<PAGE> 1
EXHIBIT 99.1
PRELIMINARY DRAFT; SUBJECT TO CHANGE
THIS EXHIBIT IS BEING FILED AS A RESULT OF CERTAIN DISCLOSURE
OBLIGATIONS OF METAL MANAGEMENT, INC. TO AN AD HOC COMMITTEE OF CERTAIN HOLDERS
OF ITS SENIOR SECURED NOTES AND SENIOR SUBORDINATED NOTES. IT CONSISTS OF A
DRAFT OF THE FINANCIAL PROJECTIONS WHICH WILL BE FILED BY THE COMPANY AS PART OF
A DISCLOSURE STATEMENT TO BE FILED WITH THE BANKRUPTCY COURT. THE EXHIBIT IS
LIKELY TO CHANGE PRIOR TO ITS FILING WITH THE BANKRUPTCY COURT. THE PROJECTIONS
ARE FORWARD LOOKING IN NATURE AND, THEREFORE, ARE SUBJECT TO ALL OF THE
QUALIFICATIONS REGARDING THE COMPANY'S AFFAIRS DISCLOSED IN THE COMPANY'S ANNUAL
REPORT ON FORM 10-K WITH RESPECT TO THE FISCAL YEAR ENDED MARCH 31, 2000
(INCLUDING THOSE SET FORTH UNDER THE HEADING "INVESTMENT CONSIDERATIONS") AND IN
ANY PUBLIC REPORT FILED AFTER THAT DATE.
PROJECTED FINANCIAL INFORMATION
INTRODUCTION
As a condition to confirmation of a plan of reorganization, the
Bankruptcy Code requires, among other things, that the bankruptcy court
determine that confirmation is not likely to be followed by the liquidation or
the need for further financial reorganization of the debtor. See "Voting and
Confirmation of the Plan - Confirmation" and "--Feasibility." In connection with
the development of the Plan, and for purposes of determining whether the Plan
satisfies this feasibility standard, the Debtors' management analyzed the
ability of the Reorganized Debtors to meet their obligations under the Plan with
sufficient liquidity and capital resources to conduct their businesses. Prior to
the Petition Date, the Debtors' management developed the Debtors' Business Plan
and prepared certain projections of the Debtors' operating profit, free cash
flow and certain other items for the fiscal years 2001 through 2004 (the
"Projection Period"). Such projections summarized below are based upon
assumptions made prior to the Petition Date and have been adjusted to reflect
the terms of the Plan, certain subsequent events and additional assumptions,
including those set forth below (as adjusted, the "Projections").
THE DEBTORS DO NOT, AS A MATTER OF COURSE, PUBLISH THEIR BUSINESS
PLANS, BUDGETS OR STRATEGIES OR MAKE EXTERNAL PROJECTIONS OR FORECASTS OF THEIR
ANTICIPATED FINANCIAL POSITIONS OR RESULTS OF OPERATIONS. ACCORDINGLY, THE
DEBTORS (INCLUDING THE REORGANIZED DEBTORS) DO NOT ANTICIPATE THAT THEY WILL,
AND DISCLAIM ANY OBLIGATION TO, FURNISH UPDATED BUSINESS PLANS, BUDGETS OR
PROJECTIONS TO HOLDERS OF CLAIMS OR INTERESTS PRIOR TO THE EFFECTIVE DATE OR TO
STOCKHOLDERS AFTER THE EFFECTIVE DATE OR TO INCLUDE SUCH INFORMATION IN
DOCUMENTS REQUIRED TO BE FILED WITH THE SEC OR OTHERWISE MAKE SUCH INFORMATION
PUBLICLY AVAILABLE.
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PRELIMINARY DRAFT; SUBJECT TO CHANGE
The Projections should be read in conjunction with the assumptions,
qualifications and explanations set forth herein and the historical consolidated
financial information (including the notes and schedules thereto) including in
Exhibit __ to the Disclosure Statement.
PRINCIPAL ASSUMPTIONS FOR THE PROJECTIONS
The Projections are based on, and assume the successful implementation
of, the Debtors' Business Plan. Both the Business Plan and the Projections
reflect numerous assumptions, including various assumptions regarding the
anticipated future performance of the Debtors and Reorganized Debtors, industry
performance, general business and economic conditions and other matters, most of
which are beyond the control of the Debtors. Therefore, although the Projections
are necessarily presented with numerical specificity, the actual results
achieved during the Projection Period will vary from the projected results.
These variations may be material. Accordingly, no representation can be or is
being made with respect to the accuracy of the Projections or the ability of the
Debtors or Reorganized Debtors to achieve the projected results of operations.
