================================================================= METALS USA BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2001 (ISSN XXXX-XXXX) November 16, 2001 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- METALS USA BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. Each issue is prepared by Peter A. Chapman, Editor. Subscription rate is US$45 per issue. Any re-mailing of METALS USA BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO METALS USA BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF METALS USA [00002] METALS USA'S JUNE 30, 2001 CONSOLIDATED BALANCE SHEET [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 PROCEEDINGS [00004] METALS USA CHAPTER 11 DATABASE [00005] LIST OF METALS USA'S 20 LARGEST UNSECURED CREDITORS [00006] DEBTORS' MOTION FOR AUTHORITY TO USE CASH COLLATERAL KEY DATE CALENDAR ----------------- 11/14/01 Voluntary Petition Date 11/29/01 Deadline to provide Utilities with adequate assurance 11/29/01 Deadline for filing Schedules of Assets and Liabilities 11/29/01 Deadline for filing Statement of Financial Affairs 11/29/01 Deadline for filing Lists of Leases and Contracts 01/03/02 Deadline to make decisions about lease dispositions 02/12/02 Deadline to remove actions pursuant to F.R.B.P. 9027 03/14/02 Expiration of Debtors' Exclusive Plan Proposal Period 05/13/02 Expiration of Debtors' Exclusive Solicitation Period 11/13/03 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting with UST to form Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 USC Sec. 341 ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO METALS USA BANKRUPTCY NEWS ----------------------------------------------------------------- METALS USA BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is $45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving METALS USA BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 24 Perdicaris Place Trenton, NJ 08618 Telephone (609) 392-0900 Fax (609) 392-0040 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990. Currently, we provide similar coverage about the chapter 11 cases involving Bethlehem Steel, LTV, Wheeling-Pittsburgh, Federal-Mogul, W.R. Grace & Co., Owens Corning, Armstrong World Industries, USG Corporation, Harnischfeger Industries, Inc., ANC Rental, Polaroid Corporation, Pacific Gas and Electric Company, Reliance Group Holdings & Reliance Financial, The FINOVA Group, Inc., Comdisco, Laidlaw, Safety-Kleen, Bridge Information Services, Imperial Sugar, The Loewen Group International, Inc., Vlasic Foods, AMF Bowling, Fruit of the Loom, Burlington Industries, Pillowtex, Warnaco, Ames Department Stores, Service Merchandise, Exodus Communications, Winstar, Covad Communications, 360networks, ICG Communications, PSINet, Lernout & Hauspie & Dictaphone, Vencor, Inc., Sun Healthcare Group, Inc., Mariner Post-Acute & Mariner Health, Genesis Health & Multicare, and Integrated Health Services. ================================================================= [ ] YES! Please enter my personal subscription to METALS USA BANKRUPTCY NEWS. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- METALS USA BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is $45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF METALS USA ----------------------------------------------------------------- METALS USA, Inc. 3 Riverway, Suite 600 Houston, Texas 77056 Telephone (713) 965-0990 Fax (713) 965-0067 http://www.metalsusa.com Metals USA, Inc. (NYSE: MUI) is a leading integrated metals processor and distributor in North America serving more than 65,000 customers. Metals USA purchases metal from primary producers who generally focus on large volume sales of unprocessed metals in standard configurations and sizes. The Company maintains an inventory of various metals to allow rapid fulfillment of customer orders and performs customized processing services to the specifications provided by end-users and other customers. The Company engages in pre-production processing of steel, aluminum and specialty metals and acts as an intermediary between primary metals producers and end-users. In most cases, the Company performs the customized, value-added processing services required to meet specifications provided by end-use customers. By providing these services, as well as offering inventory management and just-in-time delivery services, the Company enables its customers to reduce material costs, decrease capital required for raw materials inventory and processing equipment and save time, labor, warehouse space and other expenses. Metals USA's is organized in three business groups, each led by an experienced executive who is supported by professional finance, purchasing and sales staffs: (A) Plates and Shapes -- Contributing 47% of Annual Sales The Plates & Shapes Group sells carbon steel, aluminum and stainless steel plate, beams, angles, tubing and other structural shapes. These products, available in a variety of alloy grades and sizes, can be processed per customer requirement. Processing services include: * Slitting -- cutting coiled metals to specified widths along the