Renco Metals Inc – ‘10-Q’ for 7/31/00

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Quarterly Report   —   Form 10-Q
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Form 10-Q for Period Dated 7-31-2000                  14     59K 
 2: EX-27       Financial Data Schedule                                1      5K 

10-Q   —   Form 10-Q for Period Dated 7-31-2000
Document Table of Contents

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UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

 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 JULY 31, 2000

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 333-4513

RENCO METALS, INC.
(Exact name of registrant as specified in its charter)

                                                                [Download Table]
                                                                          
                DELAWARE                                   13-3724916     
      (State or other jurisdiction                       (IRS Employer    
           of incorporation or                         Identification No.)
              organization)                                               

           238 NORTH 2200 WEST                                            
          SALT LAKE CITY, UTAH                               84116        
(Address of principal executive offices)                   (Zip Code)     

(801) 532-2043
(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

Number of shares outstanding of each of the registrant's classes of common      
stock, as of September 8, 2000:                                                 

                                                                [Download Table]
                                                                                
COMMON STOCK, NO PAR VALUE                                          1,000 SHARES

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 FORM 10-Q
RENCO METALS, INC.
 QUARTER ENDED JULY 31, 2000

 TABLE OF CONTENTS

                                                        [Enlarge/Download Table]

                                                                                    PAGE NO.
                                                                                    --------
                                                                                            
PART I - FINANCIAL INFORMATION                                                              
    ITEM 1 - FINANCIAL  STATEMENTS                                                          

        Condensed Consolidated Balance Sheets - July 31, 2000 and October 31, 1999     3    

        Condensed Consolidated Statements Of Operations - Nine Months and Three        4    
          Months Ended July 31, 2000 and 1999                                               

        Condensed Consolidated Statements Of Cash Flows - Nine Months Ended July       5    
          31, 2000 and 1999                                                                 

        Notes To Consolidated Financial Statements                                     6    

    ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND           8    
             RESULTS OF OPERATIONS                                                          
PART II - OTHER INFORMATION                                                                 

    ITEM 1 - LEGAL MATTERS                                                             12   

    ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                                          12   
SIGNATURES                                                                             13   

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PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS                                                   

 RENCO METALS, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                        [Enlarge/Download Table]

                                                                     JULY 31,    October 31,
                                                                       2000         1999    
                              Assets                               (UNAUDITED)    (Audited) 
                              ------                               -----------   -----------
                                                                                            
Current assets:                                                                             
     Cash and cash equivalents                                       $   1,935    $   8,448 
     Accounts receivable, less allowance for doubtful accounts of                           
        $1,560 in 2000 and $532 in 1999                                 19,166       25,478 
     Inventories, net (note 2)                                          49,356       44,979 
     Prepaid expenses and other current assets                           1,200        1,678 
                                                                     ---------    --------- 
               Total current assets                                     71,657       80,583 
                                                                     ---------    --------- 
Property, plant, and equipment, net                                     46,568       41,862 
Other assets, net                                                        3,099        3,646 
                                                                     ---------    --------- 
                                                                     $ 121,324    $ 126,091 
                                                                     =========    ========= 
              Liabilities and Stockholder's Deficit                                         

Current liabilities:                                                                        
     Current installments of long-term debt                          $      25    $      25 
     Accounts payable                                                    4,836        7,043 
     Accrued expenses and other current liabilities                      9,340       14,294 
                                                                     ---------    --------- 
               Total current liabilities                                14,201       21,362 
                                                                     ---------    --------- 
Long-term debt, excluding current installments                         167,574      153,204 
Other liabilities                                                       10,609       11,718 
                                                                     ---------    --------- 
               Total liabilities                                       192,384      186,284 
                                                                     ---------    --------- 
Stockholder's deficit:                                                                      
     Common stock, no par value.  Authorized, issued, and                                   
        outstanding 1,000 shares                                             1            1 
     Additional paid-in capital                                            600          600 
     Accumulated deficit                                               (71,661)     (60,794)
                                                                     ---------    --------- 
               Total stockholder's deficit                             (71,060)     (60,193)
                                                                     ---------    --------- 
Commitments and contingencies                                                               
                                                                     ---------    --------- 
                                                                     $ 121,324    $ 126,091 
                                                                     =========    ========= 

