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, 1996
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, 1996
Common stock, par value $1 per share 55,210,000
<PAGE>
MASCOTECH, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet -
March 31, 1996 and December 31, 1995 1
Consolidated Condensed Statement of Income
for the Three Months Ended
March 31, 1996 and 1995 2
Consolidated Condensed Statement of
Cash Flows for the Three Months
Ended March 31, 1996 and 1995 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, 1996 and December 31, 1995
(Dollars in thousands)
March 31, December 31,
ASSETS 1996 1995
Current assets:
Cash and cash investments $ 6,280 $ 16,380
Marketable securities 4,120 4,120
Receivables 215,880 216,490
Inventories 97,900 94,420
Deferred and refundable income taxes 50,110 51,300
Prepaid expenses and other assets 18,600 21,630
Net current assets of businesses held
for disposition 24,850 62,410
Total current assets 417,740 466,750
Equity and other investments in affiliates 240,820 237,530
Property and equipment, net 466,980 466,450
Excess of cost over net assets of acquired
companies 117,790 115,750
Notes receivable and other assets 48,650 47,780
Net non-current assets of businesses held
for disposition 21,290 104,510
Total assets $1,313,270 $1,438,770
LIABILITIES
Current liabilities:
Accounts payable $ 91,410 $ 99,710
Accrued liabilities 94,280 82,400
Current portion of long-term debt 5,360 5,150
Total current liabilities 191,050 187,260
Long-term debt 557,790 701,910
Deferred income taxes and other long-term
liabilities 138,400 134,420
Total liabilities 887,240 1,023,590
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: 55.4 million
and 55.5 million 55,390 55,520
Paid-in capital 304,850 307,910
Retained earnings 49,560 32,380
Cumulative translation adjustments 5,430 8,570
Total shareholders' equity 426,030 415,180
Total liabilities and
shareholders' equity $1,313,270 $1,438,770
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, 1996 and 1995
(Dollars in thousands except per share amounts)
Three Months Ended March 31
1996 1995
Net sales $ 373,920 $ 445,010
Cost of sales (312,480) (368,550)
Selling, general and
administrative expenses (37,530) (46,390)
Charge for disposition of
businesses, net (2,000) (1,500)
Operating profit 21,910 28,570
Other income (expense), net:
Interest expense (7,930) (14,690)
Equity and interest income
from affiliates 6,650 7,050
Other income (expense), net (2,740) 1,990
(4,020) (5,650)
Income before income taxes and
cumulative effect of accounting
change, net 17,890 22,920
Income taxes 7,150 9,460
Income before cumulative effect of
accounting change, net 10,740 13,460
Cumulative effect of accounting change, net 11,700 ---
Net income $ 22,440 $ 13,460
Preferred stock dividends $ 3,240 $ 3,240
Earnings attributable to
common stock $ 19,200 $ 10,220
Earnings per common and
common equivalent share:
Primary:
Earnings before cumulative effect
of accounting change, net $ .16 $ .18
Cumulative effect of accounting
change, net .17 --
Earnings attributable to common stock $ .33 $ .18
Fully diluted:
Earnings before cumulative effect
of accounting change, net $ .17* $ .18
Cumulative effect of accounting
change, net .15 --
Earnings attributable to common stock $ .32 $ .18
Cash dividends declared $ .04 $ --
The accompanying notes are an integral part of the
consolidated condensed financial statements.
