SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarterly Period Ended March 31, 1994
Commission File Number 1-12068
MASCOTECH, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 38-2513957
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21001 Van Born Road, Taylor, Michigan 48180
(Address of principal executive offices) (Zip Code)
(313) 274-7405
(Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Shares Outstanding at
Class April 30, 1994
Common stock, par value $1 per share 60,680,000
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MASCOTECH, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet -
March 31, 1994 and December 31, 1993 1
Consolidated Condensed Statement of Income
for the Three Months Ended
March 31, 1994 and 1993 2
Consolidated Condensed Statement of
Cash Flows for the Three Months
Ended March 31, 1994 and 1993 3
Notes to Consolidated Condensed Financial
Statements 4-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
Part II. Other Information and Signature 7-8
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MASCOTECH, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
March 31, 1994 and December 31, 1993
(Dollars in thousands)
March 31, December 31,
ASSETS 1994 1993
Current assets:
Cash and cash investments $ 49,450 $ 83,200
Marketable securities 57,800 27,790
Receivables 259,920 238,820
Inventories 149,000 140,040
Deferred and refundable income taxes 41,580 41,780
Prepaid expenses and other assets 31,740 24,210
Total current assets 589,490 555,840
Equity and other investments in affiliates 167,660 170,510
Property and equipment, net 526,320 490,190
Excess of cost over net assets of acquired
companies 436,980 439,760
Notes receivable and other assets 84,840 66,100
Net assets of discontinued operations 42,470 67,510
Total assets $1,847,760 $1,789,910
LIABILITIES
Current liabilities:
Accounts payable $ 103,820 $ 95,520
Accrued liabilities 100,280 103,260
Current portion of long-term debt 1,730 2,830
Total current liabilities 205,830 201,610
Long-term debt 822,490 788,360
Deferred income taxes and other long-term
liabilities 131,100 132,310
Total liabilities 1,159,420 1,122,280
SHAREHOLDERS' EQUITY
Preferred stock, $1 par, shares authorized:
25 million; outstanding: 10.8 million 10,800 10,800
Common stock, $1 par, shares authorized:
250 million; outstanding: 60.7 million
and 60.5 million 60,670 60,510
Paid-in capital 367,810 367,290
Retained earnings 254,000 232,120
Cumulative translation adjustments (4,940) (3,090)
Total shareholders' equity 688,340 667,630
Total liabilities and
shareholders' equity $1,847,760 $1,789,910
The accompanying notes are an integral part of the
consolidated condensed financial statements.
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MASCOTECH, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
For the Three Months Ended March 31, 1994 and 1993
(Dollars in thousands except per share amounts)
Three Months Ended March 31
1994 1993
Net sales $ 412,410 $ 404,070
Cost of sales (332,120) (319,320)
Selling, general and
administrative expenses (44,660) (44,970)
Operating profit 35,630 39,780
Other income (expense), net:
Interest expense, Masco Corporation --- (1,950)
Other interest expense (11,080) (18,470)
Equity and interest income from
affiliates 4,620 3,610
Other income, net 14,660 4,300
8,200 (12,510)
Income from continuing operations
before income taxes 43,830 27,270
Income taxes 17,530 11,200
Income from continuing operations 26,300 16,070
Income from operations of
discontinued segment --- 1,450
Net income $ 26,300 $ 17,520
Preferred stock dividends $ 3,240 $ 2,330
Earnings attributable to common stock $ 23,060 $ 15,190
Earnings per common and common
equivalent share:
Primary:
Continuing operations $ .34 $ .22
Income from operations of
discontinued segment -- .03
Earnings attributable to
common stock $ .34 $ .25
Fully diluted:
Continuing operations $ .32 $ .22
Income from operations of
discontinued segment -- .02
Earnings attributable to
common stock $ .32 $ .24
Cash dividends declared $ .02 --
The accompanying notes are an integral part of the
consolidated condensed financial statements.