The accompanying notes are an integral part of these condensed consolidated     
financial statements.                                                           

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 RENCO METALS, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                           NINE MONTHS                 THREE MONTHS       
                                                          ENDED JULY 31,              ENDED JULY 31,      
                                                    -------------------------   ------------------------- 
                                                      2000             1999        2000            1999   
                                                    ---------       ---------   ---------       --------- 
                                                                                                          
Sales                                               $ 118,243       $ 132,980   $  38,547       $  45,413 
Costs and expenses:                                                                                       
     Cost of sales                                     93,874          92,301      32,350          31,988 
     Depreciation, depletion, and amortization          5,829           7,009       1,729           2,337 
     Selling, general, and administrative expenses     15,730          15,564       5,424           5,365 
                                                    ---------       ---------   ---------       --------- 
            Total costs and expenses                  115,433         114,874      39,503          39,690 
                                                    ---------       ---------   ---------       --------- 
                Income (loss) from operations           2,810          18,106        (956)          5,723 
Other income (expense):                                                                                   
     Interest income                                      156             462          32              99 
     Interest expense                                 (14,293)        (13,982)     (4,856)         (4,652)
     Equity in earnings of affiliate                      460              --         380              -- 
                                                    ---------       ---------   ---------       --------- 
            Total other income (expense)              (13,677)        (13,520)     (4,444)         (4,553)
                                                    ---------       ---------   ---------       --------- 
                Income (loss) before income taxes     (10,867)          4,586      (5,400)          1,170 
Income tax benefit                                         --          (2,063)         --              -- 
                                                    ---------       ---------   ---------       --------- 
                    Net income (loss)               $ (10,867)      $   6,649   $  (5,400)      $   1,170 
                                                    =========       =========   =========       ========= 

The accompanying notes are an integral part of these condensed consolidated     
financial statements.                                                           

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 RENCO METALS, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                          NINE MONTHS       
                                                                         ENDED JULY 31,     
                                                                    ----------------------- 
                                                                      2000           1999   
                                                                    --------       -------- 
                                                                                            
Net cash used in operating activities                               $(10,351)      $ (1,566)
                                                                    --------       -------- 
Cash flows from investing activities -                                                      
     Capital expenditures, net                                       (10,532)       (11,557)
                                                                    --------       -------- 
               Net cash used in investing activities                 (10,532)       (11,557)
                                                                    --------       -------- 
Cash flows from financing activities:                                                       
     Net borrowings (repayments) under revolving credit agreements    14,389         (1,123)
     Repayment of long-term debt                                         (19)           (17)
     Payment of financing fees                                            --            (50)
                                                                    --------       -------- 
               Net cash provided by (used in) financing activities    14,370         (1,190)
                                                                    --------       -------- 
Decrease in cash and cash equivalents                                 (6,513)       (14,313)
Cash and cash equivalents, beginning of period                         8,448         21,690 
                                                                    --------       -------- 
Cash and cash equivalents, end of period                            $  1,935       $  7,377 
                                                                    ========       ======== 

Supplemental Disclosures of Cash Flow Information                                           
     Cash paid during the period for interest                       $ 17,895       $ 17,553 
     Cash paid during the period for income taxes                   $     --       $    209 

The accompanying notes are an integral part of these condensed consolidated     
financial statements.                                                           

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 RENCO METALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

(1)   BASIS OF PRESENTATION                                                     

  The accompanying condensed consolidated financial statements have been
     prepared from the accounting records of Renco Metals, Inc. (Renco Metals)
and its subsidiaries (the Company), Magnesium Corporation of America
      (Magcorp), and Sabel Industries, Inc. (Sabel), without audit (except where
 presented data is specifically identified as audited) pursuant to the
  rules and regulations of the Securities and Exchange Commission. Renco
   Metals is a 100% owned subsidiary of The Renco Group, Inc. (Group). The
     financial statements reflect all adjustments (consisting solely of normal
     recurring adjustments) which are, in the opinion of management, necessary
  for a fair statement of results for the interim periods presented. The
results of operations for the interim periods presented are not     
   necessarily indicative of the results to be expected for the full year.
    These interim condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes 
 thereto included in the Company's Form 10-K for the fiscal year ended
October 31, 1999.                                                   

