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As filed with the Securities and Exchange Commission on March 9, 1998.
Registration No. 333-45913
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
METAL MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2835068
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 North Dearborn Street, Suite 405
Chicago, Illinois 60610
(312) 645-0700
(Address including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------------
GERARD M. JACOBS
Chief Executive Officer
METAL MANAGEMENT, INC.
500 North Dearborn Street, Suite 405
Chicago, Illinois 60610
(312) 645-0700
(Name and address, including zip code, and telephone number,
including area code, of agents for service)
------------------------------------
Approximate date of commencement of proposed
sale to the public: As soon as practicable after this
Registration Statement has become effective.
------------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 (the "Securities Act"), other than securities offered
only in connection with dividend or interest reinvestment plans, check the
following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
|_|
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE (1) AGGREGATE OFFERING PRICE(1) REGISTRATION FEE (2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK, PAR VALUE
$0.01 PER SHARE 4,148,343 (1) $52,505,164 $15,489
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</TABLE>
(1) PURSUANT TO RULE 457(C), SOLELY FOR THE PURPOSE OF CALCULATING THE
AMOUNT OF THE REGISTRATION FEE. THE AVERAGE OF THE HIGH AND LOW
PRICES REPORTED ON THE NASDAQ STOCK MARKET WAS $12.69 ON
FEBRUARY 5, 1998, AND WAS $12.44 ON MARCH 5, 1998.
(2) A REGISTRATION FEE OF $13,473 WAS PAID IN CONNECTION WITH THE
REGISTRATION OF 3,599,109 SHARES OF COMMON STOCK ON FEBRUARY 9, 1998.
AN ADDITIONAL 549,234 SHARES ARE BEING REGISTERED UNDER THIS
PRE-EFFECTIVE AMENDMENT RESULTING IN AN ADDITIONAL FEE OF $2,016
FOR A TOTAL REGISTRATION FEE OF $15,489.
(3) THIS REGISTRATION STATEMENT PURPORTS TO REGISTER AN INDETERMINABLE
NUMBER OF SECURITIES TO BE OFFERED PURSUANT TO TERMS WHICH PROVIDE FOR
A CHANGE IN THE AMOUNT OF SECURITIES BEING OFFERED OR ISSUED TO
PREVENT DILUTION RESULTING FROM STOCK SPLITS, STOCK DIVIDENDS OR
SIMILAR TRANSACTIONS.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION MARCH 9, 1998
4,148,343 SHARES
METAL MANAGEMENT, INC.
COMMON STOCK
This Prospectus relates to the resale of up to an aggregate of
4,148,343 shares (the "Shares") of common stock, par value $.01 per share (the
"Common Stock"), of Metal Management, Inc., a Delaware corporation (the
"Company"), which may be offered (the "Offering") for sale by persons
(individually a "Selling Stockholder," collectively the "Selling Stockholders")
described in this Prospectus. The Shares offered for resale hereby were issued,
or are issuable by the Company in respect of the following: (i) 2,193,343
Shares were issued by the Company in connection with business combination and
financing transactions; and (ii) 1,955,000 Shares are issuable upon exercise of
warrants granted by the Company in business combination and financing
transactions or to employees, advisors or other agents of the Company.
The Shares may be offered for sale from time to time by or for the
account of the Selling Stockholders or their respective pledgees, donees,
transferees or other successors in interest in the open market, on the Nasdaq
National Market, in the over-the-counter market, in privately negotiated
transactions, or a combination of these methods, at market prices prevailing at
the time of sale, at prices related to the prevailing market prices or at
negotiated prices. The Shares are intended to be sold through one or more
broker-dealers or directly to purchasers. These broker-dealers may receive
compensation in the form of commissions, discounts or concessions from the
Selling Stockholders or purchasers of the Shares for whom the broker-dealer may
act as agent, or to whom the Selling Shareholders may sell as principal, or
both (which compensation as to a particular broker-dealer may be in excess of
customary concessions). The Selling Stockholders and any broker-dealers who act
in connection with the sale of the Shares hereunder may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act") and any commissions received by them and the proceeds of
any resale of the Shares may be deemed to be underwriting discounts and
commissions under the Securities Act.
If all of the warrants referred to in (ii) above are exercised, the
Company will receive proceeds of $22,158,750. The Company will receive no
portion of the proceeds from the sale of the Shares offered hereby and will
bear certain expenses incident to their registration. See "Selling
Stockholders" and "Plan of Distribution."
The Common Stock is currently traded on The Nasdaq Stock Market --
National Market ("Nasdaq") under the symbol "MTLM." On March 5, 1998, the last
reported price for the Common Stock as reported by Nasdaq was $12.31 per share.
As of March 5, 1998, the Company had a total of 31,243,124 shares of Common
Stock outstanding.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS
SET FORTH UNDER THE CAPTION "RISK FACTORS" BEGINNING ON
PAGE 6 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COM-
MISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
March __, 1998
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder, and, in accordance therewith, files
reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). These reports, proxy and
information statements and other information concerning the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and at
the Commission's regional offices located at Citicorp Center, Suite 1400, 500
West Madison Street, Chicago, Illinois 60661 and at Seven World Trade Center,
Suite 1300, New York, New York, 10048. Copies of such material can also be
obtained from the Commission at prescribed rates through its Public Reference
Section at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains a site on the World Wide Web at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The Common Stock is
currently traded on Nasdaq. Information filed by the Company with Nasdaq may be
inspected through EDGAR, the Commission's on-line filing service.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act with respect to the Shares offered hereby
(including all amendments and supplements thereto, the "Registration
Statement"). This Prospectus, which forms a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. Statements contained herein concerning the
provisions of certain documents are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference. The Registration
Statement and the exhibits thereto can be inspected and copied through EDGAR,
the Commission's on-line filing service.
THE COMPANY
GENERAL
The Company and its wholly-owned subsidiaries are engaged in the
business of dismantling, processing, marketing, brokering and recycling both
ferrous and non-ferrous metals with the goal of becoming one of the largest
recyclers of scrap metal in North America. The Company operates, or participates
in joint ventures operating, thirty-eight recycling centers in eleven states and
resells processed scrap metal and other materials to domestic and foreign
customers. The Company intends to continue its expansion principally through
acquisitions. The Company believes that the scrap metal recycling industry is
highly fragmented, and that no single company is a significant processor of
scrap metal on a national scale, although certain companies are significant
processors on a local or regional scale.
The Company entered the scrap metal recycling industry on April 11,
1996, through its merger with EMCO Recycling Corp. ("EMCO"), headquartered in
Phoenix, Arizona. As part of the strategic redirection, in April 1996 management
announced plans to exit its Spectra*Star printer and consumables business. On
July 16, 1996, the inventory and related production equipment of this business
was sold for approximately $1.3 million in cash and an agreement by the
purchaser to pay the Company a percentage of revenues royalties on future sales
of Spectra*Star printers and related consumables. The Company discontinued and
sold its VideoShow and related products lines business ("VideoShow") in December
1996 for consideration substantially in the form of royalties on future sales of
VideoShow equipment in an amount which the Company does not expect will be
material.
The Company was founded in 1981 and re-incorporated in Delaware in June
1986. Prior to April 11, 1996, the Company was called General Parametrics
Corporation. On April 9, 1996, the Company's stockholders approved an amendment
to its Certificate of Incorporation to change the name to Metal Management, Inc.
Effective April 15, 1996, the Company changed its Nasdaq Stock symbol to "MTLM".
On April 25, 1996, the Board of Directors of the Company approved a change in
the Company's fiscal year-end from October 31 to March 31, effective April 1,
1996.
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RECENT DEVELOPMENTS
The Company has recently completed a number of acquisitions
which are summarized below (the "Completed Acquisitions").
- SALT RIVER RECYCLING, L.L.C. The Company, through
Cozzi, acquired the 50% membership interest in Salt River
Recycling, L.L.C. ("Salt River") that it did not previously
own on January 30, 1998 from Newell Phoenix, L.L.C.
("Newell"). Salt River operates one scrap metal recycling
facility in Phoenix, AZ. As a result of the transaction,
Cozzi owns all of the membership interests of Salt River.
- AEROSPACE METALS. The Company acquired substantially all of
the assets, and business of Aerospace Metals, Inc., Aerospace
Parts Security, Inc., and the Suisman Titanium Corporation
(collectively "Aerospace") on January 20, 1998. The Company
also entered into a long term lease for the real property
utilized in Aerospace's business as a part of the acquisition.
- HOUSTON COMPRESSED STEEL CORP. Houston Compressed Steel Corp.
("HCS") was founded in 1941 and has been operated for several
years by the Segal family. HCS operates two processing
facilities in Houston, Texas. The Company completed the
acquisition of HCS on January 8, 1998.
- COZZI. Cozzi Iron & Metal, Inc. ("Cozzi") was founded
in 1945 by the Cozzi family. Cozzi is headquartered in
Chicago, Illinois and has a network of processing facilities
located in Chicago, Illinois; East Chicago, Indiana; and the
Pittsburgh, Pennsylvania area as well as a joint venture
interest (50%) operating in Memphis, Tennessee. The Company
completed the acquisition of Cozzi on December 1, 1997.
Cozzi acquired all of the stock of Kankakee Scrap Corp.,
Kankakee, Illinois ("Kankakee"), on December 18, 1997, and
purchased certain assets of Accurate Iron & Metal Co.,
located in Franklin Park, Illinois, on February 26, 1998.
- PROLER. Proler Southwest Inc. and Proler Steelworks L.L.C.
(collectively, "Proler"), were founded in 1992 and 1994,
respectively, principally by William and Ronald Proler. Proler
operates a facility in Houston, Texas and a site in Jackson,
Mississippi. The Company completed the acquisition of Proler
on August 28, 1997.
- THE ISAAC GROUP. The Isaac group of companies (collectively,
"Isaac"), founded in 1899 by the Isaac family, operates four
processing facilities located in Defiance, Bryan, Cleveland
and Dayton, Ohio. The Company completed the acquisition of
Isaac on June 23, 1997.
- RESERVE IRON & METAL, L.P. Reserve Iron & Metal, L.P.
("Reserve"), founded in 1978 and acquired in 1990 by the
Joseph family, operates two processing facilities located in
Cleveland, Ohio and Chicago, Illinois and has a 50% interest
in a joint venture which operates a processing facility
located in Attalla, Alabama. The Company completed the
acquisition of Reserve on May 1, 1997.
- HOUTEX METALS COMPANY, INC. HouTex Metals Company, Inc.
("HouTex"), founded in 1979 by the Melnik family, operates one
processing facility on the Houston Ship Channel. The Company
completed the acquisition of HouTex on January 7, 1997.
- THE MACLEOD GROUP. The "MacLeod Group" of companies
("MacLeod"), founded in 1969 by Ian MacLeod, operates four
processing facilities in Southern California. The Company
completed the acquisition of MacLeod on January 1, 1997.
- EMCO RECYCLING CORP. EMCO Recycling Corp. ("EMCO"), formed in
1993 by the combination of three companies, Empire Metals,
Inc., Valley Steel and Copperstate Metals, Inc., operates
processing facilities at ten sites in Phoenix, Arizona and two
other sites in the State of Arizona. The Company completed the
acquisition of EMCO on April 11, 1996.
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From time to time the Company engages in discussions with third parties
regarding potential acquisitions of companies or businesses in the same or
substantially similar lines of business as the Company. If the parties are able
to agree generally on the nature, terms and conditions of a transaction,
including the purchase price and form of consideration, a letter of intent is
prepared to reflect this understanding. In many cases, these letters of intent
are structured as "binding intents" to purchase the business, although each
letter is still subject to a number of terms and conditions including but not
limited to negotiation and execution of definitive purchase agreements. In
addition, each potential acquisition may be subject to additional contingencies
specific to that acquisition. There can be no assurance that any such potential
acquisition will result in execution of a definitive agreement or that these
acquisition(s) will be completed on terms and conditions acceptable to the
Company, if at all. The Company has entered into definitive purchase agreements
or letters of intent to purchase the companies or businesses described below
(the "Potential Acquisitions"):
- SUPERIOR FORGE, INC. The Company entered into a definitive
purchase agreement on February 16, 1998 to acquire Superior
Forge, Inc. ("Superior"). Superior, founded and principally
owned by Ian and Betty Albert, uses and generates aluminum
and aluminum scrap in its forging operations, located in
Huntington Beach, California.
- GOLDIN INDUSTRIES, INC. The Company entered into a binding
letter of intent on August 5, 1997 to acquire certain scrap
metal operations and assets of Goldin Industries, Inc., Goldin
Industries Louisiana, Inc. and Goldin of Alabama, Inc.
("Goldin"). Goldin, founded and owned by the Goldin family,
operates five processing facilities, including two in
Gulfport, Mississippi, one in Harvey, Louisiana and two in
Mobile, Alabama.
- PERLCO, L.L.C. The Company entered into a binding letter of
intent on August 6, 1997 to acquire: (i) FPX, Inc. ("FPX"),
which has a 50% ownership interest in PerlCo, L.L.C.
("PerlCo"), a Tennessee limited liability company with one
facility in Memphis, Tennessee; and (ii) Southern Tin Compress
Corporation ("Southern Tin"), which owns the real estate and
certain equipment associated with the PerlCo operations. The
Company currently owns a 50% interest in PerlCo.
- 138 SCRAP INC. The Company entered into a letter of intent on
December 12, 1997 to purchase substantially all of the assets
of 138 Scrap Inc. and of Katrick Inc., Illinois corporations
headquartered in Riverdale, Illinois.
- M. KIMERLING & SONS, INC. The Company entered into a binding
letter of intent on February 11, 1998 to purchase
substantially all of the assets of M. Kimerling & Sons, Inc.
("MKS"), an Alabama corporation. MKS operates a processing
facility in Birmingham, Alabama.
- CHARLES BLUESTONE COMPANY. The Company entered into a binding
letter of intent on February 27, 1998 to merge with R&P
Holdings Corporation, the parent of Charles Bluestone Company
("CBC") and R&P Real Estate, Inc. CBC operates a processing
facility in Pittsburgh, Pennsylvania.
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The Company has recently completed a $25,000,000 private equity
placement to an affiliate of investor Sam Zell. In the transaction, Samstock,
L.L.C., ("Samstock") an affiliate of Sam Zell's Equity Group Investments, Inc.,
received 1,470,588 shares of the Company's common stock, and warrants to
purchase an additional 400,000 shares of common stock at $20 per share and
200,000 shares at $23 per share. The warrants are subject to mandatory
exercise under certain circumstances. In addition to the equity investment,
Rod Dammeyer of Equity Group Investments, Inc. has joined the Company's Board of
Directors.
The Common Stock is traded on the Nasdaq Stock Market under the trading
symbol "MTLM." The Company's principal executive offices are located at 500
North Dearborn Street, Suite 405, Chicago, Illinois 60610, and its telephone
number is (312) 645-0700.
RISK FACTORS
An investment in the Shares being offered hereby involves a significant
degree of risk. In addition to the other information set forth in this
Prospectus, prospective purchasers of the Shares should consider carefully the
following factors which may adversely affect the business, financial condition,
results of operations and future prospects of the Company, and the prevailing
market price and performance of the Company's Common Stock. Certain statements
and information contained or incorporated by reference herein constitute
"forward-looking statements" within the meaning of the Federal Private
Securities Litigation Reform Act of 1995. These forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by these forward-looking statements.
Potential Inability to Control or Manage Growth or to Successfully
Integrate Acquired Businesses. The Company intends to actively pursue
acquisitions and mergers in the scrap metal recycling industry. There can be no
assurance that the Company will be successful in acquiring other entities or
that it will be able to effectively manage these acquired entities. The
Company's ability to achieve its expansion objectives and to manage its growth
effectively depends on a variety of factors, including the ability to identify
appropriate acquisition targets and to negotiate acceptable terms for their
acquisition, the integration of new businesses into the Company's operations,
the achievement of cost savings and the availability of capital. The inability
to control or manage growth effectively or to successfully integrate future new
businesses into the Company's operations would have a material adverse effect
on the Company's results of operations and financial condition. Depending on
the nature and size of these transactions, if any, the Company may experience
working capital and liquidity shortages. There can be no assurance that
additional financing will be available on terms and conditions acceptable to
the Company, if at all.
Recent Change in Strategic Direction and Limited Operating History. The
Company has undergone a significant change in strategic direction and emphasis
in the last two years. Given this substantial change, past financial
performance should not be considered a reliable indicator of future performance
and historical trends should not be used to anticipate results or trends in
future periods. Prior to the merger with EMCO in April 1996, the Company had no
history of operations in the scrap metal recycling industry. Due to the limited
experience of management in effecting a consolidation strategy, there can be no
assurance that the Company will be able to successfully effect its strategy
even if the Company is able to acquire other entities on acceptable terms and
conditions. In addition, until being acquired by the Company, none of the
Completed Acquisitions, the Potential Acquisitions nor, in some cases,
potential future acquisitions have or will have previously operated as
subsidiaries of a public holding company subject to formal accounting and
reporting requirements. The Company will be required to continue devoting
additional management time and capital to enhance information systems and to
improve and monitor internal controls, as well as to recruit managers with
appropriate skills to insure the timeliness and accuracy of financial reports.
Further, the Company's management has limited experience in executing
consolidation strategies on the scale being pursued by the Company. The
success of the consolidation strategy depends in part on the ability of the
Company's management to oversee diverse operations and to successfully
integrate processing, marketing and other resources.
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Potential Inability to Complete Potential Acquisitions. From time to
time the Company engages in discussions with third parties regarding potential
acquisitions of companies or businesses in the same or substantially similar
lines of business as the Company. If the parties are able to agree generally on
the nature, terms and conditions of a transaction, a letter of intent is
prepared to reflect this understanding. In many cases, these letters of intent
are structured as "binding intents" to purchase the business, although each
letter is still subject to a number of terms and conditions including but not
limited to negotiation and execution of definitive purchase agreements. In
addition, each potential acquisition may be subject to additional contingencies
specific to that acquisition. There can be no assurance that any such potential
acquisition will result in execution of a definitive agreement or that such
acquisition will be completed on terms and conditions acceptable to the Company,
if at all.
Lack of Capital and Leverage. Implementing the Company's aggressive
acquisition strategy requires substantial amounts of capital. For example, to
complete the Potential Acquisitions, the Company needs to fund the cash
portions of the purchase considerations, approximately $58.8 million, subject to
adjustments. There can be no assurance that sufficient funds for these
acquisitions will become available on acceptable terms, if at all. Failure to
raise sufficient capital when required or needed could adversely affect the
Company's results of operations and financial condition.
The Company intends to continue its strategy of financing its
acquisitions in part by incurring indebtedness to sellers of acquired entities.
This may require the Company to agree to certain restrictions on its operations
which may adversely effect the Company's ability to integrate the acquired
entities into the Company's structure. For example, in connection with the
Proler, Isaac and Reserve acquisitions, the Company incurred short-term
indebtedness to the sellers of these entities. These short-term notes
restricted the Company's ability to unilaterally direct or control the
operations of Proler, Isaac and Reserve until the notes were repaid. Failure
to repay similar notes that the Company may issue in the future would have a
material adverse effect on the Company's results of operations and financial
condition and could cause the Company to cede control in or ownership of the
acquired entity. As of December 31, 1997, the Company had approximately $214.1
million of total liabilities, including approximately $63.2 million of
indebtedness owed in connection with the acquisitions of MacLeod, Reserve,
Isaac, Proler and Cozzi. The degree to which the Company is leveraged could
have adverse consequences to the Company including the following: (i) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or
other purposes may be impaired; (ii) a substantial portion, if not all, of the
Company's cash flow will be required to pay principal and interest; and (iii)
the Company will be more vulnerable to an economic downturn in the scrap metal
recycling industry which has historically been sensitive to changes in general
economic conditions.
