<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 SEPTEMBER 30, 2000
COMMISSION FILE NUMBER 1-12068
MASCOTECH, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 38-2513957
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
21001 VAN BORN ROAD, TAYLOR, MICHIGAN 48180
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(313) 274-7405
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(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 OCTOBER 20, 2000
----- ---------------------
COMMON STOCK, PAR VALUE $1 PER SHARE 44,736,601
<PAGE> 2
MASCOTECH, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet -
September 30, 2000 and December 31, 1999 1
Consolidated Condensed Statements of Income
for the Three and Nine Months Ended
September 30, 2000 and 1999 2
Consolidated Condensed Statement of
Cash Flows for the Nine Months
Ended September 30, 2000 and 1999 3
Notes to Consolidated Condensed Financial
Statements 4-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-10
Part II. Other Information and Signature 11-12
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MASCOTECH, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 2000 1999
------ ------------- -------------
<S> <C> <C>
Current assets:
Cash and cash investments $ 14,100 $ 4,490
Receivables 195,070 218,960
Inventories 177,010 183,600
Deferred and refundable income taxes 24,490 46,750
Prepaid expenses and other assets 16,490 16,320
---------- ----------
Total current assets 427,160 470,120
Equity and other investments in affiliates 115,530 110,730
Property and equipment, net 741,860 722,680
Excess of cost over net assets of acquired
companies 755,560 759,330
Notes receivable and other assets 39,290 38,410
---------- ----------
Total assets $2,079,400 $2,101,270
========== ==========
LIABILITIES
-----------
Current liabilities:
Accounts payable $ 138,990 $ 114,490
Accrued liabilities 116,970 113,910
---------- ----------
Total current liabilities 255,960 228,400
Convertible subordinated debentures 305,000 305,000
Long-term debt 949,900 1,067,890
Deferred income taxes and other long-term
liabilities 226,790 199,600
---------- ----------
Total liabilities 1,737,650 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 44,730 44,640
Paid-in capital 10 ---
Retained earnings 383,450 324,290
Accumulated other comprehensive loss (42,710) (24,870)
Less: Restricted stock awards (43,730) (43,680)
---------- ----------
Total shareholders' equity 341,750 300,380
---------- ----------
Total liabilities and
shareholders' equity $2,079,400 $2,101,270
========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated condensed financial statements.
1
<PAGE> 4
MASCOTECH, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------- ------------------------
2000 1999 2000 1999
--------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales $ 393,770 $ 399,300 $1,295,480 $1,284,470
Cost of sales (298,360) (299,960) (966,590) (955,420)
Selling, general and
administrative expenses (49,970) (51,030) (163,130) (163,430)
Gain (charge) for disposition of
businesses, net 2,800 --- 2,800 26,550
Charge for asset impairment --- --- --- (17,510)
--------- --------- ---------- ----------
Operating profit 48,240 48,310 168,560 174,660
--------- --------- ---------- ----------
Other income (expense), net:
Interest expense (20,720) (20,010) (64,500) (61,280)
Equity and interest income
from affiliates, net (520) 5,000 9,170 10,530
Loss from change in investment
of an equity affiliate --- --- --- (3,150)
Other, net 2,420 (280) 2,120 (2,320)
--------- --------- ---------- ----------
(18,820) (15,290) (53,210) (56,220)
--------- --------- ---------- ----------
Income before income taxes 29,420 33,020 115,350 118,440
Income taxes 11,560 12,820 45,490 48,270
--------- --------- ---------- ----------
Net income $ 17,860 $ 20,200 $ 69,860 $ 70,170
