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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER 1-12068
MASCOTECH, INC.
(FORMERLY MASCO INDUSTRIES, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 38-2513957
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
21001 VAN BORN ROAD, TAYLOR, MICHIGAN 48180
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 313-274-7405
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE, INC.
$1.20 CONVERTIBLE PREFERRED STOCK NEW YORK STOCK EXCHANGE, INC.
4 1/2% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2003 NEW YORK STOCK EXCHANGE, INC.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. /X/
THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S COMMON STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT ON MARCH 15, 1994 (BASED ON THE CLOSING SALE
PRICE OF $23 3/4 OF THE REGISTRANT'S COMMON STOCK ON THE NEW YORK STOCK EXCHANGE
COMPOSITE TAPE ON SUCH DATE) WAS APPROXIMATELY $742,800,000.
NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK AT MARCH 15, 1994:
60,650,000 SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE
PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FILED FOR ITS 1994
ANNUAL MEETING OF STOCKHOLDERS ARE INCORPORATED BY REFERENCE INTO PART III OF
THIS FORM 10-K.
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TABLE OF CONTENTS
ITEM PAGE
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PART I
1. Business........................................................................ 2
2. Properties...................................................................... 7
3. Legal Proceedings............................................................... 8
4. Submission of Matters to a Vote of Security Holders............................. 9
Supplementary Item. Executive Officers of Registrant............................ 9
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters........... 10
6. Selected Financial Data......................................................... 10
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................... 12
8. Financial Statements and Supplementary Data..................................... 17
9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure.................................................................... 41
PART III
10. Directors and Executive Officers of the Registrant.............................. 41
11. Executive Compensation.......................................................... 41
12. Security Ownership of Certain Beneficial Owners and Management.................. 41
13. Certain Relationships and Related Transactions.................................. 41
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................ 42
Signatures...................................................................... 46
FINANCIAL STATEMENT SCHEDULES
MascoTech, Inc. Financial Statement Schedules................................... F-1
TriMas Corporation and Subsidiaries Consolidated Financial Statements and
Financial Statement Schedules................................................. F-7
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PART I
ITEM 1. BUSINESS.
MascoTech, Inc. (formerly Masco Industries, Inc.) is a diversified
manufacturer of original equipment and aftermarket parts for the transportation
industry; commercial, institutional and residential building products for the
construction industry; and other diversified products principally for the
defense industry. Sophisticated technology plays a significant role in the
Company's businesses and in the design, engineering and manufacturing of many of
its products. Transportation-Related Products are manufactured utilizing a
variety of metalworking and other process technologies. Although published
industry statistics are not available, the Company believes that it is a leading
independent producer of many of the industrial component parts that it produces
using cold, warm or hot forming processes. In addition to its manufacturing
activities, the Company provides design and engineering services primarily for
the automotive, heavy truck and aerospace industries.
MascoTech was incorporated under the laws of Delaware in 1984 as a
wholly-owned subsidiary of Masco Corporation, which in May, 1984 transferred to
MascoTech its industrial businesses. The Company became a separate public
company in July, 1984 when Masco Corporation distributed shares of Company
Common Stock as a special dividend to its stockholders. Masco Corporation
currently owns approximately 42 percent of the Company's outstanding Common
Stock. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Corporate Development," included in Item 7 of this
Report.
Except as the context otherwise indicates, the terms "MascoTech" and the
"Company" refer to MascoTech, Inc. and its consolidated subsidiaries.
RECENT DEVELOPMENTS
The Company has undertaken the planned disposition of its energy-related
business segment, which consisted of seven business units, as part of its
long-term strategic plan to de-leverage its balance sheet and increase the focus
on its core operating capabilities. As a result, the Company's financial
statements have been reclassified to present such businesses as discontinued
operations. These businesses manufactured specialized tools, equipment and other
products for energy-related industries. Two of the businesses were sold in late
1993, including one business to the Company's affiliate, TriMas Corporation, and
the Company expects to divest the remaining businesses in 1994. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Discontinued Operations," included in Item 7 of this Report.
Except as the context otherwise indicates, all information contained herein has
been reclassified for these discontinued operations.
In July, 1993, the Company issued $216 million (liquidation value) of
Dividend Enhanced Convertible StockSM. In late 1993, the Company redeemed for
cash its outstanding $100 million of 10% Exchangeable Preferred Stock and,
following a call for redemption, the outstanding $187 million of the Company's
6% Convertible Subordinated Debentures due 2011 were converted into 10.4 million
shares of Company Common Stock (including approximately 7 million shares issued
to Masco Corporation). In early 1994, the Company issued, in a public offering,
$345 million of 4 1/2% Convertible Subordinated Debentures due 2003 which are
convertible into Company Common Stock at $31.00 per share. The net proceeds from
this offering were used to redeem, on February 1, 1994, the outstanding $250
million of the Company's 10 1/4% Senior Subordinated Notes due 1997 and reduce
outstanding bank debt.
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INDUSTRY SEGMENTS
The following table sets forth for the three years ended December 31, 1993,
the contribution of the Company's continuing industry segments to net sales and
operating profit:
(IN THOUSANDS)
NET SALES(1)
--------------------------------------
1993 1992 1991
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Transportation-Related Products.......................... $1,195,000 $1,058,000 $ 874,000
Specialty Products:
Architectural.......................................... 289,000 291,000 273,000
Other.................................................. 99,000 106,000 119,000
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$1,583,000 $1,455,000 $1,266,000
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OPERATING PROFIT (LOSS)(1)(2)
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1993 1992 1991
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Transportation-Related Products.......................... $ 160,000 $ 124,000 $ 74,000
Specialty Products:
Architectural.......................................... (4,000) 2,000 (16,000)
Other.................................................. 5,000 3,000 1,000
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$ 161,000 $ 129,000 $ 59,000
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(1) Results in 1992 and 1991 have been reclassified to conform with the
presentation adopted in 1993 (including amounts for discontinued operations
-- see the Note to the Company's Consolidated Financial Statements
captioned "Discontinued Operations" included in Item 8 of this Report).