Comprehensive Regulatory Requirements. The Company is subject to
significant government regulation including stringent environmental laws and
regulations. Among other things, these laws and regulations impose comprehensive
local, state, federal, foreign and supranational statutory and regulatory
requirements concerning, among other matters, the treatment, acceptance,
identification, storage, handling, transportation and disposal of industrial
by-products, hazardous and solid waste materials, waste water, storm water
effluent, air emissions, soil contamination, surface and ground water pollution,
employee health and safety, operating permit standards, monitoring and spill
containment requirements, zoning, and land use, among others. Various laws and
regulations set prohibitions or limits on the release of contaminants into the
environment. Such laws and regulations also require permits to be obtained and
manifests to be completed and delivered in connection with any shipment of
prescribed materials so that the movement and disposal of such material can be
traced and the persons responsible for any mishandling of such material can be
identified. This regulatory framework imposes significant compliance burdens,
costs and risks on the Company. Violation of such laws and regulations may give
rise to significant liability to the Company, including fines, damages, fees and
expenses.
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Releases of certain industrial by-products and waste materials are
subject to particular laws and regulations. Although the specific provisions of
laws and regulations related to such releases vary among jurisdictions, such
laws and regulations typically require that the relevant authorities be notified
promptly, that the release be cleaned up promptly, and that remedial action be
taken by the responsible party and/or owner of the site to restore the
environment to levels protective of human health and the environment. Generally,
the governmental authorities are empowered to act to clean up and remediate
releases and environmental damage and to charge the costs of such cleanup to one
or more of the owners of the property, the person responsible for the spill, the
generator of the contaminant and certain other parties or to direct the
responsible party to take such action. These authorities may also impose a tax
or other liens to secure the parties' reimbursement obligations. Environmental
laws and regulations impose strict operational requirements on the performance
of certain aspects of hazardous or toxic substances remedial work. These
requirements specify complex methods for identification, monitoring, storage,
treatment and disposal of waste materials managed during a project. Failure to
meet these requirements could result in substantial fines and other penalties.
Environmental legislation and regulations have changed rapidly in
recent years, and it is likely that the Company will be subject to even more
stringent environmental standards in the future. For example, the ultimate
effect on the Company of the regulations to be implemented under the Clean Air
Act Amendments of 1990 (the "Clean Air Act"), and the actual amount of any
capital expenditures required thereby, will depend on how the Clean Air Act is
interpreted and implemented pursuant to regulations that are currently being
developed and on additional factors such as the evolution of environmental
control technologies and the economic viability of these technologies. For
these reasons, future capital expenditures for environmental control facilities
cannot be predicted with accuracy; however, one may expect that environmental
control standards will become increasingly stringent and that the expenditures
necessary to comply with them could increase substantially.
Local, state, federal, foreign and supranational governments and
agencies have also from time to time proposed or adopted other types of laws,
regulations or initiatives with respect to the scrap metal recycling industry,
including laws, regulations and initiatives intended to ban or restrict the
intrastate, interstate or international shipment of wastes, to impose higher
taxes or fees on certain shipments of waste, or to classify or reclassify
certain categories of non-hazardous wastes as hazardous. Certain local, state,
federal, foreign and international governments and agencies have promulgated
"flow control" or other regulations, which attempt to require that all waste
(or certain types of waste) generated within the jurisdiction in question must
go to certain disposal sites. From time to time legislation is considered that
would enable or facilitate such laws, regulations or initiatives. Due to the
complexity of regulation of the industry and to public and political pressure,
implementation of existing or future laws, regulations or initiatives by
different levels of governments may be inconsistent and are difficult to
foresee.
The Company requires, and must comply with, various permits and
licenses to conduct its operations. Government agencies continually monitor
compliance with these permits or licenses and the Company's facilities are
subject to periodic unannounced inspection by local, state and federal
authorities. Violations of any permit or license, if not remedied, could result
in the Company incurring substantial fines, suspension of operations or closure
of a site.
Governmental authorities have a wide variety of powerful administrative
enforcement actions and remedial orders available to cause compliance with
environmental laws or to remedy or punish violations of such laws. Such orders
may be directed to various parties, including present or former owners or
operators of the concerned sites, or parties that have or had control over the
sites. In certain instances, fines and treble damages may be imposed. In the
event that administrative actions fail to cure a perceived problem or where the
relevant regulatory agency so desires, an injunction or temporary restraining
order or damages may be sought in a court proceeding. Some laws give private
parties the right, in addition to existing common laws claims, to file claims
for injunctive relief or damages against the owners or operators of the site.
8
<PAGE> 9
The Company believes that with heightened legal, political and citizen
awareness and concerns, all companies in the scrap metal recycling industry may
be faced, in the normal course of operating their businesses, with fines and
penalties and the need to expend substantial funds for capital projects,
remedial work and operating activities, such as environmental contamination
monitoring, soil removal, groundwater treatment, creation of engineered
barriers, establishing institutional controls and related activities. Regulatory
or technological developments relating to the environment may require companies
engaged in the scrap metal recycling industry to modify, supplement or replace
equipment and facilities at costs which may be substantial. Because the scrap
metal recycling industry has the potential for discharge of materials into the
environment, a material portion of the capital expenditures by the Company is
expected to relate, directly or indirectly, to such equipment and facilities.
Moreover, it is possible that future developments, such as increasingly strict
requirements of environmental laws and regulations, and enforcement policies
will require even more significant capital investments in this regard.
Due to the nature of the scrap metal recycling business, it is possible
that inquiries or claims based upon environmental laws may be made in the future
by governmental bodies or individuals against the Company and any other scrap
metal recycling entities that the Company may acquire. The location of the
Company's facilities in large urban areas may increase the risk of scrutiny and
claims. The Company is unable to predict whether any such future inquiries or
claims will in fact arise or the outcome of such matters. Additionally, it is
not possible to predict the total size of all capital expenditures or the amount
of any increases in operating costs or other expenses that may be incurred by
the Company to comply with the environmental requirements applicable to the
Company and its operations, or whether these costs can be passed on to customers
through product price increases. Moreover, environmental legislation has been
enacted, and may in the future be enacted, to create liability for past actions
that were lawful at the time taken but that have been found to affect the
environment and to create public rights of action for environmental conditions
and activities. As is the case with scrap recyclers in general, if damage to
persons or the environment has been caused, or is in the future caused, by
hazardous materials activities of the Company, the Company may be fined and held
liable for such damage. In addition, the Company may be required to remedy such
conditions and/or change procedures. Thus, there can be no assurance that
potential liabilities, expenditures, fines and penalties associated with
environmental laws and regulations will not be imposed on the Company in the
future or that such liabilities, expenditures, fines or penalties will not have
a material adverse effect on the Company's results of operations and financial
condition.
In addition, public interest groups, local citizens, local
municipalities and other persons or organizations may have a right to seek
judicial relief for purported violations of law. In some jurisdictions, recourse
to the courts by individuals under common law principles such as trespass or
nuisance have been or may be enhanced by legislation providing members of the
public with statutory rights of action to protect the environment. In such
cases, even if a scrap metal recycling facility is operated in full compliance
with applicable laws and regulations, local citizens and other persons and
organizations may seek compensation for damages allegedly caused by the
operation of the facility. In some cases, the operation of scrap metal recycling
facilities is subjected to heightened public scrutiny because of residential or
other non-industrial property uses that have developed around such facilities.
So-called "Not In My Backyard" ("NIMBY") grass roots community opposition to
such facilities can materially interfere with such facilities' on-going
operations and growth.
Significant Potential Environmental Liability. The Company is subject
to potential liability and may also be required from time to time to clean up
or take certain remedial action with regard to sites currently or formerly used
in connection with its operations. Furthermore, the Company may be required to
pay for all or a portion of the costs to clean up or remediate sites the
Company never owned or on which it never operated if it is found to have
arranged for transportation, treatment or disposal of pollutants or hazardous or
toxic substances on or to such sites. The Company also is subject to potential
liability for environmental damage that their assets or operations may cause
nearby landowners, particularly as a result of any contamination of drinking
water sources or soil, including damage resulting from conditions existing prior
to the acquisition of such assets or operations. Any substantial liability for
environmental damage could materially adversely affect the operating results and
financial condition of the Company, and could materially adversely affect the
marketability and price of the Company's stock.
9
<PAGE> 10
Incompleteness of Site Investigations. As part of its pre-transaction
"due diligence" investigations, the Company typically hires an environmental
consulting firm to conduct transaction screen reviews, or Phase I and/or Phase
II site assessments of the sites owned or leased by particular acquisition or
merger candidates (the "Pre-Transaction Site Assessments"). However, such
Pre-Transaction Site Assessments have not covered (and will not in the future
cover) all of the sites owned or leased by the companies which are acquired by
or merge with the Company. Moreover, such Pre-Transaction Site Assessments which
have occurred have not been designed or expected (and will not in the future be
designed or expected) to disclose all material contamination or liability that
may be present. For example, the Company does not include soil sampling or core
borings as a standard part of the Phase I portion of its Pre-Transaction Site
Assessments, even though such sampling or core borings might increase the
chances of finding contamination on a particular site. Failure to conduct soil
sampling or core borings on a particular site could result in the Company
failing to identify a seriously contaminated site prior to an acquisition or
merger, and could materially adversely affect the Company.
Likelihood of Contamination at Some Sites. Pre-Transaction Site
Assessments of the Company's current sites conducted by independent
environmental consulting firms have revealed that some soil, surface water
and/or groundwater contamination is likely at certain of these sites, and have
recommended that certain additional investigations and remediation be conducted.
Based upon its review of these reports, the Company believes that it is likely
that contamination exists at certain of its sites and that it is likely that
additional investigation, monitoring and remediation will be required at some of
the sites. Also based upon its review of these reports, the Company believes
that such contamination is likely to include, but not be limited to:
polychlorinated biphenyls (PCBs); total petroleum hydrocarbons; volatile organic
compounds (VOCs); antimony; arsenic; cadmium; copper; lead; mercury; silver;
zinc; waste oil; toluene; meta-and para-xylenes; baghouse dust; and/or aluminum
dross. The ultimate extent of such contamination cannot be stated with any
certainty at this point, and there can be no assurance that the cost of
remediation will be immaterial. The existence of such contamination could result
in federal, state, local or private enforcement or cost recovery actions against
the Company, possibly resulting in disruption of Company operations, the need
for proactive remedial measures, and substantial fines, penalties, damages,
costs and expenses being imposed against the Company.
The Company expects to require future cash outlays as it incurs costs
relating to the remediation of environmental liabilities. The incurrence of
these costs may have a material adverse effect on the Company's results of
operation and financial condition.
In connection with the acquisition of the assets of Aerospace, the
Company has identified certain on-site contamination which will require
remediation in accordance with a remediation plan prepared by an independent
engineering firm. The costs of such remediation will be paid by the seller of
the assets of Aerospace from an escrow fund established for such purpose out of
the purchase consideration paid by the Company for such assets.
Uncertain Costs of Environmental Compliance and Remediation. Many
factors affect the level of expenditures the Company will be required to make in
the future to comply with environmental requirements, including: (i) new local,
state and federal laws and regulations; (ii) the developing nature of
administrative standards promulgated under Superfund and other
environmental laws, and changing interpretations of such laws; (iii) uncertainty
regarding adequate control levels, testing and sampling procedures, new
pollution control technology and cost benefit analysis based on market
conditions; (iv) the incompleteness of information regarding the condition of
certain sites; (v) the lack of standards and information for use in the
apportionment of remedial responsibilities; (vi) the numerous choices and costs
associated with diverse technologies that may be used in remedial actions at
such sites; (vii) the possible ability to recover indemnification or
contribution from third parties; and (viii) the time periods over which eventual
remediation may occur. The estimated costs, and the timing of such costs, for
future environmental compliance (capital expenditures or increases in operating
costs or other expenditures) and remediation cannot be accurately predicted and
are necessarily imprecise; however, such costs could be material to future
quarterly or annual results of operations of the Company. In addition, it is not
possible to predict whether or not such costs can be passed on to customers
through price increases.
10
<PAGE> 11
Lack of Environmental Impairment Insurance. In general, the Company's
subsidiaries do not carry environmental impairment liability insurance. In
general, the Company's subsidiaries operate under general liability insurance
policies which do not cover environmental damage. If one or more of the
Company's subsidiaries were to incur significant liability for environmental
damage not covered by environmental impairment insurance, or for other claims
in excess of its general liability insurance and umbrella coverage, the
Company's results of operations and financial condition could be materially
adversely affected.
Risks Associated With Certain By-Products. Although the majority of the
Company's metal products are currently exempt from applicable solid waste
regulations, the Company's scrap metal recycling operations produce significant
amounts of by-products. Heightened environmental risk is associated with certain
of these by-products. For example, certain of the Company's subsidiaries operate
shredders for which the primary feed materials are automobile hulks and obsolete
household appliances. Approximately 20% of the weight of an automobile hulk
consists of material (shredder fluff) which remains after the segregation of
ferrous and saleable non-ferrous metals. Federal environmental regulations
require shredder fluff to pass a toxic leaching test to avoid classification as
a hazardous waste. The Company endeavors to have hazardous contaminants removed
from the feed material prior to shredding and as a result the Company believes
the shredder fluff generated is properly not considered a hazardous waste.
Should the laws, regulations or testing methods change with regard to shredder
fluff disposal, the Company may incur additional significant expenditures.
Potential Superfund Liabilities. (a) The Company's Reserve, Cozzi and
Kankakee subsidiaries have received notices from the United States
Environmental Protection Agency (the "EPA") that Reserve, Cozzi and Kankakee
and numerous other parties are considered potentially responsible parties (a
"PRP") and may be obligated under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("Superfund" or "CERCLA") to pay a
portion of the cost of remedial investigation, feasibility studies and
ultimately remediation to correct alleged releases of hazardous substances at
the Standard Scrap Metal/Chicago International Exporting Removal Action Site.
Superfund may impose joint and several liability for the costs of remedial
investigations and actions on the entities that arranged for disposal of
certain wastes, the waste transporters that selected the disposal sites, and
the owners and operators of such sites. Responsible parties (or any one of
them) may be required to bear all of such costs regardless of fault, legality
of the original disposal, or ownership of the disposal site. Based upon their
analysis of the situation, the managements of Reserve, Cozzi and Kankakee
currently do not expect their aggregate potential liability to be in
excess of $175,000. There can be no assurance, however, that their aggregate
potential liability may not be greater than $175,000.
(b) Cozzi has received a notice from the EPA that Cozzi is a PRP under
Superfund in regard to the site referred to as H&H Recycling in Gary, Indiana.
Cozzi is not currently in a position to determine its potential liability in
regard to this site. There can be no assurance that such potential liability
will not be material.
(c) Cozzi was served in a private cost recovery action alleging that
Cozzi is a PRP under Superfund in regard to the site referred to as Gould
Battery Site in Pennsylvania. Based upon its analysis of the situation,
including transaction documentation and indemnifications, Cozzi currently
expects that its ultimate liability in regard to this matter will be de
minimus, but there can be no assurance this will be the case.
(d) Cozzi has received a notice from the Port Refinery Joint Defense
Group that an entity known as Riverside Trading has been joined as a defendant
in a cost recovery action brought on behalf of the EPA under Superfund. Cozzi
is the parent of a subsidiary that operates a facility known as Riverside Iron
& Steel. Based upon its analysis of situation, including transaction
documentation, Cozzi currently expects that its ultimate liability in regard
to this matter will be de minimus, but there can be no assurance this will be
the case.
Underground Storage Tanks. Underground storage tanks (UST's) exist at
several of the Company's sites. UST's are subject to various federal, state and
local laws on their operation. In the event a release of regulated product has
occurred, the Company may incur significant costs to investigate and remediate
the release.
Employee Health and Safety Issues. The Company's operations are also
subject to regulation by federal, state and local agencies responsible for
employee health and safety, including the Occupational Safety and Health Act
(the "OSHA"). A total of four accidental deaths of, and two serious accidental
injuries to, employees have occurred at the Company's Cozzi, HouTex and Reserve
subsidiaries during the past four years. Cozzi and Reserve have been fined by
OSHA in regard to such incidents. HouTex has also been cited and fined by OSHA
for alleged failure to establish energy control procedures and employee
training in regard to mobile shearing equipment. No assurance can be given that
potential liabilities of the Company in regard to such death and injuries, or
in regard to any future deaths of or injuries to the Company's employees will
not be material.
11
<PAGE> 12
Recommendations of Environmental Consultants. Environmental consultants
to the Company have recommended that a variety of remedial actions be
undertaken, including: the sampling of soil, surface and ground water at its
various facilities; the remediation of any existing contamination under
applicable regulations; the development of Spill Prevention Control and
Countermeasure Plans ("SPCC"); the completion of certain actions in regard to
Storm Water Pollution Prevention Plans; the timely completion and/or filing of
certain annual reports and summaries required by governmental agencies; the
completion of Oil Discharge and Response Plans; and the remediation of certain
materials suspected of containing asbestos. If the Company fails to follow
these recommendations for an indefinite period of time, one or more of the
sites might, potentially, be subject to a governmental enforcement action, the
imposition of fines, penalties and damages, and/or require remediation at some
future time at a cost which may have an adverse effect on the Company's results
of operations and financial condition.
Compliance History. The Company has, in the past, been found not to be
in compliance with certain environmental laws and regulations, and has incurred
fines associated with such violations which have not been material in amount
and may in the future incur additional fines associated with such violations.
The Company has also paid a portion of the costs of certain remediation actions
at certain sites. No assurance can be given that material fines, penalties,
damages and expenses resulting from additional compliance issues and liabilities
will not be imposed on the Company in the future.
Lack of Management Depth and Experience. Due to the limited experience
of the Company's senior management in the scrap metal recycling business, the
Company relies substantially on the experience of the management team at each
subsidiary on day-to-day operating matters. There can be no assurance that these
individuals will continue to serve the subsidiaries. The loss of a significant
number of managers could have a material adverse effect on the Company's ability
to successfully implement its consolidation strategy.
Ability of Certain Individuals to Impact Ownership and Governance of
the Company. Pursuant to a stockholder's agreement (the "Stockholders
Agreement"), between Albert A. Cozzi, Frank J. Cozzi, Gregory P. Cozzi
(collectively, the "Cozzi Shareholders"), Samstock, L.L.C. ("Samstock"), T.
Benjamin Jennings, Gerard M. Jacobs, and the Company, the Company's Board of
Directors is comprised of five directors nominated by the Cozzi Shareholders
and five directors nominated by Messrs. Jacobs and Jennings, and one director
nominated by Samstock. Further, the Cozzi Shareholders, Samstock and Messrs.
