FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
Commission file number 1-10716
TRIMAS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 38-2687639
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
315 East Eisenhower Parkway, Ann Arbor, Michigan 48108
(Address of principal executive offices) (Zip Code)
(313) 747-7025
(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 (or for such shorter period that the registrant was
required to file such reports), 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 practicable date.
Shares Outstanding at
Class October 31, 1997
Common Stock, $.01 Par Value 41,326,047
TRIMAS CORPORATION
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
September 30, 1997 and December 31, 1996 1
Consolidated Condensed Statements of
Income for the Three Months and Nine
Months Ended September 30, 1997 and 1996 2
Consolidated Condensed Statements of
Cash Flows for the Nine Months
Ended September 30, 1997 and 1996 3
Notes to Consolidated Condensed
Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 5
Part II. Other Information and Signature 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TRIMAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
September 30, December 31,
1997 1996
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $125,960,000 $105,890,000
Receivables 93,400,000 80,390,000
Inventories 89,710,000 92,210,000
Other current assets 5,260,000 4,130,000
Total current assets 314,330,000 282,620,000
Property and equipment 194,660,000 194,540,000
Excess of cost over net assets
of acquired companies 176,970,000 174,710,000
Other assets 41,130,000 44,800,000
Total assets $727,090,000 $696,670,000
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 29,370,000 $ 33,750,000
Other current liabilities 37,150,000 45,430,000
Total current liabilities 66,520,000 79,180,000
Deferred income taxes and other 47,540,000 39,920,000
Long-term debt 71,630,000 187,120,000
Total liabilities 185,690,000 306,220,000
Shareholders' equity:
Common stock, $.01 par value, authorized
100 million shares, outstanding 41.3
million shares in 1997; 36.6 million
shares in 1996 410,000 370,000
Paid-in capital 259,330,000 155,690,000
Retained earnings 285,180,000 238,290,000
Cumulative translation adjustments (3,520,000) (3,900,000)
Total shareholders' equity 541,400,000 390,450,000
Total liabilities and
shareholders' equity $727,090,000 $696,670,000
The accompanying notes are an integral part of the
consolidated financial statements.
1
TRIMAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
Net sales $515,660,000 $457,520,000 $168,600,000 $149,620,000
Cost of sales (349,090,000) (308,810,000) (115,060,000) (101,830,000)
Selling, general and
administrative expenses (77,910,000) (69,030,000) (25,990,000) (23,170,000)
Operating profit 88,660,000 79,680,000 27,550,000 24,620,000
Interest expense (4,250,000) (8,150,000) (1,230,000) (2,630,000)
Other, net (principally
interest income) 4,540,000 4,520,000 1,860,000 1,680,000
290,000 (3,630,000) 630,000 (950,000)
Income before income
taxes 88,950,000 76,050,000 28,180,000 23,670,000
Income taxes 33,800,000 29,660,000 10,750,000 9,230,000
Net income $ 55,150,000 $ 46,390,000 $ 17,430,000 $ 14,440,000
Earnings per common
share:
Primary $1.37 $1.25 $.42 $.39
Fully diluted $1.33 $1.17 $.42 $.37
Dividends declared per
common share $.20 $.17 $.07 $.06
Weighted average number
of common and common
equivalent shares
outstanding:
Primary 40,343,000 36,971,000 41,679,000 36,977,000
Fully diluted 41,686,000 42,072,000 41,686,000 42,072,000
The accompanying notes are an integral part of the
consolidated condensed financial statements.
