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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-29141

MMI Products, Inc. ("MMI"), a Delaware corporation and a wholly owned subsidiary of Merchants Metals Holding Company ("MMHC"), was organized in 1953. MMI was acquired by Citicorp Venture Capital, Ltd. and members of MMI's management in 1986.

MMI is a leading manufacturer and distributor of products used in the commercial, infrastructure, and residential construction industries. MMI has established leading market positions in the fence and concrete construction products industries by combining efficient manufacturing, high quality and broad product offerings and extensive distribution capabilities. MMI employs a combination of state-of-the-art and traditional production methods to achieve cost efficiencies in its manufacturing processes. In addition, while MMI's manufacturing facilities are geared primarily toward high-volume, standardized production to promote efficiencies, many of MMI's manufacturing facilities are capable of producing customized products in response to specific customer requirements or applications that are unique to particular geographic regions of the United States. Consequently, each plant is configured to serve as both a high-volume producer of standard products and a job lot producer of specialty products. MMI also benefits from raw material purchasing efficiencies because the majority of manufactured products are produced from the same raw material.

MMI has developed an extensive and well-positioned distribution network, consisting of 74 company-operated distribution centers, located in 31 states. MMI's distribution network services over 7,800 customers, including construction contractors, fence wholesalers, industrial manufacturers, highway construction contractors and fabricators of concrete reinforcing bar. In addition to serving customers nationwide, distribution centers and production facilities are well positioned to serve areas of high population and construction growth. MMI currently has manufacturing or distribution facilities in each of the ten states with the largest projected increases in population through 2025. MMI manufactures products at 22 principal manufacturing facilities strategically located throughout the United States.

On October 2, 2000, MMI announced the engagement of UBS Warburg, LLC to consider strategic alternatives, including the possible sale of MMHC.

Historically, a significant portion of MMI's growth has been achieved through business acquisitions. Since 1989, MMI has completed nineteen such acquisitions, including nine in the past five years, which have substantially increased MMI's net sales and EBITDA. MMI completed two acquisitions in 1999 and one acquisition each in early 2000 and 2001.

On June 7, 1999, MMI purchased certain assets of the wholesale fence division of National Wholesale Fence Supply, Inc. ("National Wholesale") for cash of $13.2 million. The operations acquired include a manufacturer of ornamental iron fence products in San Fernando, California and distributors of fence products in California.

On December 30, 1999, MMI purchased certain assets of Reforce Steel and Wire Corporation for cash of $3.4 million, which was funded by the revolving credit facility. The operations acquired included a manufacturer of concrete accessories products in Brooklyn, New York.

On February 3, 2000, MMI purchased all of the issued and outstanding capital stock of Hallett Wire Products Company, a Minnesota corporation ("Hallett"). Hallett manufactured welded wire mesh at facilities located in St. Joseph, Missouri and Kingman, Arizona. Hallett had net sales of approximately $37 million for the year ended December 31, 1999. The total acquisition price was $40 million in cash and was funded by MMI's revolving credit facility.

On February 1, 2001, MMI purchased certain assets of Page Two, Inc. and Kewe 3, Inc. for cash of approximately $2.0 million, which was funded by MMI's revolving credit facility. The assets primarily consist of a production line located in Bartonville, Illinois which applies an aluminum coating on strand wire.

MMI reports the results of its operations in two business segments - Fence and Concrete Construction Products. Financial information for each business segment is disclosed in Note 12 of Notes to Consolidated Financial Statements.

The Fence and Concrete Construction Products segments share common factors in relation to seasonality of business and raw materials.

Seasonality and Cyclicality. MMI's products are used in the commercial, infrastructure and residential construction industries. These industries are both cyclical and seasonal, and changes in demand for construction services have a material impact on sales and profitability. Although MMI believes that a cyclical downturn is inevitable, MMI has implemented the following strategies which it believes will mitigate the impact of any such downturn on its future operating results and liquidity:

• Increased its focus on products used in the commercial and infrastructure construction industries, which historically have been less cyclical than the residential construction industry.
• Positioned the Concrete Construction Products segment to benefit from anticipated increases in infrastructure spending.
• Expanded its distribution network to serve diverse areas of high population growth, as well as to limit the effects of any regional economic downturns.

As a result of seasonality, the highest level of sales and profitability occur during the times of the year when climatic conditions are most conducive to construction activity. Accordingly, sales will typically be higher in the second and third quarters.

Raw Materials. MMI's manufactured products are produced primarily from steel rod. Because both business segments require large quantities of the same raw material, MMI purchases steel rod in significantly larger quantities than would be the case if the business segments were part of separate stand-alone enterprises. Because of such large volume purchases, MMI believes that it typically purchases steel rod at a cost below industry standard. Since steel rod cost comprises a substantial portion of cost of goods sold (approximately 26% in fiscal year 2000), MMI believes such cost savings provide a significant competitive advantage.

Generally, 60% of annual steel rod purchased has been produced overseas. MMI purchases steel rod from several suppliers overseas and in the United States. The ample availability of steel rod provides MMI with many purchasing options and as such MMI is not reliant on any one supplier.

MMI will normally negotiate quantities and pricing on a quarterly basis for both domestic and foreign steel rod purchases. Because all agreements for the purchase of steel rod, whether foreign or domestic, are denominated in United States dollars, there is no exposure to significant risks of fluctuations in foreign currency exchange rates with respect to such agreements.

The Fence segment is made up of three operating divisions, Merchants Metals, Security Fence and Anchor Die Cast. Merchants Metals is managed from Houston, Texas with its operations segregated and managed by geographic regions. Security Fence is a manufacturer and distributor of a variety of fence products and is located in Bladensburg, Maryland. Effective in fiscal year 2001, Security Fence was merged into the Merchants Metals operation with the Bladensburg location becoming the hub of Merchants Metals new Northeast region. Anchor Die Cast, a small manufacturer of fence fittings, is located in Harrison, Arkansas. The Fence segment contributed 52.1%, 56.3% and 49.7% of consolidated net sales in fiscal years 2000, 1999 and 1998, respectively.

Products. The Fence segment manufactures galvanized, aluminized and vinyl coated chain link fence fabric, a full line of aluminum die cast and galvanized pressed steel fittings, vinyl coated colored pipe, steel ornamental iron fence products, and vinyl fencing. These products are manufactured at nine principal facilities.

The segment also distributes a variety of fence products that it purchases from third parties. Such products include pipe, tubing, wood, vinyl, aluminum and steel ornamental iron fence products, gates, hardware, and other related products. The segment also assembles wooden fence panels for residential fences at several of its facilities.

Fence products are used in a variety of applications. The chain link fence products primarily serve as security fencing at commercial, residential, and governmental facilities, including manufacturing and other industrial facilities, warehouses, schools, airports, correctional institutions, military facilities, recreational facilities, swimming pools and dog kennels. PVC color coated wire, together with vinyl coated colored pipe, tubing and fittings, are used primarily for tennis courts and other residential applications. The segment also offers other fence products that are used primarily in the construction of wood, vinyl, aluminum or ornamental iron fence systems, and in the construction of all sizes and styles of fence gates for the residential and commercial markets.

In fiscal year 2000, approximately 50% of the Fence segment sales represented products manufactured by the segment. The remaining fence products were purchased as finished goods from third parties for distribution. Purchases of finished fence products are primarily from domestic manufacturers. MMI believes that its full line of fence products provides a competitive advantage by enabling it to provide "one-stop shopping" to its customers, thereby promoting customer loyalty.

Production Process. The chain link fence manufacturing process is virtually the same at each manufacturing facility. The dominant manufacturing process, which is known as "GAW" or "galvanized after weaving", involves four steps.

