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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2007
------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission File Number 01-15739
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REUNION INDUSTRIES, INC.
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(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
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark whether the Registrant is a
Large accelerated filer Accelerated filer Non-accelerated filer X
--- --- ---
Indicate by check mark whether the Registrant is a shell company Yes No X
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At May 10, 2007, 17,419,019 shares of common stock, par value $.01 per
share, were outstanding.
Page 1 of 27 pages.
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FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act that are intended to be covered by the safe harbors created thereby. The
forward-looking statements contained in this report are enclosed in brackets
[ ] for ease of identification. Note that all forward-looking statements
involve risks and uncertainties. Factors which could cause the future results
and shareholder values to differ materially from those expressed in the
forward-looking statements include, but are not limited to, the strengths of
the markets which the Company serves, the Company's ability to generate
liquidity and the Company's ability to service its debts and meet financial
covenants. Although the Company believes that the assumptions underlying the
forward-looking statements contained in this report are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurances
that the forward-looking statements included or incorporated by reference in
this report will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included or
incorporated by reference herein, the inclusion of such information should not
be regarded as a representation by the Company or any other person that the
Company's objectives and plans will be achieved. In addition, the Company
does not intend to, and is not obligated to, update these forward-looking
statements after filing and distribution of this report, even if new
information, future events or other circumstances have made them incorrect or
misleading as of any future date.
- 2 -
REUNION INDUSTRIES, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
March 31, 2007 (unaudited) and December 31, 2006 4
Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss) for the three months
ended March 31, 2007 and 2006 (unaudited) 5
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2007 and 2006 (unaudited) 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 20
Item 4T. Controls and Procedures 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 21
Item 3. Defaults Upon Senior Securities 21
Item 6. Exhibits 22
SIGNATURES 23
CERTIFICATIONS 24
- 3 -
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2007 AND DECEMBER 31, 2006
(in thousands)
At March 31, At December 31,
2007 2006
--------------- --------------
(unaudited)
ASSETS:
Cash and cash equivalents $ 1,538 $ 1,571
Receivables (net of allowance of
$202 and $173, respectively) 4,215 4,631
Inventories, net 2,625 2,918
Other current assets 575 921
Current assets of discontinued operations 15,507 13,551
-------- --------
Total current assets 24,460 23,592
Property, plant and equipment, net 1,051 1,047
Property, plant and equipment, held for sale 5,413 5,485
Due from related parties 945 963
Goodwill, net 1,491 1,491
Other assets, net 2,351 2,337
Non-current assets of discontinued operations 9,503 9,503
-------- --------
Total assets $ 45,214 $ 44,418
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Debt in default $ 38,404 $ 39,957
Trade payables 1,929 1,932
Accrued interest 12,131 11,113
Due to related parties 413 365
Other current liabilities 3,889 4,064
Notes payable 882 882
Notes payable - related parties 500 500
Current liabilities of discontinued operations 6,496 4,079
-------- --------
Total current liabilities 64,644 62,892
Other liabilities 785 784
Non-current liabilities of discontinued
Operations 3,338 3,273
-------- --------
Total liabilities 68,767 66,949
Minority interests 257 498
Commitments and contingent liabilities - -
Stockholders' deficit (23,810) (23,029)
-------- --------
Total liabilities and stockholders' deficit $ 45,214 $ 44,418
======== ========
See accompanying notes to condensed consolidated financial statements.
- 4 -
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(in thousands, except per share information)(unaudited)
Three Months Ended
March 31,
------------------
2007 2006
-------- --------
Sales $ 5,611 $ 5,870
Cost of sales 4,536 4,574
-------- --------
Gross profit 1,075 1,296
Selling, general & administrative 1,228 1,334
Gain on debt extinguishment - (925)
Other income, net 1 5
-------- --------
Operating profit (154) 882
Interest expense, net 1,772 2,160
-------- --------
Loss from continuing
operations before income taxes
and minority interests (1,926) (1,278)
Provision for income taxes 20 14
-------- --------
Loss from continuing
operations before minority
interests (1,946) (1,292)
Less: Minority interests 84 59
-------- --------
Loss from continuing
operations (2,030) (1,351)
Discontinued operations, net of tax:
Income from discontinued pressure vessel
operations, net of tax of $-0- 1,236 1,310
Gain on disposal of discontinued plastics operations,
net of tax of $-0- - 4,319
Income from discontinued plastics operations,
net of tax of $-0- - 161
-------- --------
Net and comprehensive income (loss) $ (794) $ 4,439
======== ========
Earnings (loss) applicable to common
stockholders $ (794) $ 4,439
======== ========
- 5 -
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(in thousands, except per share information)(unaudited)
Three Months Ended
March 31,
------------------
2007 2006
-------- --------
Basic earnings (loss) per share:
Continuing operations $ (0.12) $ (0.08)
Discontinued operations 0.07 0.35
-------- --------
Income (loss) per share - basic $ (0.05) $ 0.27
======== ========
Weighted average shares
outstanding - basic 17,419 16,657
======== ========
Diluted income (loss) per share:
Continuing operations $ (0.12) $ (0.08)
Discontinued operations 0.07 0.35
-------- --------
Income (loss) per share - diluted $ (0.05) $ 0.27
======== ========
Weighted average shares
outstanding - diluted 17,419 16,657
======== ========
See accompanying notes to condensed consolidated financial statements.