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MASCOTECH, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 1994 and 1993
(Dollars in thousands)
Three Months Ended
March 31
1994 1993
CASH FROM (USED FOR):
OPERATIONS:
Net cash from earnings $ 27,340 $ 30,860
(Increase) in inventories (7,100) (5,890)
(Increase) in receivables (18,940) (18,730)
(Decrease) in accounts payable and
accrued liabilities (2,150) (4,860)
(Increase) in marketable
securities, net (30,010) (15,650)
Discontinued operations, net --- 1,530
Other, net (6,990) 1,870
Net cash (used for)
operating activities (37,850) (10,870)
FINANCING:
Issuance of convertible debt 337,240 ---
Increase in other debt --- 125,000
Retirement of 10 1/4% Notes (253,120) ---
Payment of other debt (69,570) (4,180)
Payment of preferred stock dividends (3,240) (4,650)
Payment of common stock dividends (1,200) ---
Other, net (3,440) (400)
Net cash from financing
activities 6,670 115,770
INVESTMENTS:
Capital expenditures (24,790) (12,730)
Proceeds from sale of Energy-related
business 13,500 ---
Receipt of cash from note receivable --- 10,000
Sale of common stock of affiliate 9,810 ---
Cash paid Masco Corporation --- (87,500)
Other, net (1,090) (10,390)
Net cash (used for) investing
activities (2,570) (100,620)
CASH AND CASH INVESTMENTS:
(Decrease) increase for the three months (33,750) 4,280
At January 1 83,200 76,000
At March 31 $ 49,450 $ 80,280
Supplemental Cash Flow Information:
Net cash paid during the period for:
Interest $ 26,520 $ 30,180
Income taxes $ 2,810 $ 2,610
The accompanying notes are an integral part of the
consolidated condensed financial statements.
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MASCOTECH, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
A. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, which are normal
and recurring in nature, necessary to present fairly its financial
position as at March 31, 1994 and the results of operations and cash flows
for the three months ended March 31, 1994 and 1993. The statements of
income and cash flows and related notes for the three months ended
March 31, 1993 have been reclassified to present the Energy-related
segment as discontinued operations. In addition, the balance sheet as of
March 31, 1994 and December 31, 1993 reflects the Energy-related segment
as discontinued operations. Effective June 23, 1993, the Company changed
its name to MascoTech, Inc. from Masco Industries, Inc. Certain 1993
amounts have been reclassified to conform to the presentation adopted in
1994.
Primary earnings per common share were calculated based on 77.6 million
and 61.6 million weighted average common shares outstanding for the three
months ended March 31, 1994 and 1993, respectively.
Fully diluted earnings per common share were calculated based on 87.5
million and 72.5 million weighted average common shares outstanding for
the three months ended March 31, 1994 and 1993, respectively.
B. Inventories by component are as follows (in thousands):
March 31, December 31,
1994 1993
Finished goods $ 36,680 $ 39,400
Work in process 43,760 38,240
Raw materials 68,560 62,400
$149,000 $140,040
C. Property and equipment, net reflects accumulated depreciation of $318
million and $308 million as at March 31, 1994 and December 31, 1993,
respectively.
D. Other income, net for the three months ended March 31, 1994 includes gains
aggregating approximately $9.8 million pre-tax (approximately $.07 per
common share after-tax) from the sale by the Company of a portion of its
common stock holdings of an equity affiliate.
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MASCOTECH, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(concluded)
E. The following presents combined supplemental financial data of the Company
and TriMas Corporation as one entity, with MascoTech as the parent
company. The Company had an equity ownership interest in TriMas of
approximately 28 percent at March 31, 1993 and approximately 42 percent at
March 31, 1994. Intercompany transactions have been eliminated.
Approximate combined condensed financial data are as follows
(in thousands):
March 31
1994 1993
Current assets $ 820,740 $ 852,870
Current liabilities (263,700) (249,740)
Working capital 557,040 603,130
Property and equipment, net 690,480 689,040
Excess of cost over net
assets of acquired companies 523,290 596,320
Other assets 283,520 238,710
Long-term debt (1,061,150) (1,425,190)
Deferred income taxes and
other long-term liabilities (160,660) (233,250)
Equity of the other shareholders
of TriMas (144,180) (109,320)
Equity of shareholders of
MascoTech $ 688,340 $ 359,440
Net sales $ 545,350 $ 510,170
Operating profit $ 56,030 $ 55,290
Income from continuing
operations $ 26,300 $ 16,070
Net income $ 26,300 $ 17,520
Earnings attributable to
common stock $ 23,060 $ 15,190
F. In January, 1994, the Company issued, in a public offering, $345 million
of 4 1/2% Convertible Subordinated Debentures due December 15, 2003.
These debentures are convertible into Company Common Stock at $31 per
share. The net proceeds of approximately $337 million were used to
redeem $250 million of 10 1/4% Subordinated Notes on February 1, 1994
and to reduce other indebtedness.
