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, 1997
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, 1997
Common stock, par value $1 per share 36,970,000
<PAGE>
MASCOTECH, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet -
March 31, 1997 and December 31, 1996 1
Consolidated Condensed Statement of Income
for the Three Months Ended
March 31, 1997 and 1996 2
Consolidated Condensed Statement of
Cash Flows for the Three Months
Ended March 31, 1997 and 1996 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, 1997 and December 31, 1996
(Dollars in thousands)
March 31, December 31,
ASSETS 1997 1996
Current assets:
Cash and cash investments $ 16,340 $ 19,400
Marketable securities 49,530 37,760
Receivables 145,600 127,530
Inventories 71,060 69,640
Deferred and refundable income taxes 38,850 39,180
Prepaid expenses and other assets 13,550 14,480
Net current assets of businesses held
for disposition --- 85,980
Total current assets 334,930 393,970
Equity and other investments in affiliates 332,350 282,470
Property and equipment, net 387,450 388,460
Excess of cost over net assets of acquired
companies 69,120 69,140
Notes receivable and other assets 81,360 72,090
Net non-current assets of businesses held
for disposition --- 22,850
Total assets $1,205,210 $1,228,980
LIABILITIES
Current liabilities:
Accounts payable $ 63,490 $ 58,170
Accrued liabilities 101,630 96,910
Current portion of long-term debt 3,020 3,370
Total current liabilities 168,140 158,450
Long-term debt held by Masco Corporation 151,380 151,380
Other long-term debt 539,780 601,020
Deferred income taxes and other long-term
liabilities 158,540 153,170
Total liabilities 1,017,840 1,064,020
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: 37.5 million
and 37.3 million 37,540 37,250
Paid-in capital 42,780 41,080
Retained earnings 88,600 61,060
Other 7,650 14,770
Total shareholders' equity 187,370 164,960
Total liabilities and
shareholders' equity $1,205,210 $1,228,980
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, 1997 and 1996
(Dollars in thousands except per share amounts)
Three Months Ended March 31
1997 1996
Net sales $ 233,440 $ 373,920
Cost of sales (177,140) (312,480)
Selling, general and
administrative expenses (22,710) (37,530)
Charge for disposition of
businesses, net --- (2,000)
Operating profit 33,590 21,910
Other income (expense), net:
Interest expense, Masco Corporation (2,470) ---
Other interest expense (7,240) (7,930)
Equity and interest income
from affiliates 11,260 6,650
Gain from change in investment of
an equity affiliate 13,210 ---
Other income (expense), net 5,730 (2,740)
20,490 (4,020)
Income before income taxes and
cumulative effect of accounting
change, net 54,080 17,890
Income taxes 21,420 7,150
Income before cumulative effect of
accounting change, net 32,660 10,740
Cumulative effect of accounting change, net --- 11,700
Net income $ 32,660 $ 22,440
Preferred stock dividends $ 3,240 $ 3,240
Earnings attributable to
common stock $ 29,420 $ 19,200
Earnings per common and
common equivalent share:
Primary:
Earnings before cumulative effect
of accounting change, net $ .66 $ .16
Cumulative effect of accounting
change, net -- .17
Earnings attributable to common stock $ .66 $ .33
Fully diluted:
Earnings before cumulative effect
of accounting change, net $ .59 $ .17*
Cumulative effect of accounting
change, net -- .15
Earnings attributable to common stock $ .59 $ .32
Cash dividends declared $ .05 $ .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, 1997 and 1996
(Dollars in thousands)
Three Months Ended
March 31
1997 1996
CASH FROM (USED FOR):
OPERATIONS:
Net cash from earnings $ 14,870 $ 22,910
(Increase) in inventories (1,420) (1,850)
(Increase) in receivables (4,000) (3,910)
Increase in accounts payable and
accrued liabilities 16,950 1,800
Other, net (10,210) 3,620
Net cash from operating activities 16,190 22,570
FINANCING:
Payment of debt (61,590) (145,790)
Increase in debt --- 720
Payment of preferred stock dividends (3,240) (3,240)
Payment of common stock dividends (1,880) (2,000)
Other, net 1,770 (4,260)
Net cash (used for) financing
activities (64,940) (154,570)
INVESTMENTS:
Capital expenditures (8,300) (11,780)
Cash from sale of businesses, net 76,560 129,180
Acquisition of business (11,100) (4,470)
Receipt of cash from notes receivable --- 7,600
Advances to affiliate (7,700) ---
Other, net (3,770) 1,370
Net cash from investing activities 45,690 121,900
CASH AND CASH INVESTMENTS:
(Decrease) for the three months (3,060) (10,100)
At January 1 19,400 16,380
At March 31 $ 16,340 $ 6,280
Supplemental Cash Flow Information:
Net cash paid (refunded) during the period for:
Interest $ 5,970 $ 5,420
Income taxes $ 2,660 $ (570)
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, 1997 and the results of operations and cash
flows for the three months ended March 31, 1997 and 1996. In addition,
the balance sheet as of December 31, 1996 reflects the segregation of net
current and net non-current assets related to the disposition of the
Company's Technical Services Group ("TSG").