Renco Metals' 11.5% Senior Notes due 2003 (Senior Notes) are        
   unconditionally and fully guaranteed, jointly and severally, by both of
  its subsidiaries, Magcorp and Sabel (the Guarantors), each of which is
 wholly-owned. Separate financial statements of the Guarantors are not
 presented because, in management's opinion, such financial statements
would not be material to investors because Renco Metals is a holding
   company with no independent operations and its only assets are cash and
    its investment in Magcorp and Sabel. Summarized financial information on
the combined Guarantors is presented below:                         

 SUMMARIZED COMBINED GUARANTOR FINANCIAL INFORMATION

                                                                [Download Table]

                                      Nine Months                Three Months      
                                     Ended July 31,             Ended July 31,     
                                  2000            1999       2000            1999  
                               ---------       ---------  ---------       ---------
                                 (dollars in thousands)     (dollars in thousands) 
                                                                                   
Statement of operations data:                                                      
      Net sales                $ 118,243       $ 132,980  $  38,547       $  45,413
      Cost of sales            $  93,874       $  92,301  $  32,350       $  31,988
      Net income (loss)        $ (10,847)      $   6,576  $  (5,317)      $   1,154

                                                                [Download Table]

                                              October 31,
                               JULY 31,          1999    
                                 2000         (Audited)  
                              ---------       ---------- 
                                (dollars in thousands)   
                                                         
Balance sheet data:                                      
      Current assets          $ 70,192        $ 78,701   
      Noncurrent assets       $ 49,667        $ 45,508   
      Current liabilities     $ 11,949        $ 14,701   
      Noncurrent liabilities  $ 28,183        $ 14,922   

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(2)   INVENTORIES                                                               

Inventories consist of the following:                               

                                                                [Download Table]

                                                                 October 31,
                                                   JULY 31,         1999    
                                                     2000         (Audited) 
                                                   -------         -------  
                                                    (dollars in thousands)  
                                                                            
Finished goods                                     $42,021         $34,985  
Brine in ponds                                       1,125           1,228  
Spare parts and supplies                             9,753           9,076  
Raw materials and work-in-process                      724             963  
                                                   -------         -------  
                                                    53,623          46,252  
Less LIFO reserve                                    4,267           1,273  
                                                   -------         -------  
                                                   $49,356         $44,979  
                                                   =======         =======  

(3)   SEGMENT INFORMATION                                                       

The Company classifies its operations into two operating segments:  
  magnesium production and steel wholesaling and fabrication. Management
    evaluates a segment's performance based upon operating income. There are
      no intersegment sales, allocated costs, or jointly used assets. Summarized
financial information by operating segment follows.                 

                                                                [Download Table]

                                         NINE MONTHS              THREE MONTHS    
                                        ENDED JULY 31,           ENDED JULY 31,   
                                    ----------------------  ----------------------
                                       2000        1999        2000       1999    
                                    ----------  ----------  ---------- -----------
                                    (dollars in thousands)  (dollars in thousands)
                                                                                  
Revenues:                                                                         
     Magnesium                       $ 83,488    $ 99,548     $26,650    $ 34,165 
     Steel                             34,755      33,432      11,897      11,248 
                                    ----------  ----------  ---------- -----------
        Consolidated revenues       $ 118,243    $132,980     $38,547    $ 45,413 
                                    ==========  ==========  ========== ===========

Profit or loss:                                                                   
   Income (loss) from operations:                                                 
     Magnesium                        $ 1,221    $ 16,835    $ (1,389)    $ 5,223 
     Steel                                768         344         236         198 
                                    ----------  ----------  ---------- -----------
        Total reportable segments       1,989      17,179      (1,153)      5,421 
                                    ----------  ----------  ---------- -----------
   All other income (expense), net    (12,856)    (12,593)     (4,247)     (4,251)
                                    ----------  ----------  ---------- -----------
        Consolidated income (loss)                                                
               before income taxes   $(10,867)    $ 4,586    $ (5,400)    $ 1,170 
                                    ==========  ==========  ========== ===========

