cash Flows of Metals USA, Inc.
and Subsidiaries for the six months ended June 30, 2000 and 1999 ... 4
Condensed Notes to Unaudited Consolidated Financial Statements ....... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................... 10
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings .............................................. 20
Item 4. Submission of Matters to a Vote of Security Holders ............ 20
Item 5. Other Information .............................................. 20
Item 6. Exhibits and Reports on Form 8-K ............................... 20
Signatures ............................................................. 21
1
<PAGE>
METALS USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
JUNE 30, DECEMBER 31,
2000 1999
-------- --------
(UNAUDITED)
ASSETS
Current assets:
Cash ............................................. $ 9.7 $ 4.7
Accounts receivable, net of allowance
of $7.0 and $6.2 ............................... 179.8 128.9
Inventories ...................................... 437.9 350.5
Prepaid expenses and other ....................... 10.0 15.4
Deferred income taxes ............................ 6.5 6.4
-------- --------
Total current assets ........................... 643.9 505.9
Property and equipment, net of accumulated
depreciation of $49.1 and $42.5 ................... 244.9 223.0
Goodwill, net ....................................... 301.9 305.4
Other assets, net ................................... 12.4 15.0
-------- --------
Total assets ................................... $1,203.1 $1,049.3
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................. $ 248.8 $ 145.5
Accrued liabilities .............................. 52.1 48.9
Current portion of long-term debt ................ 5.5 6.1
-------- --------
Total current liabilities ...................... 306.4 200.5
Long-term debt, less current portion ................ 476.0 434.7
Deferred income tax liability ....................... 29.6 29.5
Other long-term liabilities ......................... 4.8 5.2
-------- --------
Total liabilities .............................. 816.8 669.9
-------- --------
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, 36,509,972 and 38,516,415
shares issued .................................. .4 .4
Additional paid-in capital ....................... 247.7 263.7
Retained earnings ................................ 138.2 119.8
Treasury stock-- none and 461,450 shares,
at cost ........................................ -- (4.5)
-------- --------
Total stockholders' equity ..................... 386.3 379.4
-------- --------
Total liabilities and stockholders' equity ..... $1,203.1 $1,049.3
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
METALS USA, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales .................................... $ 548.3 $ 435.7 $ 1,072.1 $ 858.1
Operating costs and expenses:
Cost of sales ............................. 419.0 324.6 811.6 639.1
Operating and delivery .................... 56.7 45.7 112.9 90.1
Selling, general and administrative ....... 38.8 31.2 77.3 62.2
Depreciation and amortization ............. 6.3 5.1 12.6 10.0
--------- --------- --------- ---------
Operating income ............................. 27.5 29.1 57.7 56.7
Other (income) expense:
Interest and securitization expense ....... 12.5 9.3 24.0 18.9
Other income, net ......................... (1.2) (.1) (1.6) (.2)
--------- --------- --------- ---------
Income before income taxes ................... 16.2 19.9 35.3 38.0
Provision for income taxes ................... 6.7 8.1 14.6 15.5
--------- --------- --------- ---------
Net income ................................... $ 9.5 $ 11.8 $ 20.7 $ 22.5
========= ========= ========= =========
Earnings per share ........................... $ .26 $ .31 $ .56 $ .59
========= ========= ========= =========
Earnings per share-- assuming dilution ....... $ .26 $ .31 $ .55 $ .59
========= ========= ========= =========
Number of common shares used in
the per share calculations:
Earnings per share ......................... 36.5 38.1 37.0 38.1
========= ========= ========= =========
Earnings per share-- assuming dilution .. 36.9 38.4 37.3 38.4
========= ========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
METALS USA, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
SIX MONTHS ENDED
JUNE 30,
------------------
2000 1999
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................... $ 20.7 $ 22.5
Adjustments to reconcile net income
to net cash provided by operating activities--
Provision for bad debts ........................... 1.8 1.1
Depreciation and amortization ..................... 12.6 10.0
Changes in operating assets and
liabilities, net of business acquisitions--
Accounts receivable ............................. (60.7) (22.8)
Inventories ..................................... (83.6) 36.2
Prepaid expenses and other assets ............... 5.2 1.8
Accounts payable and accrued liabilities ........ 103.4 (16.3)
Other current liabilities ....................... 2.9 (.3)
Other ............................................. .9 .5
------ ------
Net cash provided by operating activities ..... 3.2 32.7
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from securitization of receivables ......... 10.0 88.0
Purchases of property and equipment ................. (25.5) (11.4)
Purchase of businesses, net of acquired cash ........ (7.8) (13.1)
Other ............................................... -- .8
------ ------
Net cash (used in) provided by
investing activities ........................ (23.3) 64.3
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on the
Credit Facility ................................... 35.6 (97.5)
Net borrowings (repayments) on Industrial
Revenue Bonds and other long-term debt ............ 2.2 (1.8)
Deferred financing costs incurred ................... -- (.3)
Repurchases of common stock ......................... (11.5) (.4)
Payment of dividends ................................ (1.2) --
------ ------
Net cash provided by (used in)
financing activities ........................ 25.1 (100.0)
------ ------
NET INCREASE (DECREASE) IN CASH ........................ 5.0 (3.0)
CASH, beginning of period .............................. 4.7 9.3
------ ------
CASH, end of period .................................... $ 9.7 $ 6.3
====== ======
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. Metals USA, together with its wholly-owned subsidiaries, is referred to as
the "Company." Today the Company is a leading national value-added metals
processor and distributor. Following its initial public offering in July 1997,
Metals USA has acquired numerous metals processing and distributing companies.