- 6 -
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(in thousands)
(unaudited)
Three Months Ended
March 31,
------------------
2007 2006
-------- --------
Cash provided by(used in) operating activities $ 1,791 $ (1,679)
-------- --------
Cash flow from investing activities:
Capital expenditures (111) (94)
Proceeds from asset sales - 11,273
-------- --------
Cash provided by(used in) investing activities (111) 11,179
-------- --------
Cash flow from financing activities:
Net change in revolving credit facility (1,553) (6,064)
Repayments of debt - (3,487)
-------- --------
Cash used in financing activities (1,553) (9,551)
-------- --------
Net increase(decrease) in cash and cash equivalents 127 (51)
Less: Change in cash of discontinued operations (160) -
Cash and cash equivalents, beginning of period 1,571 1,923
-------- --------
Cash and cash equivalents, end of period $ 1,538 $ 1,872
======== ========
Interest paid $ 688 $ 803
======== ========
Non-cash financing activities:
Debt extinguishment, including accrued interest $ - $ 925
======== ========
Distribution declared to minority interest $ 325 $ 326
======== ========
See accompanying notes to condensed consolidated financial statements.
- 7 -
REUNION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007
NOTE 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements. In the opinion of management, all normal recurring adjustments
considered necessary for a fair statement of the results of operations have
been included. The results of operations for the three months ended March 31,
2007 are not necessarily indicative of the results of operations for the full
year. When reading the financial information contained in this Quarterly
Report, reference should be made to the financial statements, schedule and
notes contained in Reunion's Annual Report on Form 10-K for the year ended
December 31, 2006 ("Form 10-K").
Going Concern
These condensed consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. At March 31,
2007, the Company had a deficiency in working capital of $40.2 million, a loss
from continuing operations of $2.0 million and a deficiency in assets of $23.8
million. Additionally, at March 31,2007, the Company was in default on
substantially all of its debt. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. These condensed
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Over the past several years, the Company has taken steps to improve its
liquidity and defer the principal maturities of a significant portion of its
debt. During 2006, the Company sold the remaining portion of its plastics
segment and recognized a gain of $4.3 million on this sale. Additionally,
during 2006, the Company effected a settlement with the holder of a $1.017
million note payable from the Company wherein the Company recognized a gain
from this debt settlement of $925,000. The Company is investigating other
restructuring or recapitalization scenarios in an effort to provide additional
liquidity and extinguishments or deferrals of debt obligations. (See NOTE 2:
RECENT DEVELOPMENTS - Restructuring Plan.) No assurances exist that the
Company will be successful in these efforts and failure to accomplish these
plans could have an adverse impact on the Company's liquidity, financial
position and future operations.
Foreign Currency Translation
The financial statements of the Company's 65% owned joint venture in
China are measured using the local currency as the functional currency.
Assets and liabilities of this entity are translated into U.S. dollars at the
exchange rate in effect at the end of each reporting period. Income and
expense items are translated into U.S. dollars at the weighted average
exchange rates for the period. Due to the minimal movement in the rate of
exchange for such functional currency, there was no significant translation
adjustment in the period.
- 8 -
Recent Accounting Pronouncements
In September 2006 the FASB issued Statement No. 157, "Fair Value
Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a
framework for measuring fair value under GAAP, and expands disclosures about
fair value measures. SFAS 157 is effective for fiscal years beginning after
November 15, 2007, with early adoption encouraged. The provisions of SFAS
157 are to be applied on a prospective basis, with the exception of certain
financial instruments for which retrospective application is required. The
adoption of SFAS 157 is not expected to materially affect the Company's
financial position or results of operations.
In February 2007 the FASB issued Statement No. 159, "The Fair Value
Option for Financial Assets and Financial Liabilities-Including an Amendment
of FASB Statement No. 115" ("SFAS 159"). SFAS 159 permits an entity to choose
to measure many financial instruments and certain other items at fair value.
Most of the provisions of SFAS 159 are elective, however, the amendment of
SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities",
applies to all entities with available for sale or trading securities. SFAS
159 is elective as of the beginning of an entity's first fiscal year beginning
after November 15, 2007. The Company is currently evaluating the impact
adoption may have on the financial statements.
NOTE 2: RECENT DEVELOPMENTS
13% Senior Notes
The Company's tender offer for its Senior Notes was not accepted by a
holder of approximately 72% of the outstanding Senior Notes. As a result, the
tender offer was terminated and withdrawn on January 10, 2007. The 13%
restructured Senior Notes and accumulated interest, which totaled $30.8
million at December 31, 2006, became due and payable on January 3, 2007. The
Company did not make such payment and thus continued to be in default under
the Indenture under which the Senior Notes were issued. However, under an
Intercreditor and Subordination Agreement entered into in December 2003 among
Wachovia Bank, the holders of the Senior Notes and certain other lenders, the
Senior Note holders cannot commence any action to enforce their liens on any
collateral for a 180 day period beginning after the date of receipt by
Wachovia, the senior secured lender, of a written notice from the Senior Note
holders informing Wachovia of its demand for payment. On February 2, 2007,
Wachovia received written notice of such demand for payment. As of March 31,
2007, the total amount due and payable on the 13% Senior Notes, including
accumulated interest, was $34.0 million.
