-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, FOkFX7VUmmznovt7Lxr3oHxN3U/hOT7fgvTb1EnY423J2sbEPcqxkA0Fsd49a23e eOuasMmP5/ZvmHIgQBtBCw== 0000950124-94-000115.txt : 19940114 0000950124-94-000115.hdr.sgml : 19940114 ACCESSION NUMBER: 0000950124-94-000115 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940111 ITEM INFORMATION: 5 FILED AS OF DATE: 19940111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MASCOTECH INC CENTRAL INDEX KEY: 0000745448 STANDARD INDUSTRIAL CLASSIFICATION: 3714 IRS NUMBER: 382513957 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 34 SEC FILE NUMBER: 001-12068 FILM NUMBER: 94501045 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 8-K 1 FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) January 11, 1994 MASCOTECH, INC. (Exact Name of Registrant as Specified in Charter) Delaware 1-12068 38-2513957 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 21001 Van Born Road, Taylor, Michigan 48180 (Address of Principal Executive Offices) (Zip Code) (313) 274-7405 Registrant's telephone number, including area code 2 ITEM 5. OTHER EVENTS As previously reported, the Registrant has adopted a plan to dispose of its energy-related businesses and to treat such businesses as discontinued operations for financial reporting purposes, and accordingly, certain of the Registrant's financial statements and financial information have been reclassified to reflect the treatment of this business segment as discontinued operations. In connection therewith, the Registrant is including the following information herewith. 3 SELECTED FINANCIAL DATA. The following table sets forth summary consolidated financial information of the Company, for the years and dates indicated (information related to the statements of operations have been reclassified for discontinued operations):
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1992 1991 1990 1989 1988 ---------- ---------- ---------- ---------- ---------- Net sales................... $1,455,320 $1,266,210 $1,373,060 $1,528,940 $1,469,000 Operating profit............ $ 111,840 $ 43,590 $ 70,560 $ 130,260 $ 181,570 From continuing operations before extraordinary income: Income (loss)............. $ 39,040 $ (10,350) $ (26,840) $ 52,730 $ 71,100 Earnings (loss) per common share........... $.49 $(.33) $(.36) $.65 $.79 At December 31: Total assets.............. $1,877,310 $1,973,280 $2,080,470 $2,235,900 $2,121,360 Long-term debt............ $1,065,390 $1,224,990 $1,349,510 $1,435,860 $1,351,920 Shareholders' equity...... $ 353,400 $ 326,690 $ 356,010 $ 389,380 $ 369,020
Results for 1992 include pre-tax income of approximately $25 million ($14 million after-tax or $.23 per common share) from transactions related to TriMas Corporation's common stock offering (see "Equity and Other Investments in Affiliates" note to the consolidated financial statements). This income was substantially offset by charges for restructurings and other costs in 1992, aggregating approximately $21 million pre-tax ($12 million after-tax or $.19 per common share). Income from continuing operations attributable to common stock in 1992 was $29.7 million after preferred stock dividends. Results for 1991 include the effect of charges for restructurings and other costs, aggregating approximately $41 million pre-tax, which reduced operating profit by $27 million, income from continuing operations before extraordinary income by $27 million and earnings per common share by $.45. Loss from continuing operations attributable to common stock in 1991 was $20.0 million after preferred stock dividends. Results for 1990 include the effect of charges for restructurings and other costs, aggregating approximately $40 million pre-tax, which reduced operating profit by $38 million, income from continuing operations before extraordinary income by $26 million and earnings per common share by $.35. Loss from continuing operations in 1990 was $18.6 million or $.25 per common share after inclusion of extraordinary income of $8.2 million or $.11 per common share related to the early extinguishment of debt. Results for 1989 include the effect of charges for restructurings and other costs, aggregating approximately $54 million pre-tax, which reduced operating profit by $39 million, income from continuing operations before extraordinary income by $36 million and earnings per common share by $.45. Income from continuing operations per common share in 1988 is presented on a fully diluted basis. Primary earnings from continuing operations per common share were $.81 in 1988. For years 1989 through 1992, the assumed conversion of dilutive securities is anti-dilutive. 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MASCOTECH Masco Corporation undertook a major corporate restructuring during 1984, transferring its Products for Industry businesses to the Company at their historical net book value. MascoTech became a separate public company in mid-1984, when Masco Corporation distributed common shares of MascoTech as a special dividend to its shareholders. At December 31, 1992, Masco Corporation's voting ownership in MascoTech approximated 47 percent. In 1993 the Company changed its name to MascoTech, Inc. CORPORATE DEVELOPMENT Since mid-1984, the Company has acquired a number of businesses for approximately $650 million in cash and Company Common Stock, with additional purchase price amounts payable contingent upon the future earnings of the acquired businesses and/or the future value of Company Common Stock. These acquisitions have contributed significantly to the more than tripling of the sales volume of the Company. Effective October 1, 1988, the Company transferred $20 million in cash and nine businesses to TriMas Corporation ("TriMas"), a publicly traded, diversified manufacturer of commercial, industrial and consumer products. In exchange, the Company received $128 million of 14% Subordinated Debentures, $70 million of convertible preferred stock and approximately 48 percent of TriMas common stock. Although the Company received consideration which exceeded the historical net book value of the businesses transferred by $138 million, no gain was recognized at December 31, 1988. In late 1991 and early 1992, TriMas redeemed the subordinated debentures, and in 1992 TriMas sold in a public offering 4.6 million shares of newly issued common stock at $19.50 per share which reduced the Company's common equity ownership in TriMas to 28 percent from 41 percent. TriMas and the Company's other equity affiliates may, from time to time, issue additional common equity depending upon their financing requirements. At December 31, 1992, that portion of the excess consideration received from TriMas attributable to the Company's remaining approximate 28 percent common equity ownership in TriMas is accounted for as a reduction in the carrying value of this investment. The remainder of the excess consideration received from TriMas (approximately $70 million) will be recognized as income as the preferred stock is redeemed or sold. In separate transactions from late 1989 to early 1991, the Company divested itself of three subsidiaries that did not fit its long-term strategic plans. The consideration received from the sales of these subsidiaries aggregated approximately $160 million. In late 1991, the Company sold its 50 percent equity ownership interest in Masco Capital Corporation ("Masco Capital") to the other shareholder, Masco Corporation. Prior to this disposition, Masco Capital sold its investment in Payless Cashways, Inc. junior subordinated debentures and applied the proceeds to repay its outstanding bank borrowings, along with making loan repayments and dividend distributions to the Company. The Company realized approximately $115 million from these transactions. 6 In February 1993, the Company entered into an agreement with Masco Corporation to acquire 10 million shares of Company Common Stock, $77.5 million of the Company's 12% Exchangeable Preferred Stock currently held by Masco Corporation, and Masco Corporation's holdings of Emco Limited ("Emco") common stock and convertible debentures. In exchange, Masco Corporation will receive from the Company $87.5 million in cash, $100 million of the Company's 10% Exchangeable Preferred Stock and seven-year warrants to purchase 10 million shares of Company Common Stock at $13 per share. Masco Corporation has also agreed to purchase from the Company, at the Company's option within two years, up to $200 million aggregate amount of additional securities consisting of exchangeable preferred stock (maximum of $100 million) and subordinated debentures. These transactions, which will reduce Masco Corporation's common equity ownership in the Company to approximately 35 percent, are subject to several conditions including customary regulatory filings and are expected to be consummated in March 1993. Although these transactions would result in no gain or loss to the Company, shareholders' equity would decrease by approximately $7 million. As a result of these transactions, the Company will own approximately 43 percent of the outstanding common stock and convertible debentures of Emco, a major, publicly traded Canadian manufacturer and distributor principally of building and other industrial products with annual sales of approximately $800 million. DISCONTINUED OPERATIONS In late November 1993, the Company adopted a formal plan to divest its Energy-related business segment. Accordingly, the applicable financial statements and related notes have been reclassified to present such Energy-related segment as discontinued operations (see "Discontinued Operations" footnote in the accompanying financial statements). The Company believes these businesses, which have net assets of approximately $176 million as of September 30, 1993, will be sold, by the end of 1994, for proceeds of approximately $162 million (including the cash tax benefit on the loss) of which approximately $93 million has been received at December 31, 1993. The disposition of the Company's Energy-related segment is expected to result in a 1993 fourth quarter charge of approximately $20 million after-tax. Net sales attributable to the discontinued operations during 1992, 1991 and 1990 were $202 million, $201 million and $189 million, respectively. The discontinued operations had operating profit of $3 million, $1 million and $6 million in 1992, 1991 and 1990, respectively. PROFIT MARGINS - CONTINUING OPERATIONS Operating profit margin from continuing operations was eight percent in 1992, three percent in 1991 and five percent in 1990. Margins from continuing operations in 1991 and 1990 were reduced by significant charges aggregating approximately $27 million and $38 million, respectively. These charges reflect expenses related to the discontinuance of product lines, costs related to the restructuring of several businesses and other expenses. Of these charges, approximately $15 million in 1991 and the major portion in 1990 relate to the Company's automotive vehicle conversion business. This business has been restructured and consolidated with the Company's Creative Industries Group business unit (acquired in mid-1991). In addition, margins from continuing operations were negatively impacted in 1991 and 1990 as a result of reduced sales volumes in certain of the Company's Transportation-Related Products operations, due to production cutbacks by automotive customers, and in virtually all of the Company's other product groups due to recessionary market conditions. 7 The increase in the operating profit margin from continuing operations in 1992 compared with the previous two years is primarily attributable to increased sales volumes, particularly within the Transportation-Related Products segment, and from the benefits of internal cost reductions and restructuring initiatives undertaken during 1991 and 1990. Although improved in 1992, margins related to the Company's Specialty Products segment continue to be hampered by the depressed industry conditions affecting the markets that the Company serves. CASH FLOWS AND CAPITAL EXPENDITURES Net cash flow from operating activities including discontinued operations increased to $58 million in 1992 from $43 million in 1991 principally as a result of improved operating performance. Cash from operating activities in 1992 excludes the effect of noncash income of approximately $17 million related to the gain from a change in the Company's common equity ownership in TriMas. Cash from operating activities in 1991 excludes the effects of noncash income of approximately $22 million related to a gain from the disposition of assets and approximately $14 million related to the recovery of a previously established marketable securities valuation allowance. In addition, the Company received approximately $52 million and $108 million of proceeds from the sale of subsidiaries in 1991 and 1990, respectively. The Company also received approximately $26 million and $23 million from sales of marketable securities in 1991 and 1990, respectively. During 1991 and 1992, the Company received approximately $260 million in cash from the disposition of its investment in Masco Capital (during 1991 the Company had advanced Masco Capital approximately $44 million to fund debt repayment obligations and working capital requirements) and from the early redemption by TriMas, including a prepayment premium, of TriMas' subordinated debentures held by the Company. These proceeds were applied to reduce the Company's indebtedness in late 1991 and 1992. From January 1, 1990 to December 31, 1992, the Company has repaid or repurchased over $300 million, net, of its outstanding debt. In 1992, the Company received approximately $10 million as payment of a note receivable from a German subsidiary of Masco Corporation. Capital expenditures related to continuing operations totalled $60 million in 1992, compared with $49 million in 1991 and $70 million in 1990. The Company spent less on capital expenditures in 1992 and 1991 compared with 1990 due to the restructuring of its existing capacity and the completion of capital programs in 1990 related to certain product line extensions and improvements in operating performance. Depreciation and amortization related to continuing operations totalled $60 million in 1992 $59 million in 1991 and $61 million in 1990. INVENTORIES The Company's investment in inventories increased less than one percent at December 31, 1992, to approximately $222 million. The Company's continued emphasis on inventory management, utilizing Just-In-Time (JIT) and other inventory management techniques, has contributed to lower inventory levels as compared with recent years. 