Metal Management, Inc.: Information from Answers.com Mobile

Company Perspectives
The rationale for creating Metal Management was to enhance the quality, integrity and scope of services available to industrial scrap generators and consumers by pooling and consolidating the resources of many of the nation's premier scrap companies.
Key Dates
1981: General Parametrics Corporation formed as computer graphics company.
1986: General Parametrics is taken public.
1996: Name is changed to Metal Management, Inc., and focus shifts to recycling.
2000: Company declares Chapter 11 bankruptcy.
2001: Company emerges from bankruptcy protection.
2004: Daniel W. Dienst is named CEO.
2006: Company gains listing on New York Stock Exchange.

Metal Management, Inc.

Type: Public Company
Address: 500 North Dearborn Street, Suite 405, Chicago, Illinois, 60610, U.S.A.
Telephone: (312) 645-0700
Fax: (312) 645-0714
Web: http://www.mtlm.com
Employees: 1,829
Sales: $2.2 billion (2007)
Stock Exchanges: New York
Ticker Symbol: MM
Incorporated: 1981 as General Parametrics Corporation
NAIC: 423930 Recyclable Material Merchant Wholesalers
SIC: 5093 Scrap & Waste Materials

One of the largest full-service metal recyclers in the United States, Chicago-based Metal Management, Inc., operates about 50 recycling facilities in 16 states. The company collects scraps of ferrous metal, iron and steel, and nonferrous metals, including aluminum, brass, copper, nickel-based materials, titanium, and high-temperature alloys. Metal Management then processes the scrap to produce usable nonferrous metals and ferrous metal products, such as shredded, sheared, cold briquetted, and bundled scrap metal, as well as turnings, cast, and broken furnace iron.

The company's supplies of metal come from junkyards, railroads, demolition firms, steel plants, and manufacturers. Customers include mini steel mills, foundries, and metal brokers. Each year the company sells about five million tons of ferrous scrap and nearly 500 million pounds of nonferrous scrap. Shipping out of ports in New Jersey and Connecticut, Metal Management exports products around the world to such countries as China, Indonesia, Korea, Malaysia, Taiwan, Turkey, and Mexico. Metal Management is a public company listed on the New York Stock Exchange.

Corporate Lineage Dates to 1981

Although Metal Management took shape in the 1990s, the corporation that would be used to house its metal recycling assets was established in Berkeley, California, in 1981 as General Parametrics Corporation by Herbert B. Baskin, a researcher at IBM who in the 1960s developed the first computer scanner able to recognize ordinary typewriting. In the mid-1970s he went to work for Texas minicomputer manufacturer Datapoint where he developed a color graphics system. After growing wealthy from Datapoint stock he retired at the age of 47.

Less than two years later, however, he felt the need to return to work. With $100,000 of his own money and another $500,000 supplied by friends and others he launched General Parametrics to develop an electronic method of showing graphics without the use of photography, which would be ideal for producing corporate slide show presentations. At the time, such shows cost as much as $4,000 to produce because they required the services of a graphic artist. Baskin developed a slide presentation software package, PictureIt, that could be run on an IBM-compatible personal computer.

The company also developed hardware called VideoShow that allowed a computer monitor, television, or video project to display the presentation. For a time, General Parametrics was a high-flying company, going public in 1986, but in time its star would be eclipsed by Microsoft's Power Point and other slide show programs. By 1996 Baskin was ready to sell the company and he found willing buyers who had no interest in computer graphics. Rather, they wanted to consolidate the scrap metal industry in much the same fashion as Chicago's Waste Management had done with great acclaim in solid-waste collection. Hence, they called their company Metal Management.

The men behind Metal Management were investment banker T. Benjamin Jennings, attorney Gerard Jacobs, and Donald F. Moorehead, the chief executive officer of Dallas-based USA Waste Services Inc., the third largest player in the waste management industry and a mutual client of Jennings and Jacobs. The men knew firsthand about consolidation in the waste-management field. It was through USA Waste that they became interested in metal recycling after the company acquired a trash-hauling operation that brought with it Emco Recycling Corporation, a full-service Phoenix yard that included five feeder yards and generated about $70 million in revenues.

EMCO was itself a local result of consolidation, formed in 1993 in answer to a couple of difficult years in the scrap business. In 1993 a pair of family-owned Phoenix-area scrap yards, Empire Metals Inc. and Copperstate Metals Inc. merged to create EMCO. Later in the year it added a third metal recycler, Valley Steel and Supply Co. Moorehead, Jennings, and Jacobs recognized that what EMCO was doing on a small scale could be done nationally in a manner similar to what had taken place in waste management. They scouted around for a public company to acquire EMCO, and whose stock they could then use as currency to buy more recyclers and create an industry consolidator.

