##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

|         |  |                                                                                        
|-------- |  | ---------------------------------------------------------------------------------------
|CHECKBOX |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

OR

|    |  |                                                                                                           
|--- |  | ----------------------------------------------------------------------------------------------------------
|BOX |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from         to

METALLURG, INC.

|                                                                                      |  |                                                                    
|------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------
|Delaware
(State of organization)                                                      |  | 13-1661467
(I.R.S. Employer Identification No.)                    
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |  |                                                                    
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|6 East 43rd Street 
New York, New York 10017
(Address of principal executive offices) |  | (212) 835-0200
(Registrants telephone number,
including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes BOX  No BOX

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes CHECKBOX.GIF  No BOX

The number of shares of common stock, $0.01 par value, issued and
outstanding as of November 13, 2001 was 5,000,000.





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TABLE OF CONTENTS



|                                                   |                                                                                                                     |                                                                |  |  |  |  |  | 
|-------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                    
|                                                   | ITEM 1  FINANCIAL STATEMENTS                                                                                      
|                                                   |                                                                                                                     | CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)   
|                                                   |                                                                                                                     | CONDENSED CONSOLIDATED BALANCE SHEETS                         
|                                                   |                                                                                                                     | CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)   
|                                                   |                                                                                                                     | NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|                                                   | ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND                      RESULTS OF OPERATIONS
|                                                   | ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK                                                    
|PART II  OTHER INFORMATION                       
|                                                   | ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K                                                                          
|                                                   | SIGNATURES                                                                                                         
|EX-10.1: 2ND AMENDMENT TO AMEND/RESTATED LOAN AGMT
|EX-10.2: 3RD AMENDMENT TO AMEND/RESTATED LOAN AGMT
|EX-10.3: 4TH AMENDMENT TO AMEND/RESTATED LOAN AGMT



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##### Table of Contents



METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

INDEX

|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|------- | -------------- | ---------------------- | ----------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | -- | -------- |  |  |  | 
|        |                |                        |                         |                                                                                                                                        |    | Page No. |  |  |  | 
|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|       
|       
|       
|       
|Part I  |                | FINANCIAL INFORMATION: |                         |                                                                                                                                        |    |          |  | 
|       
|       
|       
|       
|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|       
|       
|       
|       
|        |                | Item 1-                |                         | Financial Statements (Unaudited)                                                                                                       |    |          |  |  |  | 
|       
|       
|       
|       
|        |                |                        |                         | Condensed Statements of Consolidated Operations for the Quarters and the Three
Quarters Ended September 30, 2001 and October 31, 2000. |    | 2        |  |  |  | 
|       
|       
|       
|       
|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|       
|       
|       
|       
|        |                |                        |                         | Condensed Consolidated Balance Sheets at September 30, 2001 and
December 31, 2000.                                                     |    | 3        |  |  |  | 
|       
|       
|       
|       
|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|       
|       
|       
|       
|        |                |                        |                         | Condensed Statements of Consolidated Cash Flows for the Three Quarters Ended
September 30, 2001 and October 31, 2000.                  |    | 4        |  |  |  | 
|       
|       
|       
|       
|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|       
|       
|       
|       
|        |                |                        |                         | Notes to Condensed Unaudited Consolidated Financial Statements                                                                         |    | 5-12     |  |  |  | 
|       
|       
|       
|       
|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|       
|       
|       
|       
|        |                | Item 2 -               |                         | Managements Discussion and Analysis of Financial Condition and Results
of Operations                                                  |    | 13-19    |  |  |  | 
|       
|       
|       
|       
|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|       
|       
|       
|       
|        |                | Item 3 -               |                         | Quantitative and Qualitative Disclosure of Market Risk                                                                                 |    | 20       |  |  |  | 
|       
|       
|       
|       
|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|       
|       
|       
|       
|Part II |                | OTHER INFORMATION:     |                         |                                                                                                                                        |    |          |  | 
|       
|       
|       
|       
|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|       
|       
|       
|       
|        |                | Item 6.                | (a) EXHIBITS            |                                                                                                                                        | 21 |          |  |  | 
|       
|       
|       
|       
|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|       
|       
|       
|       
|        |                | Item 6.                | (b) REPORTS ON FORM 8-K |                                                                                                                                        | 21 |          |  |  | 
|       
|       
|       
|       
|        |                |                        |                         |                                                                                                                                        |    |          |  |  |  | 
|       
|       
|       
|       
|        | Signature Page |                        | 22                      |                                                                                                                                        |    |         

1



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##### Table of Contents






PART I  FINANCIAL INFORMATION







ITEM 1  FINANCIAL STATEMENTS

METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(In thousands)

|                                   |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |         |  
|---------------------------------- | ------------------------------------------------------------------------- | - | -------------- | ------- | -------------------- | - | ------------- | ------- | ----------- | - | ------- | ------- | - | - | ------- | ------- | -
|                                   |                                                                           |   | Quarters Ended |         | Three Quarters Ended
|                                   |                                                                           |   |                |         |                     
|                                   |                                                                           |   | September 30,  |         | October 31,          |   | September 30, |         | October 31,
|                                   |                                                                           |   | 2001           |         | 2000                 |   | 2001          |         | 2000       
|                                   |                                                                           |   |                |         |                      |   |               |         |            
|Sales                              |                                                                           | $ | 113,893        |         |                      | $ | 117,942       |         |             | $ | 380,022 |         |   | $ | 376,085 |        
|                                  
|                                  
|                                  
|                                  
|Commission income                  |                                                                           |   | 203            |         |                      |   | 183           |         |             |   | 868     |         |   |   | 486     |        
|                                   |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |        
|                                   | Total revenue                                                             |   |                | 114,096 |                      |   |               | 118,125 |             |   |         | 380,890 |   |   |         | 376,571 |  
|                                   |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |        
|Operating costs and expenses:      |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |        
|                                  
|                                  
|                                  
|                                  
|                                   | Cost of sales                                                             |   |                | 97,830  |                      |   |               | 102,656 |             |   |         | 321,480 |   |   |         | 325,373 |  
|                                  
|                                  
|                                  
|                                  
|                                   | Selling, general and administrative expenses                              |   |                | 12,865  |                      |   |               | 13,412  |             |   |         | 40,267  |   |   |         | 41,528  |  
|                                  
|                                  
|                                  
|                                  
|                                   | Environmental expense recovery                                            |   |                |        |                      |   |               |        |             |   |         | (600    | ) |   |         | (750    | )
|                                   |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |        
|                                   | Total operating costs and expenses                                        |   |                | 110,695 |                      |   |               | 116,068 |             |   |         | 361,147 |   |   |         | 366,151 |  
|                                   |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |        
|                                   | Operating income                                                          |   |                | 3,401   |                      |   |               | 2,057   |             |   |         | 19,743  |   |   |         | 10,420  |  
|                                  
|                                  
|                                  
|                                  
|Other income (expense):            |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |        
|                                  
|                                  
|                                  
|                                  
|                                   | Other income, net                                                         |   |                | 42      |                      |   |               | 135     |             |   |         | 174     |   |   |         | 5,485   |  
|                                  
|                                  
|                                  
|                                  
|                                   | Interest expense, net                                                     |   |                | (3,387  | )                    |   |               | (2,499  | )           |   |         | (9,724  | ) |   |         | (7,848  | )
|                                   |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |        
|                                   | Income (loss) before income tax (benefit)
provision and minority interest |   |                | 56      |                      |   |               | (307    | )           |   |         | 10,193  |   |   |         | 8,057   |  
|                                  
|                                  
|                                  
|                                  
|Income tax (benefit) provision     |                                                                           |   | (49            | )       |                      |   | 1,200         |         |             |   | 5,004   |         |   |   | 4,691   |        
|                                   |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |        
|                                   | Income (loss) before minority interest                                    |   |                | 105     |                      |   |               | (1,507  | )           |   |         | 5,189   |   |   |         | 3,366   |  
|                                  
|                                  
|                                  
|                                  
|Minority interest                  |                                                                           |   | (15            | )       |                      |   | 104           |         |             |   | 37      |         |   |   | 161     |        
|                                   |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |        
|                                   | Net income (loss)                                                         |   |                | 90      |                      |   |               | (1,403  | )           |   |         | 5,226   |   |   |         | 3,527   |  
|                                  
|                                  
|                                  
|                                  
|Other comprehensive income (loss): |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |        
|                                  
|                                  
|                                  
|                                  
|                                   | Foreign currency translation adjustment                                   |   |                | 1,319   |                      |   |               | (1,472  | )           |   |         | (1,495  | ) |   |         | (4,598  | )
|                                  
|                                  
|                                  
|                                  
|                                   | Deferred income (loss) on derivatives                                     |   |                | 116     |                      |   |               |        |             |   |         | (76     | ) |   |         |        |  
|                                   |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |        
|                                   | Comprehensive income (loss)                                               |   | $              | 1,525   |                      |   | $             | (2,875  | )           |   | $       | 3,655   |   |   | $       | (1,071  | )
|                                   |                                                                           |   |                |         |                      |   |               |         |             |   |         |         |   |   |         |        

See notes to condensed unaudited consolidated financial statements.

2



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##### Table of Contents






METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

|                                     |                                                       |                             |        |               |         |              |        |         |         | 
|------------------------------------ | ----------------------------------------------------- | --------------------------- | ------ | ------------- | ------- | ------------ | ------ | ------- | ------- | 
|                                     |                                                       |                             |        | September 30, |         | December 31,
|                                     |                                                       |                             |        | 2001          |         | 2000        
|                                     |                                                       |                             |        |               |         |             
|                                     |                                                       |                             |        | (Unaudited)   |         |              |        |        
|ASSETS                               |                                                       |                             |        |               |         |              |        |        
|                                    
|                                    
|                                    
|                                    
|Current Assets:                      |                                                       |                             |        |               |         |              |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents                             |                             | $      | 28,662        |         |              | $      | 33,402  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts and notes receivable, net                    |                             |        | 64,843        |         |              |        | 69,212  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Inventories                                           |                             |        | 103,413       |         |              |        | 91,176  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Other current assets                                  |                             |        | 13,758        |         |              |        | 14,820  |        
|                                     |                                                       |                             |        |               |         |              |        |        
|                                     |                                                       | Total current assets        |        |               | 210,676 |              |        |         | 208,610 | 
|                                    
|                                    
|                                    
|                                    
|Property, plant and equipment, net   |                                                       |                             | 64,769 |               |         |              | 61,428 |        
|                                    
|                                    
|                                    
|                                    
|Other assets                         |                                                       |                             | 21,903 |               |         |              | 20,117 |        
|                                     |                                                       |                             |        |               |         |              |        |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                       | Total                       |        | $             | 297,348 |              |        | $       | 290,155 | 
|                                     |                                                       |                             |        |               |         |              |        |        
|                                    
|                                    
|                                    
|                                    
|LIABILITIES AND SHAREHOLDERS EQUITY |                                                       |                             |        |               |         |              |        |        
|                                    
|                                    
|                                    
|                                    
|Current Liabilities:                 |                                                       |                             |        |               |         |              |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Short-term debt and current portion of long-term debt |                             | $      | 6,146         |         |              | $      | 11,305  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Trade payables                                        |                             |        | 47,296        |         |              |        | 44,985  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued expenses                                      |                             |        | 28,122        |         |              |        | 27,335  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Other current liabilities                             |                             |        | 2,869         |         |              |        | 4,116   |        
|                                     |                                                       |                             |        |               |         |              |        |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                       | Total current liabilities   |        |               | 84,433  |              |        |         | 87,741  | 
|                                     |                                                       |                             |        |               |         |              |        |        
|Long-term Liabilities:               |                                                       |                             |        |               |         |              |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Long-term debt                                        |                             |        | 123,173       |         |              |        | 115,420 |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued pension liabilities                           |                             |        | 31,732        |         |              |        | 33,442  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Environmental liabilities, net                        |                             |        | 29,864        |         |              |        | 30,219  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Other liabilities                                     |                             |        | 6,736         |         |              |        | 7,029   |        
|                                     |                                                       |                             |        |               |         |              |        |        
|                                     |                                                       | Total long-term liabilities |        |               | 191,505 |              |        |         | 186,110 | 
|                                     |                                                       |                             |        |               |         |              |        |        
|                                     |                                                       | Total liabilities           |        |               | 275,938 |              |        |         | 273,851 | 
|                                     |                                                       |                             |        |               |         |              |        |        
|Minority Interest                    |                                                       |                             | 508    |               |         |              | 557    |        
|                                     |                                                       |                             |        |               |         |              |        |        
|Shareholders Equity:                |                                                       |                             |        |               |         |              |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Common stock                                          |                             |        | 50            |         |              |        | 50      |        
|                                    
|                                    
|                                    
|                                    
|                                     | Due from parent company                               |                             |        | (19,714       | )       |              |        | (19,714 | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Additional paid-in capital                            |                             |        | 49,166        |         |              |        | 47,666  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accumulated other comprehensive loss                  |                             |        | (8,062        | )       |              |        | (6,491  | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Retained deficit                                      |                             |        | (538          | )       |              |        | (5,764  | )      
|                                     |                                                       |                             |        |               |         |              |        |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                       | Total shareholders equity  |        |               | 20,902  |              |        |         | 15,747  | 
|                                     |                                                       |                             |        |               |         |              |        |        
|                                     |                                                       | Total                       |        | $             | 297,348 |              |        | $       | 290,155 | 
|                                     |                                                       |                             |        |               |         |              |        |        