Wachovia Loan Agreement
On January 22, 2007, the Company and Wachovia entered into a letter
agreement to extend the term of the existing Loan Agreement and all other
associated financing agreements from January 22, 2007 until April 23, 2007. On
April 23, 2007, the Company and Wachovia entered into a letter agreement to
extend the term of the existing Loan Agreement and all other associated
financing agreements from April 23, 2007 until June 15, 2007.
Restructuring Plan
In late January 2007, management decided that it would actively market
its pressure vessel business and, as a result, has presented the assets,
liabilities and operations of the pressure vessel business as a discontinued
operation. (See NOTE 9.) The Company intends to provide liquidity to pay off
all, or the majority, of its debt either through the sale of this pressure
vessel business or a recapitalization. As of this date, a number of either
recapitalization scenarios or indications of value for this business have been
received and one potential buyer is actively involved with the Company in
investigating the possible acquisition of this business.
- 9 -
NOTE 3: DEBT
At March 31, 2007 and December 31, 2006, the Company was in default on
its Wachovia bank financing (including the junior participation portion
thereof), its note payable to a private capital fund and its 13% senior notes.
Debt in default consists of the following (in thousands):
At March 31, December 31,
2007 2006
--------------- --------------
(unaudited)
Wachovia revolving credit facility $ 6,791 $ 8,334
Junior participation portion of the
revolving credit facility 6,100 6,100
Note payable due December 5, 2006 3,500 3,500
13% senior notes 22,013 22,013
-------- -------
Total debt in default $ 38,404 $ 39,947
======== ========
Long-term debt consists of the following (in thousands):
Note payable due June 1, 2007 $ 882 $ 882
Note payable - related party 500 500
-------- --------
Total long-term debt 1,382 1,382
Classified as current (1,382) (1,382)
-------- --------
Long-term debt $ - $ -
======== ========
NOTE 4: INVENTORIES
Inventories are comprised of the following (in thousands):
At March 31, At December 31,
2007 2006
----------- --------------
(unaudited)
Raw material $ 564 $ 766
Work-in-process 615 337
Finished goods 1,446 1,815
-------- --------
Inventories $ 2,625 $ 2,918
======== ========
Inventories are valued at the lower of cost or market, cost being
determined on the first-in, first-out method. The above amounts are net of
inventory reserves of $144 and $153 at March 31, 2007 and December 31, 2006,
respectively.
NOTE 5: STOCKHOLDERS' DEFICIT AND EARNINGS PER SHARE
The following represents a reconciliation of the change in stockholders'
deficit for the three month period ended March 31, 2007 (in thousands):
- 10 -
Accum-
Par Capital ulated
Value in Other
of Excess Accum- Compre-
Common of Par ulated hensive
Stock Value Deficit Loss Total
------ ------- -------- -------- --------
At January 1, 2007 $174 $28,127 $(48,743) $ (2,587) $(23,029)
Activity (unaudited):
Net loss - - (794) - (794)
Stock based compensation 13 13
---- ------- -------- -------- --------
At March 31, 2007 $174 $28,140 $(49,537) $ (2,587) $(23,810)
==== ======= ======== ======== ========
The computations of basic and diluted earnings (loss) per common share,
EPS (LPS), for the three month periods ended March 31, 2007 and 2006 are as
follows (in thousands, except per share amounts)(unaudited):
Net
Income EPS
(Loss) Shares (LPS)
-------- -------- -------
Three months ended March 31, 2007:
Loss applicable to common stockholders,
weighted average shares outstanding
and basic LPS $ (794) 17,419 $ (0.05)
Dilutive effect of stock options and warrants - -
-------- -------- -------
Loss applicable to common stockholders,
shares outstanding and diluted LPS $ (794) 17,419 $ (0.05)
======== ======== =======
Three months ended March 31, 2006:
Income applicable to common stockholders,
weighted average shares outstanding
and basic EPS $ 4,439 16,657 $ 0.27
Dilutive effect of stock options and warrants - -
-------- -------- ------
Income applicable to common stockholders,
shares outstanding and diluted LPS $ 4,439 16,657 $ 0.27
======== ======== =======
At March 31, 2007 and 2006, the Company's stock options outstanding
totaled 1,444,000 and 1,370,000, respectively. At March 31, 2007 and 2006,
outstanding warrants to purchase the Company's common stock totaled 4,173,489
and 4,935,989, respectively. Because the Company had a loss from continuing
operations for the three month periods ended March 31, 2007 and 2006,
inclusion of options and warrants has an anti-dilutive effect on LPS.
NOTE 6: STOCK BASED COMPENSATION ARRANGEMENTS
The Company accounts for its stock-based employee compensation
arrangements under SFAS No. 123 (revised 2004), "Share Based Payment" ("SFAS
123R"), which requires companies to recognize the cost of employee services
received in exchange for awards of equity instruments, based on the grant date
fair value of those awards, in the financial statements.
