<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended July 3, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 333-29141
MMI PRODUCTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 74-1622891
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
515 West Greens Road, Suite 710
Houston, Texas 77067
(Address of Principal Executive Offices)
(281) 876-0080
(Registrant's telephone number, including area code)
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 [ ]
There were 252,000 shares of the Registrant's Class
A Common Stock outstanding as of the close of
business on August 16, 1999, all of which are
held by Merchants Metals Holding Company.
<PAGE> 2
MMI PRODUCTS, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES Number
------
<S> <C> <C>
Item 1. Consolidated Financial Statements and Notes 3
Item 2. Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
<PAGE> 3
MMI PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
July 3,
1999 January 2,
(Unaudited) 1999
----------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,326 $ 1,979
Accounts receivable, net of allowance for doubtful accounts of
$2,354 and $1,926, respectively 78,310 58,633
Inventories 67,727 62,347
Deferred income taxes 1,980 1,495
Prepaid expenses 1,238 1,443
---------- ----------
Total current assets 152,581 125,897
Property, plant and equipment
Land 5,509 4,814
Buildings and improvements 21,260 21,129
Machinery and equipment 69,052 63,171
Rental equipment 4,022 3,259
---------- ----------
99,843 92,373
Less accumulated depreciation 34,759 31,456
---------- ----------
Property, plant and equipment, net 65,084 60,917
Intangible assets 31,558 29,123
Deferred charges and other assets 5,057 4,289
---------- ----------
Total assets $ 254,280 $ 220,226
========== ==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable $ 49,375 $ 50,328
Accrued interest 3,722 3,238
Accrued liabilities 12,610 11,175
Income taxes payable 2,683 672
Current maturities of long-term obligations 1,730 1,630
---------- ----------
Total current liabilities 70,120 67,043
Long-term obligations 179,218 158,807
Deferred income taxes and other long-term liabilities 7,680 7,383
Commitments and contingencies
Stockholder's deficit:
Common stock, $1 par value; 500,000 shares authorized;
252,000 shares issued and outstanding 252 252
Additional paid-in capital 13,009 13,009
Accumulated other comprehensive income, net of tax of $148 (221) (221)
Retained deficit (15,778) (26,047)
---------- ----------
Total stockholder's deficit (2,738) (13,007)
---------- ----------
Total liabilities and stockholder's deficit $ 254,280 $ 220,226
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE> 4
MMI PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------ ------------------------
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $136,198 $116,181 $239,140 $202,489
Cost of sales 108,706 97,352 193,634 171,619
-------- -------- -------- --------
Gross profit 27,492 18,829 45,506 30,870
Selling, general and administrative expenses 9,104 7,767 18,249 15,097
Other expense, net 111 117 258 62
-------- -------- -------- --------
Income before interest and income taxes 18,277 10,945 26,999 15,711
Interest expense 4,886 4,456 9,594 8,568
-------- -------- -------- --------
Income before income taxes 13,391 6,489 17,405 7,143
Provision for income taxes 5,489 2,592 7,136 2,857
-------- -------- -------- --------
Net income $ 7,902 $ 3,897 $ 10,269 $ 4,286
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE> 5
MMI PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------
July 3, July 4,
1999 1998
---------- ----------
<S> <C> <C>
Net income $ 10,269 $ 4,286
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 4,293 3,270
Deferred income taxes (216) 547
Other 329 244
Changes in operating assets and liabilities:
Increase in operating assets and liabilities (14,674) (13,843)
Other 303 138
---------- ----------
Cash provided by (used in) operating activities 304 (5,358)
Investing activities:
Capital expenditures (4,375) (5,695)
Acquisitions (13,236) (22,691)
Other 68 33
---------- ----------
Cash used in investing activities (17,543) (28,353)
Financing activities:
Proceeds from issuance of senior subordinated notes 32,137 --
Proceeds from (payment of) revolving credit facility, net (11,126) 33,578
Debt offering costs (1,065) --
Payment of capital leases (926) (727)
Payment of other long-term debt (434) --
---------- ----------
Cash provided by financing activities 18,586 32,851
---------- ----------
Net change is cash and cash equivalents 1,347 (860)
Cash and cash equivalents, beginning of period 1,979 3,509
---------- ----------
Cash and cash equivalents, end of period $ 3,326 $ 2,649
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE> 6
MMI PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of MMI Products,
Inc. and its wholly-owned subsidiary, Security Fence Supply Co. Inc.
