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 June 30, 1995
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 July 31, 1995
Common stock, par value $1 per share 56,220,000
<PAGE>
MASCOTECH, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet -
June 30, 1995 and December 31, 1994 1
Consolidated Condensed Statements of Income
for the Three and Six Months Ended
June 30, 1995 and 1994 2
Consolidated Condensed Statement of
Cash Flows for the Six Months
Ended June 30, 1995 and 1994 3
Notes to Consolidated Condensed Financial
Statements 4-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6-7
Part II. Other Information and Signature 8-9
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MASCOTECH, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
June 30, 1995 and December 31, 1994
(Dollars in thousands)
June 30, December 31,
ASSETS 1995 1994
Current assets:
Cash and cash investments $ 15,360 $ 61,950
Marketable securities 8,880 62,110
Receivables 180,910 171,870
Inventories 98,270 91,950
Deferred and refundable income taxes 6,330 23,800
Prepaid expenses and other assets 32,670 39,800
Net current assets of businesses held
for disposition 97,700 146,690
Total current assets 440,120 598,170
Equity and other investments in affiliates 225,060 173,230
Property and equipment, net 417,490 379,330
Excess of cost over net assets of acquired
companies 96,860 93,820
Notes receivable and other assets 62,490 53,770
Net non-current assets of businesses held
for disposition 206,300 232,370
Total assets $1,448,320 $1,530,690
LIABILITIES
Current liabilities:
Accounts payable $ 93,920 $ 111,860
Accrued liabilities 80,630 72,090
Current portion of long-term debt 6,260 3,670
Total current liabilities 180,810 187,620
Long-term debt 763,460 868,240
Deferred income taxes and other long-term
liabilities 99,910 93,690
Total liabilities 1,044,180 1,149,550
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: 56.1 million
and 56.6 million 56,090 56,610
Paid-in capital 313,530 318,960
Retained earnings (deficit) 12,720 (7,590)
Cumulative translation adjustments 11,000 2,360
Total shareholders' equity 404,140 381,140
Total liabilities and
shareholders' equity $1,448,320 $1,530,690
The accompanying notes are an integral part of the
consolidated condensed financial statements.
1
<PAGE>
MASCOTECH, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1995 and 1994
(Dollars in thousands except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Net sales $ 439,290 $ 432,780 $ 884,300 $ 845,190
Cost of sales (371,040) (343,070) (740,590) (675,190)
Selling, general and
administrative expenses (46,890) (49,310) (93,780) (93,970)
Operating profit 21,360 40,400 49,930 76,030
Other income (expense), net:
Interest expense (13,110) (11,840) (27,800) (22,920)
Equity and interest income
from affiliates 11,360 8,070 18,410 12,690
Gain from change in
investment of
equity affiliate 5,100 --- 5,100 ---
Other income, net 770 13,260 2,760 27,920
4,120 9,490 (1,530) 17,690
Income before income taxes 25,480 49,890 48,400 93,720
Income taxes 10,380 20,450 19,840 37,980
Net income $ 15,100 $ 29,440 $ 28,560 $ 55,740
Preferred stock dividends $ 3,240 $ 3,240 $ 6,480 $ 6,480
Earnings attributable to
common stock $ 11,860 $ 26,200 $ 22,080 $ 49,260
Earnings per common and
common equivalent share:
Primary $ .21 $ .39 $ .39 $ .73
Fully diluted $ .21 $ .37 $ .39 $ .69
Cash dividends declared $ .03 $ .02 $ .03 $ .04
The accompanying notes are an integral part of the
consolidated condensed financial statements.
