<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X
- --- QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1997.
OR
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________________ to _________________
Commission File No. 333-11801 (Aetna Industries, Inc.)
Commission File No. 333-11801-01 (MS Acquisition Corp.)
AETNA INDUSTRIES, INC.
MS ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
Delaware 38-200-7550/13-3379803
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
24331 Sherwood Avenue, P.O. Box 3067, Centerline, Michigan 48015-0067
- ------------------------------------------------------------------------------
(Address of principal executive officer) (Zip Code)
Registrant's telephone number, including area code (810) 759-2200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
1
<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
NONE
2
<PAGE> 3
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. FINANCIAL STATEMENTS OF AETNA INDUSTRIES, INC.
Condensed Consolidated Balance Sheets - 4
June 29, 1997 and December 29, 1996
Consolidated Statements of Operations - 5
three months and six months ended
June 29, 1997 and June 30, 1996
Condensed Consolidated Statements of Cash Flows - 6
six months ended June 29, 1997
and June 30, 1996
Notes to Consolidated Financial Statements 7
FINANCIAL STATEMENTS OF MS ACQUISITION CORP.
Condensed Consolidated Balance Sheets - 8
June 29, 1997 and December 29, 1996
Consolidated Statements of Operations - 9
three months and six months ended
June 29, 1997 and June 30, 1996
Condensed Consolidated Statements of Cash Flows - 10
six months ended June 29, 1997
and June 30, 1996
Notes to Consolidated Financial Statements 11
Item 2. Management's Discussion and Analysis of 13
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
EXHIBIT INDEX
3
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
MS ACQUISITION CORP.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 29, 1997 DECEMBER 29, 1996
------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $40 $4,011
Accounts receivable (less allowance for doubtful
accounts of $333 and $510, respectively) 44,025 32,753
Inventories, including tooling 8,391 10,348
Other current assets 1,000 969
------------- -----------------
Total current assets 53,456 48,081
------------- -----------------
Property, plant and equipment, net 52,345 49,434
Deferred costs and other assets 5,899 5,769
Cost in excess of net assets acquired 25,374 25,774
------------- -----------------
$137,074 $129,058
============= =================
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $31,881 $24,958
Accrued expenses 10,597 12,104
Current portion of long-term debt 2,176 -
------------- -----------------
Total current liabilities 44,654 37,062
------------- -----------------
Long-term debt, less current portion 85,000 85,000
Deferred income taxes 7,937 8,136
Stockholder's equity
Common stock - $.01 par value; 1,000 shares
issued and outstanding - -
Contributed capital 9,024 9,024
Accumulated deficit (9,541) (10,164)
------------- -----------------
(517) (1,140)
------------- -----------------
$137,074 $129,058
============= =================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
MS ACQUISITION CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- ------------------
JUNE 29, JUNE 30, JUNE 29, JUNE 30,
1997 1996 1997 1996
--------- --------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $48,692 $60,951 $103,789 $114,944
Cost of sales 42,712 51,198 89,687 98,472
Selling, general and administrative expenses 3,963 3,961 7,792 7,371
--------- --------- -------- --------
Operating income 2,017 5,792 6,310 9,101
Interest expense, net 2,709 2,092 5,270 4,132
--------- --------- -------- --------
Income (loss) before income taxes (692) 3,700 1,040 4,969
Income tax provision (credit) (252) 1,611 417 2,163
--------- --------- -------- --------
Net income (loss) $(440) $2,089 $623 $2,806
========= ========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
MS ACQUISITION CORP.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------
JUNE 29, JUNE 30,
1997 1996
-------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $623 $2,806
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 3,709 3,558
Deferred interest - 801
Deferred income taxes (209) 178
Changes in other assets and liabilities (3,921) (5,430)
-------- --------
Net cash provided by operating activities 202 1,913
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (5,939) (2,732)
Other, net (410) 162
-------- --------
Net cash used for investing activities (6,349) (2,570)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in line of credit 2,176 7,927
Principal payments on long-term debt - (7,250)
-------- --------
Net cash provided by financing 2,176 677
-------- --------
Net increase (decrease) in cash (3,971) 20
Cash - beginning of year 4,011 291
-------- --------
Cash - end of period $40 $311
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
MS ACQUISITION CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Aetna Industries, Inc. (Aetna) have been prepared in accordance with Rule
10-01 of Regulation S-X and do not include all the information and notes
required by generally accepted accounting principles for complete financial
statements. All adjustments, which include only normal recurring
adjustments that are, in the opinion of management, necessary for a fair
presentation of the results of the interim periods, have been made. The
results of operations for such interim periods are not necessarily
indicative of results of operations for a full year. The unaudited
condensed consolidated financial statements should be read in conjunction
with Aetna's consolidated financial statements and notes thereto for the
year ended December 29, 1996.
2. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
JUNE 29, DECEMBER 29,
1997 1996
-------- ------------
<S> <C> <C>
Inventories valued at LIFO
Raw materials $2,319 $1,758
Work-in-process 3,370 3,458
Finished goods 1,665 2,195
-------- ------------
7,354 7,411
LIFO reserve (335) (335)
-------- ------------
7,019 7,076
-------- ------------
Inventories valued at FIFO
Tooling (836) 1,592
Purchased parts and purchased labor 2,208 1,680
-------- ------------
Total inventories, including tooling $8,391 $10,348
======== ============
</TABLE>
3. STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
TOTAL
CONTRIBUTED ACCUMULATED STOCKHOLDER'S
CAPITAL DEFICIT EQUITY
----------- ----------- -------------
<S> <C> <C> <C>
Balance at December 29, 1996 $9,024 $(10,164) $(1,140)
Net income 623 623
----------- ----------- -------------
Balance at June 29, 1997 $9,024 $ (9,541) $(517)
=========== =========== =============
</TABLE>
7
<PAGE> 8
MS ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 29, 1997 DECEMBER 29, 1996
------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 40 $ 4,011
Accounts receivable (less allowance for doubtful
accounts of $333 and $510, respectively) 41,532 32,113
Inventories, including tooling 8,391 10,348
Other current assets 1,000 969
-------- --------
Total current assets 50,963 47,441
-------- --------
Property, plant and equipment, net 52,345 49,434
Deferred costs and other assets 5,899 5,769
Cost in excess of net assets acquired 25,374 25,774
-------- --------
$134,581 $128,418
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 31,881 $ 24,958
Accrued expenses 10,719 12,361
Current portion of long-term debt 3,163 2,427
-------- --------
Total current liabilities 45,763 39,746
-------- --------
Long-term debt, less current portion 85,000 85,000
Junior subordinated debentures 6,802 6,802
Deferred income taxes 7,937 8,136
Redeemable preferred stock
Series A - $100 stated value; 293,123 shares authorized;
121,291 and 114,967 shares issued and outstanding, respectively 12,635 11,979
Series B - $100 stated value; 2,000,000 shares authorized - -
Stockholders' Equity
Class A, common stock - $.01 par value, 5,000,000
shares authorized, 383,409 shares issued and outstanding 4 4
Class B, common stock - $.01 par value, 5,000,000
shares authorized, 516,590 shares issued and outstanding 5 5
Additional paid-in capital 14,853 15,509
Accumulated deficit (31,142) (31,487)
Fair market value in excess of historical cost of net
assets acquired from entities partially under
common control (7,276) (7,276)
-------- --------
(23,556) (23,245)
-------- --------
$134,581 $128,418
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE> 9
MS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- ------------------
JUNE 29, JUNE 30, JUNE 29, JUNE 30,
1997 1996 1997 1996
--------- --------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $48,692 $60,951 $103,789 $114,944
Cost of sales 42,712 51,198 89,687 98,472
Selling, general and administrative expenses 3,965 3,961 7,798 7,371
--------- --------- -------- --------
Operating income 2,015 5,792 6,304 9,101
Interest expense, net 2,928 2,092 5,728 4,132
--------- --------- -------- --------
Income (loss) before income taxes (913) 3,700 576 4,969
Income tax provision (credit) (345) 1,611 231 2,163
--------- --------- -------- --------
Net income (loss) before preferred stock dividend (568) $ 2,089 345 $ 2,806
--------- ========= -------- ========
Preferred stock dividend requirements (487) (656)
--------- --------
Net income (loss) available for common
stockholders $(1,055) $ (311)
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE> 10
MS ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------
JUNE 29, JUNE 30,
1997 1996
-------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 345 $ 2,806
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 3,709 3,558