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 accounting principles generally accepted in the United States
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 during the latest
twelve months 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
<PAGE>
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:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2000 1999 2000 1999
------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Number of shares used in computing earnings
per share (weighted-average shares) ............ 36.5 38.1 37.0 38.1
Effect of dilutive securities:
Stock options ................................... -- 1 -- .1
Convertible securities .......................... .4 .2 .3 .2
---- ---- ---- ----
Number of shares used in computing earnings
per share -- assuming dilution ................. 36.9 38.4 37.3 38.4
==== ==== ==== ====
</TABLE>
3. INVENTORIES
Inventories consist of the following:
JUNE 30, DECEMBER 31,
2000 1999
-------- ------------
(UNAUDITED)
Raw materials--
Plates and shapes ................................... $135.3 $113.0
Flat rolled ......................................... 98.9 63.1
Specialty metals .................................... 118.5 105.2
Building products ................................... 21.0 17.8
------ ------
Total raw materials ............................... 373.7 299.1
------ ------
Work-in-process and finished goods --
Plates and shapes ................................... .8 .6
Flat rolled ......................................... 19.2 14.8
Specialty metals .................................... 17.4 10.3
Building products ................................... 26.8 25.7
------ ------
Total work-in-process and finished goods .......... 64.2 51.4
------ ------
Less-- LIFO reserve .................................... -- --
------ ------
Total ............................................... $437.9 $350.5
====== ======
4. LONG-TERM DEBT
Long-term debt consists of the following:
JUNE 30, DECEMBER 31,
2000 1999
-------- -----------
(UNAUDITED)
Credit Facility .................................... $247.5 $196.0
8 5/8 % Senior Subordinated Notes .................. 200.0 200.0
Industrial Revenue Bonds (various issues) .......... 23.3 24.3
Obligations under capital leases and other ......... 10.7 20.5
------ ------
481.5 440.8
Less-- Current portion ............................. (5.5) (6.1)
------ ------
$476.0 $434.7
====== ======
6
<PAGE>
METALS USA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The Credit Facility provides for up to $350.0 of borrowings, matures in
February 2003, and 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 and
six months ended June 30, 2000 was 8.1% and 8.0%, respectively. At June 30,
2000, $102.5 was available to the Company under the Credit Facility. At June 30,
2000, the Company had $10.0 available for the payment of dividends under the
terms of the Credit Facility. As of August 8, 2000, the Company had outstanding
borrowings of $273.5 and $76.5 was available for use under this facility.
Effective June 30, 2000, the Company amended the Credit Facility to modify
certain financial ratios. The amended Credit Facility also calls for increased
interest of 3/8ths of one percent (.375%) on funded debt. Additionally the
Company paid a fee of approximately $.5 in connection with this amendment.
The Notes mature on February 15, 2008. They 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 maximum undivided interest in MRC's receivable portfolio that may be
purchased pursuant to the Receivable Securitization Facility is $100.0. The
unpurchased portion of the MRC receivable portfolio is a restricted asset and
effectively collateral for the benefit of the Purchaser. At June 30, 2000, the
unpurchased portion of the MRC receivable was $62.5 and is included in accounts
receivable on the consolidated balance sheet. The Company recorded $1.7 and
$3.2; and $1.2 and $2.1 of expense attributable to the Receivable Securitization
Facility for the three and six months ended June 30, 2000 and 1999,
respectively, which is included in interest and securitization expense on the
consolidated statements of operations.
5. STOCKHOLDERS' EQUITY
In April 1999, the Board of Directors approved the use of up to $25.0 for
the purchase of the Company's Common Stock. Shares may be purchased in open
market or privately negotiated transactions. During the six months ended June
30, 2000, the Company repurchased 1,544,993 shares. In June, 2000, the Company
retired all of its treasury stock, (2,006,443 shares), thereby reducing the
number of outstanding shares by a like amount.
On May 24, 2000, the Company announced its second quarterly dividend of $.03
per share, payable on July 12, 2000 to stockholders of record on June 19, 2000.
On July 27, 2000, the Company announced its third quarterly dividend of $.03 per
share, payable on October 11, 2000 to stockholders of record on September 18,
2000.
6. 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.
7. INTEGRATION CHARGE
In September 1999, the Company announced a comprehensive plan to reduce
operating costs and improve its operational efficiency by fully integrating
certain operations within a geographic area and consolidating certain
administrative and support functions. The Company recorded a charge to
operations of $9.4 in respect of this plan (the "Integration Charge"). The
principal components of the Integration Charge were $3.3 for termination of
certain employment contracts, $2.1 for severance costs attributable to the
consolidation of administrative and support functions, and $4.0 for the costs of
combining five processing facilities into others within the same geographic
region. These changes will affect less than 5% of the Company's workforce.
