<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
January 1, 1997
------------------------------------
Date of Report (date of earliest event reported)
METAL MANAGEMENT, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 114836 94-2835068
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
500 Dearborn Street, Suite 405
Chicago, Illinois 60610
--------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (312) 645-0700
<PAGE> 2
This Amendment No. 1 to the Registrant's Current Report on Form 8-K dated
January 1, 1997 (the "Form 8-K") is being filed for the purpose of amending
Items 7(a), (b), and (c) to the Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
(1) The following audited financial statements of the MacLeod
Companies were attached to the Form 8-K dated January 1, 1997:
1. Report of Independent Public Accountants.
2. Consolidated Statements of Income for the years ended June 30,
1996, 1995 and 1994.
3. Consolidated Balance Sheets as of June 30, 1996 and 1995.
4. Consolidated Statements of Stockholders Equity for the years
ended June 30, 1996, 1995 and 1994.
5. Consolidated Statements of Cash Flows for the years ended June
30, 1996, 1995 and 1994.
6. Notes to Financial Statements.
(2) The following updated, unaudited financial statements are attached
hereto as Exhibit 99.3.
1. Consolidated Balance Sheets as of December 31, 1996 and 1995.
2. Consolidated Statements of Income for the six months ended
December 31, 1996 and 1995.
3. Consolidated Statements of Cash Flows for the six months ended
December 31, 1996 and 1995.
4. Notes to Financial Statements.
(b) Pro Forma Financial Information
(1) The following updated, unaudited pro forma financial statements
are attached hereto as Exhibit 99.4.
1. Introduction to Pro Forma Financial Information.
2. Unaudited Pro Forma Combined Condensed Statement of Operations
for the year ended March 31, 1996.
3. Notes to Pro Forma Financial Information as of March 31, 1996.
4. Unaudited Pro Forma Combined Condensed Statement of Operations
for the nine months ended December 31, 1996.
5. Unaudited Pro Forma Combined Condensed Balance Sheet as of
December 31, 1996.
6. Notes to Unaudited Pro Forma Financial Information as of
December 31, 1996.
(c) Exhibits.
2.1* Acquisition Agreement by and among the Registrant; MMI Acquisition,
Inc. a California corporation and wholly owned subsidiary of the
Registrant, Metal Management Realty, Inc., an Arizona corporation and
a wholly owned subsidiary of the Registrant, California Metals
Recycling, Inc., a California corporation ("CA Metals"), Firma, Inc.,
a California corporation ("Firma"), MacLeod Metals Co., a California
corporation ("MacLeod Metals"), Firma Plastic
-1-
<PAGE> 3
Co., Inc., a California corporation ("Plastics"), Trojan Trading Co.,
a California corporation (together with Firma, CA Metals, MacLeod
Metals and Plastics, the "MacLeod Companies"), Ian MacLeod, an
individual and shareholder of each of the MacLeod Companies, Marilyn
MacLeod, an individual shareholder of each of the MacLeod Companies
and the MacLeod Family Trust dated January 30, 1993.
23.1* Consent of Price Waterhouse LLP.
99.1* Audited Consolidated Financial Statements of the MacLeod Companies as
of June 30, 1996 and 1995 and for the fiscal years ended June 30,
1996, 1995 and 1994.
99.2* Manually signed report of Price Waterhouse LLP relating to the
Consolidated Financial Statements for the MacLeod Companies as of June
30, 1996 and 1995, and for the fiscal years ended June 30, 1996, 1995
and 1994.
99.3 Unaudited Consolidated Financial Statements of the MacLeod Companies
as of December 31, 1996 and 1995, and for the six months ended
December 31, 1996 and 1995.
99.4 Unaudited Pro Forma Combined Condensed Financial Statements giving
effect to the merger of the Registrant, HouTex and the MacLeod
Companies as of December 31, 1996, and for the nine months ended
December 31, 1996 and for the year ended March 31, 1996.
- -----------------------
* Previously filed as an exhibit to Registrant's Form 8-K dated January 1, 1997,
filed January 15, 1997.
-2-
<PAGE> 4
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 hereunto duly authorized.
METAL MANAGEMENT, INC.
Dated March 14, 1997 By: /s/ Robert C. Larry
------------------------------------------
Robert C. Larry
Vice President and Chief Financial Officer
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<PAGE> 5
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1* Acquisition Agreement by and among the Registrant; MMI
Acquisition, Inc. a California corporation and wholly owned
subsidiary of the Registrant, Metal Management Realty, Inc., an
Arizona corporation and a wholly owned subsidiary of the
Registrant, California Metals Recycling, Inc., a California
corporation ("CA Metals"), Firma, Inc., a California corporation
("Firma"), MacLeod Metals Co., a California corporation
("MacLeod Metals"), Firma Plastic Co., Inc., a California
corporation ("Plastics"), Trojan Trading Co., a California
corporation (together with Firma, CA Metals, MacLeod Metals and
Plastics, the "MacLeod Companies"), Ian MacLeod, an individual
and shareholder of each of the MacLeod Companies, Marilyn
MacLeod, an individual shareholder of each of the MacLeod
Companies and the MacLeod Family Trust dated January 30, 1993.