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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.                                                                  

RESULTS OF OPERATIONS - NINE MONTHS ENDED JULY 31, 2000 COMPARED TO NINE MONTHS 
ENDED JULY 31, 1999                                                             

Sales for the nine-month period ended July 31, 2000 decreased 11.1% over the    
corresponding prior period. The decrease was attributable to a 16.1% decrease in
Magcorp's revenues, partially offset by a 4.0% increase in Sabel's revenues.    
Magnesium shipments decreased 11.4% and Magcorp's average selling price for     
magnesium decreased 6.5% when compared to the corresponding nine-month period in
1999. Imports from foreign producers are at record levels, and continue to put  
pressure on magnesium pricing and volumes. Magnesium pricing and volume are     
dependent on the overall world market supply and demand, and current trends are 
likely to continue for the foreseeable future. Sabel's sales increase was       
attributable primarily to overall price increases in the U.S. steel industry    
when compared with the corresponding nine-month period in 1999.                 

Cost of sales for the nine-month period ended July 31, 2000 increased 1.7% on a 
consolidated basis. Magcorp's cost of sales increased 2.6% due primarily to     
higher unit costs at Magcorp caused by low production levels and high natural   
gas costs, which increases were partially offset by lower sales volumes. Cost of
sales at Magcorp was also adversely affected by a 28.9% increase in sales volume
of die cast market recycled magnesium. Magcorp continues to increase its        
participation in die cast markets, which also requires handling and recycling of
die cast customer scrap, increasing costs and decreasing margins. Magcorp's cost
of sales increase was partially offset by a 1.2% cost of sales decrease at Sabel
attributable to volume decreases incurred while prices increased in the U.S.    
Steel industry as mentioned above.                                              

Depreciation, depletion, and amortization for the nine-month period ended July  
31, 2000 decreased 16.8% due to certain long-lived assets originally capitalized
at the time of Magcorp's acquisition in 1989 becoming fully depreciated,        
partially offset by increased depreciation for recently acquired capital        
equipment additions.                                                            

Selling, general and administrative expenses for the nine-month period ended    
July 31, 2000 are relatively fixed in nature, and did not differ significantly  
with the comparative prior period in the aggregate, but two components did      
change significantly. Bad debt expense increased $907,000 over the corresponding
prior period due primarily to increased charges to allowance for doubtful       
accounts stemming from one of Magcorp's customers filing for Chapter 11         
bankruptcy protection, which increase was offset in large part by decreases in  
profit-based deferred compensation accruals at Magcorp.                         

Interest income for the nine-month period ended July 31, 2000 decreased $306,000
due to decreased cash and cash equivalent balances on hand.                     

Interest expense for the nine-month period ended July 31, 2000 increased        
$311,000 due to higher revolving credit facility borrowings at Magcorp.         
Revolving credit facility rates are based on the prime rate, which also         
increased during the period.                                                    

Income taxes. Effective November 1, 1998, the Company was designated as a       
qualified subchapter S subsidiary by Group. Accordingly, the Company is         
generally not subject to income taxes. As a result of the subchapter S          
designation, during the nine months ended July 31, 1999 the Company recognized  
an income tax benefit of $2.1 million that included the elimination of net      
deferred tax liabilities recorded as of October 31, 1998.                       

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RESULTS OF OPERATIONS - THREE MONTHS ENDED JULY 31, 2000 COMPARED TO THREE      
MONTHS ENDED JULY 31, 1999                                                      

Sales for the three-month period ended July 31, 2000 decreased 15.1% over the   
corresponding prior period. The decrease was attributable to a 22.0% decrease in
Magcorp's revenues, partially offset by a 5.8% increase in Sabel's revenues.    
Magnesium shipments decreased 17.4% and Magcorp's average selling price for     
magnesium decreased 8.0% over the corresponding 1999 three-month period. Import 
competition from foreign producers continues to put pressure on magnesium       
volumes and pricing. Magnesium pricing and volume are dependent on the overall  
world market supply and demand, and current trends are likely to continue for   
the foreseeable future. Sabel's sales increase was due to volume increases and  
to a lesser extent, increases in prices, which softened in the U.S. Steel       
industry in July 2000.                                                          