2
<PAGE>
MASCOTECH, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1995 and 1994
(Dollars in thousands)
Six Months Ended
June 30,
1995 1994
CASH FROM (USED FOR):
OPERATIONS:
Net cash from earnings $ 40,190 $ 59,410
(Increase) in inventories (1,150) (6,460)
(Increase) in receivables (8,940) (32,790)
Increase (decrease) in accounts payable
and accrued liabilities (25,800) 9,430
(Increase) decrease in marketable
securities, net 53,230 (36,670)
Other, net 33,550 (13,360)
Net cash from (used for)
operating activities 91,080 (20,440)
FINANCING:
Issuance of convertible debt --- 337,240
Retirement of Senior Subordinated Notes (233,150) (253,120)
Payment of other debt (48,460) (82,480)
Increase in other debt 173,750 30,030
Retirement of Company Common Stock (5,990) (29,490)
Payment of preferred stock dividends (6,480) (6,480)
Payment of common stock dividends (3,550) (3,010)
Other, net (3,170) (3,420)
Net cash (used for) financing
activities (127,050) (10,730)
INVESTMENTS:
Capital expenditures (33,210) (56,120)
Cash proceeds from sale of businesses 37,400 20,330
Acquisition of businesses (22,810) ---
Receipt of cash from notes receivable 5,160 13,590
Sale of common stock of affiliate --- 17,040
Net assets of businesses held for disposition 5,380 (4,580)
Other, net (2,540) 3,370
Net cash (used for) investing
activities (10,620) (6,370)
CASH AND CASH INVESTMENTS:
(Decrease) increase for the six months (46,590) (37,540)
At January 1 61,950 83,200
At June 30 $ 15,360 $ 45,660
Supplemental Cash Flow Information:
Net cash paid during the period for:
Interest $ 33,470 $ 34,820
Income taxes $ 3,060 $ 7,480
The accompanying notes are an integral part of the
consolidated condensed financial statements.
3
<PAGE>
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 June 30, 1995, the results of operations for the three and
six months ended June 30, 1995 and 1994, and cash flows for the six months
ended June 30, 1995 and 1994. In addition, the balance sheet as of June
30, 1995 and December 31, 1994 reflects the segregation of net current and
net non-current assets related to the plan, adopted in late 1994, to
dispose of certain businesses.
Primary earnings per common share was calculated based on 58.9 million and
76.7 million weighted average common shares outstanding for the six months
ended June 30, 1995 and 1994, respectively. The convertible preferred
stock does not meet the criteria for inclusion in the primary earnings per
share calculation, as it would be anti-dilutive for the six months and
three months ended June 30, 1995.
Fully diluted earnings per common share are only presented when the
assumed conversion of convertible securities is dilutive. Fully diluted
earnings per common share for the six months and three months ended June
30, 1994 were calculated based on 86.8 million and 86.3 million weighted
average common shares outstanding, respectively. Convertible securities
did not have a dilutive effect on earnings per common share for the six
months and three months ended June 30, 1995.
B. Inventories by component are as follows (in thousands):
June 30, December 31,
1995 1994
Finished goods $ 26,410 $ 15,990
Work in process 36,180 29,260
Raw materials 35,680 46,700
$ 98,270 $ 91,950
C. Property and equipment, net reflects accumulated depreciation of $270
million and $247 million as at June 30, 1995 and December 31, 1994,
respectively.
D. Other income, net for the six months and three months ended June 30, 1994
includes gains aggregating approximately $16.9 million and $7.1 million
pre-tax, respectively, (approximately $.12 and $.05 per common share
after-tax, respectively), from the sale by the Company of a portion of its
common stock holdings of an equity affiliate.
E. In June, 1995 Titan Wheel International, Inc. ("Titan") an equity
affiliate sold newly issued common stock in a public offering and issued
common stock as a result of the conversion of convertible securities. The
Company recognized pre-tax income of approximately $5.1 million
(approximately $.05 per common share after-tax) as a result of the change
in the Company's equity ownership interest in Titan which approximates 15
percent at June 30, 1995.
4
<PAGE>
MASCOTECH, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(concluded)
F. The Company, as part of its disposition of non-core businesses, exchanged
a business unit with annual sales and net book value of approximately $60
million and $37 million respectively. The exchange resulted in the
Company receiving notes receivable due from, and a 29 percent equity
ownership interest in, the acquiring Company, Saturn Electronics and
Engineering, Inc.