At March 31, 2007, the Company had two stock option plans, stockholder
approved, that permit the grants of share options and shares to its key
employees, directors and consultants. As of March 31, 2007, 280,600 options
remain available for grant under these plans, 1,444,000 options have been
- 11 -
granted and 299,333 of the granted options are unvested. The Company believes
that such awards better align the interests of its key employees, directors
and consultants with those of its stockholders. Option awards are generally
granted with an exercise price equal to the market value of the Company's
stock on the date of grant, generally vest over a two to three year period and
have exercise terms ranging from five to ten years.
There were no stock options granted during the first quarter of 2007 The
Company recognized approximately $13,000 and $0 for the three months ended
March 31, 2007 and 2006, respectively, of non-cash compensation expense for
the fair value of options granted to employees in prior years for the adoption
of SFAS 123R.
NOTE 7: COMMITMENTS AND CONTINGENT LIABILITIES
The Company is and has been involved in a number of lawsuits and
administrative proceedings, which have arisen in the ordinary course of
business of the Company and its subsidiaries. There has been no major changes
in such lawsuits since the Company's Annual Report filing on Form 10-K.
Asbestos (ORC)
Since the end of 2006, there has been no change in the number of open
claims as no new claims have been filed and no settlements or dismissals have
occurred. All actions in which the Company has been named have been tendered
to and accepted by Rockwell Automation and the Company has incurred no costs
in these matters.
Asbestos (Alliance)
Since the end of 2006, 109 new cases have been opened, 128 cases have
been dismissed and 47 cases have been settled for a net reduction of 66 cases
during the first quarter. The gross cost of the 47 case settlements was
$48,000 and the gross amount of legal fees and costs incurred during the first
quarter were $212,000. The Company's insurance carriers cover the significant
majority of these costs and the Company's total share of these settlement and
other costs in the first quarter was $37,000.
Product Warranties
The Company provides for warranty claims at its cylinders segment.
Amounts accrued are estimates of future claims based on historical claims
experience or a management estimate related to a specifically identified
issue. The Company reevaluates its product warranty reserve quarterly and
adjusts it based on changes in historical experience and identification of new
or resolution of prior specifically identified issues. A tabular
reconciliation of the product warranty reserve for the three-month periods
ended March 31, 2007 and 2006 follows (in 000's):
March 31,
Description 2007 2006
------------------------------------------ -------- --------
Beginning balance $ 122 $ 133
Add: Provision for estimated future claims 20 30
Deduct: Cost of claims (14) (30)
-------- --------
Ending balance $ 128 $ 133
======== ========
- 12 -
NOTE 8: OPERATING SEGMENT DISCLOSURES
The following represents the disaggregation of financial data (in
thousands)(unaudited):
Capital Total
Net Sales EBITDA(1) Spending Assets
--------- --------- --------- ---------
Three months ended and
at March 31, 2007:
-------------------------------- At 3/31
Metals: --------
Cylinders $ 3,905 $ 98 $ 48 $ 6,909
Grating 1,706 262 9 3,993
-------- -------- -------- --------
Subtotal 5,611 360 57 10,902
Corporate and other - (461) - 3,889
Discontinued operations - - 54 30,423
-------- -------- -------- --------
Totals $ 5,611 (101) $ 111 $ 45,214
======== ======== ========
Depreciation (53)
Interest expense, net (1,772)
--------
Loss from continuing operations
before income taxes and
minority interests $ (1,926)
========
Capital Total
Net Sales EBITDA(1) Spending Assets
--------- --------- --------- ---------
Three months ended March 31, 2006
and at December 31, 2006:
-------------------------------- At 12/31
Metals: --------
Cylinders $ 4,675 $ 426 $ 26 $ 6,825
Grating 1,195 188 19 4,565
-------- -------- -------- --------
Subtotal 5,870 614 45 11,390
Corporate and other - (613) 1 4,489
Discontinued operations - - 48 28,539
-------- -------- -------- --------
Totals $ 5,870 1 $ 94 $ 44,418
======== ======== ========
Gain on extinguishment of debt 925
Depreciation (44)
Interest expense, net (2,160)
--------
Loss from continuing operations
before income taxes and
minority interests $ (1,278)
========
(1) EBITDA is presented as it is the primary measurement used by management
in assessing segment performance and not as an alternative measure of
operating results or cash flow from operations as determined by accounting
principles generally accepted in the United States, but because it is a
widely accepted financial indicator of a company's ability to incur and
service debt.
