<PAGE> 1
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, 2000
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 28, 2000
----- ---------------------
COMMON STOCK, PAR VALUE $1 PER SHARE 44,557,000
<PAGE> 2
MASCOTECH, INC.
INDEX
PAGE NO.
--------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet -
March 31, 2000 and December 31, 1999 1
Consolidated Condensed Statement of Income
for the Three Months Ended
March 31, 2000 and 1999 2
Consolidated Condensed Statement of
Cash Flows for the Three Months
Ended March 31, 2000 and 1999 3
Notes to Consolidated Condensed Financial
Statements 4-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-8
Part II. Other Information and Signature 9-10
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MASCOTECH, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
MARCH 31, 2000 AND DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 2000 1999
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash investments $ 11,090 $ 4,490
Receivables 263,980 218,960
Inventories 183,340 183,600
Deferred and refundable income taxes 26,660 46,750
Prepaid expenses and other assets 14,620 16,320
----------- -----------
Total current assets 499,690 470,120
Equity and other investments in affiliates 108,440 110,730
Property and equipment, net 727,490 722,680
Excess of cost over net assets of acquired
companies 768,210 759,330
Notes receivable and other assets 39,770 38,410
----------- -----------
Total assets $ 2,143,600 $ 2,101,270
=========== ===========
LIABILITIES
-----------
Current liabilities:
Accounts payable $ 129,780 $ 114,490
Accrued liabilities 114,390 113,910
----------- -----------
Total current liabilities 244,170 228,400
Convertible subordinated debentures 305,000 305,000
Long-term debt 1,066,260 1,067,890
Deferred income taxes and other
long-term liabilities 208,740 199,600
----------- -----------
Total liabilities 1,824,170 1,800,890
----------- -----------
SHAREHOLDERS' EQUITY
--------------------
Preferred stock, $1 par:
Authorized: 25 million;
Outstanding: None -- --
Common stock, $1 par:
Authorized: 250 million;
Outstanding: 44.7 million and 44.6 million 44,720 44,640
Paid-in capital 250 --
Retained earnings 346,580 324,290
Accumulated other comprehensive loss (29,390) (24,870)
Less: Restricted stock awards (42,730) (43,680)
----------- -----------
Total shareholders' equity 319,430 300,380
----------- -----------
Total liabilities and
shareholders' equity $ 2,143,600 $ 2,101,270
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
1
<PAGE> 4
MASCOTECH, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
2000 1999
--------- ---------
<S> <C> <C>
Net sales $ 459,400 $ 448,660
Cost of sales (340,000) (332,640)
Selling, general and
administrative expenses (56,170) (57,150)
Gain on disposition of businesses, net -- 10,010
--------- ---------
Operating profit 63,230 68,880
--------- ---------
Other income (expense), net:
Interest expense (21,810) (20,950)
Equity and interest income
from affiliates 1,500 1,730
Other, net (240) (2,920)
--------- ---------
(20,550) (22,140)
--------- ---------
Income before income taxes 42,680 46,740
Income taxes 16,860 22,880
--------- ---------
Net income $ 25,820 $ 23,860
========= =========
Basic earnings per share $ .63 $ .58
========= =========
Diluted earnings per share $ .51 $ .47
========= =========
Cash dividends declared per share $ .08 $ .07
========= =========
Cash dividends paid per share $ .08 $ .07
========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
2
<PAGE> 5
MASCOTECH, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------------
2000 1999
----------- ----------
<S> <C> <C>
CASH FROM (USED FOR):
OPERATIONS:
Net cash from earnings $ 55,110 $ 55,920
Decrease in inventories 3,240 1,920
(Increase) in receivables (43,460) (52,690)
Increase in accounts payable and
accrued liabilities 18,800 11,740
Decrease in prepaid expenses and
other current assets 21,510 3,330
Other, net (1,160) (3,210)
----------- ----------
Net cash from operating activities 54,040 17,010
----------- ----------
FINANCING:
Payment of debt (52,820) (39,330)
Increase in debt 47,310 54,850
Payment of common stock dividends (3,540) (3,180)
Retirement of Company common stock -- (12,280)
Other, net (300) (5,980)
----------- ----------
Net cash (used for) financing
activities (9,350) (5,920)
----------- ----------
INVESTMENTS:
Capital expenditures (26,000) (29,940)
Cash received from sale of businesses, net 3,200 3,540
Acquisition of businesses, net of cash
acquired (19,960) ---
Other, net 4,670 5,960
----------- ----------
Net cash (used for) investing
activities (38,090) (20,440)
----------- ----------
CASH AND CASH INVESTMENTS:
Increase (decrease) for the three months 6,600 (9,350)
At January 1 4,490 29,390
----------- ----------
At March 31 $ 11,090 $ 20,040
=========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Net cash paid during the period for:
Interest $ 16,840 $ 16,250
=========== =========
Income taxes $ (9,490) $ 9,120
=========== =========
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
3
<PAGE> 6
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, 2000 and the results of operations and cash flows for the
three months ended March 31, 2000 and 1999. Certain amounts for the period
ended March 31, 1999 have been reclassified to conform to the presentation
adopted in 2000.
