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UNITED STATES
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: DECEMBER 31, 1997
--- TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-20179
RECYCLING INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
COLORADO 84-1103445
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
9780 S. MERIDIAN BLVD, SUITE 180
ENGLEWOOD, COLORADO 80112
- ------------------------------------------------ ----------
(Mailing Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (303) 790-7372
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock as of the close of the period covered by this Report.
CLASS NUMBER OF SHARES OUTSTANDING AS OF:
- ----------------------------- February 5, 1998
Common Stock, $.001 Par Value -----------------------------------
18,006,974
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TABLE OF CONTENTS
<TABLE>
PART I -- FINANCIAL INFORMATION PAGE
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<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS*
Consolidated Balance Sheets - December 31, 1997
and September 30, 1997 1-2
Consolidated Statements of Operations for the three months ended
December 31, 1997 and 1996 3
Consolidated Statement of Stockholders' Equity for the three months
ended December 31, 1997 4
Consolidated Statements of Cash Flows for the three months ended
December 31, 1997 and 1996 5
Notes to the Consolidated Financial Statements 6-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2. CHANGES IN SECURITIES 14-17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
SIGNATURES 23
</TABLE>
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* The accompanying interim financial statements have not been audited by an
independent certified public accountant. Only those statements corresponding
to a fiscal year-end (September 30) are audited.
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RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND SEPTEMBER 30, 1997
(THOUSANDS OF DOLLARS)
ASSETS
<TABLE>
DECEMBER 31, 1997 SEPTEMBER 30, 1997
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<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,498 $ 746
Accounts receivable, net 26,442 8,820
Inventories 17,677 4,183
Deferred income taxes 1,110 810
Prepaid expenses and other 1,352 445
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Total Current Assets 48,079 15,004
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PROPERTY, PLANT AND EQUIPMENT, NET 159,010 33,227
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OTHER ASSETS:
Notes receivable, related party 2,490 85
Deferred income taxes 1,528 585
Other assets, net of amortization 20,132 6,178
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Total Other Assets 24,150 6,848
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TOTAL ASSETS $231,239 $55,079
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</TABLE>
See Accompanying Notes to the Consolidated Financial Statements.
1
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RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND SEPTEMBER 30, 1997
(THOUSANDS OF DOLLARS)
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31, 1997 SEPTEMBER 30, 1997
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<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,300 $ 3,300
Accounts payable 8,341 2,661
Accounts payable - related parties - 438
Other current liabilities 1,644 1,049
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Total Current Liabilities 13,285 7,448
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LONG-TERM LIABILITIES:
Long-term debt, less current maturities 138,280 29,456
Other long-term liabilities 13,157 -
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Total long-term liabilities 151,437 29,456
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Total Liabilities 164,722 36,904
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COMMITMENTS AND CONTINGENT LIABILITIES
Redeemable common stock,
$.001 par value, 363,636 shares issued and outstanding 1,500 1,500
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STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 10,000,000 shares authorized
70,000 and 10,000 shares issued and outstanding 19,660 500
Common Stock ($.001 par value), 50,000,000 shares authorized,
18,006,974 and 14,149,780 shares issued and outstanding 17 14
Additional paid-in capital 58,335 26,846
Accumulated deficit (12,995) (10,685)
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Total Stockholders' Equity 65,017 16,675
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 231,239 $ 55,079
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</TABLE>
See Accompanying Notes to the Consolidated Financial Statements.
2
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RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
DECEMBER 31, 1997 DECEMBER 31, 1996
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<S> <C> <C>
Net sales $ 31,275 $ 10,761
Cost of sales and operating expenses 26,302 9,452
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Gross profit 4,973 1,309
Selling, general and administrative expenses 2,474 1,213
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Operating income 2,499 96
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Other income (expense):
Interest expense (2,169) (459)
Miscellaneous (55) 8
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Total other income (expense) (2,224) (451)
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Earnings (loss) before income taxes and
extraordinary loss 275 (355)
Provision for income taxes 87 -
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Earnings (loss) before extraordinary loss 188 (355)
Extraordinary (loss) on early extinguishment
of debt, net of tax (2,414) -
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Net (loss) (2,226) (355)
Preferred stock dividends 84 -
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Net (loss) available to common
shareholders $ (2,310) $ (355)
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Basic earnings (loss) per common share:
Before extraordinary item $ 0.01 $ (0.03)
Extraordinary item (0.16) -
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Basic earnings (loss) per common share $ (0.15) $ (0.03)
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Weighted average number of common shares
outstanding 15,351,000 13,795,000
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</TABLE>
See Accompanying Notes to the Consolidated Financial Statements.
3
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RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 1997
(THOUSANDS OF DOLLARS)
<TABLE>
ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
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<S> <C> <C> <C> <C> <C> <C> <C>
Balances, September 30, 1997 10,000 $ 500 14,149,780 $14 $26,846 $(10,685) $16,675
Preferred stock issued for
acquisitions 60,000 19,160 - - - - 19,160
Common stock issued in connection
with acquisitions - - 2,564,705 2 20,747 - 20,749
Common stock issued on
exercise of options and warrants - - 1,292,489 1 1,735 - 1,736
Issuance of warrants in connection
with debt financing - - - - 9,007 - 9,007
Preferred stock dividends - - - - - (84) (84)
Net (loss) - - - - - (2,226) (2,226)
------ ------- ---------- --- ------- -------- -------
Balances, December 31, 1997 70,000 $19,660 18,006,974 $17 $58,335 $(12,995) $65,017
------ ------- ---------- --- ------- -------- -------
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</TABLE>
See Accompanying Notes to the Consolidated Financial Statements.
4
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RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(THOUSANDS OF DOLLARS)
<TABLE>
DECEMBER 31, DECEMBER 31,
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) $ (2,226) $ (355)
Adjustments to reconcile net (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,498 532
Prepaid loan fees 1,125 -
Non-operating activities 2,532 -
Deferred income taxes (1,243) -
Changes in Assets and Liabilities:
Accounts receivable 2,501 326
Inventories (3,960) 424
Prepaid expenses and other (132) 128
Accounts payable 3,120 (720)
Current liabilities, excluding debt (1,001) (149)
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Net Cash provided by Operating Activities 2,214 186
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INVESTING ACTIVITIES:
Capital expenditures, net (542) (261)
Note receivable, related party (1,440) (35)
Other assets (2,382) (99)
Acquisitions, net of equity issued (114,947) (134)
Cash acquired in acquisitions 1,835 -
----------------------
Net Cash (used in) Investing Activities (117,476) (529)
----------------------
FINANCING ACTIVITIES:
Proceeds from borrowings, net 147,868 2,358
Principal payments on borrowings (32,697) (2,511)
Other long-term liabilities 324 -
Prepayment penalty on debt (2,532) -
Loan fees paid (8,600) (103)
Dividends Paid (84) -
Net proceeds from issuance of stock 11,735 910
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Net Cash Provided by Financing Activities 116,014 654
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Increase in Cash 752 311
Cash, beginning of period 746 1,450
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Cash, end of period $ 1,498 $ 1,761
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----------------------
</TABLE>
See Accompanying Notes to the Consolidated Financial Statements.