Cost of sales for the three-month period ended July 31, 2000 increased 1.1% on a
consolidated basis. Magcorp's cost of sales increased 0.4% due primarily to     
higher unit production costs at Magcorp caused by production levels being below 
capacity and high natural gas costs, partially offset by lower sales volumes. A 
3.8% cost of sales increase at Sabel was attributable to sales volume increases 
described above.                                                                

Depreciation, depletion, and amortization for the three-month period ended July 
31, 2000 decreased 26.0% due to certain long-lived assets originally capitalized
at the time of Magcorp's acquisition in 1989 becoming fully depreciated, offset 
by increased depreciation for recently acquired capital equipment additions at  
both Sabel and Magcorp.                                                         

Selling, general and administrative expenses for the three-month period ended   
July 31, 2000 did not differ significantly with the comparative prior period in 
the aggregate, but two components did change significantly. Bad debt expense    
increased $305,000 over the corresponding prior period due primarily to         
increased charges to allowance for doubtful accounts stemming from one of       
Magcorp's customers filing for Chapter 11 bankruptcy protection, which increase 
was offset in large part by decreases in profit-based deferred compensation     
accruals at Magcorp.                                                            

Interest income for the three-month period ended July 31, 2000 decreased $67,000
due to decreased cash and cash equivalent balances on hand.                     

Interest expense for the three-month period ended July 31, 2000 increased       
$204,000 due to higher revolving credit facility borrowings at Magcorp.         

LIQUIDITY AND CAPITAL RESOURCES                                                 

The Company's liquidity needs arise from working capital requirements, capital  
investments and long-term debt interest payment obligations. The Company's      
primary source of liquidity has historically been cash provided by operating    
activities. Recent liquidity has been provided by the Company's $40.0 million in
revolving credit facilities that provide for advances by the lender based on    
specified percentages of eligible accounts receivable and inventories to a      
maximum of $33.0 million for Magcorp and $7.0 million for Sabel, net of         
outstanding letters of credit. As of July 31, 2000, the unused amounts available
to Magcorp and Sabel were approximately $10.1 million and $2.9 million,         
respectively. During the nine-month period ended July 31, 2000, Magcorp and     
Sabel borrowed net amounts of $13.2 million and $1.2 million, respectively,     
under their revolving credit facilities.                                        

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Cash used in operating activities was $10.4 million for the nine-month period   
ended July 31, 2000 compared to $1.6 million used in operations for the         
corresponding prior period. The $8.8 million increase in cash used in           
operations, when compared to the comparable period in 1999, resulted primarily  
from decreased operating income, partially offset by favorable changes in       
working capital items, most notably decreased accounts receivable levels and    
smaller increases in inventory levels. The reduced operating income is          
attributable to lower sales volume and pricing from increased import competition
in the magnesium operations and by lower margins earned on increased            
participation in die cast market products as discussed above. Magnesium pricing 
and volume are dependent on the overall market supply and demand, and there is  
no assurance that current trends will not continue.                             

Capital expenditures were $10.5 million for the nine-month period ended July 31,
2000, and are budgeted to total approximately $15 million for 2000, $15 million 
for 2001, and $9 million for 2002. Of these capital expenditure amounts, an     
estimated total of $31 million is related to new electrolytic cell technology   
that is expected to improve manufacturing efficiencies and ensure compliance    
with future environmental standards. Original plans for complete plant          
conversion have been scaled back and timing of the project has been revised to  
allow some flexibility due to reduced cash flow from operations caused by       
worsened market conditions. One of four existing electrolytic cell buildings has
been stripped and prepared for installation of new cells. Installation of new   
cells is expected to commence in late fall of 2000 and take place over a period 
of approximately two years. Associated cost reductions and related manufacturing
efficiencies will occur gradually as conversion progresses, but will not be     
fully realized in the Company's operating results until 2002.                   

