<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 7, 1997
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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
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(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 7, 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 Business Acquired.
(1) The following audited financial statements of the HouTex
Metals Company were attached to the Form 8-K dated January 7,
1997:
1. Report of Independent Public Accountants.
2. Consolidated Statements of Income for the nine months
ended June 30, 1996, and the years ended September
30, 1995 and 1994.
3. Consolidated Balance Sheets as of June 30, 1996,
September 30, 1995 and 1994.
4. Consolidated Statements of Stockholders Equity for
the nine months ended June 30, 1996, and the years
ended September 30, 1995 and 1994.
5. Consolidated Statements of Cash Flows for the nine
months ended June 30, 1996, and the years ended
September 30, 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# Merger Agreement by and among the Registrant, MTLM Merger,
Inc., a Texas corporation ("Sub"), HouTex Metals Company,
Inc., a Texas corporation ("HouTex"), Mike Melnik, Zalman
Melnik and Clend Investment Holdings Ltd., a British Virgin
Islands corporation
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<PAGE> 3
("Clend"), who or which constitute all of the shareholders of
HouTex dated as of December 10, 1996.
2.2# First Amendment to Merger Agreement among the Registrant, Sub,
HouTex, Mike Melnik, Zalman Melnik and Clend, dated as of
December 10, 1996.
10.1# Guaranty, dated as of January 7, 1997, by certain directors of
the Registrant to and for the benefit of LaSalle National Bank
("LaSalle National") (re loan to Registrant).
10.2# Guaranty, dated as of January 7, 1997, by certain directors of
the Registrant to and for the benefit of LaSalle National (re
loan to HouTex).
10.3# Loan Agreement, dated as of January 7, 1997, by and among the
Registrant, HouTex and LaSalle National.
10.4# Revolver Note issued by HouTex to LaSalle National, dated
January 7, 1997 ($3.5 million).
10.5# Security Agreement, dated as of January 7, 1997, by HouTex to
and for the benefit of LaSalle National.
10.6# Term Note, dated January 7, 1997, issued by the Registrant to
LaSalle National ($6.5 million).
10.7# Subordination Agreement, dated as of January 7, 1997, by and
between the Registrant and LaSalle National.
10.8# Revolving Credit Note, dated as of January 7, 1997, issued by
HouTex to the Registrant ($1 million).
10.9# Security Agreement, dated as of January 7, 1997, by HouTex to
and for the benefit of the Registrant.
10.10# Letter Agreement, dated as of January 7, 1997, by and between
the Registrant and HouTex.
23.1# Consent of Price Waterhouse LLP.
99.1# Consolidated Financial Statements of HouTex as of June 30,
1996, September 30, 1995, and September 30, 1994, the nine
months ended June 30, 1996, and for the fiscal years ended
September 30, 1995 and 1994.
99.2# Manually signed report of Price Waterhouse LLP relating to the
Financial Statements for HouTex as of June 30, 1996, September
30, 1995, and September 30, 1994, the nine months ended June
30, 1996, and for the fiscal years ended September 30, 1995
and 1994.
99.3 Unaudited Consolidated Financial Statements of HouTex 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
7, 1997, filed January 22, 1997.
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<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# Consent of Price Waterhouse LLP.
2.2# First Amendment to Merger Agreement among the Registrant, Sub,
HouTex, Mike Melnik, Zalman Melnik and Clend, dated as of
December 10, 1996.
10.1# Guaranty, dated as of January 7, 1997, by certain directors of
the Registrant to and for the benefit of LaSalle National Bank
("LaSalle National") (re loan to Registrant).
10.2# Guaranty, dated as of January 7, 1997, by certain directors of
the Registrant to and for the benefit of LaSalle National (re
loan to HouTex).
10.3# Loan Agreement, dated as of January 7, 1997, by and among the
Registrant, HouTex and LaSalle National.
10.4# Revolver Note issued by HouTex to LaSalle National, dated
January 7, 1997 ($3.5 million).