5
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RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
GENERAL INFORMATION:
I. The Financial Statements included herein have been prepared by the Company
without audit except the September 30, 1997 balance sheet, which was
audited. The Statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect all
adjustments, consisting of only normal recurring accruals which are, in
the opinion of management, necessary for a fair statement of the results
of operations for the periods shown. These Financial Statements should be
read in conjunction with the Financial Statements and notes thereto
included in the Company's latest report on Form 10-K/A, dated September 30,
1997.
II. The results of operations for the three months ending December 31, 1997,
and 1996, are not necessarily indicative of the results to be expected
for the full year.
III. Inventories as of December 31, 1997, and September 30, 1997, consisted of
the following:
<TABLE>
DECEMBER 31, 1997 SEPTEMBER 30, 1997
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<S> <C> <C>
Raw materials $ 7,731 $2,590
Finished goods 8,108 1,330
Other 1,838 263
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Total $17,677 $4,183
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</TABLE>
IV. ACQUISITIONS
On December 5, 1997, the Company acquired for approximately $23.8 million
substantially all the assets of Brenner Companies Inc. ("Brenner") located in
Winston-Salem, North Carolina. The purchase price was financed with $15.7
million of proceeds in part from a $150 million Senior Credit Facility (The
Credit Facility), $60 million in Senior Subordinated Debt (Subordinated Debt)
and Sale of Common Stock, 14,000 shares of the Company's Series F 6-1/2%
Redeemable Convertible Preferred Stock (the "Series F Preferred"), valued at
$3.5 million and 14,000 shares of the Company's Series G 6-1/2% Redeemable
Convertible Preferred Stock (the "Series G Preferred"), valued at $3.5
million and the assumption of $1.1 million in deferred compensation
liabilities. The company will continue the metals recycling operations of
Brenner.
On December 5, 1997, the Company acquired for approximately $42 million
substantially all the assets of United Metals Recyclers, a North Carolina
general partnership, headquartered in Greensboro, North Carolina ("UMR"). The
purchase price was financed with $36 million in proceeds in part from The
Credit Facility, Subordinated Debt and Sale of Common Stock and 12,000 shares
of the Company's Series H 6% Secured Redeemable Convertible Preferred Stock
(the "Series H Preferred"), valued at
6
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$6 million. The Company will continue the metals recycling operations of
United.
On December 5, 1997, the Company acquired substantially all the assets of
Money Point Land Holding Corporation and Money Point Diamond Corporation
doing business as Jacobson Metal Company ("Jacobson"), headquartered in
Chesapeake, Virginia, for an aggregate purchase price of approximately $19.9
million. The purchase price was financed with $16.9 million of proceeds in
part from The Credit Facility, Subordinated Debt and Sale of Common Stock and
$3.0 million or 10,000 shares of the Company's Series E Redeemable
Convertible Preferred Stock (the "Series E Preferred"). The company will
continue the metals recycling operations of Jacobson.
On December 5, 1997, the Company acquired for approximately $31 million
substantially all the assets of Central Metals Company, Inc. ("Central")
located in Atlanta, Georgia. The purchase price was financed with $20.7
million of proceeds in part from The Credit Facility, Subordinated Debt, and
Sale of Common Stock, the issuance of 800,000 shares of the Company's Common
Stock having an agreed value of $12.50 per share or $10 million, and the
assumption of $0.3 million of current liabilities. The Company will continue
the metals recycling operations of Central.
On December 5, 1997, the Company acquired for $7.4 million certain assets of
Grossman Bros. Company ("Grossman") located in Milwaukee, Wisconsin and
assumed $0.3 million of trade payables. The purchase price was financed in
part from the proceeds of The Credit Facility, Subordinated Debt, Sale of
Common Stock and a capital lease agreement expiring December 5, 1999 at which
time the Company will pay $4.0 million in the form of cash, stock or a
combination of both. The Company will continue the metals recycling
operations of Grossman.
On December 8, 1997, the Company acquired for approximately $25.5 million all
the outstanding Capital Stock of Wm. Lans Sons' Co. Inc., ("Lans") and
substantially all of the real property and personal property of Idal Realty
Company ("Idal"), both entities located in South Beloit, Illinois. The
purchase was financed with $22 million of proceeds in part from The Credit
Facility, Subordinated Debt and Sale of Common Stock and Series I Redeemable
Convertible Preferred Stock (the "Series I Preferred") valued at $3.5
million. The Company will continue the metals recycling operations of Lans.
The following summarized unaudited pro forma results of operations assumes
the acquisition of Addlestone Recycling Corp. (ARC) and Addlestone
International Corp (AIC) acquired in the third and fourth quarter of fiscal
1997 and the acquisitions of Grossman, Jacobson, Brenner, UMR, Central and
Lans had occurred at the beginning of each period reported.
7
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<TABLE>
Three months ended December 31, 1997 1996
- ------------------------------------------------ ---------- ----------
<S> <C> <C>
Net sales $60,047 $58,171
Depreciation and amortization 2,255 2,210
Operating income 5,248 4,208
Earnings before income taxes and
extraordinary loss 2,081 1,015
Net loss (1,103) (1,847)
Net loss available to common shareholders (1,382) (2,126)
Diluted earnings per share:
Earnings before extraordinary item 0.04 0.02
Loss after extraordinary item $ (0.06) $ (0.13)
Weighted average number of common share
outstanding 24,471,070 16,977,823
EBITDA(1) $ 7,503 $ 6,418
</TABLE>
- ----------------------
(1) The Company has included the calculation of Earnings Before Interest,
Taxes, Depreciation and Amortization (EBITDA) as a supplemental schedule
to the proforma financial information. The EBITDA calculation, which is
not a measure of financial performance under generally accepted accounting
principles, was included as certain investors use the data to determine
the Company's ability to service its indebtedness. EBITDA is not a
substitute for income from continuing operations, net income or cash flows
presentation under generally accepted accounting principles.