- 13 -
NOTE 9: DISCONTINUED OPERATIONS
At March 31, 2007 and December 31, 2006, the assets and liabilities of
discontinued operations are comprised primarily of the assets and liabilities
of the pressure vessel business plus the remaining assets and liabilities of
the Rostone business. Such assets and liabilities are as follows (in
thousands):
March 31 December 31
2007 2006
--------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 164 $ 4
Receivables, net 3,610 4,610
Inventories, net 7,495 8,398
Other current assets 4,238 539
------- -------
Total current assets $ 15,507 $ 13,551
======== ========
CURRENT LIABILITIES:
Trade payables $ 1,380 $ 1,125
Other current liabilities 5,116 2,954
------- -------
Total current liabilities $ 6,496 $ 4,079
======== ========
OTHER ASSETS:
Property, plant and equipment, held
for sale $ 5,413 $ 5,485
Goodwill 9,503 9,503
-------- --------
Total other assets $ 14,916 $ 14,988
======== ========
OTHER LIABILITIES:
Pension and other post retirement
benefit liabilities $ 3,338 $ 3,272
======== ========
Results of discontinued operations for the first quarter of 2007 relate
solely to the pressure vessel business while the results of discontinued
operations for the first quarter of 2006 relate both to the pressure vessel
business and Oneida. A summarization of such results is as follows (in
thousands):
3-months ended March 31, 2007 3-months ended March 31, 2006
--------------------------------- ---------------------------------
Net sales $ 9,114 Net sales $ 10,934
Income before taxes 1,146 Income before taxes 1,471
- 14 -
NOTE 10: COMPONENTS OF BENEFIT COSTS
The following tables present the components of net periodic benefit costs
for the discontinued pressure vessel pension and other postretirement plans
and for the Corporate Executive Payroll other postretirement plans for the
three month periods ended March 31, 2007 and 2006 (000's)(unaudited):
Pension Postretirement
------------------ ------------------
3-months ended 3-months ended
------------------ ------------------
March 31, March 31,
------------------ ------------------
2007 2006 2007 2006
------ ------ ------ -----
Benefits earned during the period $ 32 $ 53 $ 22 $ 28
Interest cost 63 60 30 29
Amortization of:
Prior service cost 4 4 - -
Unrecognized net loss (gain) 8 8 11 18
Unrecognized net obligation - - 12 12
Expected return on plan assets (82) (72) - -
------ ------ ------ ------
Defined benefit pension and
total other postretirement
benefits costs $ 25 $ 53 $ 75 $ 87
====== ====== ====== ======
The Company expects to contribute $540,000 to the Metals pension plan in
May 2007.
The following tables present the components of net periodic benefit costs
for the discontinued plastics operation pension and other postretirement plans
for the three month periods ended March 31, 2007 and 2006 (000's)(unaudited):
Pension Postretirement
------------------ ------------------
3-months ended 3-months ended
------------------ ------------------
March 31, March 31,
------------------ ------------------
2007 2006 2007 2006
------ ------ ------ ------
Benefits earned during the period $ - $ - $ - $ -
Interest cost 57 55 7 8
Amortization of:
Unrecognized net loss (gain) 21 17 - -
Expected return on plan assets (70) (65) - -
------ ------ ------ ------
Defined benefit pension and
total other postretirement
benefits costs $ 8 $ 7 $ 7 $ 8
====== ====== ====== ======
The Company expects that it will contribute $101,000 to the discontinued
plastics operation pension plan in 2007.
NOTE 11: INCOME TAXES
The Company currently files an income tax return in the U.S. federal
jurisdiction as well as in Pennsylvania, Illinois and Indiana. Tax returns
for the years 2004 through 2006 remain open for examination in various tax
jurisdictions in which it operates or operated.
- 15 -
The Company adopted the provisions of FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes-An Interpretation of FASB
Statement No. 109, Accounting for Income Taxes" ("FIN 48"), on January 1,
2007. As a result of the implementation of FIN 48, the Company recognized no
material adjustment in the liability for unrecognized income tax benefits. At
the adoption date of January 1, 2007, and at March 31, 2007, there were no
unrecognized tax benefits. Interest and penalties related to uncertain tax
positions will be recognized in income tax expense. As of March 31, 2007, no
interest related to uncertain tax positions had been accrued.
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion and analysis is provided to assist readers in
understanding financial performance during the periods presented and
significant trends which may impact future performance. It should be read in
conjunction with the consolidated financial statements and accompanying notes
included elsewhere in this Form 10-Q and in conjunction with our annual report
on Form 10-K for the year ended December 31, 2006.
GENERAL
The Company owns and operates industrial manufacturing operations that
design and manufacture engineered, high-quality products for specific customer
requirements, such as hydraulic and pneumatic cylinders and metal bar grating.
Prior to 2007, the Company's continuing operations' products also included
large-diameter seamless pressure vessels. Such pressure vessel business was
reclassified to discontinued operations effective January 1, 2007. (See NOTE
2: Recent Events ? Restructuring Plan.)
RESULTS OF OPERATIONS
Three Months Ended March 31, 2007 Compared to
Three Months Ended March 31, 2006
Net sales and gross margin percentages for the operating segments for the
three months ended 2007 and 2006 are as follows.
Net Sales Gross Margin
-------------------- --------------
2007 2006 2007 2006
--------- --------- ----- -----
Cylinders $ 3,905 $ 4,675 14.9% 20.0%
Grating 1,706 1,195 29.0% 30.3%
--------- --------- ------ ------
Totals $ 5,611 $ 5,870 19.2% 22.1%
========= ========= ====== ======
Net sales for the first quarter of 2007 were down $259,000, or 4.4%, from
the first quarter of 2006. Such decrease reflects a $770,000, or 16.5 %,
sales decrease in cylinder sales offset somewhat by a $511,000, or 42.8%,
sales increase in grating sales. The decrease in cylinder sales for the first
quarter of 2007 compared to 2006 results from three approximately equal
factors. One is the loss of a mobile cylinder customer in 2006, one is the
financial weakness of several customers resulting in a hold on shipments and
the other factor is a general weakness in the division's hydraulic and double
welded cylinder product lines. Such market weakness is not considered a
permanent trend. The increase in grating sales reflects a continuation of the
strong demand for grating product in the Far East, a growth demand that began
in mid-2006 and is continuing.