length of the coil; * Shearing and cutting to length -- cutting metals into pieces and along the width of a coil to create sheets or plates; * Precision blanking -- the process in which flat rolled metal is cut into precise two-dimensional shapes; * Laser, flame and plasma cutting -- cutting metals to produce various shapes according to customer-supplied drawings; * Leveling -- flattening metals to uniform tolerances for proper machining; * Sawing -- cutting bars, tubular goods and beams to length; * Pickling -- a chemical treatment to improve surface quality by removing the oxidation and scale which develops on the metal shortly after it is hot-rolled; * Tee-splitting -- splitting of metal beams; * Plate forming and rolling -- forming and bending plates to cylindrical or required specifications; * Edge trimming -- a process that removes a specified portion of the outside edges of coiled metal to produce uniform width and round or smooth edges. * Cambering -- bending structural steel to improve load-bearing capabilities. * Metallurgy -- analysis and testing of the physical and chemical composition of metals. Currently, Plate & Shapes has 35 locations throughout the nation from which it sells to the these industries: * Fabrication * Construction * Machinery and equipment * Transportation * Aerospace * Electronics * Energy industries. (B) Flat Rolled -- Contributing 45% of Annual Sales The Flat Rolled Group markets a variety of carbon steel and stainless steel, aluminum, brass and copper flat rolled sheet and strip products in a range of alloys and grades. Since steel mills generally ship carbon steel in a form that few customers are equipped to handle -- in continuous coils that can weigh up to 40,000 to 50,000 lbs. each -- almost all of the carbon steel and non-ferrous material undergoes additional processing prior to customer delivery. The Company processes the metals to the precise thickness, length, width, shape, temper and surface quality specified by its customers. Processing services include slitting, precision blanking, Leveling cut-to-length, laser cutting, punching, bending and shearing. Currently, Flat Rolled has 23 locations throughout the United States and sells to over 10,000 individual customers in a variety of industries, predominantly: * Electrical manufacturing * Fabrication * Appliance manufacturing * Machinery * Equipment * Transportation industries (C) Building Products -- Contributing 8% of Annual Sales The Building Products Group markets a number of finished products that are both cost and energy efficient for use in residential and commercial applications. Residential products include sunrooms, roofing products, awnings and solariums. Commercial products include covered canopies, awnings and covered walkways. Currently, Building Products has 56 locations throughout the Southeast, Southwest and Western regions of the USA and sells to individual customers in the following industries: * Construction * Wholesale trade * Building materials The Company is focused primarily on providing our customers with a comprehensive range of innovative, value-added products, services and solutions at the highest of customer satisfaction levels. Metals USA believes that the scope and depth of its vast resources enables it to play the important role of single-source partner for its many customers who seek to streamline and reduce their supply chain costs and enhance efficiency, productivity and profitability. Touting a sound business strategy based on industry, geographic and product diversity, supported by ISO 9002 certification and intelligent customer-oriented investments, Metals USA says it is the one company that can consistently deliver on its "CUSTOMER SERVICE WITHOUT COMPROMISE" promise. The Company is also capable of providing applications engineering and a variety of other value-added processes such as blasting, painting and custom machining. Using these capabilities, the Company uses processed metals to manufacture higher-value components, such as finished building products, and machines specialty metals into such items as bushings, pump parts and hydraulic cylinder parts. Once an order is received, the appropriate inventory is selected and scheduled for processing in accordance with the customer's requirements and specified delivery date. Orders are monitored by the Company's computer systems, including, in certain locations, the use of bar coding to aid in and reduce the cost of tracking material. The Company's computer systems record the source of all metal shipped to customers. This enables the Company to identify the source of any metal which may later be shown to not meet industry standards or that fails during or after manufacture. This capability is important to the Company's customers as it allows them to assign responsibility for non- conforming or defective metal to the mill or foundry that produced the metal. Many of the products and services provided by the Company can be ordered and tracked through a web-based electronic network that directly connects the Company's computer system to those of its customers. A