8 FINANCIAL POSITION AND LIQUIDITY The Company's current $685 million bank revolving-credit facility converts into a four-year term loan in 1993, with quarterly principal payments commencing September 30, 1993. The Company expects to negotiate a new bank credit facility in 1993. At December 31, 1992, the Company had additional borrowing capacity of approximately $260 million available under its current credit facility which could be applied to fund the $87.5 million due Masco Corporation as described in Corporate Development above. Of the Company's total long-term debt of approximately $1,065 million at December 31, 1992, approximately $670 million is subordinated and at fixed interest rates, with initial principal payments on the subordinated debt beginning with the maturity of the Senior Subordinated Notes in 1995. Current assets, including cash and marketable securities aggregating approximately $109 million, were greater than two times current liabilities at December 31, 1992. During 1992, the Company reduced its outstanding indebtedness by $124 million, net, including the repurchase of approximately $67 million of 10% Senior Subordinated Notes due 1995. The Company's cash and marketable securities and anticipated internal cash flow are expected to provide sufficient liquidity to fund its near-term working capital and other investment needs. The Company believes that its longer-term working capital and other general corporate requirements, including the retirement of Senior Subordinated Notes maturing in 1995 and any payments related to the scheduled reductions in the existing bank credit agreement, will be satisfied through its internal cash flow, divestiture of nonstrategic operating assets and certain additional financial assets and, to the extent necessary, future financings in the financial markets. The Company intends to adopt Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective January 1, 1993. The Company intends to recognize its accumulated postretirement benefit obligation on a prospective basis. The expected annual incremental cost to the Company will approximate $2 million pre-tax. Upon adoption in 1993, SFAS No. 109 "Accounting for Income Taxes" is not expected to have a material impact on income. The Company currently accounts for income taxes under SFAS No. 96. In November 1992, the Financial Accounting Standards Board issued SFAS No. 112 "Employers' Accounting for Postemployment Benefits," effective for fiscal years beginning after December 15, 1993. The Company does not anticipate that this statement will have a material impact on its financial statements when adopted in 1994. GENERAL FINANCIAL ANALYSIS 1992 VERSUS 1991 - CONTINUING OPERATIONS In 1992, net sales from continuing operations increased 15 percent to $1.46 billion from $1.27 billion in 1991. Income from continuing operations in 1992, after preferred stock dividends, was $29.7 million or $.49 per common share, compared with a loss from continuing operations, after preferred stock dividends, of $20.0 million or $.33 per common share in 1991. 9 Sales of Transportation-Related Products increased 21 percent due to a modest improvement in levels of automotive production, increased market penetration and the inclusion of a full year of Creative Industries Group sales. Excluding the acquisition of Creative Industries Group, 1992 Transportation-Related Products sales would have increased 16 percent. Operating profit in 1992 for Transportation-Related Products increased 68 percent to $124 million from $74 million in 1991. Operating margins, in 1992, were favorably impacted by higher sales volumes for most of the Company's Transportation-Related Products. In addition, 1992 margins have benefitted from the internal cost reductions and restructuring initiatives that the Company has undertaken in recent years. Sales of Specialty Products were generally unchanged from 1991, as a seven percent increase in sales of Architectural Products was substantially offset by reduced sales of Other Specialty Products. Operating profit for Specialty Products in 1992 was $5 million compared with an operating loss of $15 million in 1991. This improvement resulted principally from improved operating performance of the Architectural Products group which had operating profit of $2 million in 1992 compared with a loss of $16 million in 1991. The 1991 Architectural Products group results were impacted by $8 million of charges related to discontinuance of product lines, restructuring costs and other expenses. Other expense, net decreased to $44 million in 1992 from $56 million in 1991. Other expense, net in 1992 benefitted from reduced interest expense resulting from a reduction in debt and lower interest rates. This was partially offset by reduced interest income as a result of the redemptions of TriMas subordinated debentures previously held by the Company and lower income from sales of marketable securities. Other expense, net for 1992 benefitted from the inclusion of income aggregating approximately $25 million pre-tax in the second quarter resulting from a prepayment premium related to the redemption by TriMas of the subordinated debentures held by the Company, and from the change in the Company's common equity ownership interest in TriMas. This income was substantially offset by costs and expenses aggregating approximately $21 million pre-tax in the second quarter (of which $15 million is included in other expense) related to the restructuring of certain operations, and for adjustments to the carrying values of certain long-term assets. Other expense, net in 1991 benefitted from the inclusion of an approximate $22 million gain related to the disposition of certain operations and reduced interest expense, principally as a result of lower interest rates. Additionally, net gains from sales of marketable securities, including the effect of valuation allowances, aggregated approximately $12 million in 1991. The Company's effective tax rate exceeds the statutory rate primarily as a result of the impact of state taxes and nondeductible amortization. 1991 VERSUS 1990 - CONTINUING OPERATIONS In 1991, net sales from continuing operations decreased eight percent to $1.27 billion from $1.37 billion. Loss from continuing operations in 1991, after preferred stock dividends, was $20.0 million or $.33 per common share, compared with a loss from continuing operations, before extraordinary income, in 1990 of $26.8 million or $.36 per common share. 10 Sales of Transportation-Related Products declined seven percent, principally due to the depressed levels of automotive production. Excluding the acquisition of Creative Industries Group, 1991 Transportation-Related Products sales would have decreased 13 percent. Operating profit in 1991 for Transportation-Related Products increased 16 percent from 1990. Operating profit in 1991 and 1990 was reduced by charges approximating $15 million and $29 million, respectively, related to the Company's automotive vehicle conversion business. This business, which has experienced expenses on cancelled programs and significant cost overruns associated with several long-term contracts, has been restructured and consolidated with Creative Industries Group. Operating profit in 1991 was also reduced by charges to reflect costs related to the reorganization of certain manufacturing processes and workforce reductions approximating $4 million. In addition, 1991 margins were negatively impacted by reduced sales volumes at many of the Company's business units as a result of production cutbacks by automotive customers. Sales of Specialty Products decreased nine percent from 1990 principally as a result of a decrease in sales of Architectural Products. Operating loss for Specialty Products in 1991 was $15 million compared with operating profit of $17 million in 1990. The decline in operating profit is partially the result of charges aggregating approximately $8 million to reflect expenses related to the discontinuance of product lines, restructuring costs and other expenses. In addition, the operating performance of the Architectural Products group was negatively impacted by the severe reductions in residential and commercial construction spending occasioned by the economic recession which resulted in reduced sales volumes, intense competitive pricing pressures and increased bad debt expense. In addition, this group incurred increased costs for new product start-up and quality training programs. Other expense, net decreased to $56 million in 1991 from $101 million in 1990. Other expense, net in 1991 benefitted from the inclusion of an approximate $22 million gain related to the disposition of certain operations and reduced interest expense, principally as a result of lower interest rates. Additionally, net gains from sales of marketable securities, including the effect of valuation allowances, aggregated approximately $12 million in 1991 compared with losses of approximately $15 million in 1990. Results in 1990 include after-tax extraordinary gains of $8 million related to the early extinguishment of debt through the repurchase of convertible securities at less than face value. The unusual relationship of income tax credits to the pre-tax losses from continuing operations in 1991 and 1990 resulted principally from certain state and foreign taxes being incurred despite the Company's pre-tax losses from continuing operations. 11 FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED DECEMBER 31, 1992 12 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of MascoTech, Inc.: We have audited the accompanying consolidated balance sheet of MascoTech, Inc. and subsidiaries (formerly Masco Industries, Inc.) as of December 31, 1992 and 1991, and the related consolidated statements of operations and cash flows for each of the three years in the period ended December 31, 1992. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in the "Discontinued Operations" note to the consolidated financial statements, the Company adopted a plan to divest its energy-related business segment in late November, 1993. Accordingly, the accompanying consolidated statements of operations and cash flows and related notes have been reclassified to present the energy-related businesses as discontinued operations. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MascoTech, Inc. and subsidiaries as of December 31, 1992 and 1991, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1992, in conformity with generally accepted accounting principles. /s/ COOPERS & LYBRAND Coopers & Lybrand Detroit, Michigan February 12, 1993, except for the "Discontinued Operations" note, as to which the date is January 10, 1994 13 MASCOTECH, INC. CONSOLIDATED BALANCE SHEET DECEMBER 31, 1992 AND 1991 ASSETS
1992 1991 -------------- -------------- Current assets: Cash and cash investments............... $ 76,000,000 $ 117,950,000 Marketable securities................... 33,220,000 37,030,000 Receivables............................. 272,920,000 241,470,000 Inventories............................. 222,280,000 220,650,000 Prepaid expenses........................ 28,020,000 27,890,000 -------------- -------------- Total current assets............. 632,440,000 644,990,000 Equity and other investments in affiliates: TriMas Corporation: Common and preferred equity........... 112,630,000 89,630,000 Subordinated debentures............... --- 88,000,000 Other affiliates........................ 38,830,000 35,080,000 Property and equipment, net ................... 537,420,000 526,230,000 Excess of cost over net assets of acquired companies........................... 479,400,000 493,650,000 Notes receivable and other assets.............. 76,590,000 95,700,000 -------------- -------------- Total assets..................... $1,877,310,000 $1,973,280,000 -------------- -------------- -------------- -------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable........................ $ 103,620,000 $ 84,080,000 Accrued liabilities..................... 117,430,000 140,730,000 Current portion of long-term debt....... 64,430,000 29,210,000 -------------- -------------- Total current liabilities........ 285,480,000 254,020,000 Long-term debt: Masco Corporation....................... 130,000,000 130,000,000 Banks and others........................ 935,390,000 1,094,990,000 Deferred income taxes and other long-term liabilities........................ 173,040,000 167,580,000 -------------- -------------- Total liabilities................ 1,523,910,000 1,646,590,000 -------------- -------------- Shareholders' equity: Preferred stock, $1 par: Authorized: 25,000,000; Outstanding: 775,000...... 780,000 780,000 Common stock, $1 par: Authorized: 250,000,000; Outstanding: 59,520,000 and 59,450,000 ....................... 59,520,000 59,450,000 Paid-in capital......................... 84,390,000 83,800,000 Retained earnings....................... 202,660,000 173,530,000 Cumulative translation adjustments...... 6,050,000 9,130,000 -------------- -------------- Total shareholders' equity....... 353,400,000 326,690,000 -------------- -------------- Total liabilities and shareholders' equity........ $1,877,310,000 $1,973,280,000 -------------- -------------- -------------- --------------
The accompanying notes are an integral part of the consolidated financial statements. 14 MASCOTECH, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
1992 1991 1990 --------------- --------------- --------------- Net sales.................................. $ 1,455,320,000 $ 1,266,210,000 $ 1,373,060,000 Cost of sales.............................. (1,159,050,000) (1,054,520,000) (1,138,710,000) --------------- --------------- --------------- Gross profit.......................... 296,270,000 211,690,000 234,350,000 Selling, general and administrative expenses.................. (184,430,000) (168,100,000) (163,790,000) --------------- --------------- --------------- Operating profit...................... 111,840,000 43,590,000 70,560,000 --------------- --------------- --------------- Other income (expense), net: Interest expense, Masco Corporation..... (7,800,000) (7,800,000) (12,000,000) Other interest expense.................. (78,190,000) (104,680,000) (115,600,000) Re:TriMas Corporation: Interest and other income........... 15,230,000 29,800,000 30,120,000 Gain from change in investment...... 16,700,000 --- --- Gain from disposition of operations..... --- 21,500,000 --- Other, net.............................. 10,470,000 5,120,000 (3,320,000) --------------- --------------- --------------- (43,590,000) (56,060,000) (100,800,000) --------------- --------------- --------------- Income (loss) from continuing operations before income taxes and extraordinary income................ 68,250,000 (12,470,000) (30,240,000) Income taxes (credit)...................... 29,210,000 (2,120,000) (3,400,000) --------------- --------------- --------------- Income (loss) from continuing operations before extraordinary income.............................. 39,040,000 (10,350,000) (26,840,000) Income (loss) from operations of discontinued segment (net of income tax amounts)............................. (610,000) 1,380,000 2,420,000 --------------- --------------- --------------- Income (loss) before extraordinary income.. 38,430,000 (8,970,000) (24,420,000) Extraordinary income....................... --- --- 8,240,000 --------------- --------------- --------------- Net income (loss)..................... $ 38,430,000 $ (8,970,000) $ (16,180,000) --------------- --------------- --------------- --------------- --------------- --------------- Preferred stock dividends.................. $ 9,300,000 $ 9,600,000 $ --- --------------- --------------- --------------- --------------- --------------- --------------- Earnings (loss) attributable to common stock.......................... $ 29,130,000 $ (18,570,000) $ (16,180,000) --------------- --------------- --------------- --------------- --------------- --------------- Earnings (loss) per common share: Continuing operations.................. $ .49 $(.33) $(.36) Discontinued operations................ (.01) .02 .03 ----- ----- ----- Income (loss) before extraordinary income............................. .48 (.31) (.33) Extraordinary income................... -- -- .11 ----- ----- ----- Net income (loss)...................... $ .48 $(.31) $(.22) ----- ----- ----- ----- ----- -----