23.1* Consent of Price Waterhouse LLP.
99.1* Audited Consolidated Financial Statements of the MacLeod
Companies as of June 30, 1996 and 1995 and for the fiscal years
ended June 30, 1996, 1995 and 1994.
99.2* Manually signed report of Price Waterhouse LLP relating to the
Consolidated Financial Statements for the MacLeod Companies as
of June 30, 1996 and 1995, and for the fiscal years ended June
30, 1996, 1995 and 1994.
99.3 Unaudited Consolidated Financial Statements of the MacLeod
Companies as of December 31, 1996 and 1995, and for the six
months ended December 31, 1996 and 1995.
99.4 Unaudited Pro Forma Combined Condensed Financial Statements
giving effect to the merger of the Registrant, HouTex Metals
Company, Inc. and the MacLeod Companies as of December 31, 1996,
and for the nine months ended December 31, 1996 and for the year
ended March 31, 1996.
- -----------------
* Previously filed as an exhibit to Registrant's Form 8-K dated January 1, 1997,
filed January 15, 1997.
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<PAGE> 1
Exhibit 99.3
THE MACLEOD GROUP
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................... $ 460 $ 731
Accounts receivable, net ...................... 2,336 2,060
Inventories (Note 2) .......................... 2,853 2,611
Prepaid expenses & other current assets ....... 61 386
Deferred taxes (Note 7) ....................... 264 482
------ ------
Total current assets ........................ 5,974 6,270
Property and equipment, net (Note 3) ............ 587 545
Restricted cash ................................. 166 156
Other assets .................................... 57 355
------ ------
TOTAL ASSETS .............................. $6,784 $7,326
====== ======
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of debt (Notes 5 & 6) ......... $ 865 $1,015
Accounts payable and accrued expenses (Note 4) 1,177 1,125
Income taxes payable (Note 7) ................. 107 35
------ ------
Total current liabilities ................... 2,149 2,175
Deferred taxes (Note 7) ......................... 303 499
Long term debt, less current (Note 6) ........... 337 393
------ ------
TOTAL LIABILITIES ........................... 2,789 3,067
------ ------
Commitments and contingencies (Note 9)
STOCKHOLDERS EQUITY:
Common stock (Note 8) ......................... 57 57
Retained Earnings ............................. 3,938 4,202
------ ------
TOTAL STOCKHOLDERS EQUITY ................... 3,995 4,259
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY . $6,784 $7,326
====== ======
</TABLE>
See accompanying footnotes
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<PAGE> 2
THE MACLEOD GROUP
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six months Six months
ended ended
December 31, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Revenues ......................................... $ 15,598 $ 17,153
-------- --------
Costs and expenses:
Cost of sales and other operating expenses ..... 14,633 17,077
Selling, general and administrative expenses ... 1,077 1,236
-------- --------
15,710 18,313
-------- --------
Loss from operations (112) (1,160)
Other income (expense):
Interest income .............................. 67 6
Interest expense ............................. (41) (79)
Other ........................................ (29) 131
-------- --------
Loss before income taxes ......................... (115) (1,102)
Provision (benefit) for income tax ............... (39) (314)
-------- --------
Net loss ......................................... $ (76) $ (788)
======== ========
</TABLE>
See accompanying footnotes
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<PAGE> 3
THE MACLEOD GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six months Six months
ended 12/31/96 ended 12/31/95
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ................................................................... $ (76) (788)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ............................................ 101 187
Deferred income taxes .................................................... (115) (246)
(Increase) decrease in current assets:
Accounts receivable .................................................... (99) (265)
Inventories ............................................................ (146) (1,317)
Prepaid expenses and other assets ...................................... (55) (380)
Increase (decrease) in current liabilities:
Accounts payable and accrued expenses .................................. 165 648
Income taxes payable ................................................... (206) (619)
------- -------
Net cash used in operating activities ...................................... (431) (2,780)
INVESTING ACTIVITIES:
Purchase of property and equipment ......................................... (148) (14)
Proceeds from sale of equipment ............................................ 30 0
Collection on note receivable .............................................. 815 0
------- -------
Net cash provided by (used in) investing activities ...................... 697 (14)
FINANCING ACTIVITIES:
Distribution to shareholders ............................................... (125) 0
Net borrowings on line of credit ........................................... 0 950
Repayment of long-term debt ................................................ (15) (32)
Repayment of note payable to stockholder ................................... (160) 0
------- -------
Net cash provided by (used in) financing activities ...................... (300) 918
NET DECREASE IN CASH AND CASH EQUIVALENTS (34) (1,876)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 494 2,607
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 469 $ 731
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ................................................................. $ 38 $ 72
Income taxes ............................................................. $ 57 $ 451
</TABLE>
See accompanying footnotes
-8-
<PAGE> 4
THE MACLEOD GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, DOLLARS IN THOUSANDS)
NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:
THE COMPANY
The MacLeod Group (the Company) is a group of entities under common control that
are primarily engaged in the recycling of both ferrous and non-ferrous metals,
and other recycled materials, including glass, plastic and various scrap
materials. The Company's processing facility is located in South Gate,
California. The Company also operates several collection centers within the
metropolitan Los Angeles area. The Company sells the majority of its scrap metal
to customers in the United States. The MacLeod Group consists of five companies
under common ownership, which are as follows:
MacLeod Metals Co., which began operations on July 1, 1969, is engaged in
recovery of tin from "tin plate" and production of shredded steel scrap for use
as precipitation iron by the copper mining industry. MacLeod Metals also
provides management services and financial support to the four related companies
in the group.