majority of the Company's orders are filled within 24-48 hours. This is accomplished through the Company's special inventory management programs, which permit the Company to deliver processed metals in accordance with the just-in-time inventory programs of its customers. The Company is required to carry sufficient inventory of raw materials to meet the short lead time and just-in-time delivery requirements of its customers. While the Company ships products throughout the United States, most of its customers are located within a 250-mile radius of the Company's facilities, thus enabling an efficient delivery system capable of handling a large number of short lead-time orders. The Company transports most of its products directly to its customers either with its own trucks for short-distance or multi-stop deliveries or through common or contract trucking companies. John A. Hageman, General Counsel for Metals USA, says that the Company finds itself today in the midst of the slowest quarter of the year in the metals industry, near the end of a fourteen-month period of recession in the manufacturing industry, made worse by the events of September 11, 2001. These conditions have been exacerbated by the amount of foreign manufactured steel that has been imported into United States markets during the past two years. The combination of these events has driven metals prices down to 20-year lows. Eighteen primary producers of metals have sought court protection since 1998. While Metals USA is not as badly hurt by this as primary producers, these factors have had an adverse impact on Metals USA's business. "Things are improving, however," Mr. Hageman says. The upcoming first and second quarters are better for Metals USA's business. The Company believes steel prices have hit a floor set by the lowest price that the lowest foreign manufacturers can charge to produce and ship steel to the United States. A number of primary metals producers have filed anti-dumping suits, which have been ruled on favorably by United States trade authorities. In July 2001, President Bush launched a broad investigation of injury to the United States steel industry under Section 201 of the trade laws. This led to a finding in October 2001 that certain foreign steel producers had injured domestic producers by importing steel products into United States markets at unreasonably low prices. This sets the stage for the President to impose restrictions and tariffs on foreign steel coming into the United States in February 2002. "Metals USA has every reason to believe it can survive this unprecedented collection of adverse events and reorganize its operations successfully," Mr. Hageman says, explaining that Metals USA's cash on hand, asset base (including its substantial real estate holdings) and revenue generating division cash flows, will permit the Company to meet short-term liquidity needs. The Company has consolidated facilities and operations, implemented cost-cutting initiatives and employees have taken pay cuts. "Long term, Metals USA's earning power will permit substantial payment to all parties-in-interest," Mr. Hageman suggests, because "Metals USA (i) is a good business; (ii) has earned good profits in the past; (iii) has a nationwide presence with a good customer base, good and loyal employees; (v) has developed a state of the art computer system to manage metals inventories and coordinate supplying them to customers on a just-in-time basis; and (vi) has every reason to believe that it can generate going concern earning power. . . ." ----------------------------------------------------------------- [00002] METALS USA'S JUNE 30, 2001 CONSOLIDATED BALANCE SHEET ----------------------------------------------------------------- METALS USA, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS At June 30, 2001 ASSETS Current Assets: Cash and cash equivalents ............... $11,300,000 Accounts receivable, net of $8,300,000 allowance ................. 225,400,000 Inventories ............................. 328,400,000 Prepaid expenses and other .............. 15,200,000 Deferred income taxes ................... 7,100,000 -------------- Total current assets ............... 587,400,000 Property and equipment, net ................. 247,700,000 Goodwill, net ................................ 292,800,000 Other assets, net ............................ 15,700,000 -------------- Total assets ................... $1,143,600,000 ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ........................ $156,000,000 Accrued liabilities ..................... 35,800,000 Current portion of long-term debt ....... 3,000,000 -------------- Total current liabilities .......... 194,800,000 Long-term debt, less current portion ......... 553,400,000 Deferred income taxes ........................ 35,000,000 Other long-term liabilities .................. 4,100,000 -------------- Total liabilities .................. 787,300,000 -------------- Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par, 5,000,000 shares authorized, none issued ....... -- Common stock, $.01 par, 203,122,914 shares authorized, 36,509,972 shares issued ............. 