• Step one: The rod is cleaned by removing "mill scale" by passing the rod around a series of pulleys that bend the rod in four planes. This bending process fractures the scale causing it to fall away from the base metal.
• Step two: The rod is then pulled through a series of funnel shaped dies that reduce the diameter of the rod by approximately 30% in each die. This cold-drawing process produces steel wire that ranges in diameter from 12.5 gauge (.095 inches) to 6.0 gauge (.192 inches). This wire is clean and uniform in diameter with a tensile strength that is nearly 100% stronger than the original rod.
• Step three: The wire is woven into chain link fabric by automated fabric weaving machines pre-set to a specific width (which ranges from three to 20 feet wide) of chain link fence fabric and to a specific "diamond" size ranging from 3/8-inch to 2 3/8-inches.
• Step four: The galvanizing process involves acid cleaning, then coating the surface of the steel wire with zinc to provide corrosion protection and enhanced appearance.

The segment also produces other types of coated wire fabric, including polyvinyl chloride or "PVC" coated, aluminum coated, and galvanized before weaving ("GBW"). In addition, vinyl coatings are applied to the pipe, tubing, and fittings used with vinyl coated chain link fabric. Anchor Die Cast manufactures a full line of aluminum die cast and galvanized pressed steel fittings.

Sales and Marketing; Principal Customers. The Fence segment sells fence products principally to fence wholesalers and to residential and commercial contractors. Although some sales of fence products are made to the ultimate consumer by home centers, home centers are not a primary focus of the Fence segment's sales efforts. No one customer accounted for more than 10% of the Fence segment revenues in fiscal year 2000.

The segment's dedicated sales force consists of approximately 130 employees whose sales territories cover the 48 contiguous states. The 130 people consist of 46 distribution center managers, 30 sales, regional and territory managers, and 54 customer service representatives. Sales generally are made through 52 regional distribution centers (five of which are located at manufacturing facilities), which are located in 31 states. Because customer orders typically require rapid turn-around time, the distribution centers are strategically located near customers' facilities. The segment also distributes its fence products through a network of 366 authorized dealers located throughout the country.

Competition. The Fence segment's major national competitor is Master-Halco, Inc., which has a more extensive distribution network than MMI. MMI believes, however, that its more extensive fence manufacturing capabilities provide an advantage to some major accounts. The segment also competes with two strong regional competitors, one of which operates primarily on the East Coast, with particular emphasis on Florida, and one of which operates only manufacturing facilities (with no internal distribution network) primarily east of the Rocky Mountains. The remaining competitors are smaller regional manufacturers and wholesalers.

Although the ability to sell fence products at a competitive price is an important competitive factor, MMI believes that other factors, such as perceived quality of product and service and ability to deliver products to customers quickly, are also important to its fence customers. MMI believes that its reputation for quality and service and its ability to deliver product quickly due to the locations of its 52 fence distribution centers, enable MMI to obtain a slight premium in its sales price for fence products, as compared to its principal competitors.

The Concrete Construction Products segment is made up of two divisions, Ivy Steel and Wire, which produces wire mesh products, and Meadow Burke Products, which produces concrete accessories. Ivy is managed from Houston, Texas and Meadow Burke is managed from Tampa, Florida. Both companies segregate their management and operations by geographic region. The Concrete Construction Products segment contributed 47.9%, 43.7% and 50.3% of consolidated net sales in fiscal years 2000, 1999 and 1998, respectively.

Products. Concrete construction products include various classes of wire mesh, which serve as a structural reinforcing grid for concrete construction, including concrete pipe, roads, bridges, runways and sewage and drainage projects. In addition, the segment produces over 2,000 specialized accessories used in concrete construction, including products used to position and install steel reinforcing bar and wire mesh reinforcing grid.

The segment manufactures three principal classes of wire mesh, consisting of commodity building mesh (Class B-2), pipe mesh (Class C), and structural mesh (Class D). Class B-2 mesh is a commodity building mesh used in housing and light commercial construction, including driveways, slab foundations and concrete walls. Class C mesh is used to construct reinforced concrete pipe for, among other things, drainage and sewage systems and water treatment facilities. Ivy has been producing pipe mesh for over 40 years. Class D mesh is a structural wire mesh that is designed as an alternative to steel reinforcing bar for certain types of concrete construction, including roads, bridges and other heavy construction projects. Structural mesh is marketed as a cost-effective alternative to steel reinforcing bars. Although structural mesh has a higher initial cost to the customer than does steel reinforcing bar, MMI believes that the overall construction cost to the customer is generally lower if structural mesh is utilized. The segment also manufactures galvanized strand wire which is used by manufacturers and processors of all types of wire products, including shelving, household and automotive products.

The concrete accessory products include supports for steel reinforcing bars and wire mesh, form ties and related products, basket assemblies (including welded and loose dowel basket assemblies), anchors and inserts (including imbedded attachments and lifting devices, composite structural wire members and prestress strand hold down anchors) and bracing devices for holding in place tilt-up concrete walls. Although the segment manufactures most of its concrete accessories, certain products, such as plastic supports for steel reinforcing bar and certain types of form ties, are purchased from third parties for distribution by the segment. New products are continually introduced in an effort to provide a full line of concrete accessories to customers.

Concrete accessories are used in a variety of applications. Supports are used to position and install steel reinforcing bars and wire mesh in the construction of roads, bridges and other heavy construction projects. Welded and loose dowel basket assemblies are used to reinforce joints between concrete pieces in the paving of roads, highways, and runways. Anchors and inserts are used to fasten and lift precast panels and floor panels in the construction of, among other things, commercial buildings.

In fiscal year 2000, approximately 93% of the segment's sales represented manufactured products. The remaining 7% of the segment's sales were purchased as finished goods for resale through 22 regional distribution facilities.

Production Process. The Concrete Construction Products segment manufactures its products at 13 principal facilities, which are strategically located throughout the United States. Wire mesh is produced from wire that ranges in size from 1/8-inch diameter to 3/4-inch diameter, in both smooth and deformed patterns. This method of welding, known as electrical resistance welding, produces a very strong welded joint without weakening the steel as much as electrode welding. Wire mesh is manufactured from low-carbon, "hot-rolled" steel rod on large automatic welding machines. The manufacturing process involves three steps.

• Step one: The rod is cleaned by removing "mill scale" by passing the rod around a series of pulleys that bend the rod in four planes. This bending process fractures the scale causing it to fall away from the base metal.
• Step two: The rod is then pulled through a series of funnel shaped dies that reduce the diameter of the rod by approximately 30% in each die. This cold-drawing process produces steel wire that ranges in diameter from 10.0 gauge (.132 inches) to 3/4-inch (.750 inches). This wire is clean and uniform in diameter with a tensile strength that is nearly 100% stronger than the original rod.
• Step three: The wire is then processed through automatic welding machines that form customer specified wire grids needed for each particular job.

Certain aspects of the production process vary depending on the class of mesh being produced. Commodity building mesh generally is produced in roll and sheet form and is made with small diameter wire. Pipe mesh generally is custom-made to customer specifications. Additional steps in the process of producing structural wire mesh often include bending the mesh to precise shapes, cutting the exact sizes and preparing the surface to allow for the application of special coatings.

The concrete accessory manufacturing process also consists of drawing steel rod into wire that is then fed into automatic forming and resistance welding machines which produce the finished product. Additional manufacturing processes include various punch press operations, threading, machining, painting, PVC systems and epoxy coating of products. In addition to steel rod, which is the primary raw material for concrete accessories, other raw materials are used such as round and flat bar stock, slit steel coils, and reinforcing steel bars.

Sales and Marketing; Principal Customers. The segment sells its products principally to construction products distributors, industrial manufacturers (such as pre-casters of concrete products), large reinforcing bar fabricators, commercial building supply dealers and construction contractors.