- 16 -
Gross margin as a percentage of sales decreased by almost 3 percentage
points in the first quarter of 2007 compared to the first quarter of 2006
primarily reflecting the deterioration in gross profit margin in the cylinder
business. Such margin deterioration in the cylinder business, approximately 5
percentage points of sales, reflects the negative effect on plant efficiency
and overhead absorption of the volume decrease in sales discussed above. Gross
margin as a percentage of sales in the grating business fell slightly due to
some price pressures in the market but remained a strong 29% gross margin
percentage of sales.
Selling, General and Administrative
Selling, general and administrative (SGA) expenses for the first quarter
of 2007 were $1.228 million, down $106,000 from the expenses for the first
quarter of 2006. This decrease in expense is net of an increase of $59,000 in
marketing and administrative expenses in the grating business, related
primarily to the increase in sales volume noted above, being more than offset
by $154,000 of decreased expense in Corporate. Such expense reductions were
partially related to reductions in staff and partially related to other
operating expense reductions. As a percentage of sales, SGA expenses decreased
to 21.9% for the first quarter of 2007 compared to 22.7% for the first quarter
of 2006. [The Company continues to look for ways to cut costs in all areas.]
Other Income
Other income for the first quarter of 2007 was $1,000, compared to other
income of $5,000 for the first quarter of 2006. There were no significant
offsetting items of other income and expense in either period.
Minority Interests
Minority interests for the first quarter in 2007 and 2006 were $84,000
and $59,000, respectively. These amounts represent the income during the
quarter allocated to the minority ownerships of the Company's consolidated
foreign grating joint venture. Minority interests are calculated based on the
percentage of minority ownership. From a balance sheet perspective, minority
interest was reduced by the minority ownership's share of the 2007 and 2006
declared dividends.
Interest Expense
Interest expense for the first quarter of 2007 was $1.8 million compared
to $2.2 million for the first quarter of 2006. This decrease basically
reflects a reduction in amortization of deferred financing expenses originally
recorded in connection with the Wachovia loan agreement whose initial term
expired in December 2006 and a reduction in interest expense resulting from
the payments and settlements of debt in March 2006 as a result of the
liquidity provided by the sale of Oneida. Offsetting a portion of this
decrease was a $106,000 increase in interest expense related to the Senior
Notes resulting from the accrual of interest on missed interest payments.
Income Taxes
The tax provisions in 2007 and 2006 relate solely to the Company's China
joint venture. The Company has net operating loss carryforwards for federal
tax return reporting purposes totaling approximately $61.5 million at December
31, 2006, of which $737,000 will expire by the end of 2007. Management has
concluded that it is more likely than not that the Company's loss
carryforwards will expire unutilized and has determined to continue to fully
reserve for the total amount of net deferred tax assets.
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LIQUIDITY AND CAPITAL RESOURCES
General
The Company manages its liquidity as a consolidated enterprise. The
operating groups of the Company carry minimal cash balances. Cash generated
from group operating activities generally is used to repay borrowings under
revolving credit arrangements, as well as other uses (e.g. corporate
headquarters expenses, debt service, capital expenditures, etc.). Conversely,
cash required for group operating activities generally is provided from funds
available under the same revolving credit arrangements.
Recent Events
13% Senior Notes
The Company's tender offer for its Senior Notes was not accepted by a
holder of approximately 72% of the outstanding Senior Notes. As a result, the
tender offer was terminated and withdrawn on January 10, 2007. The 13%
restructured Senior Notes and accumulated interest, which totaled $30.8
million at December 31, 2006, became due and payable on January 3, 2007. The
Company did not make such payment and thus continued to be in default under
the Indenture under which the Senior Notes were issued. However, under an
Intercreditor and Subordination Agreement entered into in December 2003 among
Wachovia, the holders of the Senior Notes and certain other lenders, the
Senior Note holders cannot commence any action to enforce their liens on any
collateral for a 180 day period beginning after the date of receipt by
Wachovia, the senior secured lender, of a written notice from the Senior Note
holders informing Wachovia of its demand for payment. On February 2, 2007,
Wachovia received written notice of such demand for payment. As of March 31,
2007, the total amount due and payable on the 13% Senior Notes, including
accumulated interest, was $34.0 million.
Wachovia Loan Agreement
On January 22, 2007, the Company and Wachovia entered into a letter
agreement to extend the term of the existing Loan Agreement and all other
associated financing agreements from January 22, 2007 until April 23, 2007. On
April 23, 2007, the Company and Wachovia entered into a letter agreement to
extend the term of the existing Loan Agreement and all other associated
financing agreements from April 23, 2007 until June 15, 2007.
Restructuring Plan
In late January 2007, management decided that it would actively market
its pressure vessel business in order to provide liquidity to pay off all, or
the majority, of its debt either through a recapitalization of the Company or
the sale of this pressure vessel business. As of this date, a number of either
recapitalization scenarios or indications of value for this business have been
received and one potential buyer is actively involved with the Company in
investigating the acquisition of this business.