The pro forma data is for informational purposes only and may not necessarily
reflect the results of operations of the Company had the acquired businesses
operated as part of the Company for the periods ended December 31, 1997 and
1996.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and the notes thereto included elsewhere
herein. Statements included on the following discussion concerning
predictions of economic performance and management's plans and objectives are
forward looking statements. These statements involve risks and uncertainties
that could cause actual results to differ materially from the forward looking
statements. Factors which would cause or contribute to such differences are
summarized in the following discussion and include: downturns in the
Company's primary markets; disruptions to the Company's operations from acts
of God or extended maintenance; disruptions in the availability or pricing of
raw materials; transportation difficulties; and the unavailability of
financing to complete management's plans and objectives.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
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DECEMBER 31, SEPTEMBER 30,
(Dollars in millions) 1997 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Current ratio 3.62:1 2.01:1
Working capital $ 34.8 $ 7.6
- -------------------------------------------------------------------------------
</TABLE>
The increased liquidity at December 31, 1997 compared to September 30, 1997
is primarily attributable to increases in accounts receivable and inventory
from acquisitions, financed with long-term debt proceeds as discussed below.
The Company invested $0.5 million in property and equipment, not including
property and equipment acquired in business acquisitions, during the quarter
ended December 31, 1997, for expansion of the Company's ferrous and
non-ferrous processing capacity and general modernization and efficiency
upgrades. Planned capital expenditures during the next year for the
Company's existing facilities are estimated to be $3 million. Included in
this amount are capital expenditures for the Company's shredders and
materials handling equipment designed to increase capacity and improve
operating efficiencies. Management anticipates the capital expenditures will
be paid with cash from operations and long-term debt financing.
In December 1997, the Company entered into a $150 million Senior Credit
Facility ("Credit Facility") with General Electric Capital Corporation and
BankBoston, N.A. as agents for the lenders. The Credit
9
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Facility is comprised of a $45 million revolving credit facility, a $40
million term loan due December 5, 2003, with interest and principal payable
quarterly, a $40 million term loan due on the earlier of December 5, 2005 or
six months prior to the maturity of the Subordinated Notes discussed below
with interest and principal payable quarterly and a $25 million acquisition
line of credit due December 5, 2003, with interest and principal payable
quarterly. The notes bear interest at either (I) the higher of (a) prime
plus .75% or (b) the Federal Funds rate plus 50 basis points per annum plus
.75%, or (II) at the option of the Company upon certain conditions, the LIBOR
rate plus 2.25%. The proceeds from the Credit Facility are secured by
substantially all of the Company's assets and are to be used for
acquisitions, repayment of existing indebtedness and general corporate
purposes.
In December 1997, the Company issued $60 million in Senior Subordinated Notes
(the "Subordinated Debt") to various lenders, the proceeds of which are to be
used for acquisitions, repayment of existing indebtedness and general
corporate purposes. The notes bear interest at 13% and mature in December
2005.
In connection with the Credit Facility and the issuance of the Subordinated
Debt, the Company sold 1,666,666 shares of its Common Stock for an aggregate
of $10 million to various accredited investors in a transaction exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"). The $10 million in proceeds were used for acquisitions,
repayment of existing indebtedness and general corporate purposes.
The Company issued warrants to acquire up to 1,266,000 shares of Common Stock
in connection with the issuance of the $60 million Subordinated Debt. The
exercise price of the warrants is $0.01 per share. Additionally, warrants
were issued to acquire 200,000 shares of Common Stock with an exercise price
of $2.50 per share as part of entering into the Credit Facility agreement.
For accounting purposes the fair value of the warrants have been recorded as
paid-in-capital and as a discount to the respective debt.
On December 5, 1997, long-term debt of $32.1 million was repaid in advance of
scheduled maturity with proceeds in part from the Credit Facility and the
issuance of the Subordinated Debt and Common Stock as discussed above. As a
result of the early extinguishment of debt, the Company recognized $3.6
million in loan fees expense which includes a prepayment penalty of $2.5
million and $1.1 million of prepaid loan fees both of which were charged to
expense as an extraordinary item.
During the quarter, the Company received $1.7 million in proceeds from the
exercise of warrants and options into the Company's Common Stock.
At December 31, 1997, $7.3 million was outstanding under the Company's $45.0
million revolving credit facility.
ACQUISITIONS
On December 5, 1997, the Company acquired for $23.8 million substantially all
the assets of Brenner Companies Inc. ("Brenner") located in Winston-Salem,
North Carolina. The purchase price was financed with $15.7 million of
proceeds in part from The Credit Facility, Subordinated Debt and Sale of
Common Stock discussed above, 14,000 shares of the Company's Series F 6-1/2%
Redeemable Convertible Preferred Stock (the "Series F Preferred"), valued at
$3.5 million and 14,000 shares of the Company's Series G 6-1/2% Redeemable
Convertible Preferred Stock (the "Series G Preferred"), valued at $3.5
million and the assumption of $1.1 million in deferred compensation
liabilities. The Series F Preferred is subject to mandatory and automatic
conversion provisions at the earlier of a consolidation, merger or share
exchange of the Company or on December 5, 2000. The Series F Preferred will
convert on December 5, 2000 into the number of shares of the Company's Common
Stock as determined by dividing $3.5 million plus an amount in cash equal to
all accrued and unpaid dividends to the date of conversion by the
10
<PAGE>
average market price of the Company's Common Stock, $.001 par value (the
"Common Stock") for the ten trading days preceding the date of conversion.
The Series G Preferred is subject to mandatory and automatic conversion
provisions at the earlier of a consolidation, merger or share exchange of the
Company or on December 5, 2000. The Series G Preferred will convert into the
number of shares of the Company's Common Stock as determined by dividing $3.5
million plus an amount in cash equal to all accrued and unpaid dividends to
the date of conversion by the greater of the average market price of the
Common Stock for the ten trading days preceding the date of conversion, or
2.5 times the average market price for the ten trading days preceding the
date of issuance. At any time prior to conversion, the Company has the right
to redeem the outstanding shares of Series F and G Preferred Stock, in whole
or in part, at a cash redemption price equal to $250 per share plus all
accrued and unpaid dividends to the date of redemption. The Company has
agreed to register on or before December 5, 2000 the shares of Common Stock
received upon conversion of the Series F and G Preferred, unless such shares
may be sold by the holder thereof pursuant to rule 144(k) promulgated under
the Securities Act or any equivalent provision then in effect. The Company
will continue the metals recycling operations of Brenner.