<PAGE>
METALS USA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The following schedule sets forth the incurred costs by segment as of June
30, 2000:
Plates and Shapes .................................. $ .8
Flat Rolled ........................................ --
Specialty Metals ................................... 2.4
Building Products .................................. .2
----------------
Total ............................................ $ 3.4
================
The Company expects to incur approximately $1.0 to $2.0 during each of the
next two quarterly reporting periods with respect to the personnel related
costs. Approximately $4.0 of facility integration costs (substantially all of
which relate to leasehould termination costs) will occur at various times over
the next two quarterly reporting periods, of which, approximately $3.0,
attributable to Plates and Shapes and Building Products are expected to occur
during the fourth quarter of 2000. Although the foregoing estimates with respect
to both costs and timing reflect the best information available to management,
there can be no assurance that such costs will not exceed current expectations
or that the timing of the facility integration activities will not be delayed.
8. ACQUISITIONS
During February 2000, the Company acquired the net assets of Gibraltar
Steel's flat rolled processing operations in Chattanooga, Tennessee for cash
consideration of approximately $7.8 and the assumption of indebtedness of
approximately $2.8.
9. SEGMENT AND RELATED INFORMATION
The Company has four reportable segments with each segment managed
separately by product group teams focused on improving and expanding each
segment's operations. The four operating segments are: Plates and Shapes, Flat
Rolled, Specialty Metals and Building Products. Certain prior year balances have
been reclassified to conform with the current year presentation.
The following table shows summarized financial information concerning the
Company's reportable segments:
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
----------------------------------------------------------------------------------------
CORPORATE,
PLATES AND SPECIALTY BUILDING ELIMINATIONS
SHAPES FLAT ROLLED METALS PRODUCTS AND OTHER TOTAL
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
2000:
Net sales ........................ $ 406.9 $ 307.6 $ 296.0 $ 87.0 $ (25.4) $ 1,072.1
Operating income (loss) .......... 31.5 14.0 12.6 6.9 (7.3) 57.7
Total assets ..................... 313.8 257.9 241.7 134.8 254.9 1,203.1
Capital expenditures ............. 10.5 5.0 4.7 4.6 .7 25.5
Depreciation and amortization .... 4.5 2.2 2.1 1.4 2.4 12.6
1999:
Net sales ........................ $ 325.3 $ 213.7 $ 274.7 $ 59.4 $ (15.0) $ 858.1
Operating income (loss) .......... 24.6 16.0 14.7 5.8 (4.4) 56.7
Total assets ..................... 287.7 122.3 206.9 86.2 226.9 930.0
Capital expenditures ............. 4.7 2.3 3.2 1.0 .2 11.4
Depreciation and amortization .... 3.8 1.4 1.9 .9 2.0 10.0
</TABLE>
8
<PAGE>
METALS USA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
10. SUPPLEMENTAL INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
SIX MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- --------
Supplemental cash flow information:
Cash paid for interest ................................. $ 22.9 $ 18.1
Cash paid for income taxes ............................. 2.8 14.1
Non-cash investing and financing activities:
Acquisition of businesses:
Fair value of assets acquired .......................... $ 12.3 $ 16.9
Consideration given:
Cash paid ............................................ 7.8 13.1
Stock issued ......................................... -- --
Notes issued ......................................... -- --
-------- --------
Liabilities assumed .................................... $ 4.5 $ 3.8
======== ========
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 Item have the same meaning given to them in the Form 10-K.
RESULTS OF OPERATIONS - CONSOLIDATED
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------------------------- ------------------------------------------------
2000 % 1999 % 2000 % 1999 %
---------- --------- ---------- --------- ---------- ---------- ---------- ----------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ....................... $ 548.3 100.0% $ 435.7 100.0% $ 1,072.1 100.0% $ 858.1 100.0%
Cost of sales ................. 419.0 76.4% 324.6 74.5% 811.6 75.7% 639.1 74.5%
Operating and delivery ........ 56.7 10.3% 45.7 10.5% 112.9 10.5% 90.1 10.5%
Selling, general and
administrative ............. 38.8 7.1% 31.2 7.2% 77.3 7.2% 62.2 7.2%
Depreciation and amortization.. 6.3 1.2% 5.1 1.1% 12.6 1.2% 10.0 1.2%
---------- --------- ---------- --------- ----------- ---------- ---------- ----------
Operating income ................ 27.5 5.0% 29.1 6.7% 57.7 5.4% 56.7 6.6%
Interest and securitization
expense...................... 12.5 2.3% 9.3 2.1% 24.0 2.2% 18.9 2.2%
Other income, net ............. (1.2) (0.3)% (.1) --% (1.6) (0.1)% (.2) --%
----------- --------- ---------- ---------- ----------- ---------- ---------- ----------
Income before income taxes ...... $ 16.2 3.0% $ 19.9 4.6% $ 35.3 3.3% $ 38.0 4.4%
========== ========= ========== ========== =========== ========== ========== ==========
</TABLE>
CONSOLIDATED RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO
THE THREE MONTHS ENDED JUNE 30, 1999
NET SALES. Net sales increased $112.6 million, or 25.8%, from $435.7
million for the three months ended June 30, 1999 to $548.3 million for the three
months ended June 30, 2000. This increase is primarily due to increased
shipments for most of the Company's products and the acquisitions completed in
the second half of 1999.