B. Inventories by component are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
-------- --------
<S> <C> <C>
Finished goods $ 83,600 $ 86,240
Work in process 49,030 45,940
Raw materials 50,710 51,420
-------- --------
$183,340 $183,600
======== ========
</TABLE>
C. Property and equipment, net reflects accumulated depreciation of $339
million and $323 million at March 31, 2000 and December 31, 1999,
respectively.
D. The Company's total comprehensive income for the period was as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
2000 1999
-------- --------
<S> <C> <C>
Net income $ 25,820 $ 23,860
Other comprehensive loss (principally foreign
currency translation) (4,520) (10,780)
------- --------
Total comprehensive income $ 21,300 $ 13,080
======== ========
</TABLE>
E. In March 2000, the Company acquired a manufacturer of towing equipment and
accessories. The acquisition was accounted for as a purchase and results
are included from date of acquisition.
F. The Company completed the sale of its aftermarket-related and vacuum
metalizing businesses in 1999. These transactions resulted in a pre-tax
gain of approximately $26 million, of which $10 million was recognized in
the first quarter of 1999 (including $15.2 million ($6 million after-tax)
resulting from the Company's revised estimate of the fair market value of
certain assets held for sale at March 31, 1999 and a loss of approximately
$5.2 million ($3.8 million after-tax) on a transaction that closed in March
1999).
4
<PAGE> 7
MASCOTECH, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
G. Segment activity for the three months ended March 31, 2000 and 1999 are as
follows:
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
2000 1999
-------- --------
<S> <C> <C>
REVENUES FROM EXTERNAL CUSTOMERS
Specialty Metal Formed Products $230,500 $202,700
Towing Systems 80,510 69,090
Specialty Fasteners 61,270 61,260
Specialty Packaging & Sealing Products 60,930 57,550
Specialty Industrial Products 26,190 27,460
Companies Sold or Held for Sale --- 30,600
-------- --------
Total $459,400 $448,660
======== ========
INTERSEGMENT REVENUES
Specialty Metal Formed Products $ 2,580 $ 2,380
Towing Systems 3,060 2,250
Specialty Fasteners 1,160 830
Specialty Packaging & Sealing Products 40 ---
Specialty Industrial Products 190 170
Companies Sold or Held for Sale --- 700
-------- --------
Total $ 7,030 $ 6,330
======== ========
OPERATING PROFIT
Specialty Metal Formed Products $ 33,540 $ 29,600
Towing Systems 13,130 8,930
Specialty Fasteners 6,690 8,510
Specialty Packaging & Sealing Products 12,250 9,710
Specialty Industrial Products 2,900 4,140
Companies Sold or Held for Sale --- 3,640
-------- --------
Total $ 68,510 $ 64,530
======== ========
<CAPTION>
Three Months Ended March 31
---------------------------
2000 1999
-------- --------
<S> <C> <C>
OPERATING PROFIT
Total operating profit for reportable
segments $ 68,510 $ 64,530
General corporate expenses (5,280) (5,660)
Net gain on disposition of businesses --- 10,010
-------- --------
Total operating profit $ 63,230 $ 68,880
======== ========
</TABLE>
5
<PAGE> 8
MASCOTECH, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(CONCLUDED)
H. The following are reconciliations of the numerators and denominators used
in the computations of basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
2000 1999
----------- ----------
<S> <C> <C>
Weighted average number of shares
outstanding 40,980 41,460
=========== ==========
Earnings used for basic earnings per
share computation $ 25,820 $ 23,860
=========== ==========
Basic earnings per share $ .63 $ .58
=========== ==========
Total shares used for basic earnings
per share computation 40,980 41,460
Dilutive securities:
Stock options 380 540
Convertible debentures 9,840 9,840
Contingently issuable shares 4,370 3,820
----------- ----------
Total shares used for diluted
earnings per share computation 55,570 55,660
=========== ==========
Earnings used for basic earnings per
share computation $ 25,820 $ 23,860
Add back of debenture interest 2,340 2,290
----------- ----------
Earnings used for diluted
earnings per share computation $ 28,160 $ 26,150
=========== ==========
Diluted earnings per share $ .51 $ .47
=========== ==========
</TABLE>
Diluted earnings per share reflect the potential dilution that would occur
if securities or other contracts to issue common stock were exercised or
converted into common stock.