(collectively "MMI"). MMI Products, Inc., is a wholly-owned subsidiary of
Merchants Metals Holding Company (Holding) which is substantially wholly-owned
by MMI Products, L.L.C. The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These financial statements should be read in conjunction
with the Company's annual financial statements for the year ended January 2,
1999 included in the Company's Form 10-K filed with the Securities and Exchange
Commission on April 2, 1999.
In the opinion of management, the consolidated financial statements contain all
adjustments, consisting only of normal recurring adjustments, considered
necessary to present fairly the consolidated financial position of the Company
as of July 3, 1999 and the consolidated results of its operations and its cash
flows for the respective periods ended July 3, 1999 and July 4, 1998. Interim
results for the six months ended July 3, 1999 are not necessarily indicative of
results that may be expected for the fiscal year ending January 1, 2000.
Effective January 3, 1999 the Company has adopted the following new accounting
standards:
In March 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position ("SOP") 98-1, "Accounting For the Costs of
Computer Software Developed For or Obtained For Internal-Use." The SOP requires
the capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal-use. Prior to the
adoption of SOP 98-1, the Company expensed internal-use software related costs
as incurred. The adoption of this statement did not have a material impact on
the consolidated results of operations or financial position.
In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-Up
Activities", which requires that costs related to start-up activities be
expensed as incurred. This accounting treatment is consistent with the
Company's previous policy, therefore the adoption of this statement had no
impact on the consolidated results of operations or financial position.
Certain reclassifications have been made to the financial statements in order
to conform to the current presentation.
2. ACQUISITIONS
On June 7, 1999, MMI purchased certain assets of the wholesale fence division
of National Wholesale Fence Supply, Inc. ("National Wholesale") for cash of
approximately $13.2 million, which was funded by the revolving credit facility.
The operations acquired include the manufacture of ornamental iron fence
products in San Fernando, California and distribution of fence products in
6
<PAGE> 7
MMI PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
2. ACQUISITIONS (CONTINUED)
four California locations. MMI entered into subleases for the ornamental iron
fence manufacturing plant and the distribution locations. The acquisition has
been accounted for as a purchase. The excess of the purchase price over the
preliminary estimate of the fair value of the assets acquired of $2.9 million
is being amortized over 20 years. The consolidated financial statements include
the results of the former National Wholesale operations from the date of the
acquisition.
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
July 3, 1999
(Unaudited) January 2, 1999
------------ ---------------
(In Thousands)
<S> <C> <C>
Raw materials $ 15,042 $ 17,024
Work-in-process 438 1,150
Finished goods 52,247 44,173
========== ==========
$ 67,727 $ 62,347
========== ==========
</TABLE>
4. LONG-TERM OBLIGATIONS
On February 12, 1999, MMI issued $30 million of 11.25% senior subordinated
notes due 2007 in a private offering. The net proceeds of approximately $31.1
million including original issuance premium, after fees and expenses, were used
to reduce its borrowings under the revolving credit facility.
On April 30, 1999, MMI exchanged the $30 million Senior Subordinated Notes
issued on February 12, 1999 for Registered Senior Subordinated Notes. These
notes have the same form and terms as the February 12, 1999 notes and the $120
million Registered Senior Subordinated Notes issued on April 16, 1997.
5. SEGMENT REPORTING
MMI has five operating units that are aggregated into two reportable segments;
Fence and Concrete Construction Products. The Fence Segment has three operating
units that offer similar products and services. The Concrete Construction
Products Segment has two operating units that offer complimentary products and
services within the concrete construction industry.
Summarized financial information concerning the reportable segments is shown in
the following table. The Corporate column for earnings before interest and
income taxes represents amortization of intangibles. Corporate general and
administrative expenses are allocated to the segments based upon proportional
net sales.