See notes to condensed unaudited consolidated financial statements.

3



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##### Table of Contents






METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(In thousands)

|                                                                                            |                                                 |                                                     |         |                      |         |             |         |         |         |  
|------------------------------------------------------------------------------------------- | ----------------------------------------------- | --------------------------------------------------- | ------- | -------------------- | ------- | ----------- | ------- | ------- | ------- | -
|                                                                                            |                                                 |                                                     |         | Three Quarters Ended
|                                                                                            |                                                 |                                                     |         |                     
|                                                                                            |                                                 |                                                     |         | September 30,        |         | October 31,
|                                                                                            |                                                 |                                                     |         | 2001                 |         | 2000       
|                                                                                            |                                                 |                                                     |         |                      |         |            
|Cash Flows from Operating Activities:                                                       |                                                 |                                                     |         |                      |         |             |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Net income                                                                                  |                                                 | $                                                   | 5,226   |                      |         | $           | 3,527   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Adjustments to reconcile net income to net cash provided by
(used in) operating activities: |                                                 |                                                     |         |                      |         |             |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Depreciation and amortization                   |                                                     |         | 7,899                |         |             |         | 6,485   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Loss (gain) on sale of assets                   |                                                     |         | 77                   |         |             |         | (5,161  | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Deferred income taxes                           |                                                     |         | 2,351                |         |             |         | 1,825   |        
|                                                                                            |                                                 |                                                     |         |                      |         |             |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            |                                                 | Total                                               |         |                      | 15,553  |             |         |         | 6,676   |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Change in operating assets and liabilities:                                                 |                                                 |                                                     |         |                      |         |             |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Decrease (increase) in trade receivables        |                                                     |         | 1,900                |         |             |         | (819    | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Increase in inventories                         |                                                     |         | (13,824              | )       |             |         | (12,371 | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Decrease (increase) in other current assets     |                                                     |         | 457                  |         |             |         | (3,552  | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Increase in trade payables and accrued expenses |                                                     |         | 5,240                |         |             |         | 4,486   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Restructuring payments                          |                                                     |         | (48                  | )       |             |         | (1,510  | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Environmental payments                          |                                                     |         | (1,376               | )       |             |         | (1,889  | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Other assets and liabilities, net               |                                                     |         | (2,753               | )       |             |         | 2,338   |        
|                                                                                            |                                                 |                                                     |         |                      |         |             |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            |                                                 | Net cash provided by (used in) operating activities |         |                      | 5,149   |             |         |         | (6,641  | )
|                                                                                            |                                                 |                                                     |         |                      |         |             |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Cash Flows from Investing Activities:                                                       |                                                 |                                                     |         |                      |         |             |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Additions to property, plant and equipment                                                  |                                                 |                                                     | (11,872 | )                    |         |             | (12,356 | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Proceeds from asset sales                                                                   |                                                 |                                                     | 97      |                      |         |             | 8,417   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Acquisitions, net of cash                                                                   |                                                 |                                                     | (1,152  | )                    |         |             | (11,196 | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Other, net                                                                                  |                                                 |                                                     | 60      |                      |         |             | 62      |        
|                                                                                            |                                                 |                                                     |         |                      |         |             |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            |                                                 | Net cash used in investing activities               |         |                      | (12,867 | )           |         |         | (15,073 | )
|                                                                                            |                                                 |                                                     |         |                      |         |             |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Cash Flows from Financing Activities:                                                       |                                                 |                                                     |         |                      |         |             |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Net proceeds of long-term debt                                                              |                                                 |                                                     | 7,549   |                      |         |             | 6,915   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Net (repayment) borrowing of short-term debt                                                |                                                 |                                                     | (4,057  | )                    |         |             | 5,877   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Purchase of parent company debt                                                             |                                                 |                                                     |        |                      |         |             | (19,714 | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Minority interest contribution                                                              |                                                 |                                                     |        |                      |         |             | 676     |        
|                                                                                            |                                                 |                                                     |         |                      |         |             |         |        
|                                                                                            |                                                 | Net cash provided by (used in) financing activities |         |                      | 3,492   |             |         |         | (6,246  | )
|                                                                                            |                                                 |                                                     |         |                      |         |             |         |        
|Effects of exchange rate changes on cash and cash equivalents                               |                                                 |                                                     | (514    | )                    |         |             | (920    | )      
|                                                                                            |                                                 |                                                     |         |                      |         |             |         |        
|Net decrease in cash and cash equivalents                                                   |                                                 |                                                     | (4,740  | )                    |         |             | (28,880 | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Cash and cash equivalents  beginning of period                                             |                                                 |                                                     | 33,402  |                      |         |             | 58,611  |        
|                                                                                            |                                                 |                                                     |         |                      |         |             |         |        
|Cash and cash equivalents  end of period                                                   |                                                 | $                                                   | 28,662  |                      |         | $           | 29,731  |        
|                                                                                            |                                                 |                                                     |         |                      |         |             |         |        

See notes to condensed unaudited consolidated financial statements.

4



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##### Table of Contents






METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



|1. |  | Basis of Presentation
|-- |  | ---------------------

The accompanying condensed unaudited consolidated financial statements
include the accounts of Metallurg, Inc. and its majority-owned subsidiaries
(collectively, Metallurg). These financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information pursuant to Accounting Principles Board Opinion No. 28.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The condensed consolidated balance sheet as of December 31, 2000 was derived
from audited financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included for the interim period. Operating
results for the interim periods presented are not necessarily indicative of the
results to be expected for a full year.

Metallurg is a wholly owned subsidiary of Metallurg Holdings, Inc.
(Metallurg Holdings) since the acquisition date of July 13, 1998. The
financial statements do not reflect the pushdown of purchase accounting
adjustments recorded by Metallurg Holdings.

For further information, see the financial statements and footnotes
thereto included in Metallurgs audited consolidated financial statements for
the year ended December 31, 2000.

Effective December 31, 2000, Metallurg, Inc. changed from a fiscal year
ending January 31 to a calendar year. As a result, Metallurg, Inc. no longer
reports the results of its operating subsidiaries on a one-month lag. The
quarter ended October 31, 2000 includes operating results of Metallurg, Inc.,
the parent holding company, for the three months ended October 31, 2000 and the
operating results of its subsidiaries for the three months ended September 30,
2000. The three quarters ended October 31, 2000 include the results of
Metallurg Inc., the parent holding company, for the nine months ended October
31, 2000 and the operating results of its subsidiaries for the nine months
ended September 30, 2000.

Certain prior year amounts were reclassified to conform to current year
presentations.



|2. |  | Segments and Related Information
|-- |  | --------------------------------

Metallurg operates in one significant industry segment, the manufacture
and sale of performance-enhancing additives mainly for the metallurgical
industry. Metallurg is organized around its major production facilities in the
U.S., the U.K., Germany and Brazil, which are supported by an established
worldwide sales network. In addition to its own products, Metallurg
distributes complementary products manufactured by third parties.

Reportable Segments

Shieldalloy Metallurgical Corporation (Shieldalloy) This unit is
comprised of two production facilities in the U.S. The New Jersey plant
manufactures and sells aluminum alloy grain refiners and alloying tablets for
the aluminum industry, metal powders for the welding industry and specialty
ferroalloys for the superalloy and steel industries. The Ohio plant
manufactures and sells ferrovanadium and vanadium-based chemicals used mostly
in the steel and petrochemical industries.

London & Scandinavian Metallurgical Co Limited and its subsidiaries
(collectively, LSM) This unit is comprised mainly of three production
facilities in the U.K., one in Poland and another in Norway which manufacture
and sell aluminum alloy grain refiners and alloying tablets for the aluminum
industry, chromium metal and specialty ferroalloys for the steel and superalloy
industries and aluminum powder for various metal powder-consuming industries.
The Norwegian facility (Hydelko) was acquired on March 31, 2000.

5



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##### Table of Contents



METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|2. |  | Segments and Related Information  (Continued)
|-- |  | ----------------------------------------------

Gesellschaft fur Elektrometallurgie mbH and its subsidiaries
(collectively, GfE) This unit is comprised of two production facilities and
a sales office in Germany. The Nuremberg plant manufactures and sells a wide
variety of specialty products, including vanadium-based chemicals and
sophisticated metals, alloys and powders used in the titanium, superalloy,
electronics, telecommunications, biomedical and optics industries. The
Morsdorf plant produces medical prostheses, implants and surgical instruments
for orthopedic applications.

Elektrowerk
Weisweiler GmbH (EWW) This production unit, also located
in Germany, produces various grades of low carbon ferrochrome used in the
superalloy, welding and steel industries.

Companhia
Industrial Fluminense (CIF) This unit is comprised mainly of
two production facilities in Brazil. The Sao Joao del Rei plant manufactures
and sells aluminum alloy grain refiners and alloying tablets for the aluminum
industry and metal oxides used in the telecommunications, superalloy and
specialty metal industries. The Nazareno mine extracts and concentrates ores
containing tantalum and niobium that are processed, along with other raw
materials, into metal oxides at the Sao Joao del Rei plant.

In addition to their manufacturing operations, Shieldalloy, LSM and GfE
import and distribute complementary products manufactured by affiliates and
third parties.

