-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P1jLhwtW/PBdbtnN+FEhQgLfZm/GK4GHJOXHHfnqpgFAssoylUdEPmi9h4xBkMBN zVPawyLv6wxAT9/HLEG/mA== 0000745448-98-000014.txt : 19980515 0000745448-98-000014.hdr.sgml : 19980515 ACCESSION NUMBER: 0000745448-98-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MASCOTECH INC CENTRAL INDEX KEY: 0000745448 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 382513957 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12068 FILM NUMBER: 98620515 BUSINESS ADDRESS: STREET 1: 21001 VAN BORN RD CITY: TAYLOR STATE: MI ZIP: 48180 BUSINESS PHONE: 3132747405 MAIL ADDRESS: STREET 1: 21001 VAN BORN ROAD CITY: TAYLOR STATE: MI ZIP: 48180 FORMER COMPANY: FORMER CONFORMED NAME: MASCO INDUSTRIES INC DATE OF NAME CHANGE: 19930629 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarterly Period Ended March 31, 1998 Commission File Number 1-12068 MASCOTECH, INC. (Exact name of Registrant as specified in its Charter) Delaware 38-2513957 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 21001 Van Born Road, Taylor, Michigan 48180 (Address of principal executive offices) (Zip Code) (313) 274-7405 (Telephone Number) 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Shares Outstanding at Class April 30, 1998 Common stock, par value $1 per share 47,276,000 MASCOTECH, INC. INDEX Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheet - March 31, 1998 and December 31, 1997 1 Consolidated Condensed Statement of Income for the Three Months Ended March 31, 1998 and 1997 2 Consolidated Condensed Statement of Cash Flows for the Three Months Ended March 31, 1998 and 1997 3 Notes to Consolidated Condensed Financial Statements 4-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. Other Information and Signature 8-9 PART I. FINANCIAL INFORMATION Item 1. Financial Statements MASCOTECH, INC. CONSOLIDATED CONDENSED BALANCE SHEET March 31, 1998 and December 31, 1997 (Dollars in thousands) March 31, December 31, ASSETS 1998 1997 Current assets: Cash and cash investments $ 76,740 $ 41,110 Marketable securities 18,630 45,970 Receivables 241,800 125,930 Inventories 177,290 73,860 Deferred and refundable income taxes 30,030 36,270 Prepaid expenses and other assets 15,650 13,310 Total current assets 560,140 336,450 Equity and other investments in affiliates 85,810 263,300 Property and equipment, net 716,380 417,030 Excess of cost over net assets of acquired companies 658,110 65,610 Notes receivable and other assets 81,030 62,290 Total assets $2,101,470 $1,144,680 LIABILITIES Current liabilities: Accounts payable $ 116,110 $ 70,120 Accrued liabilities 156,560 114,650 Total current liabilities 272,670 184,770 Convertible subordinated debentures 310,000 310,000 Other long-term debt 1,082,310 282,000 Deferred income taxes and other long-term liabilities 194,000 157,250 Total liabilities 1,858,980 934,020 SHAREHOLDERS' EQUITY Common stock, $1 par: Authorized: 250 million; Outstanding: 47.3 million 47,330 47,250 Paid-in capital 41,490 41,060 Retained earnings 190,550 157,790 Accumulated other comprehensive income (4,610) (2,560) Less: Restricted stock awards (32,270) (32,880) Total shareholders' equity 242,490 210,660 Total liabilities and shareholders' equity $2,101,470 $1,144,680
The accompanying notes are an integral part of the consolidated condensed financial statements. 1 MASCOTECH, INC. CONSOLIDATED CONDENSED STATEMENT OF INCOME For the Three Months Ended March 31, 1998 and 1997 (Dollars in thousands except per share amounts) Three Months Ended March 31 1998 1997 Net sales $ 400,760 $ 233,440 Cost of sales (296,370) (177,140) Selling, general and administrative expenses (45,560) (22,710) Operating profit 58,830 33,590 Other income (expense), net: Interest expense, Masco Corporation --- (2,470) Other interest expense (18,610) (7,240) Equity and interest income from affiliates 2,100 11,260 Gain from change in investment of an equity affiliate --- 13,210 Deferred gain recognized from disposition of business 7,000 --- Other income, net 5,700 5,730 (3,810) 20,490 Income before income taxes 55,020 54,080 Income taxes 22,280 21,420 Net income $ 32,740 $ 32,660 Preferred stock dividends --- $ 3,240 Earnings attributable to common stock $ 32,740 $ 29,420 Basic earnings per share $ .74 $ .83 Diluted earnings per share $ .60 $ .59 Cash dividends declared per share -- $ .05 Cash dividends paid per share $ .06 $ .05