The specialized sales force for the wire mesh product line consists of approximately 9 employees whose sales territories cover the 48 contiguous states. Members of the wire mesh sales force generally have engineering backgrounds which permit them to consult with customers regarding product specifications. These sales employees are supported by 24 customer service employees. Because orders for wire mesh products typically do not require the quick turnaround time that is required for concrete accessories, wire mesh products are shipped directly from one of the eight wire mesh manufacturing facilities to the customer, generally in truckload quantities. Most wire mesh production is in response to particular customer orders. Light wire mesh used for residential construction, however, is produced in standard patterns in anticipation of customer orders.

The dedicated sales force for concrete accessories consists of approximately 16 employees whose sales territories cover the 48 contiguous states. These sales employees are supported by 26 customer service representatives and 11 distribution center managers. Concrete accessories are distributed primarily through 14 regional distribution centers (three of which are located at concrete accessories manufacturing facilities). Because orders for concrete accessories typically require rapid turnaround time, these distribution centers are strategically located near customers' facilities.

There was one customer that accounted for more than 10% of the Concrete Construction Products segment revenues in fiscal year 2000, however this customer did not account for more than 10% of consolidated MMI revenues.

Competition. The segment's major competitor for wire mesh is Insteel Wire Products, Inc. The segment also faces strong regional competitors in Midwestern, Southeastern, and Mid-Atlantic states. There is also competition from smaller regional manufacturers and wholesalers of wire mesh products.

The concrete accessories product line faces competition from several significant competitors. Dayton-Superior Corporation is the leading full line national participant in the concrete accessories market, with a market share greater than that of MMI. The segment also faces strong full line competition from a regional competitor and from two other significant competitors, who offer a more limited number of products.

MMI believes that its ability to produce a greater variety of wire mesh products in a wider geographical area provides an advantage to major accounts. MMI believes that its willingness and ability to provide custom-made products that fit its customers' individual needs provide a competitive advantage. For concrete accessories, MMI believes that price, extensive product selection and the ability to deliver product quickly are the principal competitive factors.

MMI believes that its raw material costs (which MMI believes are lower than many of its competitors) enhance the segment's ability to compete effectively with respect to product price in the concrete construction market.

Environmental Regulation. MMI is subject to extensive and changing federal, state and local Environmental Laws including laws and regulations (i) that relate to air and water quality, (ii) impose limitations on the discharge of pollutants into the environment, and (iii) establish standards for the treatment, storage, and disposal of toxic and hazardous wastes. Stringent fines and penalties may be imposed for non-compliance with these Environmental Laws. In addition, Environmental Laws could impose liability for costs associated with investigating and remediating contamination at MMI's facilities or at third-party facilities at which MMI has arranged for the disposal treatment of hazardous materials.

Although no assurances can be given, MMI believes that MMI and its operations are in compliance in all material respects with all Environmental Laws and MMI is not aware of any noncompliance or obligation to investigate or remediate contamination that could reasonably be expected to result in a material liability. This being said, Environmental Laws continue to be amended and revised to impose stricter obligations, and compliance with future additional environmental requirements could necessitate capital outlays. However, MMI does not believe that these expenditures should ultimately result in a material adverse effect on its financial position or results of operations. MMI cannot predict the precise effect such future requirements, if enacted, would have on MMI, although MMI believes that such regulations would be enacted over time and would affect the industry as a whole.

Health and Safety Matters. MMI's facilities and operations are governed by laws and regulations, including the federal Occupational Safety and Health Act, relating to worker health and workplace safety. MMI believes that appropriate precautions are taken to protect employees and others from workplace injuries and harmful exposure to materials handled and managed at its facilities. While it is not anticipated that MMI will be required in the near future to expend material amounts by reason of such health and safety laws and regulations, MMI is unable to predict the ultimate cost of compliance with these changing regulations.

As of March 2, 2001, MMI had approximately 2,590 full time employees. MMI is a party to eight collective bargaining agreements and one certified agreement that is currently in contract negotiations. These agreements are with six unions and a total of 314 employees are members. Such collective bargaining agreements cover employees of the Baltimore, Maryland; Tampa, Florida; Whittier, California; Riverside, California; Palisades Park, New Jersey; Chicago, Illinois; and Oregon, Ohio facilities. MMI considers its relations with its employees to be good.

MMI files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements and other information filed by MMI at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, DC 20549. Please call (800) SEC-0330 for further information on the Public Reference Room. MMI's filings are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at h ttp://www.sec.gov/.

MMI's principal executive offices are located in approximately 15,000 square feet of leased space in Houston, Texas.

The operating facilities of MMI can be broken down into two categories, manufacturing plants and distribution centers. The majority of the manufacturing plants are owned by MMI. The majority of the distribution centers are leased from third parties. The following table sets forth the facilities general information by operating segment:

MMI is involved in various claims and lawsuits incidental to its business. MMI does not believe that these claims and lawsuits in the aggregate will have a material adverse affect on MMI's business, financial condition and results of operations.

Not applicable.

Not applicable.

The following table sets forth selected historical financial data derived from MMI's audited consolidated financial statements and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto, included elsewhere herein.

The following is an analysis of the financial condition and results of operations of MMI. This analysis should be read in conjunction with MMI's Consolidated Financial Statements and Notes thereto, appearing elsewhere herein.

MMI is a leading manufacturer and distributor of products used in the commercial, infrastructure and residential construction industries. Earnings were as follows:

Acquisitions increased consolidated earnings before interest and income taxes $5.7 million, $4.5 million, and $5.0 million in 2000, 1999, and 1998, respectively.

Consolidated MMI net income increased 3.1% in 2000 and increased 70.2% in 1999. The increase in 2000 was primarily due to increased sales activity from acquisitions in the Concrete Construction Product segment. Declines in profit margins, mostly in the Fence segment, as well as higher levels of SG&A and interest expense, were the primary offsets. The 1999 increase is predominately the result of increased sales activity mostly from business acquisitions and lower raw material costs at both of the business segments.

Corporate costs decreased $1.1 million in 2000 and increased $2.9 million in 1999. The majority of the 1999 increase was a $2.4 million non-recurring expense for the redemption of incentive stock options. These options were redeemed as part of a recapitalization of MMHC in November 1999. See Note 2 to the consolidated audited financial statements. The decrease in 2000 is the net of the non-recurring charge in 1999 and increased goodwill amortization resulting from recent acquisitions. Goodwill amortization increased $1.4 million in 2000 and $.4 million in 1999.

Interest expense increased $3.7 million in 2000 and $2.1 million in 1999. In 2000, borrowings under the revolving credit facility increased due to the Hallet acquisition and payment of dividends to MMHC. Although there was some increase in interest rates, the majority of the increase in interest expense was due to the higher borrowings. In 1999, interest expense increased primarily due to the issuance of an additional $30 million of senior subordinated debentures. The higher level of borrowings to finance acquisitions and the increased mix of the "high-yield" debentures (11.25% coupon) in MMI's debt structure both contributed to the increase in interest expense.

The effective income tax rate decreased in 2000 due primarily to the implementation of state income tax savings strategies. In 1999 the effective income tax rate increased primarily as a result of non-deductible goodwill associated with recent acquisitions.

Net Sales. Net sales increased 2.0% in 2000 and 30.1% in 1999. These increases were primarily due to acquisitions and the opening of new distribution centers. The National Wholesale Fence acquisition in second quarter 1999 contributed net sales in 1999 of $13.1 million and the Security Fence acquisition in fourth quarter 1998 contributed net sales of $32.8 million. In 2000 the National Wholesale Fence acquisition contributed an additional $10.8 million of net sales. Net sales in 2000 declined $5.4 million primarily due to a loss of certain customers who are also competitors of MMI and fewer special order jobs. New distribution centers represent openings or small acquisitions over the last two years. These new distribution centers increased net sales $4.6 million in 2000 and $10.5 million in 1999.