10.5# Security Agreement, dated as of January 7, 1997, by HouTex to
and for the benefit of LaSalle National.
10.6# Term Note, dated January 7, 1997, issued by the Registrant to
LaSalle National ($6.5 million).
10.7# Subordination Agreement, dated as of January 7, 1997, by and
between the Registrant and LaSalle National.
10.8# Revolving Credit Note, dated as of January 7, 1997, issued by
HouTex to the Registrant ($1 million).
10.9# Security Agreement, dated as of January 7, 1997, by HouTex to
and for the benefit of the Registrant.
10.10# Letter Agreement, dated as of January 7, 1997, by and between
the Registrant and HouTex.
23.1# Consent of Price Waterhouse LLP.
99.1# Consolidated Financial Statements of HouTex as of June 30,
1996, September 30, 1995, and September 30, 1994, the nine
months ended June 30, 1996, and for the fiscal years ended
September 30, 1995 and 1994.
99.2# Manually signed report of Price Waterhouse LLP relating to the
Financial Statements for HouTex as of June 30, 1996, September
30, 1995, and September 30, 1994, the nine months ended June
30, 1996, and for the fiscal years ended September 30, 1995
and 1994.
99.3 Unaudited Consolidated Financial Statements of HouTex 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
7, 1997, filed January 22, 1997.
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<PAGE> 1
EXHIBIT 99.3
HOUTEX METALS COMPANY INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARES)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ....................... $ 461 $ 94
Securities available for sale ................... 80 182
Accounts receivable, net ........................ 1,200 1,041
Inventories (Note 2) ............................ 3,532 3,469
Other current assets ............................ 178 145
------- -------
Total current assets ................... 5,451 4,931
Property and equipment, net (Note 3) 2,002 1,809
Other assets 159 181
------- -------
TOTAL ASSETS ....................................... $ 7,612 $ 6,921
======= =======
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of debt (Note 5) ................ $ 3,406 $ 2,300
Accounts payable and accrued expenses (Note 4) .. 1,377 659
Income taxes payable ............................ 365 700
------- -------
Total current liabilities .............. 5,148 3,659
Long term debt, less current (Note 5) .............. 815 1,325
------- -------
TOTAL LIABILITIES .................................. $ 5,963 $ 4,984
======= =======
Commitments and contingencies (Note 6)..............
STOCKHOLDERS EQUITY:
Common stock, $1 par; 100,000 shares authorized,
20,000 shares issued and outstanding ............ 20 20
Retained Earnings ............................... 1,675 1,941
Unrealized loss on securities ................... (46) (24)
------- -------
TOTAL STOCKHOLDERS EQUITY .......................... 1,649 1,937
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY .......... $ 7,612 $ 6,921
======= =======
</TABLE>
See accompanying footnotes
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<PAGE> 2
HOUTEX METALS COMPANY INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
12/31/96 12/31/95
---------------- ----------------
<S> <C> <C>
Revenues $ 9,225 $ 5,894
Costs and expenses:
Cost of sales and other operating expenses 6,488 3,251
Selling, general and administrative expenses 2,950 2,396
------- -------
9,438 5,647
------- -------
Income (loss) from operations (213) 247
Other income (expense):
Interest income 0 10
Interest expense (254) (171)
Other 74 208
------- -------
Income (loss) before income taxes (393) 294
Provision (benefit) for income tax (132) 130
------- -------
Net income (loss) $ (261) $ 164
======= =======
</TABLE>
See accompanying footnotes
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<PAGE> 3
HOUTEX METALS COMPANY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
12/31/96 12/31/95
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (261) $ 164
Adjustment to reconcile net income (loss) to net cash provided by (used
in) operating activities -
Depreciation and amortization 28 85
Unrealized gain/loss on marketable securities (8) 0
(Increase) decrease in current assets-
Accounts receivable 1,348 (93)
Inventories 286 (1,166)
Other assets (91) (66)
Increase (decrease) in current liabilities -
Accounts payable and accrued expenses 456 (309)
Income taxes payable (207) 76
------- -------
Net cash provided by (used in) operating activities 1,551 (1,309)
INVESTING ACTIVITIES:
Purchase of property and equipment (169) (94)
Sale (Purchase) of marketable securities 94 (53)
------- -------
Net cash used in investing activities (75) (147)
FINANCING ACTIVITIES:
Repayment of long-term debt (47) (179)
Borrowings (Repayment) on line-of-credit (1,497) 1,650
------- -------
Net cash provided by (used in) financing activities (1,544) 1,471
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (68) 15
CASH AND CASH EQUIVALENTS, beginning of period 529 79
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 461 $ 94
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 254 $ 171
Income taxes $ 80 $ 23
</TABLE>
See accompanying footnotes
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<PAGE> 4
HOUTEX METALS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:
HouTex Metals Company Inc. (the Company) is engaged in the dismantling,
processing, marketing, brokering and recycling of ferrous and nonferrous metals.