See "Risk Factors" for a discussion of the certain factors that may affect the
future financial performance of the Debtors and the Reorganized Debtors and of
various risks associated with the Plan.
Although the Debtors believe that the assumptions underlying the
Projections, when considered on an overall basis, are reasonable in light of
current circumstances, no assurance can be or is given that the Projections will
be realized. In deciding whether to vote to accept or reject the Plan, holders
of Claims must make their own determinations as to the reasonableness of such
assumptions and the reliability of the Projections. See "Risk Factors."
Additional information relating to the principal assumptions used in
preparing the Projections is set forth below:
(a) General Economic Conditions: The Projections were prepared on
assumptions that general economic conditions existing at the time of
the Projections were prepared will last throughout the Projection
Period and that the general economic climate in the United States will
remain relatively stable. With respect to the industry environment
affecting the scrap metal recycling industry, during most of fiscal
2001 (calendar 2000), a pronounced decline in pricing has adversely
affected the Company. The Projections generally assume no further
material cyclical declines and an industry environment similar to
calendar 1999 exists during the fiscal 2002 through fiscal 2004 time
frame.
(b) Other General Assumptions: The Projections do not assume any material
acquisitions or divestitures of businesses. Specific capital
expenditures lead to volume growth in certain regional locations.
Seasonality is considered, with the first quarter slightly stronger
than other quarters.
(c) Sales: Sales are projected based on separate regional assumptions of
volumes and pricing. Weak pricing conditions are reflected through the
end of March 2001, and thereafter market pricing is assumed to return
to long-term historical average ferrous and non-ferrous prices.
Separate adjustments to the long-term average price is made to
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<PAGE> 3
PRELIMINARY DRAFT; SUBJECT TO CHANGE
calculate regional sales levels, based on historical variations in such
regions to the national average price.
(d) Cost of Sales: Cost of sales is based on metal margin and process
costs. Metal margin during the Projection Period is generally
consistent with the levels earned during fiscal 2001 (current fiscal
year). Processing costs include specific assumptions relating to direct
wages and benefits (assumed to increase at 4% per year), freight costs
(assumed at $15 per ton), fuel and operating costs (based on current
levels, with modest energy price declines beginning in fiscal 2002),
and repair costs (at historical levels). Rent expense is assumed at
current levels, with no favorable impact reflected from potential lease
rejections or additional rationalization of facilities.
(e) Sales and Administrative Expense ("S&A Expense"): Salaries are
projected at current levels, increasing 4% per year, with overtime and
bonus costs generally consistent with historical levels. Corporate rent
is projected with inflation factors.
(f) Interest Expense: The Projections reflect the terms of the Exit
Facility and Senior Notes as set forth in the Plan.
(g) Income Taxes: A tax rate of 38% is applied to derive tax expense.
(h) Capital Expenditures: Approximately $16 million per year is projected,
with the bulk of such amount related to ordinary maintenance and the
remainder attributable to specific projects.
(i) Working Capital: Receivables, inventory, and payables levels are
projected according to historical relationships with respect to
purchase and sales volumes.
(j) Fresh-Start Reporting: The American Institute of Certified Public
Accountants has issued a Statement of Position on Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code (the
"Reorganization SOP"). The Projections have been prepared generally in
accordance with the "fresh-start" reporting principles set forth in the
Reorganized SOP, giving effect thereto as of March 31, 2001. The
principal effects of the application of these fresh-start principles
are summarized below:
Under the Reorganization SOP, Reorganized Metal Management
will be required to record as an intangible asset the excess,
if any, of its total reorganization value over the fair value
of its identifiable net assets ("Reorganized Goodwill") as of
the Effective Date to be amortized over a period which, in
accordance with the Reorganized SOP, generally is to be
substantially less than 40 years. For purposes of the
Projections, it has been assumed that the leveraged net equity
balance as of the Effective Date is $65 million. The
Projections also assume that, after giving effect to certain
eliminations in connection with the reorganization, the fair
value of Reorganized Metal Management's fixed assets and other
non-current assets will be equal to the projected net book
value of such assets as of the
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<PAGE> 4
PRELIMINARY DRAFT; SUBJECT TO CHANGE
Effective Date, except that the Property, Plant and Equipment
account will be reduced accordingly.
