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UNITED STATES UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
METALS USA, INC. 401 (K) PLAN
(FULL TITLE OF THE PLAN)
METALS USA, INC.
(NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE PLAN)
COMMISSION FILE NUMBER 1-13123
DELAWARE 76-0533626
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
THREE RIVERWAY, SUITE 600
HOUSTON, TEXAS 77056
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 965-0990
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METALS USA, INC. 401(k) PLAN
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
SUPPLEMENTAL SCHEDULE FOR THE YEAR ENDED DECEMBER 31, 2002, AND INDEPENDENT
AUDITORS' REPORT
METALS USA, INC. 401(k) PLAN
INDEX
PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4
SUPPLEMENTAL SCHEDULE* -
Schedule H, Line 4i - Schedule of Assets (Held at End of Year), December 31, 2002 10
OTHER
Signatures 11
Index to Exhibits 12
* Other supplemental schedules required by Section 2520-103.1 of the Department
of Labor's Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974 have been omitted because they
are not applicable.
INDEPENDENT AUDITORS' REPORT
To the Trustees and Participants of
Metals USA, Inc. 401(k) Plan
Houston, Texas
We have audited the accompanying statements of net assets available for benefits
of Metals USA, Inc. 401(k) Plan (the "Plan") as of December 31, 2002 and 2001,
and the related statements of changes in net assets available for benefits for
the years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly in all material
respects, the net assets available for benefits as of December 31, 2002 and
2001, and the changes in net assets available for benefits for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule as listed in
the table of contents is presented for the purpose of additional analysis and is
not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedule is the responsibility of the Plan's management.
Such supplemental schedule has been subject to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
Deloitte & Touche LLP
Houston, Texas
June 27, 2003
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METALS USA, INC. 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 2002 AND 2001
2002 2001
ASSETS:
Investments, at fair value $ 52,850,935 $ 74,677,382
Receivables:
Employer contributions 304
Employee contributions 194,138 423,719
Participant notes 2,200,333 2,591,112
Other 3,538
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Total receivables 2,394,471 3,018,673
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NET ASSETS AVAILABLE FOR BENEFITS $ 55,245,406 $ 77,696,055
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The accompanying notes are an integral part of these financial statements.
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METALS USA, INC. 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
ADDITIONS (DEDUCTIONS) TO NET ASSETS
ATTRIBUTED TO:
Investment income (loss):
Interest $ 1,032,564 $ 1,268,325
Dividends 129,032
Net depreciation in fair value of investments (10,858,293) (16,569,918)
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Total investment loss (9,825,729) (15,172,561)
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Contributions:
Employer 70,024 2,330,156
Employee 4,225,736 6,494,504
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Total contributions 4,295,760 8,824,660
Transfer (to) from affiliated plan (216,188) 135,164
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Total deductions (5,746,157) (6,212,737)
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DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefit payments 15,999,628 10,842,415
Administrative expense 73,806 77,887
Participant notes receivable terminated due to withdrawal
of participant 631,058 376,160
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Total deductions 16,704,492 11,296,462
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NET DECREASE (22,450,649) (17,509,199)
NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING
OF YEAR 77,696,055 95,205,254
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NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $ 55,245,406 $ 77,696,055
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The accompanying notes are an integral part of these financial statements.
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METALS USA, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
1. DESCRIPTION OF PLAN
The following description of the Metals USA, Inc. 401(k) Plan (the "Plan")
provides only general information. Participants should refer to the plan
agreement for a more complete description of the Plan's provisions.
GENERAL - The Plan is a defined contribution plan established effective
June 1, 1998 which was amended and restated in its entirety and was
effective as of January 1, 2000. Each employee who was a participant in a
plan that was merged into the Plan shall become an eligible employee as of
the date of the merger. Other, nonunion employees of Metals USA, Inc. (the
"Company") become eligible to participate upon completing six months of
service. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA").