(2) Amounts are before general corporate expense.
Additional financial information concerning the Company's operations by
industry segments as of and for the three years ended December 31, 1993, is set
forth in Item 8 of this Report in the Note to the Company's Consolidated
Financial Statements captioned "Segment Information."
TRANSPORTATION-RELATED PRODUCTS
The Company manufactures a broad range of semi-finished components,
subassemblies and assemblies for the transportation industry.
Transportation-Related Products represented 76 percent of 1993 sales from
continuing operations and primarily consist of original equipment products for
the automotive and truck industries. The Company's products include a number of
high-performance products for which reliability, quality and certainty of supply
are major factors in customers' selection of suppliers. Over half of the
products are used for engine and drivetrain applications (such as semi-finished
transmission shafts, drive gears, engine connecting rods, wheel spindles and
front wheel drive and exhaust system components) and for chassis and suspension
functions (including electromechanical solenoids and relays and suspension
components). Products manufactured for exterior body trim applications include
automotive trim, luggage racks and accessories, and metal stampings. Aftermarket
products include fuel and emission systems components, windshield wiper blades,
constant-velocity joints, brake hardware repair kits, and luggage racks and
accessories. In addition to its manufacturing activities, the Company provides
engineering services primarily for the automotive and heavy-duty truck
industries, and is engaged in specialty vehicle development and conversion
programs.
Products are manufactured using various metalworking technologies,
including cold, warm and hot forming, powdered metal forming and stamping.
Approximately one-quarter of the Company's sales of Transportation-Related
Products resulted from using cold, warm or hot metal forming technologies. The
Company believes that its metalworking technologies provide cost-competitive,
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high-performance, quality components that are required in order to meet the
increasing demands of the automotive and truck markets it serves.
Approximately 85 percent of the Company's Transportation-Related Products
sales in 1993 were original equipment automotive products and services. Sales to
original equipment manufacturers are made through factory sales personnel and
independent sales representatives. During 1993, sales to various divisions and
subsidiaries of Ford Motor Company, General Motors Corporation and Chrysler
Corporation accounted for approximately 20 percent, 14 percent and 12 percent,
respectively, of the Company's net sales. Sales to the automotive aftermarket
are made primarily to distributors utilizing factory sales and service
personnel.
SPECIALTY PRODUCTS
Architectural Products
The Company manufactures a variety of Architectural Products for
commercial, institutional and residential markets. Products include steel doors
and frames; stainable and low maintenance steel doors; wood windows and
aluminum-clad wood windows; leaded, etched and beveled glass for decorative
windows and entryways; residential entry systems; garage doors; sectional and
rolling doors; security grilles; and modular metal partitions. The Company's
commercial and institutional markets include office buildings, factories,
hotels, schools, hospitals, retail stores and malls, warehouses and
mini-warehouses. Residential markets include single family new construction as
well as repair and remodeling. Architectural Products are sold principally to
wholesale distributors who sell the products to builders, developers, dealers,
retailers (such as do-it-yourself home centers) and residential, commercial,
industrial and institutional end users. Security grilles are sold directly to
builders, developers and end users.
Other Specialty Products
The Company's Other Specialty Products consist primarily of Defense
Products, including large diameter cold formed cartridge cases, projectiles and
casings for rocket motors and missiles for the United States government and its
suppliers. Changes in government procurement practices and requirements have
adversely affected orders, sales and profits of such products in recent years
and are expected to continue to do so in the future. As a result, the Company is
pursuing other commercial applications for the resources related to the
manufacturing of Defense Products, including its metal forging capability and
waste-water treatment capability. Since obtaining the necessary permits in 1990,
the Company has marketed waste-water treatment services to other industrial
companies principally in southern California.
The Company's government contracts contain standard clauses providing for
termination at the convenience of the government which, in such cases, would
provide the Company with compensation for work performed and costs of
termination. Defense Products are sold both directly to the federal government
and to other prime contractors to the federal government.
GENERAL INFORMATION CONCERNING INDUSTRY SEGMENTS
No material portion of the Company's business is seasonal or has special
working capital requirements. The Company does not consider backlog orders to be
a material factor in its industry segments, and, except as noted above, no
material portion of its business in its other industry segments is dependent
upon any one customer or subject to renegotiation of profits or termination of
contracts at the election of the federal government. Compliance with federal,
state and local regulations relating to the discharge of materials into the
environment, or otherwise relating to the protection of the environment, is not
expected to result in material capital expenditures by the Company or to have a
material effect on the Company's earnings or competitive position. See, however,
"Legal Proceedings," included as Item 3 of this Report, for a discussion of
certain pending proceedings concerning environmental matters. In general, raw
materials required by the Company are obtainable from various sources and in the
quantities desired.
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INTERNATIONAL OPERATIONS
The Company, through its subsidiaries, has businesses located in Canada,
Germany, Italy and the United Kingdom. Products manufactured by the Company
outside of the United States include forged automotive component parts,
constant-velocity joints and extruded urethane lineals. In addition, the Company
provides engineering services outside of the United States, primarily serving
automotive manufacturers in the United Kingdom and Germany. For 1991 through
1993, the Company's annual net export sales from the United States to other
countries, as a percentage of annual consolidated net sales from continuing
operations, approximated five percent.
The Company's foreign operations are subject to political, monetary,
economic and other risks attendant generally to international businesses. These
risks generally vary from country to country.