========= ========= ========== ==========
Basic earnings per share $ .44 $ .49 $1.71 $1.71
===== ===== ===== =====
Diluted earnings per share $ .37 $ .41 $1.39 $1.39
===== ===== ===== =====
Cash dividends declared per share $ .08 $ .08 $ .24 $ .22
===== ===== ===== =====
Cash dividends paid per share $ .08 $ .08 $ .24 $ .22
===== ===== ===== =====
</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 NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------
2000 1999
---- ----
<S> <C> <C>
CASH FROM (USED FOR):
OPERATIONS:
Net cash from earnings $ 147,150 $ 138,030
Decrease in inventories 9,570 11,100
(Increase) in receivables (23,670) (21,350)
Proceeds from accounts receivable sale 48,260 ---
Increase (decrease) in accounts payable
and accrued liabilities 22,740 (13,020)
Decrease in prepaid expenses and
other current assets 20,460 6,510
Other, net (6,760) (2,420)
---------- ----------
Net cash from operating activities 217,750 118,850
---------- ----------
FINANCING:
Payment of debt (154,450) (35,190)
Increase in debt 31,620 22,240
Payment of common stock dividends (10,700) (9,900)
Retirement of Company common stock --- (19,530)
Proceeds from interest rate swap settlement 15,820 ---
Other, net (5,100) 680
---------- ----------
Net cash (used for) financing
activities (122,810) (41,700)
---------- ----------
INVESTMENTS:
Capital expenditures (78,790) (100,800)
Cash received from sale of businesses, net 3,200 90,470
Acquisition of businesses, net of
cash acquired (21,090) (87,670)
Other, net 11,350 3,810
---------- ----------
Net cash (used for) investing
activities (85,330) (94,190)
---------- ----------
CASH AND CASH INVESTMENTS:
(Decrease) increase for the nine months 9,610 (17,040)
At January 1 4,490 29,390
---------- ----------
At September 30 $ 14,100 $ 12,350
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Net cash (received)/paid during the period for:
Interest $ 57,170 $ 55,570
========== ==========
Income taxes $ (900) $ 27,220
========== ==========
</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 September 30, 2000 and the results of
operations for the three and nine months ended September 30, 2000 and
1999 and cash flows for the nine months ended September 30, 2000 and
1999. Certain amounts for the period ended September 30, 1999 have been
reclassified to conform to the presentation adopted in 2000.
B. Inventories by component are as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-------- --------
<S> <C> <C>
Finished goods $ 78,490 $ 86,240
Work in process 50,250 45,940
Raw materials 48,270 51,420
-------- --------
$177,010 $183,600
</TABLE>
C. Property and equipment, net reflects accumulated depreciation of $360
million and $323 million as at September 30, 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 Nine Months Ended
September 30 September 30
------------------ -------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net income $17,860 $20,200 $ 69,860 $70,170
Other comprehensive (loss)/
Income (9,580) 4,110 (17,840) (9,580)
------- ------- -------- -------
Total comprehensive income $ 8,280 $24,310 $ 52,020 $60,590
======= ======= ======== =======
</TABLE>
The majority of other comprehensive loss relates to foreign currency
translation.
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. Interest rate swap agreements covering a notional debt amount of $400
million expired or were terminated in June 2000 at a gain, and the
Company received proceeds of approximately $15.8 million. The Company
has deferred a portion of the gain in the amount of approximately $13.7
million at September 30, 2000, which will be recognized through a
reduction in annual interest expense through 2003. The cash proceeds
were used for the reduction of long-term debt and are reflected as
financing activities in the Consolidated Condensed Statement of Cash
Flows.