Management anticipates that existing cash balances, cash generated from         
operations, and availability under its revolving credit facilities will be      
sufficient to finance the Company's liquidity needs through the end of the      
current fiscal year. Based on current operations and in light of current        
magnesium market conditions, the Company believes that its present sources of   
liquidity will not be adequate to meet its projected requirements for working   
capital, capital expenditures, scheduled debt service requirements and other    
general corporate purposes for fiscal 2001. The Company therefore is pursuing   
additional sources of liquidity. In this regard, the Company is currently in    
discussions with its primary lender to increase availability under its revolving
credit facilities.                                                              

The Company's long-term debt agreements contain numerous covenants and          
prohibitions that limit the financial activities of the Company, including      
requirements that the Company satisfy certain financial ratios and limitations  
on additional indebtedness. The ability of the Company to meet its debt service 
requirements and to comply with such covenants will be dependent upon future    
operating performance and financial results of the Company, which will be       
subject to financial, economic, political, competitive and other factors        
affecting the Company, many of which are beyond its control.                    

ENVIRONMENTAL MATTERS                                                           

Title III of the Clean Air Act will establish, on a published schedule, new     
national emission standards for hazardous air pollutants (NESHAPS). NESHAPS are 
to be based on maximum achievable control technology as determined by a         
comparison of installations at similar facilities in specific industry          
categories. Representatives from the United States Environmental Protection     
Agency (EPA) have visited Magcorp's facility in preparation for the process of  
establishing NESHAPS for hydrogen chloride and chlorine emissions. Magcorp has  
scrubbers operating to reduce pertinent hydrogen chloride emissions, and does   
not expect that it will be required to incur significant expenditures to meet   
the new standards. With respect to chlorine emissions, Magcorp expects it will  
be required to make substantial reductions to meet NESHAPS for primary magnesium
refineries that will be promulgated in mid-2002, with an expected three to six  
year timetable for compliance following establishment of the new standards.     

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In anticipation of the new EPA standards, Magcorp has embarked on a program to  
install new electrolytic cell technology that will reduce chlorine emissions at 
the source. The new cells are also expected to significantly reduce costs       
because they have much higher throughput and are more energy efficient. As noted
above, cell installation is expected to commence in late fall of 2000 and take  
place over approximately two years. Magcorp plans to spend an estimated $30 to  
$35 million of its total capital expenditure budget through 2002, directly or   
indirectly, to meet environmental regulatory requirements, primarily for        
NESHAPS, and for other anticipated future requirements. Cell-related project    
development expenses to date total $7.0 million. If unforeseen operating        
problems are encountered with the cell conversion project, it could have a      
material adverse effect on the Company's financial condition and results of     
operations.                                                                     

Sampling conducted by Magcorp and by Utah State Department of Environmental     
Quality (UDEQ) in 1998 and 1999 indicated a low but measurable accumulation of  
chlorinated hydrocarbons in the form of dioxin/furan compounds in soil and      
sediment samples from a contained and permitted process wastewater collection   
and retention system used at the Magcorp plant site for over 25 years.          
Background levels of the compounds were found in perimeter areas of the         
facility. While Magcorp does not consider, and believes that UDEQ authorities do
not consider, a health hazard to be associated with these sampling results,     
Magcorp officials are cooperating with EPA in discussions regarding what, if    
any, action may be required. Management does not expect magnesium refineries to 
become subject to new regulations regarding these compounds in the near future. 
If these compounds do become subject to government regulation, the costs of such
compliance, if any, could have a material adverse effect on the Company's       
financial condition and results of operations; however, such costs cannot be    
assessed at this time.                                                          

Industrial companies such as Magcorp and Sabel have in recent years become      
subject to changing and increasingly demanding environmental standards imposed  
by governmental laws and regulations. The Company cannot currently assess the   
impact of more stringent standards on its results of operations or financial    
condition.                                                                      

FORWARD-LOOKING STATEMENTS                                                      

This report includes "forward-looking statements," which involve known and      
unknown risks, uncertainties and other important factors that could cause the   
actual results, performance or achievements of the Company to differ materially 
from any future results, performance or achievements expressed or implied by    
such forward-looking statements. Such risks, uncertainties and other important  
factors include, among others: general economic and business conditions;        
industry capacity; demand; industry trends; competition; currency fluctuations; 
the loss of any significant customers; availability of qualified personnel;     
changes in environmental regulations; successful completion of planned          
installation of new technology; major equipment failures, import and customs    
regulations, and outcome of litigation. These forward-looking statements speak  
only as of the date of this report. The Company expressly disclaims any         
obligation or undertaking to disseminate any updates or revisions to any        
forward-looking statement contained herein to reflect any change in the         
Company's expectations with regard thereto or any change in events, conditions  
or circumstances on which any such forward-looking statement is based.          