CONTRIBUTIONS - Participants may contribute an amount equal to not less
than 1% nor more than 25% (15% in 2001) of their compensation for the
contribution period. Participants direct the investment of their
contributions into various investment options offered by the Plan. The
Plan currently offers a general account, 20 pooled separate accounts, a
guaranteed investment contract and Company stock, as investment options
for participants. Employee contributions are recorded as a receivable in
the period during which the Company makes payroll deductions from the
participant's earnings.
The Company may make a qualified matching contribution in an amount equal
to $.50 for each $1.00 contributed by a participant, up to a maximum of 6%
of the participant's compensation. Qualified matching contributions are
recorded monthly. The Company may also make discretionary qualified
nonelective and profit sharing contributions. Discretionary qualified
nonelective and profit sharing contributions, if any, are recorded when
received. For the year ended December 31, 2002 there were no discretionary
contributions made. For the year ended December 31, 2001, discretionary
qualified nonelective and profit sharing contributions were $397,091 and
$213,890, respectively. Effective October 1, 2001 the Company discontinued
their matching contribution until further notice.
PARTICIPANT ACCOUNTS - Each participant's account is credited with the
participant's contribution and allocation of the Company's contribution
and plan earnings. Earnings are allocated by fund based on the ratio of a
participant's account invested in a particular fund to all participants'
investments in that fund. The benefit to which a participant is entitled
is the benefit that can be provided from the participant's vested account.
VESTING - Participants are immediately vested in their own voluntary
contributions and qualified nonelective and profit sharing contributions
plus earnings thereon. Vesting in the Company's contribution portion of
their accounts is based on years of service. With the exception of
balances transferred from the Pacific Metal Company Amended and Restated
Employee Stock Ownership Plan and Trust, a participant becomes 25% vested
after one year of service, 50% vested after two years of service, 75%
vested after three years of service and 100% vested after four years of
service. However, if an active participant dies or becomes disabled prior
to attaining the normal retirement age, the participant's account becomes
100% vested.
- 4 -
BENEFIT PAYMENTS - On termination of service, a participant may elect to
receive either a lump-sum amount equal to the value of the vested portion
of his or her account, a distribution in the form of an annuity, or
installment payments. Distributions are subject to the applicable
provisions of the plan agreement and applicable tax laws. Benefit claims
are recorded as distributions when they have been approved for payment and
paid by the Plan.
PARTICIPANT NOTES RECEIVABLE - Participants may borrow up to a maximum of
$50,000 or 50% of the vested portion of his or her account balance,
whichever is less. Loans are treated as a transfer to/from the investment
fund from/to Participant Notes Receivable. A loan is secured by the
balance in the participant's account and bears interest at a rate
commensurate with market rates for similar loans, as defined (5.25% to
10.50% and 6.00% to 11.50% for the years ended December 31, 2002 and 2001,
respectively).
OTHER RECEIVABLE - The other receivable represents the difference between
interest actually earned on underlying investments and the interest
credited to the Ohio National Life Insurance Company ("ONLIC") Fixed
Accumulation Account during 2001. The difference was passed back to the
Plan through a subsequent adjustment to the credited rate of return, in
accordance with the Plan's contract with ONLIC.
ADMINISTRATIVE EXPENSES - The expenses of administration of the Plan,
including the expenses of the Administrator and fees of the Trustee, shall
be paid by the Plan unless the Plan sponsor elects to make payment.
BASIS OF PRESENTATION - The accompanying plan financial statements have
been prepared on the going concern basis of accounting, which contemplates
the realization of assets and the satisfaction of liabilities in the
ordinary course of business. On November 14, 2001, the Company and all of
its U.S. subsidiaries (collectively, the "Debtors") filed voluntary
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code
(the "Bankruptcy Code") in the U.S. Bankruptcy Court for the Southern
District of Texas (the "Bankruptcy Court") and began operating their
business as debtors-in-possession pursuant to the Bankruptcy Code. On
October 31, 2002, the Company's Reorganization Plan became effective and
the successor company emerged from bankruptcy court protection.
