8-K 1 0001.txt CURRENT REPORT ON FORM 8-K 1 ============================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) August 31, 2000 --------------- Commission File Number 33-64325 -------- REUNION INDUSTRIES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 06-1439715 ------------------------ ------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) 11 STANWIX STREET, SUITE 1400 PITTSBURGH, PENNSYLVANIA 15222 ------------------------------------------------------------ (Address of principal executive offices, including zip code) (412) 281-2111 ---------------------------------------------------- (Registrant's telephone number, including area code) Page 1 of 139 pages. Exhibit index is on page 17. ========================================================================== 2 FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS This Current Report on Form 8-K contains forward-looking statements as defined by Section 21E of the Securities Act of 1934, as amended, concerning the Registrant's expectations about future and pro forma results of operations, financial position and cash flows, which are dependent upon future events beyond the Registrant's control. Note that all forward-looking statements involve risks and uncertainties including, without limitation, factors which could cause the future results and shareholder values to differ significantly from those expressed in the forward-looking statements. In light of the risks and uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by Reunion or any other person that the forward- looking statements will occur. 3 ITEM 2. Acquisition or Disposition of Assets. ------------------------------------- On August 31, 2000 RII Investment Corp. ("RII"), a wholly-owned subsidiary of Reunion Industries, Inc. (the "Registrant"), sold its entire 80.47% equity interest, consisting of 12,642 "ordinary" voting shares (the "Shares"), in Data Packaging Holdings Limited ("DPHL"), an Irish company, to Tintarent Limited (the "Buyer"), an Irish company which is a subsidiary of Trend Technologies, Inc. DPHL is a holding company which owns all of the outstanding common stock of Data Packaging Limited ("DPL"), an Irish company engaged in the business of manufacturing and distributing injection molded thermoplastics components, principally in Ireland. The sale of the Shares (the "Sale Transaction") was consummated pursuant to a Share Purchase Agreement dated August 4, 2000 (the "Sale Agreement") among the Buyer, the Registrant, RII and the other shareholders of DPHL. The consideration received by RII in the Sale Transaction was $11,325,000 in cash, net of a $1,395,000 repayment of the Registrant's indebtedness to DPL. In addition, completion of the Sale Transaction resulted in the elimination of approximately $2,000,000 of debt and preferred stock obligations of DPHL and DPL from the Registrant's consolidated balance sheet. The consideration is subject to a possible post-closing reduction if the adjusted net working capital of DPHL and DPL as of the closing date is determined to be less than approximately $292,000, such adjustment to be in the amount of the shortfall, if any. The amount of consideration was determined by negotiation among the Buyer and the selling shareholders. In the Sale Agreement, the Registrant agreed not to engage in the business of manufacturing and distributing injection molded thermoplastics components in the Ireland and Northern Ireland for two years. However, the Registrant is not restricted from engaging in such business anywhere else in the world, and it intends to continue to do so through its Plastics Group division, ORC Plastics, which has facilities in New York, North Carolina and Indiana and which manufactures high volume, precision plastic products and thermoset compounds and provides engineered plastics services. ITEM 7. Financial Statement and Exhibits. --------------------------------- (a) Financial Statements None. 4 (b) Pro Forma Financial Information REUNION INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS The accompanying unaudited pro forma consolidated condensed financial statements and related notes are presented in accordance