<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 March 29, 1998.
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 38-200-7550/13-337-9803
- -------------------------------------------------------------------------------
(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 offices) (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
--- ---
As of April 26, 1998, there were 1,000 shares of Aetna Industries, Inc. common
stock outstanding and 3,899,999 shares of MS Acquisition Corp. Class A common
stock outstanding.
1
<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
NONE
2
<PAGE> 3
<TABLE>
<CAPTION>
INDEX
<S> <C> <C>
PART I FINANCIAL INFORMATION PAGE
Item 1. FINANCIAL STATEMENTS OF AETNA INDUSTRIES, INC.
Condensed Consolidated Balance Sheets - 4
March 29, 1998 and December 28, 1997
Consolidated Statements of Operations - 5
three months ended March 29, 1998
and March 30, 1997
Condensed Consolidated Statements of Cash Flows - 6
three months ended March 29, 1998
and March 30, 1997
Notes to Consolidated Financial Statements 7
FINANCIAL STATEMENTS OF MS ACQUISITION CORP.
Condensed Consolidated Balance Sheets - 9
March 29, 1998 and December 28, 1997
Consolidated Statements of Operations - 10
three months ended March 29, 1998
and March 30, 1997
Condensed Consolidated Statements of Cash Flows - 11
three months ended March 29, 1998
and March 30, 1997
Notes to Consolidated Financial Statements 12
Item 2. Management's Discussion and Analysis of 14
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17
PART II OTHER INFORMATION 17
Signatures 18
EXHIBIT INDEX 19
</TABLE>
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>
MARCH 29, 1998 DECEMBER 28, 1997
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 264 $ 23
Accounts receivable (less allowance for doubtful
accounts of $372 and $359, respectively) 46,988 40,665
Inventories 7,539 7,276
Tooling 19,332 11,410
Other current assets 2,186 1,661
----------- -----------
Total current assets 76,309 61,035
----------- -----------
Property, plant and equipment, net 53,194 51,572
Deferred costs and other assets 5,341 5,489
Cost in excess of net assets acquired 24,773 24,973
----------- -----------
$ 159,617 $ 143,069
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 40,348 $ 33,485
Accrued expenses 13,394 9,508
Line of credit 18,805 13,530
----------- -----------
Total current liabilities 72,547 56,523
----------- -----------
Long-term debt 85,000 85,000
Deferred income taxes 7,432 7,432
Stockholder's equity
Common stock - $.01 par value; 1,000 shares
issued and outstanding -- --
Contributed capital 9,024 9,024
Accumulated deficit (14,386) (14,910)
----------- -----------
(5,362) (5,886)
----------- -----------
$ 159,617 $ 143,069
=========== ===========
</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
----------------------
MARCH 29, MARCH 30,
1998 1997
---- ----
(UNAUDITED)
<S> <C> <C>
Net sales $ 53,085 $ 55,097
Cost of sales 44,974 46,975
Selling, general and administrative expenses 4,486 3,829
--------- ---------
Operating income 3,625 4,293
Interest expense, net 2,866 2,561
--------- ---------
Income before income taxes 759 1,732
Income tax provision 235 669
--------- ---------
Net income $ 524 $ 1,063
========== =========
</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>
THREE MONTHS ENDED
---------------------------
MARCH 29, MARCH 30,
1998 1997
---- ----
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 524 $ 1,063
Adjustments to reconcile net income to net cash
used for operating activities
Depreciation and amortization 1,941 1,823
Deferred income taxes -- 10
Changes in other assets and liabilities (4,285) (6,867)
-------- ----------
Net cash used for operating activities (1,820) (3,971)
-------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (3,214) (3,005)
Increase in other assets -- (117)
-------- ----------
Net cash used for investing activities (3,214) (3,122)
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in line of credit 5,275 3,117
-------- ----------
Net cash provided by financing 5,275 3,117
-------- ----------
Net increase (decrease) in cash 241 (3,976)
Cash - beginning of year 23 4,011
-------- ----------
Cash - end of period $ 264 $ 35
======== ==========
</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 28, 1997.