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MASCOTECH, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales and earnings per common share from continuing operations for the
first quarter 1994 were the highest for any first quarter in the history
of the Company. Net sales from continuing operations for the first
quarter ended March 31, 1994 increased two percent to $412 million from
$404 million in 1993. Sales of transportation-related products for the
first quarter of 1994 increased four percent. First quarter
transportation-related products sales were negatively impacted by the
planned phaseout in 1993 of certain product programs by the Company's
automotive customers. This reduction was more than offset by higher levels
of automotive production and by certain new product and replacement
programs in the first quarter. Additionally, the Company anticipates
increased sales from new and replacement programs scheduled for
introduction in the latter half of 1994 and in 1995. Sales of specialty
products decreased six percent from first quarter 1993, primarily as a
result of the severe winter weather in the first quarter which adversely
impacted the residential and commercial construction markets served by the
Company.
Income from continuing operations for the first quarter 1994, after
preferred stock dividends, increased 68 percent to $23.1 million or $.32
per common share as compared with $13.7 million or $.22 per common share
in the first quarter of 1993. Operating profit was impacted by the
phaseout of certain product programs by our automotive customers, new
product program launch costs and by costs and expenses associated with
the architectural products group related to the consolidation of certain
operating activities, start up costs associated with a new manufacturing
process and the severe winter weather.
First quarter 1994 income benefitted from higher income from equity
affiliates and reduced interest expense resulting from the redemption in
late 1993 of convertible subordinated debt for Company Common Stock and
the redemption in early 1994 of subordinated debt with lower cost
financing. First quarter 1994 results also benefitted from gains
aggregating approximately $9.8 million pre-tax (approximately $.07 per
common share after-tax) from the sale by the Company of a portion of its
common stock holdings of an equity affiliate.
In January, 1994, the Company issued, in a public offering, $345 million
of 4 1/2% Convertible Subordinated Debentures due December 15, 2003.
These debentures are convertible into Company Common Stock at $31 per
share. The net proceeds were used to redeem $250 million of 10 1/4%
Subordinated Notes on February 1, 1994 and to reduce other indebtedness.
In late 1993, the Company adopted a formal plan to divest its energy-
related business segment, which consisted of seven business units with net
sales and operating profit of $52 million and $3.3 million, respectively,
for the three months ended March 31, 1993. As of March 31, 1994, three
energy-related business units have been sold for approximately $118
million cash and other non-cash consideration. The remaining four energy-
related business units had net assets at March 31, 1994 of approximately
$42.5 million (adjusted to reflect the anticipated loss upon disposition,
net of tax benefit). The energy-related business segment had net
sales of $25.5 and a net operating loss of $.3 million (charged to the
loss reserve established in 1993) for the three months ended
March 31, 1994.
The Company's cash, additional borrowings available under the Company's
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
the following: its internal cash flow; divestiture of the remaining
businesses in the energy-related segment, other nonstrategic operating
assets and certain additional financial assets; and, to the extent
necessary, future financings in the financial markets. At March 31, 1994,
current assets were in excess of two times current liabilities.
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PART II. OTHER INFORMATION
MASCOTECH, INC.
Items 1 through 5 are not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11 Computation of Earnings Per Common Share
- Primary and Fully Diluted
Exhibit 12 Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends
(b) Reports on Form 8-K:
1. Report on Form 8-K dated January 11, 1994 reporting under
Item 5 "Other Events" the reclassification of certain of the
Company's financial statements and financial information to
reflect the treatment of the Company's energy-related
businesses as discontinued operations in connection with the
Company's previously reported plan to dispose of such
businesses. The following financial statements and financial
information were filed with such report:
(i) Selected Financial Data;
(ii) MascoTech, Inc. and Subsidiaries Audited
Consolidated Financial Statements as of
December 31, 1992 and 1991 and for the three years
in the period ended December 31, 1992 and notes
thereto; and
(iii) MascoTech, Inc. and Subsidiaries Unaudited
Consolidated Condensed Financial Statements as of
September 30, 1993 and December 31, 1992 and for
the three month and nine month periods ended
September 30, 1993 and 1992 and notes thereto.
2. Report on Form 8-K dated March 2, 1994 reporting under Item 5
"Other Events" certain financial information related to 1993.
The following financial statements were filed with such
report:
(i) MascoTech, Inc. and Subsidiaries Audited
Consolidated Financial Statements as of
December 31, 1993 and 1992 and for the three years
in the period ended December 31, 1993 and notes
thereto.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MASCOTECH, INC.
(Registrant)
Date: May 13, 1994 By: /s/ Timothy Wadhams
Timothy Wadhams
Vice President - Controller
and Treasurer
(Chief accounting officer
and authorized signatory)
MASCOTECH, INC.
EXHIBIT INDEX
Exhibit
Exhibit 11 Computation of Earnings Per Common Share
- Primary and Fully Diluted
Exhibit 12 Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock
Dividends
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Exhibit 11
MASCOTECH, INC.