EQUITY INVESTMENTS
TriMas Corporation
The Company owns approximately 43 percent of the outstanding common stock
of TriMas Corporation ("TriMas"). The Company's common equity interest in TriMas
increased from 28 percent as a result of the late 1993 conversion of TriMas
convertible preferred stock held by the Company into 7.8 million shares of
TriMas common stock. TriMas manufactures a number of industrial products,
including a variety of steel, stainless steel, aluminum and other non-ferrous
fasteners for the building construction, farm implement, medium and heavy-duty
truck, appliance, aerospace, electronics and other industries. TriMas also
provides metal treating services for manufacturers of fasteners and comparable
products. TriMas manufactures towing systems products, including vehicle
hitches, jacks, winches, couplers and related accessories for the passenger car,
light truck, recreational vehicle, marine, agricultural and industrial markets.
TriMas also manufactures specialty container products, including industrial
container closures, sealing caps and dispensing spigots primarily for the
chemical, agricultural, food, petroleum and health care industries, as well as
high-pressure seamless compressed gas cylinders used for shipping, storing and
dispensing oxygen, nitrogen, argon and helium, specialty industrial gaskets for
refining, petrochemical and other industrial applications, and a complete line
of low-pressure welded cylinders used to contain and dispense acetylene gas for
the welding and cutting industries. In addition, TriMas manufactures
flame-retardant facings and jacketings used in conjunction with fiberglass
insulation, principally for commercial and industrial construction applications,
pressure-sensitive specialty tape products and a variety of specialty precision
tools such as center drills, cutters, end mills, reamers, master gears, gages
and punches.
Emco Limited
The Company owns approximately 43 percent of the outstanding common stock
and convertible debentures of Emco Limited ("Emco"), as a result of the
transactions described under "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Corporate Development," included in Item
7 of this Report. Emco is a major, publicly traded, Canadian-based manufacturer
and distributor of building and home improvement products, including roofing
materials, wood fiber products, vinyl siding, stainless steel sinks and vinyl
windows, and a distributor of plumbing and related products. In addition, Emco
manufactures and distributes worldwide fluid handling equipment for the
petroleum and petrochemical and other industries, and produces custom
components, brass and aluminum forgings, plastic components, tools, dies and
molds. Emco also provides other services on a contract basis for original
equipment manufacturers and others.
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Titan Wheel International, Inc.
The Company owns approximately 21 percent of the outstanding common stock
of Titan Wheel International, Inc. ("Titan"), as a result of the transactions
described in the Note to the Company's Consolidated Financial Statements
captioned "Equity and Other Investments in Affiliates," included in Item 8 of
this Report. Titan is a manufacturer of wheels and other products for
agricultural, construction and other off-highway equipment.
Other Equity Investments
The Company has equity investments in several other companies which are
engaged in activities related to the Company's businesses, including the
manufacture of plastic component parts utilizing the reaction injection molding
process, primarily for the automotive and truck industries, and the manufacture
of electrical and electronic components, primarily for the automotive and truck
industries.
PATENTS AND TRADEMARKS
The Company holds a number of patents, patent applications, licenses,
trademarks and trade names. The Company considers its patents, patent
applications, licenses, trademarks and trade names to be valuable, but does not
believe that there is any reasonable likelihood of a loss of such rights which
would have a material adverse effect on the Company's industry segments or its
present business as a whole.
COMPETITION
The major domestic and foreign markets for the Company's products in its
industry segments are highly competitive. Competition is based primarily on
price, performance, quality and service, with the relative importance of such
factors varying among products. Government procurement practices are an
additional factor in the case of Defense Products. In the case of
Transportation-Related Products, the Company's competitors include a large
number of other well-established independent manufacturers as well as certain
customers who have their own metalworking and engineering capabilities. Although
a number of companies of varying size compete with the Company in its industry
segments, no single competitor is in substantial competition with the Company
with respect to more than a few of its product lines and services.
EMPLOYEES
At December 31, 1993, the Company employed approximately 12,200 people.
Satisfactory relations have generally prevailed between the Company and its
employees.
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ITEM 2. PROPERTIES.
The following list includes the Company's principal manufacturing
facilities by location and the industry segments utilizing such facilities:
Arizona..............Chandler (2)
California...........Santa Fe Springs (4), Vernon (3) and Yuba City (1)
Florida..............Auburndale (2), Deerfield Beach (1) and Orlando (2)
Georgia..............Adel (1), Lawrenceville (1) and Valdosta (1)
Indiana..............Kendallville (1)
Iowa.................Dubuque (2)
Kentucky.............Nicholasville (1)
Michigan.............Auburn Hills (1)(1), Brighton (1), Burton (1),
Coopersville (1), Detroit (1)(1)(1), Farmington Hills
(1), Fraser (1), Green Oak Township (1 and 3), Hamburg
(1 and 3), Holland (1), Livonia (1), Mesick (1), Mt.
Clemens (1), Oxford (1) (1) (1), Port Huron (1), Redford
(1), Roseville (1), Royal Oak (1), Shelby Township (1),
St. Clair (1), St. Clair Shores (1), Sterling Heights
(1), Traverse City (1) (1) (1) (1) (1), Troy (1)(1),
Warren (1) (1), West Branch (2) and Ypsilanti (1)
Mississippi..........Nesbit (2)
New York.............Brooklyn (2) and Maspeth (2)
Ohio.................Blue Ash (2), Bluffton (1), Canal Fulton (1), Columbus
(2), Lima (1), Minerva (1), Perrysburg (2), Port Clinton
(1) and Upper Sandusky (1)
Oklahoma.............Tulsa (4)
Pennsylvania.........Ridgway (1)
Texas................Bryan (4), Dallas (4), Greenville (4) and Houston (4)
(4) (4)
Virginia.............Duffield (1)
Germany..............Riedstadt (2) and Zell am Harmersbach (1 and 3)
Italy................Poggio Rusco (1)
United Kingdom.......Wednesfield, England (1)
Note: Multiple footnotes within the same parenthesis indicate the
facility is engaged in significant activities relating to more than one
segment. Multiple footnotes to the same municipality denote separate
facilities in that location. Industry segments in the preceding table are
identified as follows: (1) Transportation-Related Products; (2) Specialty
Products -- Architectural; (3) Specialty Products -- Other; and (4)
Discontinued Operations.