On December 5, 1997, the Company acquired for $42 million substantially all
the assets of United Metals Recyclers, a North Carolina general partnership,
headquartered in Greensboro, North Carolina ("UMR"). The purchase price was
financed with $36 million in proceeds in part from The Credit Facility,
Subordinated Debt and Sale of Common Stock discussed above and 12,000 shares
of the Company's Series H 6% Secured Redeemable Convertible Preferred Stock
(the "Series H Preferred"), valued at $6 million. The Series H Preferred is
subject to mandatory and automatic conversion provisions at the earlier of a
consolidation, merger or share exchange of the Company or on December 5,
2000. Dividend payments and the liquidation preference on the Series H
Preferred is secured by the Company's 50% interest in a scrap metals facility
located in Smithfield, North Carolina. The Series H Preferred will convert
on December 5, 2000 into the number of shares of the Company's Common Stock
as determined by dividing $6 million plus an amount in cash equal to all
accrued and unpaid dividends by the average market price of the Common Stock
for the ten trading days preceding the date of conversion. At any time prior
to conversion, the Company has the right to redeem the outstanding shares of
Series H Preferred Stock, in whole or in part, at a cash redemption price
equal to $500 per share plus all accrued and unpaid dividends to the date of
redemption. If the sale of the shares of Common stock into which the Series H
Preferred is converted yields net proceeds of less than $5,689,000, the
Company will pay the difference to UMR. The Company has agreed to register
on or before December 5, 2000 the shares of Common stock received upon
conversion of the Series H Preferred, unless such shares may be sold by the
holder thereof pursuant to Rule 144(k) promulgated under the Securities Act
or any equivalent provision then in effect. The Company will continue the
metals recycling operations of UMR.
On December 5, 1997, the Company acquired substantially all the assets of
Money Point Land Holding Corporation and Money Point Diamond Corporation
doing business as Jacobson Metal Company ("Jacobson"), headquartered in
Chesapeake, Virginia, for an aggregate purchase price of approximately $19.9
million. The purchase price was financed with $16.9 million of proceeds in
part from The Credit Facility, Subordinated Debt and Sale of Common Stock as
discussed above and $3 million or 10,000 shares of the Company's Series E
Redeemable Convertible Preferred Stock (the "Series E Preferred"). The Series
E Preferred is subject to automatic conversion provisions at the earlier of a
consolidation or merger of the Company or on December 5, 2000. The Series E
Preferred will convert on December 5, 2000 into the number of shares of the
Company's Common Stock as determined by dividing $3 million by the average
market price of the Common Stock for the ten trading days preceding the date
of conversion. Holders of the Series E Preferred are not entitled to
dividends. At any time prior to conversion, the Company has the right to
redeem the outstanding shares of Series E Preferred Stock, in whole or in
part, at a cash redemption price equal to $300 per share. The Company
11
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will continue the metals recycling operations of Jacobson.
On December 5, 1997, the Company acquired for $31 million substantially all
the assets of Central Metals Company, Inc. ("Central") located in Atlanta,
Georgia. The purchase price was financed with $20.7 million of proceeds in
part from The Credit Facility, Subordinated Debt, and Sale of Common Stock as
discussed above, the issuance of 800,000 shares of the Company's Common Stock
having an agreed value of $12.50 per share or $10 million, and the assumption
of $0.3 million of current liabilities. The Company has guaranteed that the
aggregate market value of the 800,000 shares of Common Stock issued to
Central will be at least $10,000,000 on December 4, 1999. If the market
value of the Common Stock is less than $10,000,000, the Company will issue
shares of Common Stock to Central having a market value equal to the
difference between $10,000,000 and the market value of the 800,000 shares of
Common Stock initially issued to Central. In connection with the acquisition,
Central was issued warrants to acquire up to 200,000 shares of the Company's
Common Stock for $15.00 per share, exercisable upon satisfaction of certain
financial performance conditions related to the operations acquired from
Central (the "Contingent Warrants"). The exercise price per share of the
Contingent Warrants is subject to adjustment at the time of exercise so that
the aggregate spread between the exercise price of all Contingent Warrants
and the market value of the Common Stock received upon exercise of the
Contingent Warrants is not less than $1,000,000. The Company granted
"piggyback" registration rights to the holders of the Contingent Warrants
with respect to the shares of Common Stock received upon their exercise. The
Company will continue the metals recycling operations of Central.
On December 5, 1997, the Company acquired for $7.4 million certain assets of
Grossman Bros. Company ("Grossman") located in Milwaukee, Wisconsin including
the assumption of $0.3 million of trade payables. The purchase price was
financed in part from the proceeds of The Credit Facility, Subordinated Debt,
Sale of Common Stock as discussed above, and a capital lease agreement
expiring December 5, 1999 at which time the Company will pay $4.0 million in
the form of cash, stock or a combination of both. The Company will continue
the metals recycling operations of Grossman.
On December 8, 1997, the Company acquired for $25.5 million all the
outstanding Capital Stock of Wm. Lans Sons' Co. Inc., ("Lans") and
substantially all of the real property and personal property of Idal Realty
Company ("Idal"), both entities located in South Beloit, Illinois. The
purchase was financed with $22 million of proceeds in part from The Credit
Facility, Subordinated Debt and Sale of Common Stock as discussed above, and
the issuance of 10,000 shares of Series I Redeemable Convertible Preferred
Stock (the "Series I Preferred") valued at $3.5 million. The Series I
Preferred is subject to automatic and mandatory conversion provisions in the
event of a consolidation or merger. The Series I Preferred will convert on
December 8, 1999 into the number of shares of the Company's Common Stock as
determined by dividing $3.5 million plus all accrued and unpaid dividends to
the date of conversion by the lesser of the average market price of the
Common Stock for the ten trading days preceding the date of conversion or
$15.00. For a period of 25 days prior to December 3, 1999, the Company shall
have the right to redeem the outstanding shares of Series I Preferred Stock,
in whole or in part, at a cash redemption price equal to $350 per share
provided that the market price of the Company's Common Stock is greater than
$15.00 per share. The Company has agreed to register on or before December 5,
2000 the shares of Common Stock received upon conversion of the Series I
Preferred. The Company will continue the metals recycling operations of Lans.