2
TRIMAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1997 1996
CASH FROM (USED FOR):
OPERATIONS:
Net income $ 55,150,000 $ 46,390,000
Adjustments to reconcile net income
to net cash from operations:
Depreciation and amortization 19,620,000 17,390,000
Deferred income taxes 2,250,000 3,100,000
(Increase) decrease in receivables (11,710,000) (5,580,000)
(Increase) decrease in inventories 2,500,000 (230,000)
Increase (decrease) in accounts
payable and other current
liabilities (8,320,000) 4,950,000
Other, net (1,210,000) (1,290,000)
Net cash from (used for)
operations 58,280,000 64,730,000
INVESTMENTS:
Capital expenditures (17,860,000) (16,740,000)
Acquisitions, net of cash acquired (21,470,000)
Contingent acquisition price paid
(principally to MascoTech, Inc. (7,450,000)
Net cash from (used for)
investments (25,310,000) (38,210,000)
FINANCING:
Long-term debt:
Issuance 17,400,000 18,480,000
Retirement (22,730,000) (22,200,000)
Common stock dividends paid (7,570,000) (5,860,000)
Net cash from (used for)
financing (12,900,000) (9,580,000)
CASH AND CASH EQUIVALENTS:
Increase (decrease) for the period 20,070,000 16,940,000
At beginning of period 105,890,000 92,390,000
At end of period $125,960,000 $109,330,000
SUPPLEMENTAL CASH FLOW INFORMATION:
Noncash financing transaction:
Conversion of convertible subordinated
debentures into common stock $106,000,000
The accompanying notes are an integral part of the
consolidated condensed financial statements.
3
TRIMAS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
A. Basis of Presentation
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been
included, and such adjustments are of a normal recurring
nature. The year-end condensed balance sheet data was derived
from audited financial statements, but does not include all
disclosures required by generally accepted accounting
principles. For further information, refer to the
consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the
year ended December 31, 1996.
B. Inventories by component are as follows:
September 30, December 31,
1997 1996
Finished goods $48,340,000 $53,380,000
Work in process 16,050,000 14,340,000
Raw material 25,320,000 24,490,000
$89,710,000 $92,210,000
C. Property and equipment reflects accumulated depreciation of
$143.8 million and $131.7 million as of September 30, 1997 and
December 31, 1996, respectively.
D. During the first quarter of 1997 the Company announced that it
would redeem for cash its outstanding issue of $115.0 million
of 5% Convertible Subordinated Debentures Due 2003. In March
1997, $9.0 million of Convertible Subordinated Debentures were
redeemed for cash. The remaining $106.0 million of
Convertible Subordinated Debentures were converted into 4.7
million shares of TriMas Corporation common stock at the
conversion price of $22 5/8 per share.
4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Consolidated net sales of $168.6 million during the current quarter were a
third quarter record, and increased 12.7 percent over the comparable period in
1996. Record sales for the first nine months of 1997 were $515.7 million, also
ahead 12.7 percent compared to $457.5 million in 1996. All four of the
Company's reporting segments recorded increased sales during the quarter and
nine months ended September 30, 1997, as compared to the prior year periods.
Sales for the Specialty Container Products segment for the third quarter
and nine months ended September 30, 1997 increased 12.6 percent and 21.8 percent
respectively. Third quarter sales equaled $52.3 million bringing the nine month
total to $165.9 million. Year-to-date segment sales reflect the results of
businesses acquired in 1996, moderate increases in sales of specialty gaskets
and container closure products, and weaker demand for cylinders from
industrial gas distributors.
Sales by the Towing Systems segment increased 11.0 percent during the
current quarter to $53.3 million compared to $48.0 million during last year's
third quarter. The continuing strength of the specialty automotive retail
market and increased demand from independent hitch installers contributed to
this segment's improved sales. Ongoing new product introductions and delayed
seasonal demand created in previous quarters by unfavorable weather conditions
also aided third quarter sales performance. Segment sales for the current year-
to-date period of $165.4 million were negatively impacted by adverse
5
weather during the first four months of the year.
Third quarter 1997 sales for the Specialty Fasteners segment were $40.9
million, an increase of 16.0 percent over sales recorded in the comparable
period of 1996. Sales during the first nine months of 1997 of $120.1 million
increased 10.8 percent compared to 1996. Continued strength in the aerospace
markets served by the segment, and strong demand for large diameter industrial
fasteners utilized in the heavy-duty truck market aided sales performance during
the current periods.
Nine month and third quarter sales by the Corporate Companies segment
increased 8.5 percent and 11.0 percent, respectively, over 1996. During the
first nine months of 1997 sales were $64.3 million compared to $59.3 million
during 1996's corresponding period. Sales during the third quarters of 1997 and
1996 were $22.0 million and $19.8 million. Sales of both specialty insulation
products and specialty precision tools increased during both the third quarter
and first nine months of 1997 as the commercial construction and precision tool
markets continued to improve.