*anti-dilutive
2
<PAGE>
MASCOTECH, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 1996 and 1995
(Dollars in thousands)
Three Months Ended
March 31
1996 1995
CASH FROM (USED FOR):
OPERATIONS:
Net cash from earnings $ 22,910 $ 24,720
(Increase) decrease in inventories (1,850) 2,840
(Increase) in receivables (3,910) (7,860)
Increase (decrease) in accounts payable
and accrued liabilities 1,800 (8,640)
Decrease in marketable securities, net --- 30,840
Other, net 3,620 500
Net cash from operating activities 22,570 42,400
FINANCING:
Retirement of 10% Notes --- (233,150)
Payment of other debt (145,790) (8,130)
Increase in other debt 720 173,750
Payment of preferred stock dividends (3,240) (3,240)
Payment of common stock dividends (2,000) (1,780)
Other, net (4,260) (3,210)
Net cash (used for) financing
activities (154,570) (75,760)
INVESTMENTS:
Capital expenditures (11,780) (18,900)
Proceeds from sale of businesses 129,180 28,880
Acquisition of businesses (4,470) (21,190)
Receipt of cash from notes receivable 7,600 9,500
Net assets of businesses held for
disposition (760) (5,550)
Other, net 2,130 3,770
Net cash from (used for) investing
activities 121,900 (3,490)
CASH AND CASH INVESTMENTS:
(Decrease) increase for the three months (10,100) (36,850)
At January 1 16,380 61,950
At March 31 $ 6,280 $ 25,100
Supplemental Cash Flow Information:
Net cash paid (refunded) during the period for:
Interest $ 5,420 $ 16,910
Income taxes $ (570) $ 13,770
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, 1996 and the results of operations and cash flows
for the three months ended March 31, 1996 and 1995. In addition, the
balance sheet as of March 31, 1996 and December 31, 1995 reflects the
segregation of net current and net non-current assets related to the plan,
adopted in late 1994, to dispose of certain businesses. Certain 1995
amounts have been reclassified to conform to the presentation adopted in
calendar 1995.
Primary earnings per common share were calculated based on 68.2 million
and 58.9 million weighted average common and common equivalent shares
outstanding for the three months ended March 31, 1996 and 1995,
respectively. The convertible preferred stock did not meet the criteria
for inclusion as a common stock equivalent in the first quarter of 1995.
Fully diluted earnings per common share are only presented when the
assumed conversion of convertible securities is dilutive. Since dilution
occurs in the first quarter 1996, earnings per share for income before
cumulative accounting change is presented on a fully diluted basis,
however, earnings per share on income before cumulative accounting change
is anti-dilutive. Fully diluted earnings per common share for the three
months ended March 31, 1996 was calculated based on 78.2 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,
1996 1995
Finished goods $ 19,950 $ 21,120
Work in process 38,810 38,480
Raw materials 39,140 34,820
$ 97,900 $ 94,420
C. Property and equipment, net reflects accumulated depreciation of $291
million and $281 million as at March 31, 1996 and December 31, 1995,
respectively.
D. On April 17, 1996, the Company announced that a letter of intent was
signed by the Company and Tower Automotive, Inc. (Tower) regarding Tower's
proposed acquisition of the Company's subsidiary, MascoTech Stamping
Technologies, Inc. (MSTI). This letter of intent is subject to the
execution of a definitive agreement, regulatory approval, and approval by
the respective company Boards of Directors. The Company expects to
receive initial consideration of approximately $80 million, including
approximately $55 million in cash, which will be applied to reduce the
Company's indebtedness. The remainder of the proceeds consists
principally of Tower common stock and notes. The Company anticipates that
this transaction will result in a non-cash after-tax charge of
approximately $30 million in the second quarter of 1996. The Company may
receive additional consideration, contingent upon the future earnings of
MSTI over the next three years, which if entirely earned, would
substantially offset the $30 million loss.
E. The liability for accrued exit costs approximated $18 million at March 31,
1996 and December 31, 1995, respectively. In the first quarter of 1996,
$2 million of exit costs were charged against earnings.
4
<PAGE>
MASCOTECH, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(concluded)
F. The Company was required to adopt Statement of Financial Accounting
Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of", effective
January 1, 1996. SFAS 121 requires that long-lived assets and certain
identifiable intangible assets held for disposition be reported at the
lower of carrying value at date of decision to dispose or fair value less
cost to sell. The Company determined that the estimated proceeds of the
businesses held for sale at January 1, 1996 exceeded the carrying value
for such assets, and accordingly, has recorded income, classified as a
cumulative effect of accounting change, in the amount of $11.7 million
after-tax to reflect the impact of adopting SFAS 121.
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 41 percent at March 31, 1996 and March 31, 1995,
respectively. Intercompany transactions have been eliminated.