Deferred interest - 801
Deferred income taxes (209) 178
Changes in other assets and liabilities (2,202) (5,430)
-------- --------
Net cash provided by operating activities 1,643 1,913
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (5,939) (2,732)
Other, net (410) 162
-------- --------
Net cash used for investing activities (6,349) (2,570)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt and junior subordinated debentures (1,441) (7,250)
Net increase in line of credit 2,176 7,927
-------- --------
Net cash provided by financing 735 677
-------- --------
Net increase (decrease) in cash (3,971) 20
Cash - beginning of year 4,011 291
-------- --------
Cash - end of period $ 40 $ 311
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
10
<PAGE> 11
MS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
MS Acquisition Corp. (MS Acquisition) was formed primarily for the purpose
of purchasing Aetna. It does not have any significant assets or
liabilities, other than preferred stock, junior subordinated debentures and
accruals.
The accompanying unaudited condensed consolidated financial statements of MS
Acquisition have been prepared in accordance with Rule 10-01 of Regulation
S-X and do not include all the information and notes required by generally
accepted accounting principles for complete financial statements. All
adjustments, which include only normal recurring adjustments that are, in
the opinion of management, necessary for a fair presentation of the results
of the interim periods, have been made. The results of operations for such
interim periods are not necessarily indicative of results of operations for
a full year. The unaudited condensed consolidated financial statements
should be read in conjunction with MS Acquisition's consolidated financial
statements and notes thereto for the year ended December 29, 1996.
2. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
JUNE 29, DECEMBER 29,
1997 1996
-------- ------------
<S> <C> <C>
Inventories valued at LIFO
Raw materials $2,319 $ 1,758
Work-in-process 3,370 3,458
Finished goods 1,665 2,195
-------- ------------
7,354 7,411
LIFO reserve (335) (335)
-------- ------------
7,019 7,076
-------- ------------
Inventories valued at FIFO
Tooling (836) 1,592
Purchased parts and purchased labor 2,208 1,680
-------- ------------
Total inventories, including tooling $8,391 $10,348
======== ============
</TABLE>
11
<PAGE> 12
MS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
3. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FAIR MARKET
VALUE IN
EXCESS OF
HISTORICAL
CLASS A CLASS B ADDITIONAL COST OF TOTAL
COMMON COMMON PAID-IN ACCUMULATED NET ASSETS STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT ACQUIRED EQUITY
------- ------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1996 $4 $5 $15,509 $ (31,487) $(7,276) $(23,245)
Net income 345 345
Dividends on redeemable
preferred stock (656) (656)
------- ------- ---------- ----------- ----------- -------------
Balance at June 29, 1997 $4 $5 $14,853 $ (31,142) $(7,276) $(23,556)
======= ======= ========== =========== =========== =============
</TABLE>
12
<PAGE> 13
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, Aetna's and
MS Acquisition's statement of operations expressed as a percentage of net
sales. This table and subsequent discussions should be read in conjunction with
the condensed consolidated financial statements and related notes thereto of
Aetna and MS Acquisition included elsewhere herein. MS Acquisition was formed
primarily for the purpose of purchasing Aetna, and it does not have any
significant assets or liabilities, other than preferred stock, junior
subordinated debentures and accruals. Additionally, MS Acquisition does not
have any incremental net sales or significant expenses, other than the interest
expense associated with the junior subordinated debentures and the related
income tax benefit.