400,000 Additional paid-in capital .............. 247,700,000 Retained earnings ....................... 108,900,000 Accumulated other comprehensive loss .. (700,000) -------------- Total stockholders' equity ......... 356,300,000 -------------- Total liabilities and stockholders' equity ........ $1,143,600,000 ============== ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 PROCEEDINGS ----------------------------------------------------------------- Metals USA Files Voluntary Chapter 11 Petition HOUSTON, Texas -- November 14, 2001 -- Metals USA, Inc. (NYSE: MUI) today announced that it has filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U. S. Bankruptcy Court in the Southern District of Texas (Houston Division). Despite cost reduction and asset rationalization efforts to improve profitability as well as the company's initiatives to sell non-core assets, the company was not able to overcome the difficulties of a troubled metals market, a recessionary manufacturing economy, and overall uncertainties in the marketplace. This filing is a necessary component of the Company's strategy to create a sustainable capital structure, increase its liquidity position and improve its profitability. J. Michael Kirksey, Chairman and CEO, stated, "While the decision to file a Chapter 11 petition was a very difficult one, we believe that it was the best means to obtain the necessary time to stabilize the Company's finances and to implement a strategic plan to ensure the long term viability of Metals USA for its constituents." The Company intends to continue its business operations without interruption during the Chapter 11 process. Metals USA has sufficient cash flow and cash reserves to fund ongoing operations. The Company's key supplier relationships remain intact and the Company will continue its commitment to deliver quality products and just-in-time service to its customer base. The U.S. Bankruptcy Code allows a company that is subject to a Chapter 11 filing to continue to operate its business as usual and provides special protections for vendors, suppliers, employees and others who provide goods and services to that company after the filing. "Chapter 11 provides us a process and framework where we can continue to conduct business operations while reorganizing our finances to put Metals USA on a sound footing for the future," added Mr. Kirksey. "Our employees have demonstrated their support to get Metals USA through these difficult times. We sincerely appreciate their loyalty and dedication." Metals USA, Inc. is a leading metals processor and distributor in North America. With a customer base of more than 65,000, Metals USA provides a wide range of products and services in the Carbon Plates and Shapes, Flat-Rolled Products, and Building Products markets. For more information, visit the Company's website at http://www.metalsusa.com ----------------------------------------------------------------- [00004] METALS USA CHAPTER 11 DATABASE ----------------------------------------------------------------- Lead Debtor: Metals USA Inc dba Mollie Marie Acquisition Corp Three Riverway, Suite 600 Houston, TX 77056 Bankruptcy Case No.: 01-42530 Debtor affiliates filing separate chapter 11 petitions: Case No. Debtor Entity -------- ------------- 01-42531 Metals USA Management Co LP 01-42532 MUSA GP Inc 01-42533 MUSA LP Inc 01-42534 Metals USA Finance Corp 01-42535 Metals USA Realty Company 01-42536 Metals Receivables Corporation 01-42537 Jeffreys Real Estate Corporation 01-42538 Aerospace Specification Metals Inc 01-42539 Aerospace Specification Metals-UK Inc 01-42540 Allmet Building Products LP 01-42541 Allmet GP Inc 01-42542 Allmet LP Inc 01-42543 Cornerstone Building Products Inc 01-42544 Cornerstone Metals Corporation 01-42545 Cornerstone Patio Concepts LLC 01-42546 Harvey Titanium Ltd 01-42547 Interstate Steel Supply Company of Maryland 01-42548 i-Solutions Direct Inc 01-42549 Metalmart Inc 01-42550 Metals Aerospace International Inc 01-42551 Metals USA Building Products Southeast Inc 01-42552 Metals USA Carbon Flat Rolled Inc 01-42553 Metals USA Flat Rolled Central Inc 01-42554 Metals USA Specialty Metals Northcentral, Inc 01-42555 WSS Transportation Inc 01-42556 Metals USA Plates and Shapes Northeast LP 01-42557 Levinston Steel GP Inc 01-42558 Levinson Steel LP Inc 01-42559 Metals USA Plates and Shapes Southcentral Inc 01-42560 Metals USA Plates and Shapes Southeast I 01-42561 Queensboro LLC 01-42562 Metals USA Plates and Shapes Southwest LP 01-42563 Instel GP Inc 01-42564 Instel LP Inc 01-42565 Metals USA Specialty Metals Northwest Inc 01-42566 Metals USA Contract Manufacturing Inc 01-42567 Metals USA Plates and Shapes Northcentral Inc 01-42568 National Manufacturing Inc 01-42569 Texas Aluminum Industries Inc 01-42570 Valley Aluminum Co 01-42571 Valley Aluminum of Nevada Inc 01-42572 Western Awning CO Inc 01-42573 Wilkof-Morris Steel Corporation Chapter 11 Petition Date: November 14, 2001 Court: United States Bankruptcy Court Southern District of Texas Houston Division 5401 Bob Casey United States