7
<PAGE> 8
MMI PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. SEGMENT REPORTING (CONTINUED)
<TABLE>
<CAPTION>
Three months ended July 3, 1999
-----------------------------------------------------
Concrete
Fence Construction
Products Products Corporate Total
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
External sales $ 78,756 $ 57,442 $ -- $ 136,198
Earnings before interest and income taxes 7,762 10,804 (289) 18,277
Interest expense -- -- 4,886 4,886
Income taxes -- -- 5,489 5,489
Net income 7,762 10,804 (10,664) 7,902
Depreciation and amortization 865 1,103 289 2,257
EBITDA (1) 8,627 11,907 -- 20,534
</TABLE>
<TABLE>
<CAPTION>
Three months ended July 4, 1998
-----------------------------------------------------
Concrete
Fence Construction
Products Products Corporate Total
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
External sales $ 59,365 $ 56,816 $ -- $ 116,181
Earnings before interest and income taxes 5,435 5,690 (180) 10,945
Interest expense -- -- 4,456 4,456
Income taxes -- -- 2,592 2,592
Net income 5,435 5,690 (7,228) 3,897
Depreciation and amortization 705 851 180 1,736
EBITDA (1) 6,140 6,541 -- 12,681
</TABLE>
<TABLE>
<CAPTION>
Six months ended July 3, 1999
-----------------------------------------------------
Concrete
Fence Construction
Products Products Corporate Total
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
External sales $ 131,770 $ 107,370 $ -- $ 239,140
Earnings before interest and income taxes 10,167 17,397 (565) 26,999
Interest expense -- -- 9,594 9,594
Income taxes -- -- 7,136 7,136
Net income 10,167 17,397 (17,295) 10,269
Depreciation and amortization 1,664 2,064 565 4,293
EBITDA (1) 11,831 19,461 -- 31,292
Segment Assets (2) 114,056 97,980 42,244 254,280
</TABLE>
8
<PAGE> 9
MMI PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. SEGMENT REPORTING (CONTINUED)
<TABLE>
<CAPTION>
Six months ended July 4, 1998
--------------------------------------------------
Concrete
Fence Construction
Products Products Corporate Total
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
External sales $ 98,282 $ 104,207 $ -- $ 202,489
Earnings before interest and income taxes 6,605 9,407 (301) 15,711
Interest expense -- -- 8,568 8,568
Income taxes -- -- 2,857 2,857
Net income 6,605 9,407 (11,726) 4,286
Depreciation and amortization 1,374 1,595 301 3,270
EBITDA (1) 7,979 11,002 -- 18,981
Segment Assets (2) 79,634 98,552 30,698 208,884
</TABLE>
(1) EBITDA is defined as the sum of income before interest expense, income
taxes, depreciation, and amortization. EBITDA should not be considered in
isolation from or as a substitute for net income or cash flow measures prepared
in accordance with generally accepted accounting principles or as a measure of a
Company's profitability or liquidity.
(2) Segment assets include accounts receivable, inventory and property, plant
and equipment. Corporate assets include all other components of total
consolidated assets.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
STATEMENT OF OPERATIONS - SELECTED DATA
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------------- --------------------------------------
July 3, July 4, July 3, July 4,
1999 Change 1998 1999 Change 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Fence Products $ 78,756 $ 19,391 $ 59,365 $ 131,770 $ 33,488 $ 98,282
Percentage of net sales 57.8% 6.7% 51.1% 55.1% 6.6% 48.5%
Concrete Construction Products $ 57,442 $ 626 $ 56,816 $ 107,370 $ 3,163 $ 104,207
Percentage of net sales 42.2% -6.7% 48.9% 44.9% -6.6% 51.5%
Net Sales $ 136,198 $ 20,017 $ 116,181 $ 239,140 $ 36,651 $ 202,489
Gross profit $ 27,492 $ 8,663 $ 18,829 $ 45,506 $ 14,636 $ 30,870
Percentage of net sales 20.2% 4.0% 16.2% 19.0% 3.8% 15.2%
Selling, general, administrative
and other expenses $ 9,215 $ 1,331 $ 7,884 $ 18,507 $ 3,348 $ 15,159
Percentage of net sales 6.8% 0.0% 6.8% 7.7% 0.3% 7.5%
Income before interest and income taxes $ 18,277 $ 7,332 $ 10,945 $ 26,999 $ 11,288 $ 15,711
Percentage of net sales 13.4% 4.0% 9.4% 11.3% 3.5% 7.8%
Interest expense $ 4,886 $ 430 $ 4,456 $ 9,594 $ 1,026 $ 8,568
Percentage of net sales 3.6% -0.2% 3.8% 4.0% -0.2% 4.2%
Effective income tax rate 41.0% -- 40.0% 41.0% -- 40.0%
Net income $ 7,902 $ 4,005 $ 3,897 $ 10,269 $ 5,983 $ 4,286
</TABLE>
Net sales for the three months and six months ended July 3, 1999 increased $20.0
million (17.2%) and $36.7 million (18.1%), respectively, from the corresponding
periods of the prior fiscal year. The fence products segment generated net sales
increase of $19.4 million and $33.5 million for the three months and six months
ended July 3, 1999, respectively. This increase in net sales was a result of the
acquisition of Security Fence and Supply Company, Inc. in October 1998, which
contributed 48.3% and 47.8% of the fence products segments net sales increase
for the three months and six months ended July 3, 1999, respectively. The fence
products segment also benefited from improved weather conditions, expansion of
its distribution network by 8 locations and the National Wholesale acquisition
in June 1999. The concrete construction products segment contributed $0.6
million and $3.2 million of the total net sales increase for the three months
and six months ended July 3, 1999, respectively. After giving consideration to
the decline in sales resulting from the disposition of a chemical processing
business in September 1998, net sales for the concrete construction products
segment improved $3.0 million and $6.6 million for the three months and six
months ended July 3, 1999, respectively. These increases were due primarily to
strong activity in commercial and infrastructure construction markets, some
acquisition of market share, and the full 1999 period impact of the acquisition
of The Burke Group L.L.C. in February 1998.