Computation of Earnings Per Common Share
Primary and Fully Diluted
(In thousands except per share amounts)
Three Months Ended
March 31,
1994 1993
PRIMARY:
Income from continuing operations $26,300 $16,070
Preferred stock dividends 3,240 2,330
Income from continuing operations
attributable to common stock 23,060 13,740
Add convertible preferred stock dividends 3,240 ---
Earnings for computing primary earnings
from continuing operations per common
share 26,300 13,740
Income from operations of discontinued
segment --- 1,450
Earnings attributable to common stock
for computing primary earnings per
share $26,300 $15,190
Weighted average number of common shares
outstanding during each period 60,610 59,530
Addition from assumed exercise of stock
options and warrants 6,440 2,020
Addition from assumed conversion of
preferred stock 10,540 ---
Weighted average number of common shares and
equivalents outstanding during each period
--without dilution 77,590 61,550
Primary earnings per common and common
equivalent share:
Continuing operations $ .34 $ .22
Income from operations of discontinued
segment -- .03
Earnings attributable to common stock $ .34 $ .25
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Exhibit 11
MASCOTECH, INC.
Computation of Earnings Per Common Share
Primary and Fully Diluted
(In thousands except per share amounts)
(concluded)
Three Months Ended
March 31,
1994 1993
FULLY DILUTED:
Income from continuing operations $26,300 $16,070
Preferred stock dividends 3,240 2,330
Income from continuing operations
attributable to common stock 23,060 13,740
Add after-tax convertible debenture
related expenses 2,040 1,870
Add convertible preferred stock dividends 3,240 ---
Earnings for computing fully diluted
earnings from continuing operations
per common share 28,340 15,610
Income from operations of discontinued
segment --- 1,450
Earnings attributable to common
stock, as adjusted $28,340 $17,060
Weighted average number of common shares
outstanding during each period 60,610 59,530
Addition from assumed conversion of
convertible debentures as of the issue date 9,650 10,380
Addition from assumed exercise of stock
options and warrants 6,440 2,570
Addition from assumed conversion of
preferred stock 10,800 ---
Weighted average number of common shares and
equivalents outstanding during each period
--fully diluted basis 87,500 72,480
Fully diluted earnings per common and common
equivalent share:
Continuing operations $ .32 $ .22
Income from operations of discontinued
segment -- .02
Earnings attributable to common stock $ .32 $ .24
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Exhibit 12
MASCOTECH, INC.
Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
(Dollars in thousands)
<CAPTION>
3 Months
Ended
March 31, For The Years Ended December 31
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Earnings Before Income
Taxes and Fixed Charges:
Income (loss) from continuing
operations before income
taxes and extraordinary
income..................... $ 43,830 $121,180 $ 68,250 $(12,470) $(30,240) $85,410
Add (deduct) equity in
undistributed (earnings)
losses of less-than-fifty-
percent owned companies.... (4,150) (19,930) (21,760) (3,530) (3,430) (1,980)
Add interest on
indebtedness, net.......... 11,450 83,000 87,830 124,220 139,770 146,570
Add amortization of debt
expense.................... 660 4,390 1,930 2,230 2,670 3,510
Estimated interest factor
for rentals................ 1,420 5,550 5,740 5,220 4,520 4,470
Earnings before income
taxes and fixed charges.... $ 53,210 $194,190 $141,990 $115,670 $113,290 $237,980
Fixed Charges:
Interest on indebtedness,
net........................ $ 11,470 $ 83,110 $ 87,980 $124,370 $140,380 $147,320
Amortization of debt
expense.................... 660 4,390 1,930 2,230 2,670 3,510
Estimated interest factor
for rentals................ 1,420 5,550 5,740 5,220 4,520 4,470
Total fixed charges...... 13,550 93,050 95,650 131,820 147,570 155,300
Preferred stock dividend
requirement (a)............ 5,430 25,860 17,140 11,350 120 130
Combined fixed charges and
preferred stock dividends.. $ 18,980 $118,910 $112,790 $143,170 $147,690 $155,430
Ratio of earnings to
fixed charges................ 3.9 2.1 1.5 .9(b) .8(d) 1.5
Ratio of earnings to combined
fixed charges and preferred
stock dividends.............. 2.8 1.6 1.3 .8(c) .8(e) 1.5
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(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 are inadequate to cover fixed charges by $16,150.
(c) 1991 earnings are inadequate to cover combined fixed charges and
preferred stock dividends by $27,500.
(d) 1990 earnings are inadequate to cover fixed charges by $34,280.
(e) 1990 earnings are inadequate to cover combined fixed charges and
preferred stock dividends by $34,400.