The accompanying notes are an integral part of the consolidated financial statements. 15 MASCOTECH, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
1992 1991 1990 ------------ ------------ ------------- CASH FROM (USED FOR): OPERATIONS: Net income (loss)........................ $ 38,430,000 $ (8,970,000) $ (16,180,000) Gain, sale of assets..................... --- (21,500,000) --- Gain from change in investment........... (16,700,000) --- --- Extraordinary income..................... --- --- (8,240,000) Depreciation and amortization............ 59,920,000 59,040,000 60,580,000 Equity earnings ......................... (5,250,000) (4,460,000) (10,060,000) Deferred taxes........................... 3,130,000 3,270,000 (14,740,000) (Decrease) increase in valuation allowance for marketable securities.... --- (13,730,000) 7,130,000 (Increase) decrease in receivables....... (23,930,000) 9,780,000 26,230,000 (Increase) decrease in inventories....... (2,920,000) 25,120,000 24,900,000 Decrease (increase) in prepaid expenses.. 4,010,000 (4,470,000) 7,320,000 (Decrease) increase in accounts payable and accrued liabilities................ (12,930,000) (530,000) (28,150,000) Other, net............................... 13,540,000 2,950,000 16,070,000 Discontinued operations, net............. 830,000 (3,340,000) 2,480,000 ------------ ------------ ------------- Net cash from operating activities... 58,130,000 43,160,000 67,340,000 ------------ ------------ ------------- FINANCING: Increase in debt......................... 11,670,000 14,720,000 23,350,000 Payment of debt.......................... (68,640,000) (121,530,000) (32,720,000) Repurchase of subordinated debt.......... (66,850,000) (900,000) (73,100,000) Repurchase of common shares for cash..... --- --- (35,840,000) Issuance of preferred stock for cash..... --- --- 30,000,000 Payment of preferred stock dividends..... (9,300,000) (7,280,000) --- Other, net............................... (2,240,000) --- (4,250,000) ------------ ------------ ------------- Net cash used for financing activities.......................... (135,360,000) (114,990,000) (92,560,000) ------------ ------------ ------------- INVESTMENTS: Cash received from redemption of TriMas subordinated debentures......... 88,000,000 40,000,000 --- Cash received from dispositions of operations.......................... --- 52,110,000 108,200,000 Masco Capital Corporation: Cash advances and investments.......... --- (43,820,000) (21,900,000) Cash received: Disposition of investment............ --- 49,450,000 --- Advances and distributions........... --- 65,040,000 --- Repayment of advances to affiliate....... 9,610,000 --- --- Capital expenditures..................... (60,000,000) ( 48,630,000) (70,200,000) Decrease in marketable securities, net......................... 3,150,000 26,190,000 22,890,000 Other, net............................... (5,480,000) 7,050,000 10,790,000 ------------ ------------ ------------- Net cash from investing activities... 35,280,000 147,390,000 49,780,000 ------------ ------------ ------------- CASH AND CASH INVESTMENTS: (Decrease) increase for the year......... (41,950,000) 75,560,000 24,560,000 At January 1............................. 117,950,000 42,390,000 17,830,000 ------------ ------------ ------------- At December 31....................... $ 76,000,000 $117,950,000 $ 42,390,000 ------------ ------------ ------------- ------------ ------------ -------------
The accompanying notes are an integral part of the consolidated financial statements. 16 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ACCOUNTING POLICIES: PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. All significant intercompany transactions have been eliminated. Corporations that are 20 to 50 percent owned are accounted for by the equity method of accounting. Capital transactions by equity affiliates at values differing from the Company's carrying value are reflected in other income or expense and the investment in affiliates account. Certain amounts for the years ended December 31, 1991 and 1990 have been reclassified to conform to the presentation adopted in 1992. The financial statements and related notes have also been reclassified to present a segment of the Company's business as discontinued operations (see "Discontinued Operations" note). Effective June 23, 1993 the Company changed its name to MascoTech, Inc. The Company has a corporate services agreement with Masco Corporation, which at December 31, 1992 owned approximately 47 percent of the Company's Common Stock. Under the terms of the agreement, the Company pays fees to Masco Corporation for various corporate staff support and administrative services, research and development and facilities. Such fees, which are determined principally as a percentage of net sales, including net sales related to discontinued operations, aggregated approximately $11 million in each of 1992, 1991 and 1990. CASH AND CASH INVESTMENTS The Company considers all highly liquid debt instruments with an initial maturity of three months or less to be cash and cash investments. The carrying amount reported in the balance sheet for cash and cash investments approximates fair value. At December 31, 1992, the Company has $35 million on deposit with a German bank that is subject to fluctuations in the exchange rate. MARKETABLE SECURITIES Marketable securities consist of marketable equity securities carried at the aggregate of lower of cost or market value. Net realized gains and losses are determined on the specific identification cost basis. Marketable securities had unrealized gains of approximately $10.6 million and $11.9 million and unrealized losses of approximately $2.7 million and $6.1 million at December 31, 1992 and 1991, respectively. Unrealized gains and losses are determined based on quoted market prices for marketable equity securities. RECEIVABLES Receivables are presented net of allowances for doubtful accounts of $7.2 million and $7.8 million at December 31, 1992 and 1991, respectively. INVENTORIES Inventories are stated at the lower of cost or net realizable value, with cost determined principally by use of the first-in, first-out method. 17 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (ACCOUNTING POLICIES-CONTINUED) PROPERTY AND EQUIPMENT, NET Property and equipment additions, including significant betterments, are recorded at cost. Upon retirement or disposal of property and equipment, the cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in income. Maintenance and repair costs are charged to expense as incurred. DEPRECIATION AND AMORTIZATION Depreciation is computed principally using the straight-line method over the estimated useful lives of the assets. Annual depreciation rates are as follows: buildings and land improvements, 2 1/2 to 10 percent, and machinery and equipment, 6 2/3 to 33 1/3 percent. The excess of cost over net assets of acquired companies is being amortized using the straight-line method over the period estimated to be benefitted, not exceeding 40 years. Deferred financing costs are amortized over the lives of the related debt securities. At December 31, 1992 and 1991, accumulated amortization of the excess of cost over net assets of acquired companies and patents was $105.1 million and $89.1 million, respectively. Amortization expense was $22.8 million, $21.2 million and $20.6 million in 1992, 1991 and 1990, respectively, including amortization expense of approximately $1.6 million in each year related to discontinued operations. INCOME TAXES The Company utilizes the liability method of accounting for income taxes in accordance with Statement of Financial Accounting Standards No. 96. The Company does not expect that the adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," will have a material impact on its financial statements. EARNINGS (LOSS) PER COMMON SHARE Primary earnings (loss) per common share were calculated on the basis of 60.9 million, 59.7 million and 74.7 million weighted average common shares outstanding in 1992, 1991 and 1990, respectively. Fully diluted earnings (loss) per common share amounts are not presented as the results of the assumed conversion of dilutive securities are anti-dilutive. 18 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SUPPLEMENTARY CASH FLOWS INFORMATION: Significant transactions not affecting cash were: in 1991: an exchange of certain operating assets (see "Dispositions of Operations" note); and the assumption of liabilities of $18 million in partial exchange for the acquisition of Creative Industries Group (see "Equity and Other Investments in Affiliates" note); and in 1990: issuance of preferred shares in exchange for Company Common Stock (see "Shareholders' Equity" note). Income taxes paid were $23 million in 1992 and $26 million in 1990. Income tax refunds of $8 million were received in 1991. Interest paid was $91 million, $115 million and $125 million in 1992, 1991 and 1990, respectively. 19 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SUBSEQUENT EVENT: In February 1993, the Company entered into an agreement with Masco Corporation to acquire 10 million shares of Company Common Stock, $77.5 million of the Company's 12% Exchangeable Preferred Stock currently held by Masco Corporation, and Masco Corporation's holdings of Emco Limited ("Emco") common stock and convertible debentures. In exchange, Masco Corporation will receive from the Company $87.5 million in cash, $100 million of the Company's 10% Exchangeable Preferred Stock and seven-year warrants to purchase 10 million shares of Company Common Stock at $13 per share. The transferable warrants will not be exercisable by Masco Corporation if an exercise would increase Masco Corporation's common equity ownership of the Company above 35 percent. Masco Corporation has also agreed to purchase from the Company, at the Company's option within two years, up to $200 million aggregate amount of additional securities consisting of exchangeable preferred stock (maximum of $100 million) and subordinated debentures. These transactions, which will reduce Masco Corporation's common equity ownership in the Company to approximately 35 percent, are subject to several conditions including customary regulatory filings and will not result in a gain or loss to the Company. As a result of these transactions, the Company will own approximately 43 percent of the outstanding common stock and convertible debentures of Emco, a major, publicly traded Canadian manufacturer and distributor of building and other industrial products with annual sales of approximately $800 million. DISCONTINUED OPERATIONS: In late November 1993, the Company adopted a formal plan to divest its Energy-related business segment. Accordingly, the consolidated statements of operations, cash flows and related notes have been reclassified to present such Energy-related segment as discontinued operations. Selected financial data for discontinued operations is as follows for years ended December 31:
(IN THOUSANDS) 1992 1991 1990 -------- -------- -------- Net sales $201,520 $200,780 $189,270 -------- -------- -------- -------- -------- -------- Pre-tax income $ 2,090 $ 1,980 $ 6,220 Income taxes 2,700 600 3,800 -------- -------- -------- Income (loss) from discontinued operations $ (610) $ 1,380 $ 2,420 -------- -------- -------- -------- -------- --------
The unusual relationship of income taxes to pre-tax income results principally from foreign losses for which no tax benefit was recorded. Pre-tax income includes charges of $6 million in 1991, principally related to the discontinuance of product lines and the cost of restructuring several businesses. 20 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following information related to the Company's plan to divest these businesses is unaudited. The Company's Energy-related business segment consists of seven business units which have net assets (principally inventory, property and equipment and receivables) of approximately $176 million at September 30, 1993. The Company estimates that these businesses will be sold for net proceeds expected to approximate $162 million (including the cash tax benefit on the loss), which will be applied to reduce the Company's indebtedness. At December 31, 1993, two of such business units have been sold for approximately $93 million, including the sale of one business unit to the Company's equity affiliate, TriMas Corporation ("TriMas") for $60 million. The remaining businesses are expected to be sold during 1994. The disposition of the Company's Energy-related segment is expected to result in a fourth quarter 1993 after-tax charge of approximately $20 million, including the deferral of a portion of the gain (approximately $6 million after-tax) related to the sale of the business to TriMas. DISPOSITIONS OF OPERATIONS: In separate transactions from late 1989 to early 1991, the Company divested itself of three subsidiaries and received consideration of approximately $160 million, of which $108 million was received in 1990. The remaining $52 million was received in 1991. In addition, in 1991 the Company disposed of certain equity affiliates, and exchanged operating assets aggregating approximately $27 million. These transactions, including the disposition of Masco Capital Corporation (see "Equity and Other Investments in Affiliates" note), resulted in an approximate $22 million pre-tax gain in 1991. 21 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) INVENTORIES:
(IN THOUSANDS) AT DECEMBER 31 -------------------------- 1992 1991 -------- -------- Finished goods................................ $ 80,220 $ 75,890 Work in process............................... 49,970 47,420 Raw material.................................. 92,090 97,340 -------- -------- $222,280 $220,650 -------- -------- -------- --------