Trojan Trading Co., which began operations on July 1, 1991, is primarily
involved in buying scrap communications and power cable from public utility
companies and other manufacturers. Trojan Trading provides processing through
related parties within the MacLeod Group and markets the finished product
locally and internationally through trading and broker relationships.
Firma, Inc., which began operations in 1983, provides chopping services to scrap
metal dealers and other companies within the MacLeod group.
Firma Plastic Co., Inc., which began operations in 1991, recycles plastic and
rubber insulation cable jackets removed from communications and power cable
during recovery of copper and aluminum scrap.
California Metals Recycling, Inc., which began operations in 1978, is primarily
engaged in the recycling of "California Redemption Value" containers, including
aluminum and non-aluminum cans, as well as miscellaneous scrap aluminum, brass,
copper, stainless steel, newspaper and other recyclable items.
The Company entered into a letter of intent dated as of August 6, 1996, as
amended, whereby Metal Management, Inc. (MTLM), formerly General Parametrics
Corporation, would acquire all of the Company's outstanding stock in exchange
for approximately 725,000 shares of MTLM common stock, warrants to purchase
175,000 shares of MTLM common stock and $7,100 ($6,600 of which was in the form
of promissory notes). The transaction was approved by MTLM's board of directors
on December 27, 1996. The closing of the transaction was effective January 1,
1997.
PRINCIPLES OF CONSOLIDATION/FINANCIAL STATEMENTS
The accompanying consolidated financial statements include the accounts of the
entities under common control that comprise the Company. These financial
statements have not been audited by independent accountants. However, in the
opinion of management, all necessary adjustments, consisting only of normal,
recurring adjustments necessary for a fair statement of the results of
operations for the interim periods, have been made.
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<PAGE> 5
USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results may differ from these estimates.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents include cash on hand, on deposit and highly liquid
investments with original maturities of three months or less. Restricted cash
represents funds on deposit with an outside lender related to outstanding
current borrowings. These funds are not legally restricted from withdrawal.
ACCOUNTS RECEIVABLE
Accounts receivable are stated at net realizable value and represent amounts due
from customers on product sales. Allowances of $68 and $79, at December 31, 1996
and 1995, respectively, have been provided for amounts not expected to be
collected.
INVENTORIES
Inventories consist of ferrous and non-ferrous material, glass and plastic
bottles and various other scrap materials and are carried at the lower of
average cost or market, on a first-in, first-out basis.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is computed principally using the straight-line method over the
estimated useful lives of the assets. The estimated economic lives are as
follows:
Trucks and Containers 3-7 years
Machinery and Equipment 5-10 years
Office equipment, Trucks and Containers 5-10 years
Plant facilities and Equipment 3-15 years
Leasehold improvements 20 years
REVENUE RECOGNITION
The Company recognizes revenue when title passes to the customer, which is
generally at the time of shipment.
INCOME TAXES
California Metals Recycling Company, Inc., and Firma Plastics Company, Inc.,
have each elected S-Corporation status, effective February 1, 1988, and January
1, 1993, respectively. The income and loss generated by a S-Corporation is
subject to federal and state tax at the shareholder level rather than the entity
level. Accordingly, no federal or state income tax provision (benefit) has been
recorded in the consolidated financial statements for these entities.
-10-
<PAGE> 6
Firma, Inc., Trojan Trading Company, and MacLeod Metals Company are each
C-Corporations. In addition to a provision (benefit) for federal and state
income taxes payable, the provision (benefit) recorded within the consolidated
financial statements for the six-month periods ending December 31, 1996 and
1995, includes amounts for deferred income taxes resulting from changes between
the tax basis of assets and liabilities and their reported amounts in the
financial statements. The impact of change in tax rates on deferred tax assets
and liabilities will be recognized as income or expense in the period in which
the change is enacted.
NOTE 2 - INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Non-ferrous material $2,684 $2,482
Other material 169 129
------ ------
$2,853 $2,611
====== ======
</TABLE>
NOTE 3 - PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Plant equipment $ 2,557 3,551
Plant facilities and improvements 871 871
Vehicles 348 373
Office equipment 74 72
------- -------
3,850 4,867
Less: accumulated depreciation (3,263) (4,322)
------- -------
$ 587 $ 545
======= =======
</TABLE>
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Trade accounts payable $1,140 $1,011
Accrued expenses 37 114
------ ------
$1,177 $1,125
====== ======
</TABLE>
NOTE 5 - LINES OF CREDIT:
The entities that comprise the Company have various revolving lines of credit
with commercial lenders that provide for an aggregate of $1,400 of revolving
credit at interest rates that range from 0% to 2 1/2% in excess of the lenders
prime rate. The lines are unsecured, and no commitment fees are paid on the
unused portion of the lines of credit.