The Company's consolidated operating profit for the first nine months of
1997 increased to $88.7 million, or 17.2 percent of net sales, compared to $79.7
million in 1996, a 17.4 percent operating margin. Operating profit for the
third quarter 1997 of $27.6 million represented an operating margin of 16.3
percent, which compares to an operating margin of 16.5 percent achieved during
last year's third quarter.
Interest expense decreased in the nine and three month periods ended
6
September 30, 1997 primarily because of the conversion in March 1997 of $106.0
million of the Company's issue of $115.0 million of 5% Convertible
Subordinated Debentures Due 2003 into 4.7 million shares of Company common
stock.
Net income for the nine months ended September 30, 1997 increased 18.9
percent to $55.2 million, compared to $46.4 million in last year's comparable
period. Primary earnings per common share for the first nine months of 1997
increased 9.6 percent to $1.37 based on 40.3 million shares outstanding,
compared to 1996's primary earnings per common share of $1.25 based on 37.0
million shares outstanding. The increase in shares outstanding resulted from
the aforementioned conversion of subordinated debt into Company common stock in
March 1997. Fully diluted earnings per common share increased 13.7 percent to
$1.33, based on 41.7 million shares outstanding, versus $1.17 last year, based
on 42.1 million shares outstanding. Net income for the third quarter of 1997
increased to $17.4 million, as compared to $14.4 million in last year's third
quarter. Primary earnings per common share for the third quarter of 1997
increased 7.7 percent to $.42 compared to $.39 in 1996's third quarter. Fully
diluted earnings per common share for the third quarter of 1997 were also $.42,
a 13.5 percent increase compared to $.37 in last year's third quarter.
Liquidity, Working Capital and Cash Flows
The Company's financial strategies include maintaining a relatively high
level of liquidity. Historically, TriMas Corporation has generated sufficient
7
cash flows from operating activities to fund capital expenditures, debt service
and dividends, while maintaining its strategic level of liquidity. At
September 30, 1997 the current ratio was 4.7 to 1 and working capital equaled
$247.8 million, including $126.0 million of cash and cash equivalents. The
Company had available credit of approximately $330.7 million under its domestic
and international revolving credit facilities at September 30, 1997.
Cash flows from operations provided $58.3 million and $64.7 million during
the first nine months of 1997 and 1996. These operating cash flows were net of
increases in accounts receivable of $11.7 million in 1997 and $5.6 million in
1996. These increases in receivables during the first nine months of each year
were due mainly to the seasonality of the Towing Systems segment and the
increased sales volumes. Historically, the cash flow provided by the seasonal
increase in receivables is realized later in the year. A corresponding increase
in accounts payable and accrued liabilities provided cash flow of $4.9 million
in the first nine months of 1996. During the first nine months of 1997 a
decrease in current liabilities used cash of $8.3 million. Current liabilities
declined primarily because of interest payments on the Company's subordinated
debt which was converted and redeemed in March, relatively higher estimated
income tax payments and reductions of accounts payable balances at certain
operating units. A reduction in the Company's inventories provided cash flow of
$2.5 million during the current nine month period.
Capital expenditures during the first nine months equaled $17.9 million in
1997 and $16.7 million in 1996. In June 1997 the Company paid MascoTech, Inc.
$7.0 million related to a business acquisition made in 1993 as a result
8
of that acquired business having achieved specified levels of profitability
during the three year period ended December 31, 1996. In September 1997 the
Company paid the former owner of a business acquired in 1996 $0.4 million as a
result of that acquired business having achieved specified levels of
profitability during the one year period ended June 30, 1997. During the third
quarter of 1996 the Company used an aggregate of $21.5 million, net of cash
acquired, to purchase The Englass Group Limited in the United Kingdom and
Queensland Towbars Pty. Ltd. in Australia.