with the SEC rules and regulations to show the pro forma effects of the merger of all of the assets and business of Chatwins Group with and into Reunion, the simultaneous acquisition of Kingway and the sale of Reunion's investment in Data Packaging Holdings Limited (DPHL), an Irish holding company which owned all of the outstanding common stock of Data Packaging Limited, Reunion's Irish plastics business. The merger was completed on March 16, 2000 and is being accounted for as a purchase under APB Opinion No. 16 "Business Combinations" with Chatwins Group as the acquirer for purposes of applying purchase accounting. Accordingly, the Chatwins Group assets and liabilities were accounted for at historical book values and the assets and liabilities of Reunion were revalued at their estimated fair value. The excess of purchase price over fair value of assets acquired and liabilities assumed (goodwill) for the acquisition of the approximately 63% of Reunion common stock not previously owned by Chatwins Group has been capitalized and is being amortized over 15 years. Simultaneously with the closing of the merger and related refinancing, Reunion acquired Kingway. This acquisition was accounted for as a purchase under APB Opinion No. 16. The disposition of DPHL occurred on August 31, 2000. The proceeds of $11,330,000 were used to repay debt. The unaudited pro forma consolidated condensed balance sheet as of June 30, 2000 includes the effects of the March 16, 2000 merger and acquisition and is based on the assumption that the sale of DPHL was completed on June 30, 2000. The unaudited pro forma consolidated condensed income statement for the six months ended June 30, 2000 is based on the assumptions that the merger, the simultaneous acquisition of Kingway and the sale of DPHL were completed January 1, 2000. The unaudited pro forma consolidated condensed income statement for the year ended December 31, 1999 is based on the assumption that the merger, the simultaneous acquisition of Kingway and the sale of DPHL were completed January 1, 1999. The Reunion Industries historical financial information presented in the unaudited pro forma consolidated condensed balance sheet and statement of operations at and for the six months ended June 30, 2000 is derived from Reunion's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000. The Reunion Industries pro forma financial information presented in the unaudited pro forma consolidated condensed statement of operations for the year ended December 31, 1999 is derived from Item 7(b) of Reunion's Current Report on Form 8-K/A as filed on May 4, 2000. 5 Pro forma data are based on assumptions and include adjustments as explained in the notes to the unaudited pro forma consolidated condensed financial statements. The pro forma data are not necessarily indicative of the financial results that would have occurred had the transactions been effective on the dates indicated above, and should not be viewed as indicative of operations in future periods. The unaudited pro forma consolidated condensed financial statements should be read in conjunction with the accompanying notes and with Reunion's, Chatwins Group's and Kingway's financial statements. The financial statements, Management's Discussion and Analysis of Financial Condition and Results of Operations and a description of the business of Chatwins Group are included under Item 7(a) of Reunion's Current Report on Form 8-K/A as filed on May 4, 2000. The financial statements of Kingway are included under Item 7(a) of Reunion's Current Report on Form 8-K/A as filed on May 4, 2000. 6 REUNION INDUSTRIES, INC. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET June 30, 2000 (in thousands) Reunion Industries Less DPHL Pro Forma Pro Forma Historical Historical Adjustments Combined ---------- ---------- ------------- ----------- ASSETS: Cash $ 1,216 $ (723) $ 11,224 (1) (11,224)(1) $ 493 Receivables 39,876 (1,387) - 38,489 Inventories 22,098 (670) - 21,428 Other Current 5,271 (372) - 4,899 -------- -------- ------- -------- Total Current Assets 68,461 (3,152) - 65,309 Property - net 55,066 (6,113) - 48,953 Goodwill 21,418 (2,866) - 18,552 Other Assets 17,605 (4) (860)(2) 16,741 -------- -------- -------- -------- Total Assets $162,550 $(12,135) $ (860) $149,555 ======== ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Current Long-Term Debt $ 9,707 $ (165) $(1,852)(1) $ 7,690 Current Long-Term Debt- Related Parties 2,998 - - 2,998 Revolving Credit 33,670 - (5,756)(1) 27,914 Trade Payables 19,464 (1,752) - 17,712 Accrued Other 12,886 (661) (50)(1) (107)(1) 485 (3) 12,553 Net Liabilities of Discontinued Operations 2,600 - - 2,600 -------- -------- -------- -------- Total Current Liabilities 81,325 (2,578) (7,280) 71,467 Long-Term Debt 56,376 (1,494) (3,459)(1) 51,423 Long-Term Debt-Related Party 1,017 - - 1,017 Other Liabilities 4,353 (1,186) - 3,167 Intercompany - (6,108) 11,224 (1) (4,631)(2) (485)(3) - -------- -------- -------- -------- Total Liabilities 143,071 (11,366) (4,631) 127,074 -------- -------- -------- -------- 7 REUNION INDUSTRIES, INC. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (Continued) June 30, 2000 (in thousands) Reunion Industries Less DPHL Pro Forma Pro Forma Historical Historical Adjustments Combined ---------- ---------- ------------- ----------- Minority Interests 3,249 (769) - 2,480 -------- -------- -------- -------- Stockholders' Equity: Common Stock 152 - - 152 Paid-in Capital 24,608 - - 24,608 Retained Earnings (accumulated deficit) (8,530) - 3,771 (2) (4,759) -------- -------- -------- -------- Total Stockholders' Equity 16,230 - 3,771 20,001 -------- -------- -------- -------- Total Liabilities and Stockholders' Equity $162,550 $(12,135) $ (860) $149,555 ======== ======== ======== ======== 8 REUNION INDUSTRIES, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (in thousands, except per share amounts) Reunion Industries Less DPHL Pro Forma Pro Forma Historical Historical Adjustments Combined ---------- ---------- ------------- ----------- SALES $ 88,819 $ (3,174) $ 15,243 (e) $100,888 Operating Costs and Expenses: Cost of Sales 71,167 (2,696) 12,151 (e) 80,622 Selling, General and Admin. 10,717 (428) 2,375 (e) 12,664 Amortization of Goodwill 428 (95) 294 (a) 627 Other 119 18 260 (e) 397 -------- -------- -------- -------- OPERATING PROFIT (LOSS) 6,388 27 163 6,578 OTHER (INCOME) EXPENSE: Interest Expense 5,170 (87) (33)(b) 5,050 Equity loss from affiliate 296 - (296)(c) - -------- -------- -------- -------- Income (Loss) from Continuing Operations Before Taxes 922 114 492 1,528 Income Tax Expense (Benefit) 366 20 225 (d) 611 -------- -------- -------- -------- Income (Loss) from Continuing Operations 556 94 267 917 Preferred Stock Dividend Accretions 95 - - 95 -------- -------- -------- -------- Income (Loss) Available to Common Stockholders $ 461 $ 94 $ 267 $ 822 ======== ======== ======== ======== 9 REUNION INDUSTRIES, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (Continued) FOR THE SIX MONTHS ENDED JUNE 30, 2000 (in thousands, except per share amounts) Reunion Industries Less DPHL Pro Forma Pro Forma Historical Historical Adjustments Combined ---------- ---------- ------------- ----------- Income (Loss) from Continuing Operations per Common Share: Basic $ 0.04 $ 0.07 ======== ======== Diluted $ 0.04 $ 0.07 ======== ======== Weighted Average Number of Common Shares Basic 11,214 1,026* 12,240 ======== ======== ======== Diluted 11,214 1,026* 12,240 ======== ======== ======== * - Represents the effect of the 2,490,000 public shares of Reunion not retired in the merger assuming the merger occurred on January 1, 2000 (2,490,000 x 75 days in pre-merger period / 182 days). 10 REUNION INDUSTRIES, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (in thousands, except per share amounts) Reunion Industries Less DPHL Pro Forma Pro Forma Pro Forma Historical Adjustments Combined ---------- ---------- ------------- ----------- SALES $214,717 $ (13,999) $ - $200,718 Operating Costs and Expenses: Cost of Sales 176,750 (11,937) - 164,813 Selling, General and Admin. 