Management believes these acquisitions will have a positive impact on its
future results of operations. The historical results of operations do not
fully reflect the operating efficiencies and improvements that are expected
to be achieved by integrating the acquired businesses into the Company's
operations.
Management intends to continue seeking opportunities for expansion in the
metals recycling business and believes that the Company's liquidity, capital
resources and borrowing capabilities are adequate for its current operations.
The Company may, however, need to raise additional capital to fund the
acquisition and integration of additional metals recycling businesses, which
is an integral component of the Company's strategy. The Company may raise
such funds through warrant exercises, bank financing or public or private
offerings of its securities. There can be no assurance that the Company will
be able to secure such additional financing. If the Company is not successful
in securing such financing, the Company's ability to pursue its acquisition
strategy may be impaired and the results of operations for future periods may
be adversely affected.
12
<PAGE>
RESULTS OF OPERATIONS
The Company's operating results depend in large part on its ability to
effectively manage the purchase, processing and sale of scrap metals. The
demand for processed ferrous and non-ferrous scrap is subject to general
economic, industry and market-specific conditions beyond the Company's
control, which may result in periodic fluctuations in the sales prices of the
Company's products. The Company seeks to maintain its operating margins by
adjusting the purchase price for raw ferrous and non-ferrous scrap in
response to such fluctuations, subject to local market conditions. Although
the Company is unable to hedge against changes in ferrous market prices, it
seeks to minimize this risk by maintaining low inventory levels of raw and
processed scrap.
The results of operations for the quarter ended December 31, 1997 and 1996
have been driven primarily by the Company's acquisition activity.
Net sales for the quarter ended December 31, 1997, were $31.3 million, an
increase of $20.5 million compared to the same period one year earlier. The
increase is primarily related to increased processing capacity resulting from
the acquisition of ARC and AIC during the third and fourth quarter of 1997
and the acquisition of Brenner, UMR, Jacobson, Central and Grossman on
December 5, 1997 and Lans on December 8, 1997 and increases in the average
selling price of ferrous and non-ferrous material. Total tons processed of
ferrous material increased by approximately 190 percent to 165,000 tons
compared to the same period one year earlier. The increase in total ferrous
tons processed was primarily related to new acquisitions as tons processed
during the quarter by facilities acquired prior to the first quarter of
fiscal 1997 were almost unchanged. Total pounds processed of non-ferrous
material for the quarter were approximately 15,441,000 an increase of 78
percent compared to the same quarter one year earlier. The increase was
partially offset by a decline in pounds processed of non-ferrous material
during the quarter for facilities acquired prior to the first quarter of
fiscal 1997. The average sales price per ton of prepared ferrous material
was $143 an increase of approximately $21 per ton compared to the same period
one year earlier. The average sales price per pound of prepared non-ferrous
material was $0.42 an increase of approximately $0.11 per pound compared to
the same period one year ago. The increase in the average sales price of
prepared ferrous and non-ferrous material is primarily attributable to
increased demand and changes in material mix. Net sales from brokerage
activities increased by $0.4 million compared to the same period one year
earlier to total $1.1 million. The increase was primarily related to new
acquisitions and increased brokerage volume at facilities acquired prior to
the first quarter of fiscal 1997.
Gross profit for the quarter ended December 31, 1997, was $4.9 million, an
increase of $3.6 million compared to the same period one year earlier. As a
percent of net sales, gross margin increased by 3.7 percent compared to the
same period one year ago. The increase in margins is principally
attributable to new acquisitions and increases in the average selling price
of prepared ferrous and non-ferrous material which were partially offset by
increases in the average purchase price of unprepared ferrous and non-ferrous
material.
Selling, general, and administrative (SG&A) expenses totaled $2.5 million for
the year ended September 30, 1997 an increase of $1.3 million compared to the
same period one year earlier. The increase was primarily the result of the
new acquisitions and staffing and other related administrative expenses in
anticipation of planned growth. As a percent of net sales SG&A was 7.9
percent, a decline of 3.4 percent compared to the same quarter one year
earlier. As a result of continued emphasis on productivity improvements, the
Company has managed to achieve increases in net sales without
13
<PAGE>
significant increases in support costs as a percentage of sales.
Operating income for the quarter ended December 31, 1997 was $2.5 million an
increase of $2.4 million compared to the same period one year earlier. The
increase was principally a result of the new acquisitions and increases in
the average selling price of ferrous and non-ferrous material and continued
emphasis on productivity improvements. Management is continuously monitoring
the operations of the facilities and has implemented certain cost cutting
strategies in an attempt to improve operating income without reducing net
sales.
Interest expense for the quarter ended December 31, 1997 increased by $1.7
million compared to the same period one year earlier to total $2.2 million.
The increase were primarily related to increases in long-term debt to finance
the acquisition of ARC and AIC in the third and fourth quarter of fiscal 1997
and Brenner, UMR, Jacobson, Central, Grossman and Lans in the first quarter
of fiscal 1998.
Miscellaneous expense includes $0.1 million of expense for minority interest
in the earnings of a metals recycling facility.
During the quarter the company recorded a $2.4 million extraordinary loss net
of a tax benefit from early extinguishment of debt. The income tax benefit
of $1.2 million was recorded as an increase in the deferred tax asset.
During the quarter the Company implemented Financial Accounting Standards
("FAS") No. 128 "Earnings per Share". FAS 128 provides for the calculation
of "basic" and "diluted" earnings per share. Basic earnings per share
includes no dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for
the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of the entity, similar to fully
diluted earnings per share. In loss periods, dilutive common equivalent
shares are excluded, as the effect would be anti-dilutive.
The Company does not believe its businesses have been adversely affected by
general inflation.
PART II - OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS.
Incorporated by reference to Item 3 - Legal Proceedings of the Company's
Annual Report On Form 10-K/A for the fiscal year ended September 30, 1997.
ITEM 2 - CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
During the quarter ended December 31, 1997, the Company completed the
following sales of its securities pursuant to the exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") provided by Section 4(2) of the Securities Act and
Regulation D promulgated thereunder. Based upon representations made to the
Company and further investigation by the Company, the Company believes that
each purchaser in the following transactions was an accredited investor as
that term is defined under Rule 501(a) of Regulation D:
14
<PAGE>
1. In connection with the Company's acquisition of substantially
all of the assets of Jacobson, on December 5, 1997, the Company
issued 10,000 shares of Series E Preferred to Money Point Land
Holding Corporation and Money Point Diamond Corporation, as payment
of $3 million of the purchase price for that acquisition. See "Item
2 - Management's Discussion and Analysis of Financial Condition and
Result of Operations - - Acquisitions," above.