2. SUMMARY OF ACCOUNTING POLICIES
METHOD OF ACCOUNTING - The Plan's financial statements are prepared on the
accrual basis of accounting. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and changes therein. Actual results
could differ from these estimates.
INVESTMENT VALUATION - Investments in the general account and the
guaranteed investment contract are non-fully benefit responsive and are
stated at fair value. The term "non-fully benefit responsive" generally
relates to investments that have or could have possible conditions,
limitations or restrictions on participant initiated transactions.
Investments in pooled separate accounts are stated at fair value, as
determined by the unit value reported by Connecticut General Life
Insurance Company ("CG Life"). Participant notes receivable are valued at
cost which approximates fair value. The Company stock is valued at its
quoted market price.
- 5 -
The Plan had 2,754,651 shares of the Company predecessor stock at December
31, 2002. Pursuant to the Company's Reorganization Plan, which became
effective October 31, 2002, all holders of Metals USA common stock were
entitled to receive warrants in exchange for their shares in an
approximate ratio of 1 warrant for every 10 shares of stock. On April 30,
2003, the Company initiated the exchange of warrants for the stock. The
Plan received approximately 275,465 warrants. The warrants were allocated
to participants who may direct the usage of the warrants. Each warrant
entitles to holder to purchase 1 share of the new Metals USA stock at a
cost of $18.50/share through October 31, 2007. The warrants trade on the
American Stock Exchange under the sticker symbol MLT.WS.
Purchases and sales of securities are recorded on a trade-date basis.
Dividends are recorded on the ex-dividend date.
RISKS AND UNCERTAINTIES - The Plan provides for investments in various
securities through the investment funds offered to participants, including
but not limited to, foreign and domestic equity securities, bonds and
obligations of the U.S. government, among others. Investment securities,
in general, are exposed to various risks, such as interest rate, credit
and overall market volatility risk. Due to the level of risk associated
with certain investment securities, it is reasonably possible that changes
in the values of investment securities will occur in the near term.
3. INVESTMENTS
Investments that represent 5% or more of the Plan's net assets are
separately identified below:
DECEMBER 31,
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2002 2001
CIGNA Guaranteed Income Fund
interest rates, 5.05% - 5.25% $ 20,810,101 $ 21,870,613
CIGNA Fidelity Advisor Equity Growth Fund 6,547,903 13,850,205
CIGNA Janus Account 4,152,503 8,019,322
CIGNA Growth & Income Fund/Multi-Manager 3,537,743 6,611,142
CIGNA Lifetime40 Fund 3,949,869 5,992,036
CIGNA S&P 500 Index Fund 2,889,144 4,392,719
- 6 -
INVESTMENT PERFORMANCE - During the years ended December 31, 2002 and
2001, the Plan's investments (including interest, dividends, realized
gains and losses on investments bought and sold and unrealized gains and
losses on investments held during the year) (depreciated) appreciated in
value as follows:
DECEMBER 31,
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2002 2001
General Account - CIGNA Charter Guaranteed Income Fund $ 842,399 $ 1,099,906
Guaranteed Investment Contract - ONLIC Fixed
Accumulation Account 111,208 135,888
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Total 953,607 1,235,794
Pooled Separate Accounts:
CIGNA S&P 500 Index Fund (920,233) (567,258)
CIGNA Growth & Income Fund/Multi-Manager (1,714,021) (1,077,942)
CIGNA Global Value/Morgan Stanley (377,088) (216,555)
CIGNA Fidelity Advisor Equity Growth Fund (3,587,903) (3,429,979)
CIGNA Warburg Pincus Emerging Growth Fund
(Advisor Shares)* (1,407,563)
CIGNA Balanced I/Wellington Management* (89,956)
CIGNA Janus Account (1,793,786) (3,252,833)
CIGNA Neuberger Berman Partners Trust (75,014)
CIGNA Lifetime20 Fund (110,187) (66,748)
CIGNA Lifetime30 Fund (161,062) (44,398)