10
<PAGE> 11
Gross profit, as a percentage of sales, increased from 16.2% to 20.2% and from
15.2% to 19.0% for the three months and six months ended July 3, 1999,
respectively, from the corresponding periods of the prior fiscal year. The
increase in gross profit was primarily due to the decrease of raw material costs
for both segments, with emphasis on the wire mesh product line within the
concrete construction products segment due to its high volume of raw material
usage. In addition, both the fence and concrete construction product segments
have benefited from a change in product mix to higher margin products as a
result of the Security Fence and Burke Group acquisitions. These benefits offset
decreases in per unit pricing in the wire mesh product line and inflationary
pressures in certain manufacturing plant costs.
Selling, general, administrative, and other expenses as a percentage of net
sales have remained relatively flat with a slight increase in the six months
ended July 3, 1999 due to increased amortization of intangibles resulting from
1998 and 1999 business acquisitions and a non-recurring casualty loss at a
manufacturing facility.
Interest expense increased $0.4 million and $1.0 million for the three months
and six months ended July 3, 1999, respectively, as compared to corresponding
periods of the prior fiscal year. The increases were principally due to higher
levels of invested capital as a result of MMI's business acquisitions in
February 1998 and October 1998 and higher interest rates as a result of the
issuance of the $30 million 11.25% Senior Subordinated Notes in February 1999.
Net income increased $4.0 million and $6.0 million for the three months and six
months ended July 3, 1999, respectively, as compared to the same period of the
last fiscal year. The increase in net income was primarily the result of the
factors discussed above.
LIQUIDITY AND SOURCES OF CAPITAL
Cash Flows. For the six months ended July 3, 1999, operating activities provided
net cash of approximately $0.3 million. Seasonal increases in net operating
assets and liabilities of $14.7 million partially offset operating cash flow of
$15.0 million provided by net income adjusted for non-cash items such as
depreciation, amortization, and other non-cash charges and the decrease in other
long-term assets. Investing activities utilized approximately $17.6 million of
cash, consisting of the National Wholesale acquisition and capital expenditures.
Financing activities provided approximately $18.6 million of cash, primarily
from the issuance of the $30 million Senior Subordinated Notes.
EBITDA is a widely accepted financial indicator of a company's ability to
service and incur debt. MMI's EBITDA for the first six months of fiscal year
1999 and 1998 was $31.3 million and $19.0 million, respectively. The increase in
EBITDA is primarily due to higher income before interest and income taxes due to
the changes in net sales, gross profit and selling, general and administrative
expenses discussed in "Results of Operations" above. EBITDA should not be
considered in isolation from or as a substitute for net income or cash flow
measures prepared in accordance with generally accepted accounting principles or
as a measure of a company's profitability or liquidity. EBITDA is defined as the
sum of income before interest, income taxes, depreciation and amortization.
MMI expects that cash flows from operations and the borrowing availability under
its bank line of credit, which includes a revolving credit facility and a term
facility, will provide sufficient
11
<PAGE> 12
liquidity to meet its normal operating requirements, capital expenditure plans,
existing debt service, and business acquisition strategy over the near term.
MMI has pursued and intends to continue to pursue a strategy of business
acquisitions that will broaden its distribution network, complement or extend
its existing product lines or increase its production capacity. The borrowing
availability under its bank line of credit is also expected to be available to
finance such acquisitions. It is possible that, depending upon MMI's future
operating cash flows and the size of potential acquisitions, MMI will seek
additional sources of financing subject to limitations set forth in its senior
subordinated notes indenture.
SEASONALITY
MMI's products are used in the commercial, infrastructure, and residential
construction industries. These industries are both cyclical and seasonal, and
changes in demand for construction services have a material impact on MMI's
sales and profitability. The highest level of sales and profitability occur
during the times of the year when climatic conditions are most conducive to
construction activity. Accordingly, sales will typically be higher in MMI's
second and third quarters and will be lower in the first and fourth quarters.