22 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) EQUITY AND OTHER INVESTMENTS IN AFFILIATES: In 1988, the Company transferred $20 million in cash and several businesses to TriMas Corporation ("TriMas"), a publicly traded, diversified manufacturer of commercial, industrial and consumer products. In exchange, the Company received $128 million principal amount of 14% Subordinated Debentures (due 2008), $70 million (liquidation value) of 10% Convertible Participating Preferred Stock and 4.7 million shares of TriMas common stock valued at $70 million. The TriMas preferred stock is convertible into 3.9 million shares of TriMas common stock at $18 per common share. TriMas has the option to redeem or convert the preferred stock commencing in 1994 but may not do so if conversion would increase the Company's ownership interest to 50 percent or more of the outstanding TriMas common stock. Since TriMas retained the Company's carrying value for the assets and liabilities of the businesses acquired from the Company, the excess of the consideration exchanged by TriMas over the cash and historical net book value of these businesses has been accounted for as a $138 million reduction of TriMas shareholders' equity. At December 31, 1992, that portion of the excess consideration received from TriMas attributable to the Company's remaining approximate 28 percent common equity ownership in TriMas is accounted for as a reduction in the carrying value of this investment. The remainder of the excess consideration received from TriMas (approximately $70 million) will be recognized as income as the preferred stock is redeemed or sold and has been included in deferred income taxes and other long-term liabilities. The quoted market value of the preferred stock (on an if-converted basis) is approximately $113 million at December 31, 1992 (which may differ from the amount that could have been realized upon disposition). The quoted market value of the Company's investment in TriMas common stock is approximately $118 million at December 31, 1992, (which may differ from the amount that could have been realized upon disposition) as compared with the Company's carrying value of approximately $43 million for such common stock. In late 1991, the Company received approximately $44 million from TriMas' redemption of $40 million of its $128 million of subordinated debentures including a prepayment premium of $4 million (included in other income (expense), net). During the second quarter of 1992, TriMas sold 4.6 million shares of newly issued common stock at $19.50 per share in a public offering which reduced the Company's common equity ownership in TriMas to 28 percent from 41 percent. The proceeds from this stock offering were utilized by TriMas to redeem its remaining $88 million of subordinated debentures held by the Company. These transactions resulted in income aggregating approximately $25 million pre-tax, which includes a prepayment premium related to the debenture redemption and a gain from the change in the Company's common equity ownership in TriMas. The Company has provided deferred income taxes at the statutory rate on the gain recognized. 23 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (EQUITY AND OTHER INVESTMENTS IN AFFILIATES-CONTINUED) Included in notes receivable and other assets are approximately $13 million of notes which resulted from the sale by the Company of 600,000 shares of its TriMas common stock holdings to members of the Company's executive management group in mid-1989. The notes, which have an effective interest rate of nine percent, payable at maturity, may be prepaid in part or in whole as to principal and interest at any time prior to maturity in 1994. Ownership and resale of certain of such shares is restricted and subject to the continuing employment of these executives. During the second quarter of 1991, the Company acquired the remaining 50 percent equity ownership interest of Creative Industries Group. Creative Industries Group had sales in 1990 of approximately $150 million. In the fourth quarter of 1991, Masco Capital Corporation ("Masco Capital") sold its investment in Payless Cashways, Inc. junior subordinated debentures for approximately $290 million, which approximated the accreted value of these securities. These proceeds were applied by Masco Capital to repay its $150 million of outstanding bank borrowings and to make loan repayments and distributions to its shareholders, of which the Company received approximately $65 million. In addition, the Company subsequently sold its 50 percent equity ownership interest in Masco Capital to the other shareholder, Masco Corporation, for approximately $50 million (which resulted in a pre-tax gain of approximately $5 million) and contingent amounts based on the future value of certain assets held by Masco Capital. In addition to its 28 percent common equity ownership interest in TriMas, the Company retains a 50 percent common equity ownership interest in Autostyle, Inc., a privately held manufacturer of reaction injection molded automotive components, and a 47 percent common equity ownership interest in Titan Wheel International, Inc., a privately held manufacturer of wheels for agricultural and construction equipment. 24 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (EQUITY AND OTHER INVESTMENTS IN AFFILIATES-CONTINUED) Approximate combined condensed financial data of TriMas and the Company's other equity affiliates (including Creative Industries Group through date of acquisition and Masco Capital through date of disposition) are as follows:
(IN THOUSANDS) AT DECEMBER 31 --------------------- 1992 1991 --------- --------- Current assets............................. $ 261,730 $ 232,200 Current liabilities........................ (128,300) (116,560) --------- --------- Working capital............................ 133,430 115,640 Property and equipment, net................ 214,760 198,780 Excess of cost over net assets of acquired companies............. 113,660 116,540 Other assets............................... 33,210 37,890 Long-term debt............................. (271,220) (350,830) Deferred income taxes and other long-term liabilities.............. (24,900) (23,030) --------- --------- Shareholders' equity....................... $ 198,940 $ 94,990 --------- --------- --------- --------- FOR THE YEARS ENDED DECEMBER 31 --------------------------------- 1992 1991 1990 --------- --------- --------- Net sales.................................. $ 655,120 $ 684,990 $ 791,170 --------- --------- --------- --------- --------- --------- Operating profit........................... $ 77,860 $ 82,000 $ 98,530 --------- --------- --------- --------- --------- --------- Net income before preferred stock dividends ......................... $ 30,200 $ 24,300 $ 35,510 --------- --------- --------- --------- --------- --------- The Company's equity in affiliates' net income available for common shareholders...................... $ 5,250 $ 4,460 $ 10,060 --------- --------- --------- --------- --------- --------- Dividends on TriMas preferred stock........ $ 7,000 $ 7,000 $ 7,000 --------- --------- --------- --------- --------- ---------
25 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) PROPERTY AND EQUIPMENT, NET:
(IN THOUSANDS) AT DECEMBER 31 --------------------------------- 1992 1991 -------- -------- Cost: Land and land improvements................ $ 39,740 $ 39,470 Buildings................................. 182,460 180,580 Machinery and equipment................... 669,800 632,950 -------- -------- 892,000 853,000 Less accumulated depreciation............... 354,580 326,770 -------- -------- $537,420 $526,230 -------- -------- -------- --------
Depreciation expense totalled $46 million, $47 million and $51 million in 1992, 1991 and 1990, respectively. These amounts include depreciation expense of $8 million, $8 million and $9 million, respectively, related to discontinued operations. 26 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) ACCRUED LIABILITIES:
(IN THOUSANDS) AT DECEMBER 31 --------------------------------- 1992 1991 -------- -------- Salaries, wages and commissions............... $ 23,800 $ 30,080 Income taxes.................................. 5,370 --- Interest...................................... 20,760 25,360 Insurance..................................... 12,150 14,600 Property, payroll and other taxes............. 10,340 9,490 Other......................................... 45,010 61,200 -------- -------- $117,430 $140,730 -------- -------- -------- --------
Included in other accrued liabilities at December 31, 1992 and 1991 are approximately $18 million and $27 million, respectively, of estimated costs associated with the discontinuance of product lines and the restructuring of several businesses. 27 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) LONG-TERM DEBT:
(IN THOUSANDS) AT DECEMBER 31 ---------------------------- 1992 1991 ---------- ---------- Held by Masco Corporation: 6% Convertible Subordinated Debentures, due 2011..................................... $ 130,000 $ 130,000 ---------- ---------- ---------- ---------- Held by Banks and Others: $685 million bank revolver, due 1997..................................... $ 410,000 $ 475,000 10% Senior Subordinated Notes, due 1995..................................... 233,150 300,000 10 1/4% Senior Subordinated Notes, due 1997..................................... 250,000 250,000 6% Convertible Subordinated Debentures, due 2011..................................... 56,890 56,890 Bank term loan, due 1996....................... 31,090 --- Other.......................................... 18,690 42,310 ---------- ---------- 999,820 1,124,200 Less current portion of long-term debt......... 64,430 29,210 ---------- ---------- Long-term debt held by banks and others........ $ 935,390 $1,094,990 ---------- ---------- ---------- ----------
The Company's bank credit agreement includes a revolving-credit facility and a bank term loan, which was converted from a portion of the outstanding borrowings under the revolving-credit facility during 1992. The remainder of the outstanding borrowings under the revolving- credit facility convert at June 30, 1993 into a four-year term loan, with the initial payment due September 30, 1993. The interest rates applicable to the bank credit agreement are principally at alternative floating rates provided for in the agreement (approximately four percent at December 31, 1992). The bank credit agreement requires the maintenance of specified levels of shareholders' equity, with limitations on long-term debt (at December 31, 1992 additional borrowing capacity of approximately $260 million was available under this agreement), intangible assets and the acquisition of Company Capital Stock. Under the most restrictive of these provisions, $29 million of retained earnings was available at December 31, 1992 for the payment of dividends and the acquisition of Company Capital Stock. The 6% debentures are convertible into Company Common Stock at $18 per share. Through December 31, 1992, the Company had repurchased, in open-market transactions, approximately $143 million of these debentures, which may be applied to satisfy future sinking fund requirements through 2004. The senior subordinated notes contain limitations on the payment of cash dividends and the acquisition of Company Capital Stock. During 1992 the Company repurchased, in open-market transactions, approximately $67 million of its 10% Senior Subordinated Notes at prices approximating face value. The maturities of long-term debt during the next five years, assuming the amounts outstanding at December 31, 1992 under the bank revolving-credit facility are converted into a term loan due 1997, are as follows (in millions): 1993 - $64; 1994 -$123; 1995 - $346; 1996 - $108; and 1997 - $302. 28 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SHAREHOLDERS' EQUITY:
(IN THOUSANDS) 1992 1991 1990 -------- -------- -------- Preferred Stock Balance, January 1.................. $ 780 $ 780 --- Issuance............................ --- --- $ 780 -------- -------- -------- Balance, December 31................ 780 780 780 -------- -------- -------- Common Stock Balance, January 1.................. 59,450 59,450 77,560 Exercise of stock options........... 70 --- --- Redemption and retirement of shares............................ --- --- (18,110) -------- -------- -------- Balance, December 31................ 59,520 59,450 59,450 -------- -------- -------- Paid-in Capital Balance, January 1.................. 83,800 83,800 92,310 Exercise of stock options........... 590 --- --- Redemption and retirement of common shares..................... --- --- (85,230) Issuance of preferred stock......... --- --- 76,720 -------- -------- -------- Balance, December 31................ 84,390 83,800 83,800 -------- -------- -------- Retained Earnings Balance, January 1.................. 173,530 192,100 208,280 Net income (loss)................... 38,430 (8,970) (16,180) Preferred stock dividends........... (9,300) (9,600) --- -------- -------- -------- Balance, December 31................ 202,660 173,530 192,100 -------- -------- -------- Cumulative Translation Adjustments Balance, January 1.................. 9,130 19,880 11,230 Adjustment related to sale of foreign operations................ --- (5,130) --- Translation adjustments, net........ (3,080) (5,620) 8,650 -------- -------- -------- Balance, December 31................ 6,050 9,130 19,880 -------- -------- -------- Shareholders' Equity Balance, December 31................ $353,400 $326,690 $356,010 -------- -------- -------- -------- -------- --------
In late 1990, the Company issued 775,000 shares of its 12% Exchangeable Preferred Stock, with a liquidation value of $100 per share, to Masco Corporation in exchange for $30 million in cash and 10 million shares of Company Common Stock (which were retired). This transaction resulted in part from the Company's obligation to repurchase shares of Company Common Stock from Masco Corporation pursuant to a long-standing stock repurchase agreement between the companies which requires the Company to repurchase shares from Masco Corporation at prices based on the Company's cost of open-market purchases of Company Common Stock in amounts sufficient to prevent Masco Corporation's common equity ownership in the Company from exceeding 49 percent. This preferred stock has no mandatory redemption provision, but at the Company's option it is redeemable at any time without premium, or exchangeable for junior subordinated debentures (see "Subsequent Event" note). 29 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (SHAREHOLDERS' EQUITY-CONTINUED) In addition, through open-market purchases in 1990, approximately 6.7 million shares of Company Common Stock were repurchased and retired. At December 31, 1992, the Company may repurchase, under certain conditions, an additional three million shares of Company Common Stock, in accordance with a previously announced Board of Directors approved share repurchase program. In connection with a 1987 acquisition, 1.4 million shares of Company Common Stock were placed in escrow and accounted for as issued to reflect contingent purchase price amounts that were anticipated to result from the future operating performance of that subsidiary. In 1990, it was determined that the likelihood of achieving the operating performance levels required for contingent purchase price payments was remote; therefore, such shares were retired at December 31, 1990 for financial reporting purposes, and accordingly, excess of cost over net assets of acquired companies was reduced. Such shares continue to be legally outstanding and will be released from escrow and returned to the Company following the expiration of the contingent purchase price period at December 31, 1993. In addition, the Company's initial consideration for this acquisition included two million shares of Company Common Stock which are subject to a stock value guarantee agreement. The agreement provides that the Company satisfy in cash and/or through issuance of additional Company Common Stock any shortfall between the guaranteed value and the market value of such Company Common Stock in June 1994. To the extent a shortfall exists in June 1994, and is satisfied in whole or in part by a cash payment, such payment would be accounted for as a reduction of paid-in capital. At December 31, 1992, the guaranteed value of the two million shares of Company Common Stock exceeded the market value in aggregate by approximately $17 million. 30 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) STOCK OPTIONS AND AWARDS: For the three years ended December 31, 1992, stock option data pertaining to stock option plans for key employees of the Company and affiliated companies are as follows:
