<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-Q
<TABLE>
<S> <C>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
<TABLE>
<S> <C>
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
COMMISSION FILE NO. 0-14836
METAL MANAGEMENT, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94-2835068
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
</TABLE>
500 N. DEARBORN ST., SUITE 405,
CHICAGO, IL 60610
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (312) 645-0700
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _
As of July 31, 1999, the Registrant had 53,191,185 shares of Common Stock
outstanding.
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I: FINANCIAL INFORMATION
ITEM 1: Financial Statements
Condensed Consolidated Balance Sheets -- June 30, 1999
(unaudited) and March 31, 1999 1
Condensed Consolidated Statements of Operations -- three
months ended June 30, 1999 and 1998 (unaudited) 2
Condensed Consolidated Statements of Cash Flows -- three
months ended June 30, 1999 and 1998 (unaudited) 3
Condensed Consolidated Statements of Stockholders' Equity --
March 31, 1999 and June 30, 1999 (unaudited) 4
Notes to Condensed Consolidated Financial Statements
(unaudited) 5
ITEM 2: Management's Discussion and Analysis of Financial Condition 13
and Results of Operations
ITEM 3: Quantitative and Qualitative Disclosures about Market Risk 21
PART II: OTHER INFORMATION
ITEM 5: Other Information 22
ITEM 6: Exhibits and Reports on Form 8-K 22
SIGNATURES 23
Exhibit Index 24
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
METAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, 1999 MARCH 31, 1999
------------- --------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,782 $ 2,482
Accounts receivable, net 110,995 103,760
Inventories 54,982 60,443
Prepaid expenses and other assets 13,075 11,405
Deferred taxes 3,303 3,303
-------- --------
Total current assets 184,137 181,393
Property and equipment, net 168,538 171,240
Goodwill, net 288,419 290,362
Deferred financing costs and other intangibles, net 14,202 13,228
Deferred taxes 4,405 3,261
Investments in joint ventures 4,484 4,525
Other assets 3,847 3,727
-------- --------
TOTAL ASSETS $668,032 $667,736
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 4,479 $ 5,308
Accounts payable 59,308 62,230
Accrued interest 4,965 8,638
Other accrued liabilities 19,578 19,323
-------- --------
Total current liabilities 88,330 95,499
Long-term debt, less current portion 339,181 330,154
Other liabilities 4,368 2,879
-------- --------
TOTAL LIABILITIES 431,879 428,532
Stockholders' equity:
Convertible preferred stock:
Series A 2,520 4,020
Series B 7,530 10,877
Series C 5,100 5,100
Common Stock 532 489
Warrants 40,745 40,745
Additional paid-in-capital 264,969 259,878
Accumulated deficit (85,243) (81,905)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 236,153 239,204
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $668,032 $667,736
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
1
<PAGE> 4
METAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
NET SALES $198,682 $214,951
Cost of sales 172,851 195,202
-------- --------
Gross profit 25,831 19,749
OPERATING EXPENSES:
General and administrative 14,827 11,545
Depreciation and amortization 6,632 4,398
Non-cash and non-recurring expense (income) (Note 3) 0 (786)
-------- --------
Total operating expenses 21,459 15,157
-------- --------
Operating income from continuing operations 4,372 4,592
OTHER INCOME (EXPENSE):
Income (loss) from joint ventures 59 (160)
Interest expense (8,736) (4,933)
Interest and other income, net 57 569
-------- --------
Income (loss) from continuing operations before income taxes
and extraordinary charge (4,248) 68
Provision (benefit) for income taxes (1,144) 540
-------- --------
Loss from continuing operations before extraordinary charge (3,104) (472)
DISCONTINUED OPERATIONS:
Gain on sale of discontinued operations, net of income
taxes 0 47
-------- --------
Loss before extraordinary charge (3,104) (425)
Extraordinary charge for early retirement of debt, net of
income taxes 0 862
-------- --------
NET LOSS (3,104) (1,287)
Preferred stock dividends 234 441
-------- --------
NET LOSS APPLICABLE TO COMMON STOCK $ (3,338) $ (1,728)
======== ========
BASIC LOSS PER SHARE:
Loss from continuing operations $ (0.06) $ (0.03)
Gain on sale of discontinued operations $ 0.00 $ 0.00
Extraordinary charge $ 0.00 $ (0.02)
-------- --------
Net loss applicable to Common Stock $ (0.06) $ (0.05)
======== ========
Weighted average shares outstanding 52,617 34,284
DILUTED LOSS PER SHARE:
Loss from continuing operations $ (0.06) $ (0.03)
Gain on sale of discontinued operations $ 0.00 $ 0.00
Extraordinary charge $ 0.00 $ (0.02)
-------- --------
Net loss applicable to Common Stock $ (0.06) $ (0.05)
======== ========
Weighted average diluted shares outstanding 52,617 34,284
</TABLE>
The accompanying notes are an integral part of these financial statements
2
<PAGE> 5
METAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
----------------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM CONTINUING OPERATIONS:
Net loss from continuing operations $ (3,104) $ (472)
Adjustments to reconcile net loss from continuing
operations to cash flows from continuing operations:
Depreciation and amortization 6,632 4,398
Deferred income taxes (1,144) 1,025
Amortization of debt issuance costs 778 380
Discontinued operations 0 59
Non-cash and non-recurring expense (income) 0 (1,718)
Penalties paid on early retirement of debt 0 (973)
Other 304 (98)
Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable (7,157) 6,784
Inventories 5,461 (1,767)
Accounts payable (2,922) (4,764)
Other (5,028) (3,109)
--------- ---------
Cash flows from continuing operations (6,180) (255)
CASH FLOWS USED BY INVESTING ACTIVITIES:
Purchases of property and equipment (2,572) (4,751)
Proceeds from sale of property and equipment 965 172
Acquisitions, net of cash acquired 0 (17,454)
Costs of operating lease buyouts 0 (9,777)
Other 88 (55)
--------- ---------
Net cash used by investing activities (1,519) (31,865)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Issuances of long-term debt 252,729 555,608
Repayments of long-term debt (243,889) (506,645)
Fees paid to issue long-term debt (1,841) (9,230)
Issuances of Common Stock, net 0 167
--------- ---------
Net cash provided by financing activities 6,999 39,900
--------- ---------
Net increase (decrease) in cash and cash equivalents (700) 7,780
Cash and cash equivalents at beginning of period 2,482 4,464
--------- ---------
Cash and cash equivalents at end of period $ 1,782 $ 12,244
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 11,632 $ 4,477
Income taxes paid (refunded), net $ (5) $ 2,302
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE> 6
METAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited, in thousands, except shares)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
-------------------------------- --------------------
NUMBER ADDITIONAL
OF PAID-IN-
SERIES A SERIES B SERIES C SHARES AMOUNT WARRANTS CAPITAL
-------- -------- -------- ------ ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1999 $4,020 $10,877 $5,100 48,890,898 $489 $40,745 $259,878
Conversion of preferred stock (1,500) (3,347) 0 4,200,105 42 0 4,888
Preferred stock dividends 0 0 0 100,182 1 0 203
Net loss 0 0 0 0 0 0 0
------ ------- ------ ---------- ---- ------- --------
BALANCE AT JUNE 30, 1999 $2,520 $ 7,530 $5,100 53,191,185 $532 $40,745 $264,969
====== ======= ====== ========== ==== ======= ========
<CAPTION>
ACCUMULATED
DEFICIT TOTAL
----------- -----
<S> <C> <C>
BALANCE AT MARCH 31, 1999 $(81,905) $239,204
Conversion of preferred stock 0 83
Preferred stock dividends (234) (30)
Net loss (3,104) (3,104)
-------- --------
BALANCE AT JUNE 30, 1999 $(85,243) $236,153
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE> 7
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements
include the accounts of Metal Management, Inc. and its subsidiaries (herein
referred to as "MTLM" or the "Company") and have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"). All significant intercompany accounts, transactions and profits have
been eliminated. Certain information related to the Company's organization,
significant accounting policies and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These unaudited condensed
consolidated financial statements reflect, in the opinion of management, all
material adjustments (which include only normal recurring adjustments) necessary
to fairly state the financial position and the results of operations for the
periods presented and the disclosures herein are adequate to make the
information presented not misleading. Operating results for interim periods are
not necessarily indicative of the results that can be expected for a full year.
These interim financial statements should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended March 31, 1999.
In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously reported
financial statements in order to conform with the financial statement
presentation of the current period.
NOTE 2 -- PRIOR YEAR ACQUISITIONS
On May 28, 1998, a subsidiary of the Company merged with R&P Holdings,
Inc., the parent of Charles Bluestone Company and R&P Real Estate, Inc.
(hereinafter, "Bluestone") through a tax-free stock-for-stock exchange. In
connection with the merger, the Company issued 1,034,826 shares of common stock,
par value $.01 per share ("Common Stock") in exchange for all the outstanding
common stock of Bluestone. The merger is accounted for as a
pooling-of-interests. The financial statements include the historical financial
information of Bluestone through the merger date. Certain reclassifications were
made to Bluestone's financial statements to conform to the Company's
presentation.
The following table presents net sales and net loss applicable to Common
Stock for the three months ended June 30, 1998 for the Company and Bluestone up
to the date of the merger (in thousands):
<TABLE>
<S> <C>
NET SALES:
- ------------------------------------------------------------
The Company -- historical $204,418
Bluestone 10,533
--------
Combined $214,951
========
NET LOSS APPLICABLE TO COMMON STOCK:
- ------------------------------------------------------------
The Company -- historical $ (587)
Bluestone (326)
--------
Net loss from continuing operations (913)
Net income from discontinued operations 47
Extraordinary charge on early retirement of debt (862)
--------
Combined $ (1,728)
========
</TABLE>
During the three months ended June 30, 1998, the Company acquired various
businesses in the scrap metals industry. The purchase consideration for these
acquisitions consisted of approximately 903,000 shares of Common Stock, warrants
to purchase 150,000 shares of Common Stock, promissory notes aggregating
5
<PAGE> 8
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
$750,000 and approximately $17.5 million of cash. The allocation of the purchase
consideration at June 30, 1998 was as follows (in thousands):
<TABLE>
<S> <C>
Fair value of tangible assets acquired $18,852
Goodwill 16,149
Liabilities assumed (7,428)
Common Stock and warrants issued (9,279)
Promissory notes issued (750)
-------
Cash paid 17,544
Less: cash acquired (90)
-------
Net cash paid for acquisitions $17,454
=======
</TABLE>
These acquisitions have been accounted for by the purchase method of
accounting and are included in the Company's results of operations from the
effective date of each acquisition. The purchase price was allocated based on
estimates of the fair value of assets acquired and liabilities assumed. These
estimates were revised during the allocation period when information regarding
contingencies became available to define and quantify the assets acquired and
liabilities assumed. The allocation period varies by acquisition but does not
usually exceed one year. The finalization of purchase accounting for all
acquisitions for which the allocation period had closed did not result in any
significant adjustments to the estimated allocation.
In July 1998, the Company acquired the common stock of Naporano Iron &
Metal Co. and Nimco Shredding Co. (collectively "Naporano"). The purchase
consideration for Naporano consisted of approximately 1.9 million shares of
Common Stock and $86.6 million of cash (including transaction costs). The Common
Stock issued to Naporano was valued at $18.5 million for financial reporting
purposes. The following unaudited pro forma statement of operations information
presents a summary of the consolidated results of operations of the Company and
Naporano as if the acquisition of Naporano had occurred on April 1, 1998. The
unaudited pro forma statement of operations information includes certain
adjustments, such as additional depreciation expense as a result of a step-up in
basis of the fixed assets acquired, additional amortization expense as a result
of goodwill and interest expense related to cash portions of purchased
consideration and assumed debt. The unaudited pro forma statement of operations
information also includes non-cash and non-recurring expenses of $2.2 million.