AS A PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------- -----------------------------------
JUNE 29, 1997 JUNE 30, 1996 JUNE 29, 1997 JUNE 30, 1996
-------------------- ------------- -------------------- -------------
MS AETNA/MS MS AETNA/MS
AETNA ACQUISITION ACQUISITION AETNA ACQUISITION ACQUISITION
------- ----------- ------------- ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 87.7 87.7 84.0 86.4 86.4 85.7
Gross profit 12.3 12.3 16.0 13.6 13.6 14.3
SG&A expenses 8.1 8.2 6.5 7.5 7.5 6.4
Operating profit 4.2 4.1 9.5 6.1 6.1 7.9
Interest expense 5.6 6.0 3.4 5.1 5.6 3.6
Income before
income taxes (1.4) (1.9) 6.1 1.0 0.5 4.3
Income tax provision (0.5) (0.7) 2.7 0.4 0.2 1.9
Net income (loss) (0.9)% (1.2)% 3.4% 0.6% 0.3% 2.4%
</TABLE>
THREE MONTHS ENDED JUNE 29, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
NET SALES: Net sales for Aetna and MS Acquisition for the second
quarter of 1997 were $48.7 million, or 20.1% lower than second quarter 1996
sales of $61.0 million. Production sales of $47.0 million in the second quarter
of 1997 were down $12.0 million from $59.0 million in the second quarter of
1996, while tooling and prototype sales were down $.3 million for the same
period of the prior year. Production sales were unfavorably impacted by the
five week Chrysler strike and the planned phase out of two General Motors
programs (the cargo van floor pan and side rail assemblies and the small truck
door beam program) during the second quarter of 1996.
GROSS PROFIT: Aetna's and MS Acquisition's gross profit was $6.0 million, or
12.3% of net sales, for the second quarter of 1997, compared to $9.8 million,
or 16.0% of net sales, for the same period in 1996. The decrease in gross
profit from the prior year was due to the five week Chrysler strike.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses for Aetna
and MS Acquisition for the second quarter of 1997 were $4.0 million, or 8.1%
and 8.2% of net sales, respectively, compared to $4.0 million, or 6.5% of net
sales, for the same period in 1996. The increase, as a percentage of sales,
was due to decreased production sales volume and additional engineering and
quality assurance staff in support of new platforms and factory assist
quotations.
INTEREST EXPENSE: Aetna's interest expense for the second quarter of 1997 was
$2.7 million, or 5.6% of net sales, compared to $2.1 million or 3.4% of net
sales in the same period in the prior year. Interest expense was impacted by
higher levels of debt outstanding. MS Acquisition also had additional interest
expense of $0.2 million, or 0.4% of sales, which is attributed to the junior
subordinated debentures.
INCOME TAXES: The income tax credit for Aetna in the second quarter of
1997 was $0.3 million with an effective tax rate of 36.4% as compared to a
provision of $1.6 million with an effective tax rate of 43.5% in the same
period in the prior year. The income tax credit for MS Acquisition in the
second quarter of 1997 was $0.3 million with an effective tax rate of 37.8% as
compared to a provision of $1.6 million with an effective tax rate of 43.5% in
the same period in the prior year. The effective rates in both periods and for
both Aetna and MS Acquisition differed from the statutory rate due principally
to the effect of non-deductible amortization of cost in excess of assets
acquired.
SIX MONTHS ENDED JUNE 29, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
NET SALES: Net sales for Aetna and MS Acquisition for the second quarter of
1997 were $103.8 million, down from the $114.9 million reported for the six
months ended June 30, 1996. Production sales decreased $8.4 million, while
tooling sales decreased $2.7 million. The decrease in production sales was
principally due to the five week Chrysler strike and the planned phase out of
two General Motors programs (the cargo van floor pan and side rail assemblies
and the small truck door beam program) during the second quarter of 1996.