Primary earnings per common share were calculated based on 49.5 million
and 68.2 million weighted average common and common equivalent shares
outstanding for the three months ended March 31, 1997 and 1996,
respectively. Earnings per common share for the periods ended March 31,
1997 were computed based upon the treasury stock method and, in 1996 as
required, the modified treasury stock method, which results in an assumed
interest expense reduction and incremental shares based on the assumed
conversion of all stock options and warrants.
Fully diluted earnings per common share are only presented when the
assumed conversion of convertible securities is dilutive. Fully diluted
earnings per common share were calculated based on 59.6 million and 78.2
million weighted average common shares outstanding for the three months
ended March 31, 1997 and 1996, respectively. 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.
B. Inventories by component are as follows (in thousands):
March 31, December 31,
1997 1996
Finished goods $ 20,110 $ 21,020
Work in process 22,390 20,360
Raw materials 28,560 28,260
$ 71,060 $ 69,640
C. Property and equipment, net reflects accumulated depreciation of $254
million and $252 million as at March 31, 1997 and December 31, 1996,
respectively.
D. On January 3, 1997, the Company completed the sale of its Technical
Services Group (comprised of the Company's engineering and technical
business services units) to MSX International, Inc. ("MSXI"). Also
included in this transaction were the net assets of APX International,
which were acquired by the Company in November, 1996 for approximately
$44 million. The sale resulted in total proceeds to the Company of
approximately $145 million consisting principally of cash, subordinated
debentures, preferred stock and an approximate 45 percent common equity
interest in MSXI. The excess of the consideration received by the Company
over the book value of the related assets, approximately $35 million, has
been accounted for as a reduction in the carrying value of the Company's
investment in MSXI, and will be recognized when additional cash is
received.
4
<PAGE>
MASCOTECH, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(concluded)
E. In March, 1997, TriMas Corporation ("TriMas"), an equity affiliate, issued
stock as a result of the redemption of a convertible debt instrument. The
Company recognized pre-tax income of approximately $13 million
(approximately $.13 per common share after-tax) as a result of the change
in the Company's equity ownership in TriMas.
F. The Company expects that Statement of Financial Accounting Standards No.
128 ("SFAS 128"), "Earnings Per Share," will not have a material impact on
its fully diluted earnings per share calculation when adopted at December
31, 1997.
G. The following presents combined supplemental financial data of the Company
and TriMas as one entity, with MascoTech as the parent company. The
Company had an equity ownership interest in TriMas of approximately 37
percent and 41 percent at March 31, 1997 and March 31, 1996, respectively.
Intercompany transactions have been eliminated. Approximate combined
condensed financial data are as follows (in thousands):
March 31
1997 1996
Current assets $ 629,630 $ 687,630
Current liabilities (249,130) (250,150)
Working capital 380,500 437,480
Property and equipment, net 582,380 642,300
Excess of cost over net
assets of acquired companies 177,270 201,160
Other assets 334,700 270,380
Long-term debt (765,490) (744,830)
Deferred income taxes and
other long-term liabilities (199,420) (175,190)
Equity of the other shareholders
of TriMas (322,570) (205,270)
Equity of shareholders of
MascoTech $ 187,370 $ 426,030
Net sales $ 396,530 $ 520,440
Operating profit $ 60,020 $ 46,380
Cumulative effect of accounting change $ --- $ 11,700
Net income $ 32,660 $ 22,440
Earnings attributable to
common stock $ 29,420 $ 19,200
5
<PAGE>
MASCOTECH, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales of the Company's core transportation-related businesses increased
approximately six percent to $233 million in the first quarter of 1997 from $220
million in 1996. The Company's reported consolidated sales for the 1996 first
quarter of $374 million included the results of certain businesses which have
been disposed, as previously announced.