These services are provided through its location in Houston, Texas, on property
that has barge access to the Houston Ship Channel.
CONSOLIDATED FINANCIAL STATEMENTS
The Company's fiscal year ends on September 30. The accompanying consolidated
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 results of
operations for the interim periods, have been made.
USES 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 EQUIVALENTS
Highly liquid investments with original maturities of three months or less are
classified as cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable represent amounts due from customers on product sales. An
allowance for doubtful accounts has not been provided as losses are not
anticipated on the realization of the accounts receivable. A reserve for tonnage
variances has been provided at December 31, 1996 and 1995 to account for
differences in shipment weights which are settled on a quarterly basis.
INVENTORIES
Inventories consist of ferrous, nonferrous, pipe and other material and are
carried at the lower of first-in, first-out cost or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation. Major
renewals and improvements are capitalized while repairs and maintenance are
expensed as incurred. Depreciation is computed using the
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<PAGE> 5
straight-line method over estimated useful lives of 31.5 to 39 years for
buildings and improvements, 5 to 7 years for equipment, furniture and fixtures
and 3 to 5 years for vehicles. When assets are sold or otherwise disposed of,
the cost and related accumulated depreciation are removed from the accounts and
any gain or loss is included in results of operations.
REVENUE RECOGNITION
The Company recognizes revenue when title passes to the customer, which
generally occurs at the time of shipment.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes, as set
forth in Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes. Under the liability method, deferred income taxes are determined
based on the difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
INVESTMENT SECURITIES
As of October 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115 (SFAS 115), Accounting for Certain Investments in Debt and
Equity Securities. Under this statement, the Company's marketable securities
have been classified as available for sale and are recorded at current market
value with an offsetting adjustment to stockholders equity. The adoption of this
statement did not have a significant effect on the Company's consolidated
financial position.
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
Three customers represented 75% of revenues for the six months ended December
31, 1996 and 1995. These customers comprised approximately 81% and 80% of
accounts receivable at December 31, 1996 and 1995, respectively. No other
customer comprised more than 10% of total sales or more than 10% of accounts
receivable for any period presented.
Financial instruments that potentially subject the Company to significant
concentration of credit risk are primarily trade accounts receivable. The
Company sells its products primarily to scrap metal brokers and steel mills
located in the southwestern region of the United States. Generally, the Company
does not require collateral or other security to support customer receivables.
Historically, the Company has not experienced material losses from the
noncollection of receivables.
