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, 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 April 30, 1995
Common stock, par value $1 per share 56,100,000
<PAGE>
MASCOTECH, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet -
March 31, 1995 and December 31, 1994 1
Consolidated Condensed Statement of Income
for the Three Months Ended
March 31, 1995 and 1994 2
Consolidated Condensed Statement of
Cash Flows for the Three Months
Ended March 31, 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
Part II. Other Information and Signature 7-8
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MASCOTECH, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
March 31, 1995 and December 31, 1994
(Dollars in thousands)
March 31, December 31,
ASSETS 1995 1994
Current assets:
Cash and cash investments $ 25,100 $ 61,950
Marketable securities 31,270 62,110
Receivables 193,340 171,870
Inventories 93,350 91,950
Deferred and refundable income taxes 23,340 23,800
Prepaid expenses and other assets 45,030 39,800
Net current assets of businesses held
for disposition 121,470 146,690
Total current assets 532,900 598,170
Equity and other investments in affiliates 206,620 173,230
Property and equipment, net 400,730 379,330
Excess of cost over net assets of acquired
companies 96,180 93,820
Notes receivable and other assets 63,620 53,770
Net non-current assets of businesses held
for disposition 189,720 232,370
Total assets $1,489,770 $1,530,690
LIABILITIES
Current liabilities:
Accounts payable $ 97,720 $ 111,860
Accrued liabilities 92,700 72,090
Current portion of long-term debt 5,850 3,670
Total current liabilities 196,270 187,620
Long-term debt 802,030 868,240
Deferred income taxes and other long-term
liabilities 97,950 93,690
Total liabilities 1,096,250 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: 56.6 million
and 56.6 million 56,610 56,610
Paid-in capital 318,960 318,960
Retained earnings (deficit) 2,630 (7,590)
Cumulative translation adjustments 4,520 2,360
Total shareholders' equity 393,520 381,140
Total liabilities and
shareholders' equity $1,489,770 $1,530,690
The accompanying notes are an integral part of the
consolidated condensed financial statements.
1
<PAGE>
MASCOTECH, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
For the Three Months Ended March 31, 1995 and 1994
(Dollars in thousands except per share amounts)
Three Months Ended March 31
1995 1994
Net sales $ 445,010 $ 412,410
Cost of sales (369,550) (332,120)
Selling, general and
administrative expenses (46,890) (44,660)
Operating profit 28,570 35,630
Other income (expense), net:
Interest expense (14,690) (11,080)
Equity and interest income
from affiliates 7,050 4,620
Other income, net 1,990 14,660
(5,650) 8,200
Income before income taxes 22,920 43,830
Income taxes 9,460 17,530
Net income $ 13,460 $ 26,300
Preferred stock dividends $ 3,240 $ 3,240
Earnings attributable to
common stock $ 10,220 $ 23,060
Earnings per common and
common equivalent share:
Primary $ .18 $ .34
Fully diluted $ .18 $ .32
Cash dividends declared $ -- $ .02
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 Three Months Ended March 31, 1995 and 1994
(Dollars in thousands)
Three Months Ended
March 31
1995 1994
CASH FROM (USED FOR):
OPERATIONS:
Net cash from earnings $ 24,720 $ 27,340
(Increase) decrease in inventories 2,840 (7,100)
(Increase) in receivables (7,860) (18,940)
(Decrease) in accounts payable and
accrued liabilities (8,640) (2,150)
(Increase) decrease in marketable
securities, net 30,840 (30,010)
Other, net 500 (6,990)
Net cash from (used for)
operating activities 42,400 (37,850)
FINANCING:
Issuance of convertible debt --- 337,240
Retirement of 101/4% Notes --- (253,120)
Retirement of 10% Notes (233,150) ---
Payment of other debt (8,130) (69,570)
Increase in other debt 173,750 ---
Payment of preferred stock dividends (3,240) (3,240)
Payment of common stock dividends (1,780) (1,200)
Other, net (3,210) (3,440)
Net cash from (used for) financing
activities (75,760) 6,670
INVESTMENTS:
Capital expenditures (23,710) (24,790)
Proceeds from sale of businesses 28,880 13,500
Acquisition of businesses (21,190) ---
Sale of common stock of affiliate --- 9,810
Receipt of cash from notes receivable 9,500 ---
Net assets of businesses held for
disposition (740) ---
Other, net 3,770 (1,090)
Net cash from (used for) investing
activities (3,490) (2,570)
CASH AND CASH INVESTMENTS:
(Decrease) increase for the three months (36,850) (33,750)
At January 1 61,950 83,200
At March 31 $ 25,100 $ 49,450
Supplemental Cash Flow Information:
Net cash paid during the period for:
Interest $ 16,910 $ 26,520
Income taxes $ 13,770 $ 2,810
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 March 31, 1995 and the results of operations and cash flows
for the three months ended March 31, 1995 and 1994. In addition, the
balance sheet as of March 31, 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 were calculated based on 58.9 million
and 77.6 million weighted average common shares outstanding for the three
months ended March 31, 1995 and 1994, respectively. The convertible
preferred stock does not meet the criteria for inclusion as common stock
equivalents in the first quarter of 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 three months ended March 31, 1994 was
calculated based on 87.5 million weighted average common shares
outstanding. Convertible securities did not have a dilutive effect on
earnings per common share for the three months ended March 31, 1995.