Summarized financial information concerning Metallurgs reportable
segments is shown in the following table (in thousands). Each segment records
direct expenses related to its employees and operations. The Other column
includes corporate related items and results of subsidiaries not meeting the
quantitative thresholds as prescribed by applicable accounting rules.
Metallurg does not allocate general corporate overhead expenses to operating
segments. There have been no material changes in segment assets from the
amounts disclosed in the last annual report.

|                                 |  |   |             |   |     |   |        |   |     |   |        |   |       |   |              |   |        |   |       |  |  |   |        |   |  |   |              |   |              |   |         |   | 
|-------------------------------- |  | - | ----------- | - | --- | - | ------ | - | --- | - | ------ | - | ----- | - | ------------ | - | ------ | - | ----- |  |  | - | ------ | - |  | - | ------------ | - | ------------ | - | ------- | - | 
|                                 |  |   |             |   |     |   |        |   |     |   |        |   |       |   |              |   |        |   |       |  |  |   |        |   |  |   | Intersegment |   | Consolidated |   |         |   | 
|                                 |  |   | Shieldalloy |   | LSM |   | GfE    |   | EWW |   | CIF    |   | Other |   | Eliminations |   | Totals
|                                 |  |   |             |   |     |   |        |   |     |   |        |   |       |   |              |   |       
|Quarter Ended
September 30, 2001 |  |   |             |   |     |   |        |   |     |   |        |   |       |   |              |   |        |   |       |  |  |   |        |   |  |   |              |   |              |   |         |  
|                                
|                                
|                                
|                                
|Revenue from external
customers  |  | $ | 24,815      |   |     | $ | 32,500 |   |     | $ | 16,064 |   |       | $ | 3,559        |   |        | $ | 3,806 |  |  | $ | 33,352 |   |  |   |              |   |              | $ | 114,096 |  
|                                
|                                
|                                
|                                
|Intergroup revenue               |  |   | 995         |   |     |   | 12,515 |   |     |   | 2,131  |   |       |   | 4,796        |   |        |   | 6,826 |  |  |   | 4,404  |   |  | $ | (31,667      | ) |              |   |        |  
|                                
|                                
|                                
|                                
|Income tax (benefit)
provision   |  |   | (323        | ) |     |   | (157   | ) |     |   | 217    |   |       |   | (34          | ) |        |   | 734   |  |  |   | (486   | ) |  |   |             |   |              |   | (49     | )
|                                
|                                
|                                
|                                
|Net (loss) income                |  |   | (581        | ) |     |   | (557   | ) |     |   | (524   | ) |       |   | 17           |   |        |   | 937   |  |  |   | 3,421  |   |  |   | (2,623       | ) |              |   | 90      |  
|                                
|                                
|                                
|                                
|Quarter Ended October 31,
2000   |  |   |             |   |     |   |        |   |     |   |        |   |       |   |              |   |        |   |       |  |  |   |        |   |  |   |              |   |              |   |         |  
|                                
|                                
|                                
|                                
|Revenue
from external
customers  |  | $ | 28,608      |   |     | $ | 31,606 |   |     | $ | 19,191 |   |       | $ | 3,023        |   |        | $ | 3,934 |  |  | $ | 31,763 |   |  |   |              |   |              | $ | 118,125 |  
|                                
|                                
|                                
|                                
|Intergroup revenue               |  |   | 951         |   |     |   | 9,181  |   |     |   | 3,059  |   |       |   | 4,556        |   |        |   | 3,651 |  |  |   | 4,816  |   |  | $ | (26,214      | ) |              |   |        |  
|                                
|                                
|                                
|                                
|Income tax (benefit)
provision   |  |   | (224        | ) |     |   | 327    |   |     |   | 22     |   |       |   | 146          |   |        |   | 56    |  |  |   | 873    |   |  |   |             |   |              |   | 1,200   |  
|                                
|                                
|                                
|                                
|Net (loss) income                |  |   | (314        | ) |     |   | 391    |   |     |   | 96     |   |       |   | 276          |   |        |   | 931   |  |  |   | (1,719 | ) |  |   | (1,064       | ) |              |   | (1,403  | )

6



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##### Table of Contents



METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|2. |  | Segments and Related Information  (Continued)
|-- |  | ----------------------------------------------

|                                        |  |   |             |   |     |   |         |  |     |   |        |   |       |   |              |  |        |   |        |  |  |   |         |  |  |   |              |   |              |   |         |   | 
|--------------------------------------- |  | - | ----------- | - | --- | - | ------- |  | --- | - | ------ | - | ----- | - | ------------ |  | ------ | - | ------ |  |  | - | ------- |  |  | - | ------------ | - | ------------ | - | ------- | - | 
|                                        |  |   |             |   |     |   |         |  |     |   |        |   |       |   |              |  |        |   |        |  |  |   |         |  |  |   | Intersegment |   | Consolidated |   |         |   | 
|                                        |  |   | Shieldalloy |   | LSM |   | GfE     |  | EWW |   | CIF    |   | Other |   | Eliminations |  | Totals
|                                        |  |   |             |   |     |   |         |  |     |   |        |   |       |   |              |  |       
|Three Quarters Ended
September 30, 2001 |  |   |             |   |     |   |         |  |     |   |        |   |       |   |              |  |        |   |        |  |  |   |         |  |  |   |              |   |              |   |         |  
|                                       
|                                       
|                                       
|                                       
|Revenue from external
customers         |  | $ | 75,920      |   |     | $ | 103,307 |  |     | $ | 61,829 |   |       | $ | 10,406       |  |        | $ | 11,667 |  |  | $ | 117,761 |  |  |   |              |   |              | $ | 380,890 |  
|                                       
|                                       
|                                       
|                                       
|Intergroup revenue                      |  |   | 3,507       |   |     |   | 31,840  |  |     |   | 8,637  |   |       |   | 18,681       |  |        |   | 18,703 |  |  |   | 15,806  |  |  | $ | (97,174      | ) |              |   |        |  
|                                       
|                                       
|                                       
|                                       
|Environmental expense
recovery          |  |   | (600        | ) |     |   |        |  |     |   |       |   |       |   |             |  |        |   |       |  |  |   |        |  |  |   |             |   |              |   | (600    | )
|                                       
|                                       
|                                       
|                                       
|Income tax
(benefit) provision          |  |   | (637        | ) |     |   | 549     |  |     |   | 1,088  |   |       |   | 1,305        |  |        |   | 1,235  |  |  |   | 1,464   |  |  |   |             |   |              |   | 5,004   |  
|                                       
|                                       
|                                       
|                                       
|Net (loss) income                       |  |   | (1,696      | ) |     |   | 759     |  |     |   | 1,022  |   |       |   | 2,195        |  |        |   | 3,366  |  |  |   | 19,255  |  |  |   | (19,675      | ) |              |   | 5,226   |  
|                                       
|                                       
|                                       
|                                       
|Three Quarters Ended
October 31, 2000   |  |   |             |   |     |   |         |  |     |   |        |   |       |   |              |  |        |   |        |  |  |   |         |  |  |   |              |   |              |   |         |  
|                                       
|                                       
|                                       
|                                       
|Revenue from external
customers         |  | $ | 87,694      |   |     | $ | 100,820 |  |     | $ | 62,716 |   |       | $ | 10,000       |  |        | $ | 11,175 |  |  | $ | 104,166 |  |  |   |              |   |              | $ | 376,571 |  
|                                       
|                                       
|                                       
|                                       
|Intergroup revenue                      |  |   | 2,975       |   |     |   | 32,409  |  |     |   | 9,722  |   |       |   | 16,364       |  |        |   | 10,728 |  |  |   | 13,137  |  |  | $ | (85,335      | ) |              |   |        |  
|                                       
|                                       
|                                       
|                                       
|Environmental expense
recovery          |  |   | (750        | ) |     |   |        |  |     |   |       |   |       |   |             |  |        |   |       |  |  |   |        |  |  |   |             |   |              |   | (750    | )
|                                       
|                                       
|                                       
|                                       
|Income tax provision                    |  |   | 658         |   |     |   | 1,337   |  |     |   | 395    |   |       |   | 847          |  |        |   | 60     |  |  |   | 1,394   |  |  |   |             |   |              |   | 4,691   |  
|                                       
|                                       
|                                       
|                                       
|Net income (loss)                       |  |   | 970         |   |     |   | 2,822   |  |     |   | (497   | ) |       |   | 838          |  |        |   | 2,035  |  |  |   | 9,930   |  |  |   | (12,571      | ) |              |   | 3,527   |  



|3. |  | Inventories
|-- |  | -----------

Inventories, net of reserves, consist of the following (in thousands):

|                |       |   |               |         |              |   |        |        | 
|--------------- | ----- | - | ------------- | ------- | ------------ | - | ------ | ------ | 
|                |       |   | September 30, |         | December 31,
|                |       |   | 2001          |         | 2000        
|                |       |   |               |         |             
|Raw materials   |       | $ | 22,597        |         |              | $ | 20,491 |       
|               
|               
|               
|               
|Work in process |       |   | 4,189         |         |              |   | 2,854  |       
|               
|               
|               
|               
|Finished goods  |       |   | 73,097        |         |              |   | 64,781 |       
|               
|               
|               
|               
|Other           |       |   | 3,530         |         |              |   | 3,050  |       
|                |       |   |               |         |              |   |        |       
|                | Total |   | $             | 103,413 |              |   | $      | 91,176 | 
|                |       |   |               |         |              |   |        |       



|4. |  | Contingent Liabilities
|-- |  | ----------------------

Metallurg continues to respond to legal claims arising in the normal
course of business. Management believes, based on the advice of counsel, that
the outcome of such claims will not have a material adverse effect on
Metallurgs consolidated financial position, results of operations or
liquidity. There can be no assurance, however, that future litigation or
proceedings will not result in an adverse judgment against Metallurg, which
could have a material adverse effect on Metallurgs future results of
operations or cash flows.



|5. |  | Earnings Per Share
|-- |  | ------------------

Earnings per share is not presented since Metallurg, Inc. is a wholly
owned subsidiary of Metallurg Holdings.

7



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##### Table of Contents



METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|6. |  | Recently Adopted Accounting Pronouncements
|-- |  | ------------------------------------------

Effective January 1, 2001, Metallurg adopted Financial Accounting
Standards Board Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended (SFAS 133). As a result of adopting SFAS
133, Metallurg recognizes all derivatives on the balance sheet at fair value.
Derivatives that are not designated hedges are adjusted to fair value through
income. Changes in the fair value of derivatives that are designated hedges
are either offset against the change in fair value of the hedged firm
commitment through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings, depending on the nature of the
hedge. The adoption of SFAS 133 did not have a material effect on Metallurgs
financial statements.



|7. |  | Recently Issued Accounting Pronouncements
|-- |  | -----------------------------------------

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, which establishes accounting and reporting standards for
business combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets, which addresses the accounting and reporting of acquired goodwill and
other intangible assets.

In August 2001, the FASB issued SFAS No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement addresses
financial accounting and reporting for the impairment and disposal of
long-lived assets.

The provisions of SFAS No. 141 apply to all business combinations
initiated after June 30, 2001. Metallurg is required to adopt SFAS No. 142 and
No. 144 on January 1, 2002. Metallurg does not expect any of the above
statements to have a material effect on its financial statements.