The Company's largest manufacturing facility is located in Vernon,
California and is a multi-plant facility of approximately 920,000 square feet.
The Company owns the largest plant, comprising approximately 540,000 square feet
and operates the remaining portions of this facility under leases, the earliest
of which expires at the end of 1994. Except for the foregoing facility and an
additional manufacturing facility covering approximately 605,000 square feet,
the Company's manufacturing facilities range in size from approximately 25,000
square feet to 325,000 square feet, are owned by the Company or leased, and are
not subject to significant encumbrances. The Company's executive offices
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are located in Taylor, Michigan, and are provided by Masco Corporation to the
Company under a corporate services agreement.
The Company's buildings, machinery and equipment have been generally well
maintained, are in good operating condition, and are adequate for current
production requirements.
The following list identifies the manufacturing facilities of TriMas by
location and the industry segments utilizing such facilities:
California.................... Commerce(a)
Illinois...................... Wood Dale(a)
Indiana....................... Auburn(c), Elkhart(b), Frankfort(a) and
Mongo(b)
Louisiana..................... Baton Rouge(c)
Massachusetts................. Plymouth(d)
Michigan...................... Canton(b), Detroit(a) and Warren(d)(d)(d)(d)
New Jersey.................... Edison(d), Netcong(d) and North Bergen(d)
Ohio.......................... Lakewood(a)
Texas......................... Houston(c) and Longview(c)
Wisconsin..................... Mosinee(b)
Australia..................... Dandenong South, Victoria(b)
Canada........................ Brampton, Ontario(c), Fort Erie, Ontario(c)
and Oakville, Ontario(b)
Mexico........................ Mexico City(c)
Note: Multiple footnotes to the same municipality denote separate
facilities in that location. Industry segments in the preceding table are
identified as follows: (a) Specialty Fasteners; (b) Towing Systems; (c)
Specialty Container Products; and (d) Corporate Companies.
TriMas' buildings, machinery and equipment have been generally well
maintained, are in good operating condition, and are adequate for current
production requirements.
ITEM 3. LEGAL PROCEEDINGS.
A civil suit was filed in the United States District Court for the Central
District of California in April, 1983 by the United States of America and the
State of California against 30 defendants, including the Company's NI
Industries, Inc. subsidiary ("NI"), for alleged release into the environment of
hazardous waste disposed of at the Stringfellow Disposal Site in California. The
plaintiffs have requested, among other things, that the defendants clean up the
contamination at that site. A consent decree has been entered into by the
plaintiffs and the defendants, including NI, providing that the consenting
parties perform partial remediation at the site. Another civil suit was filed in
the United States District Court for the Central District of California in
December, 1988 by the United States of America and the State of California
against more than 180 defendants, including NI, for alleged release into the
environment of hazardous waste disposed of at the Operating Industries, Inc.
site in California. This site served for many years as a depository for
municipal and industrial waste. The plaintiffs have requested, among other
things, that the defendants clean up the contamination at that site. Two partial
consent decrees have been entered into by the plaintiffs and a group of the
defendants, including NI, providing that the consenting parties perform certain
interim remedial work at the site and reimburse the plaintiffs for certain past
costs incurred by the plaintiffs at the site. Based upon its present knowledge,
and subject to future legal and factual developments, the Company does not
believe that any of this litigation will have a material adverse effect on its
consolidated financial position.
In November, 1993 the California Environmental Protection Agency issued a
proposed enforcement order and a tentative civil penalty in the amount of
$180,000 against the Company's subsidiary, NI Industries, Inc., principally on
account of alleged past violations of certain California environmental laws and
regulations relating to the subsidiary's handling of waste material and relating
to its permit
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allowing it to treat industrial waste. The proposed enforcement order is under
negotiation and is not yet final.
During the fourth quarter of 1991, a division of the Company was assessed a
civil penalty in excess of $100,000 by a municipal sewer authority for alleged
past violations of limitations of waste-water discharges into the authority's
sanitary sewer system. This assessment was appealed by the division, and the
appeal is pending. The division is now in compliance with all applicable
waste-water discharge requirements and the Company believes that the costs of
penalties, if paid, would be immaterial to the Company.
The Company is subject to other claims and litigation in the ordinary
course of its business, but does not believe that any such claim or litigation
will have a material adverse effect on its consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
SUPPLEMENTARY ITEM. EXECUTIVE OFFICERS OF REGISTRANT (PURSUANT TO INSTRUCTION 3
TO ITEM 401(B) OF REGULATION S-K).
OFFICER
NAME POSITION AGE SINCE
- ------------------------------ ------------------------------------------------ --- -------
Richard A. Manoogian.......... Chairman of the Board and Chief Executive 57 1984
Officer
Lee M. Gardner................ President and Chief Operating Officer 46 1992
Timothy Wadhams............... Vice President -- Controller and Treasurer 45 1984
Each of the executive officers is elected to a term of one year or less and
serves at the discretion of the Board of Directors. Mr. Manoogian is and has
been for over five years a Director, Chairman of the Board and the Chief
Executive Officer of Masco Corporation, an affiliate of the Company that is a
manufacturer of building and home improvement and home furnishings products for
the home and family. Mr. Manoogian also is a Director and Chairman of the Board
of TriMas Corporation. Mr. Gardner was appointed President and Chief Operating
Officer of the Company in October, 1992. Prior to his appointment, Mr. Gardner
was President -- Automotive. He joined the Company in 1987, and in 1990 assumed
responsibility for all of the Company's businesses serving the transportation
industry.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock commenced trading on the New York Stock Exchange
("NYSE") on June 23, 1993 under the symbol "MSX." The Company's Common Stock was
previously traded over-the-counter and quoted on the National Association of
Securities Dealers Automated Quotation System -- National Market System
("NASDAQ-NMS") under the symbol "MASX." The following table sets forth for the
periods indicated the high and low sales prices of the Company's Common Stock as
reported on the NASDAQ-NMS for the periods prior to June 23, 1993 and as
reported on the NYSE Composite Tape commencing June 23, 1993:
MARKET PRICE
-----------------------------------
1993 1992
------------- -------------
QUARTER HIGH LOW HIGH LOW
------------------------------------------ ---- ---- ---- ----
First..................................... $17 1/4 $11 3/8 $ 11 $4 3/4
Second.................................... 21 15 3/4 13 7/8 8 5/8
Third..................................... 22 5/8 19 1/2 13 5/8 10 3/8
Fourth.................................... 28 1/8 18 3/4 12 1/8 8 3/8
On March 15, 1994 there were approximately 5,600 holders of record of the
Company's Common Stock.