Income after preferred stock dividends in the first quarter of 1997 was
$29.4 million or a record $.59 per common share. Income after preferred stock
dividends for the comparable period in 1996 was $19.2 million or $.32 per common
share.
Operating profit for the Company's core businesses before general
corporate expense was approximately $39 million and $31 million for the quarters
ended March 31, 1997 and 1996, respectively.
Results for 1997 benefitted from pre-tax gains aggregating approximately
$18 million (approximately $.18 per common share after-tax) as a result of an
equity transaction by an affiliate of the Company and gains from the Company's
marketable securities portfolio. Results for the first quarter of 1996
benefitted from the required adoption of an accounting change, which resulted in
after-tax income of $11.7 million or approximately $.15 per common share.
On January 3, 1997 the Company completed the sale of its Technical
Services Group (comprised of the Company's engineering and technical business
services units) to MSX International, Inc. ("MSXI"). Also
included in this transaction were the net assets of APX International which were
acquired by the Company in November, 1996 for approximately $44 million. The
sale resulted in total proceeds to the Company of approximately $145 million
consisting principally of cash, subordinated debentures, preferred stock and an
approximate 45 percent common equity interest in MSXI.
The excess of the consideration received by the Company over the book value of
the related assets, approximately $35 million, will be recognized when
additional cash is received.
Equity and interest income from affiliates increased in 1997 as compared
to the first quarter of 1996 principally as a result of increased earnings from
equity affiliates and the MSXI transaction.
The Company declared and paid a cash dividend of $.05 per common share in
the first quarter of 1997.
Additional borrowings available under the Company's amended revolving
credit agreement and otherwise, and anticipated internal cash flows are expected
to provide sufficient liquidity to fund the Company's foreseeable working
capital, capital expansion programs, dividends, any stock repurchases and other
investment needs. At March 31, 1997, current assets were approximately 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 January 20, 1997 reporting under Item 2
"Acquisition or Disposition of Assets" and under Item 7 unaudited
pro forma consolidated condensed balance sheet as of September 30,
1996 and unaudited pro forma consolidated condensed income
statements for the year ended December 31, 1995 and for the nine
months ended September 30, 1996 for the assumed sale of MascoTech
Technical Services Group (including APX International, acquired by
MascoTech November 6, 1996) for cash (net of the purchase of APX
International), purchase of common and preferred stock of MSX
International, Inc., and notes with the net cash proceeds utilized
to retire debt.
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 14, 1997 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 11
MASCOTECH, INC.
Computation of Earnings Per Common Share
Primary and Fully Diluted
(In thousands except per share amounts)
Three Months Ended
March 31,
1997 1996
PRIMARY:
Income before cumulative effect of
accounting change $32,660 $10,740
Preferred stock dividends 3,240 3,240
Income before cumulative effect of accounting
change attributable to common stock 29,420 7,500
Add convertible preferred stock dividends 3,240 3,240
Add after-tax interest expense reduction on
conversion of stock options and warrants --- 250
Earnings before cumulative effect of accounting
change attributable to common stock 32,660 10,990
Cumulative effect of accounting change --- 11,700
Earnings attributable to common stock,
as adjusted $32,660 $22,690
Weighted average number of common shares
outstanding during each period 37,470 55,340
Addition from assumed exercise of stock
options and warrants 1,270 2,030
Addition from assumed conversion of
preferred stock 10,800 10,800
Weighted average number of common shares
and equivalents outstanding during each
period--without dilution 49,540 68,170
Primary earnings per common and common
equivalent share:
Earnings before cumulative effect of
accounting change $ .66 $ .16
Cumulative effect of accounting change -- .17
Earnings attributable to common stock $ .66 $ .33
Earnings per common share for the quarter ended March 31, 1997 was computed
based on the treasury stock method and, in 1996 as required, 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.