The unaudited pro forma results do not purport to be indicative of the financial
results which actually would have resulted had the Naporano acquisition been in
effect on April 1, 1998 (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JUNE 30, 1998
-------------
(UNAUDITED)
<S> <C>
PRO FORMA STATEMENT OF OPERATIONS
- ------------------------------------------------------------
Net sales $255,107
Net loss from continuing operations applicable to Common
Stock $ (3,204)
Basic and diluted net loss from continuing operations
applicable to Common Stock $ (0.08)
</TABLE>
NOTE 3 -- NON-CASH AND NON-RECURRING EXPENSES (INCOME)
Severance, facility closure charges and other
In connection with facility abandonments and other termination
arrangements, during the year ended March 31, 1999, the Company recorded
severance, facility closure and other charges totaling approximately $1.8
million, of which $1.5 million remained unpaid at March 31, 1999. The primary
components of this charge were $0.6 million of severance and $1.2 million for
lease cancellation, facility clean-up and other exit
6
<PAGE> 9
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
costs. Through June 30, 1999, the Company paid approximately $0.3 million
related to severance, facility closure and other charges. At June 30, 1999,
approximately $0.4 million of unpaid severance and $0.8 million of unpaid lease
cancellation, facility clean-up and other exit costs remained in accrued
liabilities. Certain terminated employees are being paid in installments and
these payments will be made by the end of the fiscal year. The final clean-up
and shutdown of all abandoned facilities is expected to be completed by
September 30, 1999.
During the three months ended June 30, 1998, the Company recorded non-cash
and non-recurring income of approximately $786,000 consisting of the following
(in thousands):
<TABLE>
<S> <C>
Non-cash warrant compensation income $(1,718)
Bluestone merger related costs 932
-------
$ (786)
=======
</TABLE>
Non-cash warrant compensation expense income
On May 1, 1997, the Company issued warrants to purchase 1,400,000 shares of
Common Stock to the former general partners of Reserve Iron & Metal, Limited
Partnership (the "Reserve Warrants"). The Reserve Warrants have initial exercise
prices of $3.50 or $4.00 per share, subject to a $0.50 per share increase in the
event that the Company's stock price exceeds $10.00 per share on the date of
exercise. The Reserve Warrants have terms that range from 30 to 60 months and
vest over 6 month, 12 month, 18 month and 24 month intervals for each group of
350,000 warrants, respectively, beginning on May 1, 1997. The decrease in the
Company's stock price during the three months ended June 30, 1998 resulted in
the reversal of $1.7 million of previously recognized non-cash warrant
compensation expense. Since the Reserve Warrants are considered variable
instruments under APB No. 25, the Company will record non-cash warrant
compensation expense or income throughout the term of the warrants depending on
the fair market value of its Common Stock. At June 30, 1999, warrants to
purchase 910,000 shares of Common Stock remained outstanding under the Reserve
Warrants.
Bluestone merger related costs
During the three months ended June 30, 1998, the Company recognized merger
expenses, consisting primarily of fees and expenses for accountants, attorneys,
and investment bankers, totaling $0.9 million.
NOTE 4 -- INVENTORIES
Inventories for all periods presented are stated at the lower of cost or
market. Cost is determined principally on the average cost method. Inventories
consisted of the following categories at (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1999 MARCH 31, 1999
------------- --------------
<S> <C> <C>
Ferrous metals $33,647 $37,679
Non-ferrous metals 19,558 19,791
Other 1,777 2,973
------- -------
$54,982 $60,443
======= =======
</TABLE>
7
<PAGE> 10
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
NOTE 5 -- DEBT
Long-term debt consisted of the following at (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1999 MARCH 31, 1999
------------- --------------
<S> <C> <C>
Senior Credit Facility $126,727 $144,410
Notes payable to related parties 2,983 3,688
12 3/4% Senior Secured Notes 27,059 0
10% Senior Subordinated Notes 180,000 180,000
Other debt 6,891 7,364
-------- --------
343,660 335,462
Less: current portion (4,479) (5,308)
-------- --------
$339,181 $330,154
======== ========
</TABLE>
Senior Credit Facility
On March 31, 1998, the Company and its subsidiaries entered into a three
year credit facility (the "Senior Credit Facility"), as amended, which provides
for a revolving credit and letter of credit facility of $250.0 million, subject
to borrowing base limitations. A security interest on substantially all of the
assets and properties of the Company and its subsidiaries, including pledges of
the capital stock of the Company's subsidiaries, are pledged as collateral
against the obligations of the Company and its subsidiaries under the Senior
Credit Facility. The Senior Credit Facility provides the Company with the option
of borrowing based either on the Bankers Trust Company's prime rate plus a
margin (1.5% at June 30, 1999) or at the London Interbank Offered Rate ("LIBOR")
plus a margin (2.5% at June 30, 1999). Pursuant to the Senior Credit Facility,
the Company pays a fee of .375% on the undrawn portion of the facility. The
Senior Credit Facility is available for working capital and general corporate
purposes, including acquisitions.
Pursuant to the Senior Credit Facility, the Company is required to satisfy
a minimum EBITDA (as defined in the Senior Credit Facility) to interest coverage
ratio test. The minimum interest coverage tests (i) for the three month period
ended June 30, 1999, (ii) for the six month period ended September 30, 1999,
(iii) for the nine month period ended December 31, 1999, (iv) for the twelve
month period ended March 31, 2000 and (v) for the end of each subsequent fiscal
quarter thereafter for the twelve month period then ending require that the
Company satisfy an interest coverage ratio of not less than 1.0 to 1.0. The
Company met its interest coverage test for the three months ended June 30, 1999.
In addition, the Senior Credit Facility places contractual restrictions on the
Company's ability to make interest payments on its Senior Subordinated Notes
(defined below) unless during the thirty day period ending on the date on which
the interest payment is to be made, there exists average undrawn availability
under the Senior Credit Facility of not less than $12.0 million plus the amount
of interest ($9.0 million) which is then due and payable on the Senior
Subordinated Notes.
Senior Secured Notes
On May 7, 1999, the Company issued $30.0 million principal amount of
12 3/4% Senior Secured Notes due on June 15, 2004 (the "Senior Secured Notes"),
in a Rule 144A private offering. Interest on the Senior Secured Notes is payable
semi-annually. The Senior Secured Notes were issued at 90% of their principal
amount and are redeemable by the Company, in whole or in part, at 100% of their
principal amount at any time after June 15, 2000. The Senior Secured Notes are
secured by a second priority lien on substantially all of the Company's personal
property, plant (to the extent it constitutes fixtures) and equipment that
secures the Senior Credit Facility. The Senior Secured Notes are senior
obligations of the Company, ranking equally with all of its existing and future
unsubordinated debt, including indebtedness under the Senior Credit Facility,
and senior to all of its existing and future subordinated debt, including the
Senior Suboridnated Notes. The
8
<PAGE> 11
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
Company's payment obligation is jointly and severally guaranteed by the
Company's current and future subsidiaries. The Company received net proceeds of
approximately $25.5 million, after the 10% original issue discount and
transaction fees and expenses. Net proceeds were used to reduce amounts
outstanding under the Senior Credit Facility. The Company filed a Registration
Statement on Form S-4 to register identical notes to be exchanged for the Senior
Secured Notes. The registered notes will be traded on the PORTAL system.
Senior Subordinated Notes
On May 13, 1998, the Company issued $180.0 million, 10% Senior Subordinated
Notes due on May 15, 2008 (the "Senior Subordinated Notes") and received net
proceeds of $174.6 million. Interest on the Senior Subordinated Notes is payable
semi-annually. The Senior Subordinated Notes are general unsecured obligations
of the Company and are subordinated in right to payment to all senior debt of
the Company, including the indebtedness of the Company under the Senior Credit
Facility and the Senior Secured Notes. The Company's payment obligation is
jointly and severally guaranteed by the Company's current and certain future
subsidiaries. The Senior Subordinated Notes are redeemable at the Company's
option at specified redemption prices and redemption events. The Senior
Subordinated Notes are traded on the PORTAL system.
The Senior Credit Facility, the Indenture governing the Senior Secured
Notes and the Indenture governing the Senior Subordinated Notes contain
covenants that, among other things, restrict the Company and most of its
subsidiaries' ability to:
- incur additional indebtedness;
- pay dividends;
- prepay subordinated indebtedness;
- dispose of some types of assets;
- make capital expenditures;
- create liens and make some types of investments or acquisitions; and
- engage in some fundamental corporate transactions.
In addition, under the Senior Credit Facility, the Company is required to
satisfy specified financial covenants, including an interest coverage ratio and
ratio of capital expenditures to consolidated revenues. The Company's ability to
comply with these provisions may be affected by general economic conditions,
industry conditions, and other events or circumstances beyond its control. A
breach of any of these covenants could result in a default under the Senior
Credit Facility. In the event of a default, depending on the actions taken by
the lenders under the Senior Credit Facility, the lenders could elect to declare
all amounts borrowed under the Senior Credit Facility, together with accrued
interest, to be due and payable. In addition, a default under the Indenture
governing the Senior Secured Notes or the Indenture governing the Senior
Subordinated Notes would constitute a default under the Senior Credit Facility
and any instruments governing our other indebtedness. During the year ended
March 31, 1999, the Company was required to enter into three amendments to the
Senior Credit Facility to avoid the occurrence of events of default under the
interest coverage ratio.
Both the Indenture governing the Senior Secured Notes and the Indenture
governing the Senior Subordinated Notes contain restrictions on the Company's
ability to incur, subject to certain exceptions, additional indebtedness, unless
the Company meets an EBITDA (as defined in the Indenture) to fixed charge
coverage ratio of 2.0 to 1.0 for the immediately preceding four calendar
quarters. Because of recent financial performance, the Company currently would
not satisfy the fixed charge coverage ratio test, and, accordingly, is
9
<PAGE> 12
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
unable and will remain unable in the foreseeable future to incur significant
amounts of additional indebtedness. As a result, if the Company experiences a
liquidity shortfall, the ability to incur additional indebtedness to cover the
shortfall will be severely limited.
Extraordinary charge on early retirement of debt
During the three months ended June 30, 1998, the Company borrowed under the
Senior Credit Facility to (i) refinance existing secured debt, (ii) buyout
certain operating leases and (iii) pay prepayment penalties associated with the
early retirement of debt. In connection with the refinancing of debt, the
Company recognized extraordinary charges consisting of the following (in
thousands):
<TABLE>
<S> <C>
Cash prepayment penalties $ 973
Write-off of related unamortized financing costs 487
------
Extraordinary charge before income tax benefit 1,460
Income tax benefit 598
------
Net extraordinary charge $ 862
======
</TABLE>
NOTE 6 -- STOCKHOLDERS EQUITY
Convertible preferred stock
The Company's Amended and Restated Certificate of Incorporation allows for
the issuance of up to 4,000,000 shares of preferred stock. During the year ended
March 31, 1998, the Company issued 25,000 shares of convertible preferred stock
(designated as Series A) and 20,000 shares of convertible preferred stock
(designated as Series B). In November 1998, the Company issued 6,000 shares of
convertible preferred stock (designated as Series C) in connection with an
acquisition. The Series A, Series B and Series C convertible preferred stock
each have a par value of $.01 per share and a stated value of $1,000 per share.