During the first quarter of 1997 $106.0 million of the Company's $115.0
million of 5% Convertible Subordinated Debentures Due 2003 were converted into
4.7 million shares of Company common stock and the remaining $9.0 was redeemed
for cash. Long-term debt issuances and retirements during the first nine months
of 1997 also include the consolidation of borrowings, originally incurred or
acquired in connection with acquisitions made in 1996, under certain of the
Company's revolving credit facilities. During the third quarter of 1996 the
Company borrowed $18.5 million to fund a portion of the purchase price for The
Englass Group and used excess cash to retire $22.2 million of domestic long-term
debt. The increase in the common dividend rate and the additional common shares
outstanding is reflected in cash used for financing activities during the first
nine months of 1997.
The Company believes its cash flows from operations, along with its
borrowing capacity and access to financial markets, are adequate to fund its
strategies for future growth, including working capital, expenditures for
manufacturing expansion and efficiencies, market share initiatives, and
corporate development activities.
9
Under a Stock Repurchase Agreement which expires in December 1998, Masco
Corporation and MascoTech, Inc. have the right to sell to the Company, at
approximate fair market value, shares of Company common stock following the
occurrence of certain events that would result in an increase in their
respective ownership percentage of the then outstanding shares of Company common
stock. In all cases, the Company has control over the amount of Company common
stock it would ultimately acquire. Neither Masco Corporation nor MascoTech,
Inc. have ever exercised their right to sell Company common stock to the
Company. To the extent these rights have been exercised at any balance sheet
date, the Company would reclassify from permanent capital an amount
representative of the repurchase obligation.
In February 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share. The Company will
adopt the provisions of this Statement during the fourth quarter of 1997 and it
is not expected to have a material effect on the Company's financial statements.
10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 Computation of Earnings Per Common Share
12 Computation of Ratios of Earnings to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K:
None were filed during the quarter ended
September 30, 1997.
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.
TRIMAS CORPORATION
Date: November 12, 1997 By: /s/William E. Meyers
William E. Meyers
Vice President - Controller
(Chief accounting officer
and authorized signatory)
11
Exhibit Index
Exhibit
Number Description of Document
11 Computation of Earnings Per Common Share
12 Computation of Ratios of Earnings to Fixed Charges
27 Financial Data Schedule
Exhibit 11
TRIMAS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands, Except Per Share Amounts)
Nine Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
Primary:
Net income $55,150 $46,390 $17,430 $14,440
Weighted average common
shares outstanding 40,009 36,644 41,329 36,644
Dilution of stock options 334 327 350 333
Weighted average common
and common equivalent
shares outstanding
after assumed exercise
of options 40,343 36,971 41,679 36,977
Primary earnings per
common share $1.37 $1.25 $.42 $.39
Fully diluted:
Net income $55,150 $43,390 $17,430 $14,440
Add after tax convertible
debenture related
expenses 300 2,760 - 920
Net income as adjusted $55,450 $49,150 $17,430 $15,360
Weighted average common
shares outstanding 40,009 36,644 41,329 36,644
Dilution of stock options 357 345 357 345
Addition from assumed
conversion of convertible
debentures 1,320 5,083 - 5,083
Weighted average common
and common equivalent
shares outstanding on
a fully diluted basis 41,686 42,072 41,686 42,072
Fully diluted earnings
per common share $1.33 $1.17 $.42 $.37
Exhibit 12
TRIMAS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Thousands)
Nine Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
Earnings:
Income before income taxes $88,950 $76,050 $28,180 $23,670
Fixed charges 5,310 8,970 1,590 2,900
Earnings before fixed
charges $94,260 $85,020 $29,770 $26,570
Fixed Charges:
Interest $4,520 $8,360 $1,320 $2,690
Portion of rental expense 940 700 320 230
Fixed charges $5,460 $9,060 $1,640 $2,920
Ratios of earnings to fixed charges 17.3 9.4 18.2 9.1
5
9-MOS
DEC-31-1997
SEP-30-1997
125,960,000
0
95,450,000
2,050,000
89,710,000
314,330,000
338,500,000
143,840,000
727,090,000
66,520,000
71,630,000
0
0
410,000
540,990,000
727,090,000
515,660,000
515,660,000
349,090,000
349,090,000
0
0
4,250,000
88,950,000
33,800,000
55,150,000
0
0
0
55,150,000
1.37
1.33