NOTE 2 - INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Ferrous material $1,516 $2,106
Nonferrous material 1,010 354
Pipe 1,006 1,009
------ ------
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C>
$3,532 $3,469
</TABLE>
NOTE 3 - PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Machinery and equipment $ 2,538 $ 2,338
Land and improvements 797 797
Buildings and improvements 465 389
Vehicles 923 813
Furniture and fixtures 67 65
------- -------
4,790 4,402
Less-accumulated depreciation (2,788) (2,593)
------- -------
$ 2,002 $ 1,809
======= =======
</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 $ 875 $ 544
Accrued liabilities 502 115
------ ------
$1,377 $ 659
====== ======
</TABLE>
NOTE 5 - LONG-TERM DEBT:
In March 1992, the Company entered into a $1,000 revolving line of credit with a
commercial lender which was subsequently increased to $3,500 and $6,000 as of
December 31, 1995 and 1996, respectively. The line of credit matures on June 30,
1997. Borrowings against the line of credit bear interest at prime plus 1% and
are secured by the Company's accounts receivable and inventories.
The Company leases certain equipment under capital lease agreements with an
effective interest rate of 10 percent. Future minimum lease payments under these
agreements are included in other long-term debt.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Line of credit $ 3,100 $ 2,300
Mortgage note payable, interest at 9.1%, payable in monthly
installments of $9 including interest through June 30, 1999,
secured by real property 786 892
Note payable in monthly installments of $9, plus interest at
prime plus 1%, through June 30, 1998, secured by vehicles and
equipment 156 260
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Mortgage note payable to stockholders, interest at 10.475%
payable in monthly installments of $4 including interest through
January 1, 1997, secured by real property 4 45
Other notes payable and capital leases maturing at various dates
through 1999, interest at rates ranging from 6.9% to 9.5%,
secured by vehicles and land 175 128
------- -------
4,221 3,625
Less-current portion (3,406) (2,300)
------- -------
Total long-term debt $ 815 $ 1,325
======= =======
</TABLE>
As of December 31, 1996, long-term debt is scheduled to mature during fiscal
years ending September 30 as follows:
<TABLE>
<S> <C>
1997 $3,347
1998 235
1999 639
------
$4,221
======
</TABLE>
NOTE 6 - COMMITMENTS AND CONTINGENCIES:
LITIGATION
The Company is a party to various lawsuits and claims arising in the normal
course of its business. In management's opinion, based on discussion with legal
counsel, the ultimate disposition of these lawsuits and claims will not have a
material adverse effect upon the Company's financial position or operations.
NOTE 7 - SUBSEQUENT EVENTS:
On January 7, 1997, the Company entered into an agreement whereby Metal
Management, Inc. (MTLM), would acquire all of the Company's outstanding stock in
exchange for 475,000 shares of MTLM common stock, warrants to purchase an
additional 250,000 shares of MTLM common stock, $750 in cash, promissory notes
for an aggregate of $1,655 due on April 30, 1997, payable to certain
shareholders of the Company, and a promissory note for $5,000 due on June 30,
1997, payable to a corporation indirectly controlled by certain shareholders of
the Company.
On January 7, 1997, the Company obtained a $3,500 short-term financing facility
from LaSalle National Bank, Chicago, Illinois. The revolving credit facility
bears an interest rate of prime plus 1% and is due on June 30, 1997, and under
certain circumstances, can be extended to September 30, 1997. This credit
facility is secured by a first lien on the assets of the Company as well as
personal guaranties by certain officers and directors of MTLM. MTLM also made
available to the Company an additional $1,000 pursuant to a Demand Note at an
interest rate of the prime rate plus 1%, subordinated to the above-mentioned
loan.
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<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 12 COMBINED 12
MONTHS ENDED PRO FORMA MONTHS 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.
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<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 Metals'
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.
-16-
<PAGE> 4
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
MTLM 9 HOUTEX 9 MACLEOD 9 9 MONTHS
MONTHS ENDED MONTHS ENDED MONTHS 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.
-17-
<PAGE> 5
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MACLEOD PRO FORMA PRO FORMA
MTLM 12/31/96 HOUTEX 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.
-18-
<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.
-19-
<PAGE> 7
(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
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.
-20-
<PAGE> 8
(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.
(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.
-21-