COST OF SALES. Cost of sales increased $94.4 million, or 29.1%, from
$324.6 million for the three months ended June 30, 1999, to $419.0 million for
the three months ended June 30, 2000. This increase is primarily due to
increased shipments and higher costs of raw materials. As a percentage of net
sales, cost of sales increased from 74.5% for the three months ended June 30,
1999 to 76.4% for the three months ended June 30, 2000. This percentage increase
was primarily due to higher cost of raw materials.
OPERATING AND DELIVERY. Operating and delivery expenses increased $11.0
million, or 24.1%, from $45.7 million for the three months ended June 30, 1999
to $56.7 million for the three months ended June 30, 2000. The increase in
operating and delivery expenses was primarily due to increased shipments for
most of the Company's products. As a percentage of net sales, operating and
delivery expenses decreased from 10.5% for the three months ended June 30, 1999
to 10.3% for the three months ended June 30, 2000. This percentage decrease was
primarily due to the allocation of fixed costs over a higher volume of net
sales.
10
<PAGE>
METALS USA, INC.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased $7.6 million, or 24.4%, from $31.2 million for the three
months ended June 30, 1999 to $38.8 million for the three months ended June 30,
2000. This increase in selling, general and administrative expenses was
primarily attributable to increased volumes of product shipments and, to a
lesser extent, the acquisitions described above. As a percentage of net sales,
selling, general and administrative expenses decreased slightly from 7.2% for
the three months ended June 30, 1999 to 7.1% for the three months ended June 30,
2000. This percentage decrease was primarily due to allocation of fixed costs
over a higher volume of net sales.
OPERATING INCOME. Operating income decreased $1.6 million, or 5.5%, from
$29.1 million for the three months ended June 30, 1999 to $27.5 million for the
three months ended June 30, 2000. As a percentage of net sales, operating income
decreased from 6.7% for the three months ended June 30, 1999 to 5.0% for the
three months ended June 30, 2000. This percentage decrease was primarily due to
the increased costs of raw materials.
INTEREST AND SECURITIZATION EXPENSE. Interest and securitization expense
increased $3.2 million, from $9.3 million for the three months ended June 30,
1999 to $12.5 million for the three months ended June 30, 2000. 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 completed during 1999, together with the increased working capital
requirements attributable to the increased volume and to a lesser extent
increased interest rates.
OTHER INCOME, NET. Other income increased $1.1 million, from $.1 million
for the three months ended June 30, 1999 to $1.2 million for the three months
ended June 30, 2000. Other income for the three months ended June 30, 2000
included a $.9 million involuntary gain arising from an insurance settlement
attributable to a fire at one of the Company's facilities in the third quarter
of 1999.
PROVISION FOR INCOME TAXES. The Company's provision for income taxes
differs from the federal statutory rate primarily due to state income taxes (net
of federal income tax benefit) and the non-deductibility of the amortization of
goodwill attributable to certain acquisitions.
CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 1999
NET SALES. Net sales increased $214.0 million, or 24.9%, from $858.1
million for the six months ended June 30, 1999 to $1,072.1 million for the six
months ended June 30, 2000. This increase is primarily due to increased
shipments for most of the Company's products and the acquisitions completed in
the second half of 1999, partially offset by lower sales to the aerospace
industry.
COST OF SALES. Cost of sales increased $172.5 million, or 27.0%, from
$639.1 million for the six months ended June 30, 1999, to $811.6 million for the
six months ended June 30, 2000. The increase in cost of sales was primarily due
to the increased shipments and acquisitions. As a percentage of net sales, cost
of sales increased from 74.5% for the six months ended June 30, 1999 to 75.7%
for the six months ended June 30, 2000. This percentage increase was primarily
due to higher cost of raw materials.
OPERATING AND DELIVERY. Operating and delivery expenses increased $22.8
million, or 25.3%, from $90.1 million for the six months ended June 30, 1999 to
$112.9 million for the six months ended June 30, 2000. The increase in operating
and delivery expenses was primarily due to the increased shipments and
acquisitions. As a percentage of net sales, operating and delivery expenses
remained unchanged at 10.5% for both periods.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased $15.1 million, or 24.3%, from $62.2 million for the six
months ended June 30, 1999 to $77.3 million for the six months ended June 30,
2000. This increase in selling, general and administrative expenses was
primarily attributable to acquisitions and increased volumes of product
shipments. As a percentage of net sales, selling, general and administrative
expenses remained unchanged at 7.2% for both periods.
11
<PAGE>
METALS USA, INC.
OPERATING INCOME. Operating income increased $1.0 million, or 1.8%, from
$56.7 million for the six months ended June 30, 1999 to $57.7 million for the
six months ended June 30, 2000. The increase in operating income was
attributable to the increased shipments, offset by higher cost of raw materials
and the decline in the Company's sales to the aerospace industry. As a
percentage of net sales, operating income decreased from 6.6% for the six months
ended June 30, 1999 to 5.4% for the six months ended June 30, 2000. This
percentage decrease was primarily due to higher cost of raw materials during the
six months ended June 30, 2000.
INTEREST AND SECURITIZATION EXPENSE. Interest and securitization expense
increased $5.1 million, or 27.0%, from $18.9 million for the six months ended
June 30, 1999 to $24.0 million for the six months ended June 30, 2000. 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 completed during the second half of 1999,
together with the increased working capital requirements attributable to the
increased volumes and to a lesser extent increased interest rates.