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1992 1991 1990 ------ ------ ------ Options outstanding, January 1..... 3,770 2,220 2,220 Options granted.................... 900 1,730 --- Option price per share...... $6 1/8-10 3/4 $4 1/2 --- Options cancelled.................. 60 180 --- Option price per share...... $4 1/2 $4 1/2-9 1/8 --- Options exercised.................. 70 --- --- Option price per share...... $9 1/8 --- --- ------------- ------------- ----- Options outstanding, December 31... 4,540 3,770 2,220 ------------- ------------- ----- ------------- ------------- ----- Exercisable, December 31........... 878 740 566 ------------- ------------- ----- ------------- ------------- -----
As of December 31, 1992, options have been granted and are outstanding with exercise prices ranging from $4 1/2 to $10 3/4, the fair market value at the dates of grant. Pursuant to restricted stock incentive plans, the Company granted long-term incentive awards, net, for 251,000, 675,000 and 440,000 shares of common stock during 1992, 1991 and 1990, respectively, to key employees of the Company and affiliated companies. The related unamortized costs, aggregating approximately $23 million at December 31, 1992, are being amortized over the ten-year vesting periods. At December 31, 1992 a combined total of 5,759,000 shares of common stock were available for the granting of options and incentive awards under the above plans. 31 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) PENSION AND PROFIT-SHARING PLANS: The Company sponsors defined-benefit pension plans for most of its employees. In addition, substantially all salaried employees participate in noncontributory profit-sharing plans, to which payments are determined annually by the Directors. Aggregate charges to income under these plans were $10.3 million in 1992, $8.3 million in 1991 and $9.2 million in 1990, including approximately $0.9 million in each year related to discontinued operations. Net periodic pension cost for the Company's defined-benefit pension plans includes the following components:
(IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31 ----------------------------------- 1992 1991 1990 ------- ------- ------- Service cost - benefits earned during the year.. $ 4,150 $ 4,140 $ 3,340 Interest cost on projected benefit obligations.. 5,090 4,590 4,170 Actual return on assets......................... (3,820) (5,450) (5,410) Net amortization and deferral................... (1,800) 430 270 ------- ------- ------- Net periodic pension cost....................... $ 3,620 $ 3,710 $ 2,370 ------- ------- ------- ------- ------- -------
Major assumptions used in accounting for the Company's defined-benefit pension plans are as follows:
1992 1991 1990 ------ ------ ------ Discount rate for obligations................... 8.25% 8.25% 8.25% Rate of increase in compensation levels......... 6.0% 6.0% 6.0% Expected long-term rate of return on plan assets 13.0% 13.0% 13.0%
32 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (PENSION AND PROFIT-SHARING PLANS-CONTINUED) The funded status of the Company's defined-benefit pension plans at December 31, 1992 and 1991 is as follows:
(IN THOUSANDS) 1992 1991 ------------------------ ------------------------ ASSETS ACCUMULATED ASSETS ACCUMULATED EXCEED BENEFITS EXCEED BENEFITS ACCUMULATED EXCEED ACCUMULATED EXCEED RECONCILIATION OF FUNDED STATUS BENEFITS ASSETS BENEFITS ASSETS - ---------------------------------------- ----------- ----------- ----------- ----------- Actuarial present value of benefit obligations: Vested benefit obligation........... $20,780 $24,160 $ 3,770 $ 37,850 ------- ------- ------- -------- ------- ------- ------- -------- Accumulated benefit obligation...... $22,120 $31,200 $ 3,870 $ 43,930 ------- ------- ------- -------- ------- ------- ------- -------- Projected benefit obligation........ $32,020 $33,030 $ 4,520 $ 53,680 Assets at fair value...................... 27,530 23,570 6,030 40,390 ------- ------- ------- -------- Projected benefit obligation (in excess of)/less than plan assets.. (4,490) (9,460) 1,510 (13,290) Reconciling items: Unrecognized net loss............... 5,920 5,140 400 8,950 Unrecognized prior service cost..... 1,240 3,400 520 3,300 Unrecognized net (asset)/obligation at transition..................... (1,940) 70 (1,170) (870) Adjustment required to recognize minimum liability................. --- (6,900) --- (6,340) ------- ------- ------- -------- (Accrued)/prepaid pension cost...... $ 730 $(7,750) $ 1,260 $ (8,250) ------- ------- ------- -------- ------- ------- ------- --------
In December 1990, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 106 (SFAS No. 106), "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective January 1, 1993. The aggregate present value of the accumulated benefit obligation approximates $26 million at December 31, 1992. The Company intends to recognize its accumulated postretirement benefit obligation on a prospective basis as permitted by SFAS No. 106. Beginning January 1, 1993, the expected annual incremental cost to the Company will approximate $2 million pre-tax as a result of the adoption of SFAS No. 106. In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," effective for fiscal years beginning after December 15, 1993. The Company does not expect that this statement will have a material impact on its financial statements when adopted in 1994. 33 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEGMENT INFORMATION: In 1992, the Company changed the composition of its segments to reflect the changing nature of its business. Transportation-Related Products now include products sold to original equipment manufacturers (OEM) and automotive aftermarket customers. Products for the defense industry are now included with Other Specialty Products. Prior year amounts have been reclassified to conform with current year presentation. The Company's business segments involve the production and sale of the following: Transportation-Related Products: Precision products, generally produced using advanced metalworking technologies with significant proprietary content, and aftermarket products for the transportation industry. Specialty Products: Architectural -- Doors, windows, security grilles and office panels and partitions for commercial and residential markets. Other -- Products manufactured principally for the defense industry. Amounts related to the Company's Energy-related segment have been presented as discontinued operations. Corporate assets consist primarily of cash and cash investments, marketable securities, equity and other investments in affiliates and notes receivable. 34 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (SEGMENT INFORMATION-CONTINUED)
(IN THOUSANDS) ASSETS EMPLOYED NET SALES OPERATING PROFIT (C) AT DECEMBER 31 -------------------------------- ---------------------------- -------------------------------- 1992 1991 1990 1992 1991 1990 1992 1991 1990 ---------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- The Company's operations by industry segment are: Transportation-Related Products (A).............. $1,058,000 $ 874,000 $ 942,000 $124,000 $ 74,000 $ 64,000 $ 851,000 $ 808,000 $ 828,000 Specialty Products: Architectural............. 291,000 273,000 304,000 2,000 (16,000) 16,000 321,000 322,000 325,000 Other (B)................. 106,000 119,000 127,000 3,000 1,000 1,000 109,000 114,000 147,000 ---------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- Total................. $1,455,000 $1,266,000 $1,373,000 129,000 59,000 81,000 1,281,000 1,244,000 1,300,000 ---------- ---------- ---------- ---------- ---------- ---------- Other expense, net.......... (44,000) (56,000) (101,000) General corporate expense... (17,000) (15,000) (10,000) -------- -------- -------- Income (loss) from continuing operations before income taxes and extraordinary income...... $ 68,000 $(12,000) $(30,000) -------- -------- -------- -------- -------- -------- Corporate assets............ 388,000 519,000 575,000 Discontinued operations..... 208,000 210,000 205,000 ---------- ---------- ---------- Total assets.......... $1,877,000 $1,973,000 $2,080,000 ---------- ---------- ---------- ---------- ---------- ----------
35 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (SEGMENT INFORMATION-CONTINUED)
DEPRECIATION AND PROPERTY ADDITIONS AMORTIZATION ----------------------------- ----------------------------- 1992 1991 1990 1992 1991 1990 ------- ------- ------- ------- ------- ------- The Company's operations by industry segment are: Transportation-Related Products.................. $47,000 $37,000 $46,000 $42,000 $41,000 $41,000 Specialty Products: Architectural............. 8,000 8,000 18,000 13,000 12,000 13,000 Other (B)................. 5,000 4,000 6,000 5,000 6,000 7,000 ------- ------- ------- ------- ------- ------- Total.................. $60,000 $49,000 $70,000 $60,000 $59,000 $61,000 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(A) Included within this segment are sales to one customer of $216 million, $201 million and $222 million in 1992, 1991 and 1990, respectively; sales to another customer of $268 million, $217 million and $246 million in 1992, 1991 and 1990, respectively; and sales to a third customer of $184 million, $126 million and $161 million in 1992, 1991 and 1990, respectively. (B) The Company, in early 1991, disposed of certain operations included in Other Specialty Products. (C) Included in 1991 and 1990 operating profit (principally Transportation-Related Products and in 1991, Architectural Products) are charges of $27 million, and $38 million, respectively, to reflect the expenses related to the discontinuance of product lines, and the costs of restructuring several businesses. Other expense, net in 1992, 1991 and 1990 includes approximately $15 million, $14 million and $2 million, respectively, to reflect disposition costs related to idle facilities and other long-term assets. 36 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) OTHER INCOME (EXPENSE), NET:
(IN THOUSANDS) 1992 1991 1990 --------- --------- --------- Interest expense, Masco Corporation........ $ (7,800) $ (7,800) $ (12,000) --------- --------- --------- Other interest expense..................... (78,190) (104,680) (115,600) --------- --------- --------- Re:TriMas Corporation: Interest and other income................ 15,230 29,800 30,120 --------- --------- --------- Gain from change in investment........... 16,700 --- --- --------- --------- --------- Gain from disposition of operations........ --- 21,500 --- --------- --------- --------- Other, net: Gains (losses) from sales of marketable securities (including the effect of valuation allowances).................. 4,020 12,010 (15,220) Interest income.......................... 9,260 7,890 11,770 Dividend income.......................... 1,750 1,910 3,820 Other expense, net....................... (4,560) (16,690) (3,690) --------- --------- --------- 10,470 5,120 (3,320) --------- --------- --------- $ (43,590) $ (56,060) $(100,800) --------- --------- --------- --------- --------- ---------
In addition to the amounts presented above other income (expense), net related to discontinued operations approximated $(1.0) million, $0.9 million and $0.4 million in 1992, 1991 and 1990, respectively, including other interest expense of approximately $0.2 million in each year. 37 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) INCOME TAXES:
(IN THOUSANDS) 1992 1991 1990 -------- -------- -------- Income (loss) from continuing operations before income taxes and extraordinary income: Domestic............................... $57,880 $(34,780) $(42,700) Foreign................................ 10,370 22,310 12,460 -------- -------- -------- $68,250 $(12,470) $(30,240) -------- -------- -------- -------- -------- -------- Provision for income taxes: Federal, current....................... $12,750 $(19,410) $ 190 State and local........................ 5,170 4,560 6,450 Foreign................................ 8,160 9,460 8,950 Deferred, principally federal.......... 3,130 3,270 (14,740) -------- -------- -------- Net income taxes.................... 29,210 (2,120) 850 Tax allocated to extraordinary income............................... --- --- 4,250 -------- -------- -------- Income taxes (credit) on income (loss) from continuing operations before income taxes and extraordinary income...... $29,210 $ (2,120) $ (3,400) -------- -------- -------- -------- -------- -------- Provision for deferred income taxes by temporary difference components: Accelerated depreciation............... $ 4,060 $ 550 $ 5,130 Marketable securities valuation........ (970) 4,660 (2,420) Charges for restructuring and other costs, net..................... (2,350) (1,300) (5,910) Items deductible for financial statements earlier than for tax...... 60 (5,770) (4,950) Alternative minimum tax................ 680 5,180 (5,860) Other, net............................. 1,650 (50) (730) -------- -------- -------- $ 3,130 $ 3,270 $(14,740) -------- -------- -------- -------- -------- --------
38 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INCOME TAXES-CONTINUED) The following is a reconciliation of tax computed at the U.S. federal statutory rate (34 percent in each year) to the provision for income taxes (credit) allocated to income (loss) from continuing operations before income taxes and extraordinary income:
(IN THOUSANDS) 1992 1991 1990 ------- ------- -------- Tax (credit) at U.S. federal statutory rate...................................... $23,210 $(4,240) $(10,280) State and local taxes, net of federal tax benefit............................... 3,390 3,030 4,240 Higher effective foreign tax rate........... 4,670 1,870 4,690 U.S. tax benefit relating to foreign operations................................ (190) (2,000) (360) Dividends-received deduction................ (2,320) (2,360) (2,870) Amortization in excess of tax, net.......... 4,780 4,210 4,070 Other, net.................................. (4,330) (2,630) (2,890) ------- ------- -------- Income taxes (credit) on income (loss) from continuing operations before income taxes and extraordinary income............................... $29,210 $(2,120) $ (3,400) ------- ------- -------- ------- ------- --------