6
<PAGE> 9
MASCOTECH, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MascoTech sales for the first quarter 2000 increased two percent to
$459 million as compared with $449 million in 1999. Income in the first quarter
2000 increased eight percent to $25.8 million or $.51 per share, compared with
$23.9 million or $.47 per share in 1999.
Excluding the 1999 sales contribution from the Company's
aftermarket-related and vacuum metalizing businesses which were sold in early
1999, first quarter 2000 sales, aided by acquisitions, would have increased
approximately ten percent. Results for first quarter 1999 benefitted from a
nonrecurring pre-tax gain, related to the disposition of certain businesses, of
approximately $10 million. This gain was partially offset by a charge of
approximately $2 million, net in other expense principally related to the
decline in value of an equity affiliate. Earnings per share, excluding the
operating results of the aftermarket-related and vacuum metalizing businesses
and the non-recurring pre-tax gain and charge, for the first quarter 1999, would
have been $.43.
The following information related to sales, operating profit and
margins relates to the Company's operating segments.
Sales for the Company's Specialty Metal Formed products, aided by an
acquisition, increased 14 percent in the first quarter 2000 as compared with
1999. Excluding the acquisition, sales would have increased approximately four
percent. Excluding the acquisition, sales of powder metal products increased 11
percent reflecting the continued ramp-up of our new Valencia, Spain plant and
new product launches. Currency fluctuations and the disposition of the Company's
Specialty Tubing business reduced sales by approximately $7 million in first
quarter 2000 as compared to 1999.
Sales of Specialty Fasteners for first quarter 2000 approximated 1999
levels. Sales of large diameter fasteners, benefitting from improved markets for
agricultural and off-highway applications increased 10 percent. This increase
was offset by the phase out of certain products resulting from a plant closure
and continued softness for aerospace fastener applications. Sales of Towing
Systems, aided by acquisitions, increased 17 percent in the first quarter 2000
as compared with 1999. First quarter 2000 sales for Specialty Packaging and
Sealing Products increased six percent as sales for specialty gaskets and
related products increased 12 percent and sales of compressed gas cylinders
increased modestly, benefitting from improved market conditions in the oil and
gas industry. Sales of Specialty Industrial Products were down five percent in
the first quarter 2000 from 1999 levels.
Operating margin was 13.8 percent in 2000 compared with 13.2 percent in
1999, excluding, in 1999, the results of the aftermarket and vacuum metalizing
businesses and the gain on disposition. The improvement in operating margin is
the result of improved market conditions for certain of the Company's products
serving the oil and gas industry and continued growth of the Towing segment. In
addition, start up costs related to the launch of new products and a new
manufacturing facility negatively impacted operating performance.
The tax rate for first quarter 2000 was 39.5 percent. The higher than
statutory rate of 39.5 percent results primarily from non-deductible goodwill
amortization from the TriMas acquisition. The tax rate for first quarter 1999
was 49 percent which resulted from the tax treatment related to the divested
businesses.
The Board of Directors declared a dividend of $.08 per common share,
payable on May 15, 2000, to shareholders of record on April 14, 2000.
7
<PAGE> 10
MASCOTECH, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONCLUDED)
At March 31, 2000, current assets, which aggregated approximately $500
million, were approximately two times current liabilities. Additional borrowings
available under the Company's revolving credit agreement and otherwise,
anticipated internal cash flows, and to the extent necessary, future financings
in the financial markets are expected to provide sufficient liquidity to fund
the Company's foreseeable working capital, capital expansion programs and other
investment needs subject to compliance with bank covenants.
Other Matters
Year 2000
The Company did not experience any significant disruptions to its
operating systems or lose any revenues as a result of the date change to year
2000.