4
<PAGE> 7
MASCOTECH, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
G. Segment activity for the three and nine months ended September 30, 2000
and 1999 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------- -----------------------
2000 1999 2000 1999
-------- -------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES FROM EXTERNAL CUSTOMERS
--------------------------------
Specialty Metal Formed Products $197,230 $197,880 $ 643,410 $ 606,830
Towing Systems 65,640 65,670 230,570 213,820
Specialty Fasteners 51,390 58,800 170,640 180,940
Specialty Packaging & Sealing Products 52,020 50,440 169,870 163,950
Specialty Industrial Products 27,490 26,510 80,990 80,120
Companies Sold or Held for Sale --- --- --- 38,810
-------- -------- ---------- ----------
Total $393,770 $399,300 $1,295,480 $1,284,470
======== ======== ========== ==========
INTERSEGMENT REVENUES
---------------------
Specialty Metal Formed Products $ 1,860 $ 2,180 $ 6,290 $ 6,710
Towing Systems 1,840 1,980 7,630 6,230
Specialty Fasteners 410 1,020 2,070 2,590
Specialty Packaging & Sealing Products 50 --- 150 ---
Specialty Industrial Products 130 210 440 570
Companies Sold or Held for Sale --- --- --- 930
-------- -------- ---------- ----------
Total $ 4,290 $ 5,390 $ 16,580 $ 17,030
======== ======== ========== ==========
OPERATING PROFIT
----------------
Specialty Metal Formed Products $ 27,940 $ 24,860 $ 91,120 $ 82,430
Towing Systems 6,830 8,500 34,080 31,660
Specialty Fasteners 6,990 7,370 19,920 23,780
Specialty Packaging & Sealing Products 10,210 9,420 31,890 29,770
Specialty Industrial Products (1,580) 3,080 4,040 9,690
Companies Sold or Held for Sale --- --- --- 4,390
-------- -------- ---------- ----------
Total $ 50,390 $ 53,230 $ 181,050 $ 181,720
======== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------- -----------------------
2000 1999 2000 1999
-------- -------- ---------- -----------
<S> <C> <C> <C> <C>
OPERATING PROFIT
----------------
Total operating profit for reportable
segments $ 50,390 $ 53,230 $ 181,050 $ 181,720
General corporate expenses (4,950) (4,920) (15,290) (16,100)
Gain (charge) for disposition of
businesses, net 2,800 --- 2,800 26,550
Charge for asset impairment --- --- --- (17,510)
-------- -------- ---------- ----------
Total operating profit $ 48,240 $ 48,310 $ 168,560 $ 174,660
======== ======== ========== ==========
</TABLE>
5
<PAGE> 8
MASCOTECH, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
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 Nine Months Ended
September 30 September 30
------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Weighted average number of
shares outstanding 40,930 41,280 40,970 41,120
======== ======== ======== ========
Earnings used for basic earnings
per share computation $ 17,860 $ 20,200 $ 69,860 $ 70,170
======== ======== ======== ========
Basic earnings per share $ .44 $ .49 $ 1.71 $ 1.71
======== ======== ======== ========
Total shares used for basic earnings
per share computation 40,930 41,280 40,970 41,120
Dilutive securities:
Stock options 400 610 370 590
Convertible debentures 9,840 9,840 9,840 9,840
Contingently issuable shares 4,030 3,570 4,100 3,760
-------- -------- -------- --------
Total shares used for diluted
earnings per share computation 55,200 55,300 55,280 55,310
======== ======== ======== ========
Earnings used for basic earnings
per share computation $ 17,860 $ 20,200 $ 69,860 $ 70,170
Add back of debenture interest 2,340 2,340 7,020 6,970
-------- -------- -------- --------
Earnings used for diluted
earnings per share computation $ 20,200 $ 22,540 $ 76,880 $ 77,140
======== ======== ======== ========
Diluted earnings per share $ .37 $ .41 $ 1.39 $ 1.39
======== ======== ======== ========
</TABLE>
Diluted earnings per share reflect the potential dilution that would
occur if securities or other contracts to issue common stock were
converted or exercised into common stock.
I. During June 2000, the Company entered into an agreement to sell, on an
ongoing basis, the trade accounts receivable of certain business
operations to a wholly owned, bankruptcy-remote, special purpose
subsidiary ("MTSPC") of the Company. MTSPC has sold and, subject to
certain conditions, may from time to time sell, an undivided fractional
ownership interest in the pool of receivables up to approximately $50
million to a third party multi-seller receivables funding company (the
"conduit"). Upon sale to the conduit, MTSPC holds a subordinated
retained interest in the receivables. The estimated fair value of the
subordinated retained interest, excluding allowance for doubtful
accounts, was approximately $19.9 million at September 30, 2000, which
is included in the receivables balance. Under the terms of the
agreement, new receivables are added to the pool as collections reduce
previously sold receivables. The Company services, administers, and
collects the receivables on behalf of MTSPC and the conduit. The
proceeds of sale are less than the face amount of accounts receivable
sold by an amount that approximates the purchaser's financing costs of
approximately $1 million included in other expense. The initial
proceeds were used for the reduction of long-term debt and are
reflected as operating cash flows in the accompanying Consolidated
Condensed Statement of Cash Flows.