-11-
<PAGE> 7
At December 31, 1996 and 1995, the balances outstanding under the line of credit
were $800 and $950, respectively. A provision of the related covenants requires
that a cash balance of $400 be maintained by the Company with the lenders. The
maintenance of this balance secures the Company a lower interest rate. These
funds are not restricted by the lending institution from withdrawal; however, if
the average quarterly balance is not at least equal to this amount, the Company
is subject to an additional charge equal to the $400 less the shortfall
multiplied by 110% of the effective interest rate. At December 31, 1996 and
1995, the Company was in compliance with this covenant.
NOTE 6 - LONG-TERM DEBT:
Long term debt consists of the following:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Long-term debt $ 402 $ 458
Less: current portion (65) (65)
----- -----
Total long-term debt $ 337 $ 393
===== =====
</TABLE>
In 1981, the Company received financing from the proceeds of the issuance of
Pollution Control Bonds by the State of California. The loan is payable in
monthly installments plus interest that varies from 4% to 6%. The underlying
loan agreements are guaranteed by the Small Business Association (SBA) and
require monthly base loan payments in amounts necessary to fund annual
redemption and interest. Funds received in excess of current interest and
principal reductions accumulate for the benefit of the Company in a restricted
cash account. In addition, a deposit is maintained equal to three months of base
loan payments plus interest earned. The Company's plant and equipment are
security for the indebtedness.
As of December 31, 1996, long-term debt is scheduled to mature during fiscal
years ending December 31 as follows:
<TABLE>
<S> <C>
1997 $ 65
1998 75
1999 75
2000 80
2001 85
Thereafter 22
----
$402
====
</TABLE>
NOTE 7 - INCOME TAXES:
The (benefit) provision for income taxes consists of the following for the six
months ended:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Current:
Federal $ 73 $(155)
State 34 (69)
----- -----
107 (224)
Deferred:
Federal (110) (90)
State (36) (0)
----- -----
(146) (90)
----- -----
Total $ (39) $(314)
===== =====
</TABLE>
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<PAGE> 8
Deferred income tax assets (liabilities) consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Deferred tax assets -
Book vs. state tax depreciation $ 10 $ 20
Section 267 expenses deductible
when paid 238 445
----- -----
248 465
----- -----
Deferred tax liabilities -
Cash tax to accrual book
adjustment (303) (499)
----- -----
Net deferred tax liability $ (55) $ (34)
===== =====
</TABLE>
Income tax (benefit) provision as reflected in the consolidated statement of
income differs from amounts computed by applying the statutory federal corporate
tax rate to income before income taxes as follows for the six months ending
December 31, 1996:
<TABLE>
<S> <C>
Income tax (benefit) provision
at statutory rate $(39)
State income tax, net of
federal tax benefit (7)
Other 7
----
$(39)
====
</TABLE>
As described in NOTE 1, certain entities that comprise the Company have elected
S-Corporation status, under which the income or loss of the entity is subject to
federal and state tax at the shareholder level rather than the entity level.
The Company uses depreciable lives and methods under federal income tax
guidelines for financial reporting purposes, and therefore does not typically
generate deferred taxes related to fixed assets. The net deferred tax liability
is the result of temporary differences resulting from one of the entities within
the Company that uses the cash method for income tax purposes.
NOTE 8 - STOCKHOLDERS' EQUITY:
The MacLeod Group consists of five companies with separate shares of common
stock, which are as follows:
MacLeod Metals Co. has authorized 250 shares of common stock at $.1 par value.
At December 31, 1996, 250 shares were issued and outstanding.
Trojan Trading Co. has authorized 100 shares of common stock at no par value. At
December 31, 1996, 100 shares were issued and outstanding.
Firma, Inc. has authorized 50,000 shares of common stock at no par value. At
December 31, 1996, 1,000 shares were issued and 750 shares were outstanding.
Firma Plastic Co., Inc. has authorized 100 shares of common stock at no par
value. At December 31, 1996, 100 shares were issued and outstanding.
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<PAGE> 9
California Metals Recycling, Inc. has authorized 100,000 shares of common stock
at no par value. At December 31, 1996, 5,000 shares were issued and outstanding.
NOTE 9 - COMMITMENTS AND CONTINGENCIES:
The company leases land, vehicles and equipment under noncancelable operating
lease agreements. The leases expire at various dates through January 1998. As of
December 31, 1996, future minimum lease payments under these agreements for
fiscal years ending December 31 are as follows:
<TABLE>
<S> <C>
1997 $460
1998 32
----
$492
====
</TABLE>
Rent expense totaled $203 and $220 for the six months ended December 31, 1996
and 1995, respectively.
NOTE 10 - RELATED PARTY TRANSACTIONS:
Some of the Company's leases are with its shareholders for land and buildings at
the Company's South Gate location. Related rental expense was $ 186 for both the
six-month periods ending December 31, 1996 and 1995, respectively.
NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
Fair value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement.