G. On March 15, 1995, the Company redeemed at maturity $233 million of its
10% Senior Subordinated Notes.
H. To date, the Company, as part of its disposition of non-core businesses,
has disposed of business units with annual sales of approximately $120
million.
I. 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 42 percent at June 30, 1995 and June 30, 1994. Intercompany
transactions have been eliminated. Approximate combined condensed
financial data are as follows (in thousands):
June 30
1995 1994
Current assets $ 724,640 $ 852,270
Current liabilities (241,240) (275,120)
Working capital 483,400 577,150
Property and equipment, net 586,190 711,110
Excess of cost over net
assets of acquired companies 183,800 526,890
Other assets 468,930 267,920
Long-term debt (1,001,860) (1,073,950)
Deferred income taxes and
other long-term liabilities (131,620) (165,820)
Equity of the other shareholders
of TriMas (184,700) (156,350)
Equity of shareholders of
MascoTech $ 404,140 $ 686,950
Net sales $1,182,130 $1,123,710
Operating profit $ 103,830 $ 123,860
Net income $ 28,560 $ 55,740
Earnings attributable to
common stock $ 22,080 $ 49,260
5
<PAGE>
MASCOTECH, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales for the second quarter ended June 30, 1995 increased modestly to
$439 million from $433 million in 1994. Sales of the Company's core
transportation-related businesses, which approximated $298 million, increased 12
percent in the second quarter of 1995, while sales of the Company's
businesses held for sale, which approximated $141 million, decreased 16 percent
from the comparable period in 1994.
Net sales for the six month period ended June 30, 1995 increased five
percent over the comparable period in 1994. Sales of the Company's core
transportation-related businesses for the six months ended June 30, 1995 which
approximated $600 million increased 15 percent compared to the prior year
period, while sales of the Company's businesses held for sale, which
approximated $285 million, decreased 12 percent from the comparable period in
1994.
Income for the second quarter 1995, after preferred stock dividends, was
$11.9 million or $.21 per common share, compared with $26.2 million or $.37 per
common share in the comparable period in 1994.
Operating profit for the Company's core businesses before general
corporate expenses for the six months and three months ended June 30, 1995 was
$67 million and $33 million, respectively as compared with $78 million and
$41 million respectively for the comparable periods in 1994. The core
businesses' operating performance for the six and three month periods was
negatively impacted by increased costs and expenses reflecting start-up costs
associated with the Company's expanded capital investment programs, launch
costs for new products, and increased steel costs. Businesses held for sale had
operating losses for the six months and three months ended June 30, 1995
of approximately $7 million and $6 million respectively as compared with
operating profit of $4 million and $3 million respectively for the
comparable period in 1994. The businesses held for sale operating loss
for the three months ended June 30, 1995 was negatively impacted by reduced
operating performance and restructuring costs.
In December 1994, the Company announced the planned disposition of a
number of businesses, including its Architectural Products, Defense and certain
of its transportation-related businesses, as part of its long-term strategic
plan to increase the focus on its core operating capabilities. To date the
Company has disposed of such businesses with aggregate annual sales of
approximately $120 million. Net assets of businesses held for disposition
decreased by approximately $75 million as a result of such dispositions and from
the reduction of assets employed in these businesses through operating activity,
asset sales and redeployment of assets. The Company continues to believe that
the divestiture of the remaining businesses held for sale will be largely
completed in 1995. The Company expects that the disposition of these
non-core businesses will have a favorable long-term effect on the Company's
balance sheet and future per common share earnings.
The Company recognized pre-tax income of approximately $5.1 million
(approximately $.05 per common share after-tax) in the second quarter of 1995 as
a result of a gain associated with the sale of stock through a public offering
by an equity affiliate. Results for the six and three months ended June 30,
1994 also benefitted from gains aggregating approximately $16.9 million and $7.1
million pre-tax, respectively, from the sale by the Company of a portion of its
common stock holdings of an equity affiliate.