Gross Profit. The Fence segment's gross profit margin declined from 15.6% in 1999 to 14.5% in 2000. The decline was primarily due to non-recurring expenses associated with expanding/modernizing a fence manufacturing facility in the West region, increased material handling expenses (mostly headcount growth in anticipation of higher sales volumes), lower margins at Security Fence where customers who are also competitors discontinued their purchases of higher margin products, and a marginal increase in raw material costs. In 1999, the gross profit margin increase to 15.6% from 14.8% in 1998 was primarily due to Security Fence selling higher margin products, the National Wholesale Fence acquisition which introduced manufactured ornamental steel products to the West region, and lower steel rod and tubing costs from that in the previous year.

SG&A and Other Expense. Selling, General and Administrative and other expense ("SG&A") increased 5.4% in 2000 and 41.5% in 1999. SG&A as a percentage of sales was 9.1%, 8.8%, and 8.1% for 2000, 1999, and 1998, respectively. The increase in expense in 2000 and 1999 was principally due to business acquisitions, the opening of distribution centers and higher bad debt expense resulting from certain customers experiencing financial difficulties and bankruptcy.

Net Sales. Net sales increased 21.1% in 2000. This increase was due to the acquisition of Hallett ($34.3 million) and increased concrete accessories sales. Net sales in 1999 stabilized in comparison to 1998 primarily due to plants working at capacity in both years, and the absence of acquisitions in 1999.

Gross Profit. Gross profit increased 17.1% in 2000 and 39.3% in 1999. Gross profit margin percentage decreased 90 basis points in 2000 and increased 710 basis points in 1999. Gross profit increased substantially in 1999 as compared to 1998 primarily as a result of decreasing cost of steel rod, MMI's principal raw material, relatively stable sales prices, and the continued growth in mix of higher margin products. Gross profit continued to rise in 2000 primarily due to the acquisition of Hallett in February 2000. The decline in margin percentage in 2000 is primarily due to increased conversion costs, including labor and maintenance costs. In 2000, raw material costs increased slightly, but the increase was offset by increases in sales prices.

SG&A and Other Expense. SG&A and other expense increased 13.1% in 2000 and 5.6% in 1999. As a percentage of sales, these expenses were 7.0%, 7.5% and 7.1% in 2000, 1999, and 1998, respectively. Expenses increased in 2000 primarily due to the Hallett acquisition. SG&A and other expense as a percentage of sales decreased in 2000, primarily due to three infrequent events that increased SG&A and other expense in 1999. Bad debt expense increased $.5 million due to certain customers with large balances having financial difficulties, some of which were caused by the customers' loss of large contracts. Also in 1999, there were increased writedowns of fixed assets ($.4 million) and a casualty loss at a manufacturing facility ($.2 million). SG&A and other expense as a percentage of sales increased in 1999 also as a result of these infrequent events.

Operating activities net of the payment of interest and income taxes and changes in working capital generated $28.5 million of cash in 2000 compared with $18.7 million in 1999. Net income, adjusted for non-cash items, such as depreciation, amortization, and other non-cash charges provided $33.7 million, $31.6 million and $18.6 million in 2000, 1999, and 1998, respectively. Excluding working capital increases resulting from a particular year's business acquisitions, MMI used $5.1 million, $12.9 million, and $3.4 million of cash in 2000, 1999, and 1998, respectively to grow its working capital as the volume of its sales increased.

Working capital decreased in 2000 to $22.4 million from $79.2 million in 1999 due primarily to the reclassification of the revolving credit facility balance of $65.2 million from a long-term to a current liability. The facility matures in December 2001. The lenders under the revolving credit facility have recently increased the facility from $75 million to $100 million and have expressed their continuing interest in MMI as a credit. While there are no assurances that it will be able to do so, management believes that it will readily be able to extend or replace the revolving credit facility at or prior to its maturity. Because MMHC is investigating strategic alternatives, including the possible sale of the company, a commitment by MMI to a revolving credit facility with an extended term has not been made.

Investing activities utilized $49.3 million, $22.3 million and $47.9 million in 2000, 1999, and 1998, respectively. In 2000, 1999, and 1998 the majority of this cash was used for acquisitions. Acquisitions utilized $42.6 million, $15.8 million, and $37.7 million in 2000,1999, and 1998, respectively. Capital expenditures for expansion, improvement and replacement of property plant and equipment were $6.9 million, $6.6 million and $10.2 million in 2000, 1999, and 1998, respectively. Capital expenditures in 1998 included $3.2 million for a wire mesh plant facility which replaced a previously leased building, and $1.9 million for rental equipment, a new product line resulting from the Burke Group acquisition.

Financing activities provided $21.3 million in 2000 compared to $4.1 million and $31.2 million in 1999 and 1998, respectively. In 2000, proceeds from long-term obligations were utilized primarily to finance the Hallett acquisition and dividend payments to MMHC. In 1999 cash flow from financing was relatively flat compared to prior years, due to growth in operating cash flow and the need to fund only one significant acquisition, National Wholesale Fence. The increase in 1998 was due primarily to funding the Burke Group and Security Fence acquisitions.

Although EBITDA should not be considered in isolation from or as a substitute for cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of a company's liquidity, it is a widely accepted financial indicator of a company's ability to incur and service debt. EBITDA is defined as the sum of income before interest expense, income taxes, depreciation and amortization, and non-recurring expenses. EBITDA was $68.4 million, $62.5 million and $42.8 million in 2000, 1999, and 1998, respectively. The increase in EBITDA is primarily from the result of net sales and gross profit resulting from acquisitions, reduced raw material costs and other changes as discussed in the segment analysis above.

Senior Subordinated Notes. On April 16, 1997, MMI issued $120 million of 11.25% senior subordinated notes due 2007 (the "Senior Subordinated Notes"). The net proceeds of $116.0 million, after fees and expenses, were used (i) to distribute $57.1 million to MMHC for the redemption by MMHC of certain of its equity interests, (ii) to repay the entire $10 million principal amount, plus accrued interest, on a senior subordinated secured note payable, (iii) to repay MMI's remaining indebtedness under a term loan facility of $11.4 million and (iv) to reduce MMI's indebtedness under the revolving credit facility.

On February 12, 1999, MMI issued $30 million of a new series of the 11.25% Senior Subordinated Notes. The net proceeds of approximately $31.1 million, including original issuance premium, after fees and expenses, were used to reduce its borrowings under the revolving credit facility.

MMI's senior subordinated notes are subject to a "Change in Control" provision. This provision states that a change in control exists if either of the following occurs; a sale of substantially all of MMI' s assets, the liquidation or dissolution of MMI, a change in the beneficial ownership of more that 50% of the total voting power of the voting stock, or the majority of the members of the Board of Directors do not continue as directors. If a change in control exists, each holder will have the right to require MMI to repurchase all or any part of their notes at a repurchase price in cash at 101% of the aggregate principal plus accrued and unpaid interest and liquidating damages, if any.

Credit Facility. MMI's revolving credit facility provides for maximum borrowings of $100 million and matures in December 2001. This facility was increased from $75 million effective March 1, 2001 to provide additional working capital for expected seasonal needs and business acquisitions. The revolver balance fluctuates throughout the year based on sales and purchasing volume, capital expenditures, and acquisitions. Borrowing availability is subject to a borrowing base calculation. The average daily balance outstanding under this credit facility was $56.0 million and $20.3 million in 2000 and 1999, respectively. Borrowings under the credit facility bear interest, at either the bank's base rate plus 0.25 percent or Eurodollar plus 1.5 percent, at the option of MMI. Borrowings bearing interest at a Eurodollar rate plus 1.5 percent are denominated in short-term obligations of U.S. LIBOR with 30 to 180 day maturities.

MMI's capital expenditure budget for fiscal year 2001 is $7.8 million and will be funded by the revolving credit facility.