Jacobs and Jennings own approximately 46% of the Company's issued and
outstanding shares of Common Stock. The Cozzi Shareholders, Samstock and
Messrs. Jacobs and Jennings have significant influence on the outcome of all
matters (including the election of directors and future mergers, acquisitions
or sale of assets) and may be deemed to have effective control over the
affairs and management of the Company. This influence may not be consistent
with the interests of the Stockholders. Further, the changes made in the
Company's governance structure to effect the merger with Cozzi and the private
equity placement to Samstock are examples of the Company's willingness to
rapidly change the management and governance of the Company if necessary or
desirable. There can be no assurance that recent changes in management and
governance or those that may occur in connection with subsequent acquisitions
or mergers will be favorable and in the best interests of the Stockholders.
The parties to the Stockholders Agreement also have agreed to vote for
proposals, if and when presented by the Company, to amend the Company's
organizational documents to require the approval of at least two-thirds of the
Board of Directors to, among other things: (i) amend the Company's certificate
of incorporation or bylaws; (ii) liquidate or merge the Company; (iii) sell
substantially all of the Company's assets; (iv) elect or remove officers; (v)
adopt an annual budget; (vi) borrow funds, sell assets or make capital
expenditures exceeding $5 million; (vii) issue or register the Company's
securities; or (viii) declare or pay any dividends or distributions. If the
Company's organizational documents are amended to reflect these restrictions,
and the Directors cannot agree on the Company's strategic direction, a minority
of four dissenting Directors could prevent the Company from taking any of the
actions listed above. Should the Board be unable to act because a minority of
dissenting Directors prevents the Board from taking a significant action, this
could have a material adverse effect on the Company's results of operations
and financial condition.
Cyclicality of Operating Results/Operating Losses. The operating
results of the scrap metal recycling processing industry in general, and the
Company's operations specifically, are highly cyclical in nature as they tend to
reflect and be amplified by general economic conditions. In periods of national
recession or periods of minimal economic growth, the operations of scrap metal
recycling processing companies have been materially adversely affected. For
example, during recessions or periods of minimal economic growth, the automobile
and construction industries typically experience major cutbacks in production,
resulting in decreased demand for steel, copper and aluminum and significant
fluctuations in demand and pricing for the Company's products. Future economic
downturns in the national economy would materially and adversely affect the
Company's results of operations and financial condition. The ability of the
Company to withstand significant economic downturns in the future will depend in
part on the level of the Company's capital and liquidity.
12
<PAGE> 13
The Company's EMCO subsidiary has incurred operating losses and
required capital infusions since the April 1996 merger which led to the
Company's decision to establish a formal plan to shutdown EMCO's operations.
There can be no assurance that the Company will not be required to provide
additional funding to its Phoenix operations. Further, there can be no
assurance that existing or future subsidiaries will not require similar
infusions, or that the Company will be able to provide such fundings if needed.
The need to provide this funding or the inability to do so could have a
material adverse effect on the Company's results of operations and financial
condition.
Failure to Acquire Joint Venture Interest. The Company is a member of,
with a 50% interest in, a limited liability company, with operations in
Memphis, Tennessee (PerlCo). The Company has signed a binding letter of intent
to acquire the remaining 50% interest in the Perlco joint venture. However,
there can be no assurance that the Company will acquire the remaining interest.
If the Company is unable to acquire the joint venture interest, then the
Company may be unable to realize some of the operational efficiencies
anticipated in connection with the merger with Cozzi and may be prohibited by
the agreement governing the joint venture from taking actions with respect to
the joint ventures' assets or liabilities that may be in the Company's best
interest.
Dependence on Scrap Suppliers. The profitability of the Company's scrap
recycling operations depends, in part, on the availability of an adequate source
of supply. The Company acquires its scrap inventory from numerous sources. These
suppliers typically are not bound by long-term contracts and have no obligation
to continue sending scrap materials to the Company. Decisions by a substantial
number of scrap suppliers to cease sending scrap materials to the Company would
have a material adverse effect on the Company's results of operations and
financial condition.
Concentration of Customers and Credit Risk. The Company's five
largest customers represented approximately 30.1% of consolidated revenues for
the nine months ended December 31, 1997. Accounts receivable balances from
these customers represented approximately 26.7% of consolidated accounts
receivable at December 31, 1997. The loss of any one of the Company's
significant customers could adversely affect the Company's results of
operations and financial condition.
In connection with the sale of the Company's products, the Company
generally does not require collateral as security for customer receivables.
Certain of the Company's subsidiaries have significant balances owing from
customers that operate in cyclical industries and under leveraged conditions
that may impair the collectibility of these receivables. Failure to collect
amounts due on these receivables could have a material adverse effect on the
Company's results of operations and financial condition.
Potential Substantial Dilution to Existing Stockholders; Registration
Rights. The Company's Amended Certificate of Incorporation authorizes the
issuance of: (i) 80,000,000 shares of common stock, of which 31,243,124 are
issued and outstanding as of March 5, 1998; (ii) 4,000,000 shares of "blank
check" preferred stock, of which 59,000 have been designated as either Series A
or Series B Preferred Stock and 41,077 of which are issued and outstanding as
of March 5, 1998. The Company's board of directors has the authority to issue
additional shares of common or preferred shares, or securities convertible or
exercisable into such shares such as options or warrants, as the case may be
for a variety of purposes including as consideration for additional
acquisitions. These additional shares may be issued, or be subject to exercise,
at prices below prevailing market prices of the Common Stock or at prices below
the Company's book value. Common Stock sold at such a discount would result in
dilution to the then-existing Stockholders of the Company as well as reduce
each Stockholders' percentage interest in the Company. Further, the Company may
issue additional shares of preferred stock on terms and conditions which may
discourage, impede or prevent a merger, tender offer or proxy contest even
though such an event may be favorable to the interest of stockholders as a
whole. The effectiveness of this Form S-3 Registration Statement, the
Company's Form S-3 Registration Statement dated January 14, 1998 and of any
subsequent registration statements relating to the Company's common stock, will
increase substantially the number of shares available for sale in the public
market and may have an adverse impact on the market price of the Common Stock.
13
<PAGE> 14
Volatility of Trading Price. The trading price of the Common Stock has
been, and in the future is expected to be, volatile and subject to market
fluctuation as a result of a number of factors, including, but not limited to,
merger and acquisition announcements and developments, current and anticipated
results of operations, execution of private or public equity or debt placements,
filing and effectiveness of registration statements relating to the Company's
common stock, future product offerings by the Company or its competitors and
factors unrelated to the operating performance of the Company. The trading
price of the Company's Common Stock may also vary as a result of changes in the
business, operations, prospects or financial results of the Company, general
market and economic conditions, additional future proposed acquisitions by the
Company and other factors. Failure in any fiscal quarter to meet the investment
community's revenues or earnings expectations, if any, could have an adverse
impact on the trading price of the Common Stock, as could sales of large
amounts of Common Stock by existing Stockholders. In addition, sales of
substantial amounts of the Company's Common Stock in the public market could
adversely affect the market price of the Company's Common Stock. In the event
the market price of Common Stock were adversely affected by such sales, the
Company's access to equity capital markets could be adversely affected and
issuances of Common Stock in connection with acquisitions, or otherwise, could
dilute future earnings per share. Management believes that the Company's stock
price reflects an assumption that the Potential Acquisitions will be completed.
If the Potential Acquisitions are not completed, the trading price of the Common
Stock could be adversely affected.
Potential Restrictions on Mergers and Other Actions. Section 203 of the
Delaware General Corporation Law (the "Delaware Business Combination Statute")
prohibits, under certain circumstances, "business combinations" between a
Delaware corporation whose stock is publicly-traded and an "interested
stockholder" of such corporation. The provisions prohibiting "business
combinations" could delay or frustrate the removal of incumbent directors or a
change in control of the Company. The provisions could also discourage, impede,
or prevent a merger, tender offer or proxy contest, even if such an event would
be favorable to the interest of stockholders. In addition, the Company's
certificate of incorporation authorizes the issuance of 4,000,000 shares of
undesignated preferred Stock (the "Preferred Stock"), which the Board of
Directors may cause the Company to issue in one or more series. The Board of
Directors has designated 36,000 and 23,000 shares, respectively, of the
Preferred Stock for issuance as Series A Convertible Preferred Stock ("Series A
Preferred Stock") and Series B Convertible Preferred Stock ("Series B Preferred
Stock"). The Board of Directors has the authority to fix the number of shares of
Preferred Stock and determine or alter for each series, the voting powers,
designations, preferences and rights of such shares. If the Company should ever
issue Preferred Stock in addition to the Convertible Preferred Stock, such
Preferred Stock could contain voting or other rights which could discourage,
impede, or prevent a merger, tender offer or proxy contest which could be
favorable to the interests of the stockholders.
So long as shares of Series A or Series B Preferred Stock are
outstanding, the Company is required to obtain the prior approval of the holders
of at least a majority of all shares of the applicable Series of Preferred Stock
outstanding at the time before: (i) increasing the authorized number of shares
of such Series of Preferred Stock; (ii) altering or changing the rights,
preferences or privileges of such Series of Preferred Stock or any other capital
Stock of the Company so as to adversely affect such Series of Preferred Stock;
or (iii) creating any new class or series of capital Stock having a preference
over such Series of Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Company. This restriction could
prevent the Company from taking actions which could be favorable to the
interests of the stockholders.
USE OF PROCEEDS
This Prospectus relates to Shares being offered and sold for the
accounts of the Selling Stockholders. The Company will not receive any proceeds
from the sale of the Shares but will receive proceeds of $22,158,750 if all the
warrants referred to herein are exercised. There can be no assurance that
any of the warrants will be exercised or that the Company will receive any
proceeds on exercise thereof. The Company has agreed to pay all expenses
related to the registration of the Shares. See "Plan of Distribution."
14
<PAGE> 15
SELLING STOCKHOLDERS
The following table sets forth the name of each Selling Stockholder,
the aggregate number of Shares of Common Stock beneficially owned by each
Selling Stockholder as of March 5, 1998 (including Shares that are issuable
on exercise of options, warrants or the conversion of the Series A Preferred
Stock), and the aggregate number of shares of Common Stock registered hereby
that each Selling Stockholder may offer and sell pursuant to this Prospectus.
Because the Selling Stockholders may offer all of a portion of the Shares at
any time and from time to time after the date hereof, no estimate can be made
of the number of Shares that each Selling Stockholder may retain upon
completion of the Offering. However, assuming all of the Shares offered
hereunder are sold by the Selling Stockholders, then unless otherwise noted,
after completion of the Offering, none of the Selling Stockholders will own
more than one percent of the shares of Common Stock outstanding. Of the
4,148,343 Shares offered hereby, 2,193,343 Shares are issued and outstanding as
of the date of this Prospectus, and an aggregate of 1,955,000 Shares have been
reserved for issuance by the Company to certain of the Selling Stockholders
upon the exercise of warrants. Based on information provided to the Company by
the Selling Stockholders, no Selling Stockholder owns 1% or more except as
indicated below. Beneficial ownership after the Offering will depend on the
number of Shares sold by each Selling Stockholder. The table set forth below
does not include such additional number of Shares which may be issuable upon
exercise of warrants to prevent dilution resulting from stock splits, stock
dividends or similar events, all of which Shares, to the extent permitted
under Rule 416 of the Securities Act, are being offered by this Prospectus.
<TABLE>
<CAPTION>
SHARES SHARES TO BE
BENEFICIALLY PERCENTAGE OFFERED FOR THE
OWNED PRIOR TO OWNED SELLING
SELLING THE PRIOR TO STOCKHOLDER'S
STOCKHOLDERS OFFERING OFFERING ACCOUNT
------------ -------------- ----------- ---------------
<S> <C> <C> <C>
Copperstate Metals, Inc. 305,587 (1) * 1,970
Diana Crone 10,000 (2) * 10,000
Danny Corp. 394,835 (3) 1.26% 394,835
Empire Metals 2,573,050 (4) 8.09% 575,856
Xavier Hermosillo 65,000 (5) * 10,000
Gerard M. Jacobs 1,688,051 (6) 5.23% 99,718
T. Benjamin Jennings 1,687,849 (7) 5.23% 99,516
Marvin Adler Management
Consultants, Inc. 8,058 (8) * 8,058
Dale Moorehead 20,000 (9) * 10,000
Evelyn Moorehead 10,000 (10) * 10,000
Donald F. Moorehead 916,143 (11) 2.90% 170,406
George O. Moorehead 438,996 (12) 1.39% 270,461
Newell Phoenix, L.L.C. 100,000 (13) * 100,000
Samstock, L.L.C. 2,070,588 (14) 6.50% 2,070,588
Norma Stachura 10,000 (15) * 10,000
Michael Suisman 5,000 (16) * 5,000
David M. Zack 301,862 (17) * 100,645
Gerald Zack 301,862 (18) * 100,645
Raymond Zack 385,196 (19) 1.23% 100,645
-------------- ---------------
Total 11,292,077 4,148,343
</TABLE>
*less than 1%
15
<PAGE> 16
- ----------------------------
1. Consists of 305,587 shares issued in connection with the acquisition of
EMCO.
2. Consists of warrants to purchase 10,000 shares.
3. Consists of 394,835 shares issued in connection with the Company's
acquisition of substantially all of the assets of Aerospace.
4. Consists of warrants to purchase 562,900 shares and 2,010,150 shares issued
to Empire Metals in connection with the Company's acquisition of EMCO.
5. Consists of warrants to purchase 35,000 shares and options to purchase
30,000 shares.
6. Director and Chief Executive Officer of the Company. Consists of
warrants to purchase 808,333 shares, options to purchase 200,000 shares,
510,000 shares purchased by Mr. Jacobs, 70,000 shares issued to Mr. Jacobs
in a private offering and 99,718 shares issued upon conversion of Series A
preferred stock.
7. Chairman of the Board and Chief Development Officer of the Company.
Consists of warrants to purchase 808,333 shares, options to purchase
200,000 shares, 510,000 shares pruchased by Mr. Jennings, 70,000 shares
issued to Mr. Jennings in a private offering, and 99,516 shares issued upon
conversion of Series A preferred stock.
8. Consists of 8,058 shares issued in connection with the Company's
acquisition of substantially all of the assets of Aerospace.
9. Consists of warrants to purchase 10,000 shares and options to purchase
10,000 shares.
10. Consists of warrants to purchase 10,000 shares.
11. Director and Vice Chairman of the Board of the Company. Consists of
warrants to purchase 251,933 shares, 44,110 shares issuable upon conversion
of Series A Preferred Stock, 300,000 shares purchased by Mr. Moorehead,
25,000 shares issued to Mr. Moorehead in a private offering, 280,100 shares
issued to Mr. Moorehead in connection with the EMCO acquisition, and
options to purchase 15,000 shares.
12. Consists of warrants to purchase 351,833 shares, 40,000 shares purchased by
Mr. Moorehead, 25,000 shares issued to Mr. Moorehead in a private offering
and 22,163 shares issued to Mr. Moorehead in connection with the EMCO
acquisition.
13. Consists of 100,000 shares issued in connection with the acquisition of a
50% membership interest in Salt River.
14. Consists of 1,470,588 shares and warrants to purchase 600,000 shares
issued in a private placement.
15. Consists of warrants to purchase 10,000 shares.
16. Consists of warrants to purchase 5,000 shares.
17. Consists of warrants to purchase 100,000 shares, 100,000 shares issued to
Mr. Zack in connection with the Company's acquisition of EMCO, and 101,862
shares owned by Copperstate Metals, Inc.
18. Consists of warrants to purchase 100,000 shares, 100,000 shares issued to
Mr. Zack in connection with the Company's acquisition of EMCO, and 101,862
shares owned by Copperstate Metals, Inc.
19. Consists of warrants to purchase 183,333 shares, 100,000 shares issued to
Mr. Zack in connection with the EMCO acquisition, and 101,863 shares
owned by Copperstate Metals, Inc.
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There are no material relationships between any of the Selling
Stockholders and the Company or any of its predecessors or affiliates, nor have
any such material relationships existed within the past three years, except as
follows:
On April 11, 1996, the Company and Harold Rubenstein, a Director of the
Company, entered into a five-year consulting agreement. Under this Agreement,
Mr. Rubenstein provides the Company with consulting and management assistance
with respect to operations, strategic planning and other aspects of the
Company's business. Fees paid for these services amounted to $84,000 for the
year ended March 31, 1997.
The Company has issued a promissory note due April 11, 1999 bearing
interest at 9% per year with a balance outstanding as of March 31, 1997 of
$547,000, to H&S Broadway, an entity principally owned by Harold Rubenstein. The
Company has also issued a promissory note due April 11, 1999 with a balance as
of March 31, 1997 of $403,000 to Harold Rubenstein. During the fiscal year ended
March 31, 1997, the Company paid $78,000 of interest to H&S Broadway and Harold
Rubenstein. Mr. Rubenstein also is a 9.91% shareholder of Waste Manufacturing
and Leasing, a company that leases equipment to EMCO and from which EMCO
purchases manufactured containers.
On December 19, 1997, the Company made a loan of $300,000 to Newell
Phoenix, L.L.C. The loan bears interest at the prime rate and is due on or
about May 1, 1998. The loan is secured by 18,000 shares of the Company's Common
Stock. On January 30, 1998, the Company received a payment of $73,000 with
respect to the Newell loan.
From August 1995 through November 1997, Xavier Hermosillo, an officer
of the Company, provided investor relations service for the Company through his
firm, Xavier Hermosillo & Associates. Under an agreement with Mr. Hermosillo's
firm, the Company paid up to $4,000 per month for the services. Beginning on
December 1, 1997, Xavier Hermosillo became an employee of the Company. The
Company has also agreed to issue to Mr. Hermosillo, as a finder's fee in
connection with the Superior acquisition, and conditioned upon the closing of
the Superior acquisition, warrants to purchase 20,000 shares of Common Stock at
an exercise price of $15.00 per share.
The Company has entered into various transactions with Ellis Metals,
Inc. ("Ellis Metals") and Empire Metals ("Empire"), which are principally owned
by Harold Rubenstein. On April 11, 1996, the Company entered into a five year
exclusive supply agreement with Ellis Metals, which requires Ellis Metals to
sell all of its inventory to EMCO or to EMCO's customers through a direct
shipment arrangement. In the latter arrangement, EMCO receives a brokerage fee.
In consideration for entering into this agreement, Ellis Metals receives a fee
of $2,500 per month. During the 1997 fiscal year, the Company paid Ellis Metals
$30,000 under the terms of this agreement. The Company also has advanced
$300,000 to Ellis Metals under an unsecured note which bears interest at the
rate of 9% per annum and matures on April 11, 2006. The Company purchases
inventory from Empire, from time to time, at prices equivalent to
market value. During the 1997 fiscal year, the Company purchased $3.9 million
and $.3 million of inventory from Ellis Metals and Empire, respectively, and
also had sales of $.3 million to Ellis Metals. As of March 31, 1997, the
Company had accounts payable of $93,000 and $84,000 to Ellis Metals and Empire,
respectively.
The Company also leases certain land to Ellis Metals. During the 1997
fiscal year, the Company received $78,000 in rent payments from Ellis Metals.
The Company has a five year option, beginning June 1, 1999, to purchase certain
assets of Ellis Metals for $1.364 million, subject to certain adjustments.
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To facilitate a loan to the Company from a commercial bank, on January
7, 1997, Gerard M. Jacobs, T. Benjamin Jennings, Donald F. Moorehead, George O.