The following table summarizes financial instruments by individual balance sheet
account for the Company at December 31, 1996:
<TABLE>
<CAPTION>
Carrying Amount Fair Value
--------------- ----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 460 $ 460
Trade accounts receivable 2,336 2,336
Restricted cash 166 166
------ ------
Total financial assets $2,962 $2,962
====== ======
Financial liabilities:
Accounts payable 1,141 1,141
Long-term debt (including current) 1,202 1,212
------ ------
Total financial liabilities $2,343 $2,253
====== ======
</TABLE>
Fair value of financial instruments classified as current assets or liabilities
approximates carrying value due to the short-term maturities of the instruments.
Fair value of long-term debt instruments is based on market prices where
available or current borrowing rates available for financing with similar terms
and maturities.
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<PAGE> 10
NOTE 12 - CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS:
The majority of the Company's business activity is conducted with scrap metal
recyclers located within the United States. At December 31, 1996 and 1995, the
Company's receivables from companies in the scrap metal recycling industry were
approximately $792 and $707, respectively.
The Company's three largest customers, on a combined basis, represented 49% and
43% of revenues for the six months ended December 31, 1996 and 1995,
respectively. The Company's single largest customer represented 27% and 16% of
revenues for the six months ended December 31, 1996 and 1995, respectively.
-15-
<PAGE> 1
Exhibit 99.4
PRO FORMA FINANCIAL INFORMATION
The acquisitions of MacLeod Metals Group (MacLeod) and HouTex Metals Company
(HouTex) by Metal Management Inc. (MTLM) were completed on January 1, 1997, and
January 7, 1997, respectively.
The following unaudited pro forma combined condensed statements of operations do
not reflect the operating results from discontinued operations. As previously
disclosed, the discontinued operations include the Spectra*Star printer and
consumables business, which was sold during the first quarter of fiscal 1997,
and the VideoShow and related product lines business, which was discontinued
during the fourth quarter of fiscal 1995 and sold during the third quarter of
fiscal 1997.
The unaudited pro forma combined condensed statements of operations give effect
to the mergers and acquisitions involving MTLM, MacLeod and HouTex for the
twelve months ended March 31, 1996, and the nine months ended December 31, 1996,
using the purchase method of accounting as if the mergers and acquisitions had
occurred on April 1, 1995, and April 1, 1996, respectively, and by giving effect
to the pro forma adjustments described below.
MTLM's statement of operations for the twelve months ended March 31, 1996, does
not include the results of EMCO Recycling Corp. (EMCO), as the EMCO merger was
not completed until April 11, 1996. Therefore, EMCO's results for the twelve
months ended March 31, 1996, were also combined using the purchase method of
accounting as if the merger had occurred on April 1, 1995. MTLM's statement of
operations for the nine months ended December 31, 1996, includes the results of
EMCO.
The following unaudited pro forma combined condensed balance sheet presents the
combined financial position of MTLM, MacLeod and HouTex as of December 31, 1996,
assuming the mergers and acquisitions occurred as of December 31, 1996, were
accounted for using the purchase method and include the pro forma adjustments
described below. The excess of the acquisition costs over the book value of the
net assets to be acquired has been allocated to goodwill, based on the Company's
estimate of the fair value of the net assets to be acquired. Such allocation of
the purchase price may change upon the final determination of the fair value of
assets acquired (including other intangibles) and liabilities assumed.
The unaudited pro forma combined condensed financial information does not
purport to represent what the combined Company's results of operations would
have been had the mergers and acquisitions occurred on the dates indicated or
for any future period or date.
The pro forma financial information should be read in conjunction with the third
quarter financial statements and notes thereto for MTLM, which appear on the
Quarterly Report on Form 10-Q dated February 11, 1997. The pro forma financial
information should also be read in conjunction with historical audited financial
statements and notes thereto for MacLeod and HouTex that appear on the Reports
on Form 8-K dated January 1, 1997, and January 7, 1997, respectively, and also
interim financial statements and notes that appear elsewhere in this Form 8-K
amendment.