Provision is made for U.S. income taxes on the undistributed earnings of foreign subsidiaries unless such earnings are considered permanently reinvested. Deferred income tax liabilities were $59 million and $57 million at December 31, 1992 and 1991, respectively. 39 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) EXTRAORDINARY INCOME: During 1990, the Company repurchased approximately $37.1 million (face value) of its 6% Convertible Subordinated Debentures in open-market transactions at prices less than face value. These transactions resulted in extraordinary income of $8.2 million or $.11 per common share in 1990. 40 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FAIR VALUE OF FINANCIAL INSTRUMENTS: In accordance with Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," the following methods were used to estimate the fair value of each class of financial instruments: NOTES RECEIVABLE AND OTHER ASSETS Fair values of financial instruments included in notes receivable and other assets were estimated using various methods including quoted market prices and discounted future cash flows based on the incremental borrowing rates for similar types of investments. In addition, for variable-rate notes receivable that fluctuate with the prime rate, the carrying amounts approximate fair value. For instruments for which there are no quoted market prices, it was not practicable to make a reasonable estimate of fair value. These financial instruments, representing approximately eight percent of notes receivable and other assets, had a carrying amount of approximately $6 million at December 31, 1992. LONG-TERM DEBT The carrying amount of indebtedness outstanding under the bank credit agreement approximates fair value as the floating rates inherent in this agreement reflect changes in overall market interest rates. The fair values of the Company's subordinated debt instruments are based on quoted market prices. The fair values of certain other debt instruments are estimated by discounting future cash flows based on the Company's incremental borrowing rate for similar types of debt instruments. For other debt instruments for which there are no quoted market prices, it was not practicable to make a reasonable estimate of fair value. These debt instruments, representing less than one percent of aggregate long-term debt, had a carrying amount of approximately $8 million at December 31, 1992. The carrying amounts and fair values of the Company's financial instruments are as follows:
(IN THOUSANDS) AT DECEMBER 31, 1992 ---------------------------------- CARRYING FAIR AMOUNTS VALUES ----------- ---------- Cash and cash investments ...................... $ 76,000 $ 76,000 Marketable securities .......................... 33,220 41,120 Notes receivable and other assets............... 26,930 26,930 Long-term debt: $685 million bank revolver .............. 410,000 410,000 6% Convertible Subordinated Debentures .. 186,890 160,730 10% Senior Subordinated Notes ........... 233,150 237,230 10 1/4% Senior Subordinated Notes ....... 250,000 251,880 Bank term loan .......................... 31,090 31,090 Other long-term debt .................... 10,780 10,780
41 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) INTERIM AND OTHER SUPPLEMENTAL FINANCIAL DATA (UNAUDITED):
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) FOR THE QUARTERS ENDED ---------------------------------------------- DECEMBER SEPTEMBER JUNE MARCH 31ST 30TH 30TH 31ST -------- --------- -------- -------- 1992: - ---- Net sales............................ $377,790 $358,240 $381,470 $337,820 Gross profit......................... $ 70,560 $ 76,320 $ 79,340 $ 70,050 Income from continuing operations before extraordinary income: Income.......................... $ 7,190 $ 10,300 $ 13,510 $ 8,040 Per common share................ $ .08 $ .13 $ .18 $ .10 Net income: Income.......................... $ 8,480 $ 9,640 $ 12,020 $ 8,290 Income attributable to common stock.................. $ 6,160 $ 7,310 $ 9,700 $ 5,960 Per common share................ $ .10 $ .12 $ .16 $ .10 Market price per common share: High............................ $ 12 1/8 $ 13 5/8 $ 13 7/8 $ 11 Low............................. $ 8 3/8 $ 10 3/8 $ 8 5/8 $ 4 3/4 1991: - ---- Net sales............................ $342,250 $344,260 $314,900 $264,800 Gross profit......................... $ 63,680 $ 69,160 $ 57,680 $ 21,170 Income (loss) from continuing operations before extraordinary income: Income (loss)................... $ 3,420 $ 160 $ (2,150) $(11,780) Per common share................ $ .01 $ (.04) $ (.07) $ (.23) Net income (loss): Income (loss)................... $ 240 $ 460 $ (540) $ (9,130) Loss attributable to common stock.................. $ (2,080) $ (1,870) $ (2,860) $(11,760) Per common share................ $ (.03) $ (.03) $ (.05) $ (.20) Market price per common share: High............................ $ 5 3/8 $ 6 3/4 $ 7 3/8 $ 6 1/2 Low............................. $ 4 3/4 $ 5 1/4 $ 4 3/4 $ 3 7/8
Certain amounts presented above have been reclassified to present a segment of the Company's business as discontinued operations (see "Discontinued Operations" note). During the second quarter of 1992, TriMas Corporation ("TriMas") sold 4.6 million shares of newly issued common stock in a public offering which reduced the Company's common equity ownership interest in TriMas to 28 percent. The proceeds from this stock offering were utilized by TriMas to redeem its remaining $88 million of subordinated debentures held by the Company. These transactions resulted in income aggregating approximately $25 million pre-tax ($14 million after-tax or $.23 per common share), which includes a prepayment premium related to the debenture redemption and a gain from the change in the Company's common equity ownership interest in TriMas. This income was substantially offset by costs and expenses aggregating approximately $21 million pre-tax ($12 million after-tax or $.19 per common share) related to the restructuring of certain operations and for adjustments to the carrying values of certain long-term assets. The 1992 results include the benefit of approximately $4 million pre-tax ($2 million after-tax or $.04 per common share), primarily in the fourth quarter, resulting from net gains from sales of marketable securities. 42 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INTERIM AND OTHER SUPPLEMENTAL FINANCIAL DATA-CONTINUED) The first quarter of 1991 results include the benefit of $33 million pre-tax income ($19 million after-tax or $.33 per common share) resulting from net gains on the disposition of certain operations and from the partial recovery of a valuation allowance for marketable securities established at December 31, 1990. The 1991 results include costs and expenses related to the Company's automotive vehicle conversion business which was restructured and consolidated with the Company's Creative Industries Group business unit, and costs and expenses related to the strategic restructuring of certain other operations and product lines, aggregating $47 million (including $6 million related to discontinued operations), of which $27 million pre-tax ($16 million after-tax or $.27 per common share) occurred in the first quarter of 1991. 43 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED) (INTERIM AND OTHER SUPPLEMENTAL FINANCIAL DATA-CONTINUED) The following supplemental unaudited financial data combine the Company with Masco Capital Corporation ("Masco Capital") (through date of disposition) and TriMas Corporation ("TriMas") and have been presented for analytical purposes. The Company had a common equity ownership in TriMas of approximately 41 percent at December 31, 1991 and 1990. During the second quarter of 1992, TriMas completed a common equity offering which reduced the Company's common equity ownership to its current holding of approximately 28 percent. The Company had a 50 percent equity ownership interest in Masco Capital through the date of disposition (late December 1991). The interests of the other common shareholders are reflected below as "Equity of the other shareholders of TriMas." All significant intercompany transactions have been eliminated.
(IN THOUSANDS) AT DECEMBER 31 ------------------------ 1992 1991 ---------- ---------- Current assets................... $ 813,570 $ 807,840 Current liabilities.............. (334,790) (297,750) ---------- ---------- Working capital.................. 478,780 510,090 Property and equipment, net...... 682,310 664,610 Excess of cost over net assets of acquired companies.......... 591,330 607,310 Other assets..................... 145,710 164,650 Bank and other debt.............. (1,243,880) (1,403,560) Deferred income taxes and other long-term liabilities.......... (196,420) (189,390) Equity of the other shareholders of TriMas......... (104,430) (27,020) ---------- ---------- Equity of shareholders of MascoTech...................... $ 353,400 $ 326,690 ---------- ---------- ---------- ----------
FOR THE YEARS ENDED DECEMBER 31 -------------------------------------- 1992 1991 1990 ---------- ---------- ---------- Net sales (A).................... $1,841,570 $1,604,180 $1,703,570 ---------- ---------- ---------- ---------- ---------- ---------- Operating profit (A)............. $ 170,460 $ 86,260 $ 123,210 ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations before extraordinary income......................... $ 39,040 $ (10,350) $ (26,840) ---------- ---------- ---------- ---------- ---------- ----------
(A) Net sales and operating profit amounts do not include the results of the Company's discontinued operations. 44 FINANCIAL STATEMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993 45 MASCOTECH, INC. CONSOLIDATED CONDENSED BALANCE SHEET SEPTEMBER 30, 1993 AND DECEMBER 31, 1992 (DOLLARS IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31, ASSETS 1993 1992 ------ ---------- ---------- Current assets: Cash and cash investments $ 21,180 $ 76,000 Marketable securities 50,240 33,220 Receivables 235,960 272,920 Inventories 151,690 222,280 Prepaid expenses and deferred income taxes 58,660 28,020 Net current assets of discontinued operations 91,500 --- ---------- ---------- Total current assets 609,230 632,440 Equity and other investments in affiliates: TriMas Corporation 118,790 112,630 Other affiliates 125,510 38,830 Property and equipment, net 478,240 537,420 Excess of cost over net assets of acquired companies 455,490 479,400 Notes receivable and other assets 81,260 76,590 Net non-current assets of discontinued operations 84,010 --- ---------- ---------- Total assets $1,952,530 $1,877,310 ---------- ---------- ---------- ---------- LIABILITIES ----------- Current liabilities: Accounts payable $ 79,800 $ 103,620 Accrued liabilities 108,460 117,430 Current portion of long-term debt 2,840 64,430 ---------- ---------- Total current liabilities 191,100 285,480 Long-term debt: Masco Corporation 130,000 130,000 Banks and others 830,350 935,390 Deferred income taxes and other long-term liabilities 205,600 173,040 ---------- ---------- Total liabilities 1,357,050 1,523,910 ---------- ---------- SHAREHOLDERS' EQUITY -------------------- Preferred stock, $1 par, shares authorized: 25 million; outstanding: 11.8 million and .8 million 11,800 780 Common stock, $1 par, shares authorized: 250 million; outstanding: 50.1 million and 59.5 million 50,130 59,520 Paid-in capital 289,160 84,390 Retained earnings 245,000 202,660 Cumulative translation adjustments (610) 6,050 ---------- ---------- Total shareholders' equity 595,480 353,400 ---------- ---------- Total liabilities and shareholders' equity $1,952,530 $1,877,310 ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the consolidated condensed financial statements. 46 MASCOTECH, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1993 AND 1992 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 --------------------- ----------------------- 1993 1992 1993 1992 --------- --------- ---------- ---------- Net sales $ 373,680 $ 358,240 $1,190,280 $1,077,530 Cost of sales (295,080) (281,920) (941,320) (851,820) Selling, general and administrative expenses (44,780) (45,110) (136,930) (137,260) --------- --------- ---------- ---------- Operating profit 33,820 31,210 112,030 88,450 --------- --------- ---------- ---------- Other income (expense), net: Interest expense, Masco Corp. (1,950) (1,950) (5,850) (5,850) Other interest expense (19,010) (18,640) (55,980) (59,660) Re:TriMas Corporation: Interest and other income 3,750 3,530 12,060 12,350 Gain from change in investment of equity affiliates --- --- 9,470 16,700 Other income, net 11,600 3,840 20,400 3,720 --------- --------- ---------- ---------- (5,610) (13,220) (19,900) (32,740) --------- --------- ---------- ---------- Income from continuing operations before income taxes 28,210 17,990 92,130 55,710 Income taxes 13,210 7,690 39,750 23,860 --------- --------- ---------- ---------- Income from continuing operations 15,000 10,300 52,380 31,850 Income (loss) from operations of discontinued segment (net of income tax amounts) 320 (660) 2,200 (1,900) --------- --------- ---------- ---------- Net income $ 15,320 $ 9,640 $ 54,580 $ 29,950 --------- --------- ---------- ---------- --------- --------- ---------- ---------- Preferred stock dividends $ 5,420 $ 2,330 $ 10,250 $ 6,980 --------- --------- ---------- ---------- --------- --------- ---------- ---------- Earnings attributable to common stock $ 9,900 $ 7,310 $ 44,330 $ 22,970 --------- --------- ---------- ---------- --------- --------- ---------- ---------- Primary earnings (loss) per common share: Continuing operations $ .17 $ .13 $ .74 $ .41 Discontinued operations .01 (.01) .04 (.03) ----- ----- ----- ----- Net income $ .18 $ .12 $ .78 $ .38 ----- ----- ----- ----- ----- ----- ----- ----- Fully diluted earnings (loss) per common share: Continuing operations $ .17 $ .13 $ .70 $ .41 Discontinued operations .01 (.01) .03 (.03) ----- ----- ----- ----- Net income $ .18 $ .12 $ .73 $ .38 ----- ----- ----- ----- ----- ----- ----- -----
The accompanying notes are an integral part of the consolidated condensed financial statements. 47 MASCOTECH, INC. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993 AND 1992 (DOLLARS IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30 ---------------------- 1993 1992 --------- --------- CASH FROM (USED FOR): OPERATIONS: Net cash from earnings $ 81,500 $ 60,330 (Increase) in inventories (16,950) (18,780) (Increase) in receivables (15,350) (31,960) (Decrease) in accounts payable and accrued liabilities (7,430) (29,640) Other, net (13,220) 15,630 Discontinued operations, net 8,830 4,090 --------- --------- Net cash from operating activities 37,380 (330) --------- --------- FINANCING: Increase in debt --- 5,800 Payment of debt (164,910) (122,650) Issuance of preferred stock for cash 209,320 --- Payment of preferred stock dividends (7,160) (6,980) Payment of common stock dividends (1,000) --- Other, net 1,250 250 --------- --------- Net cash from (used for) financing activities 37,500 (123,580) --------- --------- INVESTMENTS: Capital expenditures (30,910) (35,350) Receipt of cash from notes receivable 14,000 --- Cash received from redemption of TriMas subordinated debentures --- 88,000 (Increase) in marketable securities, net (19,870) (2,770) Cash paid Masco Corporation (87,500) --- Other, net (1,650) (990) --------- --------- Net cash (used for) from investing activities (125,930) 48,890 --------- --------- CASH AND CASH INVESTMENTS: (Decrease) for the nine months (51,050) (75,020) At January 1 76,000 117,950 --------- --------- 24,950 42,930 Less cash from discontinued operations (3,770) --- --------- --------- At September 30 $ 21,180 $ 42,930 --------- --------- --------- --------- SUPPLEMENTAL CASH FLOW INFORMATION: Net cash paid during the period for: Interest $ 73,400 $ 79,960 --------- --------- --------- --------- Income taxes $ 15,800 $ 24,340 --------- --------- --------- ---------