GROSS PROFIT: Aetna's and MS Acquisition's gross profit was $14.1 million, or
13.6% of net sales, for the six months ended June 29, 1997 compared to $16.5
million, or 14.3% of net sales, for the same period in 1996. The decrease in
gross profit from the prior year was due to the five week Chrysler strike,
partially offset by an increase in tooling gross margin and lower material
costs due to outsourcing certain parts.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses for Aetna
and MS Acquisition for the six months ended June 29, 1997 were $7.8 million, or
7.5% of net sales, compared to $7.4 million, or 6.4% of net sales, for the same
period in 1996. As a percentage of sales, the increase was due to the
interruption of production sales during the Chrysler strike and additional
engineering and quality assurance staff in support of new platforms and factory
assist quotations.
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(CONTINUED)
INTEREST EXPENSE: Aetna's interest expense for the six months ended June 29,
1997 was $5.3 million, or 5.1% of net sales, compared to $4.1 million or 3.6%
of net sales in the same period in the prior year. Interest expense was
impacted by higher levels of debt outstanding. MS Acquisition also had
additional interest expense of $0.5 million of interest expense, or 0.5% of
sales, which is attributed to the junior subordinated debentures.
INCOME TAXES: The income tax provision for Aetna for the six months ended June
29, 1997 was $0.4 million with an effective tax rate of 40.1% as compared to a
provision of $2.2 million with an effective tax rate of 43.5% in the same
period in the prior year. The income tax credit for MS Acquisition for the six
months ended June 29, 1997 was $0.2 million with an effective tax rate of
40.1% as compared to a provision of $2.2 million with an effective tax rate of
43.5% in the same period in the prior year. The effective rates in both
periods and for both Aetna and MS Acquisition differed from the statutory rate
due principally to the effect of non-deductible amortization of cost in excess
of assets acquired.
LIQUIDITY AND CAPITAL RESOURCES
Aetna's and MS Acquisition's principal capital requirements are to fund working
capital needs, to meet required debt payments and to complete planned
maintenance and expansion expenditures. At June 29, 1997 there was $32.8
million available under the Senior Revolving Credit Facility. Management
currently anticipates that its operating cash flow, together with available
borrowings under the Senior Revolving Credit Facility, will be sufficient to
meet working capital requirements, capital expenditure requirements, and
interest requirements on debt obligations.
Net cash flow provided by operations for the six months ended June 29, 1997
aggregated $0.2 million and $1.6 million for Aetna and MS Acquisition,
respectively. This compares to $1.9 million for both Aetna and MS Acquisition
in the same period in the prior year. The decrease at Aetna and MS Acquisition
was attributable to a decrease in net income and the elimination of the
deferred interest component. The decrease was partially offset by an increase
in accounts receivable due to a progress billing made on the new Jeep Grand
Cherokee (WJ) weld assembly program and an increase in accounts payable due to
the construction of Plant 10 which will be used in the production of the WJ.
Net cash used for operations at MS Acquisition is also offset by an increase in
intercompany balances aggregating $1.7 million.
Net cash flow used for investing activities at both Aetna and MS Acquisition
consists principally of capital expenditures and aggregated $6.3 million for
the six months ended June 29, 1997 as compared to $2.6 million for the same
period in the prior year. The major capital project during 1997 has been the
construction of Plant 10. As part of its growth strategy, the Company
continues to seek and review acquisition candidates.
15
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Net cash flows provided by financing aggregated $2.2 million and represented
increases in the Senior Revolving Credit Facility for Aetna and MS Acquisition.
In addition, MS Acquisition paid $1.4 million of its junior subordinated
debentures during the six months ended June 29, 1997. Net cash provided by
financing in the same period in 1996 totaled $0.7 million and represented the
net increase in the line of credit, offset by the payment of long-term debt.
To the extent dividends to Aetna Holdings, Inc. (Aetna Holdings) to fund the
interest payments on the Junior Subordinated Debentures and interest payments
on the unfunded contractual obligations to former option holders are permitted
under the 11-7/8% Senior Note Indenture and the Senior Revolving Credit
Facility, interest on the Junior Subordinated Debentures and the contractual
obligations will be funded by cash dividends by Aetna to Aetna Holdings.