6
<PAGE> 9
MASCOTECH, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(CONCLUDED)
J. 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.
K. In the second quarter of 1999, the Company recognized a non-cash charge
of $3.1 million pre-tax to reflect the other than temporary decline in
value of an equity affiliate of the Company.
L. In the second quarter 1999, the Company recorded a non-cash charge of
$17.5 million related to an impairment of certain long lived assets,
related to its hydroforming equipment and intellectual property. The
revised carrying values of these assets were generally calculated based
on expected future cash flows which were determined to be insufficient
to recover the related carrying value.
M. On August 2, 2000, the Company entered into a definitive agreement to
merge with Riverside Company LLC, an affiliate of Heartland Industrial
Partners, L.P. in a going private transaction. The value of the
recapitalization transaction, including the assumption of debt, is
expected to exceed $2 billion. Holders of common stock at the time of
the recapitalization merger will be entitled to receive, in exchange
for each share of MascoTech common stock, $16.90 in cash. In addition,
such shareholders will be entitled to additional amounts from the net
proceeds of the disposition of the Company's interest in Saturn
Electronics & Engineering, Inc. There is no assurance as to the amount
of payments, if any, to the stockholders as a result of the disposition
of the Company's interest in Saturn. The transaction is subject to
certain conditions, including the completion of financing and a
stockholder vote, currently scheduled for November 28, 2000.
7
<PAGE> 10
MASCOTECH, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MascoTech sales for the third quarter 2000 decreased modestly to $394
million as compared with $399 million in 1999. Sales for the third quarter 2000,
excluding the impact of acquisitions and dispositions, would have decreased
approximately three percent, principally as a result of currency fluctuations
which reduced third quarter 2000 sales by approximately $7 million.
Income in the third quarter 2000 was $17.9 million or $.37 per share,
compared with $20.2 million or $.41 per share in 1999. In addition to the
decline in sales, operating performance for the third quarter of 2000 as
compared with the comparable period in 1999 was negatively impacted by costs and
expenses related to the previously announced closure of a manufacturing
facility, the launch of certain new products including a new manufacturing
facility and by a flood which adversely impacted the Company's specialty
insulation business. These costs and expenses were offset by the positive
outcome of certain issues related to businesses previously disposed and the
corresponding adjustment of certain expense accruals. In addition, results were
negatively impacted by reduced equity affiliate income reflecting operating
losses and restructuring charges at two of the Company's affiliates. This
reduction in affiliate income was offset by insurance proceeds and reduced
interest expense which reflects the benefit of interest rate swap agreements
which were terminated in June of 2000.
Aided by acquisitions, sales for the Company's Specialty Metal Formed
Products and Towing System products for third quarter 2000 were comparable with
sales for third quarter 1999. Excluding the impact of acquisitions and
dispositions, Specialty Metal Formed Products and Towing Systems sales for the
third quarter of 2000 would have decreased approximately three percent and seven
percent, respectively, reflecting inventory balancing by certain customers and
currency fluctuations. Sales of Specialty Fasteners for third quarter 2000
declined approximately 13 percent reflecting the phase out of certain products
resulting from a plant closure and softness in fastener applications in the
heavy truck and off road markets. Excluding the impact of the plant closure,
sales would have declined approximately seven percent. Third quarter sales for
Specialty Packaging and Sealing Products increased three percent as a result of
improved sales of specialty gaskets and cylinder related products. Sales of
Specialty Industrial Products increased four percent in third quarter 2000 from
1999 levels.
Sales for the nine months ended September 30, 2000 increased one
percent to $1,295 million from $1,284 million in 1999 reflecting the impact of
acquisitions and dispositions, which offset each other and the impact of
currency fluctuations, which reduced sales for the nine months ended September
30, 2000 by approximately $18 million. Income for the nine months ended
September 30, 1999 benefitted from a gain of approximately $26.5 million
pre-tax, related to the sale of the Company's aftermarket-related businesses.
This gain was offset by charges to reflect the impairment in value of certain
assets related to the Company's hydroforming process, $17.5 million pre-tax, and
approximately $3 million pre-tax to reflect an other than temporary decline in
the value of an equity affiliate. Operating profit, excluding the net gains on
disposition of businesses and charge for asset impairment, for the nine months
ended September 30, 2000 and 1999 was approximately $166 million for both
periods.