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<PAGE> 2
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
MTLM AND
EMCO
MTLM 12 EMCO 12 COMBINED 12 HOUTEX 12
MONTHS ENDED MONTHS ENDED PRO FORMA MO. ENDED MONTHS ENDED
3/31/96 3/31/96 ADJUSTMENTS 3/31/96 3/31/96
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues from continuing operations $ -- $ 68,616 $ -- $ 68,616 $14,808
Costs and expenses:
Cost of sales and other operating expenses -- 54,515 -- 54,515 9,711
Selling, general and administrative expenses 1,157 12,603 (60)(1) 14,109 4,895
-- -- 239(1) --
-- -- 170(1) -- --
---------- ------------ ----------- ----------- -------
1,157 67,118 349 68,624 14,606
---------- ------------ ----------- ----------- -------
Income (loss) from continuing operations (1,157) 1,498 (349) (8) 202
Other income (expense)
Interest Income 322 23 (103)(3) 242 14
Interest expense 0 (1,491) (86)(2) (1,577) (319)
Other 114 114 235
---------- ------------ ----------- ----------- -------
Income (loss) from continuing operations before (835) 144 (538) (1,229) 132
income taxes
Provision (benefit) for income tax (381) 48 (109)(4) (442) 130
---------- ------------ ----------- ----------- -------
Net income (loss) from continuing operations $ (454) $ 96 $ (429) $ (787) $ 2
========== ============ ======== =========== =======
Net income (loss) per share from continuing (0.08) 9.60 (0.08) 0.10
operations:
Weighted average number of shares outstanding 5,870,000 10,000 9,370,000 20,000
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
MACLEOD COMBINED 12
12 MONTHS PRO FORMA MONTHS ENDED
ENDED 3/31/96 ADJUSTMENTS 3/31/96
------------- ----------- ------------
<S> <C> <C> <C>
Revenues from continuing operations $ 33,980 $ -- $ 117,404
Costs and expenses:
Cost of sales and other operating expenses 30,942 -- 95,168
Selling, general and administrative expenses 2,209 167(5) 21,968
-- 115(6)
-- 473(10) --
------------ ------- -----------
33,151 755 117,136
------------ ------- -----------
Income (loss) from continuing operations 829 (755) 268
Other income (expense)
Interest Income 39 (130)(9) 165
Interest expense (109) (399)(7) (3,172)
(768)(8)
Other 151 500
------------ ------- -----------
Income (loss) from continuing operations before 910 (2,052) (2,239)
income taxes
Provision (benefit) for income tax 561 (1,055)(11) (806)
------------ ------- -----------
Net income (loss) from continuing operations $ 349 $ (997) $ (1,433)
============ ======= ===========
Net income (loss) per share from continuing 56.29 (0.14)
operations:
Weighted average number of shares outstanding 6,200 10,570,000
</TABLE>
See accompanying notes to pro forma financial information.
-18-
<PAGE> 3
NOTES TO PRO FORMA FINANCIAL INFORMATION
The pro forma condensed statement of operations for the year ended March 31,
1996, is based on the following assumptions and adjustments:
(1) Reflects the reversal of EMCO's amortization of goodwill from prior
acquisitions and recording amortization of goodwill ($239,000) and other
intangible assets ($170,000) arising upon MTLM's acquisition of EMCO as if
the acquisition had occurred on April 1, 1995. The amortization periods
used for goodwill and other intangibles were 40 years and 10 years,
respectively.
(2) MTLM acquired from a beneficiary of Harold Rubenstein for $150,000 in cash
and $950,000 9% notes payable due in three years, two parcels of real
estate on which certain operations of Ellis Metals are located.
Adjustment represents interest expense on the $950,000 notes.
(3) Adjustment to reduce interest income for the payment of $2,050,000 cash
consideration and related transaction costs as if the acquisitions of EMCO
and the two parcels of real estate on which certain of Ellis' operations
are located had occurred on April 1, 1995.
(4) Adjustment to income tax provision to reflect the combined results of
operations of MTLM and EMCO.
(5) Adjustment made to reflect amortization of goodwill related to HouTex as
if the acquisition had occurred on April 1, 1995. The amortization period
used for goodwill was 40 years.
(6) Adjustment made to reflect amortization of goodwill related to MacLeod as
if the acquisition had occurred on April 1, 1995. The amortization period
used for goodwill was 40 years.
(7) MTLM issued 6% notes payable to Mike and Zalman Melnik ($1,655,268 due
April 30,1997) and Clend Investment Holdings ($5,000,000 due June 30,
1997), in partial consideration for all the outstanding shares of HouTex
Common Stock. Adjustment represents interest expense on these notes.
(8) MTLM issued 8% $6,600,000 notes payable to Ian and Marilyn MacLeod in
partial consideration for all the outstanding shares of MacLeod Common
Stock. The notes have due dates ranging from March 14, 1997, to January 1,
2002. Notes payable in the principal amount of $3,000,000 with an annual
interest rate of 8% were also issued to Ian and Marilyn MacLeod in partial
consideration for two parcels of real estate on which certain MacLeod
operations are located. Adjustments represents interest expense on the
notes.
(9) Adjustment to reduce interest income for the payment of $1,120,000 and
$1,488,000 cash consideration and related transaction costs for HouTex and
MacLeod, respectively, as if the acquisition had occurred on April 1,
1995.
(10) Adjustment made to increase depreciation expense related to the write-up
of fixed assets to fair market value for MacLeod ($159,000) and HouTex
($314,000). The write-up of fixed assets to fair market value was
depreciated over an average useful life of 7 years for pro forma purposes.
(11) Adjustment to income tax provision to reflect the combined results of
operations of MTLM, EMCO, HouTex and MacLeod.
NOTE:
Cost of goods sold for HouTex for the twelve months ended March 31, 1996,
only includes cost of materials.