Approximate combined condensed financial data are as follows (in
thousands):
March 31
1996 1995
Current assets $ 687,630 $ 813,100
Current liabilities (250,150) (261,510)
Working capital 437,480 551,590
Property and equipment, net 642,300 581,690
Excess of cost over net
assets of acquired companies 201,160 198,580
Other assets 270,380 437,460
Long-term debt (744,830) (1,040,430)
Deferred income taxes and
other long-term liabilities (175,190) (129,000)
Equity of the other shareholders
of TriMas (205,270) (176,300)
Equity of shareholders of
MascoTech $ 426,030 $ 423,590
Net sales $ 520,440 $ 591,770
Operating profit $ 46,380 $ 53,040
Cumulative effect of accounting change $ 11,700 $ ---
Net income $ 22,440 $ 13,460
Earnings attributable to
common stock $ 19,200 $ 10,220
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, 1996 declined to $374 million
from $445 million in 1995, reflecting the disposition of certain businesses as
part of the Company's previously announced restructuring plan. Sales of the
Company's core transportation-related businesses, which approximated $331
million, increased 7 percent in the first quarter of 1996 as compared with the
prior year quarter, while sales of the Company's businesses held for sale or
sold decreased 69 percent from the comparable period in 1995.
Income after preferred stock dividends and before the cumulative effect of
an accounting change in the first quarter of 1996 was $ 7.5 million or $.16 per
common share, compared with $10.2 million or $.18 per common share in the
comparable period in 1995. First quarter 1996 income after preferred stock
dividends and the accounting change was $19.2 million or $.32 per common share
on a fully diluted basis.
Operating profit for the Company's core businesses before general
corporate expense and charge on disposition of businesses, net was approximately
$34 million and $36 million for the quarters ended March 31, 1996 and 1995,
respectively. Non-core businesses had an operating loss before general
corporate expense and charge on disposition of businesses, net, of approximately
$5 million and $1 million for the quarters ended March 31, 1996 and 1995,
respectively. First quarter 1996 operating performance was negatively impacted
by the operating results and other costs related to the businesses the Company
plans to dispose and by the 17-day strike at General Motors, one of the
Company's major customers. First quarter 1996 results benefitted from reduced
interest expense as proceeds from the divestiture of businesses were applied to
reduce the Company's indebtedness.
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 certain of such businesses for proceeds (including
related tax benefits) aggregating approximately $315 million. The Company
expects that the divestiture of the remaining businesses held for sale will
be completed by mid-1996 for additional proceeds (including related tax
benefits) approximating $85 million. At March 31, 1996 the net assets of
businesses held for sale decreased by $121 million as compared to December 31,
1995 as a result of the disposition of such businesses and from the reduction
of assets employed in these businesses through operating activity and asset
sales.
On April 17, 1996, the Company announced that a letter of intent was
signed by the Company and Tower Automotive, Inc. (Tower) regarding Tower's
proposed acquisition of the Company's subsidiary, MascoTech Stamping
Technologies, Inc. (MSTI). This letter of intent is subject to the execution of
a definitive agreement, regulatory approval, and approval by the respective
company Boards of Directors. The Company expects to receive initial
consideration of approximately $80 million, including approximately $55 million
in cash, which will be applied to reduce the Company's indebtedness. The
remainder of the proceeds consists principally of Tower common stock and notes.
The Company anticipates that this transaction will result in a non-cash after-
tax charge of approximately $30 million in the second quarter of 1996 and will
result in a net loss for the quarter. The Company may receive additional
consideration, contingent upon the future earnings of MSTI over the next three
years, which if entirely earned, would substantially offset the $30 million
loss.
The Company paid a cash dividend of $.04 per common share in the first
quarter of 1996 and the Board of Directors declared a dividend of $.04 per
common share on April 2, 1996 payable on May 13, 1996.
Additional borrowings available under the Company's revolving credit
agreement and otherwise, proceeds from the disposition of businesses held for
sale and anticipated internal cash flow are expected to provide sufficient
liquidity to fund the Company's near-term working capital needs 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, the disposition of certain financial
assets and, to the extent necessary, future financings in the financial
markets. At March 31, 1996, 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
Exhibit 99 Press Release dated April 17, 1996.
(b) Reports on Form 8-K:
None.
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, 1996 By: /s/ Timothy Wadhams
Timothy Wadhams
Vice President - Controller
and Treasurer
(Chief accounting officer
and authorized signatory)
8
<PAGE>
MASCOTECH, INC.
EXHIBIT INDEX
Exhibit Sequential
Page No.
