Beginning in early fiscal 2002, management began the process of evaluating the Company's existing network of manufacturing plants and distribution locations, and re-engineering business processes within facilities. The initiative's primary focus is the more effective utilization of assets and reduction of excess capacity through consolidation and rationalization.

In connection with this initiative, management approved a restructuring plan that commenced during the fourth quarter of 2002. Management's plan included the closure of three manufacturing facilities (located in Baltimore, Maryland, Oregon, Ohio and Bartonville, Illinois), the shutdown of a production line at two different plants, and the closure of two distribution facilities. In connection with these activities, the Company recorded $0.8 million for severance payments associated with the termination of 149 employees, and $2.4 million related to other employee benefit costs and certain facility related costs, including remaining non-cancelable lease obligations, in third and fourth quarters of 2002.

An analysis of the payments associated with the restructuring expense provision as of June 28, 2003 is as follows (In thousands):

In conjunction with the facility closures, the Company recorded an impairment of fixed assets expense of $3.8 million in fiscal year 2002 for certain assets which have no future benefit to the Company. Additionally, certain assets were reclassified as "held-for-sale". Assets held for sale at June 28, 2003 are comprised of land and buildings (Baltimore, Maryland and Oregon, Ohio), and certain production equipment. These assets, totaling approximately $5.6 million, are included in deferred charges and other assets. These assets are recorded at amounts not in excess of what management currently expects to receive upon sale, less cost of disposal; however, the amounts the Company will ultimately realize are dependent on numerous factors, some of which are beyond management's ability to control, and could differ materially from the amounts currently recorded.

At June 28, 2003, the Company was unconditionally obliged to purchase inventory amounting to $5.0 million. This obligation will be recorded by the Company upon the transfer of title.

The Company is involved in a number of legal actions arising in the ordinary course of business. Although no assurance can be given with respect to the ultimate outcome of any asserted claim or litigation, no material affect on financial position or future operating results is expected.

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make certain estimates and assumptions that affect the amounts reported, including amounts in the accompanying notes to the consolidated financial statements. Our estimation process generally relates to potential bad debts, damaged and slow moving inventory, value of intangible assets, impairments of long lived assets, and health care and workers compensation claims. We base our judgments on historical experience and various other assumptions that we believe to be reasonable under the circumstances. These judgments result in the amounts shown as carrying values of assets and liabilities in the consolidated financial statements and accompanying notes. Actual results could diff er from our estimates.

We believe the following accounting policies are the most critical in the preparation of our consolidated financial statements.

Revenue is recognized 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. We maintain an allowance for doubtful accounts receivable by providing for specifically identified accounts where collectibility is questionable and a general allowance based on the aging of the receivables compared to past experience and current trends. A change in past experience or current trends could require a material change in our estimate of the allowance for doubtful accounts.

We reserve for damaged and slow moving inventory based on specific identification. The amount reserved is the recorded cost of the inventory minus its estimated realizable value. Manufacturing and purchase price variances remain an element of inventoriable cost until the inventory is deemed to be sold based on inventory turnover rates. See Note 3 to the Consolidated Financial Statements for discussion of the change in this methodology.

We accrue estimated liabilities for workers compensation and claims incurred but not reported for our self-insured health care program. These accruals are based on current and historical trends. A change in the trends could require a material change in our estimate for this accrued liability.

We account for business acquisitions using the purchase method of accounting. The cost of the acquired company is allocated to identifiable tangible and intangible assets based on estimated fair values, with the excess allocated to goodwill. Certain assumptions and estimates are employed in determining the fair value of assets acquired (including goodwill and other intangible assets) and of liabilities assumed. We adopted Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets on December 30, 2001, which discontinued the amortization of goodwill and indefinite life intangibles and requires an annual test of impairment based on a comparison of fair values and carrying values. The valuation of impairment under SFAS No. 142 requires the use of forecasts, estimates, and assumptions as to the future performance of the operations. Actual results could differ from forecasts resulting in a revision of our assumptions and, if required, recognizing an impairment loss. Additional ly, we completed a transitional goodwill impairment test based on a multiple of EBITDA upon adoption of SFAS No. 142 as of December 30, 2001 and determined the adoption of these rules had no impact on our financial statements. We performed the first required annual impairment test as of December 28, 2002, and the test resulted in no goodwill impairment.