Moorehead, Harold Rubenstein and Raymond F. Zack, each of whom is or was a
Director at the time of issuance, provided personal guarantees to the bank.
In consideration of the guarantees, the Company issued warrants to these
individuals (the "Guaranty Warrants") to purchase an aggregate of 500,000 shares
of Common Stock at $4.00 per share (subject to certain restrictions). The
Guaranty Warrants expire on or about January 7, 2002.
On December 1, 1997, the Company and George O. Moorehead, formerly a
Director and Executive Vice President of the Company, entered into two
agreements, a Separation Agreement and a Stock Warrant Settlement Agreement,
resolving all outstanding issues between the Company and Mr. Moorehead.
Pursuant to the Separation Agreement, Mr. Moorehead resigned from his
employment with the Company, and EMCO and resigned as a director of EMCO and
delivered a Non-Compete, Non-Solicitation and Confidentiality Covenant and
Agreement. In consideration for entering into the Separation Agreement, the
Company (a) paid Mr. Moorehead $250,000 on December 1, 1997; (b) agreed to
provide Mr. Moorehead certain insurance and other benefits during a five-year
period beginning on December 1, 1997; (c) agreed to pay certain legal fees to
Mr. Moorehead's counsel; and (d) agreed to permit Mr. Moorehead to exercise
certain warrants to acquire Common Stock previously granted to him, on a "net
cashless" basis, subject to the Company's right to refuse "net cashless"
exercises under certain circumstances. Pursuant to the Stock Warrant Settlement
Agreement, the Company issued to Mr. Moorehead fully-vested warrants to
purchase 200,000 shares of Common Stock at $12.00 per share, exercisable for a
period of five years, and agreed to pay Mr. Moorehead amounts totalling
$665,000. To date, the Company has paid $207,500 to Mr. Moorehead under the
Stock Warrant Settlement Agreement.
On December 19, 1997 an Amended and Restated Stockholders' Agreement
("Stockholders Agreement") was entered into by and among T. Benjamin Jennings,
Gerard M. Jacobs, Albert A. Cozzi, Frank J. Cozzi, Gregory P. Cozzi, and
Samstock L.L.C. The Stockholders Agreement is described in the Description of
Capital Stock section of this Prospectus. Rod Dammeyer joined the Board of
Directors of the Company in connection with the Samstock investment.
On January 20, 1998 ("Closing Date") AMI Acquisition Company, a wholly
owned subsidiary of the Company entered into a 10 year lease with Aerospace
Metals, Inc. The lease provides for annual rent payments of approximately
$150,000 in years 1 and 2 and $300,000 per year thereafter. The Company has
guaranteed the lease obligation of AMI Acquisition Company. The Company has
an option to purchase the real property for fair market value until the fifth
anniversary of the Closing Date.
PLAN OF DISTRIBUTION
The Shares may be sold or distributed from time to time by the Selling
Stockholders, or by pledgees, donees or transferees of, or other successors in
interest to, the Selling Stockholders, directly to one or more purchasers
(including pledgees) or through brokers, dealers or underwriters who may act
solely as agents or may acquire Shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, or at fixed prices, which may be changed. The
distribution of the Shares may be effected by one or more of the following
methods: (i) ordinary brokers' transactions, which may include long or short
sales; (ii) transactions involving cross or block trades or otherwise on the
Nasdaq National Market; (iii) purchases by brokers, dealers or underwriters as
principals and resale by such purchasers for their own accounts pursuant to this
Prospectus; (iv) "at the market" to or through market makers or into an existing
market for the Common Stock; (v) in other ways not involving market makers or
established trading markets, including direct sales to purchasers or sales
effected through agents; (vi) through transactions in options, swaps or other
derivatives (whether exchange-listed or otherwise), or (vii) any combination of
the foregoing, or by any other legally available means. In addition, the Selling
Stockholders or their successors in interest may enter into hedging transactions
with broker-dealers who may engage in short sales of Common Stock in the course
of hedging the positions they assume with the Selling Stockholders. The Selling
Stockholders or their successors in interest may also enter into option or
other transactions with broker-dealers that require the delivery to such
broker-dealers of the Shares, which Shares may be resold thereafter pursuant
to this Prospectus.
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Brokers, dealers, underwriters or agents participating in the
distribution of the Shares as agent may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders (and, if
they act as agent for the purchaser of such Shares, from such purchaser). Such
discounts, concessions or commissions as to a particular broker, dealer,
underwriter or agent might be greater or less than those customary in the type
of transaction involved.
The Selling Stockholders and any such brokers, dealers or other agents
that participate in such distribution may be deemed to be "underwriters" within
the meaning of the Securities Act, and any discounts, commissions or concessions
received by the Selling Stockholders and any such brokers, dealers or other
agents might be deemed to be underwriting discounts and commissions under the
Securities Act. Neither the Company nor the Selling Stockholders can presently
estimate the amount of any such compensation. The Company knows of no existing
arrangements between any Selling Stockholder and any other Selling Stockholder,
broker, dealer or other agent relating to the sale or distribution of the
Shares.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of any of the Shares may not simultaneously
engage in market activities with respect to the Common Stock for the applicable
period under Regulation M prior to the commencement of such distribution. In
addition and without limiting the foregoing, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation Rules 10b-5 and Regulation
M, which may limit the timing of purchases and sales of any of the Shares by the
Selling Stockholders. All of the foregoing may affect the marketability of the
Common Stock.
The Company will pay substantially all of the expenses incident to this
Offering of the Shares by the Selling Stockholders other than commissions,
concessions and discounts of brokers, dealers or other agents. Each Selling
Stockholder may indemnify any broker, dealer, or other agent that participates
in transactions involving sales of the Shares against certain liabilities,
including liabilities arising under the Securities Act. The Company has agreed
to indemnify certain Selling Stockholders and any such statutory "underwriter"
and controlling persons of such "underwriter" against certain liabilities,
including certain liabilities under the Securities Act.
In order to comply with certain states' securities laws, if applicable,
the Shares will be sold in such jurisdictions only through registered or
licensed brokers or dealers.
DESCRIPTION OF CAPITAL STOCK
The Amended and Restated Certificate of Incorporation of the Company
(the "Certificate of Incorporation") authorizes capital stock consisting of
80,000,000 shares of Common Stock, par value $.01 per share, and 4,000,000
shares of preferred stock without designation, par value $0.01 per share
("Preferred Stock"). There were 31,243,124 shares of Common Stock issued and
outstanding as of March 5, 1998. Additionally, the Board of Directors has
designated 36,000 shares of Preferred Stock as "Series A Preferred Stock," face
amount of $1,000 per share, 21,077 shares of which are outstanding as of
March 5, 1998, and 23,000 shares of Preferred Stock as "Series B Preferred
Stock," face amount of $1,000 per share, 20,000 shares of which are outstanding
as of March 5, 1998. The following summary description of the capital stock
of the Company is qualified in its entirety by reference to the Certificate of
Incorporation and Bylaws of the Company.
Common Stock. Each share of Common Stock is entitled to one vote. There
are no preemptive, subscription, conversion or redemption rights pertaining to
the shares of Common Stock. Stockholders are entitled to receive dividends as
declared by the Board of Directors out of assets legally available therefor and
to share ratably in the assets of the Company available upon liquidation.
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<PAGE> 20
Preferred Stock. The Company's certificate of incorporation grants the
Board of Directors the right to cause the Company to issue, from time to time,
all or part of the preferred stock remaining undesignated in one or more series,
and to fix the number of shares of preferred stock remaining undesignated and
determine or alter for each series, the voting powers, full, limited, or none,
and other designations, preferences, or relative, participating, optional or
other special rights and such qualifications, limitations, or restrictions
thereof. On August 8, 1997, the Company designated 36,000 shares of preferred
stock as "Series A Convertible Preferred Stock," par value $.01 per share
(Stated Value of $1,000 per share). On November 20, 1997, the Company designated
23,000 shares of preferred Stock as "Series B Convertible Preferred Stock," par
value $.01 per share (Stated Value of $1,000 per share).
The Series A Preferred Stock has a "Liquidation Preference" equal to
$1,000 per share plus any accrued and unpaid dividends. Upon the liquidation,
dissolution or winding up of the Company, holders of the Series A Preferred
Stock are entitled to receive payment of the Liquidation Preference on a pro
rata basis based on the Liquidation Preference of the preferred stock held by
each holder before any payment is made to holders of Common Stock or any stock
of the Company junior to the Series A Preferred Stock.
Dividends on the Series A Preferred Stock accrue at an annual rate of
6% of the Stated Value and are payable in cash or, at the Company's option, and
upon satisfaction of certain conditions, in additional shares of Series A
Preferred Stock. The holders of Series A Preferred Stock are able to convert the
shares of Series A Preferred Stock into Common Stock at a price equal to the
lower of: (i) $18.30 (to be adjusted to reflect stock splits, stock dividends or
similar events); or (ii) 85% of the average closing bid price for the common
stock for the five trading days prior to the conversion date.
If the conversion of the Series A Preferred Stock would result in the
holders receiving more than 2,500,000 shares of Common Stock, then the Company
may redeem any shares of Series A Preferred Stock in excess of 2,500,000 shares
at a redemption price equal to: (i) 117% of the Stated Value of the shares; plus
(ii) any accrued and unpaid dividends on such shares. Any shares of Series A
Preferred Stock which have not been converted on or before August 8, 2000 (the
"Maturity Date") will automatically be converted to shares of Common Stock at
the Maturity Date. However, if, at the Maturity Date any of the "Mandatory
Conversion Conditions" are not satisfied, then the Company will be required to
pay the holders of Series A Preferred Stock cash in an amount equal to the
Liquidation Preference for each share of Series A Preferred Stock owned by the
holder. "Mandatory Conversion Conditions" include: (i) a registration
statement covering the resale of all of the shares of Common Stock issuable
upon conversion of the Series A Preferred Stock is effective, or such resale
may be made under Rule 144(k) under the Securities Act.
The Series A Preferred Stock does not grant holders voting rights
except that, so long as the Series A Preferred Stock is outstanding, without the
prior approval of the holders of at least a majority of all shares of the Series
A Preferred Stock outstanding at the time, the Company may not: (i) increase the
number of shares of Series A Preferred Stock which the Company is authorized to
issue; (ii) alter or change the rights, preferences or privileges of the Series
A Preferred Stock or any other capital stock of the Company so as to adversely
affect the Series A Preferred Stock; or (iii) create any new class or series of
capital stock having a preference over the Series A Preferred Stock as to
distribution of assets upon liquidation, dissolution or winding up of the
Company. Approval of holders of the Series A Preferred Stock as to actions
described in (ii) and (iii) above will not be required if the average closing
price for the Common Stock on the five trading days immediately preceding the
effective date of such a change is equal to or exceeds $27.45 per share.
The Series B Preferred Stock has a liquidation preference equal to
$1,000 per share plus any accrued and unpaid dividends. Upon the liquidation,
dissolution or winding up of the Company, holders of the Series B Preferred
Stock are entitled to receive payment of the liquidation preference on a pro
rata basis based on the Liquidation Preference of the stock held by each holder
before any payment is made to holders of Common Stock or any stock of the
Company junior to the Series B Preferred Stock.
Dividends on the Series B Preferred Stock accrue, whether or not
declared by the Board of Directors, at an annual rate of 4.5% of the Stated
Value of each outstanding share of Series B Preferred Stock. Dividends and are
payable in cash or, at the Company's option, and upon satisfaction of certain
conditions, in additional shares of Series B Preferred Stock.
The holders of Series B Preferred Stock may convert shares of Series B
Preferred Stock into Common Stock at a price equal to the lowest of: (i) 120% of
the closing bid price for the Common Stock on the date of purchase of the Series
B Preferred Stock (to be adjusted to reflect stock splits, stock dividends or
similar events) (the "Fixed Conversion Price"); (ii) 92.5% of the average
closing bid price for the Common Stock for the five trading days prior to the
date of the conversion notice; or (iii) if applicable, the lowest traded price
of the Common Stock during the time when the Common Stock is not listed on the
Nasdaq National Market or listed on the New York Stock Exchange or other
national securities exchange.
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If the conversion of the Series B Stock would result in the holders
receiving more than 2,000,000 Shares of Common Stock, then the Company may
redeem any shares of Series B Stock in excess of 2,000,000 shares at a
redemption price equal to: (i) 117% of the Stated Value of the shares; plus
(ii) any accrued and unpaid dividends on such shares. Any shares of Series B
Preferred Stock which have not been converted within three years from the date
of purchase will automatically be converted to shares of Common Stock at the
maturity date of the Series B Preferred Stock. However, if, at the maturity
date, a registration statement covering the resale of all of the shares of
Common Stock issuable upon conversion of the Series B Preferred Stock is not
effective, and resale may not be made under Rule 144(k) under the Securities
Act, then the Company will be required to pay to the holders of Series B
Preferred Stock cash in an amount equal to the liquidation preference for the
shares of Series B Preferred Stock owned by the holder.
The Series B Preferred Stock does not grant holders voting rights
except that, so long as shares of Series B Preferred Stock are outstanding,
without the prior approval of the holders of at least a majority of all shares
of the Series B Preferred Stock outstanding at the time, the Company may not:
(i) increase the number of shares of Series B Preferred Stock which the Company
is authorized to issue; (ii) alter or change the rights, preferences or
privileges of the Series B Preferred Stock or any other capital stock of the
Company so as to adversely affect the Series B Preferred Stock; or (iii) create
any new class or series of capital stock having a preference over the Series B
Preferred Stock as to distribution of assets upon liquidation, dissolution or
winding up of the Company. Approval of holders of the Series B Preferred Stock
as to actions described in (ii) and (iii) above will not be required if the
average closing price for the Common Stock on the five trading days immediately
preceding the effective date of such a change is equal to or exceeds 150% of the
Fixed Conversion Price.
Certificate of Incorporation and Bylaws. The Company's Certificate of
Incorporation was amended on April 9, 1996 to change the Company's corporate
name to Metal Management, Inc. The directors of the Company are elected each
year at the annual meeting of the stockholders for terms of one year and until
their successors are elected and qualified; existing directors may nominate and
elect qualified persons to fill vacancies on the Board of Directors.
Stockholders' Agreement. Albert A. Cozzi, Frank J. Cozzi and Gregory P.
Cozzi (collectively, the "Cozzi Stockholders"), Samstock, L.L.C. ("Samstock")
and Messrs. Jacobs and Jennings (collectively, the "MTLM Stockholders") and the
Company entered into a stockholders agreement dated as of December 19, 1997 and
having a term of ten years, unless renewed or extended (the "Stockholders
Agreement"). Under the Stockholders Agreement, the Cozzi Stockholders, Samstock
and the MTLM Stockholders have agreed that each group will act in a manner to
cause the nomination of the directors slated for election at each annual
meeting of the Company, five of whom shall be selected by the Cozzi
Stockholders and five of whom shall be selected by the MTLM Stockholders
(provided that each group has agreed to nominate one individual, independent and
unaffiliated from each group or the Company, as part of its slate) and one of
whom shall be selected by Samstock. The Stockholders Agreement further requires
each group to vote for the other group's nominees for election to the Board and
to vote for proposals, if and when presented by the Company, to amend the
Company's organizational documents to require the approval of at least
two-thirds of the Board of Directors to, among other things: (i) amend the
Company's certificate of incorporation or bylaws; (ii) liquidate or merge the
Company; (iii) sell substantially all of the Company's assets; (iv) elect or
remove officers; (v) adopt an annual budget; (vi) borrow funds, sell assets or
make capital expenditures exceeding $5 million; (vii) issue or register the
Company's securities; or (viii) declare or pay any dividends or distributions.
Transfer Agent and Registrar. The Transfer Agent and Registrar for the
Common Stock is LaSalle National Bank of Chicago.
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LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Shefsky & Froelich Ltd., Chicago, Illinois. Certain attorneys
employed by Shefsky & Froelich Ltd. beneficially own, or have the right to
acquire through exercise of warrants or options granted to such individuals, an
aggregate of approximately 133,000 shares of the Company's Common Stock as of
the date hereof. Certain members of the firm have also received compensation in
the form of warrants for non-legal services partly in connection with certain
financings completed by the Company.
EXPERTS
The consolidated balance sheets and the related consolidated statements
of operations, of cash flows and of changes in stockholders' equity of the
Company and its subsidiaries at March 31, 1997 and October 31, 1995, and the
results of their operations and their cash flows for the year ended March 31,
1997, the five months ended March 31, 1996 and for each of the two years in the
period ended October 31, 1995, incorporated in this Prospectus by reference to
the Company's Annual Report on Form 10-K (as amended) for the fiscal year ended
March 31, 1997, and the Company's Proxy Statement dated November 20, 1997 have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated balance sheets of Cozzi Iron & Metal, Inc. and
subsidiaries as of December 31, 1996 and 1995 and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1996, incorporated in this Prospectus by
reference from the Company's Proxy Statement, dated November 20, 1997, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The balance sheets of The Isaac Corporation and Ferrex Trading
Corporation at December 31, 1996 and 1995 and the related statements of
income, shareholders' equity and cash flows for the years ended December 31,
1994, 1995 and 1996, incorporated in this Prospectus by reference to the
Company's current report on Form 8-K dated June 23, 1997, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
incorporated herein in reliance upon such reports given upon the authority of
such firm as experts in auditing and accounting.
The consolidated balance sheets as of June 1, 1996 and May 31, 1997,
and the consolidated statements of income, retained earnings, and cash flows
for each of the three years ended June 3, 1995, June 1, 1996 and May 31, 1997,
included in this prospectus, have been so included herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference herein the following documents
filed pursuant to the Exchange Act under the Company's Exchange Act File No.
0-14836: (i) the Company's Annual Report on Form 10-K (as amended) for the
fiscal year ended March 31, 1997; (ii) the Company's Quarterly Reports on Form
10-Q for the periods ended June 30, 1997, September 30, 1997 and December 31,
1997; (iii) the Company's Amended Quarterly Report on Form 10-QA for the period
ended September 30, 1997; (iv) the Company's Current Report on Form 8-K dated
May 1, 1997 (relating to the Reserve acquisition and including historical and
proforma financial statements of Reserve); (v) the Company's Current Report on
Form 8-K dated June 23, 1997 (relating to the Isaac acquisition and including
historical and pro forma financial statements of Isaac); (vi) the Company's
Current Report on Form 8-K dated August 28, 1997 (relating to the Proler
acquisition); (vii) the Company's Current Report on Form 8-K dated October 24,
1997 (relating to the reclassification of amounts received from the sale of the
Series A Preferred Stock); (viii) the Company's Proxy Statement dated November
20, 1997; (ix) the Company's Current Report on Form 8-K dated December 1, 1997
(relating to the acquisition of Cozzi Iron & Metal, Inc.); (x) the Company's
Current Report on Form 8-K dated December 18, 1997 (relating to the private
equity placement to Samstock); (xi) the Company's Current Report on Form 8-K
dated January 8, 1998 (relating to the acquisition of Houston Compressed Steel
Corp.); and (xii) the Company's Current Report on Form 8-K dated January 20,
1998 (relating to the acquisition of substantially all of the assets of
Aerospace Metals, Inc.).