MMI expects that cash flows from operations and the borrowing availability under its existing bank revolving credit facility and any future revolving credit facilities will provide sufficient liquidity to meet its normal operating requirements, capital expenditure plans, existing debt service, allowable dividends to MMHC, and business acquisition strategy during fiscal year 2001.

MMI has pursued and intends to continue to pursue a strategy of business acquisitions that will broaden its distribution network, complement or extend its existing product lines or increase its production capacity. The borrowing availability under its bank revolving credit facility is also expected to be available to finance such acquisitions. It is possible that, depending upon MMI's future operating cash flows and the size of potential acquisitions, MMI will seek additional sources of financing subject to limitations set forth in its senior subordinated notes indenture.

The impact of inflation on MMI's operations has not been significant in recent years. There can be no assurance, however, that a high rate of inflation in the future will not have an adverse effect on MMI's operating results.

This report contains forward-looking statement s that reflect management's current assumptions and estimates of future performance and economic conditions. Such statements are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements contain words such as "expects," "plans," "believes," "will," "estimates," "intends," and other words of similar meaning that do not relate strictly to historical or current facts. Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those projected, stated or implied by the statements. Such risks and uncertainties include, but are not limited to, general economic conditions in the markets in which MMI operates; unanticipated changes in customer demands, order patterns and inventory levels; fluctuations in the cost and availability of MMI's primary raw material, steel wire rod; MMI's ability to raise selling prices in order to recover increases in wire rod prices; legal, environmental or regulatory developments that significantly impact MMI's operating cost; continuation of good labor relations; and MMI's ability to refinance indebtedness as necessary.

MMI is subject to market risk exposure related to changes in interest rates on its revolving credit facility and its Senior Subordinated Notes. Borrowings under the credit facility bear interest, at either the bank's base rate plus 0.25 percent or Eurodollar rate plus 1.5 percent, at the option of MMI. For fiscal year 2000, the average daily balance outstanding under this credit facility was $56.0 million. Based on this balance, a one percent change in the interest rate would cause a change in interest expense of approximately $560,000. MMI is exposed to changes in the fair value of its 11.25% fixed rate senior subordinated notes. At December 30, 2000 the notes with a face value of $150 million had a fair value of approximately 97.5% of par, or $146.3 million. At January 1, 2000, the fair value of these notes was approximately 103% of par, or $154.5 million. The variation in fair value is a function of market interest rate changes and the investor perception of the investment quality of the senior subordinated notes.

MMI also has exposure to price fluctuations associated with steel rod, its primary raw material. MMI negotiates purchase commitments from one to nine months in advance to limit its exposure to price fluctuation and ensure availability of the materials. Generally, 60% of steel rod is purchased from foreign sources. Such purchases are denominated in US dollars.

To the Board of Directors and Stockholder

MMI Products, Inc.

We have audited the accompanying consolidated balance sheets of MMI Products, Inc. as of December 30, 2000 and January 1, 2000, and the related consolidated statements of income, stockholder's equity (deficit) and cash flows for each of the three fiscal years in the period ended December 30, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MMI Products, Inc. at December 30, 2000 and January 1, 2000, and the consolidated results of its operations and its cash flows for each of the three fiscal years in the period ended December 30, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

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

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

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

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

The consolidated financial statements include the accounts of MMI Products, Inc. and its wholly owned subsidiary, MMI Management, Inc., and their partnership interests in MMI Management Services L.P. (collectively, "MMI"). All significant intercompany balances and transaction have been eliminated. MMI Products, Inc. is a wholly owned subsidiary of Merchants Metals Holding Company ("MMHC"). MMI is a manufacturer and distributor of products used in the residential, commercial and infrastructure construction industries within the United States. The manufactured products in each of MMI's product lines are produced primarily from the same raw material, steel rod. MMI's customers include contractors, fence wholesalers, industrial manufacturers, highway construction contractors and fabricators of reinforcing bar.

On October 2, 2000, MMI announced the engagement of UBS Warburg, LLC to consider strategic alternatives, including the possible sale of MMHC.

On November 12, 1999, MMHC completed a recapitalization transaction (the "1999 Recapitalization") in which (i) MMHC entered into a $69.2 million subordinated credit facility due in 2007 (the "MMHC Credit Facility") with an investment fund managed by an affiliate of MMHC's majority economic owner, (ii) MMHC redeemed its existing equity interests, including stock options granted to certain employees and a director of MMI, and (iii) certain MMHC stockholders and new stockholders invested in new common and preferred stock of MMHC. Interest at a rate of 14% per annum on the MMHC Credit Facility is payable semi-annually in cash or in kind at the option of MMHC. In connection with any prepayment or repayment of the facility, MMHC will pay a premium on the principal such that the internal rate of return is equal to (i) 18% per annum if such prepayment or repayment occurs prior to November 11, 2002 or (ii) 20% per annum if such prepayment or repayment occurs on or after November 11, 2002. The MMHC preferred shares have a stated value of $64.8 million and accrue cumulative preferred dividends at a rate of 12% per annum. Cash payment of dividends on MMHC's common and preferred stock is not permitted while the MMHC Credit Facility is outstanding.

Availability of cash at MMHC to pay the MMHC Credit Facility interest and cumulative preferred dividends is principally dependent upon MMI's cash flows. MMI's Revolving Credit Facility agreement and senior subordinated notes indenture require MMI to meet certain restricted payment tests before any dividends can be distributed to MMHC. In 2000, MMI paid dividends of $31 million to MMHC for payments applied to the MMHC credit facility.

As a result of the 1999 Recapitalization, MMI recognized a non-cash stock compensation charge of $2.4 million ($1.4 million net of tax) related to the redemption of MMHC's stock options granted in previous years to certain employees of MMI.

A former stockholder of MMHC exercised appraisal rights and filed a lawsuit against MMHC with respect to the value of the common and preferred stock redeemed in connection with a recapitalization transaction (the "1996 Recapitalization"). In January 1997, MMHC paid the stockholder $2.2 million with respect to the value of the preferred stock, the original value offered in the 1996 Recapitalization. In October 1998, MMHC paid $6.45 million, including accrued interest of $1.04 million, to settle the value of the common stock redeemed. The $1.7 million increase in the original value offered in the 1996 Recapitalization was charged to Additional Paid-in-Capital to reflect the finalization of the December 1996 change in capital contributions by MMHC. MMI declared a dividend of $1.3 million to MMHC during the fourth quarter of 1998 to settle the interest and legal expenses paid on MMHC's behalf by MMI. The $6.45 million settlement was funded by MMI's revolving credit facility and had no effect on the operating results of MMI.

MMI follows a 52-53 week fiscal year ending on the Saturday closest to December 31. The 2000, 1999 and 1998 fiscal years refer to the fifty-two week periods ended December 30, 2000, January 1, 2000 and January 2, 1999, respectively.

MMI recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectibility is probable. These criteria are met generally at the time product is shipped but sometimes when the product reaches its destination.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

MMI considers all demand deposits and time deposits with original maturities of three months or less when purchased to be cash equivalents.

Inventories are valued at the lower of average cost or market.

Property, plant and equipment are stated at historical cost, except for assets acquired in business combinations which are recorded at fair value at the date of acquisition. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets. Estimated useful lives are as follows:

Depreciation expense was $10,613,000, $7,834,000 and $6,423,000 for fiscal years 2000, 1999 and 1998, respectively.

Major capital upgrades are capitalized. Maintenance, repairs and minor upgrades are expensed as incurred. Gains and losses from dispositions are included in the results of operations.

MMI leases certain machinery and equipment under capital leases. Assets recorded under capital leases are amortized over the period of the respective leases with the related amortization included in depreciation expense. Assets under these obligations, totaling $4,732,000 and $4,994,000 (net of accumulated amortization of $4,890,000 and $4,685,000) at December 30, 2000 and January 1, 2000, respectively, are included in property, plant and equipment in the accompanying consolidated balance sheets.