The following table presents, as a percentage of sales, certain selected consolidated financial data for the Company for the periods indicated:

Consolidated net sales declined approximately 9% as compared to 2002 primarily due to reduced market activity resulting from an unstable economic climate, lower infrastructure spending, and wet weather in the Northeast and Mid-Atlantic regions. Competitive pricing pressures in this difficult market also played a factor.

Consolidated gross profit declined approximately 29% as compared to 2002 primarily due to lower sales volume and its unfavorable impact on the utilization of manufacturing and distribution capacity, increasing steel rod costs and the pricing pressures associated with the pursuit by all competitors of the market activity that did exist. The gross profit decline includes the impact ($1.9 million) from a change in estimating what portion of raw material purchase price variances, plant performance variances from standard costs for manufactured products, and vendor rebates for purchased products is retained on the balance sheet as part of the quarter end inventory cost.

Consolidated selling, general, and administrative expenses increased approximately 9% as compared to 2002.

Other expense increased approximately $1.1 for the second quarter of 2003 as compared to 2002 due primarily to the continuation of expenses associated with the rationalization of manufacturing facilities begun in late 2002. Approximately $1.0 million of this expense is related to the relocation of equipment. In addition, estimated pension liability costs resulting from a curtailment of the Baltimore, Maryland union pension plan amounted to $0.6 million. A $0.6 million decline in prompt payment discounts from vendors also contributed to the increase as the Company elected to maintain a lower investment in working capital. A decrease in other expenses in 2003 resulted from the $822 thousand gain on sale of the Whittier, California chain link fence manufacturing facility, an additional action taken to reduce the fixed costs of the manufacturing network.

Interest expense increased $0.4 million due primarily to the increase in amounts borrowed under the revolving credit facility to fund the SRP acquisition and the deposits on welding equipment.

Income tax expense of $0.5 million was incurred in the second quarter of 2003 despite a $1.9 million loss before income taxes. This is primarily the result of a revision in the estimated income tax benefit rate for all of fiscal year 2003 computed as of the end of the second quarter. Because of the change in estimated effective annual rate (due primarily to the impact of permanent differences on lower forecasted profitability and the continuation of some state income tax expense), income tax expense needed to be recorded in the second quarter in order to provide the appropriate fiscal year to date income tax benefit.

Consolidated net sales declined approximately 12% as compared to 2002 primarily due to reduced market activity resulting from very bad weather, an uncertain economic climate, depressed commercial construction activity, and the impact of state budget deficits on infrastructure spending. Competitive pricing pressures in this difficult market also played a factor.

Consolidated gross profit declined approximately 29% as compared to 2002 primarily due to lower sales volume and its unfavorable impact on the utilization of manufacturing and distribution capacity, increasing steel rod costs and the pricing pressures associated with the pursuit by all competitors of the market activity that did exist. The gross profit decline includes the impact ($0.7 million) from a change in accounting estimate relating to the portion of manufacturing and purchase price variances and vendor rebates that remain an element of inventoriable cost versus having an impact on cost of sales.

Consolidated selling, general, and administrative expenses increased approximately 9% as compared to 2002.

Other expense increased approximately $1.9 in 2003 as compared to 2002 due primarily to the continuation of expenses associated with the rationalization of manufacturing facilities begun in late 2002. Moving and relocation of equipment costs were approximately $1.6 and estimated curtailment costs for the Baltimore, Maryland union pension plan was approximately $1.4 million. A decline in prompt payment discounts from vendors contributed $0.5 million to the unfavorable change as the Company elected to maintain a lower investment in working capital. Partially offsetting these costs was a gain on the sale of the Whittier, California manufacturing facility of $0.8 million.

Interest expense increased $1.0 million due primarily to the increase in amounts borrowed under the revolving credit facility to fund the SRP acquisition and deposits on welding equipment.