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the Offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document or information
incorporated or deemed to be incorporated herein by reference shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document that also is,
or is deemed to be, incorporated herein by reference, modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The making of a modifying or superseding statement shall not be deemed
an admission that the modified or superseded statement, when made, constituted a
misrepresentation, an untrue statement of a material fact or an omission to
state a material fact that is required to be stated or that is necessary to make
a statement not misleading in light of the circumstances in which it was made.
The Company hereby undertakes to provide without charge to each person
including any beneficial owner to whom a copy of this Prospectus has been
delivered, upon written or oral request of the person, a copy of any or all of
the foregoing documents or information referred to above that has been
incorporated herein by reference in this Prospectus (other than exhibits to
documents, unless these exhibits are specifically incorporated by reference into
the documents). Requests for these documents should be made to Mr. Robert C.
Larry at the Company's principal executive offices located at 500 North Dearborn
Street, Suite 405, Chicago, Illinois 60610; telephone number (312) 645-0700.
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements
give effect to the Company's acquisition of substantially all of the assets of
Aerospace Metals, Inc., Aerospace Parts Security, Inc. and The Suisman Titanium
Corporation (collectively "Aerospace") using the purchase method of accounting.
An unaudited pro forma combined condensed balance sheet is provided as of
December 31, 1997, giving effect to the acquisition of Aerospace and to other
significant transactions as if these transactions occurred on December 31,
1997. An unaudited pro forma combined condensed statement of operations is
provided for the nine months ended December 31, 1997, giving effect to the
acquisition of Aerospace and other significant transactions as if these
transactions had occurred on April 1, 1997. An unaudited pro forma combined
condensed statement of operations for the year ended March 31, 1997 was
presented in the Company's Current Report on Form 8-K dated January 20, 1998.
The following unaudited pro forma combined condensed statement of
operations does not reflect the operating results from discontinued operations.
As previously disclosed, the discontinued operations include i) the
Spectra*Star printer and consumables business, which was sold during the first
quarter of fiscal 1997 and ii) 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 accompanying unaudited pro forma combined condensed financial
statements have been derived from the Company's unaudited consolidated
condensed balance sheet as of December 31, 1997 and the unaudited consolidated
condensed statement of operations for the nine months ended December 31, 1997
(incorporated by reference to pages 1-2 of the Company's Quarterly Report on
Form 10-Q for the period ended December 31, 1997), and the unaudited balance
sheet as of December 26, 1997 and the unaudited statement of operations for the
nine months ended December 26, 1997 for Aerospace.
The excess of the acquisition costs over the fair value, as estimated by
the Company, of the net assets to be acquired has been allocated to goodwill.
The Company considers all intangible assets in the allocation of purchase
price. 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 Company's combined results of operations would
have been had the acquisition occurred on the dates indicated or for any future
period or date.
The unaudited pro forma combined condensed financial information should be
read in conjunction with: 1) the annual financial statements and notes thereto
for the Company which appear in the Company's Form 10-K for the year ended
March 31, 1997, filed with the Commission on June 20, 1997; (2) the Company's
Proxy Statement dated November 20, 1997, and (3) the historical audited
financial statements and notes thereto and unaudited interim financial
statements and notes thereto for Aerospace which appear elsewhere in this Form
S-3.
24
<PAGE> 25
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
MTLM AEROSPACE PRO FORMA PRO FORMA
12/31/97 12/26/97 ADJUSTMENTS (1) COMBINED
-------- -------- --------------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $30,134 $5,762 $(14,411) 2. $8,123
(5,762) 5.
(20,900) 11.
13,300 13.
Accounts receivable, net 85,900 5,620 90 5. 91,610
Inventories 43,350 8,332 3,226 7. 54,908
Other current assets 6,352 961 (251) 5. 7,062
-------- -------- -------- --------
Total current assets 165,736 20,675 (24,708) 161,703
Property and equipment, net 94,532 4,144 1,926 8. 98,876
(1,726) 9.
Goodwill and other intangibles 166,619 224 2,763 6. 169,382
(224) 5.
Other assets 10,027 147 (147) 5. 10,027
-------- -------- -------- --------
TOTAL ASSETS $436,914 $25,190 ($22,116) $439,988
======== ======== ======== ========
LIABILITIES AND EQUITY
Current liabilities:
Operating lines of credit $7,610 $0 $0 $7,610
Accounts payable 53,823 4,887 74 4. 58,784
Other accrued liabilities 14,272 334 109 5. 14,618
(97) 12.
Current portion of debt 29,748 444 (444) 5. 20,606
(20,900) 11.
(1,542) 12.
13,300 13.
-------- -------- -------- --------
Total current liabilities 105,453 5,665 (9,500) 101,618
Long term debt, less current 96,272 1,806 (1,806) 5. 96,272
Deferred taxes 11,534 513 (513) 5. 11,534
Other liabilities 836 220 (220) 5. 836
-------- -------- -------- --------
TOTAL LIABILITIES 214,095 8,204 (12,039) 210,260
-------- -------- -------- --------
Stockholders equity:
Convertible preferred stock - Series A 24,217 0 24,217
Convertible preferred stock - Series B 19,063 0 19,063
Common stock, warrants and 202,098 527 5,270 3. 209,007
additional paid in capital (527) 10.
1,639 12.
Retained earnings (accumulated deficit) (22,559) 16,459 (16,459) 10. (22,559)
-------- -------- -------- --------
Total stockholders equity 222,819 16,986 (10,077) 229,728
-------- -------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $436,914 $25,190 ($22,116) $439,988
======== ======== ======== ========
</TABLE>
See notes to unaudited pro forma combined condensed balance sheet
25
<PAGE> 26
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
Items 1 - 10 represent pro forma adjustments to the Company's balance sheet as
of December 31, 1997 giving effect to the acquisition of Aerospace using the
purchase method of accounting.
1. The purchase consideration is comprised of the following ($ in 000's):
<TABLE>
<CAPTION>
AEROSPACE
---------
<S> <C>
Shares of MTLM restricted common stock issued 402,893
Cash payment $ 14,411
Value of restricted common stock issued 5,270
Cash payment for transaction costs 210
---------
Total estimated consideration $ 19,891
=========
</TABLE>
The estimated consideration will be allocated for pro forma purposes as
follows (in 000's):
<TABLE>
<CAPTION>
AEROSPACE
---------
<S> <C>
Current assets $ 17,978
Noncurrent assets 4,344
Current liabilities (5,330)
Long term debt/other liabilities 0
Goodwill 2,899
---------
$ 19,891
=========
</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. Reflects the cash consideration paid to the former shareholder of
Aerospace in partial consideration for substantially all of the assets of
Aerospace.
3. Reflects the issuance of 402,893 shares of restricted common stock
issued to the sole shareholder of Aerospace in partial consideration for
substantially all of the assets of Aerospace. The Company has agreed to
register the restricted shares issued within 120 days of closing,
therefore, the common stock was valued based on the closing stock price of
$13.625 on January 20, 1998, discounted by 4% for trading restrictions.
4. Reflects estimated transaction costs remaining to be incurred for
Aerospace (in 000's):
<TABLE>
<S> <C>
Estimated transaction costs $ 210
Incurred through December 31, 1997 136
--------
Remaining costs to be paid $ 74
========
</TABLE>
The remaining costs to be incurred is presented as an increase in
accounts payable.
5. Reflects the elimination of assets and liabilities which were not
purchased or assumed from Aerospace.
6. Reflects the goodwill, net of transaction costs already capitalized,
related to the acquisition of Aerospace.
7. Reflects the adjustment of LIFO inventory to a FIFO basis to conform to
MTLM's accounting policy for inventory valuation.
8. Reflects the write-up of fixed assets to fair market value (in 000's):
<TABLE>
<S> <C>
Fair market value $ 4,344
Book value 2,418
--------
Write-up of fixed assets $ 1,926
========
</TABLE>
9. Reflects the elimination of real property of Aerospace which was not
purchased by the Company.
26
<PAGE> 27
10. Reflects the elimination of the equity accounts of Aerospace.
Items 11-13 represent pro forma adjustments to the Company's consolidated
balance sheet for significant equity and financing transactions completed by
the Company subsequent to December 31, 1997 assuming these transactions
occurred on December 31, 1997.
11. On January 7, 1998, the Company repaid a $8.1 million short-term loan
issued to the former shareholders of Proler Southwest, Inc. On February
13, 1998, the Company repaid $12.8 million of short-term loans issued to
the former shareholders of Isaac. Presented as a $20.9 million decrease
to cash and current portion of debt.
12. On January 14, 1998, the former shareholders of Reserve converted a
$1,541,660 note payable and accrued interest of $97,124 into 182,087
shares of common stock. Presented as a $1,541,660 reduction in current
portion of debt, a $97,124 reduction in accrued expenses and a $1,638,784
increase in equity.
13. On February 12, 1998, the Company drew $13.3 million from two lines of
credit at an interest rate of prime rate plus 50 basis points. Presented
as a $13.3 million increase in cash and current portion of debt.
27
<PAGE> 28
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
THE COMPANY RESERVE ISAAC PROLER COZZI AEROSPACE
NINE MONTHS ONE MONTH TWELVE WEEKS FIVE MONTHS EIGHT MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
12/31/97 4/30/97 6/23/97 8/31/97 11/30/97 12/26/97
-------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales $283,353 $9,304 $44,133 $13,477 $173,813 $41,109
Cost of sales 255,579 8,448 42,611 11,123 162,111 35,966
-------- ------- -------- -------- -------- --------
Gross profit 27,774 856 1,522 2,354 11,702 5,143
Expenses:
General and administrative 14,610 489 3,394 1,872 5,824 2,861
Depreciation and amortization 6,712 186 360 144 1,914 444
(Income) loss from joint-ventures (195) (23) 738
Non-recurring expenses 25,456
-------- ------- -------- -------- -------- --------
Operating income (loss) from (18,809) 204 (2,232) 338 3,226 1,838
continuing operations
Interest expense (6,166) (226) (755) (34) (2,832) (132)
Other income, net 562 (1) 123 133 476 172
-------- ------- -------- -------- -------- --------
Income (loss) from continuing (24,413) (23) (2,864) 437 870 1,878
operations before income taxes
Provision (benefit) for income tax (3,165) 0 0 140 514 780
-------- ------- -------- -------- -------- --------
Net income (loss) from (21,248) (23) (2,864) 297 356 1,098
continuing operations
Accretion of preferred stock 57
to redemption value
Preferred stock dividends 895
Non-cash dividend 5,592
-------- ------- -------- -------- -------- --------
Net income (loss) from continuing $ (27,792) $ (23) $ (2,864) $ 297 $ 356 $ 1,098
operations applicable to ======== ======= ======== ======== ======== ========
common stock
Net income (loss) from continuing ($1.73) n/a n/a n/a n/a n/a
operations per common share
Weighted average shares 16,032,000 n/a n/a n/a n/a n/a
outstanding
</TABLE>
See notes to unaudited pro forma combined statement of operations.
28
<PAGE> 29
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA COMBINED
ADJUSTMENTS 12/31/97
----------- --------
<S> <C>
$0 $565,189
318 1. 516,359
203 2.
-------- --------
(521) 48,830
(1,133) 3. 27,917
1,870 4. 11,221
(2,425) 4.
264 5.
(53) 6.
1,752 7.
53 8.
520
25,456
-------- --------
(849) (16,284)
1,308 9. (9,931)
(426) 10.
(761) 11.
93 12.
1,465
-------- --------
(635) (24,750)
(730) 13. (2,461)
-------- --------
95 (22,289)
57
904 14. 7,391
-------- --------
$ (809) $ (29,737)
======== ========
($0.99)
12,420,429 15. 30,115,455
261,957 16.
1,401,069 17.
</TABLE>
29
<PAGE> 30
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
The following reflects pro forma adjustments to the Company's statement of
operations giving effect to the Company's acquisitions of Reserve, Isaac,
Proler, Cozzi and Aerospace ("Acquired Companies") as if these acquisitions
had occurred on April 1, 1997.
1. Reflects the adjustment of LIFO cost of goods sold for Cozzi and
Aerospace to conform to the Company's accounting policy for inventory
valuation. Adjustment for Cozzi is through the December 1, 1997 closing
date for the Cozzi acquisition (in 000's):
<TABLE>
<S> <C>
Cozzi $ (20)
Aerospace 338
--------
Total $ 318
========
</TABLE>
2. The Company did not purchase the real estate where the operations of
Aerospace are conducted. The Company entered into a 10 year lease
agreement requiring annual lease payments of $150,000 for the first two
years of the lease. The annual lease payments will increase to $300,000
for the remaining term. The pro forma adjustment reflects the
straight-line lease expense for the period.
3. Reflects the reduction in compensation expense for the former
shareholders of the Acquired Companies who have signed new employment
agreements with the Company. The pro forma adjustment is reflected for
the period up to the effective date for each respective acquisition (in
000's):
<TABLE>
<S> <C>
Isaac $ 173
Proler 271
Cozzi 25
Aerospace 664
--------
Total $ 1,133
========
</TABLE>
4. Reserve, Isaac and Cozzi recorded depreciation expense based on
accelerated depreciation methods. The Company calculates depreciation
expense using the straight line method. Reflects the reversal of
depreciation expense recognized based on the accelerated method and the
recognition of depreciation expense based on the straight-line method.
Depreciation expense is calculated based on the fair market value of the
fixed assets acquired using an average useful life of 30 years for
buildings and improvements, 7 to 19 years for operating machinery and
equipment and 5 years for office equipment. The pro forma adjustment is
reflected for the period up to the effective date for each respective
acquisition (in 000's):
<TABLE>
<CAPTION>
REVERSAL OF ACCELERATED DEPRECIATION EXPENSE: STRAIGHT-LINE DEPRECIATION EXPENSE:
--------------------------------------------- -----------------------------------
<S> <C> <C> <C>
Reserve $ 177 Reserve $ 129
Cozzi 1,888 Cozzi 1,298
Isaac 360 Isaac 443
------- --------
Total $ 2,425 Total $ 1,870
======= ========
</TABLE>
5. Proler and Aerospace used the straight line method for recording
depreciation expense. Reflects additional depreciation expense on the
write-up of the fixed assets to fair market value. Incremental
depreciation expense was computed assuming an average useful life of 30
years for buildings and improvements and 7 years for machinery and
equipment. Also, the Company did not purchase the real estate where
Aerospace's operations are located. Therefore, historical depreciation
expense on the real estate is eliminated. Pro forma adjustment is
reflected for the period up to the effective date for each respective
acquisition (in 000's).
<TABLE>
<CAPTION>
INCREMENTAL DEPRECIATION EXPENSE
--------------------------------
<S> <C>
Aerospace $ 206
Aerospace real estate (98)
Proler 156
---
Total $ 264
=======
</TABLE>
6. Reflects the elimination of existing goodwill amortization for Reserve
and Cozzi. Pro forma adjustment is reflected for the period up to the
effective date of each respective acquisition.
<TABLE>
<S> <C>
Reserve $ 9
Cozzi 44
--
Total $ 53
=======
</TABLE>
30
<PAGE> 31
7. Reflects goodwill amortization associated with MTLM's acquisition of
each respective company. Pro forma adjustments are reflected for the
period up to the effective date of each respective acquisition (in 000's):
Reserve $ 15
Isaac 280
Proler 292
Cozzi 1,111
Aerospace 54
------------
Total $ 1,752
============
8. Reflects amortization expense on the $1.8 million non-compete
intangible asset created from the acquisition of Isaac. The non-compete
intangible asset is being amortized over 8 years which represents the term
of the non-compete agreement. Pro forma adjustment represents estimated
amortization for periods prior to the effective date of the Isaac
acquisition.
9. Reflects the reversal of interest expense recognized on notes payable
which have been repaid or converted into common stock by the Company.
These notes were issued as purchase consideration to the selling
shareholders of the Acquired Companies (in 000's):
MacLeod $ 119
HouTex 48
Reserve 94
Isaac 799
Proler 248
------------
Total $ 1,308
============
10. Reflects interest expense on outstanding notes payable issued in
connection with the following acquisitions (in 000's):
MacLeod $ 43
Isaac 313
Proler 70
------------
Total $ 426
============
11. The Company completed the following debt transactions with commercial
banks:
(a) In May 1997, the Company obtained a $4.5 million revolving and term
loan at the prime rate of interest.
(b) In August 1997, the Company repaid a $6.5 million term loan.
(c) In February 1998, the Company drew down $13.3 million from two
lines of credit at the prime rate of interest + 50 basis points. Pro
forma adjustment represents recognition of interest expense for the period
up to the date of loans and reversal of interest expense recognized on
the repaid loan (in 000's):
$4.5 million loan $ 64
$6.5 million loan (201)
$13.3 million loan 898
------------
Total $ 761
============
12. Pro forma adjustment reflects elimination of interest expense recognized
by Aerospace on a preferred stock redemption and shareholder loan which
were not assumed liabilities.
13. Adjustment to income tax provision to reflect income taxes on Reserve,
Isaac and deductible pro forma adjustments. Income taxes were calculated
at a statutory rate of 40%.
14. On August 8, 1997, MTLM issued 21,000 shares of Series A Convertible
Preferred Stock, par value $.01 per share (stated value of $1,000 per
share) to two institutional investors for an aggregate purchase price of
$21.0 million. MTLM received net proceeds of $19.95 million. Between
August 21, 1997 and September 8, 1997, the Company issued 4,000 additional
shares of Series A Convertible Preferred Stock to 6 individuals for an
aggregate purchase price of $4.0 million. On December 1, 1997, the
Company issued 20,000 shares of Series B Convertible Preferred Stock, par
value $.01 per share (stated value of $1,000 per share) to two
institutional investors for an aggregate purchase price of $20.0 million.
The Company received net proceeds of $19.1 million. Dividends accrue at
6% and 4.5%, respectively, on the Series A and Series B Convertible
Preferred Stock. Pro forma adjustment represents dividends periods prior
to the issuance date of the Series A and Series B Preferred Stock:
Series A $ 305
Series B 599
------------
Total $ 904
============
31
<PAGE> 32
15. Reflects the pro forma adjustment to weighted shares outstanding to
reflect the incremental shares issued with each respective acquisition and
the conversion of debt to stock as if the transactions had occurred on
April 1, 1997:
Isaac 586,390
Proler 941,818
Cozzi 10,203,624
Aerospace 402,893
Debt Conversion and warrant exercise 285,704
----------
12,420,429
==========
16. In April and May 1997, the Company completed a private offering of
2,025,000 shares of common stock at $7.25 per share. Adjustment
represents the incremental shares for the nine months ended December 31,
1997.
17. On December 18, 1997, the Company completed a private offering of
1,470,588 shares of common stock to Samstock, L.L.C. The Company received
proceeds of approximately $25.0 million. Adjustment represents the
incremental shares for the nine months ended December 31, 1997.
32
<PAGE> 33
AEROSPACE METALS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
_______
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants 34
Consolidated Financial Statements:
Consolidated Balance Sheets as of June 1, 1996, May 31, 1997 and
(unaudited) December 26, 1997 35
Consolidated Statements of Income and Retained Earnings
for the years ended June 3, 1995, June 1, 1996, May 31, 1997 and
(unaudited) seven months ended December 28, 1996 and December 26, 1997 36
Consolidated Statements of Cash Flows for the years ended
June 3, 1995, June 1, 1996, May 31, 1997 and (unaudited)
seven months ended December 28, 1996 and December 26, 1997 37
Notes to Consolidated Financial Statements 38-48
</TABLE>
33
<PAGE> 34
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Aerospace Metals, Inc.:
We have audited the accompanying consolidated balance sheets of Aerospace
Metals, Inc. and Subsidiaries (the "Company") as of June 1, 1996 and May 31,
1997, and the related consolidated statements of income and retained earnings
and cash flows for each of the three years ended June 3, 1995, June 1, 1996
and May 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Aerospace Metals, Inc. and Subsidiaries as of June 1, 1996 and May 31, 1997,
and the consolidated results of their operations and cash flows for the three
years ended June 3, 1995, June 1, 1996 and May 31, 1997 in conformity with
generally accepted accounting principles.