8



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##### Table of Contents



METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|8. |  | Supplemental Guarantor Information
|-- |  | ----------------------------------

In November 1997, Metallurg, Inc. issued $100 million principal amount of
its 11% Senior Notes due 2007 (the Senior Notes). Under the terms of the
Senior Notes, Shieldalloy, Metallurg Holdings Corporation, Metallurg Services,
Inc., Metallurg International Resources, LLC and MIR (China), Inc.
(collectively, the Guarantors), wholly owned subsidiaries of Metallurg, Inc.,
have fully and unconditionally guaranteed on a joint and several basis
Metallurg, Inc.s obligations to pay principal, premium and interest relative
to the Senior Notes. Management has determined that separate, full financial
statements of the Guarantors would not be material to potential investors and,
accordingly, such financial statements are not provided. Supplemental
financial information of the Guarantors is presented below.

Condensed Consolidating Statement of Operations (Unaudited)
Quarter Ended September 30, 2001
(In thousands)

|                                   |                                                                           |  |            |        |              |   |               |         |              |   |              |        |   |   |         |         |   |   |         |         |  
|---------------------------------- | ------------------------------------------------------------------------- |  | ---------- | ------ | ------------ | - | ------------- | ------- | ------------ | - | ------------ | ------ | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                   |                                                                           |  |            |        |              |   | Combined      |         | Combined     |   |              |        |   |   |         |         |  
|                                   |                                                                           |  | Metallurg, |        | Guarantor    |   | Non-Guarantor |         |              |   |              |        |   |   |        
|                                   |                                                                           |  | Inc.       |        | Subsidiaries |   | Subsidiaries  |         | Eliminations |   | Consolidated
|                                   |                                                                           |  |            |        |              |   |               |         |              |   |             
|Total revenue                      |                                                                           |  |            |        |              | $ | 36,579        |         |              | $ | 97,282       |        |   | $ | (19,765 | )       |   | $ | 114,096 |        
|                                   |                                                                           |  |            |        |              |   |               |         |              |   |              |        |   |   |         |         |   |   |         |        
|Operating costs and expenses:      |                                                                           |  |            |        |              |   |               |         |              |   |              |        |   |   |         |         |   |   |         |        
|                                  
|                                  
|                                  
|                                  
|                                   | Cost of sales                                                             |  |            |        |              |   |               | 31,017  |              |   |              | 86,002 |   |   |         | (19,189 | ) |   |         | 97,830  |  
|                                  
|                                  
|                                  
|                                  
|                                   | Selling, general and administrative
expenses                              |  | $          | 1,404  |              |   |               | 2,529   |              |   |              | 9,295  |   |   |         | (363    | ) |   |         | 12,865  |  
|                                   |                                                                           |  |            |        |              |   |               |         |              |   |              |        |   |   |         |         |   |   |         |        
|                                   | Total operating costs and expenses                                        |  |            | 1,404  |              |   |               | 33,546  |              |   |              | 95,297 |   |   |         | (19,552 | ) |   |         | 110,695 |  
|                                   |                                                                           |  |            |        |              |   |               |         |              |   |              |        |   |   |         |         |   |   |         |        
|                                   | Operating (loss) income                                                   |  |            | (1,404 | )            |   |               | 3,033   |              |   |              | 1,985  |   |   |         | (213    | ) |   |         | 3,401   |  
|                                  
|                                  
|                                  
|                                  
|Other income (expense):            |                                                                           |  |            |        |              |   |               |         |              |   |              |        |   |   |         |         |   |   |         |        
|                                  
|                                  
|                                  
|                                  
|                                   | Other income, net                                                         |  |            |       |              |   |               | 19,557  |              |   |              | 42     |   |   |         | (19,557 | ) |   |         | 42      |  
|                                  
|                                  
|                                  
|                                  
|                                   | Interest (expense) income, net                                            |  |            | (2,641 | )            |   |               | 246     |              |   |              | (992   | ) |   |         |        |   |   |         | (3,387  | )
|                                  
|                                  
|                                  
|                                  
|                                   | Equity in earnings of subsidiaries                                        |  |            | 2,425  |              |   |               | (19,300 | )            |   |              | (272   | ) |   |         | 17,147  |   |   |         |        |  
|                                   |                                                                           |  |            |        |              |   |               |         |              |   |              |        |   |   |         |         |   |   |         |        
|                                   | (Loss) income before income tax
(benefit) provision and minority
interest |  |            | (1,620 | )            |   |               | 3,536   |              |   |              | 763    |   |   |         | (2,623  | ) |   |         | 56      |  
|                                  
|                                  
|                                  
|                                  
|Income tax (benefit) provision     |                                                                           |  | (1,710     | )      |              |   | 770           |         |              |   | 891          |        |   |   |        |         |   |   | (49     | )      
|                                   |                                                                           |  |            |        |              |   |               |         |              |   |              |        |   |   |         |         |   |   |         |        
|                                   | Income (loss) before minority interest                                    |  |            | 90     |              |   |               | 2,766   |              |   |              | (128   | ) |   |         | (2,623  | ) |   |         | 105     |  
|                                  
|                                  
|                                  
|                                  
|Minority interest                  |                                                                           |  |           |        |              |   |              |         |              |   | (15          | )      |   |   |        |         |   |   | (15     | )      
|                                   |                                                                           |  |            |        |              |   |               |         |              |   |              |        |   |   |         |         |   |   |         |        
|                                   | Net income (loss)                                                         |  |            | 90     |              |   |               | 2,766   |              |   |              | (143   | ) |   |         | (2,623  | ) |   |         | 90      |  
|                                  
|                                  
|                                  
|                                  
|Other comprehensive income (loss): |                                                                           |  |            |        |              |   |               |         |              |   |              |        |   |   |         |         |   |   |         |        
|                                  
|                                  
|                                  
|                                  
|                                   | Foreign currency translation adjustment                                   |  |            | 1,319  |              |   |               | 1,271   |              |   |              | 2,660  |   |   |         | (3,931  | ) |   |         | 1,319   |  
|                                  
|                                  
|                                  
|                                  
|                                   | Deferred income (loss) on derivatives                                     |  |            | 116    |              |   |               | 96      |              |   |              | (96    | ) |   |         |        |   |   |         | 116     |  
|                                   |                                                                           |  |            |        |              |   |               |         |              |   |              |        |   |   |         |         |   |   |         |        
|                                   | Comprehensive income                                                      |  | $          | 1,525  |              |   | $             | 4,133   |              |   | $            | 2,421  |   |   | $       | (6,554  | ) |   | $       | 1,525   |  
|                                   |                                                                           |  |            |        |              |   |               |         |              |   |              |        |   |   |         |         |   |   |         |        

9



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##### Table of Contents



METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|8. |  | Supplemental Guarantor Information  (Continued)
|-- |  | ------------------------------------------------

Condensed Consolidating Statement of Operations (Unaudited)
Three Quarters Ended September 30, 2001
(In thousands)

|                                   |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |        |   |         |         |         |   |         |         |        |   | 
|---------------------------------- | -------------------------------------------- | ------------------------------------------------------------------ | ------ | ------ | ---------- | - | ------------ | ------- | ------------- | ------------ | ------------ | ------- | ------ | - | ------- | ------- | ------- | - | ------- | ------- | ------ | - | 
|                                   |                                              |                                                                    |        |        |            |   |              |         | Combined      |              | Combined     |         |        |   |         |         |         |   |        
|                                   |                                              |                                                                    |        |        | Metallurg, |   | Guarantor    |         | Non-Guarantor |              |              |         |        |   |         |         |        
|                                   |                                              |                                                                    |        |        | Inc.       |   | Subsidiaries |         | Subsidiaries  | Eliminations | Consolidated
|                                   |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |       
|Total revenue                      |                                              |                                                                    |        |        |            | $ | 124,811      |         |               | $            | 317,742      |         |        | $ | (61,663 | )       |         | $ | 380,890 |        
|                                   |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |        |   |         |         |         |   |         |        
|Operating costs and expenses:      |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |        |   |         |         |         |   |         |        
|                                  
|                                  
|                                  
|                                  
|                                   | Cost of sales                                |                                                                    |        |        |            |   |              | 108,617 |               |              |              | 272,608 |        |   |         | (59,745 | )       |   |         | 321,480 |       
|                                  
|                                  
|                                  
|                                  
|                                   | Selling, general and administrative
expenses |                                                                    | $      | 4,065  |            |   |              | 7,986   |               |              |              | 28,936  |        |   |         | (720    | )       |   |         | 40,267  |       
|                                  
|                                  
|                                  
|                                  
|                                   | Environmental expense recovery               |                                                                    |        |       |            |   |              | (600    | )             |              |              |        |        |   |         |        |         |   |         | (600    | )     
|                                   |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |        |   |         |         |         |   |         |        
|                                   | Total operating costs and expenses           |                                                                    |        | 4,065  |            |   |              | 116,003 |               |              |              | 301,544 |        |   |         | (60,465 | )       |   |         | 361,147 |       
|                                   |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |        |   |         |         |         |   |         |        
|                                   | Operating (loss) income                      |                                                                    |        | (4,065 | )          |   |              | 8,808   |               |              |              | 16,198  |        |   |         | (1,198  | )       |   |         | 19,743  |       
|                                  
|                                  
|                                  
|                                  
|Other income (expense):            |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |        |   |         |         |         |   |         |        
|                                  
|                                  
|                                  
|                                  
|                                   |                                              | Other income, net                                                  |        |        |           |   |              |         | 48,155        |              |              |         | 174    |   |         |         | (48,155 | ) |         |         | 174    |  
|                                  
|                                  
|                                  
|                                  
|                                   |                                              | Interest (expense) income, net                                     |        |        | (7,524     | ) |              |         | 446           |              |              |         | (2,646 | ) |         |         |        |   |         |         | (9,724 | )
|                                  
|                                  
|                                  
|                                  
|                                   |                                              | Equity in earnings of subsidiaries                                 |        |        | 12,725     |   |              |         | (43,371       | )            |              |         | 968    |   |         |         | 29,678  |   |         |         |       |  
|                                   |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |        |   |         |         |         |   |         |        
|                                   |                                              | Income before income tax (benefit)
provision and minority interest |        |        | 1,136      |   |              |         | 14,038        |              |              |         | 14,694 |   |         |         | (19,675 | ) |         |         | 10,193 |  
|                                  
|                                  
|                                  
|                                  
|Income tax (benefit) provision     |                                              |                                                                    | (4,090 | )      |            |   | 3,564        |         |               |              | 5,530        |         |        |   |        |         |         |   | 5,004   |        
|                                   |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |        |   |         |         |         |   |         |        
|                                   |                                              | Income before minority interest                                    |        |        | 5,226      |   |              |         | 10,474        |              |              |         | 9,164  |   |         |         | (19,675 | ) |         |         | 5,189  |  
|                                  
|                                  
|                                  
|                                  
|Minority interest                  |                                              |                                                                    |       |        |            |   |             |         |               |              | 37           |         |        |   |        |         |         |   | 37      |        
|                                   |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |        |   |         |         |         |   |         |        
|                                   |                                              | Net income                                                         |        |        | 5,226      |   |              |         | 10,474        |              |              |         | 9,201  |   |         |         | (19,675 | ) |         |         | 5,226  |  
|                                  
|                                  
|                                  
|                                  
|Other comprehensive (loss) income: |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |        |   |         |         |         |   |         |        
|                                  
|                                  
|                                  
|                                  
|                                   |                                              | Foreign currency translation adjustment                            |        |        | (1,495     | ) |              |         | (426          | )            |              |         | (222   | ) |         |         | 648     |   |         |         | (1,495 | )
|                                  
|                                  
|                                  
|                                  
|                                   |                                              | Deferred (loss) income on derivatives                              |        |        | (76        | ) |              |         | 96            |              |              |         | (288   | ) |         |         | 192     |   |         |         | (76    | )
|                                   |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |        |   |         |         |         |   |         |        
|                                   |                                              | Comprehensive income                                               |        | $      | 3,655      |   |              | $       | 10,144        |              |              | $       | 8,691  |   |         | $       | (18,835 | ) |         | $       | 3,655  |  
|                                   |                                              |                                                                    |        |        |            |   |              |         |               |              |              |         |        |   |         |         |         |   |         |        