For the nine month period ended September 30, 2000, sales of Specialty
Metal Formed Products and Towing Systems aided by acquisitions increased six and
eight percent, respectively, as compared with 1999. Excluding the impact of
acquisitions and dispositions, Specialty Metal Formed Products sales for the
nine months ended September 30, 2000 would have approximated 1999 levels while
sales of Towing Systems would have increased in excess of two percent, despite
the negative impact of currency fluctuations. Sales for Specialty Fasteners
decreased six percent as a result of the phase out of certain products related
to a plant closure. Specialty Packaging and Sealing Products sales for the first
nine months increased four percent as a result of improved sales of specialty
gaskets and cylinder related products. Sales for Specialty Industrial Products
for the first nine months of 2000 increased one percent.
8
<PAGE> 11
MASCOTECH, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Excluding the impact of the gains on disposition and the non-recurring
charge for asset impairment, operating margin for the nine months ended
September 30, 2000 and 1999 would have been 12.8 percent and 12.9 percent,
respectively. Higher than expected start-up costs related to the launch of new
products and new manufacturing facilities negatively impacted operating
performance in both periods.
The tax rate for third quarter 2000 was 39.3 percent. The higher than
statutory rate of 39.3 percent results primarily from non-deductible goodwill
amortization for tax purposes. The tax rate for third quarter 1999 was 38.8
percent.
In the second quarter 2000, the Company entered into a securitization
agreement to sell, on an ongoing basis, a pool of its trade accounts receivable.
The proceeds, approximately $48 million, from the sale were used for the
reduction of long-term debt.
In the second quarter 2000, the Company's interest rate swap agreements
covering a notional amount of $400 million expired or were terminated resulting
in proceeds of approximately $15.8 million. The cash proceeds were used for the
reduction of long-term debt. As a result of the expiration or termination of the
interest rate swap agreements, the Company has greater exposure to interest rate
fluctuations on its floating rate debt.
On August 2, 2000, the Company entered into a definitive agreement to
merge with Riverside Company LLC, an affiliate of Heartland Industrial Partners,
L.P. in a going private transaction. The value of the recapitalization
transaction, including the assumption of debt, is expected to exceed $2 billion.
Holders of common stock at the time of the recapitalization merger will be
entitled to receive, in exchange for each share of MascoTech common stock,
$16.90 in cash. In addition, such shareholders will be entitled to additional
amounts from the net proceeds of the disposition of the Company's interest in
Saturn Electronics & Engineering, Inc. There is no assurance as to the amount of
payments, if any, to the stockholders as a result of the disposition of the
Company's interest in Saturn. The transaction is subject to certain conditions,
including the completion of financing and a stockholder vote, currently
scheduled for November 28, 2000.
At September 30, 2000, current assets, which aggregated approximately
$427 million, were approximately 1.7 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 short-term and long-term working capital, capital
expansion programs and other investment needs subject to compliance with bank
covenants.
Litigation
Five purported stockholder class action lawsuits have been filed
against MascoTech, each of MascoTech's directors and Masco Corporation, in the
Delaware Court of Chancery on behalf of MascoTech's unaffiliated stockholders,
in connection with the proposed merger of the Company with an affiliate of
Heartland Industrial Partners, L.P. The lawsuits, although not identical,
allege, among other things, that (1) the directors breached their fiduciary
duties to MascoTech's stockholders through an unfair process of negotiating the
recapitalization agreement and unfair and inadequate consideration and (2)
Heartland and the continuing stockholders unfairly possessed nonpublic
information when negotiating the recapitalization agreement. The lawsuits
further allege that these actions by MascoTech prevented or could prevent the
stockholders of MascoTech from realizing the full and fair value of their stock.