Income tax expense of $3.3 million in the second half of 2002 compares to an income tax benefit of $2.9 million in the first half of 2003 due primarily to the change from income before tax of $8.7 million in 2002 to a $9.0 million loss before income tax in the first half of 2003. The effective tax benefit rate of 32.0% in the first half of 2003 was lower than the effective tax expense rate of 38.3% in the first half of 2002 due primarily to the impact of permanent differences on lower forecasted profitability and the continuation of some state income tax expense.

Cash Flows. For the six months ended June 28, 2003, operating activities used net cash of $10.9 million, an increase of $2.2 million as compared to the first six months of 2002. The incurrence of a net loss of $6.1 million versus net income of $5.3 million in 2002 was the primary contributor to the decline in operating cash flow. A significant offset to the impact of lower profitability was the impact on cash flows from an increase in accounts payable and accrued liabilities, primarily as the result of taking fewer prompt payment discounts. At June 28, 2003, accounts payable and accrued liabilities had increased $10.3 million as compared to the balances at the end of fiscal year 2002. For the similar period in fiscal 2002, the balances in these accounts had decreased $4.8 million. Cash used in investing activities increased approximately $28.7 million. The acquisition of SRP represented $23.7 million of this increase. Capital expenditures and deposits relating to new equipment accounted for mos t of the remaining increase. The factors noted above resulted in higher borrowings under the revolving credit facility in 2003 as compared to 2002.

MMI currently has under its $115 million revolving credit facility, a computed borrowing base of approximately $99 million. Approximately $8 million of the borrowing base is utilized by outstanding letters of credit which support workers' compensation programs. Availability under this facility averaged $32.7 million during the July accounting period. Favorably impacting availability in July was the receipt of $2.2 million (net of all related costs) from the sale of the Whittier, California fence plant and approximately $7 million of lease financing (out of a total of $9 million), which reimbursed MMI for deposits it had made on welding and related support equipment placed into service in St. Joseph, Missouri, and Jacksonville, Florida. Even at the profitability levels reported by the company in recent quarters, adequate liquidity has been maintained as the credit line under the revolving credit facility has been increased and as capital lease financing has been obtained for important investments in machin ery and equipment. The reported results have, however, resulted in the company not meeting a covenant in the debt agreements. The process of amending the revolving credit facility as of May 8, 2003, included a waiver by the lenders of the fixed charge coverage ratio covenant test for the period ended March 29, 2003. The amended facility modified the test to a lower ratio for the period ending June 28, 2003. On August 18, 2003 the credit facility was further amended. Major elements of the amendment included a waiver of the fixed charge coverage ratio for the second quarter of 2003 and modification of the required ratio computation for the subsequent quarters through the first quarter of 2004. Although we can provide no assurance as to whether future covenant tests will be met, we expect that operational cash flows, giving effect to cash flows related to capital expenditures and income taxes, will be sufficient in relation to the defined fixed charges to achieve the ratios required by this amendment to the cre dit facility agreement.

We have pursued and intend to continue to pursue a strategy of business acquisitions that will optimize our distribution network, complement or extend our existing product lines or otherwise increase our market share. It is possible, depending on our future operating cash flows and the size of potential acquisitions, we will seek additional sources of financing, subject to limitations set forth in our senior subordinated note indenture and revolving credit facility. Significant acquisition opportunities will require additional equity financing or capital infusions.

We have paid dividends to MMHC from time to time to pay operating expense, interest and principal on MMHC's indebtedness and for other purposes. Such payments of dividends are limited by state of Delaware corporate law and financial tests (based on MMI's profitability and liquidity) included in both our senior subordinated note indenture and revolving credit facility loan agreement. Such restrictions effectively minimize the payment of dividends in the near term as the impacts of recent unprofitable results will have to be recouped. MMHC's balance of its subordinated credit facility was $55.3 million at June 28, 2003. Interest on this facility is payable semi-annually in cash or in kind at the option of MMHC. The loan matures on September 30, 2007.

Our 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. 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 and will be lower in the first and fourth quarters.