The accompanying notes are an integral part of the consolidated condensed financial statements. 2 MASCOTECH, INC. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS For the Three Months Ended March 31, 1998 and 1997 (Dollars in thousands) Three Months Ended March 31 1998 1997 CASH FROM (USED FOR): OPERATIONS: Net cash from earnings $ 44,900 $ 14,870 (Increase) in inventories (4,380) (1,420) (Increase) in receivables (34,040) (4,000) Increase in accounts payable and accrued liabilities 29,160 16,950 Decrease (increase) in marketable securities, net 27,340 (6,920) Other, net (880) (3,290) Net cash from operating activities 62,100 16,190 FINANCING: Payment of debt (284,450) (61,590) Increase in debt 1,040,000 --- Payment of preferred stock dividends --- (3,240) Payment of common stock dividends (2,810) (1,880) Other, net 200 1,770 Net cash from (used for) financing activities 752,940 (64,940) INVESTMENTS: Capital expenditures (24,830) (8,300) Cash from sale of businesses, net --- 76,560 Acquisition of businesses, net of cash acquired (820,260) (11,100) Proceeds from redemptions of debt by affiliates 56,900 --- Advances to affiliate --- (7,700) Other, net 8,780 (3,770) Net cash (used for) from investing activities (779,410) 45,690 CASH AND CASH INVESTMENTS: Increase (decrease) for the three months 35,630 (3,060) At January 1 41,110 19,400 At March 31 $ 76,740 $ 16,340 Supplemental Cash Flow Information: Net cash paid during the period for: Interest $ 14,340 $ 5,970 Income taxes $ 4,190 $ 2,660
The accompanying notes are an integral part of the consolidated condensed financial statements. 3 MASCOTECH, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS A. In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly its financial position as at March 31, 1998 and the results of operations and cash flows for the three months ended March 31, 1998 and 1997. Certain amounts for the year ended December 31, 1997 have been reclassified to conform to the presentation adopted in 1998. B. In January 1998, the Company completed the acquisition of TriMas Corporation ("TriMas") by purchasing all the outstanding shares of TriMas not already owned by the Company for approximately $920 million. TriMas is a diversified proprietary products company with leadership product positions in commercial, industrial and consumer markets and had 1997 sales in excess of $660 million. The Company previously owned 37 percent of TriMas. The results for the first quarter of 1998 reflect TriMas sales and operating results from the date of acquisition. The consolidated condensed financial statements reflect a tentative purchase price allocation which will be adjusted upon the completion of on-going valuations. The following pro forma results of operations reflect this transaction as if it had occurred on January 1, 1997. The pro forma data does not purport to be indicative of the results which would actually have been reported if the transaction had occurred on such date (in thousands, except per share amounts). Three Months Ended March 31 1998 1997 Net sales $436,710 $397,660 Net income $ 32,420 $ 22,640 Diluted earnings per share $.60 $.42
C. In connection with the TriMas acquisition in early 1998, the Company entered into a new $1.3 billion credit facility. This new facility includes a $500 million term loan with principal payments as follows: 1998 - $25 million; 1999 - $40 million; 2000 - $60 million; 2001 - $75 million; and 2002 - $190 million. The remainder of the term loan and the $800 million revolver terminate in 2003. The Company has the ability and intent to refinance current amounts on a long-term basis under the revolver. D. Inventories by component are as follows (in thousands): March 31, December 31, 1998 1997 Finished goods $ 76,570 $ 22,160 Work in process 41,730 22,990 Raw materials 58,990 28,710 $177,290 $ 73,860
E. Property and equipment, net reflects accumulated depreciation of $271 million and $265 million as at March 31, 1998 and December 31, 1997, respectively. 4 MASCOTECH, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued) F. In January 1998, the Company received $48 million of cash from MSX International, Inc. ("MSXI") in payment of certain amounts due MascoTech, resulting from the sale of the Company's engineering and technical business services units to MSXI in early 1997. As a result, the Company realized a pre-tax gain of $7 million in the first quarter of 1998 resulting from the partial recognition of a deferred gain that was deferred at the time of the sale pending the receipt of cash. G. Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." Accordingly, the Company's total comprehensive income for the period was as follows: Three Months Ended March 31, 1998 1997 Net income $32,740 $32,660 Other comprehensive loss (2,050) (7,120) Total comprehensive income $30,690 $25,540