10



---



##### Table of Contents



METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|8. |  | Supplemental Guarantor Information  (Continued)
|-- |  | ------------------------------------------------

Condensed Consolidating Balance Sheet September 30, 2001 (Unaudited)
(In thousands)

|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |         |         |         | 
|------------------------------------ | ----------------------------------------- | ----------------------------------------------------- | --------------------------- | ------ | ---------- | ------- | ------------ | ------ | ------------- | ------- | ------------ | ------ | ------------ | ------- | -------- | ------- | -------- | -------- | ------ | ------- | ------- | ------- | 
|                                     |                                           |                                                       |                             |        |            |         |              |        | Combined      |         | Combined     |        |              |         |          |         |          |          |       
|                                     |                                           |                                                       |                             |        | Metallurg, |         | Guarantor    |        | Non-Guarantor |         |              |        |              |         |          |         |         
|                                     |                                           |                                                       |                             |        | Inc.       |         | Subsidiaries |        | Subsidiaries  |         | Eliminations |        | Consolidated
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |             
|ASSETS                               |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                    
|                                    
|                                    
|                                    
|Current Assets:                      |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents                 |                                                       | $                           | 21,845 |            |         | $            | 1,231  |               |         | $            | 15,453 |              |         | $        | (9,867  | )        |          | $      | 28,662  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts, notes and loans
receivable, net |                                                       |                             | 25,512 |            |         |              | 31,541 |               |         |              | 62,747 |              |         |          | (54,957 | )        |          |        | 64,843  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Inventories                               |                                                       |                             |       |            |         |              | 41,216 |               |         |              | 66,250 |              |         |          | (4,053  | )        |          |        | 103,413 |        
|                                    
|                                    
|                                    
|                                    
|                                     | Other current assets                      |                                                       |                             | 8,631  |            |         |              | 3,899  |               |         |              | 11,190 |              |         |          | (9,962  | )        |          |        | 13,758  |        
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                     |                                           |                                                       | Total current assets        |        |            | 55,988  |              |        |               | 77,887  |              |        |              | 155,640 |          |         |          | (78,839  | )      |         |         | 210,676 | 
|                                    
|                                    
|                                    
|                                    
|Investments  intergroup             |                                           |                                                       | 93,844                      |        |            |         | 24,037       |        |               |         | 63,333       |        |              |         | (181,214 | )       |          |          |       |        
|                                    
|                                    
|                                    
|                                    
|Property, plant and equipment, net   |                                           |                                                       | 758                         |        |            |         | 16,566       |        |               |         | 47,445       |        |              |         |         |         |          |          | 64,769 |        
|                                    
|                                    
|                                    
|                                    
|Other assets                         |                                           |                                                       | 6,126                       |        |            |         | 59,239       |        |               |         | 64,898       |        |              |         | (108,360 | )       |          |          | 21,903 |        
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                     |                                           |                                                       | Total                       |        | $          | 156,716 |              |        | $             | 177,729 |              |        | $            | 331,316 |          |         | $        | (368,413 | )      |         | $       | 297,348 | 
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|LIABILITIES AND
SHAREHOLDERS EQUITY |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                    
|                                    
|                                    
|                                    
|Current Liabilities:                 |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Short-term debt and current portion of
long-term debt |                             |        |            |         |              |        |               |         |              | $      | 16,013       |         |          | $       | (9,867   | )        |        | $       | 6,146   |         | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Trade payables                                        |                             | $      | 10,919     |         |              | $      | 42,283        |         |              |        | 49,051       |         |          |         | (54,957  | )        |        |         | 47,296  |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Accrued expenses                                      |                             |        | 5,674      |         |              |        | 7,110         |         |              |        | 15,338       |         |          |         |         |          |        |         | 28,122  |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Other current liabilities                             |                             |        |           |         |              |        | 9,962         |         |              |        | 2,869        |         |          |         | (9,962   | )        |        |         | 2,869   |        
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                     |                                           |                                                       | Total current liabilities   |        |            | 16,593  |              |        |               | 59,355  |              |        |              | 83,271  |          |         |          | (74,786  | )      |         |         | 84,433  | 
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|Long-term Liabilities:               |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Long-term debt                                        |                             |        | 100,000    |         |              |        |              |         |              |        | 23,173       |         |          |         |         |          |        |         | 123,173 |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Accrued pension liabilities                           |                             |        | 858        |         |              |        |              |         |              |        | 30,874       |         |          |         |         |          |        |         | 31,732  |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Environmental liabilities, net                        |                             |        |           |         |              |        | 27,551        |         |              |        | 2,313        |         |          |         |         |          |        |         | 29,864  |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Other liabilities                                     |                             |        | 18,363     |         |              |        |              |         |              |        | 49,298       |         |          |         | (60,925  | )        |        |         | 6,736   |        
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                     |                                           |                                                       | Total long-term liabilities |        |            | 119,221 |              |        |               | 27,551  |              |        |              | 105,658 |          |         |          | (60,925  | )      |         |         | 191,505 | 
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                     |                                           |                                                       | Total liabilities           |        |            | 135,814 |              |        |               | 86,906  |              |        |              | 188,929 |          |         |          | (135,711 | )      |         |         | 275,938 | 
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|Minority Interest                    |                                           |                                                       |                            |        |            |         |             |        |               |         | 508          |        |              |         |         |         |          |          | 508    |        
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|Shareholders Equity:                |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Common stock                                          |                             |        | 50         |         |              |        | 1,227         |         |              |        | 120,935      |         |          |         | (122,162 | )        |        |         | 50      |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Due from parent company                               |                             |        | (19,714    | )       |              |        |              |         |              |        |             |         |          |         |         |          |        |         | (19,714 | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Additional paid-in capital                            |                             |        | 49,166     |         |              |        | 104,945       |         |              |        | 11,927       |         |          |         | (116,872 | )        |        |         | 49,166  |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Accumulated other comprehensive
(loss) income         |                             |        | (8,062     | )       |              |        | (4,956        | )       |              |        | 14,734       |         |          |         | (9,778   | )        |        |         | (8,062  | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                           | Retained deficit                                      |                             |        | (538       | )       |              |        | (10,393       | )       |              |        | (5,717       | )       |          |         | 16,110   |          |        |         | (538    | )      
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                     |                                           |                                                       | Total shareholders equity  |        |            | 20,902  |              |        |               | 90,823  |              |        |              | 141,879 |          |         |          | (232,702 | )      |         |         | 20,902  | 
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        
|                                     |                                           |                                                       | Total                       |        | $          | 156,716 |              |        | $             | 177,729 |              |        | $            | 331,316 |          |         | $        | (368,413 | )      |         | $       | 297,348 | 
|                                     |                                           |                                                       |                             |        |            |         |              |        |               |         |              |        |              |         |          |         |          |          |        |        

11



---



##### Table of Contents



METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|8. |  | Supplemental Guarantor Information  (Continued)
|-- |  | ------------------------------------------------

Condensed Consolidating Statement of Cash Flows (Unaudited)
Three Quarters Ended September 30, 2001
(In thousands)

|                                                              |                                              |                                                     |        |                 |       |              |       |              |        |               |        |              |        |   |         |     |     |   |        |         |         |  
|------------------------------------------------------------- | -------------------------------------------- | --------------------------------------------------- | ------ | --------------- | ----- | ------------ | ----- | ------------ | ------ | ------------- | ------ | ------------ | ------ | - | ------- | --- | --- | - | ------ | ------- | ------- | -
|                                                              |                                              |                                                     |        |                 |       |              |       | Combined     |        | Combined      |        |              |        |   |         |     |     |  
|                                                              |                                              |                                                     |        |                 |       |              |       | Guarantor    |        | Non-Guarantor |        |              |        |   |         |     |     |  
|                                                              |                                              |                                                     |        | Metallurg, Inc. |       | Subsidiaries |       | Subsidiaries |        | Eliminations  |        | Consolidated
|                                                              |                                              |                                                     |        |                 |       |              |       |              |        |               |        |             
|Cash Flows from Operating Activities                          |                                              | $                                                   | (7,158 | )               |       | $            | 3,296 |              |        | $             | 9,011  |              |        |   |         |     |     | $ | 5,149  |        
|                                                              |                                              |                                                     |        |                 |       |              |       |              |        |               |        |              |        |   |         |     |     |   |        |        
|Cash Flows from Investing Activities:                         |                                              |                                                     |        |                 |       |              |       |              |        |               |        |              |        |   |         |     |     |   |        |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Additions to property, plant and
equipment   |                                                     |        | (25             | )     |              |       | (4,952       | )      |               |        | (6,895       | )      |   |         |     |     |   |        | (11,872 | )      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Proceeds from asset sales                    |                                                     |        | 11              |       |              |       |             |        |               |        | 86           |        |   |         |     |     |   |        | 97      |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Other, net                                   |                                                     |        | 60              |       |              |       |             |        |               |        | (1,152       | )      |   |         |     |     |   |        | (1,092  | )      
|                                                              |                                              |                                                     |        |                 |       |              |       |              |        |               |        |              |        |   |         |     |     |   |        |        
|                                                              |                                              | Net cash provided by (used in)
investing activities |        |                 | 46    |              |       |              | (4,952 | )             |        |              | (7,961 | ) |         |     |     |   |        |         | (12,867 | )
|                                                              |                                              |                                                     |        |                 |       |              |       |              |        |               |        |              |        |   |         |     |     |   |        |        
|Cash Flows from Financing Activities:                         |                                              |                                                     |        |                 |       |              |       |              |        |               |        |              |        |   |         |     |     |   |        |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Net (repayment) borrowing of
intergroup debt |                                                     |        | (964            | )     |              |       | 1,303        |        |               |        | (339         | )      |   |         |     |     |   |        |        |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Net proceeds of long-term debt               |                                                     |        |                |       |              |       |             |        |               |        | 7,549        |        |   |         |     |     |   |        | 7,549   |        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Net repayment of short-term debt             |                                                     |        |                |       |              |       |             |        |               |        | (4,675       | )      |   | $       | 618 |     |   |        | (4,057  | )      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Dividends received (paid)                    |                                                     |        | 4,745           |       |              |       |             |        |               |        | (4,745       | )      |   |         |    |     |   |        |        |        
|                                                              |                                              |                                                     |        |                 |       |              |       |              |        |               |        |              |        |   |         |     |     |   |        |        
|                                                              |                                              | Net cash provided by (used in)
financing activities |        |                 | 3,781 |              |       |              | 1,303  |               |        |              | (2,210 | ) |         |     | 618 |   |        |         | 3,492   |  
|                                                              |                                              |                                                     |        |                 |       |              |       |              |        |               |        |              |        |   |         |     |     |   |        |        
|Effects of exchange rate changes on cash
and cash equivalents |                                              |                                                     |       |                 |       |              |      |              |        |               | (514   | )            |        |   |        |     |     |   | (514   | )      
|                                                              |                                              |                                                     |        |                 |       |              |       |              |        |               |        |              |        |   |         |     |     |   |        |        
|Net decrease in cash and cash
equivalents                     |                                              |                                                     | (3,331 | )               |       |              | (353  | )            |        |               | (1,674 | )            |        |   | 618     |     |     |   | (4,740 | )      
|                                                             
|                                                             
|                                                             
|                                                             
|Cash and cash equivalents 
beginning of period               |                                              |                                                     | 25,176 |                 |       |              | 1,584 |              |        |               | 17,127 |              |        |   | (10,485 | )   |     |   | 33,402 |        
|                                                              |                                              |                                                     |        |                 |       |              |       |              |        |               |        |              |        |   |         |     |     |   |        |        
|Cash and cash equivalents 
end of period                     |                                              | $                                                   | 21,845 |                 |       | $            | 1,231 |              |        | $             | 15,453 |              |        | $ | (9,867  | )   |     | $ | 28,662 |        
|                                                              |                                              |                                                     |        |                 |       |              |       |              |        |               |        |              |        |   |         |     |     |   |        |        