CIGNA Lifetime40 Fund (577,670) (336,561)
CIGNA Lifetime50 Fund (72,615) (50,713)
CIGNA Lifetime60 Fund (14,920) 542
CIGNA Large Cap Value Fund/Levin & Co. (370,161) 35,242
CIGNA Mid-size Value Fund/Wellington (161,796) (7,838)
CIGNA Mid-size Blend Fund/Cadence (39,588) (3,547)
CIGNA Mid-size Growth Fund/Artisan (617,036) 149,300
CIGNA Small Cap Value Fund/Sterling (183,495) (3,559)
CIGNA Small Cap Growth Fund/Times Square (61,169) 5,131
CIGNA American Century International Growth Fund (19,937) (1,743)
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Total (10,782,667) (10,441,992)
Common Stock - Metals USA, Inc. Stock (186,834) (6,197,413)
Participant Notes Receivable 190,165 231,050
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Net decrease $ (9,825,729) $ (15,172,561)
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* Removed from plan in 2002
- 7 -
4. INVESTMENT CONTRACTS WITH INSURANCE COMPANIES
The Plan participates in a contract with CG Life via an investment in the
CIGNA Guaranteed Income Fund. CG Life commingles the assets of the CIGNA
Guaranteed Income Fund with other assets. For the Plan's investment in the
CIGNA Guaranteed Income Fund the Plan is credited with interest at the
rate specified in the contract, which was 3.90% and 5.05% for the years
ended December 31, 2002 and 2001, respectively, net of asset charges. CG
Life prospectively guaranteed the interest rates credited for the CIGNA
Charter Income Fund for six months. The Plan participates in a contract
with Ohio National Life Insurance Company via an investment in the ONLIC
Fixed Accumulation Account. For the Plan's investment in the ONLIC Fixed
Accumulation Account, the Plan is credited with interest at the rate
specified in the contract which was 4.85% and 5.25% for the years ended
December 31, 2002 and 2001, respectively, net of asset charges. As
discussed in Note 2, the CIGNA Income Fund and the ONLIC Fixed
Accumulation Account are included in the financial statements at fair
value which, principally because of the periodic rate reset process,
approximates contract value.
5. RELATED-PARTY TRANSACTIONS
Plan assets include investments in funds managed by CG Life, a wholly
owned subsidiary of CIGNA. CG Life is the Plan's trustee and as such,
transactions with the trustee qualify as party-in-interest transactions.
Personnel and facilities of the Company have been used to perform
administrative functions for the Plan at no charge to the Plan. In
addition, the Plan holds shares of common stock of Metals USA, Inc., the
plan sponsor, which also qualifies as a party-in-interest.
6. PLAN TERMINATION
The Company has the right under the Plan to discontinue its contributions
at any time and to terminate the Plan subject to the provisions of ERISA.
In the event of plan termination, participants will become 100% vested in
their accounts.
7. TAX STATUS
The Plan is a tax-qualified retirement plan under the Internal Revenue
Code (the "Code") Section 401(a), with a qualified cash or deferred
arrangement under Code Section 401(k) ("CODA") and is subject to the
provisions of the Employee Retirement Income Security Act of 1974.
The Plan is an adopted form of the PDS Tax Qualified 401(k) Savings Plan &
Trust Agreements Volume Submitter Plan (the "Volume Submitter Plan"), a
non-standardized profit sharing plan with CODA. The Volume Submitter Plan
obtained an opinion letter from the IRS dated November 20, 2000, which
stated that the Volume Submitter Plan was in compliance with the
applicable requirements of the Code. The Company is in the process of
applying for a determination letter covering the adoption agreement of the
Volume Submitter Plan. The Company believes that the Plan is currently
being administered in compliance with the applicable requirements of the
Code. Therefore, no provision for income taxes has been included in the
Plan's financial statements.
8. TRANSFER FROM AFFILIATED PLAN
During 2002 and 2001, certain employees and their participant balances
were transferred to/from an affiliated plan to the Plan.