OTHER INCOME, NET. Other income increased by $1.4 million, from $.2
million for the six months ended June 30, 1999 to $1.6 million for the six
months ended June 30, 2000. Other income for the six months ended June 30, 2000
included a $1.2 million involuntary gain arising from an insurance settlement
attributable to a fire at one of the Company's facilities in the third quarter
of 1999.
PROVISION FOR INCOME TAXES. The Company's provision for income taxes
differs from the federal statutory rate primarily due to state income taxes (net
of federal income tax benefit) and the non-deductibility of the amortization of
goodwill attributable to certain acquisitions.
RESULTS OF OPERATIONS - SEGMENT
SEGMENT RESULTS-- THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE
MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------------------
OPERATING
NET COSTS AND
SALES % EXPENSES %
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
2000: (DOLLARS IN MILLIONS)
Plates and Shapes .............................. $ 202.2 36.9% $ 188.5 36.2%
Flat Rolled .................................... 160.4 29.3% 153.7 29.5%
Specialty Metals ............................... 148.6 27.1% 143.0 27.5%
Building Products .............................. 49.9 9.1% 44.1 8.5%
Corporate, eliminations and other .............. (12.8) (2.4)% (8.5) (1.7)%
------------ ------------ ------------ ------------
Total ....................................... $ 548.3 100.0% $ 520.8 100.0%
============ ============ ============ ============
1999:
Plates and Shapes .............................. $ 165.5 38.0% $ 155.1 38.1%
Flat Rolled .................................... 111.7 25.6% 102.0 25.1%
Specialty Metals ............................... 134.1 30.8% 127.3 31.3%
Building Products .............................. 33.4 7.7% 28.9 7.1%
Corporate, eliminations and other .............. (9.0) (2.1)% (6.7) (1.6)%
------------ ------------ ------------ ------------
Total ....................................... $ 435.7 100.0% $ 406.6 100.0%
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------
OPERATING
INCOME CAPITAL
(LOSS) % EXPENDITURES %
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
2000: (DOLLARS IN MILLIONS)
Plates and Shapes .............................. $ 13.7 49.8% $ 4.2 32.6%
Flat Rolled .................................... 6.7 24.3% 3.4 26.4%
Specialty Metals ............................... 5.6 20.3% 2.0 15.5%
Building Products .............................. 5.8 21.0% 2.8 21.7%
Corporate, eliminations and other .............. (4.3) (15.4)% .5 3.8%
------------ ------------ ------------ ------------
Total ....................................... $ 27.5 100.0% $ 12.9 100.0%
============ ============ ============ ============
1999:
Plates and Shapes .............................. $ 10.4 35.7% $ 1.5 29.4%
Flat Rolled .................................... 9.7 33.3% 1.2 23.5%
Specialty Metals ............................... 6.8 23.4% 1.7 33.3%
Building Products .............................. 4.5 15.5% .6 11.8%
Corporate, eliminations and other .............. (2.3) (7.9)% .1 2.0%
------------ ------------ ------------ ------------
Total ....................................... $ 29.1 100.0% $ 5.1 100.0%
============ ============ ============ ============
</TABLE>
PLATES AND SHAPES. Net sales increased $36.7 million, or 22.2%, from $165.5
million for the three months ended June 30, 1999 to $202.2 million for the three
months ended June 30, 2000. Average realized prices for steel products increased
approximately 7.0% for the three months ended June 30, 2000 compared to the
three months ended June 30, 1999. Material shipments increased 12.8% for the
three months ended June 30, 2000 compared to the three months ended June 30,
1999. Operating costs and expenses increased $33.4 million, or 21.5%, from
$155.1 million for the three months ended June 30, 1999 to $188.5 million for
the three months ended June 30, 2000. Operating costs and expenses as a
percentage of net sales decreased from 93.7% for the three months ended June 30,
1999 to 93.2% for the three months ended June 30, 2000. This percentage decrease
was primarily due to the spread of fixed operating costs over
12
<PAGE>
METALS USA, INC.
higher sales volumes. Operating income increased by $3.3 million, or 31.7%, from
$10.4 million for the three months ended June 30, 1999 to $13.7 million for the
three months ended June 30, 2000. Operating income as a percentage of net sales
increased from 6.3% for the three months ended June 30, 1999 to 6.8% for the
three months ended June 30, 2000. This percentage increase was primarily due to
higher shipments.
FLAT ROLLED. Net sales increased $48.7 million, or 43.6%, from $111.7
million for the three months ended June 30, 1999 to $160.4 million for the three
months ended June 30, 2000. Average realized prices for steel products increased
approximately 4.0% for the three months ended June 30, 2000 compared to the
three months ended June 30, 1999. Material shipments increased 38.1% for the
three months ended June 30, 2000 compared to the three months ended June 30,
1999. Net sales on a "same store" basis increased by 25.8%, due to a 23.3%
increase in shipments. Operating costs and expenses increased $51.7 million, or
50.7%, from $102.0 million for the three months ended June 30, 1999 to $153.7
million for the three months ended June 30, 2000. Operating costs and expenses
as a percentage of net sales, increased from 91.3% for the three months ended
June 30, 1999 to 95.8% for the three months ended June 30, 2000. This percentage
increase was primarily due to higher cost of raw material. Operating income
decreased by $3.0 million, or 30.9%, from $9.7 million for the three months
ended June 30, 1999 to $6.7 million for the three months ended June 30, 2000.