Coopers & Lybrand LLP
Hartford, Connecticut
August 12, 1997 except as to the information presented in Note 7, for which
the date is March 9, 1998
34
<PAGE> 35
AEROSPACE METALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 1, 1996 and May 31, 1997 and
(unaudited) December 26, 1997
(Dollars in Thousands)
_______
<TABLE>
<CAPTION>
ASSETS
(Unaudited)
June 1, May 31, December 26,
1996 1997 1997
---- ---- ----
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,936 $ 2,095 $ 5,762
Accounts receivable, less allowance
for doubtful accounts of $159 in
1996 and $138 in 1997 and $152
in December 1997 10,581 10,257 5,620
Inventories 5,127 7,323 8,332
Prepaid expenses and other current assets 1,075 986 751
Deferred income taxes, net 253 210 210
-------- -------- --------
Total current assets 20,972 20,871 20,675
-------- -------- --------
Property, plant and equipment, at cost 16,312 17,040 17,739
Less - accumulated depreciation (12,686) (13,257) (13,595)
-------- -------- --------
3,626 3,783 4,144
-------- -------- --------
Other assets:
Investments 6 8 8
Cash surrender value of life insurance
(net of policy loans of $93 in 1996
and 1997 and December 1997) 111 134 139
Intangible asset - pension plans 258 224 224
-------- -------- --------
375 366 371
-------- -------- --------
Total assets $ 24,973 $ 25,020 $ 25,190
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
(Unaudited)
June 1, May 31, December 26,
1996 1997 1997
---- ---- ----
<S> <C> <C> <C>
Current liabilities:
Current portion of long-term debt $ 208 $ 247 $ 444
Accounts payable 4,267 4,101 4,887
Accrued expenses 826 503 432
Accrued and withheld taxes 196 402 184
Accrued pension liability 326 137 -
Income taxes payable (refundable) 773 276 (282)
Dividends payable 107 - -
-------- -------- --------
Total current liabilities 6,703 5,666 5,665
Pension liability 60 137 220
Long-term debt, less current portion 712 1,928 1,806
Deferred income taxes, net 535 513 513
-------- -------- --------
Total liabilities 8,010 8,244 8,204
-------- -------- --------
Commitments and Contingencies (Note 7)
Stockholder's equity:
6% preferred stock (1% cumulative) - $100
par value; authorized 19,365 shares;
issued and outstanding -0- in 1997 and
17,800 shares in 1996 1,780 - -
Common stock - $25 par value; authorized
32,000 shares; issued and outstanding
14,288 shares 357 357 357
Retained earnings 14,982 16,298 16,459
Paid-in capital - 298 298
Pension liability adjustment (156) (177) (128)
-------- -------- --------
Total stockholder's equity 16,963 16,776 16,986
-------- -------- --------
Total liabilities and stockholder's
equity $ 24,973 $ 25,020 $ 25,190
======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THE CONSOLIDATED FINANCIAL STATEMENTS.
35
<PAGE> 36
AEROSPACE METALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
for the years ended June 3, 1995, June 1, 1996 and May 31, 1997 and
(unaudited) seven months ended December 28, 1996 and December 26, 1997
(Dollars in Thousands)
_______
<TABLE>
<CAPTION>
1995 1996 1997 (Unaudited) (Unaudited)
------- ------- ------- Seven Months Seven Months
Ended Ended
December 28, December 26,
1996 1997
------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $42,264 $54,177 $50,400 $24,894 $28,804
Cost of goods sold 35,209 44,964 44,756 23,115 26,799
------- ------- ------- ------- -------
Gross profit 7,055 9,213 5,644 1,779 2,005
General and administrative expenses 3,497 3,647 3,452 1,625 1,795
------- ------- ------- ------- -------
Income from operations 3,558 5,566 2,192 154 210
Other income, net 290 174 204 142 168
Interest expense (110) (81) (148) (52) (103)
------- ------- ------- ------- -------
Income before provision
for income taxes 3,738 5,659 2,248 244 275
Provision for income taxes 1,349 2,370 932 101 114
------- ------- ------- ------- -------
Net income 2,389 3,289 1,316 143 161
Retained earnings, beginning of period 9,518 11,800 14,982 14,982 16,298
Preferred stock dividends ($6 per share) (107) (107) - - -
------- ------- ------- ------- -------
Retained earnings, end of period $11,800 $14,982 $16,298 $15,125 $16,459
======= ======= ======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THE CONSOLIDATED FINANCIAL STATEMENTS.
36
<PAGE> 37
AEROSPACE METALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended June 3, 1995, June 1, 1996 and May 31, 1997 and
(unaudited) seven months ended December 28, 1996 and December 26, 1997
(Dollars in Thousands)
_______
<TABLE>
<CAPTION>
1995 1996 1997 (Unaudited) (Unaudited)
------- ------ ------- Seven Months Seven Months
Ended Ended
December 28, December 26,
1996 1997
------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,389 $ 3,289 $ 1,316 $ 143 $ 161
------- ------- ------- ------- -------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation 663 537 571 328 339
Loss on disposition of property, plant and equipment 6 42 - - -
Deferred income taxes 314 125 21 - -
Change in assets and liabilities:
Decrease (increase) in accounts receivable, net (4,968) (554) 324 3,029 4,637
(Increase) decrease in inventories 575 399 (2,196) (2,679) (1,009)
Decrease (increase) in prepaid expenses and other
current assets (30) (414) 89 270 235
(Increase) in cash value of life insurance (33) (9) (23) (6) (5)
(Decrease) increase in accounts payable and
accrued expenses 663 362 (283) (280) 497
(Decrease) increase in accrued pension costs 16 (778) (99) 188 (6)
(Decrease) increase in income taxes payable 578 55 (497) (1,305) (558)
------- ------- ------- ------- -------
Total adjustments (2,216) (235) (2,093) (455) 4,130
------- ------- ------- ------- -------
Net cash provided by (used in) operating activities 173 3,054 (777) (312) 4,291
------- ------- ------- ------- -------
Cash flows from investing activities:
Capital expenditures (346) (509) (728) (486) (699)
Proceeds from disposition of property, plant and equipment - 22 - - -
(Increase) in investments - - (2) - -
------- ------- ------- ------- -------
Net cash provided by (used in) investing activitie (346) (487) (730) (486) (699)
------- ------- ------- ------- -------
Cash flows from financing activities:
Loan from officer - - 300 300 293
Repayment of loan from officer (46) - (261) (26) (96)
Repayment of long-term debt (139) (191) (208) (122) (122)
Purchase of preferred stock - - (58) (58) -
Preferred stock dividends (18) (107) (107) (107) -
------- ------- ------- ------- -------
Net cash provided by (used in) financing activities (203) (298) (334) (13) 75
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents (376) 2,269 (1,841) (811) 3,667
Cash and cash equivalents at beginning of period 2,043 1,667 3,936 3,936 2,095
------- ------- ------- ------- -------
Cash and cash equivalents at end of period $ 1,667 $ 3,936 $ 2,095 $ 3,125 $ 5,762
======= ======= ======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 119 $ 76 $ 135 $ 41 $ 32
Income taxes 457 2,189 1,408 1,406 672
Non-cash investing and financing activities:
For the years ended June 1, 1996 and May 31, 1997, the Company recorded
minimum pension liability adjustments of $414 and $401, respectively
(see Note 3).
During fiscal year 1997, the Company redeemed its outstanding 6% preferred
stock of $1,780 for $1,482, resulting in a paid-in capital contribution
of $298 (see Note 4). The transaction was funded with a cash payment of
$58 and a note in the amount of $1,424.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THE CONSOLIDATED FINANCIAL STATEMENTS.
37
<PAGE> 38
AEROSPACE METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
years ended June 3, 1995, June 1, 1996 and May 31, 1997
and (unaudited) seven months ended December 28, 1996 and December 26, 1997
_______
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
Aerospace Metals, Inc. (the "Company") is an international company with
special capabilities in recycling aerospace and high technology metals and
alloys. Through its Suisman and Blumenthal Division, the Company is a
technical and marketing leader in the recycling of aerospace and high
technology metals, especially nickel and cobalt alloys. Suisman Titanium (a
wholly-owned subsidiary) is the world leader in recycling of titanium for
the aerospace industry. The Company is the sole manufacturer of ST-20001,
a titanium scrap turning product.
Fiscal Year
The Company prepares its financial statements on the basis of a 52-53 week
fiscal year with the year ending on the Saturday nearest May 31.
Principles of Consolidation
The consolidated financial statements include the accounts of Aerospace
Metals, Inc. (the "Company") and those of its division, Suisman &
Blumenthal, and its wholly-owned subsidiaries, Danny Corp. (formerly
Aerodyne Alloys, Inc.), and Suisman Titanium Corp. Significant
intercompany accounts and transactions have been eliminated in
consolidation.
Cash Equivalents
Short-term investments with original maturities when purchased of three
months or less are considered to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method for the Suisman & Blumenthal
Division's inventories and the first-in, first-out (FIFO) method for the
inventories of the Company's wholly-owned subsidiaries.
38
<PAGE> 39
AEROSPACE METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
years ended June 3, 1995, June 1, 1996 and May 31, 1997
and (unaudited) seven months ended December 28, 1996 and December 26, 1997
_______
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Inventories, Continued
Inventories consist of the following:
<TABLE>
<CAPTION>
(Unaudited)
June 1, May 31, December 26,
1996 1997 1997
---- ---- ----
($ in Thousands)
<S> <C> <C> <C>
Processed $ 6,569 $ 8,336 $ 9,760
Partially processed and unprocessed 2,122 2,213 1,798
------- ------- -------
Gross inventories at FIFO 8,691 10,549 11,558
Less: LIFO reserve (3,564) (3,226) (3,226)
------- ------- -------
Net inventories $ 5,127 $ 7,323 $ 8,332
======= ======= =======
</TABLE>
Periodically, the Company enters into foreign currency exchange contracts
in order to hedge any currency risks associated with certain purchases of
foreign source aerospace scrap. Any gains or losses on such contracts are
recognized in the period in which the contract is settled.
Property, Plant and Equipment
Property, plant and equipment is stated at cost, less accumulated
depreciation. Depreciation of the related assets is charged against income
over their estimated useful lives by using the straight-line and
declining-balance methods. Estimated useful lives range from 3 to 40
years.
Expenditures for repairs and maintenance are charged to expense as
incurred. For assets sold or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts, and any resulting
gain or loss is reflected in income for the period.
39
<PAGE> 40
AEROSPACE METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
years ended June 3, 1995, June 1, 1996 and May 31, 1997
and (unaudited) seven months ended December 28, 1996 and December 26, 1997
_______
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. Under this method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory rates
applicable to future years to differences between the financial statement
carrying amounts and tax bases of existing assets and liabilities. The
effect on deferred taxes of a change in tax rates is recognized in income
in the period that includes the enactment date. In addition, deferred tax
assets are subject to a valuation allowance to reduce them to net
realizable value.
Pension Plans
The Company has two noncontributory defined benefit pension plans covering
substantially all of its employees. Pension expense is actuarially
determined in accordance with Statement of Financial Accounting Standards
No. 87 (see Note 3). Additionally, the Company offers a 401(k) savings
plan for eligible salaried employees.
Investments
Investments are carried at the lower of cost or market.
Concentrations of Credit Risk
The Company invests its excess cash in deposits and short-term investments,
which have maturities of less than ninety days and, therefore, bear minimal
risk. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral. The Company's sales are
concentrated in the aerospace industry, principally to domestic customers.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
40
<PAGE> 41
AEROSPACE METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
years ended June 3, 1995, June 1, 1996 and May 31, 1997
and (unaudited) seven months ended December 28, 1996 and December 26, 1997
_______
2. PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
A summary of property, plant and equipment is as follows:
(Unaudited)
June 1, May 31, December 26,
1996 1997 1997
($in Thousands)
<S> <C> <C> <C>
Land $ 269 $ 269 $ 269
Plant and improvements 4,626 4,654 4,654
Roads and surfacing 466 526 526
Machinery and equipment 8,255 8,715 9,000
Trucks, cranes and containers 2,266 2,290 2,329
Furniture, fixtures and office equipment 418 433 439
Construction in process 12 153 522
-------- -------- --------
16,312 17,040 17,739
Less - accumulated depreciation (12,686) (13,257) (13,595)
-------- -------- --------
$ 3,626 $ 3,783 $ 4,144
======== ======== ========
</TABLE>
3. EMPLOYEE BENEFIT PLANS:
The Company has two defined benefit pension plans (salaried and hourly)
covering substantially all of its employees. The benefits for the salaried
plan are based on years of service and the employee's compensation during
the later years of employment. Benefits for the hourly plan are based on
arrangements set forth in collective bargaining agreements. Contributions
are intended to provide not only for benefits attributed to service to date
but also for those expected to be earned in the future. The Company's
policy is to fund an amount within the deductible range as allowed by
Internal Revenue Service regulations.
41
<PAGE> 42
AEROSPACE METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
years ended June 3, 1995, June 1, 1996 and May 31, 1997
and (unaudited) seven months ended December 28, 1996 and December 26, 1997
_______
3. EMPLOYEE BENEFIT PLANS, CONTINUED:
The following table sets forth a reconciliation of each of the plan's
funded status to the amounts recognized in the Company's consolidated
balance sheets as of June 1, 1996, May 31, 1997 and December 26, 1997,
respectively:
<TABLE>
<CAPTION>
June 1, 1996
------------
($ in Thousands)
Salaried Hourly Total
-------- ------ -----
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ 2,874 $ 1,561 $ 4,435
Nonvested benefits 24 44 68
------- ------- -------
Accumulated benefit obligations 2,898 1,605 4,503
Projected effect of future compensation increases 328 15 343
------- ------- -------
Projected benefit obligations for service rendered to date 3,226 1,620 4,846
Less - plan assets at fair value, primarily
insurance company separate accounts,
immediate participation guarantee contracts and
mutual funds (2,915) (1,549) (4,464)
-------- ------- -------
Projected benefit obligations in excess of plan assets 311 71 382
Unrecognized prior service cost (39) (143) (182)
Unrecognized net gain (loss) from past experience
different from that assumed and effects of changes
in assumptions 292 (171) 121
Unrecognized net obligation at June 1, 1987 being
recognized over 15 years (234) (115) (349)
Additional minimum liability - 414 414
------- ------- -------
Accrued pension liability included in the
Company's consolidated balance sheets $ 330 $ 56 $ 386
======= ======= =======
</TABLE>
42
<PAGE> 43
AEROSPACE METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
years ended June 3, 1995, June 1, 1996 and May 31, 1997
and (unaudited) seven months ended December 28, 1996 and December 26, 1997
_______
3. EMPLOYEE BENEFIT PLANS, CONTINUED:
<TABLE>
<CAPTION>
May 31, 1997
------------
($ in Thousands)
Salaried Hourly Total
-------- ------ -----
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ 2,756 $ 1,631 $ 4,387
Nonvested benefits 36 50 86
------- ------- -------
Accumulated benefit obligations 2,792 1,681 4,473
Projected effect of future compensation increases 625 - 625
------- ------- -------
Projected benefit obligations for service rendered to date 3,417 1,681 5,098
Less - plan assets at fair value, primarily
insurance company separate accounts,
immediate participation guarantee contracts and
mutual funds (3,105) (1,663) (4,768)
------- ------- -------
Projected benefit obligations in excess of plan assets 312 18 330
Unrecognized prior service cost (37) (127) (164)
Unrecognized net gain (loss) from past experience
different from that assumed and effects of changes
in assumptions 187 (177) 10
Unrecognized net obligation at June 1, 1987 being
recognized over 15 years (206) (97) (303)
Additional minimum liability - 401 401
------- ------- -------
Accrued pension liability included in the
Company's consolidated balance sheets $ 256 $ 18 $ 274
======= ======= =======
</TABLE>
43
<PAGE> 44
AEROSPACE METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
years ended June 3, 1995, June 1, 1996 and May 31, 1997
and (unaudited) seven months ended December 28, 1996 and December 26, 1997
_______
3. EMPLOYEE BENEFIT PLANS, CONTINUED:
<TABLE>
<CAPTION>
(Unaudited)
December 26, 1997
-----------------
($ in Thousands)
Salaried Hourly Total
-------- ------ -----
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ 2,914 $ 1,688 $ 4,602
Nonvested benefits 36 53 89
------- ------- -------
Accumulated benefit obligations 2,950 1,741 4,691
Projected effect of future compensation increases 625 - 625
------- ------- -------
Projected benefit obligations for service
rendered to date 3,575 1,741 5,316
Less - plan assets at fair value, primarily
insurance company separate accounts,
immediate participation guarantee contracts and
mutual funds (3,337) (1,781) (5,118)
------- ------- -------
Projected benefit obligations in excess of (less than)
plan assets 238 (40) 198
Unrecognized prior service cost (36) (118) (154)
Unrecognized net gain (loss) from past experience
different from that assumed and effects of changes
in assumptions 248 (150) 98
Unrecognized net obligation at June 1, 1987 being
recognized over 15 years (190) (87) (277)
Additional minimum liability - 355 355
------- ------- -------
Accrued pension liability included in the
Company's consolidated balance sheets $ 260 $ (40) $ 220
======= ======= =======
</TABLE>
44
<PAGE> 45
AEROSPACE METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
years ended June 3, 1995, June 1, 1996 and May 31, 1997
and (unaudited) seven months ended December 28, 1996 and December 26, 1997
_______
3. EMPLOYEE BENEFIT PLANS, CONTINUED:
Net pension cost included the following components:
<TABLE>
<CAPTION>
(Unaudited)
June 3, June 1, May 31, December 28, December 26,
1995 1996 1997 1996 1997
---- ---- ---- ---- ----
($in Thousands)
<S> <C> <C> <C> <C> <C>
Service cost - benefits
earned during the period $159 $123 $158 $ 92 $ 97
Interest cost on projected
benefit obligation 369 374 406 237 240
Actual return on plan assets (184) (428) (484) (234) (246)
Net amortization and deferral (32) 178 147 38 38
---- ---- ---- ----- -----
$312 $247 $227 $ 133 $ 129
==== ==== ==== ===== =====
</TABLE>
The weighted-average discount rate, rate of increase in future compensation
levels and the expected long-term rate of return on assets used in
determining the actuarial present value of the projected benefit obligation
for fiscal years 1995, 1996 and 1997 were 8.25%, 4.5% and 9.0%,
respectively.
In accordance with provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions" ("SFAS 87"), the
Company has accrued an additional minimum liability of $414,000 and
$401,000 as of June 1, 1996 and May 31, 1997, respectively. Under the
provisions of SFAS 87, a corresponding amount is recognized as either an
intangible asset, a reduction of equity or a combination of both.