Exhibit 11 Computation of Earnings Per Common Share
- Primary and Fully Diluted 10-11
Exhibit 12 Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock
Dividends 12
Exhibit 27 Financial Data Schedule 13
Exhibit 99 Press Release dated April 17, 1996 14
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,
1996 1995
PRIMARY:
Income before cumulative effect of
accounting change $10,740 $13,460
Preferred stock dividends 3,240 3,240
Income before cumulative effect of accounting
change attributable to common stock 7,500 10,220
Add convertible preferred stock dividends 3,240 -- *
Add after tax interest expense reduction on
conversion of stock options and warrants 250 300
Earnings before cumulative effect of accounting
change attributable to common stock 10,990 10,520
Cumulative effect of accounting change 11,700 --
Earnings attributable to common stock,
as adjusted $22,690 $10,520
Weighted average number of common shares
outstanding during each period 55,340 56,610
Addition from assumed exercise of stock
options and warrants 2,030 2,330
Addition from assumed conversion of
preferred stock 10,800 -- *
Weighted average number of common shares
and equivalents outstanding during each
period--without dilution 68,170 58,940
Primary earnings per common and common
equivalent share:
Earnings before cumulative effect of
accounting change $ .16 $ .18
Cumulative effect of accounting change .17 --
Earnings attributable to common stock $ .33 $ .18
Earnings per common share for the quarter ended March 31, 1996 and 1995
were computed based on the modified treasury stock method which results in an
assumed interest expense reduction and the issuance of incremental shares based
on the assumed conversion of all stock options and warrants.
* Anti-dilutive.
10
<PAGE>
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,
1996 1995
FULLY DILUTED:
Income before cumulative effect of
accounting change $10,740 $13,460
Preferred stock dividends 3,240 3,240
Income attributable to common stock 7,500 10,220
Add after-tax convertible debenture
related expenses 2,380 -- *
Add convertible preferred stock dividends 3,240 -- *
Add interest reduction on conversion of
stock options and warrants 110 300
Earnings before cumulative effect of
accounting change attributable to
common stock $13,230 $10,520
Cumulative effect of accounting change 11,700 --
Earnings attributable to common stock,
as adjusted $24,930 $10,520
Weighted average number of common shares
outstanding during each period 55,340 56,610
Addition from assumed conversion of
convertible debentures as of the issue date 10,000 -- *
Addition from assumed exercise of stock
options and warrants 2,030 2,330
Addition from assumed conversion of
preferred stock 10,800 -- *
Weighted average number of common shares and
equivalents outstanding during each period
--fully diluted basis 78,170 58,940
Fully diluted earnings per common and common
equivalent share:
Earnings before cumulative effect of
accounting change .17* $ .18
Cumulative effect of accounting change $ .15 --
Earnings attributable to common stock $ .32 $ .18
Earnings per common share for the quarter ended March 31, 1996 and 1995
were computed based on the modified treasury stock method which results in an
assumed interest expense reduction and the issuance of incremental shares based
on the assumed conversion of all stock options and warrants.
* Anti-dilutive.
Exhibit 12
MASCOTECH, INC.
Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
(Dollars in thousands)
<TABLE>
<CAPTION>
3 Months
Ended
March 31, For The Years Ended December 31
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Earnings (Loss) Before Income
Taxes and Fixed Charges:
Income (loss) from continuing
operations before income
taxes (credit),
extraordinary income (loss)
and cumulative effect of
accounting change $ 17,890 100,280 $(264,490) $121,180 $ 68,250 $(12,470)
Deduct equity in
undistributed earnings
of less-than-fifty-
percent owned companies.... (4,460) (29,590) (23,350) (19,930) (21,760) (3,530)
Add interest on
indebtedness, net.......... 8,350 51,500 51,290 83,000 87,830 124,220
Add amortization of debt
expense.................... 380 1,670 3,450 4,390 1,930 2,230
Estimated interest factor
for rentals................ 1,800 7,070 6,220 5,550 5,740 5,220
Earnings (loss) before income
taxes and fixed charges.... $ 23,960 $130,930 $(226,880) $194,190 $141,990 $115,670
Fixed Charges:
Interest on indebtedness,
net........................ $ 8,370 $ 51,690 $ 51,540 $ 83,110 $ 87,980 $124,370
Amortization of debt
expense.................... 380 1,670 3,450 4,390 1,930 2,230
Estimated interest factor
for rentals................ 1,800 7,070 6,220 5,550 5,740 5,220
Total fixed charges...... 10,550 60,430 61,210 93,050 95,650 131,820
Preferred stock dividend
requirement (a)............ 5,400 21,970 14,630 25,860 17,140 11,350
Combined fixed charges and
preferred stock dividends.. $ 15,950 $ 82,400 $ 75,840 $118,910 $112,790 $143,170
Ratio of earnings to
fixed charges................ 2.3 2.2 -- (b) 2.1 1.5 .9(d)
Ratio of earnings to combined
fixed charges and preferred
stock dividends.............. 1.5 1.6 -- (c) 1.6 1.3 .8(e)
(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.