General Parametrics Sold: 1995

In 1995 the Jennings, Jacobs and Moorehead-led investment group bought out Baskin and his 27 percent stake in General Parametrics and began to exert their influence on the company. They then took steps to redirect General Parametrics into metal recycling. In April 1996 a $12.8 million acquisition of EMCO was negotiated and approved by General Parametrics shareholders, which also agreed to change the company name to Metal Management Inc. In addition, Jennings was named chairman of the board and chief development officer, his primary task to line up further acquisitions, Jacobs became president and chief executive officer, and Moorehead gained a seat on the board of directors. Shareholders also agreed to double the amount of common shares of stock to prepare for further acquisitions, and approved moving the refashioned company's headquarters to Chicago, where Jennings and Jacobs lived. General Parametric's printer business continued to operate out of Berkeley until it was sold in July of that year. A month later the Jacobs-Jennings-Moorehead group won complete control of Metal Management in a proxy fight.

In the final months of 1996 Metal Management lined up acquisitions that were completed in January 1997. They included the five companies that comprised California-based The MacLeod Group: California Metals Inc., Firma Inc., MacLeod Metals Inc., Firma Plastics, and Trojan Trading Inc. Together they generated about $35 million in annual sales. Also in early 1997 Metal Management completed the acquisition of HouTex Metals Company, Inc., which added another $20 million in annual sales and established a base from which Metal Management hoped to consolidate the south-central United States.

A spate of acquisition agreements followed in the rest of 1997, with some of them closing in 1998. In May 1997 Reserve Iron & Metal L.P., a Cleveland-based ferrous metal-breaking operation, was acquired. The following month Metal Management added Maumee, Ohio-based The Isaac Group of companies, which included Ferrex Trading Corporation; the Isaac Corporation; Paulding Recycling, Inc.; and Briquetting Corporation of America, Inc. Isaac Group produced about $175 million a year in sales, mostly from the sale of ferrous briquettes to steel minimills and integrated mills located in Chicago, Cleveland, Detroit, and Pittsburgh.

Much of the raw material came from cast-iron borings from car engine blocks produced by the likes of General Motors at their foundry operation. Proler Southwest, Inc., and sister company Proler Steelworks L.L.C. were added in August 1997. The former was a Houston ferrous scrap recycler that served area steelmakers as well as Mexican mills, while the latter operated a small steel scrap processing facility in Jackson, Mississippi. The most significant deal of 1997, first announced in March 1997 but not completed until the end of the year, was the $111 million cash and stock acquisition of Chicago-based Cozzi Iron & Metal Inc., which processed about 1.5 million tons of ferrous scrap per year. The deal also led to a restructuring of Metal Management's senior leadership ranks. Albert Cozzi became president and chief operating officer while his brother Frank was named vice-president. They also became directors of the corporation.

Several other deals negotiated in 1997 closed in early 1998. They included Hartford, Connecticut-based Aerospace Metals Inc., which recycled titanium and high-temperature nickel and cobalt alloy scraps from aircraft engine, airframe, and helicopter plants; Houston Compressed Steel Corporation, a processor and dismantler with two yards in Houston; and the half-interest in Salt River Recycling L.L.C., a Phoenix shredder not already acquired through the Cozzi deal. Four more deals were completed in February and March: Accurate Iron and Metal of Kankakee, Illinois; Arizona-based Ellis Metals Inc. with operations in Tucson and Casa Grande; and Superior Forge, Inc., a California aluminum scrap operation.

When fiscal 1998 came to a close on March 31, Metal Management had generated sales of $570 million and posted a net loss of $41.3 million. Revenues would grow to $805.3 million in fiscal 1999 as the company continued its acquisition spree despite a steady decline in the company's stock price, which fell from $30 a share in the fall of 1997 to slightly more than $2 a share a year later. "Seeming to have a 'spare no expense' outlook," according to American Metal Market, Metal Management's "principals agreed in 1998 to lay out $46.4 million in cash for the purchase of M. Kimerling & Sons Inc., Birmingham, Ala., and another $105 million in cash for three East Coast operations, Naporano Iron & Metal CO. and Nimco Shredding Co., Newark, N.J., and Michael Schiavone & Sons Inc., North Haven, Conn." Metal Management was not the only industry consolidator in trouble; Canada's Philip Services Corp. put itself up for sale, but Metal Management was so strapped by that time that it had to pass on buying the business, unable to take advantage of the situation. Instead, management maintained that it would focus on developing synergies between its existing units.