26,599 (1,539) - 25,060 Amortization of Goodwill 1,373 (191) 72 (f) 1,254 Other 609 115 - 724 -------- -------- -------- -------- OPERATING PROFIT (LOSS) 9,386 (447) (72) 8,867 OTHER (INCOME) EXPENSE: Interest Expense 11,684 (329) (1,428)(g) 9,927 Provision for Bargo Judgment and Costs 1,646 - - 1,646 Bargo Settlement Gain (3,617) - - (3,617) Equity loss from affiliate - - - - Other (Income) Expense (672) - - (672) -------- -------- -------- -------- Income (Loss) from Continuing Operations Before Taxes 345 (118) 1,356 1,583 Income Tax Expense (Benefit) 138 221 274 (h) 633 -------- -------- -------- -------- Income (Loss) from Continuing Operations 207 (339) 1,082 950 Preferred Stock Dividend Accretions 1,598 - - 1,598 -------- -------- -------- -------- Income (Loss) Available to Common Stockholders $ (1,391) $ (339) $ 1,082 $ (648) ======== ======== ======== ======== 11 REUNION INDUSTRIES, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (Continued) FOR THE YEAR ENDED DECEMBER 31, 1999 (in thousands, except per share amounts) Reunion Industries Less DPHL Pro Forma Pro Forma Pro Forma Historical Adjustments Combined ---------- ---------- ------------- ----------- Income (Loss) from Continuing Operations per Common Share: Basic $ (0.12) $ (0.05) ======== ======== Diluted $ (0.12) $ (0.05) ======== ======== Weighted Average Number of Common Shares Basic 11,974 11,974 ======== ======== Diluted 11,974 11,974 ======== ======== 12 REUNION INDUSTRIES, INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (in thousands) Note 1. Pro Forma Adjustments to the Unaudited Pro Forma Consolidated Condensed Balance Sheet Adjustments to the unaudited pro forma combined balance sheet as of June 30, 2000: (1) To record the receipt of $11.3 million of cash proceeds from the disposition and the uses of the proceeds as follows: Uses of proceeds: Classifications of Debt and Other ------------------------------------------------ Long Total Current Revolver -term Other Uses -------- -------- -------- -------- -------- Revolver Paydown: Overadvance $ - $ 2,819 $ - $ - $ 2,819 Other - 2,937 - - 2,937 -------- -------- -------- -------- -------- - 5,756 - - 5,756 -------- -------- -------- -------- -------- Debt Paydown: Note payable 1,183 - - - 1,183 Term loan A - - 542 - 542 Term loan B 669 - 2,917 - 3,586 Accrued interest - - - 50 50 -------- -------- -------- -------- -------- 1,852 - 3,459 50 5,361 -------- -------- -------- -------- -------- Closing costs - - - 107 107 -------- -------- -------- -------- -------- Totals $ 1,852 $ 5,756 $ 3,459 $ 157 $ 11,224 ======== ======== ======== ======== ======== (2) Represents the elimination of the investment in DPHL upon disposition and resulting $3.8 million gain net of $0.9 million tax effect recorded as a reduction of deferred tax assets related to net operating loss carryforwards acquired in the merger. (3) Represents the establishment of a reserve for closing costs and estimated working capital adjustments pursuant to the share purchase agreement. 13 Note 2. Pro Forma Adjustments to the Unaudited Pro Forma Consolidated Condensed Statements of Operations Adjustments to the unaudited pro forma consolidated condensed statement of operations for the six months ended June 30, 2000: (a) To adjust the amortization of goodwill related to the merger of Chatwins Group and Reunion, as well as the amortization of goodwill related to the acquisition of Kingway over a 15-year period assuming such events occurred on January 1, 2000. No adjustments have been made to depreciation. The book values of property for Reunion and Kingway are assumed to approximate fair value because substantially all of these assets had been recently restated to fair value as a result of the application of purchase accounting under APB Opinion 16. (b) To record the effect on interest expense for the first six months of 2000 resulting from the merger, acquisition and the application of sale proceeds to borrowings. It was assumed that if Reunion had been engaged in the merger with Chatwins Group, the acquisition of Kingway and the disposition of DPHL all at the same time, the $5.0 million term loan B facility would not have been necessary and the remaining sale proceeds would have been used to repay a $1.2 million note payable then applied to revolver borrowings: Pro Forma Average Pro Forma Annual Rates Balance Interest ------------ -------- -------- Pro Forma Interest