Additionally, up to $2.5 million in the aggregate principal amount of the
Junior Subordinated Debentures will be required to be redeemed by Aetna
Holdings from time to time to the extent dividends to Aetna Holdings are
permitted to be paid by the 11-7/8% Senior Note Indenture and the Senior
Revolving Credit Facility. In February 1997 and in May 1997, Aetna paid $1.5
million and $0.6 million, respectively, representing interest and prepayment of
principal on these debentures and obligations on behalf of Aetna Holdings.
16
<PAGE> 17
PART II. OTHER INFORMATION
There have been no reportable events under Items 1, 2, 3, or 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of each of Aetna and MS Acquisition was
held on April 28, 1997.
At each such meeting all of the following nominees for election as directors
were elected; Ueli Spring, Harold Brown, Michael Delaney, David Howe
and John Wurster. All such nominees were currently serving as members of
the board of directors of each of Aetna and MS Acquisition. All of the
shares represented at the meeting were voted in favor of such persons.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
<S> <C>
27.1 Financial Data Schedule for Aetna Industries, Inc. (EDGAR Filing Only)
27.2 Financial Data Schedule for MS Acquisition Corp. (EDGAR Filing Only)
(b) No reports on Form 8-K were filed by the registrants during the three
months ended June 29, 1997.
</TABLE>
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
The signatory hereby acknowledges and adopts the typed form of his name in the
electronic filing of this document with the Securities and Exchange Commission.
Aetna Industries, Inc.
Date: August 6, 1997 By: s/ Harold A. Brown
------------------
Harold A. Brown
Vice President, Finance and Secretary
(Principal Financial and Accounting
Officer)
MS Acquisition Corp.
Date: August 6, 1997 By: s/ Harold A. Brown
------------------
Harold A. Brown
Vice President, Finance and Secretary
(Principal Financial and Accounting
Officer)
18
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
<S> <C>
27.1 Financial Data Schedule for Aetna Industries, Inc.
27.2 Financial Data Schedule for MS Acquisition Corp.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) STATEMENTS.
</LEGEND>
<CIK> 0001022657
<NAME> AETNA INDUSTRIES, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> JUN-29-1997
<CASH> 40
<SECURITIES> 0
<RECEIVABLES> 44,358
<ALLOWANCES> 333
<INVENTORY> 8,139
<CURRENT-ASSETS> 53,456
<PP&E> 88,441
<DEPRECIATION> 36,096
<TOTAL-ASSETS> 137,074
<CURRENT-LIABILITIES> 44,654
<BONDS> 85,000
0
0
<COMMON> 0
<OTHER-SE> (517)
<TOTAL-LIABILITY-AND-EQUITY> 137,074
<SALES> 103,789
<TOTAL-REVENUES> 103,789
<CGS> 89,687
<TOTAL-COSTS> 89,687
<OTHER-EXPENSES> 7,792
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,270
<INCOME-PRETAX> 1,040
<INCOME-TAX> 417
<INCOME-CONTINUING> 623
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 623
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION AND BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) STATEMENTS.
</LEGEND>
<CIK> 0001021907
<NAME> MS ACQUISITION CORP.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> JUN-29-1997
<CASH> 40
<SECURITIES> 0
<RECEIVABLES> 41,865
<ALLOWANCES> 333
<INVENTORY> 8,139
<CURRENT-ASSETS> 50,963
<PP&E> 88,441
<DEPRECIATION> 36,096
<TOTAL-ASSETS> 134,581
<CURRENT-LIABILITIES> 45,763
<BONDS> 91,802
12,635
0
<COMMON> 9
<OTHER-SE> (23,565)
<TOTAL-LIABILITY-AND-EQUITY> 134,581
<SALES> 103,789
<TOTAL-REVENUES> 103,789
<CGS> 89,687
<TOTAL-COSTS> 89,687
<OTHER-EXPENSES> 7,798
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,728
<INCOME-PRETAX> 576
<INCOME-TAX> 231
<INCOME-CONTINUING> 345
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 345
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