Dividends on the Series A, Series B and Series C convertible preferred
stock accrue, whether or not declared by the Board of Directors, at an annual
rate of 6.0%, 4.5% and 6.9%, respectively, of the stated value of each
outstanding share of Series A, Series B and Series C convertible preferred
stock. Dividends are payable in cash, or at the Company's option, in additional
shares of preferred stock or, in the case of the Series C convertible preferred
stock, Common Stock.
The holders of Series A convertible preferred stock are able to convert the
shares into Common Stock at a price equal to the lower of: (i) $18.30; or (ii)
85% of the average closing bid price for the Common Stock for the five trading
days prior to the conversion date. The holders of Series B convertible preferred
stock are able to convert the shares into Common Stock at a price equal to the
lower of: (i) $24.60; (ii) 92.5% of the average closing bid price for the Common
Stock for the five trading days prior to the conversion date; or (iii) if
applicable, the lowest traded price of the Common Stock during the time when the
Common Stock is not listed on a national securities exchange. The holders of the
Series C convertible preferred stock are able to convert the shares into Common
Stock at price equal to $9.00 per share of Common Stock, until November 2003,
and thereafter, at a price equal to the average closing bid price for the Common
Stock for the five trading days prior to the conversion date.
10
<PAGE> 13
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
The following presents a summary of the Series A, Series B and Series C
convertible preferred stock issued and converted during the three months ended
June 30, 1999:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
-------- -------- --------
<S> <C> <C> <C>
Shares outstanding at March 31, 1999 4,020 10,877 6,000
Shares converted into Common Stock (1,500) (3,347) 0
Shares issued for dividends 0 0 0
------ ------ -----
Shares outstanding at June 30, 1999 2,520 7,530 6,000
====== ====== =====
</TABLE>
NOTE 7 -- RECENTLY ISSUED ACCOUNTING STANDARDS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued by the FASB in June 1998 and is effective for fiscal
years beginning after June 15, 2000. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. SFAS
No. 133 requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company is evaluating SFAS No. 133 to determine its impact on
the consolidated financial statements.
NOTE 8 -- LOSS PER COMMON SHARE
Basic and diluted earnings per share (EPS) are calculated in accordance
with SFAS No. 128, "Earnings Per Share." Basic EPS is computed by dividing
reported net income (loss) applicable to Common Stock by the weighted average
shares outstanding. Diluted EPS includes the incremental shares issuable upon
the assumed exercise of stock options and warrants, using the treasury stock
method. The following is a reconciliation of the numerators and denominators of
the basic and diluted EPS from continuing operations per share computations (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------
1999 1998
---- ----
<S> <C> <C>
LOSS (NUMERATOR):
Net loss from continuing operations $(3,104) $ (472)
Dividends on convertible preferred stock (234) (441)
------- -------
Net loss applicable to Common Stock $(3,338) $ (913)
======= =======
SHARES (DENOMINATOR):
Weighted average number of shares outstanding during the
period 52,617 34,284
Incremental common shares attributable to dilutive stock
options and warrants 0 0
------- -------
Diluted number of shares outstanding during the period 52,617 34,284
======= =======
Basic loss per common share $ (0.06) $ (0.03)
======= =======
Diluted loss per common share $ (0.06) $ (0.03)
======= =======
</TABLE>
The effect of dilutive stock options and warrants were not included as
their effect would have been anti-dilutive for both periods presented. Also, the
potentially dilutive effect of the Company's convertible preferred stock were
not used in the diluted earnings per share calculation as its effect was also
anti-dilutive.
11
<PAGE> 14
METAL MANAGEMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
NOTE 9 -- SUBSEQUENT EVENT
Effective July 15, 1999, T. Benjamin Jennings, the Company's former
Chairman of the Board and Chief Executive Officer, resigned as a director of the
Company and as an officer and director of any and all of the Company's
subsidiaries for which he served in such capacities. In connection with Mr.
Jennings resignation, the Company and Mr. Jennings entered into an agreement
(the "Jennings Agreement"), pursuant to which the Company agreed to pay Mr.
Jennings a lump-sum payment of approximately $2.1 million, to continue to
provide Mr. Jennings with health, dental and life insurance benefits through
December 1, 2003, and to provide certain other benefits as set forth in the
Jennings Agreement. Pursuant to the Jennings Agreement, on January 2, 2000, the
Company will also forgive a $500,000 promissory note, plus accrued interest,
owed to the Company by Mr. Jennings, provided that Mr. Jennings has
substantially complied with his obligations under the Jennings Agreement. During
the quarter ending September 30, 1999, the Company will recognize a non-
recurring charge of approximately $3 million related to the Jennings Agreement.
Effective August 1, 1999, the Company and George A. Isaac III entered into
an agreement (the "Isaac Agreement") in order to resolve a contractual right
provided to Mr. Isaac with respect to the change of control provision included
in his employment agreement with the Company. Pursuant to the Isaac Agreement,
Mr. Isaac resigned as the Company's Executive Vice President and as an officer
and director of any and all of the Company's subsidiaries for which he served in
such capacities. Mr. Isaac will continue to serve as a member of the Company's
Board of Directors and serve as a non-officer part-time employee of the Company.
In his continuing employment capacity with the Company, it is anticipated that
for the next six months, Mr. Isaac will be an advisor to the Office of the Chief
Executive and participate in certain strategic initiatives. The Isaac Agreement
provides for consulting services following the initial six month term at an
agreed upon hourly rate. The Isaac Agreement provided Mr. Isaac with (i) a
lump-sum payment of approximately $768,000, (ii) additional aggregate payments
totaling $475,000 to be paid in six equal monthly installments of $79,167
beginning September 1, 1999 and ending February 1, 2000, (iii) continuation of
health, dental and life insurance benefits through June 23, 2002, and (iv)
certain other benefits as set forth in the Isaac Agreement. During the quarter
ending September 30, 1999, the Company will recognize a non-recurring charge of
approximately $1.4 million related to the Isaac Agreement.
12
<PAGE> 15
This Form 10-Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements in this Form 10-Q which address
activities, events or developments that the Company expects or anticipates will
or may occur in the future, including such things as future acquisitions
(including the amount and nature thereof), business strategy, expansion and
growth of the Company's business and operations and other such matters are
forward-looking statements. Although the Company believes the expectations
expressed in such forward-looking statements are based on reasonable assumptions
within the bounds of its knowledge of its business, a number of factors could
cause actual results to differ materially from those expressed in any
forward-looking statements. These and other risks, uncertainties and other
factors are discussed under "Investment Considerations" appearing in the
Company's Annual Report on Form 10-K for the year ended March 31, 1999, as the
same may be amended from time to time.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included under
Item 1. In addition, reference should be made to the audited consolidated
financial statements and notes thereto and related Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's Annual Report on Form 10-K for the year ended March 31, 1999.
GENERAL OVERVIEW
Metal Management is one of the largest and fastest-growing full-service
metals recyclers in the United States, with approximately 50 recycling
facilities in 15 states. In addition, Metal Management holds a 28.5% member
interest in Southern Recycling, the largest scrap metal recycler in the Gulf
Coast region. The Company is a leading consolidator in the metals recycling
industry. The Company has achieved its leading position in the metals recycling
industry primarily by implementing a national strategy of completing and
integrating regional acquisitions. The Company believes that its consolidation
strategy will enhance the competitive position and profitability of the
operations it acquires because of improved managerial and financial resources
and increased economies of scale.
The Company is primarily engaged in the collection and processing of
ferrous and non-ferrous metals for resale to metals brokers, steel producers,
and producers and processors of other metals. The Company collects industrial
scrap and obsolete scrap, processes it into reusable forms and supplies the
recycled metals to its customers, including mini-mills, integrated steel mills,
foundries and metals brokers. The Company believes that it provides one of the
most comprehensive offerings of both ferrous and non-ferrous scrap metals in the
industry. The Company's ferrous products primarily include shredded, sheared,
hot briquetted, cold briquetted and bundled scrap and other processed scrap,
such as turnings, cast and broken furnace iron. The Company also processes
non-ferrous metals, including aluminum, copper, stainless steel, brass, titanium
and high temperature alloys, using similar techniques and through application of
the Company's proprietary technologies.
The Company's predecessor was incorporated on September 24, 1981 as a
California corporation under the name General Parametrics Corporation, and was
reincorporated as a Delaware corporation in June 1986 under the same name. Prior
to April 1996, the Company manufactured and marketed color thermal and dye
sublimation printers and related consumables, including ribbons, transparencies
and paper. On April 12, 1996, the Company changed its name to "Metal Management,
Inc."
The Company's Common Stock is traded on the NASDAQ SmallCap Market under
the 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.
13
<PAGE> 16
RESULTS OF OPERATIONS
The Company's consolidated net sales consist primarily of revenues derived
from the sale of processed and brokered scrap metals. The Company recognizes
revenues from processed product sales at the time of shipment. Revenues related
to brokerage sales are recognized upon receipt of the material by the customer.
Cost of sales consists primarily of the cost of metals sold, direct and
indirect labor and related taxes and benefits, repairs and maintenance, and
freight.
General and administrative expenses include management salaries, clerical
and administrative costs, professional services, facility rentals and related
insurance and utility costs, as well as costs related to the Company's marketing
and business development activities.
Non-cash and non-recurring expenses include costs recognized relating to
issuances of warrants and one-time merger related costs.
Other income and expense consists principally of interest expense, interest
income, gains or losses on the sale of fixed assets, and income and losses from
joint ventures, which represent an allocation of income and losses attributable
to investments made by the Company in four joint ventures. The joint ventures
are accounted for under the equity method of accounting.
On May 28, 1998, the Company merged with Bluestone through a tax-free,
stock-for-stock exchange. The merger was accounted for as a
pooling-of-interests. All information set forth below includes the historical
information of the Company and Bluestone on a pooled basis for all periods
presented.
The Company's results of operations for the three months ended June 30,
1998 include the operations of Superior Forge, Inc. ("Superior Forge"), which
was sold in March 1999. Superior Forge derived substantially all of its revenues
from non-ferrous metals. The Company's results of operations for the three
months ended June 30, 1999 include the results of operations of businesses
acquired by the Company subsequent to June 30, 1998. These acquisitions include
Naporano Iron & Metal Co. and Nimco Shredding Co. (collectively, "Naporano") and
Michael Schiavone & Sons, Inc. ("Schiavone") which are primarily ferrous
processors, and M. Kimerling & Sons, Inc. ("Kimerling") which is primarily a
non-ferrous processor (collectively, "July 1998 Acquisitions"). The three months
ended June 30, 1998 reflect no activity from the July 1998 Acquisitions.
During the fiscal year ended March 31, 1999 ("Fiscal 1999"), the Company's
results of operations were negatively impacted by the adverse market conditions
prevalent in the steel and scrap metals sectors. These market conditions were
characterized by a significant decline in the price and demand for scrap metals.
This decline resulted in large part from the increase in steel imports flowing
into the United States, principally from Japanese, Brazilian, Russian and
Southeast Asian steel producers during the last six months of calendar 1998. By
way of example, for the twelve months ended December 31, 1998, steel imports
into the United States increased by approximately 33% compared with the same
period in 1997, according to the American Iron & Steel Institute.
In the three months ended June 30, 1999, the Company experienced
improvements in its results of operations compared to the previous three
quarters as a result of improved pricing and demand in the scrap metals
industry. The Company's management believes that improved pricing and demand
realized during the first six months of calendar 1999 represent the beginning of
a return to more normalized market conditions in the scrap metals industry. The
Company believes that as a result of the consolidation initiatives that it has
undertaken during the adverse market conditions prevalent in Fiscal 1999, and
the cost cutting initiatives that the Company continues to develop and
implement, it is well positioned to benefit from improving market conditions.