The sale of the pressure vessel business has the potential of providing
sufficient liquidity to pay off all of the Company's approximately $52 million
of debt and accrued interest. Such a scenario, although producing a virtually
debt free entity, would leave the Company with much fewer assets and far less
EBITDA in its continuing cylinder and grating businesses.
Should the Company be able to entered into a recapitalization plan, it
is expected that such a scenario would entail a new financing arrangement in
concert with another third party providing an equity infusion into the
Company. This scenario would theoretically provide the liquidity to pay off
- 18 -
the existing debt and accrued interest, add new debt to the Company and dilute
the current ownership of the Company.
As noted above, a demand for payment notice under an Intercreditor and
Subordination Agreement has been delivered. The Company is attempting to
complete a sale of its pressure vessel business or a recapitalization of the
Company before the end of the standstill period under such Intercreditor and
Subordination Agreement which will be August 2, 2007. The Company has no other
current plans to meet its debt obligations and failure to accomplish these
plans could have an adverse impact on the Company's liquidity, financial
position and future operations.
SUMMARY OF 2007 ACTIVITIES
Cash and cash equivalents totaled $1.5 million at March 31, 2007, an
increase of $127,000 from the comparable cash and cash equivalents at December
31, 2006 when considering the cash at the discontinued seamless pressure
vessel operation. This increase resulted from the $1.791 million of net cash
provided by operating activities being offset somewhat by the $1.553 million
of net cash used in financing activities and $111,000 used for investing
activities. Cash and cash equivalents at the end of a period generally
represent lockbox receipts from customers to be applied to our Wachovia
revolving credit facility in the following one to two business days.
Operating Activities
Operating activities provided $1.8 million in cash in the first three
months of 2007 resulting from a $1.4 million reduction in receivables, a $1.2
million reduction in inventory and a $3.4 million net increase in current
liabilities offset somewhat by a $0.8 million net loss and a $3.4 million
increase in other current assets resulting primarily from prepayments on raw
material orders for the seamless pressure vessel business. The net increase
in current liabilities primarily reflects customer deposits on orders received
by the seamless pressure vessel division and a $1.0 million increase in
accrued interest related to the Company's Senior Notes that are in default.
Investing Activities
Investing activities used $111,000 for the acquisition of capital assets.
Financing Activities
Financing activities used $1.6 million in the net reduction for the
quarter in the Wachovia revolving credit facility.
FACTORS THAT COULD AFFECT FUTURE RESULTS
The Majority of Reunion's debt for borrowed money is in default
Since 2001, the Company has not been able to make any of the scheduled
interest payments on the Senior Notes and has not been able to make any
payments of principal on such currently matured Senior Notes. Additionally,
the principal amount of the restructured Senior Notes matured on January 3,
2007 and was not paid. As a result, events of default have occurred under the
Indenture ("Indenture Default") under which the Senior Notes were issued. With
an Indenture Default, holders of more than 25% of the principal amount of the
Senior Notes may, by written notice to the Company and to the Trustee, declare
the principal of and accrued but unpaid interest on all the Senior Notes to be
immediately due and payable (the "acceleration"). However, under an
Intercreditor and Subordination Agreement entered into in December 2003 among
Wachovia, the holders of the Senior Notes and certain other lenders, the
Senior Note holders can not commence any action to enforce their liens on any
collateral for a 180 day period beginning after the date of receipt by
- 19 -
Wachovia, the senior secured lender, of a written notice from the Senior Note
holders informing Wachovia of such Indenture Default and demanding
acceleration or immediate payment. On February 2, 2007, Wachovia received
written notice of such demand for payment. (See above: Recent Developments -
13% Senior Notes.)
Additionally, a $3.5 million subordinated promissory note payable to a
private capital fund matured on December 5, 2006 and is in default. The
defaults under the Senior Notes and the $3.5 million subordinated promissory
note payable have triggered cross default provisions in the Wachovia Bank loan
agreement and therefore the Company' bank debt is also in default.
Although the Company is investigating restructuring or recapitalization
scenarios in an effort to provide additional liquidity for the extinguishments
or deferrals of such debt obligations, (See above: Recent Developments -
Restructuring Plan.), no assurances exist that the Company will be successful
in these efforts and failure to accomplish these plans could have an adverse
impact on the Company's liquidity, financial position and future operations.
Reunion's vendors may restrict credit terms
We have corrected many vendor-related problems with liquidity generated
from the refinancing of debt and from asset sales. However, another period of
tight liquidity could result in key vendors restricting or eliminating the
extension of credit terms to us. If this would happen, our ability to obtain
raw materials would be strained significantly and our ability to manufacture
products would be reduced.
Reunion's past performance could impact future prospects
Because of losses suffered by the Company over the past several years,
potential or current customers may decide not to do business with us. If this
were to happen, our sales may not increase or may decline. If sales do not
increase, or we experience a decline in sales, our ability to cover costs
would be further reduced, which could negatively impact our financial position
and results of operations.
Reunion as a going concern
The financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. At March 31, 2007, the Company
has a deficiency in working capital of $40.2 million, a loss from continuing
operations for its latest quarter of $2.9 million and a deficiency in assets
of $23.8 million. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classifications
of liabilities that may result from the outcome of this uncertainty.