B. Inventories by component are as follows (in thousands):
March 31, December 31,
1995 1994
Finished goods $ 24,890 $ 15,990
Work in process 38,130 29,260
Raw materials 30,330 46,700
$ 93,350 $ 91,950
C. Property and equipment, net reflects accumulated depreciation of $259
million and $247 million as at March 31, 1995 and December 31, 1994,
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.
E. On March 15, 1995 the Company redeemed at maturity $233 million of its 10%
Senior Subordinated Notes.
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. This exchange resulted in the
Company receiving notes receivable due from, and a 29 percent equity
ownership interest in, the acquiring Company, Saturn Electronics &
Engineering, Inc.
4
<PAGE>
MASCOTECH, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(concluded)
G. 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 March 31, 1995 and March 31, 1994.
Intercompany transactions have been eliminated. Approximate combined
condensed financial data are as follows (in thousands):
March 31
1995 1994
Current assets $ 808,800 $ 820,740
Current liabilities (259,970) (263,700)
Working capital 548,830 557,040
Property and equipment, net 569,140 690,480
Excess of cost over net
assets of acquired companies 183,820 523,290
Other assets 437,460 283,520
Long-term debt (1,040,430) (1,061,150)
Deferred income taxes and
other long-term liabilities (129,000) (160,660)
Equity of the other shareholders
of TriMas (176,300) (144,180)
Equity of shareholders of
MascoTech $ 393,520 $ 688,340
Net sales $ 591,770 $ 545,350
Operating profit $ 53,040 $ 56,030
Net income $ 13,460 $ 26,300
Earnings attributable to
common stock $ 10,220 $ 23,060
5
<PAGE>
MASCOTECH, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales for the first quarter ended March 31, 1995 increased eight percent
to $445 million from $412 million in 1994. In December 1994, the Company
announced the planned disposition of a number of businesses, including its
Architectural Products and Defense businesses and certain of its transportation-
related businesses as part of its long-term strategic plan to increase the focus
on its core operating capabilities. Sales of the Company's core transportation-
related businesses, which approximated $301 million, increased approximately 18
percent in the first quarter of 1995, while sales of the Company's businesses
held for sale, which approximated $144 million, decreased approximately eight
percent from the comparable period in 1994.
Income for the first quarter 1995, after preferred stock dividends, was
$10.2 million or $.18 per common share, compared with $23.1 million or $.32 per
common share in the comparable period in 1994.
Operating profit for the Company's core businesses before general
corporate expense was approximately $34 million and $37 million for the quarters
ended March 31, 1995 and 1994, respectively. First quarter 1995 operating
performance 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 principally
for the Company's core transportation-related businesses. Non-core businesses
had an operating loss of approximately $1 million in the quarter ended March 31,
1995, partly as a result of restructuring costs, as compared to an operating
profit of approximately $1 million in the comparable period in 1994.
First quarter 1994 results benefitted from gains aggregating approximately
$9.8 million pre-tax (approximately $.07 per common share after tax) from the
sale by the Company of stock of an equity affiliate.
As part of the Company's planned disposition of its non-core businesses,
the Company recently exchanged a business unit with annual sales of
approximately $60 million for notes receivable and an approximate 29 percent
equity ownership interest in the acquiring company, Saturn Electronics &
Engineering, Inc. The value of the consideration received approximated the
carrying value of this business unit at December 31, 1994.
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.
The Company paid a cash dividend of $.03 per common share in the first
quarter of 1995 and the Board of Directors declared a dividend of $.03 per
common share on April 3, 1995 payable on May 15, 1995.
The Company's cash, marketable securities, additional borrowings available
under the Company's revolving credit agreement and otherwise, and anticipated
internal cash flow 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 non-core businesses and certain financial assets and, to the
extent necessary, future financings in the financial markets. At March 31,
1995, current assets were in excess of two times current liabilities.
6
<PAGE>
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
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
1. Report on Form 8-K dated December 22, 1994 reporting under
Item 5 "Other Events" unaudited pro forma consolidated
condensed balance sheet as of December 31, 1994 and unaudited
pro forma consolidated condensed statement of operations for
the year ended December 31, 1994 for the assumed disposition
of the net assets of the Company's Architectural, Defense and
certain transportation-related businesses.