The Series E Preferred is subject to automatic conversion
provisions at the earlier of a consolidation or merger of the Company
or on December 5, 2000. The Series E Preferred will convert on
December 5, 2000 into the number of shares of the Company's Common
Stock as determined by dividing $3 million by the average market price
of the Common stock for the ten trading days preceding the date of
conversion. Holders of the Series E Preferred are not entitled to
dividends. At any time prior to conversion, the Company has the right
to redeem the outstanding shares of Series E Preferred Stock, in
whole or in part, at a cash redemption price equal to $300 per share.
2. In connection with the Company's acquisition of substantially
all of the assets of Brenner, on December 5, 1997, the Company issued
14,000 shares of Series F Preferred and 14,000 shares of Series G
Preferred to Brenner Companies, Inc., as payment of $7 million of the
purchase price for that acquisition. See "Item 2 - Management's
Discussion and Analysis of Financial Condition and Result of
Operations - - Acquisitions," above.
The Series F Preferred is subject to mandatory and automatic
conversion provisions at the earlier of a consolidation, merger or
share exchange of the Company or on December 5, 2000. The Series F
Preferred will convert on December 5, 2000 into the number of shares
of the Company's Common Stock as determined by dividing $3.5 million
plus an amount in cash equal to all accrued and unpaid dividends to
the date of conversion by the average market price of the Company's
common stock, $.001 par value (the "common stock") for the ten trading
days preceding the date of conversion. The Series G Preferred is
subject to mandatory and automatic conversion provisions at the
earlier of a consolidation, merger or share exchange of the Company
or on December 5, 2000. The Series G Preferred will convert into the
number of shares of the Company's Common Stock as determined by
dividing $3.5 million plus an amount in cash equal to all accrued and
unpaid dividends to the date of conversion by the greater of the
average market price of the Common stock for the ten trading days
preceding the date of conversion, or 2.5 times $7.81 (the average
market price for the ten trading days preceding the date of issuance).
At any time prior to conversion, the Company has the right to redeem
the outstanding shares of Series F and G Preferred Stock, in whole or
in part, at a cash redemption price equal to $250 per share plus all
accrued and unpaid dividends to the date of redemption. The company
has agreed to register on or before December 5, 2000 the shares of
Common stock received upon conversion of the Series F and G Preferred,
unless such shares may be sold by the holder thereof pursuant to
Rule 144(k)promulgated under the Securities Act or any equivalent
provision then in effect. Holders of the Series F Preferred are
entitled to dividends on a cumulative basis at an annual rate of
6 1/2% which shall accrue and be paid in cash upon the conversion of
the Series F Preferred, to the extent not previously paid.
3. In connection with the Company's acquisition of substantially
all of the assets of UMR, on December 5, 1997, the Company issued
12,000 shares of Series H Preferred to United Metals Recyclers, as
payment of $5.6 million of the purchase price for that acquisition.
See "Item 2 - Management's Discussion and Analysis of Financial
Condition
15
<PAGE>
and Result of Operations -- Acquisitions," above.
The Series H Preferred is subject to mandatory and automatic
conversion provisions at the earlier of a consolidation, merger or
share exchange of the Company or on December 5, 2000. Dividend
payments and the liquidation preference on the Series H Preferred is
secured by the Company's 50% interest in a scrap metals facility
located in Smithfield, North Carolina. The Series H Preferred will
convert on December 5, 2000 into the number of shares of the Company's
Common Stock as determined by dividing $6 million plus an amount in
cash equal to all accrued and unpaid dividends by the average market
price of the Common Stock for the ten trading days preceding the date
of conversion. At any time prior to conversion, the Company has the
right to redeem the outstanding shares of Series H Preferred Stock,
in whole or in part, at a cash redemption price equal to $500 per
share plus all accrued and unpaid dividends to the date of
redemption. If the sale of the shares of Common stock into which the
Series H Preferred is converted yields net proceeds of less than
$5,689,000, the Company will pay the difference to UMR. The Company
has agreed to register on or before December 5, 2000 the shares of
Common stock received upon conversion of the Series H Preferred,
unless such shares may be sold by the holder thereof pursuant to Rule
144(k) promulgated under the Securities Act or any equivalent
provision then in effect. Holders of the Series G Preferred are
entitled to dividends on a cumulative basis at an annual rate of
6 1/2% payable as follows: (i) Dividends that accrue through
December 5, 1998 will be paid in cash on the earlier of conversion of
the Series G Preferred or December 5, 1999, to the extent not
previously paid, and (ii) Dividends that accrue from December 6, 1998
to December 5, 2,000 will be paid in cash on the earlier of the
conversion of the Series G Preferred or December 5, 2000, to the
extent not previously paid.
4. In connection with the Company's acquisition of all the outstanding
Capital Stock of Lans, on December 8, 1997, the Company issued 10,000
shares of Series I Preferred to Wm. Lans Sons' Co. Inc., as payment
of $3.5 million of the purchase price for that acquisition. See
"Item 2 - Management's Discussion and Analysis of Financial Condition
and Result of Operations - - Acquisitions," above.
The Series I Preferred is subject to automatic and mandatory
conversion provisions in the event of a consolidation or merge. The
Series I Preferred will convert on December 5, 2000 into the number
of shares of the Company's Common Stock as determined by dividing
$3.5 million plus all accrued and unpaid dividends to the date of
conversion by the lesser of the average market price of the Common
stock for the ten trading days preceding the date of conversion or
$15.00. For a period of 25 days prior to December 3, 1999, the Company
shall have the right to redeem the outstanding shares of Series I
Preferred Stock, in whole or in part, at a cash redemption price equal
to $350 per share provided that the market price of the Company's
Common Stock is greater than $15.00 per share. The Company has agreed
to register on or before December 5, 2000 the shares of Common Stock
received upon conversion of the Series I Preferred. Holders of the
Series I Preferred are entitled to dividends on a cumulative basis at
an annual rate of 8% which shall accrue and be paid in cash on the
earlier of conversion or December 5, 2000, to the extent not
previously paid.
5. In connection with the Company's acquisition of substantially all of
the assets of Central, on December 5, 1997, the Company issued
800,000 shares of its Common Stock as payment of $10 million of the
purchase price for that acquisition. See "Item 2 - Management's
Discussion and Analysis of Financial Condition and Result of
Operations -- Acquisitions," above.