The Company commenced paying cash dividends on its Common Stock in August,
1993 and to date has declared four and paid three quarterly dividends, each in
the amount of $.02 per share. Future declarations of dividends on the Common
Stock are discretionary with the Board of Directors and will depend upon the
Company's earnings, capital requirements, financial condition and other factors.
Dividends may not be paid on Company Common Stock if there are any dividend
arrearages on the Company's outstanding Preferred Stock. In addition, certain of
the Company's long-term debt instruments contain provisions that restrict the
dividends that it may pay on its capital stock. See the Note to the Company's
Consolidated Financial Statements captioned "Long-Term Debt," included in Item 8
of this Report.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth summary consolidated financial information
of the Company, for the years and dates indicated (information related to the
statements of income and, in 1993, the balance sheet, have been reclassified for
discontinued operations):
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
Net sales.......................... $1,582,880 $1,455,320 $1,266,210 $1,373,060 $1,528,940
Operating profit................... $ 145,720 $ 111,840 $ 43,590 $ 70,560 $ 130,260
From continuing operations before
extraordinary items:
Income (loss).................... $ 70,890 $ 39,040 $ (10,350) $ (26,840) $ 52,730
Earnings (loss) per common
share......................... $.91 $.49 $(.33) $(.36) $.65
Per share of common stock:
Dividends declared............... $.06 -- -- -- --
Dividends paid................... $.04 -- -- -- --
At December 31:
Total assets..................... $1,789,910 $1,807,310 $1,973,280 $2,080,470 $2,235,900
Long-term debt................... $ 788,360 $1,065,390 $1,224,990 $1,349,510 $1,435,860
Shareholders' equity............. $ 667,630 $ 353,400 $ 326,690 $ 356,010 $ 389,380
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Results for 1993 and 1992 include pre-tax income of approximately $9
million and $25 million, respectively, as a result of gains associated with the
sale of common stock through public offerings by equity affiliates and, in 1992,
a prepayment premium related to the redemption of debentures held by the
Company. This income was largely offset by costs and expenses related to
cost-reduction initiatives, the restructuring of certain operations and product
lines, adjustments to the carrying value of certain long-term assets, and other
costs and expenses.
Results for 1993 were reduced by a charge of approximately $.03 per common
share reflecting the increased 1993 federal corporate income tax rate related to
adjusting deferred tax balances as of December 31, 1992 for the higher income
tax rate.
Results for 1993 are before the effect of a $5.8 million pre-tax
extraordinary charge ($3.7 million after-tax or $.06 per common share) related
to the early extinguishment of subordinated debt (see the Note to the Company's
Consolidated Financial Statements captioned "Long-Term Debt," included in Item 8
of this Report). 1993 results are also before an after-tax charge of
approximately $22 million ($.39 per common share) related to the disposition of
a segment of the Company's business (see the Note to the Company's Consolidated
Financial Statements captioned "Discontinued Operations," included in Item 8 of
this Report). Net income for 1993 before preferred stock dividends was $47.6
million or $.57 per common share.
Income from continuing operations per common share in 1993 is presented on
a fully diluted basis. Primary earnings from continuing operations per common
share were $.97 in 1993. For years 1989 through 1992, the assumed conversion of
dilutive securities is anti-dilutive.
Income from continuing operations before extraordinary loss attributable to
common stock was $56.0 million and $29.7 million after preferred stock dividends
in 1993 and 1992, respectively.
Results for 1991 include the effect of charges for restructurings and other
costs, aggregating approximately $41 million pre-tax, which reduced operating
profit by $27 million, income from continuing operations before extraordinary
income by $27 million and earnings per common share by $.45.
Loss from continuing operations attributable to common stock in 1991 was
$20.0 million after preferred stock dividends.
Results for 1990 include the effect of charges for restructurings and other
costs, aggregating approximately $40 million pre-tax, which reduced operating
profit by $38 million, income from continuing operations before extraordinary
income by $26 million and earnings per common share by $.35.
Net loss in 1990 was $18.6 million or $.25 per common share after inclusion
of extraordinary income of $8.2 million or $.11 per common share related to the
early extinguishment of debt.
Results for 1989 include the effect of charges for restructurings and other
costs, aggregating approximately $54 million pre-tax, which reduced operating
profit by $39 million, income from continuing operations before extraordinary
income by $36 million and earnings per common share by $.45.
11
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
MASCOTECH
Masco Corporation undertook a major corporate restructuring during 1984,
transferring its Products for Industry businesses to the Company at their
historical net book value. MascoTech became a separate public company in
mid-1984, when Masco Corporation distributed common shares of MascoTech as a
special dividend to its shareholders. At December 31, 1993, Masco Corporation
owned approximately 42 percent of MascoTech Common Stock.