2. SUBSEQUENT EVENT
On April 14, 1998, the outstanding capital stock of Societe Financiere de
Developpement Industriel et Technologique, a French societe anonyme
(Sofedit) was transferred to MS Acquisition Corp., the holding company for
Aetna, in consideration of (i) promissory notes of MS Acquisition in an
aggregate principal amount of approximately $41 million; (ii) a portion of
Sofedit's profits for fiscal year 1997 to be paid to the former
stockholders of Sofedit consistent with the past dividend policy of
Sofedit; (iii) $27 million in Series B Preferred Stock of MS Acquisition;
and (iv) 3,000,000 shares of Class A Common Stock of MS Acquisition
(representing approximately 75% of MS Acquisition's common stock
ownership). In addition, MS Acquisition assumed approximately $12 million
of debt of the Sofedit group in connection with the transaction.
3. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 28,
1998 1997
---- ----
<S> <C> <C>
Inventories valued at LIFO
Raw materials $ 1,603 $ 483
Work-in-process 2,505 3,134
Finished goods 1,701 1,500
--------- ---------
5,809 5,117
LIFO reserve (200) (200)
--------- ---------
5,609 4,917
--------- ---------
Inventories valued at FIFO
Purchased parts and purchased labor 1,930 2,359
--------- ---------
Total inventories $ 7,539 $ 7,276
========= =========
</TABLE>
7
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AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
MS ACQUISITION CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
TOTAL
CONTRIBUTED ACCUMULATED STOCKHOLDER'S
CAPITAL DEFICIT EQUITY
------- ------- ------
<S> <C> <C> <C>
Balance at December 28, 1997 $ 9,024 $ (14,910) $ (5,886)
Net income 524 524
-------- ---------- --------
Balance at March 29, 1998 $ 9,024 $ (14,386) $ (5,362)
======== ========== ========
</TABLE>
8
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MS ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 29, 1998 DECEMBER 28, 1997
--------------- ------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 264 $ 23
Accounts receivable (less allowance for doubtful
accounts of $372 and $359, respectively) 46,832 40,439
Inventories 7,539 7,276
Tooling 19,332 11,410
Other current assets 2,186 1,661
--------- ---------
Total current assets 76,153 60,809
--------- ---------
Property, plant and equipment, net 53,194 51,572
Deferred costs and other assets 5,341 5,489
Cost in excess of net assets acquired 24,773 24,973
--------- ---------
$ 159,461 $ 142,843
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 40,348 $ 33,485
Accrued expenses 13,522 9,848
Line of credit 18,805 13,530
--------- ---------
Total current liabilities 72,675 56,863
--------- ---------
Long-term debt 85,000 85,000
Junior subordinated debentures 7,789 7,789
Deferred interest, junior subordinated debentures 432 --
Deferred income taxes 7,432 7,432
Redeemable preferred stock
Series A - $100 stated value;293,123 shares authorized; 13,689 13,328
135,096 and 127,962 shares issued and outstanding, respectively -- --
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 13,799 14,159
Accumulated deficit (34,088) (34,461)
Fair market value in excess of historical cost of net
assets acquired from entities partially under
common control (7,276) (7,276)
--------- ---------
(27,556) (27,569)
--------- ---------
$ 159,461 $ 142,843
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
9
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MS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 29, MARCH 30,
1998 1997
---- ----
(UNAUDITED)
<S> <C> <C>
Net sales $ 53,085 $ 55,097
Cost of sales 44,974 46,975
Selling, general and administrative expenses 4,489 3,833
--------- ---------
Operating income 3,622 4,289
Interest expense, net 3,082 2,800
--------- ---------
Income before income taxes 540 1,489
Income tax provision 167 576
--------- ---------
Net income before preferred stock dividend 373 913
--------- ---------
Preferred stock dividend requirements (360) (324)
--------- ---------
Net income available for common stockholders $ 13 $ 589
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
10
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MS ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
MARCH 29, MARCH 30,
1998 1997
---- ----
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 373 $ 913
Adjustments to reconcile net income to net cash
used for operating activities
Depreciation and amortization 1,941 1,823
Deferred interest 432 --
Deferred income taxes -- 10
Changes in other assets and liabilities (4,566) (5,672)
-------- ---------
Net cash used for operating activities (1,820) (2,926)
-------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (3,214) (3,005)
Increase in other assets -- (117)
-------- ----------
Net cash used for investing activities (3,214) (3,122)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of junior subordinated debentures -- (1,045)
Net increase in line of credit 5,275 3,117
-------- ---------
Net cash provided by financing 5,275 2,072
-------- ---------
Net increase (decrease) in cash 241 (3,976)
Cash - beginning of year 23 4,011
-------- ---------
Cash - end of period $ 264 $ 35
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE> 12
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 Industries, Inc. (Aetna). It does not have any
significant operations, other than its investments in its subsidiaries
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 28,
1997.