-19-
<PAGE> 4
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
MTLM HOUTEX MACLEOD COMBINED
9 MONTHS 9 MONTHS 9 MONTHS 9 MONTHS
ENDED ENDED ENDED PRO FORMA ENDED
12/31/96 12/31/96 12/31/96 ADJUSTMENTS 12/31/96
------------ ------------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues from continuing operations $ 40,344 $ 14,707 $22,608 $ -- $ 77,659
Costs and expenses:
Cost of sales and other operating expenses 36,770 10,495 22,135 -- 69,400
Selling, general and administrative expenses 5,127 4,261 1,524 125(14) 11,536
86(14)
-- -- -- 413(18) --
------------ ------------ ------- ---------- -----------
41,897 14,756 23,659 624 80,936
------------ ------------ ------- ---------- -----------
Loss from continuing operations (1,553) (49) (1,051) (624) (3,277)
Other income (expense)
Interest Income 151 0 64 (98)(17) 117
Interest expense (674) (364) (54) (299)(15) (1,967)
-- -- -- (576)(16)
Other 85 271 356
------------ ------------ ------- ---------- -----------
Loss from continuing operations before income (2,076) (328) (770) (1,597) (4,771)
taxes
Provision (benefit) for income tax (373) (132) (272) (941)(19) (1,718)
------------ ------------ ------- ---------- -----------
Net loss from continuing operations $ (1,703) $ (196) $ (498) $ (656) $ (3,053)
============ ============ ======= ========== ===========
Net loss per share from continuing operations: (0.19) (9.80) (80.32) (0.30)
Weighted average number of shares outstanding 8,949,000 20,000 6,200 10,149,000
</TABLE>
See accompanying notes to pro forma financial information.
-20-
<PAGE> 5
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HOUTEX MACLEOD PRO FORMA PRO FORMA
MTLM 12/31/96 12/31/96 12/31/96 ADJUSTMENTS COMBINED
------------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,277 $ 460 $ 460 $ (750)(8) $ 1,413
(34)(9)
Accounts receivable, net 4,552 1,208 2,336 (92)(12) 8,004
Inventories 1,549 3,532 2,853 70(10) 8,004
Other current assets 3,758 251 326 (824)(9) 2,511
(1,000)(4)
-------- -------- -------- -------- --------
Total current assets 11,136 5,451 5,975 (2,630) 19,932
Property and equipment, net 9,122 2,002 587 3,500(2) 19,552
2,023(11)
2,318(10)
Other assets -- 159 222 -- 381
Goodwill and other intangibles 11,115 -- -- 6,693(1,7,9) 22,412
4,604(1,7,9)
-------- -------- -------- -------- --------
Total assets $ 31,373 $ 7,612 $ 6,784 $ 16,508 $ 62,277
======== ======== ======== ======== ========
LIABILITIES AND EQUITY
Current Liabilities:
Operating line of credit $ 2,539 $ 3,100 $ 800 $ -- $ 6,439
Accounts Payable 3,539 794 1,177 -- 5,510
Other accrued liabilities 607 948 107 1,997(13) 3,659
Current portion of debt 1,093 306 65 6,655(8) 14,119
6,000(4)
-------- -------- -------- -------- --------
Total current liabilities 7,778 5,148 2,149 14,652 29,727
Long term debt, less current 4,480 815 337 3,600(4) 8,446
(786)(12)
Other liabilities 1,465 303 1,768
-------- -------- -------- -------- --------
Total liabilities 13,723 5,963 2,789 17,466 39,941
-------- -------- -------- -------- --------
Stockholders equity:
Common stock and APIC 12,804 1,155 57 (1,212)(6) 17,490
1,669(1,3)
478(1,5)
2,327(1,3)
212(1,5)
Retained earnings 4,846 494 3,938 (4,432)(6) 4,846
-------- -------- -------- -------- --------
Total stockholders equity 17,650 1,649 3,995 (958) 22,336
-------- -------- -------- -------- --------
Total liabilities and $ 31,373 $ 7,612 $ 6,784 $ 16,508 $ 62,277
stockholders equity ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to pro forma financial information.
-21-
<PAGE> 6
NOTES TO PRO FORMA FINANCIAL INFORMATION
The pro forma condensed financial statements as of December 31, 1996, are based
on the following assumptions and adjustments:
(1) Reflects the issuance of common stock, warrants and cash consideration for
HouTex and MacLeod as follows:
<TABLE>
<CAPTION>
HOUTEX MACLEOD
AMOUNT AMOUNT
---------- ----------
(IN 000'S) (IN 000'S)
<S> <C> <C>
Cash payment to shareholders $ 750 $ 1,000
Issue 475,000 shares and 725,000 of MTLM Common Stock, respectively 1,669 2,327
Issue warrants for 250,000 shares of MTLM Common Stock at $4.00 per share 478 --
Issue warrants for 175,000 shares of MTLM Common Stock between $3.96 to $4.75 per share -- 212
Promissory Notes issued 6,655 9,600
Cash payment of transaction costs 370 488
------- -------
Total estimated consideration $ 9,922 $13,627
======= =======
</TABLE>
The estimated consideration will be allocated for pro forma purposes as follows:
<TABLE>
<CAPTION>
HOUTEX MACLEOD
AMOUNT AMOUNT
---------- ----------
(IN 000'S) (IN 000'S)
<S> <C> <C>
Current assets 5,360 6,045
Noncurrent Assets 4,184 6,627
Current liabilities (5,149) (2,149)
Long-term debts/other liabilities (29) (640)
Deferred Taxes (1,137) (860)
Goodwill 6,693 4,604
-------- --------
$ 9,922 $ 13,627
======== ========
</TABLE>
The above allocation of the estimated consideration is preliminary and may
change upon final determination of the fair value of assets acquired and
liabilities assumed. Goodwill is being amortized over 40 years.