Operating income as a percentage of net sales decreased from 8.7% for the three
months ended June 30, 1999 to 4.2% for the three months ended June 30, 2000.
This percentage decrease is primarily due to higher costs of raw material.
SPECIALTY METALS. Net sales increased $14.5 million, or 10.8%, from $134.1
million for the three months ended June 30, 1999 to $148.6 million for the three
months ended June 30, 2000. Excluding sales to the aerospace industry, average
realized prices increased approximately 3.5% and shipments increased 13.2% for
the three months ended June 30, 2000 compared to the three months ended June 30,
1999. Average realized prices and shipments of products to the aerospace
industry decreased 28.3%, and 8.4% respectively, for the three months ended June
30, 2000 compared to the three months ended June 30, 1999. Operating costs and
expenses increased $15.7 million, or 12.3%, from $127.3 million for the three
months ended June 30, 1999 to $143.0 million for the three months ended June 30,
2000. Operating costs and expenses as a percentage of net sales increased from
94.9% for the three months ended June 30, 1999 to 96.2% for the three months
ended June 30, 2000. This percentage increase was primarily due to higher costs
of raw materials. Operating income decreased by $1.2 million, or 17.6%, from
$6.8 million for the three months ended June 30, 1999 to $5.6 million for the
three months ended June 30, 2000. Operating income as a percentage of net sales
decreased from 5.1% for the three months ended June 30, 1999 to 3.8% for the
three months ended June 30, 2000. This decrease was primarily due to higher
costs of raw materials.
BUILDING PRODUCTS. Net sales increased $16.5 million, or 49.4%, from $33.4
million for the three months ended June 30, 1999 to $49.9 million for the three
months ended June 30, 2000. The Allmet acquisition completed in the fourth
quarter of 1999 accounted for substantially all of the increase in net sales.
Operating costs and expenses increased $15.2 million, or 52.6%, from $28.9
million for the three months ended June 30, 1999 to $44.1 million for the three
months ended June 30, 2000. This increase is primarily due to the Allmet
acquisition and higher raw material costs. Operating costs and expenses as a
percentage of net sales increased from 86.5% for the three months ended June 30,
1999 to 88.4% for the three months ended June 30, 2000. This percentage increase
is primarily due to increased cost of raw materials. Operating income increased
by $1.3 million, or 28.9%, from $4.5 million for the three months ended June 30,
1999 to $5.8 million for the three months ended June 30, 2000. This increase is
primarily due to the Allmet acquisition. Operating income as a percentage of net
sales decreased from 13.5% for the three months ended June 30, 1999 to 11.6% for
the three months ended June 30, 2000. This percentage decrease was primarily due
to higher raw material costs.
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
increased by $2.0 million, from a loss of $2.3 million for the three months
ended June 30, 1999 to a loss of $4.3 million for the three months ended June
30, 2000. This change is primarily due to increased cost of the Company's
information technology initiatives and other general and administrative costs.
13
<PAGE>
METALS USA, INC.
SEGMENT RESULTS-- SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS
ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------------
OPERATING
NET COSTS AND
SALES % EXPENSES %
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
2000: (DOLLARS IN MILLIONS)
Plates and Shapes .......................... $ 406.9 38.0% $ 375.4 37.0%
Flat Rolled ................................ 307.6 28.7% 293.6 28.9%
Specialty Metals ........................... 296.0 27.6% 283.4 27.9%
Building Products .......................... 87.0 8.1% 80.1 7.9%
Corporate, eliminations and other .......... (25.4) (2.4)% (18.1) (1.7)%
------------ ------------ ------------ ------------
Total ................................... $ 1,072.1 100.0% $ 1,014.4 100.0%
============ ============ ============ ============
1999:
Plates and Shapes .......................... $ 325.3 37.9% $ 300.7 37.5%
Flat Rolled ................................ 213.7 24.9% 197.7 24.7%
Specialty Metals ........................... 274.7 32.0% 260.0 32.4%
Building Products .......................... 59.4 6.9% 53.6 6.7%
Corporate, eliminations and other .......... (15.0) (1.7)% (10.6) (1.3)%
------------ ------------ ------------ ------------
Total ................................... $ 858.1 100.0% $ 801.4 100.0%
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------
OPERATING
INCOME CAPITAL
(LOSS) % EXPENDITURES %
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
2000: (DOLLAR S IN MILLIONS)
Plates and Shapes .......................... $ 31.5 54.6% $ 10.5 41.2%
Flat Rolled ................................ 14.0 24.3% 5.0 19.6%
Specialty Metals ........................... 12.6 21.8% 4.7 18.5%
Building Products .......................... 6.9 12.0% 4.6 18.0%
Corporate, eliminations and other .......... (7.3) (12.7)% .7 2.7%
------------ ------------ ------------ ------------
Total ................................... $ 57.7 100.0% $ 25.5 100.0%
============ ============ ============ ============
1999:
Plates and Shapes .......................... $ 24.6 43.4% $ 4.7 41.1%
Flat Rolled ................................ 16.0 28.2% 2.3 20.2%
Specialty Metals ........................... 14.7 25.9% 3.2 28.1%
Building Products .......................... 5.8 10.2% 1.0 8.8%
Corporate, eliminations and other .......... (4.4) (7.7)% .2 1.8%
------------ ------------ ------------ ------------
Total ................................... $ 56.7 100.0% $ 11.4 100.0%
============ ============ ============ ============
</TABLE>
PLATES AND SHAPES. Net sales increased $81.6 million, or 25.1%, from $325.3
million for the six months ended June 30, 1999 to $406.9 million for the six
months ended June 30, 2000. Average realized prices for steel products increased
approximately 4.3% for the six months ended June 30, 2000 compared to the six
months ended June 30, 1999. Material shipments increased 18.5% for the six
months ended June 30, 2000 compared to the six months ended June 30, 1999.