3. SUBSEQUENT EVENT
On April 14, 1998, the outstanding capital stock of Societe Financiere de
Developpement Industriel et Technologique, a French societe anonyme
(Sofedit) was transferred to MS Acquisition Corp., the holding company for
Aetna, in consideration of (i) promissory notes of MS Acquisition in an
aggregate principal amount of approximately $41 million; (ii) a portion of
Sofedit's profits for fiscal year 1997 to be paid to the former
stockholders of Sofedit consistent with the past dividend policy of
Sofedit; (iii) $27 million in Series B Preferred Stock of MS Acquisition;
and (iv) 3,000,000 shares of Class A Common Stock of MS Acquisition
(representing approximately 75% of MS Acquisition's common stock
ownership). In addition, MS Acquisition assumed approximately $12 million
of debt of the Sofedit group in connection with the transaction.
12
<PAGE> 13
MS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
3. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 28,
1998 1997
---- ----
<S> <C> <C>
Inventories valued at LIFO
Raw materials $ 1,603 $ 483
Work-in-process 2,505 3,134
Finished goods 1,701 1,500
--------- ---------
5,809 5,117
LIFO reserve (200) (200)
--------- ---------
5,609 4,917
--------- ---------
Inventories valued at FIFO
Purchased parts and purchased labor 1,930 2,359
--------- ---------
Total inventories $ 7,539 $ 7,276
========= =========
</TABLE>
4. 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 28, 1997 $ 4 $ 5 $ 14,159 $ (34,461) $ (7,276) $ (27,569)
Net income 373 373
Dividends on redeemable
preferred stock (360) (360)
------ ----- --------- ---------- -------- ---------
Balance at March 29, 1998 $ 4 $ 5 $ 13,799 $ (34,088) $ (7,276) $ (27,556)
====== ===== ========= ========== ======== =========
</TABLE>
13
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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.
THREE MONTHS ENDED MARCH 29, 1998 COMPARED TO THREE MONTHS ENDED MARCH 30, 1997
AS A PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 29, 1998 MARCH 30, 1997
-------------- --------------
MS MS
AETNA ACQUISITION AETNA ACQUISITION
----- ----------- ----- -----------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 84.7 84.7 85.3 85.3
Gross profit 15.3 15.3 14.7 14.7
Selling, general &
administrative expenses 8.5 8.5 6.9 6.9
Operating income 6.8 6.8 7.8 7.8
Interest expense, net 5.4 5.8 4.7 5.0
Income before income taxes 1.4 1.0 3.1 2.8
Income tax provision 0.4 0.3 1.2 1.1
Net income 1.0% 0.7% 1.9% 1.7%
</TABLE>
NET SALES: Net sales for Aetna and MS Acquisition for the first quarter of 1998
were $53.1 million, or 3.7%, lower than first quarter 1997 sales of $55.1
million. Production sales of $52.6 million in the first quarter of 1998 were
down $1.2 million from $53.8 million in the first quarter of 1997, while tooling
and prototype sales were down $0.8 million for the same period. Production sales
were unfavorably impacted by the disposal of low volume, marginally profitable
roll form jobs and the balance out of production related to the General Motors'
C/K truck sales due to a platform change that was begun last year. This decrease
was partially offset by an increase in Jeep Cherokee (XJ) sales.