Founders Leave

Matters only worsened, however, as low-cost steel imported from Eastern Europe, Asia, and South America crippled demand for recycled metal, the prices of which were cut in half in 1998. By the start of 1999 a new executive management committee, headed by Albert Cozzi, took charge and soon Jacobs resigned as president and CEO. "To the chagrin of shareholders," reported American Metal Market, "the company sold him a property--Superior Forge Inc., Huntington Beach, Calif.--for less than MTLM had paid for it in July 1997." Later in 1998 Jennings also left the company.

Cozzi became CEO and attempted a turnaround. Although in debt to the tune of $350 million, Metal Management was still willing to acquire Arizona-based National Metals Co. out of bankruptcy in October 1998. By the end of the year business conditions appeared to be improving. The worst of the economic crisis in Asia was over, creating more demand for metals in the region and causing recyclers to no longer dump surplus metals at rock-bottom prices in the United States. Metal Management was able to trim its net losses to $13.9 million on sales of $915.1 million in fiscal 2000, but as the U.S. economy lapsed into recession, fiscal 2001 proved far more difficult.

In November 2000 Metal Management sought Chapter 11 bankruptcy protection. To turn around the company, Daniel W. Dienst, a former investment banker, was hired. He recognized that the company had taken on too much debt, although it had bought a "bunch of the best businesses available at the time," he told Recycling Today in a 2005 profile. He maintained, "Metal Management in the late 1990s was a great thesis, but the execution was not there, and markets clearly did not cooperate."

Metal Management emerged from bankruptcy protection in June 2001 with a clean slate financially but still had to contend with a metals market that remained in one of the worst slumps in recent memory. The company lost another $6 million in sales of $464.8 million in fiscal 2002. However, the demand for scrap in export markets led to a surge in prices that significantly improved Metal Management's fortunes. Revenues jumped to $770 million in fiscal 2003, and the company recorded net earnings of $20.5 million. The price of Metal Management stock rose accordingly, from $2 a share when it emerged from Chapter 11 to around $20 in the autumn of 2003. The sector that was doing particularly well was stainless steel scrap. To take advantage of rising demand, Metal Management doubled the number of its facilities that handled stainless steel scrap, adding it to the Denver and Toledo facilities.

Revenues topped $1 billion in fiscal 2004 while net income increased to $51.4 million. Business continued to thrive in fiscal 2005 with sales improving to more then $1.7 billion and net income to $9.25 million. The company also focused on nonferrous metals and became involved in the port management industry through joint ventures. In 2005 it joined forces with Donjon Marine Inc. to create Port Albany Ventures LLC to provide stevedoring and marine services operations near the Port Albany Terminal on the Hudson River in upstate New York. It also formed Metal Management Nashville LLC with partner Houchens Industries Inc. to operate scrap metal facilities in Nashville and Bowling Green, Kentucky.

In the meantime, Albert and Frank Cozzi, along with another brother and their sister, left the company in early 2004, the result, according to American Metal Market, of a "boardroom coup." After joining the board of directors in June 2001, Dienst had become chairman in April 2003, and succeeded Albert Cozzi as CEO.

Ferrous selling price declined in fiscal 2006, leading to a dip in revenues for the year to $1.6 billion and net earnings to $60.3 million. Nevertheless, it remained a strong performance, one that allowed Metal Management to gain a listing on the New York Stock Exchange in 2006. The company also resumed external expansion, acquiring 20 southern scrap yards from Mississippi-based Morris Recycling Inc. at the cost of $25.8 million, as well as an East Chicago scrap yard from OmniSource Corp. of Fort Wayne, Indiana. In early 2007 the company acquired a scrap yard in The Bronx, New York. A short time later fiscal 2007 came to a close, producing record results: more than $2.2 billion in sales and $116.4 million in net income.

Principal Subsidiaries

CIM Trucking, Inc.; Metal Management Aerospace, Inc.; Metal Management Northeast, Inc.; Metal Management Proler Southwest Inc.; Metal Management West, Inc.

Principal Competitors

Schnitzer Steel Industries, Inc.; Appliance Recycling Centers of America; Environmental Energy Services Inc.