Operating costs and expenses increased $74.7 million, or 24.8%, from $300.7
million for the six months ended June 30, 1999 to $375.4 million for the six
months ended June 30, 2000. Operating costs and expenses as a percentage of net
sales decreased marginally from 92.4% for the six months ended June 30, 1999 to
92.3% for the six months ended June 30, 2000. Operating income increased by $6.9
million, or 28.0%, from $24.6 million for the six months ended June 30, 1999 to
$31.5 million for the six months ended June 30, 2000. This increase is primarily
due to increased sales volumes. Operating income as a percentage of net sales
increased marginally from 7.6% for the six months ended June 30, 2000 to 7.7%
for the six months ended June 30, 1999.
FLAT ROLLED. Net sales increased $93.9 million, or 43.9%, from $213.7
million for the six months ended June 30, 1999 to $307.6 million for the six
months ended June 30, 2000. Average realized prices for steel products increased
approximately 3.8% for the six months ended June 30, 2000 compared to the six
months ended June 30, 1999. Material shipments increased 38.8% for the six
months ended June 30, 2000 compared to the six months ended June 30, 1999. Net
sales on a "same store" basis increased by 20.9%, due primarily to increased
shipments. Operating costs and expenses increased $95.9 million, or 48.5%, from
$197.7 million for the six months ended June 30, 1999 to $293.6 million for the
six months ended June 30, 2000. This increase is primarily due to acquisitions
and higher costs of raw materials. Operating costs and expenses as a percentage
of net sales, increased from 92.5% for the six months ended June 30, 1999 to
95.4% for the six months ended June 30, 2000. Operating income decreased by $2.0
million, or 12.5%, from $16.0 million for the six months ended June 30, 1999 to
$14.0 million for the six months ended June 30, 2000. This decrease is primarily
due to higher costs of raw materials, partially offset by increased shipments.
Operating income as a percentage of net sales decreased from 7.5% for the six
months ended June 30, 1999 to 4.6% for the six months ended June 30, 2000.
SPECIALTY METALS. Net sales increased $21.3 million, or 7.8%, from $274.7
million for the six months ended June 30, 1999 to $296.0 million for the six
months ended June 30, 2000. Excluding sales in the aerospace industry, average
realized prices increased approximately 3.1% and shipments increased 13.9% for
the six months ended June 30, 2000 compared to the six months ended June 30,
1999. Average realized prices and shipments to the aerospace industry decreased
26.1%, and 29.5% respectively, for the six months ended June 30, 2000 compared
to the six months ended
14
<PAGE>
METALS USA, INC.
June 30, 1999. Operating costs and expenses increased $23.4 million, or 9.0%,
from $260.0 million for the six months ended June 30, 1999 to $283.4 million for
the six months ended June 30, 2000. Operating costs and expenses as a percentage
of net sales increased from 94.6% for the six months ended June 30, 1999 to
95.7% for the six months ended June 30, 2000. This percentage increase was
primarily due to higher costs of raw materials. Operating income decreased by
$2.1 million, or 14.3%, from $14.7 million for the six months ended June 30,
1999 to $12.6 million for the six months ended June 30, 2000. This decrease was
primarily due to higher cost of raw materials coupled with the decline in the
Company's sales to the aerospace industry subsequent to the first quarter of
1999. Operating income as a percentage of net sales decreased from 5.4% for the
six months ended June 30, 1999 to 4.3% for the six months ended June 30, 2000.
BUILDING PRODUCTS. Net sales increased $27.6 million, or 46.5%, from
$59.4 million for the six months ended June 30, 1999 to $87.0 million for the
six months ended June 30, 2000. The Allmet acquisition completed in the fourth
quarter of 1999 accounted for substantially all of the increase in net sales.
Operating costs and expenses increased $26.5 million, or 49.4%, from $53.6
million for the six months ended June 30, 1999 to $80.1 million for the six
months ended June 30, 2000. This increase is primarily due to the Allmet
acquisition and higher raw material costs. Operating costs and expenses as a
percentage of net sales increased from 90.2% for the six months ended June 30,
1999 to 92.1% for the six months ended June 30, 2000. This increase is primarily
due to higher cost of raw materials. Operating income increased by $1.1 million,
or 19.0%, from $5.8 million for the six months ended June 30, 1999 to $6.9
million for the six months ended June 30, 2000. This increase is primarily due
to the Allmet acquisition. Operating income as a percentage of net sales
decreased from 9.8% for the six months ended June 30, 1999 to 7.9% for the six
months ended June 30, 2000. This decrease was primarily due to higher raw
material costs.
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
increased by $2.9 million, from a loss of $4.4 million for the six months ended
June 30, 1999 to a loss of $7.3 million for the six months ended June 30, 2000.