GROSS PROFIT: Aetna's and MS Acquisition's gross profit was $8.1 million, or
15.3% of net sales, for the first quarter of 1998 compared to $8.1 million, or
14.7% of net sales, for the same period in 1997. The increase, as a percentage
of sales, was due to short-term factory assist work running more efficiently in
the first quarter compared to previous quarters.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses for Aetna
and MS Acquisition for the first quarter of 1998 were $4.5 million, or 8.5% of
net sales, compared to $3.8 million, or 6.9% of net sales, for the same period
in 1997. The increase, as a percentage of sales, was due to start up costs and
additional staff in support of new platforms, especially the new Chrysler Jeep
Grand Cherokee, the Saturn LS and new CAMI J2 programs.
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
INTEREST EXPENSE: Aetna's interest expense for the first quarter of 1998 was
$2.9 million, or 5.4% of net sales, compared to $2.6 million or 4.7% of net
sales for the same period in 1997. 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 provision for Aetna in the first quarter of 1998
was $0.2 million with an effective tax rate of 31.0% as compared to a provision
of $0.7 million with an effective tax rate of 38.6% for the same period in 1997.
The income tax provision for MS Acquisition in the first quarter of 1998 was
$0.2 million with an effective tax rate of 30.9% as compared to a provision of
$0.6 million with an effective tax rate of 38.7% for the same period in 1997.
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.
On April 14, 1998, the outstanding capital stock of Societe Financiere de
Developpement Industriel et Technologique, a French societe anonyme (Sofedit)
was transferred to MS Acquisition in consideration of (i) promissory notes of MS
Acquisition in an aggregate principal amount of approximately $41 million; (ii)
a portion of Sofedit's profits for fiscal year 1997 to be paid to the former
stockholders of Sofedit consistent with the past dividend policy of Sofedit;
(iii) $27 million in Series B Preferred Stock of MS Acquisition; and (iv)
3,000,000 shares of Class A Common Stock of MS Acquisition (representing
approximately 75% of MS Acquisition's common stock ownership). In addition, MS
Acquisition assumed approximately $12 million of debt of the Sofedit group in
connection with the transaction.
At March 29, 1998 there was $15.0 million available under the Credit Agreement
dated as of May 2, 1996 among Aetna, MS Acquisition, Aetna Holdings, Inc. (Aetna
Holdings) and Aetna Export Sales Corp. and NBD Bank, as amended (Senior
Revolving Credit Facility). In March 1998, the Company obtained a commitment for
an additional $20.0 million under the Senior Revolving Credit Facility to
support Saturn tooling expenditure requirements.
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 through June 30,
1999, the current term of the Senior Revolving Credit Facility.
Net cash flow used for operations for the three months ended March 29, 1998
aggregated $1.8 million for Aetna and MS Acquisition. This compares to net cash
used for operations of $4.0 million and $2.3 million for Aetna and MS
Acquisition, respectively, for the same period in 1997. The decrease was
attributable to a prior year new job pricing issue that was later resolved that
led to a build-up in accounts receivable. The decrease was partially offset by
an increase in tooling inventory for new Mitsubishi and Saturn platforms as well
as WJ prototypes.
15
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow used for investing activities aggregated $3.2 million for the
three months ended March 29, 1998 as compared to $3.1 million for the same
period in 1997 at both Aetna and MS Acquisition and consists principally of
capital expenditures. The major capital projects during 1998 have been the
renovation of Plant 7 which will be used to stamp the majority of the new Saturn
LS jobs at Aetna and the purchase of equipment for the start up of the Aetna
Manufacturing Canada plant in London, Ontario serving CAMI's J2 platform.
Net cash flows provided by financing aggregated $5.3 million and represented
increases in the Senior Revolving Credit Facility for Aetna and MS Acquisition.
In addition, MS Acquisition paid $1.0 million of its junior subordinated
debentures during the three months ended March 30, 1997.