Expense: Senior notes 13% $ 24,975 $ 1,623 Revolving credit facility Prime + .50% 46,780 1,266 Term loan A Prime + .75% 25,800 1,158 Other debt (actual first half 2000) 769 -------- Total Pro Forma Cash Interest 4,816 Amortization of deferred financing costs 234 -------- Total Pro Forma Interest 5,050 Less: Historical Interest Expense (excluding DPHL) (5,083) -------- Pro Forma Interest Adjustment $ (33) ======== A 0.125% change in interest rates would affect interest expense by approximately $33 for the six months ended June 30, 2000. (c) To eliminate Chatwins Group's equity loss from continuing operations of Reunion. (d) To adjust the proforma combined income tax expense for continuing operations to an effective rate of approximately 40% of pro forma combined income from continuing operations before taxes. (e) Represents the operating results of businesses merged (excluding DPL) and acquired on March 16, 2000 for the period from January 1, 2000 through March 15, 2000. 14 Adjustments to the unaudited pro forma consolidated condensed statement of operations for the year ended December 31, 1999: (f) To record the amortization of goodwill related to the merger of Chatwins Group and Reunion, as well as the amortization of goodwill related to the acquisition of Kingway over a 15-year period assuming such events occurred on January 1, 1999. No adjustments have been made to depreciation. The book values of property for Reunion and Kingway are assumed to approximate fair value because substantially all of these assets had been recently restated to fair value as a result of the application of purchase accounting under APB Opinion 16. (g) To record the effect on interest expense for 1999 assuming the DPHL sale proceeds were received on January 1, 1999. It was assumed that if Reunion had been engaged in the merger with Chatwins Group, the acquisition of Kingway and the disposition of DPHL all at the same time, the $5.0 million term loan B facility would not have been necessary and the remaining sale proceeds would have been used to repay a $1.2 million note payable then applied to revolver borrowings: Pro Forma Average Effect on Annual Rates Balance Interest ------------ -------- -------- Reduction in Interest Expense: Term loan B 20% 5,000 $ (1,000) Revolving credit facility Prime + .50% 4,990 (428) -------- Effect on Interest Expense $ (1,428) ======== A 0.125% change in interest rates would affect interest expense by approximately $78 for 1999. (h) To adjust the proforma combined income tax expense for continuing operations to an effective rate of approximately 40% of pro forma combined income from continuing operations before taxes. 15 (c) Exhibits Exhibit No. Description of Exhibit ----------- ---------------------- 10.22 Share Purchase Agreement dated August 4, 2000 among the Registrant, RII Investment Corp., Enterprise Ireland, Paul Walsh, Donal Lawlor, Brendan Murtagh and Tintarent Limited. 10.23 Deed of Indemnity dated August 4, 2000 between RII Investment Corp. and Tintarent Limited. 10.24 Deed of Guarantee dated August 4, 2000 between the Registrant and Tintarent Limited. 10.25 Disclosure Letter dated August 4, 2000 between the RII Investment Corp. and Tintarent Limited. 99.1 Press release dated September 6, 2000. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned, hereunto duly authorized. Date: September 15, 2000 REUNION INDUSTRIES, INC. ------------------ (Registrant) By: /s/ John M. Froehlich --------------------- John M. Froehlich Executive Vice President of Finance and Chief Financial Officer 17 EXHIBIT INDEX Exhibit No. Description of Exhibit Page ----------- ---------------------- ---- 10.22 Share Purchase Agreement dated August 4, 2000 18 among the Registrant, RII Investment Corp., Enterprise Ireland, Paul Walsh, Donal Lawlor, Brendan Murtagh and Tintarent Limited. 10.23 Deed of Indemnity dated August 4, 2000 between 105 RII Investment Corp. and Tintarent Limited. 10.24 Deed of Guarantee dated August 4, 2000 between 120 the Registrant and Tintarent Limited. 10.25 Disclosure Letter dated August 4, 2000 between 126 RII Investment Corp. and Tintarent Limited. 99.1 Press release dated September 6, 2000. 139