The Company has had in place an internal review team that has been and
is continuing to address the Year 2000 issues that encompass operating and
administrative areas of the Company. Also, executive management and the Board of
Directors continues to monitor the status of the Company's Year 2000 remediation
plans. The process includes an assessment of issues and development of
remediation plans, where necessary, as they relate to internally used software,
computer hardware and the use of computer applications in the Company's
manufacturing processes. Additionally, contingency plans were designed to
address either internal or external Year 2000 problems.
Forward-Looking Statements
Statements in this quarterly report on Form 10-Q which are not
historical facts are forward looking statements that involve certain risks and
uncertainty including, but not limited to, risks associated with the uncertainty
of future financial results, conditions within the markets in which the Company
competes, labor relations of the Company and certain of its customers and other
uncertainties detailed in the Company's filings with the Securities and Exchange
Commission.
8
<PAGE> 11
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 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.
9
<PAGE> 12
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 12, 2000 BY: /s/ TIMOTHY WADHAMS
------------------------------ ------------------------------------
Timothy Wadhams
Executive Vice President
Finance and Administration
(Principal financial officer
and authorized signatory)
10
<PAGE> 13
MASCOTECH, INC.
EXHIBIT INDEX
EXHIBIT
- -------
Exhibit 12 Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock
Dividends
Exhibit 27 Financial Data Schedule
<PAGE> 1
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 FOR THE YEARS ENDED DECEMBER 31
MARCH 31, -------------------------------------------------
2000 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES:
Income from continuing
operations before income
taxes and cumulative
effect of accounting
change, net................ $ 42,680 $139,470 $144,520 $190,290 $ 77,220 $ 100,280
Deduct equity in
undistributed earnings
of less-than-fifty
percent owned companies.... (1,350) (9,800) (8,530) (46,030) (31,650) (29,590)
Add interest on
indebtedness, net.......... 21,850 80,660 81,280 36,650 30,350 51,500
Add amortization of debt
expense.................... 670 2,740 3,250 900 1,490 1,670
Estimated interest factor
for rentals................ 970 3,710 3,620 2,100 6,350 7,070
-------- -------- ------- -------- -------- ---------
Earnings before income
taxes and fixed charges.... $ 64,820 $216,780 $224,140 $183,910 $ 83,760 $ 130,930
======== ======== ======== ======== ======== =========
FIXED CHARGES:
Interest on indebtedness,
net........................ $ 21,840 $ 80,950 $ 81,740 $ 36,770 $ 30,590 $ 51,690
Amortization of debt
expense.................... 670 2,740 3,250 900 1,490 1,670
Estimated interest factor
for rentals................ 970 3,710 3,620 2,100 6,350 7,070
-------- -------- -------- -------- -------- ---------
Total fixed charges...... 23,480 87,400 88,610 39,770 38,430 60,430
-------- -------- -------- -------- -------- ---------
Preferred stock dividend
requirement (a)............ --- --- --- 10,300 21,570 21,970
-------- -------- -------- -------- -------- ---------
Combined fixed charges and
preferred stock dividends.. $ 23,480 $ 87,400 $ 88,610 $ 50,070 $ 60,000 $ 82,400
======== ======== ======== ======== ======== =========
RATIO OF EARNINGS TO
FIXED CHARGES................ 2.8 2.5 2.5 4.6 2.2 2.2
=== === === === === ===
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS.............. 2.8 2.5 2.5 3.7 1.4 1.6
=== === === === === ===
</TABLE>
(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.
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
2000 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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 11,090
<SECURITIES> 0
<RECEIVABLES> 263,980
<ALLOWANCES> (3,970)
<INVENTORY> 183,340
<CURRENT-ASSETS> 499,690
<PP&E> 1,066,960
<DEPRECIATION> 339,470
<TOTAL-ASSETS> 2,143,600
<CURRENT-LIABILITIES> 244,170
<BONDS> 1,371,260
0
0
<COMMON> 44,720
<OTHER-SE> 274,710
<TOTAL-LIABILITY-AND-EQUITY> 2,143,600
<SALES> 459,400
<TOTAL-REVENUES> 459,400
<CGS> (340,000)
<TOTAL-COSTS> (340,000)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,810
<INCOME-PRETAX> 42,680
<INCOME-TAX> 16,860
<INCOME-CONTINUING> 25,820
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,820
<EPS-BASIC> 0.63
<EPS-DILUTED> 0.51
</TABLE>