The foregoing assumptions and resulting computations were made
solely for purposes of preparing the Projections. Reorganized
Metal Management will be required to determine the amount by
which its reorganization value as of the Effective Date
exceeds, or is less than, the fair value of its assets as of
the Effective Date. Such determination will be based upon the
fair values at that time, which may be based on, among other
things, a different methodology with respect to the valuation
of Reorganized Metal Management's reorganized value. In all
events, such valuations, as well as the determination of the
fair value of Reorganized Metal Management's assets and the
determination of its actual liabilities, will be made as of
the Effective Date, and the changes between the amounts of any
or all of the foregoing items as assumed in the Projections
and the actual amounts thereof as of the Effective Date may be
material.
PROJECTIONS
The projected consolidated financial statements of the Reorganized
Debtors set forth below have been prepared based on the assumption that the
Effective Date is March 31, 2001. Although the Debtors presently intend to seek
to cause the Effective date to occur as soon as practicable, there can be no
assurance as to when the Effective Date actually will occur.
Reorganized Metal Management and Subsidiaries Projected Consolidated
Balance Sheet as of March 31, 2001 (the "Effective Date Balance Sheet") set
forth below presents: (a) the projected consolidated financial position of the
Reorganized Debtors prior to Confirmation and the consummation of the
transactions contemplated by the Plan; (b) the projected adjustments to such
projected consolidated financial position required to reflect Confirmation and
the consummation of the transactions contemplated by the Plan (collectively, the
"Balance Sheet Adjustments"); and (c) the projected consolidated financial
position of the Reorganized Debtors, after giving effect to the Balance Sheet
Adjustments, as of March 31, 2001. The Balance Sheet Adjustments set forth in
the columns captioned "Debt Discharge" and "Fresh Start and Other Adjustments"
reflect the assumed effects of Confirmation and the consummation of the
transactions contemplated by the Plan, including the settlement of various
liabilities and related securities issuances, cash payments and borrowings. The
various Balance Sheet Adjustments are described in greater detail in the Notes
to the Effective Date Balance Sheet.
Reorganized Metal Management and Subsidiaries Projected Consolidated
Balance Sheets as of the end of fiscal years 2001 through 2004 set forth below
present the projected consolidated position of the Reorganized Debtors, after
giving effect to Confirmation and the consummation of the transactions
contemplated by the Plan, as of the Effective Date and the end of each fiscal
year in the Projection Period.
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<PAGE> 5
PRELIMINARY DRAFT; SUBJECT TO CHANGE
The Debtors and Reorganized Metal Management and Subsidiaries Projected
Consolidated Statements of Operations and Projected Consolidated Statements of
Cash Flows set forth below present the projected consolidated results of
operations for the fiscal year ending March 31, 2001 and for each fiscal year
included in the Projection Period.
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<PAGE> 6
PRELIMINARY DRAFT; SUBJECT TO CHANGE
THE DEBTORS AND REORGANIZED METAL MANAGEMENT AND SUBSIDIARIES
PROJECTED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, 2001
(UNAUDITED)
(ACTUAL DOLLARS)
-------------------------------------------------------------------------
Fresh Start
Projected Debt and Other Projected
Pre-Confirmation Discharge Adjustments Post-Confirmation Notes
---------------- -------------- --------------- ------------------- ------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 909,763 $ -- $ -- $ 909,763
Accounts receivable, net 132,102,107 132,102,107
Inventories 51,600,000 51,600,000
Prepaid expenses 3,273,021 3,273,021
Other current assets 3,435,256 3,435,256
------------- ------------- ------------- -------------
Total current assets 191,320,147 -- -- 191,320,147
Property and equipment, net 155,056,651 (12,489,894) 142,566,757
Goodwill, net 276,847,973 (276,847,973) -- (1)
Reorg. value in excess of ident. assets -- -- -- (1)
Deferred financing costs, net 9,885,991 (9,885,991) -- (1)
Investments in joint ventures 3,184,735 3,184,735
Other assets 1,609,268 1,609,268
------------- ------------- ------------- -------------
TOTAL ASSETS 637,904,765 $ -- $(299,223,858) $338,680,907
============= ============= ============= =============
LIABILITIES AND EQUITY
Current liabilities:
Accounts Payable $ 38,832,240 38,832,240
Other accrued liabilities 8,547,140 8,547,140
Accrued bond interest 9,657,763 (9,657,763) -- (2)
Accrued bonuses 2,372,785 2,372,785
Accrued insurance 1,217,713 1,217,713
Current portion of debt 1,552,612 1,552,612
------------- ------------- ------------- -------------
Total current liabilities 62,180,253 (9,657,763) 52,522,490
Long term debt, SCF 175,665,645 3,520,000 179,185,645 (3)
Long term debt, Senior note offering -- --
Long-term debt, 12 3/4% Senior Notes 33,028,125 33,028,125
Long-term debt, other 4,178,274 4,178,274
Liabilities subject to compromise 192,000,000 (192,000,000) -- (2)
Other liabilities 3,516,372 1,250,000 4,766,372 (3)
------------- ------------- ------------- -------------
TOTAL LIABILITIES 470,568,670 (201,657,763) 4,770,000 273,680,907
Stockholders equity:
Convertible preferred stock - Series B 1,009,000 (1,009,000) -- (2)
Convertible preferred stock - Series C 5,100,000 (5,100,000) -- (2)
Common Stock, Warrants, PIC 312,151,186 207,766,763 (454,917,949) 65,000,000 (1)
Retained earnings (accumulated deficit) (150,924,091) 150,924,091 -- (1)
------------- ------------- ------------- -------------
Total stockholders equity 167,336,095 201,657,763 (303,993,858) 65,000,000
------------- ------------- ------------- -------------
TOTAL LIABILITIES AND EQUITY $ 637,904,765 $ -- $(299,223,858 $ 338,680,907
============= ============= ============= =============
</TABLE>
6
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PRELIMINARY DRAFT; SUBJECT TO CHANGE
Notes to Reorganized Metal Management Projected Consolidated Balance Sheet
1. Estimated "fresh start" accounting adjustments reflect a leveraged
equity value of $65 million. For illustrative purposes, all of the book
intangible asset value is eliminated and Property, Plant & Equipment is
reduced to derive balanced accounts.