In 1993 the Company changed its name to MascoTech, Inc. from Masco
Industries, Inc. to reflect the significance of technology in the design,
engineering and manufacturing of many of the Company's products.
CORPORATE DEVELOPMENT
Since mid-1984, the Company has acquired a number of businesses for
approximately $650 million in cash and Company Common Stock. These acquisitions
have contributed significantly to the more than tripling of the sales volume of
the Company during this time. The Company has invested more than $1.2 billion in
capital expenditures and acquisitions combined to build up the Company's
technological positions in its industrial markets.
Since late 1988 the Company has divested several operations as part of its
long-term strategic plan to de-leverage its balance sheet and focus on its core
operating capabilities. The Company's divestiture activity included several
businesses transferred to its equity affiliate, TriMas Corporation ("TriMas"),
and in late 1993 the announcement of the Company's plan to dispose of its
energy-related business segment. In addition to its continuing common equity
ownership interest in TriMas (43 percent at December 31, 1993), the Company has
realized cash proceeds of approximately $400 million through December 31, 1993
from its divestiture activity which has been applied to reduce the Company's
indebtedness.
In early 1993, the Company acquired from Masco Corporation 10 million
shares of Company Common Stock, $77.5 million of the Company's 12% Exchangeable
Preferred Stock held by Masco Corporation, and Masco Corporation's holdings of
Emco Limited ("Emco") common stock and convertible debentures. In exchange,
Masco Corporation received from the Company $87.5 million in cash, $100 million
of the Company's 10% Exchangeable Preferred Stock (subsequently redeemed in
1993) and seven-year warrants to purchase 10 million shares of Company Common
Stock at $13 per share. As part of this transaction, as modified in late 1993,
Masco Corporation agreed to purchase from the Company, at the Company's option
through March, 1997, up to $200 million of subordinated debentures. As a result
of these transactions, the Company owns approximately 43 percent of the
outstanding common stock and convertible debentures of Emco, a major, publicly
traded, Canadian-based manufacturer and distributor principally of building and
other industrial products with annual sales of approximately $800 million in
1993.
DISCONTINUED OPERATIONS
In late November, 1993, the Company adopted a formal plan to divest its
energy-related business segment which consisted of seven business units.
Accordingly, the applicable financial statements and related notes have been
reclassified to present such energy-related segment as discontinued operations
and include a 1993 fourth quarter charge of approximately $22 million after-tax
to reflect the estimated loss from the disposition of this segment. During 1993,
two energy-related business units were sold for approximately $93 million,
including the sale of one business unit to the Company's equity affiliate,
TriMas, for $60 million. The remaining five energy-related business units had
net assets at December 31, 1993 of approximately $68 million (adjusted to
reflect the anticipated loss upon disposition, net of tax benefit) and are
expected to be disposed of during 1994.
12
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Net sales attributable to the discontinued operations during 1993 (through
the decision to discontinue), 1992 and 1991 were $192 million, $202 million and
$201 million, respectively. The discontinued operations had operating profit of
approximately $6 million, $3 million and $1 million in 1993, 1992 and 1991,
respectively.
PROFIT MARGINS -- CONTINUING OPERATIONS
Operating profit margin from continuing operations was nine percent in
1993, eight percent in 1992 and three percent in 1991. The increase in the
operating profit margin from continuing operations in 1993 compared with the
previous two years is primarily attributable to increased sales volumes in the
Transportation-Related Products segment, and from the benefits of internal cost
reductions and restructuring initiatives undertaken in recent years. Margins in
1993 related to the Company's Specialty Products segment continue to be hampered
by the depressed industry conditions affecting the construction and defense
markets that the Company serves. Operating profit from continuing operations was
reduced by significant charges aggregating approximately $27 million in 1991.
These charges reflect expenses related to the discontinuance of product lines,
costs related to the restructuring of several businesses and other expenses. Of
these charges, approximately $15 million in 1991 relate to the Company's
automotive vehicle conversion business, which has been restructured and returned
to profitability. In addition, margins from continuing operations were
negatively impacted in 1991 as a result of reduced sales volumes in certain of
the Company's Transportation-Related Products operations, due to production
cutbacks by automotive customers, and in virtually all of the Company's other
product groups due to recessionary market conditions.
CASH FLOWS AND CAPITAL EXPENDITURES
Net cash flow from operating activities, including discontinued operations,
increased to $100 million in 1993 from $58 million in 1992 principally as a
result of improved operating performance. In 1993, the Company received
approximately $210 million from the issuance of equity (6% Dividend Enhanced
Convertible StockSM -- the "DECS") and $93 million from the sale of two
energy-related businesses. These proceeds were applied to reduce the Company's
indebtedness. The Company redeemed $100 million of non-convertible preferred
stock for cash and, in early 1993, the Company invested $87.5 million as
described in Corporate Development.
During 1991 and 1992, the Company received approximately $260 million in
cash from the disposition of its investment in Masco Capital (during 1991 the
Company had advanced Masco Capital approximately $44 million to fund debt
repayment obligations and working capital requirements) and from the early
redemption by TriMas, including a prepayment premium, of TriMas' subordinated
debentures held by the Company. These proceeds were applied to reduce the
Company's indebtedness in late 1991 and 1992.
From January 1, 1991 to December 31, 1993, the Company repaid or
repurchased over $380 million, net, of its outstanding debt, and an additional
$187 million of convertible debt was converted to Company Common Stock.
The Company has substantial new business opportunities over the next few
years in its Transportation-Related Products segment which are anticipated to
require an increase from the recent level of capital expenditures and increased
working capital needs.
INVENTORIES
The Company's investment in inventories decreased to $140 million at
December 31, 1993. This decrease was the result of the sale during 1993 of a
portion of the Company's energy-related segment and the reclassification of the
remaining inventories in the energy-related segment at December 31, 1993 into
net assets of discontinued operations. The Company's continued emphasis on
inventory management, utilizing Just-In-Time (JIT) and other inventory
management techniques has contributed to higher inventory turnover rates in
recent years.