Over the past several years, the Company has taken steps to improve its
liquidity and defer the principal maturities of a significant portion of its
debt. The Company is investigating other restructuring or recapitalization
scenarios in an effort to provide additional liquidity and extinguishments or
deferrals of debt obligations. (See above: Recent Developments - Restructuring
Plan.) No assurances exist that the Company will be successful in these
efforts and failure to accomplish these plans could have an adverse impact on
the Company's liquidity, financial position and future operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no significant changes in the market risk factors which
affect the Company since the end of the preceding fiscal year.
- 20 -
Item 4T. Controls and Procedures
Management is responsible for establishing and maintaining adequate
internal controls over financial reporting. As required by Rule 13a-15(b) of
the Securities Exchange Act of 1934, as amended, Reunion's management,
including its Chief Executive Officer and Chief Financial Officer, conducted
an evaluation as of the end of the period covered by this report of the
effectiveness of Reunion's disclosure controls and procedures as defined in
Rule 13a-15(e). Based on that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that Reunion's disclosure controls and
procedures were effective as of the end of the period covered by this report.
As required by Rule 13a-15(d), Reunion's management, including its Chief
Executive Officer and Chief Financial Officer, also conducted an evaluation of
Reunion's internal control over financial reporting as defined in Rule 13a-
15(f) to determine whether any changes occurred during the quarter that have
materially affected, or are reasonably likely to materially affect, Reunion's
internal control over financial reporting. Management has concluded that no
material decline in internal controls has occurred.
It should be noted that any system of controls, however well designed
and operated, can provide only reasonable, and not absolute, assurance that
the objectives of the system will be met. In addition, the design of any
control system is based in part upon certain assumptions about the likelihood
of future events.
This management evaluation report does not include an attestation report
of the Company's registered public accounting firm regarding internal control
over financial reporting as this report is not subject to attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal proceedings and environmental
matters. There have been no significant changes in such matters since the end
of the preceding fiscal year.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously
referred to in Item 1A to Part I of the Company's Annual Report on Form 10-K
for the year ended December 31, 2006.
Item 3. Defaults Upon Senior Securities
The information contained in Notes 2 and 3 of Notes to Condensed
Consolidated Financial Statements in Item 1 of Part I of this Report
concerning defaults under the Company's debt for borrowed money is
incorporated by reference into this Item.
- 21 -
Item 6. Exhibits
Exhibit No. Exhibit Description
----------- -------------------
31.1 Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.2 Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32.1 Certification pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
- 22 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
Date: May 15, 2007 REUNION INDUSTRIES, INC.
----------------- (Registrant)
By: /s/ Kimball J. Bradley
-------------------------------
Kimball J. Bradley
Chairman and Chief
Executive Officer
By: /s/ John M. Froehlich
-------------------------------
John M. Froehlich
Executive Vice President, Finance
and Chief Financial Officer
(chief financial and accounting officer)
- 23 -
EXHIBIT 31.1
CERTIFICATION
I, Kimball J. Bradley, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Reunion Industries,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which
this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial accounting principles:
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 15, 2007
/s/ Kimball J. Bradley
-------------------------------------
Chief Executive Officer
- 24 -
EXHIBIT 31.2
CERTIFICATION
I, John M. Froehlich, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Reunion Industries,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which
this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial accounting principles:
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 15, 2007
/s/ John M. Froehlich
-------------------------------------
Chief Financial Officer
- 25 -
EXHIBIT 32.1
REUNION INDUSTRIES, INC.
SARBANES-OXLEY ACT SECTION 906 CERTIFICATION
In connection with this quarterly report on Form 10-Q of Reunion Industries,
Inc. for the quarter ended March 31, 2007, I, Kimball J. Bradley, Chief
Executive Officer of Reunion Industries, Inc., hereby certify pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 Of the Sarbanes-Oxley
Act of 2002, that:
1. this Form 10-Q for the quarter ended March 31, 2007 fully complies
with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
2. the information contained in this Form 10-Q for the quarter ended
March 31, 2007 fairly presents, in all material respects, the financial
condition and results of operations of Reunion Industries, Inc. for the
periods presented therein.
Date: May 15, 2007
/s/ Kimball J. Bradley
---------------------------
Chief Executive Officer
- 26 -
EXHIBIT 32.2
REUNION INDUSTRIES, INC.
SARBANES-OXLEY ACT SECTION 906 CERTIFICATION
In connection with this quarterly report on Form 10-Q of Reunion Industries,
Inc. for the quarter ended March 31, 2007, I, John M. Froehlich, Chief
Financial Officer of Reunion Industries, Inc., hereby certify pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 Of the Sarbanes-Oxley
Act of 2002, that:
1. this Form 10-Q for the quarter ended March 31, 2007 fully complies
with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
2. the information contained in this Form 10-Q for the quarter ended
March 31, 2007 fairly presents, in all material respects, the financial
condition and results of operations of Reunion Industries, Inc. for the
periods presented therein.
Date: May 15, 2007
/s/ John M. Froehlich
---------------------------
Chief Financial Officer
- 27 -