12



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##### Table of Contents






ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Forward-Looking Statements

Certain matters discussed under the caption Managements Discussion and
Analysis of Financial Condition and Results of Operations in this Form 10-Q
may constitute forward-looking statements for purposes of Section 21E of the
Securities Exchange Act of 1934, as amended, and as such may involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance and achievements of Metallurg to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. Factors which may cause Metallurgs results to be
materially different include the cyclical nature of Metallurgs business,
Metallurgs dependence on foreign customers (particularly customers in Europe),
the economic strength of Metallurgs markets generally and particularly the
strength of the demand for aluminum, superalloys, titanium alloys, iron and
steel in those markets, the accuracy of Metallurgs estimates of the costs of
environmental remediation and the extension or expiration of existing
anti-dumping duties.

Overview

Metallurg is a leading international producer and seller of high-quality
specialty metals, alloys and metallic chemicals which are essential to the
production of high-performance aluminum and titanium alloys, superalloys, steel
and certain non-metallic materials for engineered applications in the
aerospace, power supply, automotive, petrochemical processing and
telecommunications industries. The industries that Metallurg supplies are
cyclical.

Over the first three quarters of 2001, production in the aluminum industry
has subsided from the high levels of late 2000. The decline was particularly
pronounced in the U.S. during this period, and recently has become more notable
in Europe, Japan, and Southeast Asia. Demand for Metallurgs aluminum products
has thus been subdued in North America, but has held up well elsewhere during
the first three quarters. Metallurg carried out a rationalization of its
aluminum master alloys and grain refiner production activities during the
second quarter in order to better utilize the capabilities of its various
plants and better serve customers in this competitive and increasingly global
marketplace. As a result, melting operations are now discontinued at
Shieldalloys New Jersey facility and production has been increased at plants
in the U.K., Norway and Brazil.

The superalloy industry operated at a high capacity level during the first
three quarters of 2001 to meet heavy U.S. demand for power generation equipment
and aerospace materials, resulting in healthy demand for Metallurgs chromium
and high-purity niobium products.

U.S. steel production has been quite depressed during the first three
quarters of 2001 with output falling continuously over the second and third
quarters due to the weakening economy and excess world supply. In the rest of
the world, steel production remained relatively stable for the first half of
the year, but dropped in the third quarter. Ferrovanadium demand in the U.S.
was weak over the third quarter and prices drifted lower.

During 2000, demand for electronic components containing tantalum
increased sharply, which impacted the price of all tantalum materials as the
year progressed. Metallurg benefited, particularly in the last twelve months,
in its various tantalum operations from the consequent strengthening of its
tantalum product prices. Prices and demand have declined in 2001, but
Metallurgs products continue to be priced at higher levels than in the
corresponding periods of 2000.

The third quarter is traditionally a time of weaker demand from our
customers due to summer vacations in the northern hemisphere and this year the
general weakening of world economic activity was also being increasingly felt.
The tragic events of September 11th have had a further negative impact on the
global economic outlook, and we are anticipating weakening demand and pricing
for our products in the months to come.

13



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##### Table of Contents



Results of Operations  The Quarter Ended September 30, 2001 Compared to the
Quarter Ended October 31, 2000

Metallurg operates in one significant industry segment, the manufacture
and sale of performance-enhancing additives mainly for the metallurgical
industry. Metallurg is organized around its major production facilities in the
U.S., the U.K., Germany and Brazil, which are supported by an established
worldwide sales network. In addition to its own products, Metallurg
distributes products manufactured by third parties. This is a natural
complement to Metallurgs manufacturing operations and leverages its global
sales staff by providing a broader product offering to existing customers
without incurring significant additional overhead.

Summarized financial information concerning Metallurgs reportable
segments is shown in the following table (in thousands). Each segment records
direct expenses related to its employees and operations. The Other column
includes corporate related items and results of subsidiaries not meeting the
quantitative thresholds as prescribed by applicable accounting rules.
Metallurg does not allocate general corporate overhead expenses to operating
segments. There have been no material changes in segment assets from the
amounts disclosed in the last annual report.

|                               |                                  |   |             |   |     |   |        |   |     |   |        |   |       |   |              |   |        |   |        |   |  |   |        |   |  |   |              |   |              |   |         |   | 
|------------------------------ | -------------------------------- | - | ----------- | - | --- | - | ------ | - | --- | - | ------ | - | ----- | - | ------------ | - | ------ | - | ------ | - |  | - | ------ | - |  | - | ------------ | - | ------------ | - | ------- | - | 
|                               |                                  |   |             |   |     |   |        |   |     |   |        |   |       |   |              |   |        |   |        |   |  |   |        |   |  |   | Intersegment |   | Consolidated
|                               |                                  |   | Shieldalloy |   | LSM |   | GfE    |   | EWW |   | CIF    |   | Other |   | Eliminations |   | Totals
|                               |                                  |   |             |   |     |   |        |   |     |   |        |   |       |   |              |   |       
|                               | Quarter Ended
September 30, 2001 |   |             |   |     |   |        |   |     |   |        |   |       |   |              |   |        |   |        |   |  |   |        |   |  |   |              |   |              |   |         |   | 
|                              
|                              
|                              
|                              
|Total revenue                  |                                  | $ | 25,810      |   |     | $ | 45,015 |   |     | $ | 18,195 |   |       | $ | 8,355        |   |        | $ | 10,632 |   |  | $ | 37,756 |   |  | $ | (31,667      | ) |              | $ | 114,096 |  
|                              
|                              
|                              
|                              
|Gross profit                   |                                  |   | 1,527       |   |     |   | 2,405  |   |     |   | 3,241  |   |       |   | 345          |   |        |   | 2,282  |   |  |   | 7,042  |   |  |   | (576         | ) |              |   | 16,266  |  
|                              
|                              
|                              
|                              
|SG&A                           |                                  |   | 2,362       |   |     |   | 2,664  |   |     |   | 3,370  |   |       |   | 416          |   |        |   | 429    |   |  |   | 3,987  |   |  |   | (363         | ) |              |   | 12,865  |  
|                              
|                              
|                              
|                              
|Operating (loss) income        |                                  |   | (835        | ) |     |   | (259   | ) |     |   | (129   | ) |       |   | (71          | ) |        |   | 1,853  |   |  |   | 3,055  |   |  |   | (213         | ) |              |   | 3,401   |  
|                              
|                              
|                              
|                              
|Interest (expense)
income, net |                                  |   | (69         | ) |     |   | (479   | ) |     |   | (189   | ) |       |   | 54           |   |        |   | (182   | ) |  |   | (2,522 | ) |  |   |             |   |              |   | (3,387  | )
|                              
|                              
|                              
|                              
|Income tax (benefit)
provision |                                  |   | (323        | ) |     |   | (157   | ) |     |   | 217    |   |       |   | (34          | ) |        |   | 734    |   |  |   | (486   | ) |  |   |             |   |              |   | (49     | )
|                              
|                              
|                              
|                              
|Net (loss) income              |                                  |   | (581        | ) |     |   | (557   | ) |     |   | (524   | ) |       |   | 17           |   |        |   | 937    |   |  |   | 3,421  |   |  |   | (2,623       | ) |              |   | 90      |  
|                              
|                              
|                              
|                              
|                               | Quarter Ended
October 31, 2000   |   |             |   |     |   |        |   |     |   |        |   |       |   |              |   |        |   |        |   |  |   |        |   |  |   |              |   |              |   |         |   | 
|                              
|                              
|                              
|                              
|Total revenue                  |                                  | $ | 29,559      |   |     | $ | 40,787 |   |     | $ | 22,250 |   |       | $ | 7,579        |   |        | $ | 7,585  |   |  | $ | 36,579 |   |  | $ | (26,214      | ) |              | $ | 118,125 |  
|                              
|                              
|                              
|                              
|Gross profit                   |                                  |   | 1,890       |   |     |   | 3,862  |   |     |   | 3,650  |   |       |   | 844          |   |        |   | 994    |   |  |   | 4,449  |   |  |   | (220         | ) |              |   | 15,469  |  
|                              
|                              
|                              
|                              
|SG&A                           |                                  |   | 2,577       |   |     |   | 2,814  |   |     |   | 3,309  |   |       |   | 441          |   |        |   | 409    |   |  |   | 3,862  |   |  |   |             |   |              |   | 13,412  |  
|                              
|                              
|                              
|                              
|Operating (loss) income        |                                  |   | (687        | ) |     |   | 1,048  |   |     |   | 341    |   |       |   | 403          |   |        |   | 585    |   |  |   | 587    |   |  |   | (220         | ) |              |   | 2,057   |  
|                              
|                              
|                              
|                              
|Interest income
(expense), net |                                  |   | 149         |   |     |   | (354   | ) |     |   | (351   | ) |       |   | 19           |   |        |   | 394    |   |  |   | (2,356 | ) |  |   |             |   |              |   | (2,499  | )
|                              
|                              
|                              
|                              
|Income tax (benefit)
provision |                                  |   | (224        | ) |     |   | 327    |   |     |   | 22     |   |       |   | 146          |   |        |   | 56     |   |  |   | 873    |   |  |   |             |   |              |   | 1,200   |  
|                              
|                              
|                              
|                              
|Net (loss) income              |                                  |   | (314        | ) |     |   | 391    |   |     |   | 96     |   |       |   | 276          |   |        |   | 931    |   |  |   | (1,719 | ) |  |   | (1,064       | ) |              |   | (1,403  | )

Total Revenue

Consolidated total revenue decreased by $4.0 million (3%) in the third
quarter of 2001 as compared to the third quarter of 2000. Shieldalloy revenue
was $3.7 million (13%) below the third quarter of 2000 due primarily to
decreased selling prices of vanadium and aluminum products. LSM revenue was
$4.2 million (10%) above the third quarter of 2000. An increase in sales
volume and prices of aluminum products, chromium metal and ferrotitanium was
offset by a discontinuation of sales of certain low-margin products sourced
from third parties. GfE revenue was $4.1 million (18%) below the third quarter
of 2000 due primarily to lower sales volume of third-party nickel, niobium and
ferrovanadium products sold to the iron and steel industries. EWW revenue was
$0.8 million (10%) above the third quarter of 2000 due primarily to increased
sales volume of ferrochrome. CIF revenue was $3.0 million (40%) above the
third quarter of 2000 due primarily to increased selling prices of tantalum
products.