7
<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: May 15, 1995 By: /s/Timothy Wadhams
Timothy Wadhams
Vice President - Controller
and Treasurer
(Chief accounting officer
and authorized signatory)
8
<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)
Three Months Ended
March 31,
1995 1994
PRIMARY:
Net income $13,460 $26,300
Preferred stock dividends 3,240 3,240
Net income attributable to common stock 10,220 23,060
Add convertible preferred stock dividends -- (A) 3,240
Add after tax interest expense reduction on
conversion of stock options and warrants 300 --
Earnings attributable to common stock
for computing primary earnings per
share, as adjusted $10,520 $26,300
Weighted average number of common shares
outstanding during each period 56,610 60,610
Addition from assumed exercise of stock
options and warrants 2,330 6,440
Addition from assumed conversion of
preferred stock -- (A) 10,540
Weighted average number of common shares
and equivalents outstanding during each
period--without dilution 58,940 77,590
Primary earnings per common and common
equivalent share $ .18 $ .34
FULLY DILUTED:
Net income $13,460 $26,300
Preferred stock dividends 3,240 3,240
Net income attributable to common stock 10,220 23,060
Add after-tax convertible debenture
related expenses -- (A) 2,040
Add convertible preferred stock dividends -- (A) 3,240
Add interest reduction on conversion of
stock options and warrants 300 --
Earnings attributable to common
stock, as adjusted $10,520 $28,340
Weighted average number of common shares
outstanding during each period 56,610 60,610
Addition from assumed conversion of
convertible debentures as of the issue date -- (A) 9,650
Addition from assumed exercise of stock
options and warrants 2,330 6,440
Addition from assumed conversion of
preferred stock -- (A) 10,800
Weighted average number of common shares and
equivalents outstanding during each period
--fully diluted basis 58,940 87,500
Fully diluted earnings per common and common
equivalent share $ .18 $ .32
Earnings per common share for the quarter ended March 31, 1995 was
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)
<CAPTION>
3 Months
Ended
March 31 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..................... $ 22,920 $(264,490) $121,180 $ 68,250 $(12,470) $(30,240)
Add (deduct) equity in
undistributed (earnings)
losses of less-than-fifty-
percent owned companies.... (4,810) (23,350) (19,930) (21,760) (3,530) (3,430)
Add interest on
indebtedness, net.......... 15,050 51,290 83,000 87,830 124,220 139,770
Add amortization of debt
expense.................... 560 3,450 4,390 1,930 2,230 2,670
Estimated interest factor
for rentals................ 1,660 6,220 5,550 5,740 5,220 4,520
Earnings before income
taxes and fixed charges.... $ 35,380 $(226,880) $194,190 $141,990 $115,670 $113,290
Fixed Charges:
Interest on indebtedness,
net........................ $ 15,100 $ 51,540 $ 83,110 $ 87,980 $124,370 $140,380
Amortization of debt
expense.................... 560 3,450 4,390 1,930 2,230 2,670
Estimated interest factor
for rentals................ 1,660 6,220 5,550 5,740 5,220 4,520
Total fixed charges...... 17,320 61,210 93,050 95,650 131,820 147,570
Preferred stock dividend
requirement (a)............ 5,520 14,630 25,860 17,140 11,350 120
Combined fixed charges and
preferred stock dividends.. $ 22,840 $ 75,840 $118,910 $112,790 $143,170 $147,690
Ratio of earnings to
fixed charges................ 2.0 --(b) 2.1 1.5 .9(d) .8(f)
Ratio of earnings to combined
fixed charges and preferred
stock dividends.............. 1.5 --(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 MARCH 31,
1995 MASCOTECH, INC. 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 25,100
<SECURITIES> 31,270
<RECEIVABLES> 193,340<F1>
<ALLOWANCES> 0
<INVENTORY> 93,350
<CURRENT-ASSETS> 532,900
<PP&E> 660,040
<DEPRECIATION> (259,310)
<TOTAL-ASSETS> 1,489,770
<CURRENT-LIABILITIES> 196,270
<BONDS> 802,030
<COMMON> 56,610
0
10,800
<OTHER-SE> 326,110
<TOTAL-LIABILITY-AND-EQUITY> 1,489,770
<SALES> 445,010
<TOTAL-REVENUES> 445,010
<CGS> 369,550
<TOTAL-COSTS> 369,550
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,690
<INCOME-PRETAX> 22,290
<INCOME-TAX> 9,460
<INCOME-CONTINUING> 13,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,460
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
<FN>
<F1>RECEIVABLE ARE PRESENTED NET OF ALLOWANCES
</FN>
</TABLE>