Goodwill represents the excess cost of companies acquired over the fair value of their net identifiable assets. Goodwill is being amortized on a straight-line basis over periods ranging from 10 to 40 years. The carrying value of goodwill, as well as the related amortization periods, is periodically evaluated to determine whether adjustments to the carrying value or related lives are required. This evaluation is based on MMI's projection of undiscounted cash flows of the acquired operations over the remaining amortization period. To the extent such projections indicate that future undiscounted cash flows are not sufficient to recover the carrying amounts of the related goodwill, the underlying assets are written down by charges to expense so that the carrying amount is equal to fair value, primarily determined based on future discounted cash flows.

The carrying values of long-lived assets, principally identifiable intangibles, property, plant and equipment and any related goodwill, are reviewed for potential impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, as determined based on the estimated future undiscounted cash flows.

If such assets are considered to be impaired, the carrying value of the related assets would be reduced to their estimated fair value.

Financial instruments that could potentially subject MMI to concentrations of credit risk are accounts receivable. MMI continuously evaluates the creditworthiness of its customers and generally does not require collateral. No customer accounted for 10% or more of consolidated revenues for fiscal years 2000, 1999 and 1998.

MMI considers the recorded value of its monetary assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, and accounts payable, to approximate their respective fair values at December 30, 2000 and January 1, 2000. The carrying value of MMI's senior subordinated debt is approximately $150.0 million versus its estimated fair value of approximately $146.3 million and $154.5 million at December 30, 2000 and January 1, 2000, respectively. The estimated fair values are based on the quoted market prices. The fair value of the revolving credit facility approximated its carrying value.

Certain reclassifications have been made to the 1998 and 1999 financial statements in order to conform to the 2000 presentation.

Effective October 1, 2000, MMI adopted Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements", as amended ("SAB 101"), issued by the Securities and Exchange Commission in December 1999. The adoption of SAB 101 did not have a material effect on revenue and quarterly earnings during fiscal year 2000 or prior years.

In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities," which requires all derivative instruments to be recognized at fair value in the balance sheet. Changes in the fair value of a derivative instrument will be reported as earnings or other comprehensive income, depending upon the intended use of the derivative instrument. MMI plans to adopt SFAS 133 on January 1, 2001 and does not expect the adoption to have a material impact on the results of operations or financial position.

Effective November 12, 1999 in connection with the 1999 Recapitalization, MMI incurred nonrecurring charges related to MMHC's stock options granted in previous years to certain employees of MMI. The aggregate effect of these expenses was $2.4 million for fiscal year 1999 ($1.4 million, net of tax).

On February 3, 2000, MMI purchased all of the issued and outstanding capital stock of Hallett Wire Products Company, a Minnesota corporation ("Hallett"). Hallett manufactured welded wire mesh at facilities located in St. Joseph, Missouri and Kingman, Arizona. Hallett had net sales of approximately $37 million for the year ended December 31, 1999. The excess purchase price over the fair value of the assets acquired of $21.3 million is being amortized over 20 years. The total acquisition price was $40 million in cash and was funded by the MMI's revolving credit facility. To facilitate the purchase, the revolving credit facility was increased from $48.5 million to $75 million on February 3, 2000. The acquisition was accounted for using the purchase method of accounting and the accompanying consolidated financial statements include the operating results of this acquisition from the date of the acquisition.

Inventories consisted of the following:

Intangible assets consisted of the following:

Intangible assets are amortized on a straight-line basis over their respective estimated lives (the period when benefits are expected to be derived). Total amortization expense for fiscal years 2000, 1999 and 1998 was $2,563,000, $1,199,000 and $764,000, respectively.

Accrued liabilities consisted of the following:

Long-term debt, including capital lease obligations, consisted of the following:

MMI's revolving credit facility provides for maximum borrowings of $100 million which was increased from $75 million effective March 1, 2001, see Note 14 to the consolidated financial statements. The classification of this facility has changed from long-term debt in 1999 to current maturities in 2000 as the maturity date is December 12, 2001. The lenders under the revolving credit facility have expressed their continuing interest in MMI as a credit. While there are no assurances that it will be able to do so, management believes that it will readily be able to extend or replace the revolving credit facility at or prior to its maturity. Because MMHC is investigating strategic alternatives, including the possible sale of the company, a commitment by MMI to a revolving credit facility with an extended term has not been made. This facility incurs interest payable at the bank's base rate plus 0.25 percent or Eurodollar rate plus 1.5 percent at MMI's option. Borrowings bearing interest at a Eurodollar rate plus 1.5 percent are denominated in short-term obligations of US LIBOR with 30 to 180 day maturities. On December 30, 2000 the portion of the outstanding borrowings under US LIBOR was approximately $60 million of which $10 million matures on January 12, 2001, $30 million on February 5, 2001, and $20 million on March 6, 2001. As of December 30, 2000, the average interest rate for this facility was 8.22 percent. MMI is required to pay a commitment fee of 1/2 of 1.0 percent of the unused portion of the credit facility on a monthly basis. The revolving credit facility is secured by all the assets and stock of MMI and guaranteed by MMHC. Borrowing availability under the revolving credit facility at December 30, 2000, after taking into account borrowing base restrictions and outstanding borrowings and letters of credit, was approximately $7.8 million. The borrowing availability at year-end was based on a maximum borrowing limit of $75 million. MMI had outstanding letters of credit (which cannot exceed $20 million) totaling $2 million and $2.6 million at December 30, 2000 and January 1, 2000, respectively.

On April 16, 1997, MMI issued $120 million of senior subordinated notes due 2007. The net proceeds of $116.0 million, after fees and expenses, were used to (i) distribute $57.1 million to MMHC for the redemption by MMHC of certain of its equity interests, (ii) repay the entire $10.0 million principal amount, plus accrued interest, on a senior subordinated secured note payable, (iii) repay MMI's remaining indebtedness under a term loan facility of $11.4 million and (iv) reduce MMI's indebtedness under the revolving credit facility. The senior subordinated notes are general unsecured obligations of MMI and are subordinated to MMI's revolving credit facility.

On February 12, 1999, MMI issued $30 million of 11.25% senior subordinated notes due 2007. The net proceeds of approximately $31.1 million, which include the original issuance premium, after fees and expenses, were used to reduce the borrowings under the revolving credit facility. The effective interest rate of these notes is 10.5%.

The senior subordinated notes may be redeemable at the option of MMI, in whole or in part, at any time on or after April 15, 2002 at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and liquidated damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on April 15 of the years indicated below:

MMI's senior subordinated notes are subject to a "Change in Control" provision. This provision states that a change in control exists if either of the following occurs; a sale of substantially all of MMI' s assets, the liquidation or dissolution of MMI, a change in the beneficial ownership of more that 50% of the total voting power of the voting stock, or the majority of the members of the Board of Directors do not continue as directors. If a change in control exists, each holder will have the right to require MMI to repurchase all or any part of their notes at a repurchase price in cash at 101% of the aggregate principal plus accrued and unpaid interest and liquidating damages, if any.

Scheduled maturities of long-term debt, including capital lease obligations, are as follows:

MMI leases warehouse and office space and certain machinery and equipment under operating leases. Future minimum lease payments on noncancelable operating leases with remaining terms of one or more years consisted of the following at December 30, 2000 (in thousands):

Total rental expense for fiscal years 2000, 1999 and 1998 was $5,807,000, $5,846,000 and $5,103,000, respectively.

401(k) Plan. MMI maintains the MMI Products, Inc. 401(k) Savings Plan (the "401(k) Plan"). All Company employees are eligible to participate in the 401(k) Plan after one year of employment. In some instances amendments are made to the 401(k) Plan for immediate eligibility of employees of an acquired company. Employees may elect to make pre-tax contributions up to the applicable statutory maximum limits to the 401(k) Plan. MMI makes matching contributions (subject to statutory limits) in an amount equal to 25% of the employee's contributions on the first 2% of the employee's compensation. In addition, MMI may make additional contributions in such amounts as it may elect. Company contributions vest over four years at a rate of 25% for each year of service completed.