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1996 MASCHTECH, INC. 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,280
<SECURITIES> 4,120
<RECEIVABLES> 215,880
<ALLOWANCES> 0
<INVENTORY> 97,900
<CURRENT-ASSETS> 417,740
<PP&E> 758,270
<DEPRECIATION> (291,290)
<TOTAL-ASSETS> 1,313,270
<CURRENT-LIABILITIES> 191,050
<BONDS> 557,790
0
10,800
<COMMON> 55,390
<OTHER-SE> 359,840
<TOTAL-LIABILITY-AND-EQUITY> 1,313,270
<SALES> 373,920
<TOTAL-REVENUES> 373,920
<CGS> 312,480
<TOTAL-COSTS> 312,480
<OTHER-EXPENSES> 2,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,930
<INCOME-PRETAX> 17,890
<INCOME-TAX> 7,150
<INCOME-CONTINUING> 10,740
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 11,700
<NET-INCOME> 22,440
<EPS-PRIMARY> .33
<EPS-DILUTED> .32
</TABLE>
Exhibit 99
For Immediate Release Contact:
April 17, 1996 Ken Zak, (313) 374-6386
MASCOTECH ANNOUNCES AGREEMENT TO SELL
MASCOTECH STAMPING TECHNOLOGIES, INC.
TO TOWER AUTOMOTIVE, INC.
MascoTech, Inc. (NYSE:MSX) and Tower Automotive, Inc. (NASDAQ:TWER) have
announced that they have signed a letter of intent regarding Tower Automotive's
acquisition of MascoTech's subsidiary, MascoTech Stamping Technologies, Inc.
(MSTI). This agreement is subject to the execution of a definitive agreement,
regulatory approval, and approval by the respective company Boards of Directors.
MSTI's operations are headquartered in Rochester Hills, Michigan and
consist of manufacturing facilities in Ohio, Indiana, and Michigan with
approximately $190 million in annual sales and 280,000 square feet of production
space. Consummation of this transaction will position MSTI with a strategic
owner which should provide enhanced opportunities for MSTI's employees and
customers in a consolidating industry, and will allow MascoTech to further focus
on its core operating capabilities.
MascoTech expects to receive initial consideration of approximately $80
million, including approximately $55 million in cash which will be applied to
reduce the Company's indebtedness. The balance of the initial consideration
will consist principally of Tower common stock and notes. MascoTech may also
receive additional consideration, depending upon the future earnings performance
of the business being sold.
While MascoTech believes that the book value of its investment in MSTI is
realizable in the longer term in the ordinary course of its business, the sale
of MSTI, if consummated, would result in an initial non-cash after-tax charge of
approximately $30 million. MascoTech anticipates that this will result in a net
loss for the quarter in which it is recognized, currently expected to be the
second quarter 1996. Future years may reflect gains upon the recognition of any
contingent payments realized based upon the future earnings of the business
being sold, which if entirely earned would substantially offset the $30 million
loss.
As disclosed in MascoTech's 1995 Annual Report, the Company also expects
to report non-recurring income of approximately $10-15 million after-tax in the
first quarter of 1996, principally from the cumulative effect of the adoption of
a new accounting rule relating to the accounting for assets held for sale. This
new rule applies to assets of businesses that MascoTech previously announced
were being held for sale.
Headquartered in Taylor, Michigan, MascoTech's transportation-related
businesses include metalworked components primarily for vehicle powertrain and
drivetrain applications, engineering and other technical support services and
automotive aftermarket products.