14
<PAGE> 17
Consolidated net sales for the three months ended June 30, 1999 and 1998 in
broad product categories were as follows (in thousands):
<TABLE>
<CAPTION>
6/30/99 6/30/98
---------------------------- ----------------------------
COMMODITY WEIGHT NET SALES % WEIGHT NET SALES %
--------- ------ --------- - ------ --------- -
<S> <C> <C> <C> <C> <C> <C>
Ferrous metals (tons) 1,038 $103,131 51.9 893 $110,172 51.3
Non-ferrous metals (lbs) 146,201 63,004 31.7 127,054 66,146 30.8
Brokerage -- ferrous (tons) 273 23,967 12.1 251 32,324 15.0
Brokerage -- non ferrous (lbs) 16,378 4,088 2.1 11,246 5,599 2.6
Other 4,492 2.2 710 0.3
-------- ---- -------- ----
$198,682 100% $214,951 100%
======== ==== ======== ====
</TABLE>
Consolidated net sales for the three months ended June 30, 1999 were $198.7
million compared to consolidated net sales of $215.0 million for the three
months ended June 30, 1998. The Company's consolidated net sales decreased by
$16.3 million or 7.6%, even though the Company completed 6 acquisitions
subsequent to June 30, 1998. The decrease in consolidated net sales was due to
the continuing effect of the adverse market conditions which began during Fiscal
1999, and led to lower prices and demand for scrap metals.
Ferrous sales during the three months ended June 30, 1999 decreased by $7.0
million compared to ferrous sales in the three months ended June 30, 1998,
notwithstanding an increase of 145,000 tons of ferrous metals sold by the
Company compared to the prior period. The increase in ferrous volumes was
primarily attributable to the inclusion of the sales of Naporano and Schiavone,
each of which was acquired subsequent to June 30, 1998. Overall ferrous sales
decreased due to declines in realized prices of ferrous scraps metals compared
to the prior period. The Company's average sales price for ferrous metals
decreased by 19% to $99 per ton during the three months ended June 30, 1999
compared to the three months ended June 30, 1998.
Non-ferrous volumes during the three months ended June 30, 1999 increased
by 19.1 million pounds compared to the three months ended June 30, 1998,
primarily due to the acquisition of Kimerling. Non-ferrous sales decreased,
however, in absolute dollar terms due to lower realized prices for certain
non-ferrous metals. The Company's average selling price for non-ferrous metals
declined by 17% to $0.43 per pound during the three months ended June 30, 1999
compared to the three months ended June 30, 1998. The Company's average selling
price for non-ferrous sales are impacted by market conditions and the product
mix of non-ferrous metals sold. The majority of the Company's non-ferrous sales
are derived from copper, aluminum and stainless steel.
Brokerage ferrous sales represented 12.1% of consolidated net sales for the
three months ended June 30, 1999 compared to 15.0% of consolidated net sales for
the three months ended June 30, 1998. Although tons of ferrous metals brokered
increased slightly, brokerage ferrous sales declined due to lower realized
selling prices during the three months ended June 30, 1999 compared to the prior
period. The Company's average sales price for brokered ferrous metals decreased
by 32% to $88 per ton during the three months ended June 30, 1999 compared to
the three months ended June 30, 1998.
Brokerage non-ferrous sales represented 2.1% of consolidated net sales for
the three months ended June 30, 1999 compared to 2.6% of consolidated net sales
for the three months ended June 30, 1998. Although pounds of non-ferrous metals
brokered increased by 5.1 million pounds, brokerage non-ferrous sales decreased
due to lower realized selling prices. The Company's average sales price for
brokered non-ferrous metals decreased by 50% to $0.25 per pound during the three
months ended June 30, 1999 compared to the three months ended June 30, 1998.
Other sales reflect, among other categories, stevedoring sales generated by
Naporano, which was acquired in July 1998.
Consolidated gross profit was $25.8 million (13.0% of consolidated net
sales) for the three months ended June 30, 1999 compared to consolidated gross
profit of $19.7 million (9.2% of consolidated net sales) for the
15
<PAGE> 18
three months ended June 30, 1998. The $6.1 million increase in the dollar amount
of consolidated gross profit and the increase in consolidated gross profit
margin for the three months ended June 30, 1999 principally reflects improved
margins by the Company, resulting from better purchasing practices.
Consolidated general and administrative expenses were $14.8 million (7.5%
of consolidated net sales) for the three months ended June 30, 1999 compared to
$11.5 million (5.4% of consolidated net sales) for the three months ended June
30, 1998. The increase over the prior year period is due to the inclusion of
general and administrative expenses of the businesses comprising the July 1998
Acquisitions. The increase as a percentage of consolidated net sales reflects
the decrease in the Company's consolidated net sales arising from market
conditions causing lower realized selling prices.
Depreciation and amortization expense was $6.6 million (3.3% of
consolidated net sales) for the three months ended June 30, 1999 compared to
$4.4 million (2.0% of consolidated net sales) for the three months ended June
30, 1998. The increase, both in dollars and as a percentage of consolidated net
sales, is attributed to the inclusion of goodwill amortization and depreciation
of fixed assets of the businesses comprising the July 1998 Acquisitions.
During the three months ended June 30, 1998, the Company recorded non-cash
and non-recurring income of $0.8 million consisting of the following (in
thousands):
<TABLE>
<S> <C>
Non-cash warrant compensation income $(1,718)
Bluestone merger related costs 932
-------
$ (786)
=======
</TABLE>
See Note 3 to the condensed consolidated financial statements included in
Item 1 of this Report.
Interest expense was $8.7 million (4.4% of consolidated net sales) for the
three months ended June 30, 1999 compared to $4.9 million (2.3% of consolidated
net sales) for the three months ended June 30, 1998. The increase is primarily
due to the issuance of the Senior Secured Notes on May 7, 1999 and the
recognition of three months of interest on the Senior Subordinated Notes during
the three months ended June 30, 1999 compared to one and one-half months of
interest related to the Senior Subordinated Notes recorded during the three
months ended June 30, 1998.
Net loss from continuing operations, after preferred stock dividends, was
$3.3 million ($0.06 per share) for the three months ended June 30, 1999 compared
to a net loss from continuing operations, after preferred stock dividends, of
$0.9 million ($0.03 per share). The increase in the net loss is primarily due to
higher interest expense and depreciation and amortization expense arising from
acquisitions and financing transactions completed by the Company since July 1,
1998, without a corresponding increase in revenues because of the continuing
effects of adverse market conditions.
The Company's effective tax rate was 27% and 794% for the three months
ended June 30, 1999 and 1998, respectively. The effective tax rate differs from
the statutory rate primarily due to permanent differences represented by
non-deductible goodwill amortization and certain non-deductible, non-cash and
non-recurring expenses.
During the three months ended June 30, 1998, the Company recognized an
extraordinary charge of $0.9 million, net of taxes, related to the early
retirement of debt and other costs principally incurred in connection with the
closing of the Senior Credit Facility (see Note 5 to the condensed consolidated
financial statements included in Item 1 of this Report).
LIQUIDITY AND CAPITAL RESOURCES
The Company has required significant amounts of capital to fund its
operations, capital expenditures and acquisition program. The Company has funded
these cash needs principally through cash generated from operating activities,
borrowings under the Senior Credit Facility, and the issuance of equity
securities, the Senior Subordinated Notes, and most recently, the Senior Secured
Notes. During Fiscal 1999, as a result of
16
<PAGE> 19
adverse market conditions and the impact of such adverse conditions on the
Company's liquidity, the Company also sold certain non-core assets, principally
its Superior Forge aluminum forging operation.
The Company's management anticipates that the Company will continue to have
significant capital requirements to fund its operations, capital expenditures
and acquisition program. While the Company believes that cash generated from
operations and undrawn borrowing availability under the Senior Credit Facility
provide it with sufficient liquidity to fund its operations, capital expenditure
and debt service requirements, limiting conditions provided for in the
documentation governing the Senior Credit Facility, the Senior Subordinated
Notes and the Senior Secured Notes will limit the Company's ability to incur
additional debt to fund significant acquisition or expansion opportunities
unless and until the Company's results of operations show significant
improvement for four consecutive quarters.
Cash Flows from Continuing Operations
During the three months ended June 30, 1999, the Company consumed $6.2
million of cash in continuing operations. During this period, accounts
receivable balances increased by $7.2 million due to higher sales, inventories
decreased by $5.5 million as a result of an announced strategy to reduce
inventories accumulated during adverse markets in Fiscal 1999, and accounts
payable decreased by $2.9 million as the Company reduced its levels of
inventory. During the three months ended June 30, 1999, the Company also made a
$9.0 million interest payment on the Senior Subordinated Notes.
Cash Flows from Investing Activities
During the three months ended June 30, 1999, the Company used $1.5 million
of cash for investing activities. Purchases of property and equipment were $2.6
million, while the Company generated $1.0 million of cash from the sale of fixed
assets. Proceeds from the sale of property and equipment include assets sold as
part of the Company's plan to abandon and consolidate certain facilities.
Cash Flows from Financing Activities
During the three months ended June 30, 1999, the Company's financing
activities provided $7.0 million of cash, principally from increased borrowings
under the Senior Credit Facility. On May 7, 1999, the Company issued $30.0
million aggregate principal amount of Senior Secured Notes, of which the net
proceeds to the Company were $25.5 million after the 10% discount and
transaction fees and expenses. Proceeds from the Senior Secured Notes were used
to repay amounts outstanding under the Senior Credit Facility.
FINANCIAL CONDITION
Cash Requirements for Maturing Debt Obligations and Interest Payments
On November 15, 1999, the Company is required to make a semi-annual
interest payment of $9.0 million on the Senior Subordinated Notes. The Company's
amended Senior Credit Facility allows the Company to make interest payments on
the Senior Subordinated Notes, but requires the Company to maintain average
unused availability equal to the sum of (x) the interest payment and (y) $12.0
million for a period of thirty days prior to the payment date. On December 15,
1999, the Company is required to make a semi-annual interest payment of
approximately $2.5 million on the Senior Secured Notes. The Company believes,
based on its current financial condition and liquidity and its current
projections of cash flows, that it will be able to meet all interest payment and
maturing debt obligations coming due in the current fiscal year.
Cash Transactions subsequent to June 30, 1999
On July 22, 1999, the Company made a $2.1 million payment to T. Benjamin
Jennings pursuant to the Jennings Agreement.
Pursuant to the Isaac Agreement, the Company will make payments to George
A. Isaac III totaling $1.2 million consisting of a lump-sum payment of
approximately $768,000, which is payable in August 1999
17
<PAGE> 20
and aggregate payments totaling $475,000 to be paid in six equal monthly
installments of $79,167 beginning on September 1, 1999.
See Note 9 to the condensed consolidated financial statements included in
Item 1 of this Report.
Working Capital Availability and Requirements
Accounts receivable balances of the Company increased from $103.8 million
at March 31, 1999 to $111.0 million at June 30, 1999 principally due to higher
sales in the three months ended June 30, 1999 compared to the three months ended
March 31, 1999, and a large export sale which was shipped towards the end of
June 1999.
Accounts payable balances of the Company decreased from $62.2 million at
March 31, 1999 to $59.3 million at June 30, 1999. The decrease in accounts
payable resulted principally from lower purchases of inventory during the
period.
Inventory levels can vary significantly among the Company's operations and
with changes in market conditions. Inventories consisted of the following
categories at (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1999 MARCH 31, 1999
------------- --------------
<S> <C> <C>
Ferrous metals $33,647 $37,679
Non-ferrous metals 19,558 19,791
Other 1,777 2,973
------- -------
$54,982 $60,443
======= =======
</TABLE>
The Company's inventory levels have decreased as it continues to focus on
reducing inventories to lower financing costs and to reduce its exposure to
changing market prices for scrap metals.