5 MASCOTECH, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (concluded) H. The following are reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per share: Three Months Ended March 31 1998 1997 Weighted average number of shares outstanding 44,270 35,450 Income $ 32,740 $ 32,660 Less preferred stock dividends --- 3,240 Earnings used for basic earnings per share computation $ 32,740 $ 29,420 Basic earnings per share $ 0.74 $ 0.83 Total shares used for basic earnings per share computation 44,270 35,450 Dilutive securities: Stock options and warrants 1,210 1,270 Assumed conversion of preferred stock at January 1, 1997 --- 10,800 Convertible debentures 10,000 10,000 Contingently issuable shares 3,000 2,020 Total shares used for diluted earnings per share computation 58,480 59,540 Earnings used for basic earnings per share computation $ 32,740 $ 29,420 Add back of preferred stock dividends --- 3,240 Add back of debenture interest 2,380 2,380 Earnings used for diluted earnings per share computation $ 35,120 $ 35,040 Diluted earnings per share $ 0.60 $ 0.59
Diluted earnings per share reflect the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. 6 MASCOTECH, INC. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MascoTech sales for the first quarter 1998, aided by the previously announced acquisition of TriMas Corporation which was completed on January 22, 1998 for approximately $920 million, increased 72 percent to $401 million from $233 million in 1997. Income in the first quarter of 1998 was $32.7 million or $.60 per common share, compared with $29.4 million or $.59 per common share after preferred dividends in 1997. The results for the first quarter of 1998 reflect TriMas sales and results of operations from the date of acquisition. The Company previously owned 37 percent of TriMas. Results for first quarter 1998 benefitted from pre-tax gains aggregating approximately $12 million which resulted from partial recognition of a deferred gain related to the 1997 divestiture of a business and gains from the Company's marketable securities portfolio. These gains were more than offset by increased interest expense resulting from increased indebtedness related to the TriMas acquisition, and lower affiliate income as compared to 1997. Results for 1997 benefitted from pre-tax gains aggregating approximately $18 million as a result of an equity transaction by an affiliate of the Company and gains from the Company's marketable securities portfolio. Assuming that the MascoTech and TriMas results were consolidated for the entire first quarters of 1998 and 1997, pro forma sales would have increased approximately 10 percent to $437 million as compared with $398 million for first quarter 1997. Sales benefitted from increased light truck production, increased sales in Europe, increased demand for aerospace and large diameter industrial fasteners and from the mild spring weather which positively impacted sales for the Company's towing systems product group. In addition, the Company's aftermarket, corporate companies and specialty container product groups had modest sales increases. Operating profit on a pro forma basis for first quarter 1998 would have increased approximately 12 percent to $63 million as compared with $56 million for first quarter 1997. Earnings per share, excluding unusual income and expenses, on a pro forma basis for first quarter 1998 and 1997 would have been $.48 and $.40, respectively. Operating margins, before general corporate expense and the additional amortization and depreciation expense related to the TriMas acquisition, approximated 17 percent in both the first quarters of 1998 and 1997. Operating margins for the Company's specialty fastener product group improved due to increased sales volume which offset modest operating margin declines for the Company's metalworking and aftermarket product groups. Metalworking product group margins were negatively impacted by a previously announced work stoppage at one of the Company's manufacturing facilities and higher than anticipated product start-up costs related to the Company's hydroforming process. Operating margins for the Company's aftermarket product group were negatively impacted by soft economic conditions impacting certain products. The Company paid a cash dividend of $.06 per common share in the first quarter of 1998 and the Board of Directors declared a dividend of $.06 per share on April 2, 1998 payable on May 11, 1998. Although the Company incurred increased debt with the purchase of TriMas, the Company's interest coverage ratio and debt to cash flow ratio are expected to remain strong. The Company expects that its ratio of debt to total debt plus equity will improve from the operating performance of its businesses and the disposition of certain financial assets. Additional borrowings available under the Company's new revolving credit agreement and otherwise, and anticipated internal cash flows are expected to provide sufficient liquidity to fund the Company's debt repayment requirements, foreseeable working capital, capital expansion programs and other investment needs. At March 31, 1998, current assets were approximately two times current liabilities. 