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9. FORFEITURES
Forfeitures result from nonvested Company contributions remaining in the
Plan for all terminated employees. Upon reaching the break-in-service
requirement, as defined in the plan agreement, forfeitures generated are
added to the forfeiture reserve balance. The forfeiture reserve of $1,697
at December 31, 2001, is included in the CIGNA Charter Guaranteed Income
Fund and is available to offset contributions, which would be otherwise
payable by the Company or reallocated to the participants, in accordance
with the plan agreement. In 2001, company cash contributions were offset
by $26,984 from forfeited nonvested accounts. There was no forfeiture
reserve balance at December 31, 2002.
* * * * * *
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METALS USA, INC. 401(k) PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR),
DECEMBER 31, 2002
(a) (b) (c) (d) (e)
DESCRIPTION OF INVESTMENT INCLUDING
IDENTITY OF ISSUE, BORROWER, MATURITY DATE, RATE OF INTEREST, CURRENT
LESSOR, OR SIMILAR PARTY COLLATERAL, PAR OR MATURITY VALUE COST VALUE
* Connecticut General Life Insurance Company CIGNA Guaranteed Income Fund N/A** $ 20,810,101
* Connecticut General Life Insurance Company CIGNA S&P 500 Index Fund N/A** 2,889,144
* Connecticut General Life Insurance Company CIGNA Growth & Income Fund/Multi-Manager N/A** 3,537,743
* Connecticut General Life Insurance Company CIGNA Global Value/Morgan Stanley N/A** 1,635,732
* Connecticut General Life Insurance Company CIGNA Fidelity Advisor Equity Growth Fund N/A** 6,547,903
* Connecticut General Life Insurance Company CIGNA Janus Account N/A** 4,152,503
* Connecticut General Life Insurance Company CIGNA Lifetime20 Fund N/A** 523,516
* Connecticut General Life Insurance Company CIGNA Lifetime30 Fund N/A** 854,868
* Connecticut General Life Insurance Company CIGNA Lifetime40 Fund N/A** 3,949,869
* Connecticut General Life Insurance Company CIGNA Lifetime50 Fund N/A** 741,305
* Connecticut General Life Insurance Company CIGNA Lifetime60 Fund N/A** 455,834
* Connecticut General Life Insurance Company CIGNA Large Cap Value Fund/Levin & Co. N/A** 812,942
* Connecticut General Life Insurance Company CIGNA Mid-size Value Fund/Wellington N/A** 728,065
* Connecticut General Life Insurance Company CIGNA Mid-size Blend Fund/Cadence N/A** 142,839
* Connecticut General Life Insurance Company CIGNA Mid-size Growth Fund/Artisan N/A** 1,647,685
* Connecticut General Life Insurance Company CIGNA Small Cap Value Fund/Sterling N/A** 585,632
* Connecticut General Life Insurance Company CIGNA Small Cap Growth Fund/Times Square N/A** 292,038
* Connecticut General Life Insurance Company CIGNA American Century International
Growth Fund N/A** 117,511
* National Financial Services Corporation Metals USA, Inc. Common Stock N/A** 55,093
* Connecticut General Life Insurance Company CIGNA Guaranteed Income Fund N/A** 850,794
* Ohio National Life Insurance Company ONLIC Fixed Accumulation Account N/A** 1,519,818
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Total investments 52,850,935
* Plan Participants Participant Notes Receivable bearing
interest at 6% to 11.5%
N/A** 2,200,333
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$ 55,051,268
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* Indicates an identified person known to be a party-in-interest to the Plan.
** Cost information has been omitted for participant directed investments.
- 10 -
SIGNATURES
The Plan, pursuant to the requirements of the Securities Exchange Act of 1934,
the Plan Administrator has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
METALS USA, INC.
METALS USA, INC. 401(k) PLAN
July 1, 2003 By: /S/ TERRY L. FREEMAN
-----------------------
Terry L. Freeman
Senior Vice President and
Chief Financial Officer
- 11 -
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
4 Plan Agreement for the Metals USA, Inc. 401(k) Plan as restated January 1, 2000.
99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
- 12 -