6. On December 4, 1997, the Company issued Warrants to acquire up to
1,266,000 shares of its Common Stock in connection with the issuance
of $60 million Subordinated Debt. Each warrant is exercisable at a
price of $0.01 per share.
7. On December 4, 1997, the Company issued warrants to acquire up to
200,000 shares of
16
<PAGE>
its Common Stock to Recycling Warrant Holdings, G.P. in connection
with the recent financing. The exercise price is $2.50 per share.
8. On December 4, 1997, in connection with the Credit facility and the
issuance of the Subordinated Debt, the Company sold 1,666,666 shares
of its Common Stock for an aggregate amount of $10 million to various
accredited investors.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 17, 1997, the Company held its 1997 Annual Meeting of the
Shareholders. The matters voted upon by the Company's shareholders at the
meeting, including the election of directors, and the votes cast for each
matter, are as follows:
1. ELECTION OF DIRECTORS. The following individuals were elected to serve as
directors of the Company until its next Annual Meeting of the Shareholders
and until their respective successors are elected and qualified:
<TABLE>
- -------------------------------------------------------------------------------
VOTES AGAINST BROKER
DIRECTOR VOTES FOR OR WITHELD ABSTENTIONS NON-VOTES
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas J. Weins 11,620,345 46,574 - -
Luke F. Botica 11,626,445 40,974 - -
Brian L. Klemsz 11,626,145 41,274 - -
Jerome B. Misukanis 11,621,445 45,974 - -
Greydon H. Neher 11,621,445 45,974 - -
Barry D. Plost 11,621,445 45,974 - -
- -------------------------------------------------------------------------------
</TABLE>
2. To amend the Company's articles of incorporation to remove provisions
concerning "Substantial Shareholders":
Votes Against or Broker
Votes For Withheld Abstentions Non-Votes
--------- ---------------- ----------- ---------
4,773,964 3,233,005 156,653 3,503,797
3. To approve the 1995 Non-Statutory Stock Option Plan:
Votes Against or Broker
Votes For Withheld Abstentions Non-Votes
--------- ---------------- ----------- ---------
7,716,103 459,076 120,467 3,371,773
4. To approve the 1995 Non-Employee Director Stock Option Plan:
Votes Against or Broker
Votes For Withheld Abstentions Non-Votes
--------- ---------------- ----------- ---------
7,939,258 269,875 160,216 3,298,070
5. To approve the 1997 Executive Stock Option Plan:
17
<PAGE>
Votes Against or Broker
Votes For Withheld Abstentions Non-Votes
--------- ---------------- ----------- ---------
7,275,255 811,644 235,591 3,344,929
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
Number Description
- ------- -----------
2.1 Agreements related to the Acquisition of the Assets of Grossman
Brothers Company and Milwaukee Metal Briquetting Co., Inc.
2.1.1 Asset Purchase Agreement dated October 31, 1997, by and among
Recycling Industries of Wisconsin, Inc., a Colorado corporation,
Recycling Industries, Inc., a Colorado corporation, Grossman Brothers
Company, Inc., a Wisconsin corporation, Milwaukee Metal Briquetting
Co., Inc., a Wisconsin corporation, and Arthur Grossman. Incorporated
by reference to Exhibit 2.1.1 to the Company's current report on
Form 8-K as filed with the Commission on December 22, 1997 and amended
on February 11, 1998 on Form 8-K/A, Commission File No. 0-20179.
2.1.2 Amendment to Asset Purchase Agreement dated December 5, 1997, by and
among Recycling Industries of Wisconsin, Inc., Recycling Industries,
Inc., Grossman Brothers Company, Inc. and Milwaukee Metal Briquetting
Co., Inc. Incorporated by reference to Exhibit 2.1.2 to the Company's
current report on Form 8-K as filed with the Commission on
December 22, 1997 and amended on February 11, 1998 on Form 8-K/A,
Commission File No. 0-20179.
2.2 Asset Purchase Agreement dated December 4, 1997 by and among Recycling
Industries, Inc., a Colorado corporation, Recycling Industries of
Atlanta, Inc., a Colorado corporation, and Central Metals Company,
Inc., a Georgia corporation. Incorporated by reference to Exhibit 2.2
to the Company's current report on Form 8-K as filed with the
Commission on December 22, 1997 and amended on February 11, 1998 on
Form 8-K/A, Commission File No. 0-20179.
2.3 Asset Purchase Agreement dated December 5, 1997 by and among Recycling
Industries of Chesapeake, Inc., a Colorado corporation, Recycling
Industries, Inc., a Colorado corporation, Money Point Land Holding
Corporation, a Virginia corporation, Money Point Diamond Corporation,
a Virginia corporation, George B. Ginsburg, the Fred Jacobson
Revocable Trust, a Virginia trust, and the Dorothy G. Jacobson
Revocable Trust, a Virginia trust. Incorporated by reference to
Exhibit 2.3 to the Company's current report on Form 8-K as filed with
the Commission on December 22, 1997 and amended on February 11, 1998
on Form 8-K/A, Commission File No. 0-20179.
2.4 Stock Purchase Agreement dated December 8, 1997, by and among
Recycling Industries, Inc., a Colorado corporation, Wm. Lans Sons'
Co., Inc., an Illinois corporation, Bertram Lans, Bruce Lans and
Scott Lans. Incorporated by reference to Exhibit 2.4 to the Company's
current report on Form 8-K as filed with the Commission on
December 22, 1997 and amended on February 11, 1998 on Form 8-K/A,
Commission File No. 0-20179.
2.5 Asset Purchase Agreement dated December 5, 1997 by and among Recycling
Industries of Winston-Salem, Inc., a Colorado corporation, Recycling
Industries, Inc., a Colorado corporation, Brenner Companies, Inc., a
North Carolina corporation, Frank Brenner, Mike Brenner and the
Shareholder of the Brenner Companies, Inc. Incorporated by reference
to Exhibit 2.5 to the Company's current report on Form 8-K as filed
with the Commission on December 22, 1997 and amended on February 11,
1998 on Form 8-K/A, Commission File No. 0-20179.