This change is primarily due to increased cost of the Company's information
technology initiatives and other general and administrative costs.
FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES
The Company generated $3.2 million and $32.7 million in net cash from
operating activities for the six months ended June 30, 2000 and 1999,
respectively. Net cash used for investing activities was $23.3 million and net
cash provided by investing activities was $64.3 million for the six months ended
June 30, 2000 and 1999, respectively. Net cash provided from financing
activities was $25.1 million and net cash used in financing activities was
$100.0 million, for the six months ended June 30, 2000 and 1999, respectively.
The cash used for investing activities during the six months ended June 30, 2000
included proceeds of $10.0 million from the sale of accounts receivable under
the Company's securitization facility offset by cash used for acquisitions and
capital expenditures. For the six months ended June 30, 2000, the cash provided
from financing activities consisted primarily of $35.6 million of borrowings on
the Credit Facility. At June 30, 2000, the Company had cash of $9.7 million,
working capital of $337.5 million and total debt of $481.5 million. At December
31, 1999, the Company had cash of $4.7 million, working capital of $305.4
million and total debt of $440.8 million. As of December 31, 1999 and June 30,
2000, the Company had $154.0 million and $102.5 million of borrowing
availability under the Credit Facility. As of August 8, 2000, the Company had
outstanding borrowings under the Credit Facility of $273.5 million, leaving
$76.5 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 the majority of its earnings to finance the
expansion of its existing business and for general corporate purposes, including
future acquisitions. In addition, the Company's Credit Facility and the
Indenture include restrictions on the ability of the Company to pay dividends.
As of June 30, 2000, the Company had $10.0 million available for the payment of
dividends under the terms of the Credit Facility. On May 24, 2000, the Company
announced its second quarterly dividend of $.03 per share, payable on July 12,
2000 to stockholders of record on June 19, 2000. On July 27, 2000, the Company
announced its third quarterly dividend of $.03 per share, payable on October 11,
2000 to stockholders of record on September 18, 2000.
15
<PAGE>
METALS USA, INC.
INTEGRATION CHARGE
In September 1999, the Company announced a comprehensive plan to reduce
operating costs and improve its operational efficiency by fully integrating
certain operations within a geographic area and consolidating certain
administrative and support functions. The Company recorded a charge to
operations of $9.4 million in respect of this plan (the "Integration Charge").
The principal components of the Integration Charge were $3.3 million for
termination of certain employment contracts, $2.1 million for severance costs
attributable to the consolidation of administrative and support functions and
$4.0 million for the costs of combining five processing facilities into others
within the same geographic region. These changes will affect less than 5% of the
Company's workforce. See Note 7 to Condensed Notes to Unaudited Consolidated
Financial Statements for additional information.
INVESTING ACTIVITIES
During February 2000, the Company acquired the net assets of Gibraltar
Steel's flat rolled processing operations in Chattanooga, Tennessee for cash
consideration of approximately $7.8 million and the assumption of indebtedness
of approximately $2.8 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 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.
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 6,914,140 shares are
available under this registration statement for use in connection with future
acquisitions.
FINANCING ACTIVITIES
On April 22, 1999, the Company announced that the Board of Directors had
approved the use of up to $25.0 million to repurchase shares of the Company's
stock. The shares may be purchased, from time to time, in open market or in
privately negotiated transactions. During the six months ended June 30, 2000,
the Company had repurchased 1,544,993 shares at an average price of $7.47 per
share. In June, 2000, the Company retired all of its Treasury stock (2,006,443
shares), thereby reducing the number of outstanding shares by a like amount,
effective June 30, 2000 the Company amended the Credit Facility to modify
certain financial ratios. The amended Credit Facility also calls for increased
interest of 3/8ths of one percent (.375%) on funded debts.
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 June 30, 2000,
approximately 30.3% ($145.8 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 variable interest
long-term debt. The detrimental effect of a hypothetical 100 basis point
increase in interest rates would be to reduce income before taxes by $1.5
million on an annual basis. At June 30, 2000, the fair value of the Company's
fixed rate debt is approximately $207.2 million based upon discounted future
cash flows using current market prices and the fair value of the interest rate
swap agreements is $1.1 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting held on May 17, 2000, holders of the
Company's Common Stock elected four Class III directors. The Class III directors
will hold office until the Company's Annual Meeting in 2003, or until their
respective successors are elected. The Class III directors are: Tommy Knight,
Lester Peterson, T. William Porter, and Leon Jeffreys.
Holders of the Company's Common Stock and Restricted Common Stock ratified
the Board of Directors appointment of Arthur Andersen LLP as the Company's
independent public accountants for the year ending December 31, 2000. The
results of the vote for the ratification of the appointment of Arthur Andersen
LLP were as follows: For -- 26,185,917; Against -- 36,763; Abstentions
(including broker non-votes) -- 3,525.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
10 Amendment No. 4 to the Company's $350 million Amended and Restated
Credit Agreement dated February 11, 1998, between Bank One, N.A, as
agent and other financial institutions parties thereto as lenders
21 List of Subsidiaries of the Company
27 Financial Data Schedule
B. REPORTS ON FORM 8-K:
None.
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METALS USA, INC.
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: August 14, 2000 and Chief Accounting Officer
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