Pension Plan. MMI maintains the MMI Products, Inc. Pension Plan (the "Pension Plan"), which is a money purchase defined contribution plan. Employees of MMI (other than employees covered by a collective bargaining agreement) generally are eligible to participate in the Pension Plan after one year of employment.

MMI makes annual contributions to the Pension Plan for each eligible employee in accordance with a formula that is based on the participant's age and level of compensation. The Pension Plan provides for 100% vesting after five years of service.

MMI's contributions to the 401(k) Plan and the Pension Plan for fiscal years 2000, 1999 and 1998 were $1,566,000, $1,444,000 and $1,385,000, respectively.

MMI maintains a retirement plan which covers certain employees under a collective bargaining agreement. Plan benefits are based primarily on years of service. It is the policy of MMI to fund this plan currently based upon actuarial determinations and applicable tax regulations.

The following table provides the amounts recognized in the statement of financial position:

The plan's accumulated benefit obligation was $2,697,000 and $2,257,000 for fiscal years 2000 and 1999, respectively.

The amount included within other comprehensive income arising from changes in the additional minimum pension liability was a charge of $427,000 in fiscal year 2000 and income of $272,000 for fiscal year 1999.

The prior-service costs are amortized on a straight-line basis over the average remaining working lifetime of participants. Gains and losses in excess of 10% of the greater of benefit obligation and the market-related value of assets are amortized over the average remaining working lifetime of participants expected to receive benefits.

MMI also contributes to certain multi-employer, defined benefit plans covering certain employees under other collective bargaining agreements. Total expenses for these plans were $447,000, $345,000 and $280,000 for fiscal years 2000, 1999 and 1998, respectively.

On November 12, 1999 options for 15,660 shares of MMHC Class A Common Stock were redeemed at a price of $1.00 per share in connection with the 1999 Recapitalization transaction. All outstanding stock options were redeemed in this transaction and subsequently the plan was terminated.

Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123) establishes alternative methods of accounting and disclosure for employee stock-based compensation arrangements. MMI uses the intrinsic value method of accounting as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, for MMHC's stock options granted to MMI's employees. This method generally does not result in the recognition of compensation expense when employee stock options are granted if the exercise price of the option equals or exceeds the fair market value of the stock at the date of grant.

If the provisions of SFAS 123 had been used in fiscal years 2000 and 1999 earnings would not have been materially different than reported.

Significant components of the provision for income taxes which are not allocated to the business segments, are as follows:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The net deferred tax liability increased by $5,705,000 related to the acquisition of Hallett. Significant components of MMI's deferred tax liabilities and assets are as follows:

For the year ended December 30, 2000 MMI has recorded a deferred tax benefit of $275,000 arising from the changes in the additional minimum pension liability that is recorded as part of accumulated other comprehensive income.

The reconciliation of income tax computed at the US federal statutory tax rate to income tax expense is as follows for fiscal years 2000, 1999, and 1998:

MMI is involved in a number of legal actions arising in the ordinary course of business. MMI believes that the various asserted claims and litigation in which it is involved will not materially affect its financial position or future operating results, although no assurance can be given with respect to the ultimate outcome of any such claim or litigation.

MMI has five operating units that are aggregated into two reportable segments; Fence and Concrete Construction Products. The Fence segment has three operating units that offer similar products and services. The Concrete Construction Products segment has two operating units that offer complimentary products and services within the concrete construction industry.

The Fence segment manufactures chain link fence fabric, a full line of aluminum die cast and galvanized pressed steel fittings, ornamental iron products, PVC color coated wire and vinyl coated color pipe, tubing and fittings. In addition, the segment also distributes a variety of fence products including pipe, tubing, wood, vinyl, aluminum, and ornamental iron fence products, gates, hardware, and other related products. The fence products are used in a variety of residential and commercial applications.

The Concrete Construction Products segment manufactures wire mesh and a variety of concrete accessories. Concrete accessories include supports for steel reinforcing bars and wire mesh, form ties, basket assemblies, anchors and inserts. The concrete construction products are used in the construction of roads, bridges and other heavy construction projects including commercial buildings.

The accounting policies of the reportable segments are the same as those described in Note 1. MMI evaluates the performance of its operating segments based upon income before interest expense, income taxes, depreciation, amortization and nonrecurring items.

Summarized financial information concerning the reportable segments is shown in the following table. The Corporate column for earnings before interest and income taxes represents only amortization of intangibles and nonrecurring items. Corporate general and administrative expenses are allocated to the segments based upon proportional net sales.

On February 1, 2001, MMI purchased certain assets of Page Two, Inc. and Kewe 3, Inc. for cash of approximately $2 million, which was funded by the revolving credit facility. The assets primarily consist of a production line located in Bartonville, Illinois which applies an aluminum coating on strand wire. The acquisition was accounted for as a purchase. The excess purchase price over the preliminary estimate of the fair value of the assets acquired of $0.6 million will be amortized over 10 years.

On March 1, 2001, MMI's revolving credit facility was increased from $75 million to $100 million to provide additional working capital for expected seasonal needs and business acquisitions.

None.

The following table sets forth certain information regarding MMI's directors and executive officers, including their respective ages.

Julius S. Burns has been Chairman of the Board of Directors of MMI since January 2, 2001. Prior to January 2, 2001, Mr. Burns served as President and Chief Executive Officer of MMI for 12 years and President and General Manager of Ivy Steel & Wire Company, Inc., a predecessor to MMI, for 13 years. Mr. Burns has 35 years of related industry experience.

Thomas F. McWilliams has been a director of MMI since 1992. Mr. McWilliams is Managing Director of Citicorp Venture Capital, Ltd., a small business investment company ("CVC"), and has been affiliated with CVC since 1983. Mr. McWilliams is a member of CVC's three-person investment committee. Mr. McWilliams is a director of Chase Brass Industries, Inc., a metals processing company, Ergo Science Corporation, a pharmaceutical product development company and various other private companies.

Carl L. Blonkvist has been a director of MMI since April 1997. Mr. Blonkvist is President and Chief Operating Officer of Page-Wheatcroft & Co. Mr. Blonkvist was Senior Vice President of Coca-Cola Foods from January 1994 to April 1996, and was a Senior Partner of Computer Science Corporation, a consulting firm, from 1991 to 1994. In 1984, Mr. Blonkvist formed Paragon Consulting Group, a consulting firm specializing in operations strategy, which was purchased by Computer Science Corporation in 1991.

Stuyvesant Comfort has been a director of MMI since December 1999. Mr. Comfort is a Director of Citicorp Venture Capital, Ltd. Mr. Comfort was an executive at Alchemy Partners, a U.K. based private equity advisor, and has been affiliated with Alchemy Partners from February 1999 to February 2000. Mr. Comfort previously served in the strategic investments and acquisitions group of Microsoft Corporation from March 1996 to December 1998.

Ronald R. Ross became President and Chief Executive Officer on January 2, 2001. Mr. Ross previously served as the Chairman and Chief Executive Officer of Cameron Ashley Building Products, Inc., a distributor of building products, prior to its sale to Guardian Industries Corp. in 2000.

Robert N. Tenczar has been Vice President, Chief Financial Officer and Secretary of MMI since May 1993. From 1985 to 1993, Mr. Tenczar was employed by Baker Hughes Incorporated, Houston, Texas, his last assignment as Vice President - Finance of its EnviroTech Controls division.

James M. McCall has been employed with MMI and its predecessors in various management positions of increasing responsibility since 1975, as General Manager of Wire Mesh operations since 1989 and the President of the Ivy Steel and Wire division since 1999. Mr. McCall has 36 years of related industry experience.