IMPACT OF YEAR 2000
State of Readiness. MMI completed an assessment and has completed or is in the
process of modifying or replacing portions of its software so that its computer
systems will function properly with respect to dates in the Year 2000 and
beyond. In October 1998, MMI replaced its general ledger, accounts payable,
accounts receivable, sales analysis, and financial reporting systems with
software which includes eight digit dates and date routines. Although the
software supplier is confident that the current code will successfully handle
the Year 2000 turnover, it has recommended upgrade to its most recent version to
achieve the highest possible degree of assurance for a successful Year 2000
turnover. MMI has begun the project to accomplish this upgrade by the end of
1999. Year 2000 compliance in other systems has been achieved through
modification of internally developed programs.
Third Party Relationships. MMI does not expect any significant disruption on
operations in the event that any of its suppliers or customers fail to achieve
Year 2000 compliance.
Risks and Uncertainties. Because the existing software for general ledger,
accounts payable, accounts receivable, sales analysis, and financial reporting
does incorporate eight digit dates and date routines, any delay in accomplishing
the upgrade project is not expected to have a materially adverse impact. MMI
believes that it will experience at most, isolated and minor disruptions of
business processes as a result of the Year 2000 issue. Such disruptions are not
expected to have a material effect on MMI's business, consolidated financial
position or results of operations. However, the magnitude of all Year 2000
disturbances cannot be predicted. Failure to complete these programs as planned
could result in a system failure or miscalculations causing disruptions of
operations, including among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities,
all of which could have a material impact on MMI's business, consolidated
financial position or results of operations.
12
<PAGE> 13
Costs. MMI's significant growth in recent years required system software and
hardware upgrades and improvements that were planned for and initiated in 1996.
Because the costs of software and hardware upgrades were already being incurred,
and planned modification of internal systems is primarily for improvement and
increased capacity, the actual cost for Year 2000 specific upgrades and
modifications is not expected to exceed $100,000 and will be expensed as
incurred.
FORWARD LOOKING INFORMATION
The statements contained in this report which are not historical facts,
including, but not limited to, statements found under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" above,
are forward looking statements that involve a number of risks and uncertainties.
The actual results of the future events described in such forward looking
statements in this report could differ materially from those contemplated by
such forward looking statements. Among the factors that could cause actual
results to differ materially are the risks and uncertainties discussed in the
report, including without limitations the portions of such statements under the
caption referenced above, and the uncertainties set forth from time to time in
the Company's other public reports and filings and public statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MMI is subject to market risk exposure related to changes in interest rates on
it's revolving credit facility and it's senior subordinated notes. Borrowings
under the revolving credit facility bear interest, at the option of MMI, at
either the bank's base rate plus 0.25 percent or Eurodollar rate plus 1.5
percent. MMI is exposed to changes in the fair value of its $150 million 11.25%
fixed rate senior subordinated notes. Although the fair value of these notes has
not fluctuated much, the variation in fair value is a function of market
interest rate changes and the investor perception of the investment quality of
the senior subordinated notes.
MMI has exposure to price fluctuations associated with steel rod, its primary
raw material. MMI negotiates purchase commitments from one to nine months in
advance to limit its exposure to price fluctuation and ensure availability of
the materials. Approximately 50% of steel rod is purchased from foreign sources.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibit 27 Financial Data Schedule
B. Reports on Form 8-K A Form 8-K was filed with the Commission on June 16,
1999. The Form 8-K reported the acquisition of fence
operations from National Wholesale Fence Supply,
Inc.
14
<PAGE> 15
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.
Date: August 17, 1999 By: /s/ Robert N. Tenczar
---------------------------------------
Robert N. Tenczar, Vice President
and Chief Financial Officer
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JUL-03-1999
<CASH> 3,326
<SECURITIES> 0
<RECEIVABLES> 80,664
<ALLOWANCES> 2,354
<INVENTORY> 67,727
<CURRENT-ASSETS> 152,581
<PP&E> 99,843
<DEPRECIATION> 34,759
<TOTAL-ASSETS> 254,280
<CURRENT-LIABILITIES> 70,120
<BONDS> 150,000
0
0
<COMMON> 252
<OTHER-SE> (2,990)
<TOTAL-LIABILITY-AND-EQUITY> 254,280
<SALES> 239,140
<TOTAL-REVENUES> 239,140
<CGS> 193,634
<TOTAL-COSTS> 193,634
<OTHER-EXPENSES> 18,507
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,594
<INCOME-PRETAX> 17,405
<INCOME-TAX> 7,136
<INCOME-CONTINUING> 10,269
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,269
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