(2) MTLM acquired from Ian and Marilyn MacLeod two parcels of real estate on
which MacLeod operations are located. The consideration given was $500,000
in cash and $3,000,000 of notes payable accruing interest at 8% and due on
January 1, 1002.
(3) Reflects the issuance of 475,000 and 725,000 shares of MTLM Common Stock
at a weighted average share price of $3.52 and $3.21 per share in partial
consideration for all the outstanding shares of HouTex and MacLeod Common
Stock, respectively, for a total of $3,996,000. Such price reflects
various discounts from the average closing market price per share as
quoted on the Nasdaq National Market System during the period January 1,
1997, to January 7, 1997. The discounts reflect, among other things, that
none of the shares are currently registered.
(4) Reflects the cash consideration of $500,000, $6,000,000 8% notes payable
due on March 14, 1997, which can be extended until May 31, 1997, and
$600,000 8% notes payable due on or before January 1, 2002, in partial
consideration for all the outstanding shares of MacLeod, and $500,000 in
cash and $3,000,000 8% in notes payable due on January 1, 2002, in
consideration for two parcels of real estate on which certain MacLeod
-22-
<PAGE> 7
operations are located. Presented as a reduction of $1,000,000 in other
current assets (deposit made on 12/31/96) and an increase of $6,000,000 in
short-term debt and $3,600,000 in long-term debt.
(5) Reflects the estimated value of 250,000 warrants to acquire MTLM Common
Stock at $4.00 per share in partial consideration for all the outstanding
shares of HouTex common stock and the estimated value of 175,000 warrants
to acquire MTLM Common Stock between $3.96 and $4.75 per share in partial
consideration for all the outstanding shares of MacLeod Common Stock.
(6) Reflects the elimination of HouTex ($1,649,000) and MacLeod ($3,995,000)
stockholders equity account.
(7) Reflects the goodwill related to MTLM's acquisition of HouTex ($6,693,000)
and MTLM's acquisition of MacLeod ($4,604,000) as if both transactions had
occurred on December 31, 1996.
(8) Reflects the cash consideration of $750,000, $1,655,000 6% notes payable
due on April 30, 1997, and $5,000,000 6% notes payable due on June 30,
1997, in partial consideration for all the outstanding shares of HouTex
Common Stock. Presented as a $750,000 reduction in cash and cash
equivalents and a $6,655,000 increase in short-term debt.
(9) Transaction costs for HouTex and MacLeod were estimated to be $858,000 in
total. As of December 31, 1996, MTLM has spent and capitalized $824,000 of
transaction costs. Difference of $34,000 represents remaining cash to be
spent. Presented as a $34,000 reduction in cash and cash equivalents, and
a $824,000 reduction in other current assets.
(10) Reflects the write-up of inventory and fixed assets for MacLeod to fair
market value.
(11) Reflects the elimination of land and buildings not purchased
($1,136,000) and the write-up of fixed assets ($3,159,000) to fair
market value for HouTex. Presented as a net increase to property and
equipment.
(12) Reflects the elimination of accounts receivable ($92,000) and
elimination of mortgage payable ($786,000) associated with land and
buildings not bought from HouTex.
(13) Reflects the deferred tax liability associated with the write-up of
fixed assets and inventory over the tax basis of these assets for HouTex
and MacLeod. Presented as an increase in other accrued liabilities.
(14) Reflects the recording of amortization of goodwill arising upon MTLM's
acquisition of HouTex ($125,000) and MacLeod ($86,000) as if the
acquisitions had occurred on April 1, 1996. The amortization period used
for goodwill was 40 years.
(15) MTLM issued 6% notes payable to Mike and Zalman Melnik ($1,655,268 due
April 30, 1997) and Clend Investment Holdings ($5,000,000 due June 30,
1997 ), respectively, in partial consideration for all the outstanding
shares of HouTex Common Stock. Adjustment represents interest expense on
the notes.
(16) MTLM issued 8% $6,600,000 notes payable to Ian and Marilyn MacLeod in
partial consideration for all the outstanding shares of MacLeod Common
Stock. The notes have due dates ranging from March 14, 1997, to January 1,
2002. 8% $3,000,000 notes payable were also issued to Ian and Marilyn
MacLeod in partial consideration for two parcels of real estate on which
certain MacLeod operations are located. Adjustment represents interest
expense on the notes.
-23-
<PAGE> 8
(17) Adjustment to reduce interest income for the payment of $1,120,000 and
$1,488,000 cash consideration and related transaction costs for HouTex and
MacLeod, respectively, as if the acquisition had occurred on April 1,
1996.
(18) Adjustment made to increase depreciation expense related to the write-up
of fixed assets to fair market value for MacLeod ($189,000) and HouTex
($224,000). The write-up of fixed assets to fair market value was
depreciated over an average useful life of 7 years, for pro forma
purposes.
(19) Adjustment to income tax provision to reflect the combined results of
operations of MTLM, HouTex and MacLeod.
NOTE:
Cost of goods sold for HouTex for the nine months ended December 31, 1996,
only includes cost of materials.
-24-