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FINANCIAL POSITION AND LIQUIDITY
During 1993, the Company's financial position was substantially improved as
the Company's equity increased by approximately $314 million while its total
indebtedness decreased by approximately $339 million. This improvement in
financial position resulted from the Company's positive operating performance,
the issuance of the DECS, the conversion of the Company's previously outstanding
convertible debt into Company Common Stock and from the collection of $93
million of proceeds related to the sale of two of the Company's energy-related
businesses. The Company also redeemed its $100 million of 10% Exchangeable
Preferred Stock with significantly lower cost bank borrowings, and invested
$87.5 million as part of the transactions whereby it acquired the Emco holdings.
The Company's financial flexibility and liquidity were also substantially
improved during 1993. In September, 1993, the Company entered into a new $675
million revolving credit agreement, replacing a prior bank agreement which
required principal payments commencing September 30, 1993. Amounts outstanding
under this new agreement are due in January, 1997; however, under certain
circumstances the due date may be extended until July, 1998. In addition, the
Company in early 1994 sold $345 million of 4 1/2% Convertible Subordinated
Debentures due 2003. The proceeds from this offering were used to redeem $250
million of 10 1/4% Subordinated Notes (called in late 1993 for redemption on
February 1, 1994) and to retire other indebtedness. The Company at December 31,
1993 had cash and cash investments of $83 million.
As a result of the above mentioned transactions, the Company's debt as a
percent of debt plus equity was reduced to 54 percent at December 31, 1993 from
76 percent at December 31, 1992. In addition, the Company's annual financing
costs have been reduced by approximately $20 million after-tax. As of December
31, 1993, adjusted on a pro forma basis for the issuance in early 1994 of the
4 1/2% Convertible Debentures, the Company had floating rate debt of
approximately $213 million (at a current interest rate of approximately 4%) and
$578 million of fixed rate debt (at a weighted average interest rate of under
7%).
At December 31, 1993 current assets, which aggregated approximately $556
million, were approximately three times current liabilities. In addition, the
Company has significant financial assets, including 20 percent or more ownership
positions in the securities of three publicly traded companies with an aggregate
carrying value of approximately $137 million. This compares with an aggregate
quoted market value at December 31, 1993 (which may differ from the amounts that
would have been realized upon disposition) of approximately $524 million.
The Company's cash, additional borrowings available under the Company's new
revolving credit agreement and anticipated internal cash flow are expected to
provide sufficient liquidity to fund its near-term working capital and other
investment needs. The Company believes that its longer-term working capital and
other general corporate requirements, including the retirement of Senior
Subordinated Notes maturing in 1995, will be satisfied through its internal cash
flow, proceeds from the early 1994 issuance of the 4 1/2% Convertible
Debentures, divestiture of the remaining businesses in the energy-related
segment, other nonstrategic operating assets and certain additional financial
assets and, to the extent necessary, future financings in the financial markets.
GENERAL FINANCIAL ANALYSIS
1993 versus 1992 -- Continuing Operations
In 1993, net sales from continuing operations increased nine percent to
$1.58 billion from $1.46 billion in 1992. Income from continuing operations in
1993, after preferred stock dividends, was $56.0 million or $.91 per common
share, assuming full dilution, compared with income from continuing operations,
after preferred stock dividends, of $29.7 million or $.49 per common share in
1992.
Including the results of discontinued operations and the loss upon
disposition of those businesses, and an extraordinary loss ($3.7 million
after-tax) related to the early extinguishment of debt, earnings
14
16
for 1993 after preferred stock dividends were $.57 per common share, compared
with earnings, after preferred stock dividends, of $.48 per common share in
1992.
Sales of Transportation-Related Products increased 13 percent, principally
due to increased levels of automotive production. Sales also benefitted from new
product introductions which were partially offset by the phase-out of existing
programs, including the mid-1993 completion of the Company's conversion program
for the Ford Mustang convertible. Operating profit in 1993 for Transportation-
Related Products increased to $160 million from $124 million in 1992. Operating
margins, in 1993, continued to be favorably impacted by higher sales volumes for
most of the Company's Transportation-Related Products. Margins in both 1993 and
1992 have benefitted from the internal cost reductions and restructuring
initiatives that the Company has undertaken in recent years.
Sales of Specialty Products in 1993 decreased approximately two percent
from 1992 levels reflecting the continued unfavorable market conditions for the
Company's Architectural and Defense Products. Operating profit declined to $1
million in 1993 from $5 million in 1992 as the result of the $4 million
operating loss for Architectural Products in 1993. This loss was principally the
result of costs and expenses related to the consolidation of certain operating
activities, start-up costs associated with a new manufacturing process and the
unfavorable conditions existing in the markets served by these products.
Other expense, net decreased to $25 million in 1993 from $44 million in
1992. Other expense, net in 1993 benefitted from reduced interest expense
resulting from a reduction in debt and lower interest rates; and from increased
equity and interest income from affiliates related primarily to the Company's
Emco holdings. Additionally, 1993 and 1992 results benefitted from gains from
sales of marketable securities of approximately $11.5 million and $4.0 million,
respectively.
Other expense, net for 1993 and 1992 include gains aggregating
approximately $13 million and $25 million pre-tax, respectively. These gains
resulted from the sale of stock through public offerings by equity affiliates
(including in 1993, affiliate shares held by the Company) and, in 1992, a
prepayment premium related to the redemption of debentures held by the Company.
The Company's equity affiliates may, from time to time, issue additional common
equity depending upon their financing requirements. This income was largely
offset by costs and expenses related to cost reduction initiatives, the
restructuring of certain operations and product lines, adjustments to the
carrying values of certain long-term assets and other costs and expenses.