COMPANY INDEBTEDNESS
The Company's principal indebtedness is represented by borrowings under the
Senior Credit Facility, the Senior Subordinated Notes and the Senior Secured
Notes.
Senior Credit Facility
The Credit Agreement, dated March 31, 1998, among the Company, BT
Commercial Corporation, as agent and the lenders thereunder (as amended, the
"Senior Credit Facility") provides for a revolving credit and letter of credit
facility of $250.0 million, subject to borrowing base limitations. The Company's
obligations under the Senior Credit Facility are secured by substantially all of
the Company's assets and properties, including pledges of the capital stock of
the Company's subsidiaries. Availability of loans and letters of credit under
the Senior Credit Facility is generally limited to a borrowing base of 85% of
eligible accounts receivable, 70% of eligible inventory (subject to a cap of
$100.0 million) and a fixed asset sublimit ($53.8 million as of June 30, 1999)
that amortizes on a quarterly basis.
The Senior Credit Facility provides the Company with the option of
borrowing at an interest rate equal to either the Bankers Trust Company's prime
rate plus a margin or the London Interbank Offered Rate ("LIBOR") plus a margin.
Through December 31, 1998, the interest rate margins were set at 0.5% for
Bankers Trust Company's prime rate and 1.75% for LIBOR. Under a December 31,
1998 amendment, the interest rate margins were increased to 1.5% for Bankers
Trust Company's prime rate and 2.5% for LIBOR borrowings. The margins applicable
to both prime and LIBOR rate loans, however, decrease to the extent that the
Company is able to satisfy interest coverage tests in subsequent fiscal periods
or has excess availability of at least $40.0 million for a period of 30
consecutive days.
The Senior Credit Facility also contains certain financial covenants,
including a minimum interest coverage ratio, imposes certain limitation on the
Company's ability to make capital expenditures and incur
18
<PAGE> 21
additional indebtedness, and restricts payments of dividends and equity
redemptions. The Senior Credit Facility limits capital expenditures to 2% of
consolidated net sales for the fiscal year ending March 31, 2000.
The interest coverage test require the Company to maintain an interest
coverage ratio of not less than 1.0 to 1.0 (EBITDA (as defined in the Senior
Credit Facility) to interest expense) (i) for the three months ended June 30,
1999, (ii) for the six months ended September 30, 1999, (iii) for the nine
months ended December 31, 1999, (iv) for the twelve months ended March 31, 2000
and (v) for the end of each fiscal quarter thereafter, for the twelve-month
period then ended. The Company met its interest coverage test for the three
months ended June 30, 1999 and was in compliance with its other covenants as of
June 30, 1999. During Fiscal 1999, the Company was required to, in three
consecutive quarters, to seek accommodations from its lenders under the Senior
Credit Facility to avoid an event of default under the interest coverage ratio
test in effect during each such period. Based on its current projections, the
Company expects to be in compliance with all covenants under the Senior Credit
Facility during the fiscal year ending March 31, 2000.
At June 30, 1999, the Company had outstanding borrowings under its Senior
Credit Facility of approximately $126.7 million. As of July 29, 1999, the
Company had undrawn availability of approximately $35 million under the Senior
Credit Facility.
The Senior Credit Facility also restricts the Company's ability to make
interest payments on the Senior Subordinated Notes with respect to the interest
payment due on November 15, 1999 and on each subsequent interest payment date
thereafter unless the Company maintains average undrawn availability of $12.0
million plus the amount of the interest payment for the 30-day period ending on
the interest payment date.
10% Senior Subordinated Notes due 2008
On May 13, 1998, the Company issued $180.0 million of 10% Senior
Subordinated Notes due on May 15, 2008 (the "Senior Subordinated Notes") in a
private placement pursuant to exemptions under the Securities Act of 1933.
Interest on the Senior Subordinated Notes is payable semi-annually during May
and November of each year. The Company received net proceeds of $174.6 million
in the offering of the Senior Subordinated Notes. The Senior Subordinated Notes
are the Company's general unsecured obligations and are subordinated in right of
payment to all of the Company's senior debt, including the Company's
indebtedness under the Senior Credit Facility and the Senior Secured Notes. The
Company's payment obligations are jointly and severally guaranteed by all of the
Company's current and certain future subsidiaries.
Except as described below, the Senior Subordinated Notes are not redeemable
at the Company's option prior to May 15, 2003. After May 15, 2003, the Senior
Subordinated Notes are redeemable by the Company at the redemption prices
(expressed as a percentage of the principal amount and rounded to the nearest
whole percentage) plus accrued and unpaid interest, if redeemed during the
twelve month period beginning on May 15 of each of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 105%
2004 103%
2005 102%
2006 and thereafter 100%
</TABLE>
Also, prior to May 15, 2001, the Company may redeem up to 35% of the
aggregate principal amount of the Senior Subordinated Notes at a redemption
price of 110% of the principal amount of the Senior Subordinated Notes, plus
accrued and unpaid interest, from the proceeds of one or more sales of Common
Stock. The Senior Subordinated Notes are also redeemable at the option of the
holders of such notes at a repurchase price of 101% of the principal amount
thereof, plus accrued and unpaid interest, in the event of certain change of
control events with respect to the Company. Subject to certain exceptions, the
Senior Subordinated Notes are redeemable at the option of the holders of such
notes at a repurchase price of 100% of the principal amount thereof, plus
accrued and unpaid interest, in the event of certain asset sales made by the
Company.
19
<PAGE> 22
The Indenture governing the Senior Subordinated Notes contains certain
covenants that limit, among other things, the Company's ability to: (i) incur
additional indebtedness (including by way of guarantee), subject to certain
exceptions, unless the Company meets a fixed charge coverage ratio of 2.0 to 1.0
or certain other conditions apply; (ii) issue certain types of securities
containing mandatory redemption rights or which otherwise are redeemable at the
option of the holder prior to the maturity of the Senior Subordinated Notes;
(iii) pay dividends or distributions, or make certain types of investments or
other restricted payments, unless the Company meets certain specified
conditions; (iv) enter into certain transactions with affiliates; (v) dispose of
certain assets; (vi) incur liens securing indebtedness that is pari passu or
subordinated to the Senior Subordinated Notes; or (viii) engage in certain
mergers and consolidations.
12 3/4% Senior Secured Notes due 2004
On May 7, 1999, the Company issued $30.0 million aggregate principal amount
of its Senior Secured Notes (the "Senior Secured Notes") in a private placement
pursuant to Rule 144A under the Securities Act of 1933. The Senior Secured Notes
were issued at 90% of their stated principal amount at maturity. The Senior
Secured Notes mature on June 15, 2004 and bear interest at the rate of 12 3/4%
per annum. Interest on the Senior Secured Notes is payable semi-annually during
June and December of each year. The Company received net proceeds of $25.5
million in the offering of the Senior Secured Notes. The Senior Secured Notes
are senior obligations of the Company and will rank equally in right of payment
with all of the Company's unsubordinated debt, including the Company's
indebtedness under the Senior Credit Facility, and senior in right of payment to
all of the Company's subordinated debt, including the Senior Subordinated Notes.
The Company's payment obligations are jointly and severally guaranteed by
all of the Company's current and future subsidiaries. The Senior Secured Notes
are also secured by a second priority lien on substantially all of the Company's
personal property, plant (to the extent it constitutes fixtures) and equipment
that secure the Senior Credit Facility. The liens that secure the Senior Secured
Notes are subordinated to the liens that secure the indebtedness under the
Senior Credit Facility.
The Senior Secured Notes are not redeemable at the Company's option prior
to June 15, 2000. Thereafter, the Company may redeem some or all of the Senior
Secured Notes (in multiples of $10.0 million) at a redemption price of 100% of
the principal amount thereof, plus accrued and unpaid interest. The Senior
Secured Notes are redeemable at the option of the holders of such notes at a
repurchase price of 101% of the principal amount thereof, plus accrued and
unpaid interest, in the event of a change of control with respect to the
Company. Subject to certain exceptions, the Senior Secured Notes are redeemable
at the option of the holders of such notes at a repurchase price of 100% of the
principal amount thereof, plus accrued and unpaid interest, in the event of
certain asset sales made by the Company.
The Indenture governing the Senior Secured Notes contains substantially the
same operating restrictions as those contained in the Indenture governing the
Senior Subordinated Notes. These include limits on, among other things, the
Company's ability to: (i) incur additional indebtedness; (ii) pay dividends or
distributions on the Company's capital stock or repurchase its capital stock;
(iii) issue stock of subsidiaries; (iv) make certain investments; (v) create
liens on the Company's assets; (vi) enter into transactions with affiliates;
(vii) merge or consolidate with another company; and (viii) transfer and sell
assets or enter into sale and leaseback transactions.
YEAR 2000
A year 2000 problem arises because some existing computer programs
recognize only the last two digits rather than four digits to define the
applicable year. Use of non-year 2000 compliant programs can result in system
failures, miscalculations or errors causing disruptions of operations or other
business failures, including, a potential inability to process invoices or
transactions or engage in other normal business activities. As it relates to the
Company's internal systems, the Company believes that, as a result of its
efforts to resolve potential year 2000 problems, actual year 2000 problems
affecting the Company should not be material. No assurance can be made, however,
that this will be the case. In addition, the impact of year 2000 problems
experienced by the Company's vendors, customers and service providers cannot
accurately be assessed at this
20
<PAGE> 23
time. To the extent these third parties are not year 2000 compliant, it could
have a material adverse effect on the Company's operations. The Company is
unable at this time to state its "worst case" year 2000 scenario. The Company is
currently developing a contingency plan in the event of noncompliance, which
should be completed by the end of the second fiscal quarter of the current
fiscal year.
The Company has experienced tremendous growth as a result of having
completed 26 acquisitions since April 1996. Essentially all of the companies and
businesses the Company has acquired operated on separate computer hardware,
software, systems and processes ("Information Systems") before being acquired.
In order to address the potential year 2000 problem, among other
computer-related challenges facing the Company, in Fiscal 1998, the Company
created an MIS Steering Committee. The MIS Steering Committee has developed a
plan for year 2000 compliance which includes four major phases -- assessment,
remediation, testing and implementation.
The Company has completed all of its assessment of the impact of the year
2000 problem on its Information Systems. Based on this assessment, the Company
does not expect the cost of making its Information Systems year 2000 compliant
to have a material adverse impact on its financial position or results of
operations in future periods. The Company has completed all of its remediation
phase for all of its significant Information Systems and estimates that it will
complete software upgrades and/or replacements by the end of the second quarter
of the current fiscal year. To date, the Company has completed approximately 93%
of its assessment phase and has implemented approximately 73% of the required
remediation for its Information Systems. The testing and implementation phases
are targeted to be substantially complete by the end of the second quarter of
the current fiscal year.
The Company has substantially completed its assessment phase of the impact
of year 2000 problems on its non-information technology systems such as
telephones, processing equipment or other equipment containing embedded
technology such as microcontrollers ("Non-IT Systems"). As part of the
assessment, the Company has created an equipment inventory database of its
Non-IT Systems to help with the assessment. The Company believes that it will
substantially complete its remediation, testing and implementation phases for
Non-IT Systems by the end of the second quarter of the current fiscal year. The
Company not expect the cost of making its Non-IT Systems year 2000 compliant to
have a material adverse impact on its financial position or results of
operations in future periods.