Davy J. Wilkes has been employed by MMI and its predecessors since 1974, as General Manager of Concrete Accessories operations since November 1992 and the President of the Meadow Burke Products division since 1999. Mr. Wilkes has 40 years of related industry experience.

Each director holds office until the next annual meeting of stockholders of MMI or until their successor is duly elected and qualified. All officers are elected annually and serve at the direction of the Board of Directors. In 1999 the Board of Directors approved a resolution to increase the number of members to five. Directors of MMI are reimbursed for all expenses actually incurred for each Board meeting which they attend. One member of the Board of Directors receives a fee of $2,000 per meeting he attends. The other members of the Board of Directors do not receive a fee for any meetings they attend. The executive officers of MMI are elected by the Board of Directors to serve at the discretion of the Board.

MMI has entered into Indemnification Agreements with certain of its directors and executive officers pursuant to which it will indemnify such persons against expenses (including attorney's fees), judgments, fines and amounts paid in settlement incurred as a result of the fact that such person in his or her capacity as a director or officer, is made or threatened to be made a party to any suit or proceeding. Such persons will be indemnified to the fullest extent now or hereafter permitted by the General Corporation Law of the State of Delaware.

The Indemnification Agreements also provide for the advancement of certain expenses to such directors and officers in connection with any such suit or proceeding.

The following table sets forth the compensation for fiscal years 2000, 1999, and 1998 awarded to or earned by the chief executive officer of MMI and the four other most highly compensated executive officers of MMI who were serving as executive officers at December 30, 2000.

None of the executive officers named in the Summary Compensation Table were granted options to purchase any capital stock of MMHC during fiscal years 2000 or 1999.

MMI maintains the MMI Products, Inc. 401(k) Savings Plan (the "401(k) Plan"). All MMI employees are eligible to participate in the 401(k) Plan after one year of employment. Employees may elect to make pretax contributions up to the applicable statutory maximum limits to the 401(k) Plan. MMI makes matching contributions (subject to statutory limits) in an amount equal to 25% of the employee's contributions up to 2% of the employee's compensation. In addition, MMI may make additional contributions in such amounts as it may elect. Company contributions are vested at a rate of 25% for each year of service.

MMI maintains the MMI Products, Inc. Pension Plan (the "Pension Plan"), which is a money purchase defined contribution plan. Employees of MMI (other than employees covered by a collective bargaining agreement) generally are eligible to participate in the Pension Plan after one year of employment. MMI makes annual contributions to the Pension Plan for each eligible employee in accordance with a formula that is based on the participant's age and level of compensation. The Pension Plan provides for 100% vesting after five years of service.

See Item 10, which is incorporated herein by reference, for a description of compensation of directors.

Julius S. Burns, MMI's current Chairman of the Board, is party to an employment agreement with MMI effective January 1, 2001, which will expire on April 30, 2004. It provides a per diem payment to Mr. Burns of $2,873.56 for each day that he performs services under the agreement with a maximum annual salary of $750,000. Prior to January 1, 2001, Mr. Burns was employed by MMI as its President and Chief Executive Officer.

Ronald R. Ross, MMI's current Chief Executive Officer, is party to an employment agreement with MMI that will expire on October 15, 2002. The agreement provides for an annualized salary of $750,000, which will be increased to $1,000,000 on October 16, 2001. Mr. Ross also received a signing bonus of $250,000. If MMHC or MMI is acquired by a third party, Mr. Ross will receive a success fee of 0.50% of the consideration paid by such third party and a "change of control fee" of $2,250,000. However, he will not receive the "change of control fee" if he remains employed by MMI or its successor entity after the change of control.

Each member of MMI's management that owns common stock of MMHC holds such stock subject to various repurchase agreements. Until the ownership in stock vests, MMHC may repurchase such common stock for $1.00 per share upon the termination of such person's employment. Under Mr. Burns' repurchase agreements, MMHC may also repurchase his vested common stock at the fair market value thereof.

The Board of Directors of MMI is responsible for determining executive officer compensation.

MMI is a wholly owned subsidiary of MMHC. The following table sets forth certain information regarding the beneficial ownership of MMHC's capital stock as of March 3, 2001, by (1) each person who is known to MMI to beneficially own more than five percent (5%) of any class of voting securities of MMHC, (2) each of the directors and named executive officers and (3) all directors and officers as a group. MMHC has three classes of Common Stock. MMHC's Class A Common Stock, par value $0.01 per share (the "Class A Common Stock"), Class B Common Stock, par value $0.01 per share (the "Class B Common Stock") and Class C Common Stock, par value $0.01 per share (the "Class C Common Stock") vote together as a single class. The Class A Common Stock is the class into which all other classes of Common Stock are convertible under certain circumstances, and until all classes are converted, has 17% of the combined voting power of all three classes of Common Stock. Each share of Class A Common Stock has voting power equal to its pro rata share of such 17.0% vote. The only outstanding shares of Class A Common Stock are held by Carl Blonkvist. The Class B Common Stock has 49.5% of the combined voting power of the three classes of Common Stock and is held by Citicorp Venture Capital ("CVC") and its affiliates and associates. All of the Class B Common Stock shares will be voted in accordance with a majority of interest vote of such class, which is held by CVC. The Class C Common Stock has 33.5% of the combined voting power of the three classes of Common Stock and is held by management of MMHC. Class B Common Stock is convertible into Class A Common Stock upon the first to occur of the date on which the outstanding number of shares of Class B Common Stock represents less than 45% of the outstanding Common Stock and upon a vote of the holders of a majority in interest of the Class B Common Stock to convert their shares of Class B Common Stock into Class A Common Stock. In addition, any holder of the Class B Common Stock, other than CVC, may convert his or its shares to Class A Common Stock at such time as such person is no longer affiliated or associated with CVC. The Class C Common Stock automatically converts into Class A Common Stock upon an initial public offering, if required by the underwriters, or at such time as no shares of Class B Common Stock are still outstanding. As of March 2, 2001, 2,000 shares of Class A Common Stock, 818,164 shares of Class B Common Stock and 179,836 shares of Class C Common Stock were outstanding.

1. Percentage given on a basis as if all shares of Class B Common Stock and Class C Common Stock were converted into shares of Class A Common Stock.
2. Address is: c/o Citicorp Venture Capital, Ltd., 300 Park Avenue, 14th Floor, Zone 4, New York, New York, 10043
3. Thomas P. McWilliams has a 26.2% indirect interest in CCT Partners VI, L.P.'s investment in MMHC.
4. Julius S. Burns is also a Director and Chairman of MMHC. Until January 1, 2001, Mr. Burns was also President and Chief Executive Officer of MMHC.

On November 12, 1999, MMHC completed a recapitalization transaction (the "1999 Recapitalization") in which, among other things, MMHC entered into a $69.2 million subordinated credit facility due in 2007 (the "MMHC Credit Facility") with an investment fund managed by an affiliate of MMHC's majority economic owner. Interest at a rate of 14% per annum on the MMHC Credit Facility is payable semiannually in cash or in kind at the option of MMHC. In connection with the MMHC Credit Facility, MMHC also issued a warrant to such lender to purchase its Class B Common Stock. The warrant is not exercisable until September 30, 2007.

Availability of cash for MMHC to pay the MMHC Credit Facility interest is principally dependent upon MMI's cash flows. MMI's revolving credit facility agreement and senior subordinated notes indenture require MMI to meet certain restricted payment tests before distribution of any dividends to MMHC. In the 2000 fiscal year, MMHC paid $12,232,000 in interest (including premiums on the principal such that the internal rate of return earned by the lender equaled 18%) and $23,612,000 in principal on the MMHC Credit Facility. Cash for these payments was provided by borrowings on MMI's revolving credit facility which was then paid in a dividend from MMI to MMHC.