The accompanying notes are an integral part of the consolidated condensed financial statements. 48 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 September 30, 1993 and the results of operations for the three and nine months ended September 30, 1993 and 1992, and cash flows for the nine months ended September 30, 1993 and 1992. Prior period data related to extraordinary items have been reclassified to conform with the calendar 1992 presentation. The consolidated condensed balance sheet as of September 30, 1993 and the statements of operations and cash flows for all periods presented, and related notes have been reclassified to reflect the accounting for a segment of the Company's business as discontinued operations (see note "M"). Effective June 23, 1993 the Company changed its name to MascoTech, Inc. Primary earnings per common share were calculated on the basis of 56.9 million and 60.6 million weighted average common shares outstanding for the nine month periods ended September 30, 1993 and 1992, respectively. Fully diluted earnings per common share were calculated on the basis of 67.9 million and 71.2 million weighted average common shares outstanding for the nine month periods ended September 30, 1993 and 1992, respectively. Fully diluted earnings per common share amounts in 1992 are the same as primary earnings per common share amounts since the result of assumed conversion of dilutive securities in 1992 is anti-dilutive. Both primary and fully diluted earnings per common share for the first through third quarters do not total to the 1993 year to date amounts. This is the result of the purchase and retirement of 10 million shares of Company Common Stock and the issuance of warrants on March 31, 1993, which resulted in greater dilution for the year to date calculation. B. Inventories by component are as follows (in thousands):
SEPTEMBER 30, DECEMBER 31, 1993 1992 -------- -------- Finished goods $ 36,930 $ 80,220 Work in process 44,400 49,970 Raw materials 70,360 92,090 -------- -------- $151,690 $222,280 -------- -------- -------- --------
The change in inventory is principally due to the reclassification of amounts for discontinued operations. C. Property and equipment, net reflects accumulated depreciation of $306 million and $355 million as at September 30, 1993 and December 31, 1992, respectively. D. Other income, net for the nine months ended September 30, 1993 and 1992 includes approximately $6.4 million and $3.2 million pre-tax, respectively, of realized gains on sales of marketable securities. E. Results for the third quarter 1993 were reduced by a charge of approximately $.04 per common share reflecting the recently increased 1993 federal corporate income tax rate; of this amount, approximately $.03 per common share represents a one-time charge related to applying the increased statutory income tax rate to deferred tax balances as of December 31, 1992. 49 MASCOTECH, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) F. At December 31, 1992, the Company had an approximate 47 percent common equity ownership interest in Titan Wheel International, Inc. ("Titan"), a manufacturer of wheels for agricultural and off-highway construction and equipment markets. In May, 1993, Titan completed an initial public offering of 3 million shares of common stock at $15.00 per share (including 292,000 shares held by the Company), reducing the Company's common equity ownership interest in Titan to 24 percent. This transaction resulted in a gain aggregating approximately $9 million pre-tax as a result of the sale of shares held by the Company and from the change in the Company's equity ownership interest in Titan. G. At December 31, 1991, the Company had an approximate 41 percent common equity ownership interest in TriMas Corporation. In April, 1992, TriMas sold 9.2 million shares of newly issued common stock in a public offering which reduced the Company's common equity ownership interest in TriMas to 28 percent. The proceeds from this stock offering were applied by TriMas to redeem its remaining $88 million of subordinated debentures held by the Company. The Company recognized pre-tax income of approximately $25 million as a result of the prepayment premium related to the debenture redemption and from the change in the Company's equity ownership interest in TriMas. H. The following presents combined supplemental financial data of the Company and TriMas Corporation as one entity, with MascoTech, Inc. as the parent company. The Company had an equity ownership interest in TriMas of approximately 28 percent at September 30, 1993 and 1992. Intercompany transactions have been eliminated. Approximate combined condensed financial data are as follows (in thousands):
SEPTEMBER 30 -------------------------- 1993 1992 ----------- ----------- Current assets $ 808,090 $ 806,450 Current liabilities (239,640) (302,130) ----------- ----------- Working capital 568,450 504,320 Property and equipment, net 626,440 670,740 Excess of cost over net assets of acquired companies 565,200 593,740 Notes receivable and other assets 240,030 150,990 Net long-term assets of discontinued operations 84,010 --- Long-term debt (1,138,690) (1,264,070) Deferred income taxes and other long-term liabilities (230,080) (191,610) Equity of the other shareholders of TriMas (119,880) (102,320) ----------- ----------- Equity of shareholders of MascoTech $ 595,480 $ 361,790 ----------- ----------- ----------- ----------- Net sales $ 1,522,960 $ 1,379,370 ----------- ----------- ----------- ----------- Operating profit $ 165,540 $ 135,500 ----------- ----------- ----------- ----------- Income from continuing operations before extraordinary income $ 52,380 $ 31,850 ----------- ----------- ----------- -----------
50 MASCOTECH, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) I. In January, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". The impact of adoption, which is not material to the Company, was previously disclosed in the March 31, 1993 quarterly filing. J. On March 31, 1993, the Company acquired from Masco Corporation 10 million shares of Company Common Stock, valued at $100 million, $77.5 million of the Company's 12% Exchangeable Preferred Stock, and Masco Corporation's holdings of Emco Limited common stock and convertible debentures, valued at $80.8 million. Emco Limited is a major, publicly traded Canadian manufacturer and distributor of building and other industrial products with annual sales of approximately $800 million. In exchange, Masco Corporation received $100 million (liquidation value) of the Company's 10% Exchangeable Preferred Stock, seven-year warrants to purchase 10 million shares of Company Common Stock at $13 per share, valued at $70.8 million, and $87.5 million in cash. The 10% Exchangeable Preferred Stock may be exchanged, at the Company's option, for junior subordinated debentures. The cash portion of this transaction is included in the accompanying statement of cash flows as cash used for investing activities of $87.5 million. In addition, Masco Corporation has also agreed to purchase from the Company, at the Company's option within two years, up to $200 million aggregate amount of additional securities consisting of exchangeable preferred stock (maximum of $100 million) and subordinated debentures (the "Masco Corporation Facility"). K. In July, 1993, the Company issued 10.8 million shares of 6% Convertible Preferred Stock at $20 per share ($216 million aggregate liquidation amount) in a public offering. The net proceeds from this issuance were used during the third quarter to reduce the Company's indebtedness. On July 1, 1997, each of the then outstanding shares of 6% Convertible Preferred Stock will convert into one share of Company Common Stock if not previously redeemed by the Company or converted at the option of the holder, in both cases for Company Common Stock. Each share of 6% Convertible Preferred Stock is convertible at the option of the holder anytime prior to July 1, 1997, into .806 of a share of Company Common Stock, equivalent to a conversion price of $24.81 per share of Company Common Stock. Dividends are cumulative and each share of 6% Convertible Preferred Stock has 4/5 of a vote, voting together as one class with holders of Company Common Stock. Beginning July 1, 1996, the Company, at its option, may redeem the 6% Convertible Preferred Stock at a call price payable in shares of Company Common Stock principally determined by a formula based on the then current market price of Company Common Stock. Redemption by the Company, as a practical matter, will generally not result in a call price that exceeds one share of Company Common Stock or is less than .806 of a share of Company Common Stock (resulting from the holder's conversion option). L. During the third quarter of 1993, the Company entered into a new $675 million Revolving Credit Agreement with a group of banks, replacing its prior bank credit agreement. Amounts outstanding under the Revolving Credit Agreement are due in January, 1997; however, under certain circumstances, the due date may be extended until July, 1998. 51 MASCOTECH, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONCLUDED) M. In late November 1993, the Company adopted a formal plan to divest its Energy-related business segment. Selected financial data for the discontinued operations prior to discontinuance is as follows for periods ended September 30 (in thousands):
3 MONTHS 9 MONTHS -------------------- ------------------ 1993 1992 1993 1992 ---------- -------- -------- -------- Net sales $ 51,770 $ 48,040 $153,840 $148,120 -------- -------- -------- -------- -------- -------- -------- -------- Pre-tax income (loss) $ 720 $ (680) $ 4,600 $ (1,270) Income taxes (credit) 400 (20) 2,400 630 -------- -------- -------- -------- Income (loss) from discontinued operations $ 320 $ (660) $ 2,200 $ (1,900) -------- -------- -------- -------- -------- -------- -------- --------
The unusual relationship of income taxes to pre-tax income resulted principally from foreign losses for which no tax benefit was received. The Company's Energy-related business segment consists of seven business units which have net assets (principally inventory, property and equipment and receivables) of approximately $176 million at September 30, 1993. The Company estimates that these businesses will be sold for net proceeds expected to approximate $162 million (including the cash tax benefit on the loss), which will be applied to reduce the Company's indebtedness. Since September 30, 1993, two of such business units have been sold for approximately $93 million, including the sale of one business unit to the Company's equity affiliate, TriMas Corporation ("TriMas") for $60 million. The remaining businesses are expected to be sold during 1994. The disposition of the Company's Energy-related segment is expected to result in a fourth quarter 1993 after-tax charge of approximately $20 million, including the deferral of a portion of the gain (approximately $6 million after-tax) related to the sale of the business to TriMas. 52 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 53 MASCOTECH, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DISCONTINUED OPERATIONS In late November 1993, the Company announced the planned disposition of its Energy-related business segment which has net assets of approximately $176 million as of September 30, 1993. Management's Discussion and Analysis has been reclassified to reflect the accounting for the disposition of the businesses as discontinued operations (see note "M" in the accompanying consolidated condensed financial statements). The expected loss on sale from divesting the Energy-related segment is approximately $20 million, net of tax and will result in a loss for the Company in the fourth quarter. Net sales attributable to the discontinued operations for the three month periods ended September 30, 1993 and 1992 were $51.8 million and $48.0 million, respectively, with operating profit of the discontinued segment of $.8 million in 1993 and an operating loss of $.4 million in 1992. Net sales attributable to the discontinued operations for the nine month periods ended September 30, 1993 and 1992 were $153.8 million and $148.1 million, respectively, with operating profit of the discontinued segment totalling $4.6 million for the nine months ended September 30, 1993 and a $.7 million loss during the same period in the prior year. CONTINUING OPERATIONS Net sales from continuing operations for the three month period ended September 30, 1993 increased four percent over the comparable period in 1992. Sales of transportation products increased six percent, benefitting from higher levels of automotive production. Sales of specialty products for the three month period ended September 30, 1993 were generally unchanged as compared to the same period in the prior year. Net sales from continuing operations for the nine month period ended September 30, 1993 increased 10 percent over the comparable period in 1992. Sales of transportation products for the nine months ended September 30, 1993 increased 15 percent from the comparable period in 1992, benefitting from increased levels of automotive production. Sales of Specialty Products for the nine month period ended September 30, 1993 were generally unchanged as compared to the same period in the prior year. Income from continuing operations for the third quarter 1993, after preferred stock dividends, was $9.6 million or $.17 per common share as compared to $8.0 million or $.13 per common share in the third quarter of 1992. Income from continuing operations, after preferred stock dividends, for the nine months ended September 30, 1993 was $42.1 million or $.70 per common share as compared to $24.9 million or $.41 per common share for the nine months ended September 30, 1992. 