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PART II- OTHER INFORMATION

ITEM 1 - LEGAL MATTERS                                                          

TRADE ISSUES                                                                    

Proceedings involving trade issues that occurred during the quarter for which   
this report is filed are discussed below. These trade issue updates should be   
read in conjunction with background information contained in the Company's Form 
10-K for the fiscal year ended October 31, 1999.                                

Magnesium from Canada                                                           
On July 5, 2000, in conjunction with its sunset review, the Department of       
Commerce (DOC) published its determination that revocation of the existing      
countervailing duty orders (CVD) on pure and alloy magnesium from Canada and the
antidumping duty order on pure magnesium from Canada would be likely to lead to 
the continuation or recurrence of countervailable subsidies and dumping. On July
13, 2000, the U.S. International Trade Commission (ITC) determined that         
revocation of the antidumping and CVD orders would be likely to lead to the     
continuation or recurrence of material injury to the domestic industry within a 
reasonably foreseeable time. As a result, these orders will remain in place. On 
August 4, 2000, the Government of Quebec filed appeals of the DOC's final       
determination of the sunset reviews. The current antidumping duties on pure     
magnesium from Canada are 0% for Norsk Hydro Canada Inc. (NHCI) and 21% for all 
others, and current countervailing duty margins on pure and alloy magnesium from
Canada are 1.38% for NHCI and 7.34% for all others.                             

Magnesium from China                                                            
On August 3, 2000, in conjunction with its sunset review, the DOC published its 
determination that revocation of the existing antidumping duty order on pure    
magnesium from China would be likely to lead to continuation or recurrence of   
dumping. On August 22, 2000, the U.S. International Trade Commission (ITC)      
determined that revocation of the antidumping duty order would be likely to lead
to continuation or recurrence of material injury to the domestic industry within
a reasonably foreseeable time. As a result, the antidumping duty order on       
imports of pure magnesium from China will remain in place. The current          
antidumping duties are 69.53% for one Chinese producer/exporter, Taiyuan Heavy  
Machinery Import and Export Corporation, and 108.26% for all others.            

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                                       

(a)     Exhibits                                                                

      A list of exhibits required to be filed as part of this Report on Form
        10-Q is set forth in the "Exhibit Index" which immediately precedes such
exhibits, and is incorporated herein by reference.              

(b)     Reports on Form 8-K                                                     

   No reports on Form 8-K were filed during the quarter for which this
report is filed.                                                

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 S I G N A T U R E S

    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 thereunto duly authorized.                                          

                          RENCO METALS, INC.
                    (Registrant)

                                                                [Download Table]
                                                                                
         September 8, 2000                     /s/    Ira Leon Rennert          
----------------------------------          ------------------------------------
Date                                        Ira Leon Rennert                    
                                            Chairman of the Board and           
                                            Principal Executive Officer         

         September 8, 2000                     /s/    Roger L. Fay              
----------------------------------          ------------------------------------
Date                                        Roger L. Fay                        
                                            Vice President - Finance            
                                            Principal Financial and             
                                            Accounting Officer                  

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EXHIBIT INDEX 

                                                                [Download Table]

EXHIBIT                               
NUMBER         DESCRIPTION            
------         -----------            
                                      
   27          Financial Data Schedule

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-Q’ Filing		Date		First		Last			Other Filings
Filed on:		9/11/00
		9/8/00		1		13
		8/22/00		12
		8/4/00		12
		8/3/00		12
For Period End:		7/31/00		1		10
		7/13/00		12
		7/5/00		12
		10/31/99		6		12			10-K405
		7/31/99		2		9			10-Q
		11/1/98		8
		10/31/98		8					10-K405
									List all Filings