Accordingly, the Company recorded intangible assets of $258,000 and
$224,000 as of June 1, 1996 and May 31, 1997, respectively. In addition,
the Company recorded equity reductions of $156,000 and $177,000 as of June
1, 1996 and May 31, 1997, respectively.
The Company offers a savings plan under Section 401(k) of the Internal
Revenue Code. The savings plan allows eligible salaried employees to defer
up to 10% of their income on a pretax basis through contributions to the
plan. For every dollar an employee contributes (up to 6% of an individual's
income on a pretax basis), the Company will match 50%. For the years ended
June 3, 1995, June 1, 1996 and May 31, 1997, the expense for matching
contributions was $48,000, $55,000 and $64,000, respectively.
45
<PAGE> 46
AEROSPACE METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
years ended June 3, 1995, June 1, 1996 and May 31, 1997
and (unaudited) seven months ended December 28, 1996 and December 26, 1997
_______
4. LONG-TERM DEBT:
Long-term debt comprised the following at:
<TABLE>
<CAPTION>
(Unaudited)
June 1, May 31, December 26,
1996 1997 1997
---- ---- ----
($in Thousands)
<S> <C> <C> <C>
Officer promissory note, due on demand (a) $ - $ 39 $ 236
Term loan (b) 920 712 590
7-1/2% promissory note, due 2006 (c) - 1,424 1,424
------ ------ ------
920 2,175 2,250
Less - current portion (208) (247) (444)
------ ------ ------
$ 712 $1,928 $1,806
====== ====== ======
</TABLE>
(a) This promissory note, which is payable to the Chairman of the
Company, was entered into during fiscal year 1997, in the amount of
$300,000 and is payable upon demand and accrues interest at the base
rate minus 1/2%.
(b) The Company has a credit facility with Fleet Bank consisting
of a term loan facility of $2,500,000 and a revolving working
capital line of credit of $10,000,000. At June 1, 1996 and May 31,
1997, borrowings of $920,000 and $712,000, respectively, were
outstanding under the term loan facility, which expires on October
1, 2000. These borrowings bear interest at a fixed rate of 6.98%.
Under the terms of this facility, the Company covenants that, among
other things, it will maintain certain levels of tangible net worth.
An additional $1,250,000 is available to the Company under the term
loan facility for a seven-year term, at a fixed rate of interest to
be determined at the time of the related closing. The revolving
$10,000,000 working capital line of credit expires on December 1,
1998 and bears interest at the bank's base rate with an option to
convert to a LIBOR rate. Borrowings under this facility are limited
by a collateral formula based on levels of accounts receivable and
inventories. At June 1, 1996 and May 31, 1997, there were no
borrowings outstanding under this line of credit, however, the
Company did maintain standby letters of credit in conjunction with
its workers' compensation insurance plan, in the amount of
approximately $165,000 and $100,000, respectively. Both the term
loan and the working capital line of credit are collateralized by
accounts receivable, inventories and certain personal property.
(c) On December 15, 1996, the Company redeemed all the
outstanding shares of its 6% preferred stock in exchange for an
initial $58,000 payment and a $1,424,000 promissory note (the
"Note"). The Note, issued to a related party, bears interest at a
fixed rate of 7-1/2% and matures in 2006. The Note is
uncollateralized and subordinate to the prior payment in full of any
institutional indebtedness. Interest, in the amount of
approximately $49,000, had been paid as of May 31, 1997.
46
<PAGE> 47
AEROSPACE METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
years ended June 3, 1995, June 1, 1996 and May 31, 1997
and (unaudited) seven months ended December 28, 1996 and December 26, 1997
_______
4. LONG-TERM DEBT, CONTINUED:
Maturities of long-term debt at June 1, 1997 for the succeeding five fiscal
years and thereafter are as follows:
<TABLE>
<CAPTION>
($in Thousands)
<S> <C>
1998 $ 247
1999 208
2000 208
2001 88
2002 -
Thereafter 1,424
------
$2,175
======
</TABLE>
5. INCOME TAXES:
The provision for income taxes comprised the following:
<TABLE>
<CAPTION>
(Unaudited)
June 3 June 1, May 31, December 28, December 26,
1995 1996 1997 1996 1997
---- ---- ---- ---- ----
($in Thousands)
<S> <C> <C> <C> <C> <C>
Currently payable:
Federal $ 867 $1,597 $ 666 $ 75 $ 85
State 168 648 246 26 29
------ ------ ------ ----- -----
1,035 2,245 912 101 114
------ ------ ------ ----- -----
Deferred:
Federal 278 94 15 - -
State 36 31 5 - -
------ ------ ------ ----- -----
314 125 20 - -
------ ------ ------ ----- -----
$1,349 $2,370 $ 932 $ 101 $ 114
====== ====== ====== ===== =====
</TABLE>
Deferred taxes comprised the following:
<TABLE>
<CAPTION>
(Unaudited)
June 1, May 31, December 26,
1996 1997 1997
---- ---- ----
($in Thousands)
<S> <C> <C> <C>
Deferred tax assets $ 354 $ 272 $ 272
Deferred tax liabilities (636) (575) (575)
----- ----- -----
$(282) $(303) $(303)
===== ===== =====
</TABLE>
47
<PAGE> 48
AEROSPACE METALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
years ended June 3, 1995, June 1, 1996 and May 31, 1997
and (unaudited) seven months ended December 28, 1996 and December 26, 1997
_______
5. INCOME TAXES, CONTINUED:
The principal temporary differences that give rise to deferred tax assets
and liabilities are related to inventory capitalization adjustments,
miscellaneous reserves, and the use of accelerated methods of depreciation.
The difference between the actual tax provision and the amounts obtained by
applying the statutory U.S. Federal income rate of 34% to income before
taxes is primarily attributable to state income taxes.
6. CONTINGENT LIABILITY:
The Company has been named, together with other parties, in certain claims
by the U.S. Environmental Protection Agency (the "EPA"), as a potentially
responsible party ("PRP"), with respect to alleged liability under the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), relating to cleanup costs at certain sites not owned or operated
by the Company.
The Company's counsel has indicated that it was not possible at this time to
provide an opinion as to the potential liability, if any, with respect to
any of the aforementioned CERCLA claims. In the opinion of management,
ultimate resolution of these claims will not have a material impact on the
financial position of the Company.
7. SUBSEQUENT EVENT:
On January 20, 1998, Metal Management, Inc. ("MTLM") purchased certain
of the Company's assets and assumed certain of its liabilities. In
connection with this transaction, approximately $2 million of the purchase
price is being held in escrow to cover the anticipated costs of remediating
the Company's property, in accordance with a remediation workplan approved
by MTLM. Currently, a subsidiary of MTLM is leasing the property under a
ten year lease with an option to purchase the property after four years.
Management believes that the escrowed funds will be sufficient to
cover the remediation costs contemplated by the remediation workplan.
48
<PAGE> 49
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
TABLE OF CONTENTS
P A G E
-------
Available Information.....................................................3
The Company...............................................................3
Risk Factors..............................................................6
Use of Proceeds..........................................................14
Selling Stockholders.....................................................15
Plan of Distribution.....................................................18
Description of Capital Stock.............................................19
Legal Matters............................................................22
Experts..................................................................22
Incorporation of Certain Documents
by Reference...........................................................23
METAL MANAGEMENT, INC.
-------------------
PROSPECTUS
-------------------
4,148,343
SHARES OF
COMMON STOCK
($.01 Par Value)
<PAGE> 50
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses payable by the
Registrant in connection with the filing of this Registration Statement. All of
such expenses, other than the filing fee for the Commission, are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee.................................................... $ 15,489
Printing and Engraving Expenses.................................................................. $ 10,000*
Legal Fees and Expenses.......................................................................... $ 10,000*
Accounting Fees and Expenses..................................................................... $ 20,000*
Blue Sky Fees and Expenses....................................................................... $ 0
--------
Total ............................................................................... $ 55,489
========
</TABLE>
* estimated for purposes of this filing
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the provisions of Section 145(a) of the Delaware General
Corporation Law, the Company has the power to indemnify anyone made or
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the Company) because such person is
or was a director or officer of the Company against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in the defense or settlement of such action, suit, or
proceeding, provided that (i) such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the Company's best interest and
(ii) in the case of a criminal proceeding such person had no reasonable cause to
believe his conduct was unlawful.
With respect to an action or suit by or in the right of the Company to
procure a judgment in its favor, Section 145(b) of the Delaware General
Corporation Law provides that the Company shall have the power to indemnify
anyone who was, is, or is threatened to be made a party to a threatened,
pending, or completed action or suit brought by or in the right of the Company
to procure a judgment in its favor because such person is or was a director or
officer of the Company against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit, provided that such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the Company's best interests,
except that no indemnification shall be made in a case in which such person
shall have been adjudged to be liable to the Company unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall have determined upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses.
Indemnification as described above shall only be granted in a specific
case upon a determination that indemnification is proper under the circumstances
using the applicable standard of conduct which is made by (a) a majority of a
quorum of directors who were not parties to such proceeding, (b) independent
S-1
<PAGE> 51
legal counsel in a written opinion if such quorum cannot be obtained or if a
quorum of disinterested directors so directs, or (c) the shareholders of the
Company.
Section 145(g) of the Delaware General Corporation Law permits the
purchase and maintenance of insurance to indemnify directors and officers
against any liability asserted against or incurred by them in any such capacity,
whether or not the Company itself would have the power to indemnify any such
director or officer against such liability. The Company has purchased this type
of insurance, has paid and intends to continue paying the premiums thereon.
The Company's Amended Certificate of Incorporation provides for the
indemnification of directors and officers of the Company to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law, as the same
may be amended or supplemented. The Certificate of Incorporation further
provides that the indemnification provided for therein shall not be exclusive of
any rights to which those indemnified may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors, or otherwise.
The Amended Certificate of Incorporation also contains a provision that
eliminates the personal liability of the Company's directors to the Company or
its shareholders for monetary damages for breach of fiduciary duty as a
director. The provision does not limit a director's liability for (i) breaches
of duty of loyalty to the Company or its shareholders, (ii) acts or omissions
not in good faith, involving intentional misconduct or involving knowing
violations of law, (iii) the payment of unlawful dividends or unlawful stock
repurchases or redemptions under Section 174 of the Delaware General Corporation
Law, or (iv) transactions in which the director received an improper personal
benefit. Depending on judicial interpretation, the provision may not affect
liability for violations of the federal securities laws.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The Company understands that the staff of the Securities and Exchange
Commission is of the opinion that statutory, charter and contractual provisions
as are described above have no effect on claims arising under the federal
securities laws. The Company is not aware of any material threatened or ongoing
litigation or proceeding that may result in a claim for such indemnification.
ITEM 16. EXHIBITS
The following exhibits are filed as part of this Registration
Statement:
S-2
<PAGE> 52
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
3.1 Amended Certificate of Incorporation of Metal Management, Inc.
(incorporated by reference to Exhibit 3.1 to the Registrant's
Report on Form 10-Q dated December 31, 1996 and Exhibit 3.1 to
the Registrant's current report on Form 8-K dated December 15,
1997).
3.2 Amended and restated Bylaws as amended through May 24, 1997
(incorporated by reference to Exhibit 3.1 to the Registrant's
Report on Form 10-K for the year ended March 31, 1997).
4.1 Amended and Restated Stockholders' Agreement, dated December
19, 1997, by an among T. Benjamin Jennings, Gerard M. Jacobs,
Albert A. Cozzi, Frank J. Cozzi, Gregory P. Cozzi, Samstock,
L.L.C. and the Company, (incorporated by reference to Exhibit
10.2 of the Registrant's report on Form 8-K dated December
18, 1997)
4.2 Shelf Registration Rights Agreement, dated December 19, 1997,
by and between the Registrant and Samstock, L.L.C.
(incorporated by reference to Exhibit 4.2 of the Registrant's
report on Form 8-K dated December 18, 1997).
4.3 Amended and Restated Registration Rights Agreement, dated
December 19, 1997, by and among the Company and T. Benjamin
Jennings, Gerard M. Jacobs, Albert A. Cozzi, Frank J. Cozzi,
Gregory P. Cozzi and Samstock, L.L.C. (incorporated by
reference to Exhibit 4.3 of the Registrant's report on Form
8-K dated December 18, 1997).
4.4 Registration Rights Agreement, dated January 20, 1998 by and
between Metal Management, Inc. and Aerospace Metals, Inc.
(incorporated by reference to Exhibit 10.3 of the
Registrant's report on Form 8-K, dated January 20, 1998).
4.5* Registration Rights Agreement, dated January 30, 1998, by and
between Metal Management, Inc. and Newell Phoenix, L.L.C.
5.1* Opinion of Shefsky & Froelich Ltd. as to the validity of the
Shares.
23.1* Consent of Shefsky & Froelich Ltd. (included in Exhibit 5.1
above).
23.2* Consent of Price Waterhouse LLP.
23.3* Consent of Deloitte & Touche LLP.
23.4* Consent of Ernst & Young LLP.
23.5* Consent of Coopers & Lybrand L.L.P.
27.1** Financial Data Schedule
* Filed herewith.
** Not provided herewith as this Registration statement does not include
financial statements that have not been previously included in a filing with
the Commission.
S-3
<PAGE> 53
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in this Registration Statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in this
Registration Statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in this Registration Statement or any
material change to such information in this
Registration Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do
not apply if the information required to be included in a
post-effective amendment by these paragraphs is contained in periodic
reports filed with or furnished by the Registrant pursuant to Section
13 or 15(d) of the Exchange Act that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the Offering.
(b) The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under the
Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of
1934 (and where applicable each filing of an employee
benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this Registration
Statement shall be deemed to be a new registration
statement relating to the securities offered
S-4
<PAGE> 54
therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide
offering thereof.
(h) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange
Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person
of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such
director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its
counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate
jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Securities Act and will be governed
by the final adjudication of such issue.
S-5
<PAGE> 55
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-3 and has duly caused this
registration statement or amendment thereto to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on March 9, 1998.
METAL MANAGEMENT, INC.
By: /s/ Gerard M. Jacobs
----------------------------------------------------
Gerard M. Jacobs
Director, Chief Executive Officer and Member of
Executive Committee
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement or amendment thereto has been signed by the
following persons in the capacities indicated on March 9, 1998.
S-6
<PAGE> 56
/s/ T. Benjamin Jennings Director, Chairman of the Board, Member of
- --------------------------------- Executive Committee and Chief Development
T. Benjamin Jennings Officer
/s/ Gerard M. Jacobs Director, Member of Executive Committee and
- --------------------------------- Chief Executive Officer
Gerard M. Jacobs
/s/ Donald F. Moorehead Director and Vice Chairman of the Board
- ---------------------------------
Donald F. Moorehead
/s/ Albert A. Cozzi Director, President, Chief Operating
- --------------------------------- Officer and Member of Executive Committee.
Albert A. Cozzi
/s/ Frank J. Cozzi Director and Vice President
- ---------------------------------
Frank J. Cozzi
/s/ Gregory P. Cozzi Director
- ---------------------------------
Gregory P. Cozzi
/s/ George A. Isaac, III Director, Member of Executive Committee and
- --------------------------------- Executive Vice President
George A. Isaac, III
/s/ William T. Proler Director
- ---------------------------------
William T. Proler
/s/ Harold Rubenstein Director
- ---------------------------------
Harold Rubenstein
/s/ Christopher G. Knowles Director
- ---------------------------------
Christopher G. Knowles
/s/ Rod F. Dammeyer Director
- ---------------------------------
Rod F. Dammeyer
/s/ Robert C. Larry Vice President, Finance, Treasurer and Chief
- --------------------------------- Financial Officer
Robert C. Larry
S-7
<PAGE> 57
EXHIBIT INDEX
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
3.1 Amended Certificate of Incorporation of Metal Management, Inc.
(incorporated by reference to Exhibit 3.1 to the Registrant's
Report on Form 10-Q dated December 31, 1996 and Exhibit 3.1 to
the Registrant's current report on Form 8-K dated December 15,
1997).
3.2 Amended and restated Bylaws as amended through May 24, 1997
(incorporated by reference to Exhibit 3.1 to the Registrant's
Report on Form 10-K for the year ended March 31, 1997).
4.1 Amended and Restated Stockholders' Agreement, dated December
19, 1997, by an among T. Benjamin Jennings, Gerard M. Jacobs,
Albert A. Cozzi, Frank J. Cozzi, Gregory P. Cozzi, Samstock,
L.L.C. and the Company, (incorporated by reference to Exhibit
10.2 of the Registrant's report on Form 8-K dated December
18, 1997)
4.2 Shelf Registration Rights Agreement, dated December 19, 1997,
by and between the Registrant and Samstock, L.L.C.
(incorporated by reference to Exhibit 4.2 of the Registrant's
report on Form 8-K dated December 18, 1997).
4.3 Amended and Restated Registration Rights Agreement, dated
December 19, 1997, by and among the Company and T. Benjamin
Jennings, Gerard M. Jacobs, Albert A. Cozzi, Frank J. Cozzi,
Gregory P. Cozzi and Samstock, L.L.C. (incorporated by
reference to Exhibit 4.3 of the Registrant's report on Form
8-K dated December 18, 1997).
4.4 Registration Rights Agreement, dated January 20, 1998 by and
between Metal Management, Inc. and Aerospace Metals, Inc.
(incorporated by reference to Exhibit 10.3 of the
Registrant's report on Form 8-K, dated January 20, 1998).
4.5* Registration Rights Agreement, dated January 30, 1998, by and
between Metal Management, Inc. and Newell Phoenix, L.L.C.
5.1* Opinion of Shefsky & Froelich Ltd. as to the validity of the
Shares.
23.1* Consent of Shefsky & Froelich Ltd. (included in Exhibit 5.1
above).
23.2* Consent of Price Waterhouse LLP.
23.3* Consent of Deloitte & Touche LLP.
23.4* Consent of Ernst & Young LLP.
23.5* Consent of Coopers & Lybrand L.L.P.
27.1** Financial Data Schedule
* Filed herewith.
** Not provided herewith as this Registration Statement does not include
financial statements that have not been previously included in a filing with
the Commission.
S-8
<PAGE> 1
EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is made and
entered into as of the 30th day of January, 1998, by and between Metal
Management, Inc., a Delaware corporation (the "COMPANY") and Newell Phoenix,
L.L.C., an Arizona limited liability company ("STOCKHOLDER").
RECITALS:
A. Pursuant to the Membership Interest Purchase Agreement dated
as of January 30th, 1998 (the "PURCHASE AGREEMENT"), by and among the Company,
Stockholder, the members of Stockholder (the "MEMBERS") and Cozzi Iron & Metal,
Inc., an Illinois corporation ("COZZI"), Stockholder received from the Company
shares of the Company's common stock, par value $.01 per share (the "COMMON
STOCK"). All terms which are capitalized and used without definition herein
shall have the meanings ascribed to such terms in the Purchase Agreement.
