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Metals USA, Inc, Houston, TX, intends to divest its niche Specialty Metals and Aerospace businesses. In addition, the company will integrate the operations of eight smaller facilities into larger facilities and further reduce other overhead costs. Certain facilities and other assets will be sold in addition to the divested businesses as a result of these steps. The company expects annualized profit improvement of $20 million resulting from these actions.
The company said these strategic initiatives were intended to reduce indebtedness through the sale of non-core assets and reduce costs through integration and rationalization of several smaller facilities. They are designed to strengthen the company's competitive position and allow it to rebound more rapidly from the current economic slowdown.
The businesses being divested had combined revenues of $135 million and $35 million for the twelve-month and three-month periods ended Jun. 30, 2001. The company said it believes all the actions included in these strategic initiatives would have increased operating income by $4.5 million for the three months ended Jun. 30. Metals USA also expects annualized reductions in interest expenses to total approximately $4 million based on estimated proceeds from the sale of selected businesses and assets.
As a result of these actions, Metals USA expects to report an after-tax charge in the third quarter of approximately $66 million. The non-cash portion totals $61 million associated with businesses and assets held for sale being reduced to their estimated fair values, $50 million of which represents goodwill.
'Our primary goal is to enhance shareholder value by returning the company to profitability in this extremely challenging economic environment,' stated J. Michael Kirksey, chairman and CEO. 'These actions denote that we are not going to wait for the economy to improve to make our businesses more profitable. We have reduced debt by $60 million since Dec. 31, 2000, and plan to use proceeds from asset sales to continue to reduce debt. The company has an objective to achieve debt reduction of $50-$70 million over the next six months thereby increasing our financial flexibility. Additionally, we have reduced headcount 18 percent since the beginning of the year representing actions necessary to reduce operating costs in this economic downturn.'