7 PART II. OTHER INFORMATION MASCOTECH, INC. Items 1 through 5 are not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 12 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K: 1. A Current Report on Form 8-K dated January 30, 1998 was filed by MascoTech, Inc. during the quarter ended March 31, 1998 reporting under Item 2. "Acquisition or Disposition of Assets," the completion of the tender offer for shares of TriMas Corporation. 2. A Current Report on Form 8-K dated February 23, 1998 was filed by MascoTech, Inc. during the quarter ended March 31, 1998 reporting under Item 5, "Other Events," the Company's declaration of a dividend of one preferred stock purchase right (a "Right") for each outstanding share of common stock of the Company payable to holders of record on February 27, 1998. The Rights become exercisable upon certain events set forth in the Rights Agreement dated as of February 20, 1998 between the Company and The Bank of New York, as Rights Agent. The Rights have certain anti-takeover effects and may cause substantial dilution to a person that attempts to acquire the Company without a condition to such an offer that a substantial number of the Rights be acquired or that the Rights be redeemed or declared invalid. 3. A Current Report on Form 8-K/A dated April 6, 1998 was filed by MascoTech, Inc. reporting under Item 2. "Acquisition or Disposition of Assets," to include the required financial information relating to the acquisition of TriMas which was not available at the time of the initial filing on Form 8-K. 8 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MASCOTECH, INC. (Registrant) Date: May 14, 1998 By: /s/Timothy Wadhams Timothy Wadhams Senior Vice President and Chief Financial Officer (Chief accounting officer and authorized signatory) 9 MASCOTECH, INC. EXHIBIT INDEX Exhibit Sequential Page No. Exhibit 12 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends 11 Exhibit 27 Financial Data Schedule 12 EX-12 2 Exhibit 12 MASCOTECH, INC. Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Dollars in thousands) 3 Months Ended March 31, For The Years Ended December 31 1998 1997 1996 1995 1994 1993 Earnings (Loss) Before Income Taxes and Fixed Charges: Income (loss) from continuing operations before income taxes (credit), extraordinary item and cumulative effect of accounting change, net..... $ 55,020 $190,290 $ 77,220 $100,280 $(264,490) $121,180 Deduct equity in undistributed earnings of less-than-fifty- percent owned companies.... (920) (46,030) (31,650) (29,590) (23,350) (19,930) Add interest on indebtedness, net.......... 18,690 36,650 30,350 51,500 51,290 83,000 Add amortization of debt expense.................... 970 900 1,490 1,670 3,450 4,390 Estimated interest factor for rentals................ 1,150 2,100 6,350 7,070 6,220 5,550 Earnings (loss) before income taxes and fixed charges.... $ 74,910 $183,910 $ 83,760 $130,930 $(226,880) $194,190 Fixed Charges: Interest on indebtedness, net........................ $ 18,700 $ 36,770 $ 30,590 $ 51,690 $ 51,540 $ 83,110 Amortization of debt expense.................... 970 900 1,490 1,670 3,450 4,390 Estimated interest factor for rentals................ 1,150 2,100 6,350 7,070 6,220 5,550 Total fixed charges...... 20,820 39,770 38,430 60,430 61,210 93,050 Preferred stock dividend requirement (a)............ --- 10,300 21,570 21,970 14,630 25,860 Combined fixed charges and preferred stock dividends.. $ 20,820 $ 50,070 $ 60,000 $ 82,400 $ 75,840 $118,910 Ratio of earnings to fixed charges................ 3.6 4.6 2.2 2.2 -- (b) 2.1 Ratio of earnings to combined fixed charges and preferred stock dividends.............. 3.6 3.7 1.4 1.6 -- (c) 1.6 (a) Represents amount of income before provision for income taxes required to meet the preferred stock dividend requirements of the Company and its 50% owned companies. (b) 1994 results of operations are inadequate to cover fixed charges by $288,090. (c) 1994 results of operations are inadequate to cover combined fixed charges and preferred stock dividends by $302,720.
11 EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31, 1998 MASCOTECH, INC. 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 MAR-31-1998 76,740 18,630 241,800 0 177,290 560,140 987,000 (270,620) 2,101,470 272,670 1,392,310 0 0 47,330 195,160 2,101,470 400,760 400,760 296,370 296,370 0 0 18,610 55,020 22,280 32,740 0 0 0 32,740 .74 .60
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