2. Adjustments in connection with the financial restructuring transaction
which will result in the conversion of $180 million of senior
subordinated debt and approximately $9.6 million of related and other
interest.
3. Costs at closing pertain to the exit financing commitment fee,
professional fees, and an unsecured note to be issued for payment of
certain professional fees.
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PRELIMINARY DRAFT; SUBJECT TO CHANGE
THE DEBTORS AND REORGANIZED METAL MANAGEMENT AND SUBSIDIARIES
PROJECTED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(DOLLARS ACTUAL)
<TABLE>
<CAPTION>
Pre-Effective Date,
Debtors Reorganized Metal Management
------------------- ---------------------------------------------------
Fiscal Fiscal Fiscal Fiscal
2001 2002 2003 2004
------------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sales $ 896,742,828 $1,035,237,088 $1,059,970,683 $ 1,072,131,542
Cost of Goods Sold 830,315,300 947,225,820 964,361,734 963,562,855
------------- -------------- -------------- ---------------
Gross Margin $ 66,427,529 $ 88,011,268 $ 95,608,949 $ 108,568,687
Gross Margin % 7.4% 8.5% 9.0% 10.1%
Sales & Administrative Expense (Exc. Amort) 59,150,648 58,849,399 62,002,411 61,697,414
Goodwill & Reorg Value Amortization 8,005,809 -- -- --
Other (Income) / Expense (159,838) (13,800) (13,800) (13,800)
Interest Expense and Fees 37,796,656 21,761,885 18,334,366 16,530,945
Amortization of Financing Costs 2,581,806 -- -- --
(Gain) / Loss on Sale of Assets (294,842) (2,518,000) -- --
Non-Recurring Expense 8,919,830 -- -- --
------------- -------------- -------------- ---------------
Earnings Before Tax $ (49,572,540) $ 9,931,785 $ 15,285,972 $ 30,354,128
------------- -------------- -------------- ---------------
Taxes / Tax Asset Write-Off 8,291,107 -- -- 11,868,859
------------- -------------- -------------- ---------------
Net Income $ (57,863,647) $ 9,931,785 $ 15,285,972 $ 18,485,269
------------- -------------- -------------- ---------------
</TABLE>
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<PAGE> 9
PRELIMINARY DRAFT; SUBJECT TO CHANGE
THE DEBTORS AND REORGANIZED METAL MANAGEMENT AND SUBSIDIARIES
PROJECTED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS ACTUAL)
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
2001 2002 2003 2004
------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 909,763 $ 909,763 $ 909,763 $ 909,763
Accounts receivable, net 132,102,107 145,704,815 148,690,418 150,396,404
Inventories 51,600,000 61,566,864 59,627,830 58,828,892
Prepaid expenses 3,273,021 3,273,021 3,273,021 3,273,021
Other current assets 3,435,256 1,885,256 1,885,256 1,885,256
------------ ------------ ------------ ------------
Total current assets 191,320,147 213,339,720 214,386,288 215,293,336
Property and equipment, net 142,566,757 126,382,505 118,283,967 117,471,144
Goodwill, net -- -- -- --
Reorg. value in excess of ident. assets -- -- -- --
Deferred financing costs, net -- -- -- --
Investments in joint ventures 3,184,735 3,184,735 3,184,735 3,184,735
Other assets 1,609,268 1,609,268 1,609,268 1,609,268
------------ ------------ ------------ ------------
TOTAL ASSETS $338,680,907 $344,516,228 $337,464,259 $337,558,483
============ ============ ============ ============
LIABILITIES AND EQUITY
Current liabilities:
Accounts Payable $ 38,832,240 $ 62,118,759 $ 63,124,892 $ 63,491,229
Other accrued liabilities 8,547,140 7,637,136 6,852,975 6,292,975
Accrued bond interest -- -- -- --
Accrued bonuses 2,372,785 2,372,785 2,372,785 2,372,785