9
<PAGE> 12
MASCOTECH, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONCLUDED)
On November 3, 2000, the parties to these lawsuits entered into a
Memorandum of Understanding concerning the terms of a proposed settlement of
these lawsuits. In connection with a proposed settlement, (a) MascoTech and
Riverside agreed to amend the recapitalization agreement to provide, among other
things, for a possible increase in the amount payable to MascoTech stockholders
from the proceeds of the disposition of Saturn stock, (b) the special committee
agreed that, as the members of the adjustment committee (charged with the
responsibility to dispose of the Saturn stock) after the recapitalization
merger, they will continue to have fiduciary duties, as directors of the
Delaware corporation, to the stockholders of MascoTech entitled to receive any
proceeds of the sale of the Saturn stock, (c) the special committee agreed that
the plaintiffs' counsel will from time to time receive reports from the advisors
to the adjustment committee regarding such sale, and (d) MascoTech provided
plaintiffs' counsel with an opportunity to review and comment upon the
disclosure provided to MascoTech stockholders in the proxy statement that was
mailed to Company shareholders on or about October 26, 2000. The proposed
settlement is subject to a number of conditions, including confirmatory
discovery by plaintiffs' counsel, approval of the proposed settlement by the
Delaware Court of Chancery and consummation of the recapitalization merger.
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.
10
<PAGE> 13
PART II. OTHER INFORMATION
MASCOTECH, INC.
Items 1, 2, 3, 4 and 5 are not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
Exhibit 10.a MascoTech, Inc. Key Employee Retention Plan
Exhibit 10.b Change of Control Agreement with William T. Anderson,
dated September 21, 2000
Exhibit 10.c Change of Control Agreement with David B. Liner,
dated September 21, 2000
Exhibit 10.d Change of Control Agreement with Leroy H. Runk,
dated September 21, 2000
Exhibit 10.e Change of Control Agreement with James F. Tompkins,
dated September 21, 2000
Exhibit 10.f Amendment No. 1 dated as of October 23, 2000 (filed
herewith) to Recapitalization Agreement dated as of
August 1, 2000 (filed as an exhibit to the Current
Report on Form 8-K dated August 7, 2000, Commission
File No. 001-12068).
Exhibit 10.g Stock Purchase Agreement by and between MascoTech,
Inc. and Citicorp Venture Capital, Ltd, dated as
of August 1, 2000 (Incorporated by reference to
Annex D to the Proxy Statement dated October 26,
2000, Commission File No. 001-12068).
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:
A report on Form 8-K dated August 7, 2000 reporting under Item
5 "Other Events" that MascoTech, Inc. has entered into a
Recapitalization Agreement with an affiliate of Heartland
Industrial Partners L.P. pursuant to which the affiliate will
be merged with and into MascoTech, Inc. with MascoTech, Inc.
as the surviving corporation. As a result of the transactions
contemplated by the Recapitalization Agreement, Heartland
Industrial Partners L.P. will acquire control of MascoTech,
Inc.
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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: NOVEMBER 14, 2000 BY: /s/ Timothy Wadhams
---------------------------- -----------------------------
Timothy Wadhams
Executive Vice President
Finance and Administration
(Chief Accounting Officer
and authorized signatory)
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<PAGE> 15
MASCOTECH, INC.
EXHIBIT INDEX
EXHIBIT
Exhibit 10.a MascoTech, Inc. Key Employee Retention Plan
Exhibit 10.b Change of Control Agreement with William T. Anderson,
dated September 21, 2000
Exhibit 10.c Change of Control Agreement with David B. Liner,
dated September 21, 2000
Exhibit 10.d Change of Control Agreement with Leroy H. Runk,
dated September 21, 2000
Exhibit 10.e Change of Control Agreement with James F. Tompkins,
dated September 21, 2000
Exhibit 10.f Amendment No. 1 dated as of October 23, 2000 (filed
herewith) to Recapitalization Agreement dated as of
August 1, 2000 (filed as an exhibit to the Current
Report on Form 8-K dated August 7, 2000, Commission
File No. 001-12068).
Exhibit 10.g Stock Purchase Agreement by and between MascoTech,
Inc. and Citicorp Venture Capital, Ltd, dated as of
August 1, 2000 (Incorporated by reference to Annex D
to the Proxy Statement dated October 26, 2000,
Commission File No. 001-12068).
Exhibit 12 Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends
Exhibit 27 Financial Data Schedule
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