To the extent dividends to Aetna Holdings, Inc. (Aetna Holdings) which fund cash
interest payments on the Junior Subordinated Debentures and cash 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. Aetna is
in default under the Indenture and is therefore not permitted to make a
distribution to Aetna Holdings. The amount of deferred interest at March 29,
1998 representing interest on the debentures was $0.4 million.
FUTURE OPERATING RESULTS
With the exception of historical matters, the matters discussed in this
Quarterly Report on Form 10-Q are forward-looking statements that involve risks
and uncertainties, including, but not limited to, factors related to the highly
competitive nature of the automotive supplier industry and its sensitivity to
changes in general economic conditions, the results of financing efforts and
other factors discussed in Aetna's and MS Acquistion's filings with the
Securities and Exchange Commission (including the April 14, 1998 transaction
with Sofedit). Such factors could affect Aetna's and MS Acquisition's actual
results during the remainder of 1998 and beyond to differ materially from those
expressed in any forward-looking statement made by or on behalf of Aetna or MS
Acquisition. There can be no assurance that additional sources of financing will
not be required during the next twelve months as a result of unanticipated cash
demands or opportunities for expansion or acquisition, changes in growth
strategy or adverse operating results. There can be no assurance that any
additional funds required by Aetna or MS Acquisition, whether within the next
twelve months or thereafter, will be available to Aetna or MS Acquisition on
satisfactory terms.
16
<PAGE> 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
ITEM 1 TO 5. Not applicable.
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)
</TABLE>
(b) No reports on Form 8-K were filed by the registrants during the three
months ended March 29, 1998.
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: May 6, 1998 By: s/ Harold A. Brown
-------------------
Harold A. Brown
Vice President, Finance and Secretary
(Principal Financial and Accounting
Officer)
MS Acquisition Corp.
Date: May 6, 1998 By: s/ Harold A. Brown
-------------------
Harold A. Brown
Vice President, Finance and Secretary
(Principal Financial and Accounting
Officer)
18
<PAGE> 19
EXHIBIT INDEX
Exhibit No. Description of Exhibits
- ----------- -----------------------
27.1 Financial Data Schedule for Aetna Industries, Inc.
27.2 Financial Data Schedule for MS Acquisition Corp.
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001022657
<NAME> AETNA INDUSTRIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> MAR-29-1998
<CASH> 264
<SECURITIES> 0
<RECEIVABLES> 47,360
<ALLOWANCES> 372
<INVENTORY> 26,871
<CURRENT-ASSETS> 76,309
<PP&E> 96,152
<DEPRECIATION> 42,958
<TOTAL-ASSETS> 159,617
<CURRENT-LIABILITIES> 72,547
<BONDS> 85,000
0
0
<COMMON> 0
<OTHER-SE> (5,362)
<TOTAL-LIABILITY-AND-EQUITY> 159,617
<SALES> 53,085
<TOTAL-REVENUES> 53,085
<CGS> 44,974
<TOTAL-COSTS> 44,974
<OTHER-EXPENSES> 4,486
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,866
<INCOME-PRETAX> 759
<INCOME-TAX> 235
<INCOME-CONTINUING> 524
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 524
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001021907
<NAME> MS ACQUISITION CORP.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> MAR-29-1998
<CASH> 264
<SECURITIES> 0
<RECEIVABLES> 47,204
<ALLOWANCES> 372
<INVENTORY> 26,871
<CURRENT-ASSETS> 76,153
<PP&E> 96,152
<DEPRECIATION> 42,958
<TOTAL-ASSETS> 159,461
<CURRENT-LIABILITIES> 72,675
<BONDS> 92,789
13,689
0
<COMMON> 9
<OTHER-SE> (27,565)
<TOTAL-LIABILITY-AND-EQUITY> 159,461
<SALES> 53,085
<TOTAL-REVENUES> 53,085
<CGS> 44,974
<TOTAL-COSTS> 44,974
<OTHER-EXPENSES> 4,489
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,082
<INCOME-PRETAX> 540
<INCOME-TAX> 167
<INCOME-CONTINUING> 373
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 373
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