Courthouse 515 Rusk Ave Houston, Texas 77002 Telephone (713) 250-5500 Judge: The Honorable William R. Greendyke Debtors' Counsel: Zack A. Clement, Esq. Johnathan C. Bolton, Esq. Robert F. Gray, Esq. Linda L. Addison, Esq. I. Clay Rogers, Esq. Davor S. Vukadin, Esq. FULBRIGHT & JAWORSKI, L.L.P. 1301 McKinney, Suite 4100 Houston, TX 77010-3095 Telephone (713) 651-5434 Total Assets: $1,104,800,000 Total Liabilities: $724,700,000 ----------------------------------------------------------------- [00005] LIST OF METALS USA'S 20 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Type of Claim Claim Amount ------ ------------- ------------ US Trust Company N.A. Bonds $200,000,000 Garrett P. Smith One Embarcadero Center Suite 2050 San Francisco, CA 94111-3709 Nucor Trade $8,782,019 2100 Rexford Road Charlotte, NC 28211 IPSCO Steel Trade $5,611,814 650 Warrenville Road Suite 500 Lisle, Illinois 60532 National Steel Corp. Trade $5,444,294 4100 Edison Lakes Parkway Mishawaka, IN 46545 LTV Steel Trade $5,165,106 200 Public Square Suite 16-614 Cleveland, OH 44114 Commonwealth Aluminum Trade $4,859,913 PO Box 480 Lewisport, KY 42351-0480 Chaparral Steel Company Trade $4,533,373 300 Ward Road Midlothian, TX 76065 Alcoa Trade $4,258,103 53 Pottsville St. Cressona, PA 17929 AK Steel Corp. Trade $4,426,045 703 Curtis St. Middletown, OH 45045 US Steel Corp. Trade $3,850,491 2021 Spring Rd. Suite 700 Oak Brook, IL 60523 Bethlehem Steel Trade $3,280,013 1st Floor/Main Rte 12 & Hwy 149 Chesterton, IN Mexinox USA Trade $3,259,609 2275 Halfday Rd. #127 Bannockburn IL 60015-1201 Metal Tech, Inc. Trade $3,191,590 2400 2nd Ave. Pittsburgh, PA 15219 Mitsui and Co. (USA) Trade $3,000,000 2500 Windy Ridge Parkway Suite 1500 Atlanta, GA 30339 Ormet Alum Hannibal Trade $2,946,953 PO Box 164 Hannibal, OH 43931-0164 Steel Dynamics Inc. Trade $2,609,006 4500 County Rd. 59 Butler, IN 46721 Usinor Steel Corp. Trade $1,992,618 345 Hudson Street New York, NY 10014 Ameristeel Trade $1,973,119 5100 W. Lemon St. Suite 312 Tampa, FL 33609 Geneva Steel Trade $1,250,509 PO Box 2500 Provo, UT 84603 Atlas Tube Trade $1,162,789 200 Clark Street Harrow, Ontario ----------------------------------------------------------------- [00006] DEBTORS' MOTION FOR AUTHORITY TO USE CASH COLLATERAL ----------------------------------------------------------------- On March 14, 2001, Metals USA, Inc., and each of its debtor- affiliates entered into two new financing agreements with Bank of America N.A. and PNC Bank N.A. These Credit Facilities provide the Debtors with access to $450,000,000 in the form of a $350,000,000 revolving credit facility and a $100,000,000 receivables securitization facility. Prior to any syndication of these facilities, BofA and PNC split the lending commitment 50/50. All borrowings are secured by [recently recorded] mortgages on certain of the Debtors' real estate and liens on all of the Company's receivables (not otherwise pledged under the accounts receivable facility), inventories, property and equipment, virtually every other asset owned and not otherwise pledged, and all cash and cash proceeds from that collateral. The Debtors tell Judge Greendyke that they need access -- immediately -- to that Cash Collateral to fund their on-going working capital needs. Without access to the Lenders' Cash Collateral, the Company can't meet its day-to-day expenses. The Debtors argue that the Bank Group is adequately protected. At the Petition Date, the Debtors owe the Bank Group approximately $250,000,000. The value of the Debtors' inventory, receivables and equipment pledged to the Bank Group is well over $500,000,000. The Debtors propose to (i) segregate all cash the constitutes Cash Collateral, (ii) provide the Bank Group with enhanced levels of post-bankruptcy financial reporting, and (iii) grant the Bank Group a post-petition replacement lien, "leaving the Bank Group well protected." The Debtors ask for immediate non-consensual authority to use the Lenders' Cash Collateral on an interim basis pending a final Cash Collateral Hearing in exchange for the adequate protection package offered. Between now and the time of that Final Hearing, the Debtors plan to (i) sit down and attempt to hammer-out a consensual permanent Cash Collateral Order with the Bank Group or (ii) secure a debtor-in-possession financing facility from the Bank Group or another lender and bring that deal to the Court for approval. At an Emergency Hearing convened yesterday, Judge Greendyke finds that the Debtors have an immediate need to use the Lenders' Cash Collateral to avoid immediate and irreparable harm to their estates. The Debtors may use the Lenders' Cash Collateral to fund their day-to-day post-petition operating expenses. The Debtors' adequate protection proposal is approved. The Debtors are directed to segregate and carefully account for all Cash Collateral. The Bank Group is granted a replacement lien to the extent that the Debtors use any of the Bank Group's cash collateral. Judge Greendyke will convene a Final Cash Collateral Hearing at 1:30 p.m. on December 5, 2001. *** End of Issue No. 1 ***