The Company is in the process of identifying third parties, such as
suppliers, service providers and customers, with which it has a significant
relationship that, in the event of a year 2000 failure, could have a material
adverse impact on its financial position or results of operations. Once this
list is developed, the Company expects to send each of these third parties a
survey requesting information on its year 2000 readiness. Based on the responses
to these surveys, the Company will gauge the readiness of its suppliers, service
providers and customers for year 2000 and determine any appropriate action that
the Company will need to take to address identified concerns.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to financial risk resulting from fluctuations in
interest rates and commodity prices. The Company seeks to minimize these risks
through regular operating and financing activities and, where appropriate,
through use of derivative financial instruments. The Company's use of derivative
financial instruments is limited and related solely to hedges of certain
non-ferrous inventory positions. Reference is made to the Company's quantitative
disclosures about market risk as of March 31, 1999 included under Item 7A of the
Company's most recent Annual Report on Form 10-K.
21
<PAGE> 24
PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Agreement with T. Benjamin Jennings
Effective July 15, 1999, T. Benjamin Jennings, the Company's former
Chairman of the Board and Chief Executive Officer, resigned as a director of the
Company and as an officer and director of any and all of the Company's
subsidiaries for which he served in such capacities. In connection with Mr.
Jennings resignation, the Company and Mr. Jennings entered into an agreement
(the "Jennings Agreement"), pursuant to which the Company agreed to pay Mr.
Jennings a lump-sum payment of approximately $2.1 million, and to continue to
provide Mr. Jennings with health, dental, life insurance and certain other
benefits as set forth in the Jennings Agreement. Pursuant to the Jennings
Agreement, on January 2, 2000, the Company will also forgive a $500,000
promissory note, plus accrued interest, owed to the Company by Mr. Jennings,
provided that Mr. Jennings has substantially complied with his obligations under
the Jennings Agreement. Mr. Jennings agreed to release, waive and renounce his
interest under and pursuant to the amended and restated stockholders' agreement,
dated February 12, 1999 and, accordingly Mr. Jennings no longer has the right to
nominate any of the Company's directors. Pursuant to the Jennings Agreement, the
Company and Mr. Jennings agreed to mutual general releases from any and all
liabilities arising out of any matter or event occurring on or prior to the date
of the Jennings Agreement.
Agreement with George A. Isaac III
Effective August 1, 1999, the Company and George A. Isaac III entered into
an agreement (the "Isaac Agreement") in order to resolve a contractual right
provided to Mr. Isaac with respect to the change of control provision included
in his employment agreement with the Company. Pursuant to the Isaac Agreement,
Mr. Isaac resigned as the Company's Executive Vice President and as an officer
and director of any and all of the Company's subsidiaries for which he served in
such capacities. Mr. Isaac will continue to serve as a member of the Company's
Board of Directors and serve as a non-officer part-time employee of the Company.
In his continuing employment capacity with the Company, it is anticipated that
for the next six months, Mr. Isaac will be an advisor to the Office of the Chief
Executive and participate in certain strategic initiatives. The Isaac Agreement
provides for consulting services following the initial six month term at an
agreed upon hourly rate. The Isaac Agreement provided Mr. Isaac with (i) a
lump-sum payment of approximately $768,000, (ii) additional aggregate payments
totaling $475,000 payable in six equal monthly installments of $79,167 beginning
on September 1, 1999 and ending February 1, 2000, (iii) continuation of health,
dental and life insurance benefits through June 23, 2002, and (iv) certain other
benefits as set forth in the Isaac Agreement. Pursuant to the Isaac Agreement,
the Company and Mr. Isaac agreed to mutual general releases from any and all
liabilities arising out of any matter or event occurring on or prior to the date
of the Isaac Agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
See Exhibit Index
(B) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed during the quarter ended June
30, 1999:
(1) Form 8-K dated April 16, 1999, filed April 16, 1999, disclosing that
the Company and its bank group amended the Company's $250 million
Senior Credit Facility, to among other things, eliminate the
contractual restriction on the Company to make its May 15, 1999
interest payment on its Senior Subordinated Notes.
(2) Form 8-K dated May 7, 1999, filed May 18, 1999, disclosing the
Company's issuance of $30 million of Senior Secured Notes.
22
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
METAL MANAGEMENT, INC.
By: /s/ ALBERT A. COZZI
------------------------------------
Albert A. Cozzi
Director, Chairman of the
Board, President and
Chief Operating Officer
(Principal Executive Officer)
By: /s/ ROBERT C. LARRY
------------------------------------
Robert C. Larry
Executive Vice President,
Finance, Treasurer, Chief
Financial Officer and
Assistant Secretary
(Principal Financial Officer)
By: /s/ AMIT N. PATEL
------------------------------------
Amit N. Patel
Vice President, Finance and
Controller
(Principal Accounting Officer)
Date: August 12, 1999
23
<PAGE> 26
METAL MANAGEMENT, INC.
EXHIBIT INDEX
NUMBER AND DESCRIPTION OF EXHIBIT
<TABLE>
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the
Company, as filed with the Secretary of State of the State
of Delaware on November 2, 1998 (incorporated by reference
to Exhibit 3.1 of the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998)
3.2 Certificate of Designations, Preferences and Rights of
Series C Convertible Preferred Stock of the Company, as
filed with the Secretary of State of the State of Delaware
on November 2, 1998 (incorporated by reference to Exhibit
3.2 of the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998)
3.3 Restated By-Laws of the Company, as amended through March
31, 1999 (incorporated by reference to Exhibit 3.3 of the
Company's Annual Report on Form 10-K for the year ended
March 31, 1999)
4.1 Indenture, dated as of May 7, 1999, among the Company, the
Guarantors (as defined therein) and Harris Trust and Savings
Bank, as Trustee (incorporated by reference to Exhibit 4.1
of the Company's Current Report on Form 8-K dated May 7,
1999)
10.1 Amendment No. 5 to Credit Agreement, dated as of April 14,
1999, by and among the Company and its subsidiaries named
therein, BT Commercial Corporation and the other financial
institutions signatories thereto as lenders (incorporated by
reference to Exhibit 10.1 of the Company's Current Report on
Form 8-K dated April 16, 1999)
10.2 Amendment No. 6 to Credit Agreement, dated as of April 29,
1999, by and among the Company and its subsidiaries named
therein, BT Commercial Corporation and the other financial
institutions signatories thereto as lenders (incorporated by
reference to Exhibit 10.1 of the Company's Current Report on
Form 8-K dated May 7, 1999)
10.3 Purchase Agreement, dated May 5, 1999, among the Company,
its subsidiaries named therein and BT Alex. Brown
Incorporated (incorporated by reference to Exhibit 10.2 of
the Company's Current Report on Form 8-K dated May 7, 1999)
10.4 Exchange and Registration Rights Agreement, dated as of May
7, 1999, among the Company, the Guarantors and BT Alex.
Brown Incorporated (incorporated by reference to Exhibit 4.2
of the Company's Current Report on Form 8-K dated May 7,
1999)
10.5 Settlement Agreement and General Release, dated July 21,
1999, between the Company and T. Benjamin Jennings
10.6 Settlement Agreement and General Release, dated August 6,
1999, between the Company and George A. Isaac, III
27.1 Financial Data Schedule
</TABLE>
24
<PAGE> 1
EXHIBIT 10.5
SETTLEMENT AGREEMENT AND GENERAL RELEASE
THIS SETTLEMENT AGREEMENT and GENERAL RELEASE (hereinafter "Agreement")
is made and entered into by and between T. BENJAMIN JENNINGS (hereinafter
"Jennings") and METAL MANAGEMENT, INC., a Delaware corporation (hereinafter
"MTLM").
WHEREAS, the parties have engaged in discussions resulting in an
amicable and mutually satisfactory agreement concerning Jennings' resignation
from his employment and directorships and management committee positions with
MTLM and any and all of its affiliates.
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth below, the parties hereby agree as follows:
1. The Employment Agreement. Jennings and MTLM are parties to an
"Employment Agreement" dated December 15, 1997. Except for Jennings' obligations
pursuant to Paragraphs 15, 18, 19, 23 and 26(a) thereof and MTLM's obligations
pursuant to Paragraphs 24 and 25 thereof, which shall continue, or except as
otherwise expressly provided in this Agreement, this Agreement shall supersede
the terms and provisions of the Employment Agreement, which is terminated
effective immediately and is hereby null and void and without further effect.
2. Jennings' Resignation. Effective July 15, 1999, Jennings hereby
resigns as Chairman of the Board, Chief Executive Officer and Chief Development
Officer of MTLM, as an officer of MTLM and any and all of its affiliates and as
a director and management committee
<PAGE> 2
member of MTLM and any and all of MTLM's affiliates (including his position on
the Executive Committee of the Board of Directors of MTLM) (July 15, 1999 being
sometimes referred to herein as the "Resignation Date").
3. The Obligations of MTLM. On and after Jennings' execution of this
Agreement, and in consideration of Jennings' promises as set forth herein, MTLM
shall be obligated to him as set forth herein. Except as expressly set forth in
this Agreement (including in Section 1 above), MTLM shall have no continuing
obligation to Jennings of any kind or nature whatsoever.
a. Severance Benefits. MTLM shall afford to Jennings all of the
benefits set forth in Paragraph 17 of the Employment Agreement, as if Jennings'
employment had been terminated by MTLM pursuant to Paragraph 14(a) of the
Employment Agreement. Such benefits shall be as set forth in such Paragraph 17
as if such Paragraph 17 were set forth fully herein, except that the lump sum
severance payment specified in Paragraph 17(a) of the Employment Agreement shall
be paid within one (1) business day of Jennings' execution of this Agreement,
and shall be an amount equal to five (5) times the gross earnings specified in
Jennings' 1998 W-2 tax statement, less applicable deductions and withholdings
for federal and state taxes. MTLM shall also pay for Jennings' cell phone
service through July 15, 2000.
b. Loan. MTLM shall forgive, effective as of January 2, 2000, the
outstanding five hundred thousand dollar ($500,000) loan to Jennings, plus any
accrued interest thereon, which loan is evidenced by a demand note dated July
22, 1998 and which shall not be called due unless Jennings does not
substantially comply with the terms of this Agreement, and at that time shall
release the related pledge agreement, provided that as of such date Mr. Jennings
has substantially
<PAGE> 3
complied with the terms of this Agreement; provided, however, that any failure
or alleged failure by Jennings to comply with his obligations set forth in the
first sentence of Section 4(c) hereof shall not serve as the basis for any claim
by MTLM that such loan need not be forgiven.
c. Benefit Plans. It is understood and agreed that Jennings' continuous
service under MTLM's 401(k) plan and its other benefit plans shall cease as of
his Resignation Date, except as may be set forth in Paragraph 17 of the
Employment Agreement.
d. Legal Fees. MTLM agrees to reimburse Jennings in an amount not to
exceed $5,000 for the reasonable fees and disbursements of Jennings' counsel
incurred in connection with the negotiation of this agreement, at such counsel's
customary rates.