14



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##### Table of Contents



Gross Profit

Gross profit increased to $16.3 million (14.3% of total revenue) in the
quarter ended September 30, 2001 from $15.5 million (13.1% of total revenue) in
the quarter ended October 31, 2000, an increase of 5%. Improved profitability
in tantalum-containing and niobium products was offset somewhat by reduced
profitability of ferrovanadium, ferrotitanium and aluminum products.

Selling, General and Administrative Expenses (SG&A)

SG&A decreased slightly to $12.9 million in the quarter ended September
30, 2001 from $13.4 million in the quarter ended October 31, 2000. For the
quarter ended September 30, 2001, SG&A represented 11.3% of total revenue
compared to 11.4% for the quarter ended October 31, 2000.

Operating Income

Operating income increased to $3.4 million in the quarter ended September
30, 2001 from $2.1 million in the quarter ended October 31, 2000, due primarily
to the increase in gross profit, discussed above.

Interest Expense, Net

Interest expense, net, is as follows (in thousands):

|                 |                       |   |                |        |             |   |        |        |  
|---------------- | --------------------- | - | -------------- | ------ | ----------- | - | ------ | ------ | -
|                 |                       |   | Quarters Ended
|                 |                       |   |               
|                 |                       |   | September 30,  |        | October 31,
|                 |                       |   | 2001           |        | 2000       
|                 |                       |   |                |        |            
|Interest income  |                       | $ | 369            |        |             | $ | 1,124  |       
|                
|                
|                
|                
|Interest expense |                       |   | (3,756         | )      |             |   | (3,623 | )     
|                 |                       |   |                |        |             |   |        |       
|                
|                
|                
|                
|                 | Interest expense, net |   | $              | (3,387 | )           |   | $      | (2,499 | )
|                 |                       |   |                |        |             |   |        |       

The decrease in interest income was due to lower interest rates in the
current period and lower cash balances following the purchase of Metallurg
Holdings Senior Discount Notes for $19.7 million in October 2000.

Income Tax (Benefit) Provision, Net

Income tax (benefit) provision, net, is as follows (in thousands):

|               |                                     |   |                |     |             |   |     |       | 
|-------------- | ----------------------------------- | - | -------------- | --- | ----------- | - | --- | ----- | 
|               |                                     |   | Quarters Ended
|               |                                     |   |               
|               |                                     |   | September 30,  |     | October 31,
|               |                                     |   | 2001           |     | 2000       
|               |                                     |   |                |     |            
|Total current  |                                     | $ | (303           | )   |             | $ | 729 |      
|              
|              
|              
|              
|Total deferred |                                     |   | 254            |     |             |   | 471 |      
|               |                                     |   |                |     |             |   |     |      
|              
|              
|              
|              
|               | Income tax (benefit) provision, net |   | $              | (49 | )           |   | $   | 1,200 | 
|               |                                     |   |                |     |             |   |     |      

The difference between the statutory federal income tax rate and
Metallurgs effective rate for the quarter ended September 30, 2001 is
principally due to: (i) the excess of foreign tax rates over the statutory
federal income tax rate; (ii) the U.S. taxability of foreign dividends; and
(iii) certain deductible temporary differences which, in other circumstances
would have generated a deferred tax benefit, have been fully provided for in a
valuation allowance.

The deferred tax provision is comprised mainly of (i) losses in certain
foreign jurisdictions for which the related deferred tax was offset by a
valuation allowance; and (ii) the deferred tax effects of certain deferred tax
assets for which a corresponding credit has been recorded to Additional
paid-in capital, of $0.4 million in the quarter ended September 30, 2001. The
deferred tax expenses referred to in item (ii) above will not result in cash
payments in future periods.

15



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##### Table of Contents



Net Income (Loss)

Net income was $0.1 million in the quarter ended September 30, 2001
compared to a net loss of $1.4 million in the quarter ended October 31, 2000.
The quarter ended September 30, 2001 benefited primarily from the increased
gross margins, discussed above.

Results of Operations  The Three Quarters Ended September 30, 2001 Compared to
the Three Quarters Ended October 31, 2000

|                               |                                         |   |             |   |     |   |         |   |     |   |        |   |       |   |              |  |        |   |        |   |  |   |         |   |  |   |              |   |              |   |         |   | 
|------------------------------ | --------------------------------------- | - | ----------- | - | --- | - | ------- | - | --- | - | ------ | - | ----- | - | ------------ |  | ------ | - | ------ | - |  | - | ------- | - |  | - | ------------ | - | ------------ | - | ------- | - | 
|                               |                                         |   |             |   |     |   |         |   |     |   |        |   |       |   |              |  |        |   |        |   |  |   |         |   |  |   | Intersegment |   | Consolidated
|                               |                                         |   | Shieldalloy |   | LSM |   | GfE     |   | EWW |   | CIF    |   | Other |   | Eliminations |  | Totals
|                               |                                         |   |             |   |     |   |         |   |     |   |        |   |       |   |              |  |       
|                               | Three Quarters Ended
September 30, 2001 |   |             |   |     |   |         |   |     |   |        |   |       |   |              |  |        |   |        |   |  |   |         |   |  |   |              |   |              |   |         |   | 
|                              
|                              
|                              
|                              
|Total revenue                  |                                         | $ | 79,427      |   |     | $ | 135,147 |   |     | $ | 70,466 |   |       | $ | 29,087       |  |        | $ | 30,370 |   |  | $ | 133,567 |   |  | $ | (97,174      | ) |              | $ | 380,890 |  
|                              
|                              
|                              
|                              
|Gross profit                   |                                         |   | 4,299       |   |     |   | 10,803  |   |     |   | 13,675 |   |       |   | 4,771        |  |        |   | 6,479  |   |  |   | 21,301  |   |  |   | (1,918       | ) |              |   | 59,410  |  
|                              
|                              
|                              
|                              
|SG&A                           |                                         |   | 7,139       |   |     |   | 8,367   |   |     |   | 10,907 |   |       |   | 1,423        |  |        |   | 1,359  |   |  |   | 11,792  |   |  |   | (720         | ) |              |   | 40,267  |  
|                              
|                              
|                              
|                              
|Environmental expense
recovery |                                         |   | (600        | ) |     |   |        |   |     |   |       |   |       |   |             |  |        |   |       |   |  |   |        |   |  |   |             |   |              |   | (600    | )
|                              
|                              
|                              
|                              
|Operating (loss) income        |                                         |   | (2,240      | ) |     |   | 2,436   |   |     |   | 2,768  |   |       |   | 3,348        |  |        |   | 5,120  |   |  |   | 9,509   |   |  |   | (1,198       | ) |              |   | 19,743  |  
|                              
|                              
|                              
|                              
|Interest (expense)
income, net |                                         |   | (93         | ) |     |   | (1,230  | ) |     |   | (719   | ) |       |   | 152          |  |        |   | (519   | ) |  |   | (7,315  | ) |  |   |             |   |              |   | (9,724  | )
|                              
|                              
|                              
|                              
|Income tax (benefit)
provision |                                         |   | (637        | ) |     |   | 549     |   |     |   | 1,088  |   |       |   | 1,305        |  |        |   | 1,235  |   |  |   | 1,464   |   |  |   |             |   |              |   | 5,004   |  
|                              
|                              
|                              
|                              
|Net (loss) income              |                                         |   | (1,696      | ) |     |   | 759     |   |     |   | 1,022  |   |       |   | 2,195        |  |        |   | 3,366  |   |  |   | 19,255  |   |  |   | (19,675      | ) |              |   | 5,226   |  
|                              
|                              
|                              
|                              
|                               | Three Quarters Ended
October 31, 2000   |   |             |   |     |   |         |   |     |   |        |   |       |   |              |  |        |   |        |   |  |   |         |   |  |   |              |   |              |   |         |   | 
|                              
|                              
|                              
|                              
|Total revenue                  |                                         | $ | 90,669      |   |     | $ | 133,229 |   |     | $ | 72,438 |   |       | $ | 26,364       |  |        | $ | 21,903 |   |  | $ | 117,303 |   |  | $ | (85,335      | ) |              | $ | 376,571 |  
|                              
|                              
|                              
|                              
|Gross profit                   |                                         |   | 7,823       |   |     |   | 13,353  |   |     |   | 11,325 |   |       |   | 3,213        |  |        |   | 2,903  |   |  |   | 12,637  |   |  |   | (56          | ) |              |   | 51,198  |  
|                              
|                              
|                              
|                              
|SG&A                           |                                         |   | 7,661       |   |     |   | 8,580   |   |     |   | 10,617 |   |       |   | 1,560        |  |        |   | 1,159  |   |  |   | 11,951  |   |  |   |             |   |              |   | 41,528  |  
|                              
|                              
|                              
|                              
|Environmental expense
recovery |                                         |   | (750        | ) |     |   |        |   |     |   |       |   |       |   |             |  |        |   |       |   |  |   |        |   |  |   |             |   |              |   | (750    | )
|                              
|                              
|                              
|                              
|Operating income               |                                         |   | 912         |   |     |   | 4,773   |   |     |   | 708    |   |       |   | 1,653        |  |        |   | 1,744  |   |  |   | 686     |   |  |   | (56          | ) |              |   | 10,420  |  
|                              
|                              
|                              
|                              
|Interest income
(expense), net |                                         |   | 716         |   |     |   | (808    | ) |     |   | (1,014 | ) |       |   | 32           |  |        |   | 342    |   |  |   | (7,116  | ) |  |   |             |   |              |   | (7,848  | )
|                              
|                              
|                              
|                              
|Income tax provision           |                                         |   | 658         |   |     |   | 1,337   |   |     |   | 395    |   |       |   | 847          |  |        |   | 60     |   |  |   | 1,394   |   |  |   |             |   |              |   | 4,691   |  
|                              
|                              
|                              
|                              
|Net income (loss)              |                                         |   | 970         |   |     |   | 2,822   |   |     |   | (497   | ) |       |   | 838          |  |        |   | 2,035  |   |  |   | 9,930   |   |  |   | (12,571      | ) |              |   | 3,527   |  

Total Revenue

Consolidated total revenue increased by $4.3 million (1%) in the first
three quarters of 2001 as compared to the first three quarters of 2000.
Shieldalloy revenue was $11.2 million (12%) below the first three quarters of
2000. Increased sales volume of chrome products was more than offset by lower
sales volume and prices of vanadium and aluminum products. LSM revenue was
$1.9 million (1%) above the first three quarters of 2000. An increase in sales
of aluminum products, due to increased sales volume of aluminum powder and
master alloys and the acquisition of Hydelko on March 31, 2000, and higher
sales volume of ferrotitanium and chromium metal were offset by a
discontinuation of sales of certain low-margin products sourced from third
parties. GfE revenue was $2.0 million (3%) below the first three quarters of
2000. Increased sales volume and selling prices of specialty coating materials
and alloys for the titanium industry were more than offset by decreased volume
and selling prices of third-party nickel, niobium and ferrovanadium products
sold to the iron and steel industries. CIF revenue was $8.5 million (39%)
above the first three quarters of 2000 due primarily to increased selling
prices of tantalum products. Increased revenue at EWW and from distribution
activities included in Other above was primarily the result of increased
volume and/or selling prices of tantalum-containing products.

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Gross Profit

Gross profit increased to $59.4 million (15.6% of total revenue) in the
three quarters ended September 30, 2001 from $51.2 million (13.6% of total
revenue) in the three quarters ended October 31, 2000, an increase of 16%.
Improved profitability in tantalum-containing and niobium products and
specialty coating materials was offset somewhat by reduced profitability of
ferrovanadium, ferrotitanium and aluminum products.