On March 15, 1995, the Company redeemed at maturity $233 million of 10%
Senior Subordinated Notes utilizing additional borrowings under the Company's
revolving credit agreement.
Total capital-related expenditures for the six months ended June 30, 1995
were approximately $48 million including expenditures related to the Company's
non-core business operations and assets leased to the Company pursuant to
operating leases.
The Company paid a cash dividend of $.03 per common share in the second
quarter of 1995 and the Board of Directors declared a dividend of $.04 per
common share, a 33 percent increase in the quarterly dividend rate, on
July 5, 1995 payable on August 14, 1995.
6
<PAGE>
MASCOTECH, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(concluded)
The Company's anticipated internal cash flow, additional borrowings
available under the Company's revolving credit agreement and otherwise, are
expected to provide sufficient liquidity to fund its near-term working capital
and capital expansion programs. The Company believes that its longer-term
working capital and other general corporate requirements will be satisfied
through its internal cash flow, revolving credit agreement, divestiture of
businesses held for sale and certain financial assets and, to the extent
necessary, future financings in the financial markets. At June 30, 1995,
current assets were in excess of two times current liabilities.
7
<PAGE>
PART II. OTHER INFORMATION
MASCOTECH, INC.
Items 1, 2, 3 and 5 are not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on May 17, 1995 at which
a nominee for the Company's Board of Directors identified in the
Company's proxy statement dated April 18, 1995, was re-elected.
Following is a tabulation of shares voted:
Election of Director
Richard Manoogian
For 57,757,690
Withheld 476,000
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
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
None
8
<PAGE>
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: August 14, 1995 By: /s/Timothy Wadhams
Timothy Wadhams
Vice President - Controller
and Treasurer
(Chief accounting officer
and authorized signatory)
9
<PAGE>
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
Exhibit 27 Financial Data Schedule
Exhibit 11
MASCOTECH, INC.
Computation of Earnings Per Common Share
Primary and Fully Diluted
(In thousands except per share amounts)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
PRIMARY:
Net income $15,100 $29,440 $28,560 $55,740
Preferred stock dividends 3,240 3,240 6,480 6,480
Net income attributable to common stock 11,860 26,200 22,080 49,260
Add convertible preferred stock dividend --- (A) 3,240 --- (A) 6,480
Add after tax interest expense reduction on
conversion of stock options and warrants 320 --- 640 ---
Earnings attributable to common stock
for computing primary earnings per
share, as adjusted $12,180 $29,440 $22,720 $55,740
Weighted average number of common shares
outstanding during each period 56,220 60,680 56,420 60,640
Addition from assumed exercise of stock
options and warrants, net of assumed
repurchases 2,430 3,970 2,430 5,210
Addition from assumed conversion of
preferred stock --- (A) 10,800 --- (A) 10,800
Weighted average number of common shares
and equivalents outstanding during each
period--without dilution 58,650 75,450 58,850 76,650
Primary earnings per common and common
equivalent share $ .21 $ .39 $ .39 $ .73
FULLY DILUTED:
Net income $15,100 $29,440 $28,560 $55,740
Preferred stock dividends 3,240 3,240 6,480 6,480
Net income attributable to common stock 11,860 26,200 22,080 49,260
Add after-tax convertible debenture
related expenses --- (A) 2,570 --- (A) 4,610
Add convertible preferred stock dividends --- (A) 3,240 --- (A) 6,480
Add after tax interest expense reduction on
conversion of stock options and warrants 250 --- 580 ---
Earnings attributable to common
stock, as adjusted $12,110 $32,010 $22,660 $60,350
Weighted average number of common shares
outstanding during each period 56,220 60,680 56,420 60,640
Addition from assumed conversion of
convertible debentures as of the issue date --- (A) 10,830 --- (A) 10,190
Addition from assumed exercise of stock
options and warrants, net of assumed
repurchases 2,430 3,970 2,430 5,210
Addition from assumed conversion of
preferred stock --- (A) 10,800 --- (A) 10,800
Weighted average number of common shares and
equivalents outstanding during each period
--fully diluted basis 58,650 86,280 58,850 86,840
Fully diluted earnings per common and common
equivalent share $ .21 $ .37 $ .39 $ .69
Earnings per common share for the periods ended June 30, 1995 were computed based on the modified treasury stock method
which results in an assumed interest expense reduction and incremental shares based on assumed conversion of all stock options
and warrants and, in 1994, on the treasury stock method.