4. The Obligation of Jennings. In consideration of the promises of MTLM
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Jennings agrees as
follows:
a. Mutual General Releases. Except for actions which
constitute or are alleged to constitute fraud or similar wrongdoing
and any obligations arising under this Agreement, (i) Jennings, for
himself and for his estate, heirs, personal representatives,
executors, administrators and assigns, hereby releases and forever
discharges MTLM, its subsidiaries and related and affiliated
entities, and each of its and their directors, officers, employees,
attorneys, agents and representatives (hereinafter collectively and
individually the "MTLM Releasees"), and (ii) the MTLM Releasees
hereby release and forever discharge Jennings, his estate, heirs,
personal representatives, executors, attorneys, successors,
administrators and assigns, from any and all rights, claims,
demands, debts, dues, sums of money,
<PAGE> 4
accounts, attorneys' fees, complaints, judgments, executions, actions
and causes of action of any nature whatsoever, cognizable at law or
equity, which either party now has or claims, or might hereafter have
or claim, against the other party, whether known or unknown, suspected
or unsuspected, accrued or unaccrued, based upon or arising out of any
matter or thing whatsoever through the date of this release,
including, without limitation, any claim, action or cause of action
which was or is related to or arises out of any acts, omissions,
representations, facts, events, matters, transactions or occurrences
during Jennings' employment or directorship with, or his shareholding
in, MTLM, or his separation and/or resignation therefrom, or which is
based upon or arises under the Employment Agreement, the Restated
Stockholders Agreement (as defined below), or any local, state, or
federal law dealing with employment discrimination, including without
limitation Title VII of the Civil Rights Act of 1964 and the Americans
with Disabilities Act.
b. Stockholders' Agreement. Jennings hereby releases, waives and
renounces his interest under and pursuant to the Amended and Restated
Stockholders' Agreement dated February 12, 1999 (the "Restated
Stockholders Agreement"). Upon the request of MTLM's Board of
Directors, Jennings will execute such further documents as may be
necessary to effectuate the foregoing.
c. Availability. Jennings agrees to cooperate reasonably with
MTLM in connection with the transition of his responsibilities.
Jennings also agrees to assist in the transition of pending
transactions and/or discussions by making
<PAGE> 5
introductions to the principals of companies with whom discussions
have begun or with whom the prospect of discussions has been
discussed. Jennings further agrees to make himself reasonably
available to MTLM and its attorneys and agents for interview,
deposition and testimony and agrees to appear as a witness at trial
and, at the election of MTLM, provide a sworn statement or deposition
of any matters in which MTLM is a party and/or for which Jennings may
have knowledge of any relevant facts. In addition, upon the mutual
agreement of the parties, Jennings will consult with MTLM from time to
time concerning acquisitions, potential acquisitions or any other
matter mutually agreed upon by the parties, on such terms, including
compensation, as shall be mutually agreed between Jennings and the
Company. MTLM agrees to reimburse Jennings for any reasonable,
pre-approved out-of-pocket expenses that he incurs in providing such
assistance and/or consulting, including the cost of travel or lost
compensation. Jennings agrees not to withhold any information relevant
to such matters from the Company. Nothing in this Agreement is
intended to influence any such testimony that Jennings may offer.
d. MTLM Property. Jennings represents that he has turned over or
will turn over to MTLM all property of MTLM in his control or
possession by the Resignation Date, except the property described on
Schedule A hereto which Jennings shall be entitled to retain as his
personal possessions. This includes all notes, memoranda, records,
documents and all other information, no matter how produced or
reproduced, all computer equipment and programs, all office keys
<PAGE> 6
and access cards, and all credit and charge cards kept by Jennings
or in his possession or control used in or pertaining to the
business of MTLM, it being hereby acknowledged that all of said
items, and all copies of said items, are the sole and exclusive
property of MTLM. The obligations set forth herein are in addition
to the obligations of Jennings pursuant to Paragraph 15 of the
Employment Agreement.
e. Confidentiality of Agreement. Except pursuant to valid
subpoena issued by a court or government agency of competent
jurisdiction, Jennings shall not, directly or indirectly, discuss or
communicate the terms of this Agreement with any third party, except
members of his immediate family, his accountant and his attorney who
shall be advised of this confidentiality restriction. Except
pursuant to a valid subpoena, Jennings will not communicate or
cooperate with any employee or director or former employee or
director of MTLM, or with any third party, concerning any claim
against MTLM.
5. Non-Disparagement. Form and after the date of presentment
of this Agreement, both parties represent that they have not and
will not, nor will they cause or assist another person to, disparage
or make critical, negative, derogatory or defamatory statements
about the other to any third party (including in the case of MTLM,
its employees), or make any other statement to a third party which
is intended to or would reasonably have the effect of harming the
other party to this Agreement. It is understood that Jennings'
commitment hereunder extends to the Company's officers and
directors. MTLM agrees to promptly advise its senior officers and
directors in writing of the foregoing restriction.
<PAGE> 7
6. Effective Date. This Agreement shall be effective immediately
upon its execution by the parties.
7. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the heirs, assigns, administrators, executors,
and legal representatives of Jennings and shall be binding upon and
inure to the benefit of the MTLM Releases.
8. Entire Agreement. This instrument constitutes the entire
Agreement between the parties. It may not be amended or modified
except by a subsequent written instrument signed by all parties
hereto.
9. Severability. If any provision, section, subsection or other
portion of this Agreement shall be determined by any court of
competent jurisdiction to be invalid, illegal or unenforceable in
whole or in part, and such determination shall become final, such
provision or portion shall be deemed to be severed or limited, but
only to the extent required to render the remaining provisions and
portions of this Agreement enforceable. This Agreement as thus amended
shall be enforced so as to give effect to the intention of the parties
insofar as that is possible. In addition, the parties hereby expressly
empower a court of competent jurisdiction to modify any term or
provision of this Agreement to the extent necessary to comply with
existing law and to enforce this Agreement as modified.
10. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Illinois.
11. Counterparts. This Agreement may be signed in multiple
counterparts, each of which shall be deemed to be an original for all
purposes.
<PAGE> 8
12. Acknowledgment. Jennings acknowledges that he has carefully read
and fully understands the terms and provisions of this Settlement Agreement and
General Release, has had the opportunity to be represented in this matter by
counsel of his own choosing, and that his execution of this Settlement Agreement
and General Release is voluntary. The parties agree that the language used in
this Agreement is the language chosen by the parties to express their mutual
intent, and that no rule of strict construction is to be applied to or against
any party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date(s) set forth below.
METAL MANAGEMENT, INC., a Delaware
corporation
By: /s/ Albert A. Cozzi
-----------------------------
Title: Chairman
-----------------------------
Date: July 21, 1999
-----------------------------
/s/ T. Benjamin Jennings
-------------------------------------
T. Benjamin Jennings
Date: July 21, 1999
-----------------------------
<PAGE> 1
EXHIBIT 10.6
SETTLEMENT AGREEMENT AND GENERAL RELEASE
THIS SETTLEMENT AGREEMENT and GENERAL RELEASE (hereinafter "Agreement")
is made and entered into by and between GEORGE A. ISAAC, III (hereinafter
"Isaac") and METAL MANAGEMENT, INC., a Delaware corporation (hereinafter
"MTLM").
WHEREAS, the parties have engaged in discussions resulting in an
amicable and mutually satisfactory agreement concerning Isaac's resignation from
his executive committee, officer, director and employment positions with MTLM
and any and all of its affiliates (other than his directorship with MTLM).
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth below, the parties hereby agree as follows:
1. The Employment Agreement. Isaac and MTLM are parties to an
"Employment Agreement" dated June 23, 1997. Except for Isaac's obligations
pursuant to Paragraphs 18 (as if the "Employment Period" ended on January 31,
2000 thereunder), 19 and 25(a) thereof, MTLM's obligations pursuant to
Paragraphs 23 and 24 thereof, and the provisions of Paragraphs 20 and 22
thereof, all of which shall continue in full force and effect as if set forth
fully herein, or except as otherwise expressly provided in this Agreement, this
Agreement shall supersede the terms and provisions of the Employment Agreement,
which is terminated effective immediately and is hereby null and void and
without further effect or obligation. Notwithstanding the foregoing, in the
event (and only in the event) that (i) MTLM fails to make any payment to Isaac
as required in Section 3(a) below, or (ii) MTLM fails to make a salary payment
to Isaac as
<PAGE> 2
provided in Section 3(b) below during the Six-Month Period (as defined below),
or (iii) MTLM fails to provide Isaac with medical insurance or dental insurance
as set forth in Section 3(c) below, and in any such case such failure continues
for a period of three (3) business days after written notice of such failure
from Isaac to MTLM, then, if Isaac elects to reinstate the Employment Agreement
by serving written notice to MTLM, the Employment Agreement shall be
automatically and fully reinstated and both Isaac and MTLM shall be entitled to
any and all rights and remedies thereunder as if Isaac had duly delivered a
notice to MTLM that he was terminating the "Employment Period" for "Good Reason"
pursuant to Paragraph 14(a) of the Employment Agreement effective as of the
Effective Date of this Agreement and as if this Agreement were never executed
and delivered. In the event that the Employment Agreement is reinstated as set
forth in the previous sentence, Isaac agrees that cash payments made to Isaac
under Section 3(a) of this Agreement shall be credited to MTLM against any
adjudication or settlement with respect to the Employment Agreement, and further
agrees that in the event that such adjudication or settlement results in MTLM
owing to Isaac a cash amount less than cash amounts already paid to Isaac
hereunder, Isaac will refund the difference to MTLM in cash.
2. Isaac's Resignation. Effective August 1, 1999, Isaac hereby resigns
as Executive Vice President of MTLM, as an officer of MTLM and as an officer and
director of any and all of MTLM's affiliates (including those companies
comprising the Isaac Group (as defined in the Employment Agreement)) and as a
member of the Executive Committee of MTLM (August 1, 1999 being sometimes
referred to herein as the "Resignation Date").
3. The Obligations of MTLM. On and after Isaac's execution of this
Agreement, and in consideration of Isaac's promises as set forth herein, MTLM
shall be obligated to him as
2
<PAGE> 3
set forth herein. Except as expressly set forth in this Agreement (including in
Section 1 above), MTLM and its affiliates (including those in the Isaac Group)
shall have no continuing obligation to Isaac of any kind or nature whatsoever.
a. Cash Payments. On or before the Effective Date of this Agreement (as
defined in Section 6 below), or if such Effective Date is not a business day,
then on the first (1st) business day following the Effective Date, MTLM shall
pay to Isaac the sum of $767,917 by wire transfer to an account specified by
Isaac. In addition, MTLM shall pay Isaac six equal installments of $69,166.67 on
each of September 1, 1999, October 1, 1999, November 1, 1999, December 1, 1999,
January 3, 2000 and February 1, 2000 by wire transfer to an account specified by
Isaac.
b. Continued Employment and Salary. MTLM agrees to continue to employ
Isaac as a non-officer part-time employee located in the Toledo, Ohio area, with
the title "Assistant to the Chairman" or another title agreeable to the parties,
from August 1, 1999 through January 31, 2000, at the salary of $120,000 per year
(meaning that Isaac's aggregate salary for the six-month continued employment
period (the "Six-Month Period") will be $60,000). Such salary shall be payable
monthly beginning on September 1, 1999 and shall be paid to Isaac or in the
event of his death, to Isaac's beneficiaries, whether or not Isaac performs any
services for MTLM under this Agreement, unless Isaac voluntarily resigns (other
than on account of his disability) from such part-time employment. Isaac shall
not be eligible for any bonus or other incentive compensation payments relating
to such period.
c. Benefits. It is understood and agreed that Isaac's continuous
service under MTLM's 401(k) plan and, except as specifically provided herein,
its other benefit plans shall cease as of January 31, 2000. During the Six-Month
Period, MTLM shall afford to Isaac the
3
<PAGE> 4
employee benefits set forth in Paragraphs 9, 10 and 11 of the Employment
Agreement as if such employee benefit provisions were set forth fully herein, in
addition to continued participation in, and under the same terms as, Isaac's
present medical insurance and dental insurance plans. During the Six-Month
Period, Isaac shall also be entitled to continue to receive his car allowance
under its present terms and conditions, and shall be entitled to reimbursement
for all reasonable business expenses incurred by him in connection with the
performance of his services during such period, subject to the submission of
reasonable documentation. In addition, until June 23, 2002, MTLM shall continue
to provide to Isaac medical insurance and dental insurance benefits in
accordance with MTLM's policies from time to time in effect for its executive
officers as if Isaac were an active, full-time executive employee of MTLM, and
life insurance in accordance with MTLM's current monthly life insurance
reimbursement practices in the amount of $1,169.76. The provision by MTLM of
such medical and dental benefits shall not be considered continuation coverage
pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended, and
such continuation coverage shall commence on the date that the benefits provided
hereunder cease to the extent required by applicable law.