2.6 Asset Purchase Agreement dated December 5, 1997 by and among
Recycling Industries of Greensboro, Inc., a Colorado corporation,
Recycling Industries, Inc., a Colorado corporation, United Metal
Recyclers, a North Carolina general partnership, Brenner Companies,
Inc., a North Carolina corporation, and Levin Brothers, Inc., a
North Carolina corporation. Incorporated by reference to Exhibit 2.6
to the Company's current report on Form 8-K as filed with the
Commission on December 22, 1997 and amended on February 11, 1998
on Form 8-K/A, Commission File No. 0-20179.
3(i).1 Articles of Amendment to the Amended and Restated Articles of
Incorporation of Recycling Industries, Inc. - Designation of
Preferences, Limitations and Relative Rights of the Series E
Redeemable Convertible Preferred Stock of Recycling Industries, Inc.
Incorporated by reference to Exhibit 3(i).1 to the Company's current
report on Form 8-K as filed with the Commission on December 22, 1997
and amended on February 11, 1998 on Form 8-K/A, Commission File No.
0-20179.
3(i).2 Articles of Amendment to the Amended and Restated Articles of
Incorporation of Recycling Industries, Inc. - Designation of
Preferences, Limitations and Relative Rights of the Series F 61/2%
Redeemable Convertible Preferred Stock of Recycling Industries, Inc.
Incorporated by reference to Exhibit 3(i).2 to the Company's current
report on Form 8-K as filed with the Commission on December 22, 1997
and amended on February 11, 1998 on Form 8-K/A, Commission File No.
0-20179.
3(i).3 Articles of Amendment to the Amended and Restated Articles of
Incorporation of Recycling Industries, Inc. - Designation of
Preferences, Limitations and Relative Rights of the Series G 61/2%
Redeemable Convertible Preferred Stock of Recycling Industries, Inc.
Incorporated by reference to Exhibit 3(i).3 to the Company's current
report on Form 8-K as filed with the Commission on December 22, 1997
and amended on February 11, 1998 on Form 8-K/A, Commission File No.
0-20179.
3(i).4 Articles of Amendment to the Amended and Restated Articles of
Incorporation of Recycling Industries, Inc. - Designation of
Preferences, Limitations and Relative Rights of the Series H 6%
Secured Redeemable Convertible Preferred Stock of Recycling
Industries, Inc. Incorporated by reference to Exhibit 3(i).4 to the
Company's current report on Form 8-K as filed with the Commission on
December 22, 1997 and amended on February 11, 1998 on Form 8-K/A,
Commission File No. 0-20179.
3(i).5 Articles of Amendment to the Amended and Restated Articles of
Incorporation of Recycling Industries, Inc. - Designation of
Preferences, Limitations and Relative Rights of the Series I 8%
Redeemable Convertible Preferred Stock of Recycling Industries, Inc.
Incorporated by reference to Exhibit 3(i).5 to the Company's current
report on Form 8-K as filed with the Commission on December 22, 1997
and amended on February 11, 1998 on Form 8-K/A, Commission File No.
0-20179.
3.1 Amended and Restated Articles of Incorporation, incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on
Form S-1, filed May 3, 1996, as amended, Commission File No.
333-4574.
3.2 Amended Bylaws of Recycling Industries, Inc., incorporated by
reference to Exhibit 3.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, Commission File No.
0-20179.
4.1 Indenture dated December 4, 1997. Incorporated by reference to
Exhibit 4.1 to the Company's current report on Form 8-K as filed with
the Commission on December 22, 1997 and amended on February 11, 1998
on Form 8-K/A, Commission File No. 0-20179.
10.1 Credit Agreement dated December 4, 1997, among Recycling Industries,
Inc., a Colorado corporation, Nevada Recycling, Inc., a Nevada
corporation, NR Holdings, Inc., a Nevada corporation, Recycling
Industries of Texas, Inc., a Colorado corporation, Recycling
Industries of Missouri, Inc., a Colorado corporation, Recycling
Industries of Georgia, Inc., a Colorado corporation, Recycling
Industries of Atlanta, Inc., a Colorado corporation, Weissman
Industries, Inc., an Iowa corporation, Recycling Industries of South
Carolina, Inc., a Colorado corporation, Recycling Industries of
Chesapeake, Inc., a Colorado corporation, Recycling Industries of
Greensboro, Inc., a Colorado corporation, Recycling Industries of
Winston-Salem, Inc., a Colorado corporation, William Lans Sons
Company, an Illinois corporation, Recycling Industries of Wisconsin,
Inc., a Colorado corporation, and General Electric Capital
Corporation, a New York corporation, and BankBoston, N.A. Incorporated
by reference to Exhibit 10.1 to the Company's current report on
Form 8-K as filed with the Commission on December 22, 1997 and amended
on February 11, 1998 on Form 8-K/A, Commission File No. 0-20179.
27 Financial Data Schedule*
* Filed herewith.
REPORTS OF FORM 8-K
1. Current Report on Form 8-K dated December 22, 1997, reporting
the acquisition of substantially all of the assets of Brenner,
United, Jacobson, Central and Grossman on December 5, 1997 and Lans
on December 8, 1997, Commission File No. 0-20179.
2. Current Report on Form 8-K dated December 22, 1997, reporting a
change in auditors for a subsidiary from A.J. Robbins P.C. to
BDO Seidman, LLP. Commission File No. 0-20179.
18
<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.
Recycling Industries, Inc.
Date: February 14, 1997 By: /s/ Thomas J. Wiens
------------------------------------------
Thomas J. Wiens, Chairman & Chief
Executive Officer
Date: February 14, 1997 By: /s/ Brian L. Klemsz
------------------------------------------
Brian L. Klemsz, Principal Financial
Officer
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,498
<SECURITIES> 0
<RECEIVABLES> 26,698
<ALLOWANCES> (256)
<INVENTORY> 17,677
<CURRENT-ASSETS> 48,079
<PP&E> 164,162
<DEPRECIATION> (5,152)
<TOTAL-ASSETS> 231,239
<CURRENT-LIABILITIES> 13,285
<BONDS> 0
0
19,660
<COMMON> 17
<OTHER-SE> 45,340
<TOTAL-LIABILITY-AND-EQUITY> 65,017
<SALES> 31,275
<TOTAL-REVENUES> 31,275
<CGS> 26,302
<TOTAL-COSTS> 26,302
<OTHER-EXPENSES> 2,474
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,169
<INCOME-PRETAX> 275
<INCOME-TAX> 87
<INCOME-CONTINUING> 188
<DISCONTINUED> 0
<EXTRAORDINARY> (2,414)
<CHANGES> 0
<NET-INCOME> (2,226)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> 0
<FN>
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