B. As a condition to Stockholder agreeing to enter into the
Purchase Agreement, Stockholder is being granted registration rights with
respect to its shares of Common Stock.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
1. Mandatory Registration.
(a) On or before February 10, 1998 (the "FILING
DEADLINE"), which date may be extended as provided in Section 1(j) below, the
Company shall prepare and file at the Company's sole cost and expense (other
than the fees and disbursements of counsel for the Eligible Holder (as defined
herein), and the underwriting discounts, if any, payable in respect of the
Registrable Securities (as defined below) sold by the Eligible Holder) one
registration statement on Form S-3 covering the resale of the Registrable
Securities. The Company will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable following the filing thereof, but in no
event later than April 21, 1998. The Stockholder acknowledges that its
Registrable Securities will be registered under the same registration statement
with shares of Common Stock issued by the Company in connection with its
acquisition of Aerospace Metals, Inc.
(b) As used herein: (i) "COMMISSION" means the Securities
and Exchange Commission; (ii) "ELIGIBLE HOLDER" means a Stockholder (or its
assigns) to the extent it (or its assigns) then holds any Registrable
Securities; and (iii) "REGISTRABLE SECURITIES" shall mean the shares of Common
Stock owned by Stockholder on the date hereof as set forth on Schedule 1,
which, with respect to Stockholder, have not been previously sold pursuant to a
registration statement or Rule 144 promulgated under the Securities Act of
1933, as amended (the "SECURITIES ACT").
<PAGE> 2
(c) Upon a registration pursuant to the provisions of
this Section 1, the Company shall use its best efforts to cause the Registrable
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Eligible Holder may
reasonably request; provided, however, that the Company shall not be required
to qualify to do business in any state by reason of this Section 1(c) in which
it is not otherwise required to qualify to do business.
(d) The Company shall keep effective any registration or
qualification contemplated by this Section 1 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document and communication for such period of
time as shall be required to permit the Eligible Holder to complete the offer
and sale of the Registrable Securities covered thereby. The Company shall in
no event be required to keep any such registration or qualification in effect
for a period in excess of nine (9) months from the date on which the Eligible
Holder are first free to sell such Registrable Securities; provided, however,
that, if the Company is required to keep any such registration or qualification
in effect with respect to securities other than the Registrable Securities
beyond such period, the Company shall keep such registration or qualification
in effect as it relates to the Registrable Securities for so long as such
registration or qualification remains or is required to remain in effect in
respect of such other securities; provided, further, such nine (9) month period
shall be extended for the number of days of a Standstill Period (as defined
herein).
(e) In the event of a registration pursuant to the
provisions of this Section 1, the Company shall furnish to each Eligible Holder
such number of copies of the registration statement and of each amendment and
supplement thereto (in each case, including all exhibits), such reasonable
number of copies of each prospectus contained in such registration statement
and each supplement or amendment thereto (including each preliminary
prospectus), all of which shall conform to the requirements of the Securities
Act and the rules and regulations thereunder, and such other documents, as any
Eligible Holder may reasonably request to facilitate the disposition of the
Registrable Securities included in such registration.
(f) Upon a registration pursuant to the provisions of
this Section 1, the Company shall furnish each Eligible Holder with an opinion
of its counsel (reasonably acceptable to the Eligible Holder) to the effect
that (i) the registration statement has become effective under the Securities
Act and no order suspending the effectiveness of the registration statement,
preventing or suspending the use of the registration statement, any preliminary
prospectus, any final prospectus, or any amendment or supplement thereto has
been issued, nor has the Commission or any securities or blue sky authority of
any jurisdiction instituted or threatened to institute any proceedings with
respect to such an order, (ii) the registration statement and each prospectus
forming a part thereof (including each preliminary prospectus), and any
amendment or supplement thereto, comply as to form with the Securities Act and
the rules and regulations thereunder, and (iii) such counsel has no knowledge
of any material misstatement or omission in such registration statement or any
prospectus, as amended or supplemented. Such opinion shall also state the
jurisdictions in which the Registrable Securities have been registered or
qualified for sale pursuant to the provisions of Section 1(c).
2
<PAGE> 3
(g) The Company agrees that until all the Registrable
Securities have been sold under a registration statement or pursuant to Rule
144 under the Securities Act, it shall use its best efforts to keep current in
filing all reports, statements and other materials required to be filed with
the Commission to permit holders of the Registrable Securities to sell such
securities under Rule 144.
(h) The Company shall notify the Eligible Holder promptly
when such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed. The
Company shall notify the Eligible Holder promptly of the happening of any event
as a result of which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and use its best efforts to promptly update and/or correct such prospectus;
provided, however, that the Company shall not be required to update and/or
correct such prospectus if, and so long as, the Board of Directors of the
Company determines in good faith that to do so at such time would be
detrimental to the business or prospects of the Company. Any such period
(beginning upon notification of the Eligible Holder) in which the prospectus
remains not updated or corrected is herein referred to as a "STANDSTILL
PERIOD."
(i) The Company shall notify the Eligible Holder of the
issuance by the Commission of any stop or other order suspending the
effectiveness of the registration statement. If at any time the Company shall
receive any such order, the Company shall use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time; provided,
however, that the Company shall not be required to obtain the withdrawal or
lifting of such order if, and so long as, the Board of Directors of the Company
determines in good faith that to do so at such time would be detrimental to the
business or prospects of the Company.
(j) The Filing Deadline shall be extended by the number
of days during any period in which the Company has been advised by its outside
counsel that the registration statement will not be accepted for filing by the
Commission as a result of the Company then having on file a registration
statement which has not yet gone effective or a proxy statement that is then
being reviewed by the Commission.
(k) If requested by the underwriter for any underwritten
offering of Registrable Securities on behalf of an Eligible Holder pursuant to
a registration requested under this Agreement, the Company and such Eligible
Holder will enter into an underwriting agreement with such underwriter for such
offering, which shall be reasonably satisfactory in substance and form to the
Company and the Company's counsel, such Eligible Holder and the underwriter,
and such agreement shall contain such representations and warranties by the
Company and such Eligible Holder and such other terms and provisions as are
customarily contained in an underwriting agreement with respect to secondary
distributions solely by selling stockholders, including, without limitation,
indemnities substantially to the effect and to the extent provided in Section 2
hereof.
3
<PAGE> 4
(l) In connection with the registration of Registrable
Securities pursuant to a registration statement, each Eligible Holder shall:
(i) furnish to the Company such information regarding itself and the intended
method of disposition of Registrable Securities as the Company shall reasonably
request in order to effect the registration thereof; and (ii) upon receipt of
any notice from the Company of the initiation of a Standstill Period,
immediately discontinue disposition of Registrable Securities pursuant to the
registration statement until receiving written notice from the Company that the
Standstill Period has terminated.
(m) The Company shall use its best efforts to have the
Registrable Securities included for quotation on the Nasdaq National Market.
2. Indemnification. (a) Subject to the conditions set forth
below, the Company agrees to indemnify and hold harmless each Eligible Holder,
its officers, directors, partners, employees, agents, and counsel, and each
person, if any, who controls any such person within the meaning of Section 15
of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), from and against any and all loss, liability,
charge, claim, damage, and expense whatsoever (which shall include, for all
purposes of this Section 2, but not be limited to, reasonable attorneys' fees
and any and all reasonable expenses whatsoever incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), as and when incurred, arising out of, based upon, or in connection
with (i) any untrue statement or alleged untrue statement of a material fact
contained (A) in any registration statement, preliminary prospectus, or final
prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, relating to the sale of any of the Registrable Securities
or (B) in any application or other document or communication (in this Section 2
collectively called an "APPLICATION") executed by or on behalf of the Company
or based upon written information furnished by or on behalf of the Company
filed in any jurisdiction in order to register or qualify any of the
Registrable Securities under the securities or blue sky laws thereof or filed
with the Commission or any securities exchange; or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements made therein not misleading, unless (x) such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to such Eligible Holder by or on behalf
of such person expressly for inclusion in any registration statement,
preliminary prospectus, or final prospectus, or any amendment or supplement
thereto, or in any application, as the case may be, or (y) such loss,
liability, charge, claim, damage or expense arises out of such Eligible
Holder's failure to comply with the terms and provisions of this Agreement, or
(ii) any breach of any representation, warranty, covenant, or agreement of the
Company contained in this Agreement. The foregoing agreement to indemnify
shall be in addition to any liability the Company may otherwise have, including
liabilities arising under this Agreement.
If any action is brought against any Eligible Holder or any of
its officers, directors, partners, employees, agents, or counsel, or any
controlling persons of such person (an "INDEMNIFIED PARTY") in respect of which
indemnity may be sought against the Company pursuant to the foregoing
paragraph, such indemnified party or parties shall promptly notify the Company
in writing of the institution of such action (but the failure so to notify
shall not relieve the Company from any liability
4
<PAGE> 5
other than pursuant to this Section 2(a)) and the Company shall promptly assume
the defense of such action, including the employment of counsel (reasonably
satisfactory to such indemnified party or parties), provided that the
indemnified party shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless the employment of such
counsel shall have been authorized in writing by the Company in connection with
the defense of such action or the Company shall not have promptly employed
counsel reasonably satisfactory to such indemnified party or parties, or such
indemnified party or parties shall have reasonably concluded that there may be
one or more legal defenses available to it or them or to other indemnified
parties which are different from or additional to those available to the
Company, in any of which events such fees and expenses shall be borne by the
Company and the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Anything in this Section
2 to the contrary notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its written consent,
which shall not be unreasonably withheld. The Company shall not, without the
prior written consent of each indemnified party that is not released as
described in this sentence, settle or compromise any action, or permit a
default or consent to the entry of judgment in or otherwise seek to terminate
any pending or threatened action, in respect of which indemnity may be sought
hereunder (whether or not any indemnified party is a party thereto), unless
such settlement, compromise, consent, or termination includes an unconditional
release of each indemnified party from all liability in respect of such action.
The Company agrees promptly to notify Eligible Holder of the commencement of
any litigation or proceedings against the Company or any of it officers or
directors in connection with the sale of any Registrable Securities or any
preliminary prospectus, prospectus, registration statement, or amendment or
supplement thereto, or any application relating to any sale of any Registrable
Securities.
(b) Each Eligible Holder agrees to indemnify and hold
harmless the Company, each director of the Company, each officer of the Company
who shall have signed any registration statement covering Registrable
Securities held by such Eligible Holder, each other person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, and its or their respective counsel, to the
same extent as the foregoing indemnity from the Company to such Eligible Holder
in Section 2(a), but only with respect to statements or omissions, if any, made
in any registration statement, preliminary prospectus, or final prospectus (as
from time to time amended and supplemented), or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with written
information furnished to the Company with respect to such Eligible Holder by or
on behalf of such Eligible Holder, expressly for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. If
any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary prospectus,
or final prospectus or any amendment or supplement thereto, or in any
application, and in respect of which indemnity may be sought against such
Eligible Holder pursuant to this Section 2(b), such Eligible Holder shall have
the rights and duties given to the Company, and the Company and each other
person so indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of Section 2(a).
5
<PAGE> 6
(c) To provide for just and equitable contribution, if
(i) an indemnified party makes a claim for indemnification pursuant to Section
2(a) or 2(b) (subject to the limitations thereof) but it is found in a final
judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this Agreement
expressly provides for indemnification in such cases, or (ii) any indemnified
or indemnifying party seeks contribution under the Securities Act, the Exchange
Act or otherwise, then the Company (including for this purpose any contribution
made by or on behalf of any director of the Company, any officer of the Company
who signed any such registration statement, any controlling person of the
Company, and its or their respective counsel), as one entity, and the Eligible
Holder of the Registrable Securities, included in such registration in the
aggregate (including for this purpose any contribution by or on behalf of an
indemnified party), as a second entity, shall contribute to the losses,
liabilities, claims, damages, and expenses whatsoever to which any of them may
be subject, on the basis of relevant equitable considerations such as the
relative fault of the Company and such Eligible Holder in connection with the
facts which resulted in such losses, liabilities, claims, damages, and
expenses. The relative fault, in the case of an untrue statement, alleged
untrue statement, omission, or alleged omission shall be determined by, among
other things, whether such statement, alleged statement, omission, or alleged
omission relates to information supplied by the Company or by such Eligible
Holder, and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement, alleged statement, omission,
or alleged omission. The Company and Eligible Holder agree that it would be
unjust and inequitable if the respective obligations of the Company and the
Eligible Holder for contribution were determined by pro rata or per capita
allocation of the aggregate losses, liabilities, claims, damages, and expenses
(even if each Eligible Holder and the other indemnified parties were treated as
one entity for such purpose) or by any other method of allocation that does not
reflect the equitable considerations referred to in this Section 2(c). In no
case shall any Eligible Holder be responsible for a portion of the contribution
obligation imposed on all Eligible Holder in excess of its pro rata share based
on the number of shares of Common Stock owned by him and included in such
registration as compared to the number of shares of Common Stock owned by all
Eligible Holder and included in such registration. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section
2(c), each person, if any, who controls any Eligible Holder within the meaning
of Section 15 of the Securities Act or Section 20(a) of the Exchange Act and
each officer, director, partner, employee, agent, and counsel of Eligible
Holder or control person shall have the same rights to contribution as such
Eligible Holder or control person and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act, each officer of the Company who shall have signed any such
registration statement, each director of the Company, and its or their
respective counsel shall have the same rights to contribution as the Company,
subject in each case to the provisions of this Section 2(c). Anything in this
Section 2(c) to the contrary notwithstanding, no party shall be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 2(c) is intended to supersede any
right to contribution under the Securities Act, the Exchange Act or otherwise.
6
<PAGE> 7
3. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of
its obligations under this Agreement, Stockholder, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
(b) Agreements and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, unless such amendment, modification or supplement is
in writing and signed by the parties hereto.
(c) Notices. All notices and other communications
provided for or permitted hereunder shall be made in accordance with the
provision of the Purchase Agreement.
(d) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent holders of the Registrable Securities subject to the
terms hereof.
(e) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for
convenience of references only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Illinois without
reference to its conflicts of law provisions.
(h) Severability. In the event that any one or more of
the provisions contained herein, or the application hereof in any circumstance
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions contained herein shall not be affected or
impaired thereby.
(i) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of this agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises warranties or undertakings, other than those set forth
or referred to herein, concerning the registration rights granted by the
Company pursuant to this Agreement.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
METAL MANAGEMENT, INC.
By: /s/ ALBERT A. COZZI
-------------------------------
Albert A. Cozzi
President
NEWELL PHOENIX, L.L.C.
By: /s/ SCOTT NEWELL
-------------------------------
Alton Scott Newell, Jr.,
Manager
8
<PAGE> 9
SCHEDULE 1
REGISTRABLE SECURITIES
STOCKHOLDER NUMBER OF SHARES OF COMMON STOCK
- ----------- --------------------------------
Newell Phoenix, L.L.C. 100,000
<PAGE> 1
EXHIBIT 5.1
[SHEFSKY & FROELICH LTD. LETTERHEAD]
March 9, 1998
Metal Management, Inc.
500 North Dearborn
Suite 405
Chicago, Illinois 60610
Gentlemen:
We have acted as your special counsel in connection with the filing of
a Registration Statement on Form S-3 (the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"). The
Registration Statement relates to an aggregate of 4,148,343 shares of the
Company's common stock, par value $0.01 per share, a total of 2,193,343 of
which are outstanding on the date hereof, and a total of 1,955,000 shares
which are issuable upon the exercise of warrants (the "Warrants") previously
granted by the Company (the "Derivative Securities").
In rendering this opinion, we have examined such corporate records,
documents, instruments and certificates of the Company, have received and
reviewed representations from the officers and directors of the Company and
have reviewed those questions of law as we have deemed necessary, relevant or
appropriate to enable us to render the opinions expressed herein. In our
examination, we have assumed the genuineness of all signatures and authenticity
of all documents, instruments, records and certificates submitted to us as
originals, the genuineness of all signatures on documents reviewed by us and
the legal capacity of natural persons executing such documents, instruments,
records and certificates.
We are admitted to practice law in the State of Illinois and,
accordingly, we do not purport to be experts on the laws of any other
jurisdiction nor do we express an opinion as to the laws or jurisdictions other
than the laws of the State of Illinois, and the Delaware General Corporation
Law, all as currently in effect.
We call your attention to the fact that certain attorneys employed by
our firm beneficially own, or have the right to acquire through the exercise
of warrants or options granted to such individuals, an aggregate of 133,000
shares of the Company's common stock. In addition, certain members of the firm
have received compensation in the form of warrants for non-legal services in
connection with certain issuances of securities by the Company.
<PAGE> 2
Based upon our examination and review and upon the representations made
to us by the officers and directors of the Company, we are of the opinion that:
(i) the Shares currently outstanding and offered for sale on the terms and
conditions set forth in the Registration Statement have been duly and validly
authorized and are validly issued, fully-paid and nonassessable; and (ii) the
Shares issuable upon exercise of Warrants have been duly authorized for
issuance and when issued in conformity with the documents governing the
issuance thereof, the Derivative Securities will be validly issued, fully-paid
and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving this consent we do not thereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act and the
Rules and Regulations for the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ SHEFSKY & FROELICH
SHEFSKY & FROELICH LTD.
MJC/SMS/amc
329636
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 1 to the Registration Statement on Form
S-3 (No. 333-45913) of the following: our report dated May 21, 1997, except as
to Notes 16 and 17 which are as of June 19, 1997, appearing on page F-1 of
Metal Management, Inc.'s Annual Report on Form 10-K for the year ended March
31, 1997 and also appearing on page F-1 of Metal Management, Inc.'s Proxy
Statement dated November 20, 1997; our report dated March 14, 1997, except as
to Note 10 which is as of May 1, 1997, relating to the financial statements of
Reserve Iron and Metal Limited Partnership, appearing in Metal Management,
Inc.'s Current Report on Form 8-K dated May 2, 1997 and filed May 15, 1997;
and, our report dated April 17, 1997 relating to the financial statements of
Proler Southwest, Inc. and Proler Steelworks L.L.C. appearing on page F-52 of
Metal Management, Inc.'s Proxy Statement dated November 20, 1997. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Chicago, Illinois
March 9, 1998
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement No. 333-45913 of Metal Management, Inc. on Form S-3 of
our report on the Cozzi Iron & Metal, Inc. financial statements dated April
22, 1997, appearing in the Proxy Statement of Metal Management, Inc. dated
November 20, 1997. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
Deloitte & Touche LLP
Chicago, Illinois
March 9, 1998
<PAGE> 1
EXHIBIT 23.4
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in Amendment No. 1 to the Registration Statement
(Form S-3 No. 333-45913) and related Prospectus of Metal Management, Inc.
for the registration of 4,148,343 shares of its common stock of our report
dated February 28, 1997 (except Note 8, as to which the date is June 23, 1997)
with respect to the financial statements of The Isaac Corporation and of our
report dated February 28, 1997 (except Note 9, as to which the date is June 23,
1997) with respect to the financial statements of Ferrex Trading Corporation,
included as Exhibits 99.1 and 99.2 in Metal Management, Inc.'s Current Report
on Form 8-K dated June 23, 1997, filed with the Securities and Exchange
Commission.
Ernst & Young LLP
Toledo, Ohio
March 6, 1998
<PAGE> 1
EXHIBIT 23.5
Consent of Independent Accountants
We consent to the inclusion in the Registration Statement on Form S-3 (File No.
333-45913) of our report dated August 12, 1997, except as to the information
presented in Note 7, for which the date is March 9, 1998, on our audits of the
financial statements of Aerospace Metals, Inc. We also consent to the
references to our firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Hartford, Connecticut
March 9, 1998