d. Legal Fees. MTLM agrees to reimburse Isaac in an amount not to
exceed $5,000 for the reasonable fees and disbursements of Isaac's counsel
incurred in connection with the negotiation of this agreement, at such counsel's
customary rates.
e. Use of Office. MTLM agrees to provide to Isaac, at no cost to Isaac,
the use of his present physical office space and file room, and his present
administrative assistant's physical office space and file room, through June 23,
2002, in each case for so long as MTLM or one of its affiliates has the right to
utilize the space where such office is located. MTLM agrees
4
<PAGE> 5
not to voluntarily relinquish its right to utilize such office space other than
as part of a bona fide business initiative, rather than for the primary purpose
of avoiding its obligations hereunder. MTLM also agrees to provide Isaac with
continuous services of an administrative assistant, who shall initially be
Melody Kaye Garber for as long as she is employed by MTLM or one of its
subsidiaries (and thereafter another suitable administrative assistant), through
June 23, 2002, it being understood that although such administrative assistant
will primarily work with and for Isaac, as an employee of MTLM or one of its
affiliates such administrative assistant will also be asked to perform customary
services for his or her employer. Such administrative assistant's work for Isaac
will have priority over his or her work for his or her employer in the event of
a conflict. MTLM shall provide Isaac and his administrative assistant with
access to their office space and file rooms seven days a week, twenty-four hours
per day, similar to their present practice. In the event that MTLM or its
affiliates move the MTLM office currently used by Isaac to another location in
the Toledo, Ohio area, MTLM's obligations as set forth in this subsection (e)
(including without limitation the provision of office and file space for Isaac
and his administrative assistant which is comparable in all material respects)
and subsection (f) below shall continue to apply at such relocated office, and
MTLM shall pay to relocate Isaac and his administrative assistant's offices and
file room to such new location.
f. Isaac Property Company. MTLM agrees to continue to extend its
current lease arrangement with Isaac Property Company, allowing Mr. L.A. "Zac"
Isaac and his administrative assistant to occupy their current physical office
space and file rooms, under the same terms and conditions that are currently in
effect, through June 23, 2002, for so long as MTLM or one of its affiliates has
the right to utilize the space where such office is located.
5
<PAGE> 6
g. Authorization. MTLM hereby represents and warrants that it, and its
representative signing this Agreement on its behalf, have full power and
authority to enter into this Agreement.
4. The Obligations of Isaac. In consideration of the promises of MTLM
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Isaac agrees as
follows:
a. Mutual General Releases. Except for actions which constitute
or are alleged to constitute fraud or embezzlement and any
obligations arising under this Agreement, (i) Isaac, for himself and
for his estate, heirs, personal representatives, executors,
administrators and assigns, hereby releases and forever discharges
MTLM, its subsidiaries and related and affiliated entities, and each
of its and their directors, officers, employees, attorneys, agents
and representatives (hereinafter collectively and individually the
"MTLM Releasees"), and (ii) the MTLM Releasees hereby release and
forever discharge Isaac, his estate, heirs, personal
representatives, executors, attorneys, successors, administrators
and assigns (the "Isaac Releasees"), from any and all rights,
claims, demands, debts, dues, sums of money, accounts, attorneys'
fees, complaints, judgments, executions, actions and causes of
action of any nature whatsoever, cognizable at law or equity, which
either party now has or claims, or might hereafter have or claim,
against the other party, whether known or unknown, suspected or
unsuspected, accrued or unaccrued, based upon or arising out of any
matter or thing whatsoever through the date of this release,
including, without limitation,
6
<PAGE> 7
any claim, action or cause of action which was or is related to or
arises out of any acts, omissions, representations, facts, events,
matters, transactions or occurrences during Isaac's employment,
executive committee membership or directorship with MTLM or any of its
subsidiaries and affiliates, or his separation and/or resignation
therefrom, or which is based upon or arises under the Employment
Agreement (except as provided in this Agreement) or any local, state,
or federal law dealing with employment discrimination, including
without limitation Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act and the Age Discrimination in
Employment Act.
The following provisions are applicable to and made a part of
this Agreement and the foregoing general release and waiver:
(i) Except with respect to the matters defined in this
Agreement, neither Isaac nor MTLM releases or waives any right or
claim which he or it may have, including without limitation under the
Age Discrimination in Employment Act, which arises after the date of
execution of this Agreement.
(ii) On or immediately prior to the last day of the Six-Month
Period, so long as neither Isaac nor MTLM is in material breach of
this Agreement, Isaac and MTLM will re-execute and deliver to one
another a Mutual and General Release dated such date, that is
identical to the release set forth above, it being understood that
such release shall not apply to the parties' continuing obligations
hereunder.
7
<PAGE> 8
(iii) MTLM hereby expressly advises Isaac to consult with an
attorney of his choosing prior to executing this Agreement which
contains the foregoing general release and waiver.
(iv) Isaac has twenty-one (21) days from the date of presentment
to consider whether or not to execute this Agreement. In the event of
such execution, Isaac has a further period of seven (7) days from such
date in which to revoke said execution, notice of which must be
received by MTLM within such seven (7) day period.
b. Performance of Duties. During the Six-Month Period, Isaac
agrees to (i) use his best efforts to transition his responsibilities
with the Isaac Group to designees of MTLM, (ii) complete certain
projects that he is currently undertaking on behalf of MTLM, including
establishing RONA targets and an acquisition due diligence checklist,
and (iii) make himself available for consultations and meetings at the
request of any member of the office of the chief executive regarding
pending acquisition discussions; provided, that the number of hours
that Isaac is required to perform these services shall not exceed
twenty hours per week for the four weeks beginning August 16, 1999 (it
being understood that Isaac will be on vacation during the week of
August 9, 1999), and forty hours per month thereafter for the
remainder of the Six-Month Period. If MTLM requests, and Isaac agrees
to perform (each in their sole discretion), services in excess of the
foregoing hourly limit (which request and agreement shall be in
writing in order to entitle Isaac to the following additional
8
<PAGE> 9
compensation), MTLM shall compensate Isaac at the rate of $220.00 per
hour therefor. After the Six-Month Period, Isaac shall continue to
make himself available as may be mutually agreed between Isaac and
MTLM as a consultant with respect to pending transactions at an hourly
rate of $220.00 per hour or such other amount as the parties may
agree.
c. Availability. Isaac agrees to cooperate reasonably with MTLM
in connection with the transition of his responsibilities. Isaac
further agrees to make himself reasonably available to MTLM and its
attorneys and agents for interview, deposition and testimony and
agrees to appear as a witness at trial and, at the election of MTLM,
provide a sworn statement or deposition of any matters in which MTLM
is a party and/or for which Isaac may have knowledge of any relevant
facts, provided that MTLM compensates Isaac in accordance with Section
4(b) above with respect thereto. Nothing in this Agreement is intended
to influence any such testimony that Isaac may offer.
d. MTLM Property. Isaac represents that he has turned over or
will turn over to MTLM all property of MTLM in his control or
possession by January 31, 2000, except the property described on
Schedule A hereto which Isaac shall be entitled to retain as his
personal possessions, and as to which MTLM surrenders all rights and
title to Isaac. This includes all notes, memoranda, records, documents
and all other information, no matter how produced or reproduced, all
computer equipment and programs, all office keys and access cards
(except as required pursuant to Section 3(e) above), and all credit
and
9
<PAGE> 10
charge cards kept by Isaac or in his possession or control used in or
pertaining to the business of MTLM, it being hereby acknowledged that
all of said items, and all copies of said items, are the sole and
exclusive property of MTLM.
e. Confidentiality of Agreement. Except pursuant to valid
subpoena issued by a court or government agency of competent
jurisdiction, Isaac shall not, directly or indirectly, discuss or
communicate the terms of this Agreement with any third party, except
members of his immediate family, his accountant and his attorney and
other professional advisers who shall be advised of this
confidentiality restriction. Except pursuant to a valid subpoena,
Isaac will not communicate or cooperate with any employee or director
or former employee or director of MTLM, or with any third party,
concerning any claim against MTLM.
5. Non-Disparagement. From and after the date of presentment of this
Agreement, both parties represent that they have not and will not, nor will they
cause or assist another person to, disparage or make critical, negative,
derogatory or defamatory statements about the other to any third party, other
than any statement made in connection with a proceeding seeking to enforce this
Agreement. It is understood that Isaac's commitment hereunder extends to the
Company's current officers and directors.
6. Effective Date. The effective date of this Agreement (the "Effective
Date") shall be the eighth (8th) day after Isaac and MTLM shall have executed
this Agreement, unless prior to the close of business on the seventh (7th) day
after Isaac and MTLM shall have executed this Agreement, MTLM has received a
signed statement from Isaac revoking such execution.
10
<PAGE> 11
7. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the heirs, assigns, administrators, executors, and legal
representatives of Isaac and shall be binding upon and inure to the benefit of
the MTLM Releasees and their successors.
8. Entire Agreement. This Agreement constitutes the entire agreement
between the parties. It may not be amended or modified except by a subsequent
written instrument signed by all parties hereto.
9. Severability. If any provision, section, subsection or other portion
of this Agreement shall be determined by any court of competent jurisdiction to
be invalid, illegal or unenforceable in whole or in part, and such determination
shall become final, such provision or portion shall be deemed to be severed or
limited, but only to the extent required to render the remaining provisions and
portions of this Agreement enforceable. This Agreement as thus amended shall be
enforced so as to give effect to the intention of the parties insofar as that is
possible. In addition, the parties hereby expressly empower a court of competent
jurisdiction to modify any term or provision of this Agreement to the extent
necessary to comply with existing law and to enforce this Agreement as modified.
10. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Illinois.
11. Costs of Enforcement. MTLM shall advance Isaac all reasonable
attorneys' fees and costs as they are incurred by Isaac in connection with any
good faith claims brought by him seeking to enforce the provisions of this
Agreement.
12. Counterparts. This Agreement may be signed in multiple counterparts by
facsimile, each of which shall be deemed to be an original for all purposes.
11
<PAGE> 12
13. Acknowledgment. Isaac acknowledges that he has carefully read and
fully understands the terms and provisions of this Settlement Agreement and
General Release, has had the opportunity to be represented in this matter by
counsel of his own choosing, and that his execution of this Settlement Agreement
and General Release is voluntary. The parties agree that the language used in
this Agreement is the language chosen by the parties to express their mutual
intent, and that no rule of strict construction is to be applied to or against
any party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date(s) set forth below.
METAL MANAGEMENT, INC., a Delaware
corporation
By: /s/ Albert A. Cozzi
------------------------------
Title: Chairman
Date: August 6, 1999
------------------------------
/s/ George A. Isaac, III
-------------------------------------
George A. Isaac, III
Date: August 6, 1999
------------------------------
12
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<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,782,000
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<RECEIVABLES> 113,073,000
<ALLOWANCES> 2,078,000
<INVENTORY> 54,982,000
<CURRENT-ASSETS> 184,137,000
<PP&E> 200,584,000
<DEPRECIATION> 32,046,000
<TOTAL-ASSETS> 668,032,000
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0
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