Accrued insurance 1,217,713 1,217,713 1,217,713 1,217,713
Current portion of debt 1,552,612 1,072,612 592,612 112,612
------------ ------------ ------------ ------------
Total current liabilities 52,522,490 74,419,005 74,160,977 73,487,314
Long term debt SCF 179,185,645 153,312,667 132,602,755 115,005,373
Long term debt, Senior note offering -- -- -- --
Long-term debt, 12 3/4% Senior Notes 33,028,125 33,028,125 33,028,125 33,028,125
Long-term debt, other 4,178,274 4,058,274 3,938,274 3,818,274
Liabilities subject to compromise -- -- -- --
Other liabilities 4,766,372 4,766,372 3,516,372 3,516,372
------------ ------------ ------------ ------------
TOTAL LIABILITIES 273,680,907 269,584,443 247,246,502 228,855,458
Stockholders equity:
Convertible preferred stock - Series B -- -- -- --
Convertible preferred stock - Series C -- -- -- --
Common Stock Warrants, PIC 65,000,000 65,000,000 65,000,000 65,000,000
Retained earnings (accumulated deficit) -- 9,931,785 25,217,756 43,703,025
------------ ------------ ------------ ------------
Total stockholders equity 65,000,000 74,931,785 90,217,756 108,703,025
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND EQUITY $338,680,907 $344,516,228 $337,464,259 $337,558,483
============ ============ ============ ============
</TABLE>
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<PAGE> 10
PRELIMINARY DRAFT; SUBJECT TO CHANGE
THE DEBTORS AND REORGANIZED METAL MANAGEMENT AND SUBSIDIARIES
PROJECTED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS ACTUAL)
<TABLE>
<CAPTION>
Pre-Effective Date,
Debtors Reorganized Metal Management
------------------- -------------------------------------------------
Fiscal Fiscal Fiscal Fiscal
2001 2002 2003 2004
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(58,366,218) $ 9,931,785 $ 15,285,972 $ 18,485,269
Depreciation & Amortization 27,785,872 21,384,252 23,598,538 16,312,823
Financing Accretion/Amortization 8,237,962 -- -- --
Deferred taxes (6,736,139) -- -- --
Non-recurring (non-cash) 2,638,528 -- -- --
Equity in joint ventures 685,032 -- -- --
Other 1,687,930 1,550,000 -- --
Changes in working capital 28,324,966 (1,193,058) (2,074,597) (1,100,710)
------------ ------------ ------------ ------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES $ 4,257,934 $ 31,672,978 $ 36,809,913 $ 33,697,382
============ ============ ============ ============
INVESTING ACTIVITIES
Purchases of fixed assets (10,092,235) (16,000,000) (15,500,000) (15,500,000)
Disposals of fixed assets 575,021 10,800,000 -- --
Note payment from Superior Forge 83,854 -- -- --
Investment in joint ventures (253,414) -- -- --
------------ ------------ ------------ ------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES $ (9,686,774) $ (5,200,000) $(15,500,000) $(15,500,000)
============ ============ ============ ============
FINANCING ACTIVITIES
Borrowings from SCF 490,837,101 14,483,217 7,244,909 8,855,470
Repayments to SCF (482,621,579) (40,356,195) (27,954,822) (26,452,852)
Fees paid to renew SCF (2,789,049) -- -- --
Repurchase of common stock (67,188) -- -- --
Payments of long term debt (417,137) (600,000) (600,000) (600,000)
------------ ------------ ------------ ------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES $ 4,942,148 $(26,472,978) $(21,309,913) $(18,197,382)
============ ============ ============ ============
NET CASH PROVIDED (USED) $ (486,692) $ (0) $ -- $ --
============ ============ ============ ============
CASH AT BEGINNING OF PERIOD $ 1,396,455 $ 909,763 $ 909,763 $ 909,763
CASH AT END OF PERIOD $ 909,763 $ 909,763 $ 909,763 $ 909,763
</TABLE>
10