Statements made in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions ("Factors") which are difficult to predict. Some of the Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to: the cyclical nature of the Company's business; national and regional economic conditions in the U.S.; seasonality of the Company's operations; levels of construction spending in major markets; supply/demand structure of the industry; competition from new or existing competitors; unfavorable weather conditions during peak construction periods; changes in and implementation of environmental and other governmental regulations; our ability to successfully identify, complete and efficient ly integrate acquisitions; our ability to successfully penetrate new markets; and other Factors disclosed in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. In general, the Company is subject to the risks and uncertainties of the construction industry and of doing business in the U.S. The forward-looking statements are made as of this date and the Company undertakes no obligation to update them, whether as a result of new information, future events or otherwise.

We are subject to market risk exposure related to changes in interest rates on our $115.0 million revolving credit facility and our senior subordinated notes. As required by the August 18, 2003 amendment to the credit facility, borrowings bear interest, at our option, at either the bank's base rate plus an adjustable margin, which ranges from 0.00% to 0.50% or Eurodollar rate plus an adjustable margin, which ranges from 1.25% to 3.25%. The maximum adjustable margins of 0.50% and 3.25% reduce to 0.25% and 2.75% once a fixed charge ratio covenant of 1.10 (utilizing trailing twelve months performance data) is achieved. Both adjustable margins are based on our previous 12 month adjusted earnings from operations once the fixed change coverage ratio coverage of 1.10 (utilizing trailing twelve months performance data) is achieved. For the six months ended June 28, 2003, the average daily balance outstanding under our credit facility was $56.4 million. Interest rate protection in the form of a "floating to fi xed" rate hedging agreement for a minimum portion of the principal balance outstanding is also required under the amended revolving credit facility. Such a hedging agreement was contracted on July 10, 2003. It established a fixed Eurodollar base rate that will be applied to $15 million of the principal balance outstanding over the three year period beginning December 12, 2003. In 2003, absent any additional business acquisitions, we expect the average balance of this facility will be approximately $57 million. Based on this balance, a one percent change in the interest rate would cause a change in interest expense of approximately $0.6 million. A one percent change in the interest rate for the first six months ended June 28, 2003 would have caused a change in interest expense of approximately $0.3 million.

We have exposure to price fluctuations associated with steel rod, our primary raw material. We negotiate purchase commitments from one to nine months in advance to limit our exposure to price fluctuations and ensure availability of the materials. Purchases from foreign sources are denominated in U.S. dollars. Our ability to continue to acquire steel rod from overseas sources on favorable terms may be adversely affected by fluctuations in foreign currency exchange rates, foreign taxes, duties, tariffs, trade embargoes and other import limitations, resulting in an increase in our cost of sales. Most steel rod imports were subject to a three-year, tariff-rate quota that commenced in March 2000 and expired on February 28, 2003. In addition, anti-dumping and countervailing-duty cases relating to steel rod imports from selected foreign countries have been assessed by governmental agencies. Several countries are subject to a high tariff which will prohibit them from shipping steel rod into the United States for the next few years. Because steel rod comprises a substantial portion of our cost of goods sold (approximately 22% in fiscal 2002), any increase in steel rod cost which cannot be passed on to our customers would reduce our gross profit and cash flows from operations. Steel rod costs in 2003 have been and are expected to continue to be higher than the costs incurred in 2002. For the six months ended June 28, 2003, steel rod costs included in cost of goods sold increased over 5%. Steel rod prices may increase further by the end of the year as domestic mills have increased their prices and have recently announced another round of increases. Although we have historically been able to pass along most increases in steel rod prices to our customers, competitive pressures may prevent us from doing so in the future. A significant decrease in our volume of raw material purchases could also result in us being unable to secure volume purchase discounts we have received in the past. This could reduce cash flows from oper ations and impact future levels of profitability.

The Company's management evaluated, with the participation of the Company's principal executive and principal financial officers, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of June 30, 2003. Based on their evaluation, the Company's principal executive and principal financial officers concluded that the Company's disclosure controls and procedures were effective in reasonably assuring the timely accumulation and communication to management of information required to be disclosed in the reports filed with the SEC as of June 28, 2003.

There has been no change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company's fiscal quarter ended June 28, 2003, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

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.