54 MASCOTECH, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONCLUDED) Income from continuing operations for the three months ended September 30, 1993 additionally benefitted from increased equity in earnings of affiliates, interest income and gains on marketable securities, partially offset by increased interest expense, as compared to the comparable period in 1992. Interest income increased as the result of increased cash investments arising from the issuance of 6% Convertible Preferred Stock in July, combined with a significant increase in borrowings during the second quarter of 1993 under the Company's prior bank credit agreement. This excess cash was applied to reduce the Company's outstanding bank borrowings in September, 1993 subsequent to completion of the Company's new $675 million Revolving Credit Agreement. Third quarter 1993 results from continuing operations were reduced by a charge of approximately $.04 per common share reflecting the recently increased 1993 federal corporate income tax rate; of this amount, approximately $.03 per common share was a one-time charge related to adjusting deferred tax balances as of December 31, 1992 for this higher income tax rate. Income from continuing operations for the nine months ended September 30, 1993 and 1992 includes gains aggregating approximately $9 million and $25 million pre-tax, recognized during the second quarter of each respective period. These gains resulted from the sale of stock through public offerings by equity affiliates and, in 1992, a prepayment premium related to the redemption of debentures held by the Company. This income was largely offset by costs and expenses related to cost reduction initiatives, the restructuring of certain operations and product lines, adjustments to the carrying values of certain long-term assets, and other costs and expenses. Additionally, income from continuing operations for the nine months ended September 30, 1993 and 1992 benefitted from gains from sales of marketable securities of approximately $6.4 million and $3.2 million, respectively. Income from continuing operations for the nine months ended September 30, 1993 also benefitted from increased equity in earnings of affiliates and interest income as compared to the first nine months of 1992. At September 30, 1993 current assets were approximately three times current liabilities. The Company's cash and marketable securities, additional borrowings available under the Company's new Revolving Credit Agreement and anticipated internal cash flow are expected to provide sufficient liquidity to fund its near-term working capital and other investment needs. The Company believes that its longer-term working capital and other general corporate requirements, including the retirement of Senior Subordinated Notes maturing in 1995, will be satisfied through its internal cash flow, divestiture of nonstrategic operating assets and certain additional financial assets and, to the extent necessary, future financings in the financial markets or through issuance of securities under the outstanding Masco Corporation Facility. Sales from continuing operations for the first nine months of 1993 were the highest for any comparable period in the history of the Company. The Company's performance benefitted from the modest improvement in general economic conditions, particularly the increased levels of automotive and light truck production, and from the contribution received from cost rationalization and growth initiatives that have been undertaken. 55 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) Exhibits. The following Exhibits are filed herewith: 22 Consent of Coopers & Lybrand. 99.a Computation of Earnings (Loss) Per Common Share For The Three Years Ended December 31, 1992. 99.b Computation of Earnings Per Common Share For Periods Ended September 30, 1993 and 1992. 99.c Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends For The Five Years Ended December 31, 1992 and nine months ended September 30, 1993. 56 SIGNATURES 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, hereunto duly authorized. MASCOTECH, INC. By /s/ TIMOTHY WADHAMS Timothy Wadhams Vice President - Controller and Treasurer Date: January 11, 1994 57 EXHIBIT INDEX Exhibit No. Description - --------- ------------ 22 Consent of Coopers & Lybrand 99.a Computation of Earnings (Loss) Per Common Share For The Three Years Ended December 31, 1992 99.b Computation of Earnings Per Common Share For Periods Ended September 30, 1993 and 1992 99.c Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends For The Five Years Ended December 31, 1992 and Nine Months Ended September 30, 1993 EX-22 2 EXHIBIT 22 1 EXHIBIT 22 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the prospectuses and prospectus supplements included in the registration statements of MascoTech, Inc. on Form S-3 (Registration No. 33-59222) and on Form S-8 (Registration Nos. 33-30735 and 33-42230) of our report dated February 12, 1993, except for the Discontinued Operations note as to which the date is January 10, 1994, on our audits of the consolidated financial statements of MascoTech, Inc. and subsidiaries as of December 31, 1992 and 1991, and for each of the three years in the period ended December 31, 1992, which report is included in this Current Report on Form 8-K. We also consent to the reference to our Firm under the caption "Experts" in such prospectuses and prospectus supplements. /s/ COOPERS & LYBRAND COOPERS & LYBRAND Detroit, Michigan January 11, 1994 EX-99.A 3 EXHIBIT 99.A 1 EXHIBIT 99.A (PAGE 1 OF 2) MASCOTECH, INC. COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE PRIMARY AND FULLY DILUTED (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE YEARS ENDED DECEMBER 31 ------------------------------- 1992 1991 1990 -------- -------- -------- PRIMARY: Income (loss) from continuing operations before extraordinary income................. $39,040 $(10,350) $(26,840) Preferred stock dividends..................... 9,300 9,600 --- -------- -------- -------- Earnings (loss) for computing primary earnings (loss) from continuing operations per common share before extraordinary income.... 29,740 (19,950) (26,840) Income (loss) from operations of discontinued operations.................................. (610) 1,380 2,420 -------- -------- -------- Earnings (loss) for computing primary earnings (loss) per common share before extraordinary income........................ 29,130 (18,570) (24,420) Extraordinary income.......................... --- --- 8,240 -------- -------- -------- Earnings (loss) attributable to common stock....................................... $29,130 $(18,570) $(16,180) -------- -------- -------- -------- -------- -------- Weighted average number of common shares outstanding during each period.............. 59,490 59,450 74,740 Addition from assumed exercise of stock options..................................... 1,360 240 --- ------ ------ ------ Weighted average number of common shares and equivalents outstanding during each period --without dilution.......................... 60,850 59,690 74,740 ------ ------ ------ ------ ------ ------ Primary earnings (loss) per common share: Continuing operations..................... $ .49 $(.33) $(.36) Discontinued operations................... (.01) .02 .03 ------ ------ ------ Income (loss) before extraordinary income.................................. .48 (.31) (.33) Extraordinary income...................... -- -- .11 ------ ------ ------ Net income (loss)......................... $ .48 $(.31) $(.22) ------ ------ ------ ------ ------ ------
2 EXHIBIT 99.A (PAGE 2 OF 2) MASCOTECH, INC. COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE PRIMARY AND FULLY DILUTED (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31 ------------------------------- 1992 1991 1990 -------- -------- -------- FULLY DILUTED: Income (loss) from continuing operations before extraordinary income................. $ 39,040 $(10,350) $(26,840) Preferred stock dividends..................... 9,300 9,600 --- Add after-tax convertible debenture related expenses............................ 7,480 7,480 7,790 -------- -------- -------- Earnings (loss) for computing fully diluted earnings (loss) from continuing operations per common share before extraordinary income ..................................... 37,220 (12,470) (19,050) Income (loss) from operations of discontinued segment..................................... (610) 1,380 2,420 -------- -------- -------- Earnings (loss) for computing fully diluted earnings (loss) per common share before extraordinary income................. 36,610 (11,090) (16,630) Extraordinary income.......................... --- --- 8,240 -------- -------- -------- Earnings (loss) attributable to common stock - as adjusted......................... $ 36,610 $(11,090) $ (8,390) -------- -------- -------- -------- -------- -------- Weighted average number of common shares outstanding during each period.............. 59,490 59,450 74,740 Addition from assumed conversion of convertible debentures as of the issue date. 10,380 10,380 10,820 Addition from assumed exercise of stock options..................................... 1,650 290 --- ------ ------ ------ Weighted average number of common shares and equivalents outstanding during each period --fully diluted basis....................... 71,520 70,120 85,560 ------ ------ ------ ------ ------ ------ Fully diluted earnings (loss) per common share (1): Continuing operations..................... $ .49 $(.33) $(.36) Discontinued operations................... (.01) .02 .03 ----- ----- ----- Income (loss) before extraordinary income.................................. .48 (.31) (.33) Extraordinary income...................... -- -- .11 ----- ----- ----- Net income (loss)......................... $ .48 $(.31) $(.22) ----- ----- ----- ----- ----- -----
- -------------------- (1) Amounts agree to primary earnings (loss) per common share amounts since the results of assumed conversion of dilutive securities in 1992, 1991 and 1990 are anti-dilutive. EX-99.B 4 EXHIBIT 99.B 1 EXHIBIT 99.B (PAGE 1 OF 2) MASCOTECH, INC. COMPUTATION OF EARNINGS PER COMMON SHARE PRIMARY AND FULLY DILUTED (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------------ 1993 1992 1993 1992 -------- -------- -------- -------- PRIMARY: Income from continuing operations $15,000 $10,300 $52,380 $31,850 Preferred stock dividends 5,420 2,330 10,250 6,980 ------- ------- ------- ------- Earnings for computing primary earnings from continuing operations per common share 9,580 7,970 42,130 24,870 Income (loss) from operations of discontinued segment 320 (660) 2,200 (1,900) ------- ------- ------- ------- Earnings for computing primary earnings per common share $ 9,900 $ 7,310 $44,330 $22,970 ------- ------- ------- ------- ------- ------- ------- ------- Weighted average number of common shares outstanding during each period 50,200 59,520 53,190 59,470 Addition from assumed exercise of stock options and warrants 5,430 1,510 3,740 1,170 ------ ------ ------ ------ Weighted average number of common shares and equivalents outstanding during each period --without dilution 55,630 61,030 56,930 60,640 ------ ------ ------ ------ ------ ------ ------ ------ Primary earnings per common share: Continuing operations $.17 $ .13 $.74 $ .41 Discontinued operations .01 (.01) .04 (.03) ---- ----- ---- ----- Net income (loss) $.18 $ .12 $.78 $ .38 ---- ----- ---- ----- ---- ----- ---- -----
2 EXHIBIT 99.B (PAGE 2 OF 2) MASCOTECH, INC. COMPUTATION OF EARNINGS PER COMMON SHARE PRIMARY AND FULLY DILUTED (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------------ 1993 1992 1993 1992 -------- -------- -------- -------- FULLY DILUTED: Income from continuing operations $15,000 $10,300 $52,380 $31,850 Preferred stock dividends 5,420 2,330 10,250 6,980 Add after-tax convertible debenture related expenses 1,770 1,870 5,510 5,610 ------- ------- ------- ------- Earnings for computing fully diluted earnings from continuing operations per common share 11,350 9,840 47,640 30,480 Income from operations of discontinued segment 320 (660) 2,200 (1,900) ------- ------- ------- ------- Earnings for computing fully diluted earnings per common share $11,670 $ 9,180 $49,840 $28,580 ------- ------- ------- ------- ------- ------- ------- ------- Weighted average number of common shares outstanding during each period 50,200 59,520 53,190 59,470 Addition from assumed conversion of convertible debentures as of the issue date 10,380 10,380 10,380 10,380 Addition from assumed exercise of stock options and warrants 5,540 1,510 4,360 1,390 ------ ------ ------ ------ Weighted average number of common shares and equivalents outstanding during each period --fully diluted basis 66,120 71,410 67,930 71,240 ------ ------ ------ ------ ------ ------ ------ ------ Fully diluted earnings per common share (1): Continuing operations $ .17 $ .13 $ .70 $ .41 Discontinued operations .01 (.01) .03 (.03) ----- ----- ----- ----- Net income (loss) $ .18 $ .12 $ .73 $ .38 ----- ----- ----- ----- ----- ----- ----- -----
(1) Amounts in 1992 agree to primary earnings per common share amounts since the results of assumed conversion of dilutive securities in 1992 is anti-dilutive. Both primary and fully diluted earnings per common share for the first through third quarters do not total to the 1993 year to date amounts. This is the result of the purchase and retirement of 10 million shares of Company Common Stock on March 31, 1993, which resulted in greater dilution for the year to date calculation. EX-99.C 5 EXHIBIT 99.C 1 EXHIBIT 99.C MASCOTECH, INC. COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (DOLLARS IN THOUSANDS)
9 MONTHS ENDED YEAR ENDED DECEMBER 31 SEPTEMBER 30, ------------------------------------------------- 1993 1992 1991 1990 1989 1988 ---------- --------- -------- -------- -------- ------- EARNINGS BEFORE INCOME TAXES AND FIXED CHARGES: Income (loss) from continuing operations before income taxes and extraordinary income..................... $ 92,130 $ 68,250 $(12,470) $(30,240) $ 85,410 $127,800 Add (deduct) equity in undistributed (earnings) losses of less-than-fifty- percent owned companies.... (13,850) (21,760) (3,530) (3,430) (1,980) 300 Add interest on indebtedness, net.......... 63,030 87,830 124,220 139,770 146,570 107,540 Add amortization of debt expense.................... 1,440 1,930 2,230 2,670 3,510 2,070 Estimated interest factor for rentals................ 4,250 5,740 5,220 4,520 4,470 3,560 -------- -------- -------- -------- -------- -------- Earnings before income taxes and fixed charges.... $147,000 $141,990 $115,670 $113,290 $237,980 $241,270 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- FIXED CHARGES: Interest on indebtedness, net........................ $ 63,150 $ 87,980 $124,370 $140,380 $147,320 $108,690 Amortization of debt expense.................... 1,440 1,930 2,230 2,670 3,510 2,070 Estimated interest factor for rentals................ 4,250 5,740 5,220 4,520 4,470 3,560 -------- -------- -------- -------- -------- -------- Total fixed charges...... 68,840 95,650 131,820 147,570 155,300 114,320 -------- -------- -------- -------- -------- -------- Preferred stock dividend requirement (a)............ 18,260 17,140 11,350 120 130 --- -------- -------- -------- -------- -------- -------- Combined fixed charges and preferred stock dividends.. $ 87,100 $112,790 $143,170 $147,690 $155,430 $114,320 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- RATIO OF EARNINGS TO FIXED CHARGES................ 2.1 1.5 .9(b) .8(d) 1.5 2.1 ---- ---- ---- ---- ---- ---- RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS.............. 1.7 1.3 .8(c) .8(e) 1.5 2.1 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(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) 1991 earnings were inadequate to cover fixed charges by $16,150. (c) 1991 earnings were inadequate to cover combined fixed charges and preferred stock dividends by $27,500. (d) 1990 earnings were inadequate to cover fixed charges by $34,280. (e) 1990 earnings were inadequate to cover combined fixed charges and preferred stock dividends by $34,400. Amounts for the 9 months ended September 30, 1992 are not presented as the reclassification for discontinued operations did not result in a change to the ratio reported in the September 30, 1992 10-Q. -----END PRIVACY-ENHANCED MESSAGE-----