Selling, General and Administrative Expenses

SG&A decreased slightly to $40.3 million in the three quarters ended
September 30, 2001 from $41.5 million in the three quarters ended October 31,
2000. For the three quarters ended September 30, 2001, SG&A represented 10.6%
of total revenue compared to 11.0% for the three quarters ended October 31,
2000.

Operating Income

Operating income increased to $19.7 million in the three quarters ended
September 30, 2001 from $10.4 million in the three quarters ended October 31,
2000, due primarily to the increase in gross profit, discussed above. In
addition, Shieldalloy recognized an environmental expense recovery of $0.6
million in the three quarters ended September 30, 2001 compared to $0.8 million
in the three quarters ended October 31, 2000 upon settlements of legal actions
relating to environmental matters at its New Jersey facility.

Interest Expense, Net

Interest expense, net, is as follows (in thousands):

|                 |                       |   |                      |        |             |   |         |        |  
|---------------- | --------------------- | - | -------------------- | ------ | ----------- | - | ------- | ------ | -
|                 |                       |   | Three Quarters Ended
|                 |                       |   |                     
|                 |                       |   | September 30,        |        | October 31,
|                 |                       |   | 2001                 |        | 2000       
|                 |                       |   |                      |        |            
|Interest income  |                       | $ | 1,397                |        |             | $ | 2,787   |       
|                
|                
|                
|                
|Interest expense |                       |   | (11,121              | )      |             |   | (10,635 | )     
|                 |                       |   |                      |        |             |   |         |       
|                
|                
|                
|                
|                 | Interest expense, net |   | $                    | (9,724 | )           |   | $       | (7,848 | )
|                 |                       |   |                      |        |             |   |         |       

The decrease in interest income was due to lower interest rates in the
current year and lower cash balances following the purchase of Metallurg
Holdings Senior Discount Notes for $19.7 million in October 2000.

Income Tax Provision, Net

Income tax provision, net of tax benefits, is as follows (in thousands):

|               |                           |   |                      |       |             |   |       |       | 
|-------------- | ------------------------- | - | -------------------- | ----- | ----------- | - | ----- | ----- | 
|               |                           |   | Three Quarters Ended
|               |                           |   |                     
|               |                           |   | September 30,        |       | October 31,
|               |                           |   | 2001                 |       | 2000       
|               |                           |   |                      |       |            
|Total current  |                           | $ | 2,653                |       |             | $ | 2,866 |      
|              
|              
|              
|              
|Total deferred |                           |   | 2,351                |       |             |   | 1,825 |      
|               |                           |   |                      |       |             |   |       |      
|              
|              
|              
|              
|               | Income tax provision, net |   | $                    | 5,004 |             |   | $     | 4,691 | 
|               |                           |   |                      |       |             |   |       |      

The difference between the statutory federal income tax rate and
Metallurgs effective rate for the three quarters ended September 30, 2001 is
principally due to: (i) the excess of foreign tax rates over the statutory
federal income tax rate; (ii) the U.S. taxability of foreign dividends; and
(iii) certain deductible temporary differences which, in other circumstances
would have generated a deferred tax benefit, have been fully provided for in a
valuation allowance.

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The deferred tax provision is comprised mainly of (i) losses in certain
foreign jurisdictions for which the related deferred tax was offset by a
valuation allowance; (ii) the deferred tax effects of certain tax assets,
primarily foreign net operating losses, for which the benefit had been
previously recognized of $0.7 million in the three quarters ended September 30,
2001; and (iii) the deferred tax effects of certain deferred tax assets for
which a corresponding credit has been recorded to Additional paid-in capital,
of $1.5 million in the three quarters ended September 30, 2001. The deferred
tax expenses referred to in items (ii) and (iii) above will not result in cash
payments in future periods.

Net Income

Net income was $5.2 million in the three quarters ended September 30, 2001
compared to $3.5 million in the three quarters ended October 31, 2000. The net
income for the three quarters ended September 30, 2001 benefited primarily from
the increased gross margins, discussed above, whereas the net income for the
three quarters ended October 31, 2000 resulted primarily from a pre-tax gain of
approximately $5.1 million, recorded in other income, on the sale of
Metallurgs interest in Solikamsk Magnesium Works.

Liquidity and Financial Resources

General

Metallurgs sources of liquidity include cash and cash equivalents, cash
from operations and amounts available under credit facilities. At September
30, 2001, Metallurg had $28.7 million in cash and cash equivalents. Metallurg
believes that these sources are sufficient to fund current and anticipated
future requirements through the next twelve months.

At September 30, 2001, Metallurg had working capital of $126.2 million, as
compared to $120.9 million at December 31, 2000. For the first three quarters
of 2001, Metallurgs operations provided $5.1 million in cash primarily from
net income.

Credit Facilities and Other Financing Arrangements

Metallurg has a credit facility with certain financial institutions led by
Fleet National Bank as agent (the Revolving Credit Facility) which provides
Metallurg, Inc., Shieldalloy and certain of their subsidiaries with up to $50.0
million of financing resources, including a German subfacility (as discussed
below). Interest is charged at a rate per annum equal to (i) LIBOR plus 2.0% -
2.5% or (ii) Prime plus up to 1%, based on the performance of Metallurg, Inc.
and certain of its subsidiaries. The Revolving Credit Facility permits
borrowings of up to $50.0 million for working capital requirements and general
corporate purposes, up to $35.0 million of which may be used for letters of
credit in the U.S. As part of the Revolving Credit Facility, Fleet National
Bank, through its London office, makes available up to DM 20.5 million ($9.6
million) of financing to GfE, which is guaranteed by Metallurg, Inc. and the
other U.S. borrowers under the Revolving Credit Facility. At September 30,
2001, no loans were outstanding and $23.2 million of letters of credit were
outstanding in the U.S.

During the second quarter, LSM extended and restructured its revolving
credit facilities and term loans with Barclays Bank plc and HSBC Bank plc. The
agreements provide LSM with several facilities. Three overdraft facilities
provide LSM with up to £8.5 million ($12.5 million) of borrowings, £43.3
million ($63.8 million) in notional amount of foreign exchange contracts and
options and £2.8 million ($4.1 million) for other ancillary banking
arrangements, including bank guarantees. Borrowings under these facilities are
payable on demand. Outstanding loans under this facility bear interest at a
rate of 1.0% over the lenders base rate. Four revolving term loan facilities
provide for borrowings up to £12.0 million ($17.7 million) at interest rates of
LIBOR plus 0.75%  0.95%. LSM is required to pay fees ranging from 0.375% to
0.475% per annum on the unused portion of these facilities. Two of the
facilities expire during the second quarter of 2004 while the other two expire
during the second quarter of 2006. These term loan facilities require LSM to
comply with various covenants, including the maintenance of minimum net worth
and interest coverage. The proceeds from these loans were used to refinance
existing term loans and overdraft facilities. At September 30, 2001, LSM had
£1.7 million ($2.5 million) outstanding under the overdraft facilities and
£12.0 million ($17.7 million) outstanding under the revolving term loan
facilities.

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In addition, certain other foreign subsidiaries of Metallurg have credit
facility arrangements with local banking institutions to provide funds for
working capital and general corporate purposes. These local credit facilities
contain restrictions that vary from company to company. At September 30, 2001,
there were $2.5 million of outstanding loans under these local credit
facilities.

Capital Expenditures

Metallurg invested $11.9 million in capital expenditures during the first
three quarters of 2001. Capital expenditures are expected to total
approximately $18 million in 2001. Although Metallurg has projected these
items in 2001, Metallurg has not committed purchases to vendors for all of
these projects as some projects remain contingent on final approvals and other
conditions and the actual timing of expenditures may extend into 2002.
Metallurg believes that these projects will be funded through existing and
future internally generated cash and credit lines.

Environmental Remediation Costs

Losses associated with environmental remediation obligations are accrued
when such losses are deemed probable and reasonably estimable. Such accruals
generally are recognized no later than the completion of the remedial
feasibility study and are adjusted as further information develops or
circumstances change. Costs of future expenditures for environmental
remediation obligations are generally not discounted to their present value.
During the first three quarters of 2001, Metallurg expended $1.4 million for
environmental remediation expenses that have been previously accrued.

In 1997, Shieldalloy entered into settlement agreements with various
environmental regulatory authorities with regard to all of the significant
environmental remediation liabilities of which it is aware. Pursuant to these
agreements, Shieldalloy has agreed to perform environmental remediation that,
as of September 30, 2001, had an accrual of $31.2 million for the remaining
estimated cost of completion. Of this amount, $0.7 million is expected to be
expended in the last quarter of 2001, $3.6 million in 2002 and $2.3 million in
2003. In addition, Metallurg had accruals of $3.1 million for estimated
expenditures with respect to environmental remediation at its foreign
facilities. Of this amount, $0.8 million is expected to be expended over the
next three years.

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ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

Refer to the Market Risk section of Managements Discussion and Analysis
of Financial Condition and Results of Operations included in Metallurgs annual
report on Form 10-K for the year ended December 31, 2000, which is incorporated
by reference herein.

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PART II  OTHER INFORMATION




ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K



| |             
| | ------------
| | (a) EXHIBITS

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Second Amendment to Amended and Restated Loan Agreement
(dated as of October 29, 1999), dated as of November 3, 2000, by
and among Metallurg, Inc., Shieldalloy Metallurgical Corporation
and Metallurg International Resources, LLC, as Borrowers, Metallurg
Services, Inc., MIR (China), Inc. and Metallurg Holdings
Corporation, as Guarantors, and Fleet National Bank (formerly known
as BankBoston, N.A.) as Agent for itself and the other financial
institutions parties thereto, and the banks named therein.
|    
|    
|    
|    
|10.2 |  | Third Amendment to Amended and Restated Loan Agreement
(dated as of October 29, 1999), dated as of July 2, 2001, among
Metallurg, Inc., Shieldalloy Metallurgical Corporation and
Metallurg International Resources, LLC, as Borrowers, Metallurg
Services, Inc., Metallurg Holdings Corporation and MIR (China),
Inc. as Guarantors, and Fleet National Bank (formerly known as
BankBoston, N.A.) as Agent for itself and the other financial
institutions parties thereto, and the banks named therein.             
|    
|    
|    
|    
|    
|10.3 |  | Fourth Amendment, dated as of July 2, 2001, to German Loan
Agreement (dated as of October 20, 1997, as amended and restated as
of July 22, 1998), by and among GfE Gesellschaft fur
Elektrometallurgie mbH, GfE Umwelttecknik GmbH, GfE Giesserei-und
Stahlwerksbedarf GmbH, GfE Metalle und Materialien GmbH, Keramed
Medizintechnik GmbH and Fleet National Bank (formerly known as
BankBoston, N.A.), London Branch.                                                                                               



| |  |  | (b) REPORTS ON FORM 8-K
| |  |  | -----------------------



| |  |  | None
| |  |  | ----

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on November 13, 2001 on its
behalf by the undersigned thereunto duly authorized.

| |  |                                                                  
| |  | -----------------------------------------------------------------
| |  | METALLURG, INC.                                                  
|
|
|
|
| |  |                                                                  
|
|
|
|
| |  | By: /s/ Barry C. Nuss                                            
| |  |                                                                  
| |  | Barry C. Nuss
Vice President, Finance and Chief Financial Officer

22