(A) Anti-dilutive in 1995.
</TABLE>
Exhibit 12
MASCOTECH, INC.
Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
(Dollars in thousands)
<TABLE>
6 Months
Ended
June 30, For The Years Ended December 31
1995 1994 1993 1992 1991 1990
<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..................... $ 48,400 $(264,490) $121,180 $ 68,250 $(12,470) $(30,240)
Deduct equity in
undistributed earnings
of less-than-fifty-
percent owned companies.... (19,250) (23,350) (19,930) (21,760) (3,530) (3,430)
Add interest on
indebtedness, net.......... 28,560 51,290 83,000 87,830 124,220 139,770
Add amortization of debt
expense.................... 930 3,450 4,390 1,930 2,230 2,670
Estimated interest factor
for rentals................ 3,240 6,220 5,550 5,740 5,220 4,520
Earnings before income
taxes and fixed charges.... $ 61,880 $(226,880) $194,190 $141,990 $115,670 $113,290
Fixed Charges:
Interest on indebtedness,
net........................ $ 28,650 $ 51,540 $ 83,110 $ 87,980 $124,370 $140,380
Amortization of debt
expense.................... 930 3,450 4,390 1,930 2,230 2,670
Estimated interest factor
for rentals................ 3,240 6,220 5,550 5,740 5,220 4,520
Total fixed charges...... 32,820 61,210 93,050 95,650 131,820 147,570
Preferred stock dividend
requirement (a)............ 10,980 14,630 25,860 17,140 11,350 120
Combined fixed charges and
preferred stock dividends.. $ 43,800 $ 75,840 $118,910 $112,790 $143,170 $147,690
Ratio of earnings to
fixed charges................ 1.9 --(b) 2.1 1.5 .9(d) .8(f)
Ratio of earnings to combined
fixed charges and preferred
stock dividends.............. 1.4 --(c) 1.6 1.3 .8(e) .8(g)
(a) Represents amount of income before provision for income taxes required to meet the preferred stock dividend
requirements of the Company and its 50% owned companies.
(b) 1994 results of operations are inadequate to cover fixed charges by $288,090.
(c) 1994 results of operations are inadequate to cover combined fixed charges and preferred stock dividends by $302,720.
(d) 1991 earnings are inadequate to cover fixed charges by $16,150.
(e) 1991 earnings are inadequate to cover combined fixed charges and preferred stock dividends by $27,500.
(f) 1990 earnings are inadequate to cover fixed charges by $34,280.
(g) 1990 earnings are inadequate to cover combined fixed charges and preferred stock dividends by $34,400.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCOTECH,
INC.'S JUNE 30, 1995 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 15,360
<SECURITIES> 8,880
<RECEIVABLES> 180,910
<ALLOWANCES> 0
<INVENTORY> 98,270
<CURRENT-ASSETS> 440,120
<PP&E> 687,050
<DEPRECIATION> (269,560)
<TOTAL-ASSETS> 1,448,320
<CURRENT-LIABILITIES> 180,810
<BONDS> 763,460
<COMMON> 56,090
0
10,800
<OTHER-SE> 337,250
<TOTAL-LIABILITY-AND-EQUITY> 1,448,320
<SALES> 884,300
<TOTAL-REVENUES> 884,300
<CGS> 740,590
<TOTAL-COSTS> 740,590
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,800
<INCOME-PRETAX> 48,400
<INCOME-TAX> 19,840
<INCOME-CONTINUING> 28,560
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,560
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