<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,
1997 1996
FULLY DILUTED:
Income before cumulative effect of
accounting change $32,660 $10,740
Preferred stock dividends 3,240 3,240
Income attributable to common stock 29,420 7,500
Add after-tax convertible debenture
related expenses 2,380 2,380
Add convertible preferred stock dividends 3,240 3,240
Add interest reduction on conversion of
stock options and warrants --- 110
Earnings before cumulative effect of
accounting change attributable to
common stock $35,040 $13,230
Cumulative effect of accounting change --- 11,700
Earnings attributable to common stock,
as adjusted $35,040 $24,930
Weighted average number of common shares
outstanding during each period 37,470 55,340
Addition from assumed conversion of
convertible debentures 10,000 10,000
Addition from assumed exercise of stock
options and warrants 1,350 2,030
Addition from assumed conversion of
preferred stock 10,800 10,800
Weighted average number of common shares and
equivalents outstanding during each period
--fully diluted basis 59,620 78,170
Fully diluted earnings per common and common
equivalent share:
Earnings before cumulative effect of
accounting change $ .59 $ .17*
Cumulative effect of accounting change -- .15
Earnings attributable to common stock $ .59 $ .32
Earnings per common share for the quarter ended March 31, 1997 was computed
based on the treasury stock method and, in 1996 as required, 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
1997 1996 1995 1994 1993 1992
<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 item and
cumulative effect of
accounting change, net..... $ 54,080 $ 77,220 $100,280 $(264,490) $121,180 $ 68,250
Deduct equity in
undistributed earnings
of less-than-fifty-
percent owned companies.... (20,750) (31,650) (29,590) (23,350) (19,930) (21,760)
Add interest on
indebtedness, net.......... 9,740 30,350 51,500 51,290 83,000 87,830
Add amortization of debt
expense.................... 210 1,490 1,670 3,450 4,390 1,930
Estimated interest factor
for rentals................ 540 6,350 7,070 6,220 5,550 5,740
Earnings (loss) before income
taxes and fixed charges.... $ 43,820 $ 83,760 $130,930 $(226,880) $194,190 $141,990
Fixed Charges:
Interest on indebtedness,
net........................ $ 9,770 $ 30,590 $ 51,690 $ 51,540 $ 83,110 $ 87,980
Amortization of debt
expense.................... 210 1,490 1,670 3,450 4,390 1,930
Estimated interest factor
for rentals................ 540 6,350 7,070 6,220 5,550 5,740
Total fixed charges...... 10,520 38,430 60,430 61,210 93,050 95,650
Preferred stock dividend
requirement (a)............ 5,360 21,570 21,970 14,630 25,860 17,140
Combined fixed charges and
preferred stock dividends.. $ 15,880 $ 60,000 $ 82,400 $ 75,840 $118,910 $112,790
Ratio of earnings to
fixed charges................ 4.2 2.2 2.2 -- (b) 2.1 1.5
Ratio of earnings to combined
fixed charges and preferred
stock dividends.............. 2.8 1.4 1.6 -- (c) 1.6 1.3
(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.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1997 MASCOTECH, 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 16,340
<SECURITIES> 49,530
<RECEIVABLES> 145,600
<ALLOWANCES> 0
<INVENTORY> 71,060
<CURRENT-ASSETS> 334,930
<PP&E> 641,900
<DEPRECIATION> (254,450)
<TOTAL-ASSETS> 1,205,210
<CURRENT-LIABILITIES> 168,140
<BONDS> 691,160
0
10,800
<COMMON> 37,540
<OTHER-SE> 139,030
<TOTAL-LIABILITY-AND-EQUITY> 1,205,210
<SALES> 233,440
<TOTAL-REVENUES> 233,440
<CGS> 177,140
<TOTAL-COSTS> 177,140
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,710
<INCOME-PRETAX> 54,080
<INCOME-TAX> 21,420
<INCOME-CONTINUING> 32,660
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,660
<EPS-PRIMARY> .66
<EPS-DILUTED> .59
</TABLE>