Earnings in 1993 were reduced by an extraordinary charge of $3.7 million
after-tax related to the early extinguishment of debt. Although the federal
statutory corporate tax rate increased in 1993, the Company's effective tax rate
on income from continuing operations declined slightly in 1993 as compared with
1992. This decrease was the result of the relationship of substantially higher
pre-tax income in 1993 to certain book expenses that are not deductible for tax
purposes and to the Company's foreign and state tax expenses. In addition, the
application of the increased tax rate to deferred tax balances at December 31,
1992 resulted in a 1993 third quarter one-time charge of approximately $.03 per
common share.
1992 versus 1991 -- Continuing Operations
In 1992, net sales from continuing operations increased 15 percent to $1.46
billion from $1.27 billion in 1991. Income from continuing operations in 1992,
after preferred stock dividends, was $29.7 million or $.49 per common share,
compared with a loss from continuing operations, after preferred stock
dividends, of $20.0 million or $.33 per common share in 1991.
Sales of Transportation-Related Products increased 21 percent due to a
modest improvement in levels of automotive production, increased market
penetration and the inclusion of a full year of Creative Industries Group sales.
Excluding the acquisition of Creative Industries Group, 1992
Transportation-Related Products sales would have increased 16 percent. Operating
profit in 1992 for Transportation-Related Products increased 68 percent to $124
million from $74 million in 1991.
15
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Operating margins, in 1992, were favorably impacted by higher sales volumes for
most of the Company's Transportation-Related Products. In addition, 1992 margins
have benefitted from the internal cost reductions and restructuring initiatives
that the Company has undertaken in recent years.
Sales of Specialty Products were generally unchanged from 1991, as a seven
percent increase in sales of Architectural Products was substantially offset by
reduced sales of Other Specialty Products. Operating profit for Specialty
Products in 1992 was $5 million compared with an operating loss of $15 million
in 1991. This improvement resulted principally from improved operating
performance of the Architectural Products group which had operating profit of $2
million in 1992 compared with a loss of $16 million in 1991. The 1991
Architectural Products group results were impacted by $8 million of charges
related to discontinuance of product lines, restructuring costs and other
expenses.
Other expense, net decreased to $44 million in 1992 from $56 million in
1991. Other expense, net in 1992 benefitted from reduced interest expense
resulting from a reduction in debt and lower interest rates. This was partially
offset by reduced interest income as a result of the redemptions of TriMas
subordinated debentures previously held by the Company and lower income from
sales of marketable securities.
Other expense, net for 1992 benefitted from the inclusion of income
aggregating approximately $25 million pre-tax in the second quarter resulting
from a prepayment premium related to the redemption by TriMas of the
subordinated debentures held by the Company, and from the change in the
Company's common equity ownership interest in TriMas. This income was
substantially offset by costs and expenses aggregating approximately $21 million
pre-tax in the second quarter (of which $15 million is included in other
expense) related to the restructuring of certain operations, and for adjustments
to the carrying values of certain long-term assets. Other expense, net in 1991
benefitted from the inclusion of an approximate $22 million gain related to the
disposition of certain operations and reduced interest expense, principally as a
result of lower interest rates. Additionally, net gains from sales of marketable
securities, including the effect of valuation allowances, aggregated
approximately $12 million in 1991.
The Company's effective tax rate exceeds the statutory rate primarily as a
result of the impact of state taxes and nondeductible amortization.
16
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of MascoTech, Inc.:
We have audited the accompanying consolidated balance sheet of MascoTech,
Inc. and subsidiaries (formerly Masco Industries, Inc.) as of December 31, 1993
and 1992, and the related consolidated statements of income and cash flows for
each of the three years in the period ended December 31, 1993, and the financial
statement schedules as listed in Item 14(a)(2)(i) of this Form 10-K. These
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of MascoTech, Inc.
and subsidiaries as of December 31, 1993 and 1992, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedules
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND
Detroit, Michigan
February 24, 1994
17
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MASCOTECH, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993 AND 1992
1993 1992
-------------- --------------
ASSETS
Current assets:
Cash and cash investments................................... $ 83,200,000 $ 76,000,000
Receivables................................................. 238,820,000 272,920,000
Inventories................................................. 140,040,000 222,280,000
Deferred and refundable income taxes........................ 41,780,000 13,990,000
Prepaid expenses and other assets........................... 52,000,000 47,250,000
-------------- --------------
Total current assets................................... 555,840,000 632,440,000
Equity and other investments in affiliates.................... 170,510,000 81,460,000
Property and equipment, net................................... 490,190,000 537,420,000
Excess of cost over net assets of acquired companies.......... 439,760,000 479,400,000
Notes receivable and other assets............................. 66,100,000 76,590,000
Net assets of discontinued operations......................... 67,510,000 --
-------------- --------------
Total assets........................................... $1,789,910,000 $1,807,310,000
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 95,520,000 $ 103,620,000
Accrued liabilities......................................... 103,260,000 117,430,000
Current portion of long-term debt........................... 2,830,000 64,430,000
-------------- --------------
Total current liabilities.............................. 201,610,000 285,480,000
Long-term debt................................................ 788,360,000 1,065,390,000
Deferred income taxes and other long-term liabilities......... 132,310,000 103,040,000
-------------- --------------
Total liabilities...................................... 1,122,280,000 1,453,910,000
-------------- --------------
Shareholders' equity:
Preferred stock, $1 par: Authorized: 25,000,000;
Outstanding: 10.8 million in 1993 (liquidation value-$216
million) and .8 million in 1992 (liquidation value-$77.5
million)................................................. 10,800,000 780,000
Common stock, $1 par: Authorized: 250,000,000; Outstanding:
60,510,000 and 59,520,000................................ 60,510,000 59,520,000
Paid-in capital............................................. 367,290,000 84,390,000
Retained earnings........................................... 232,120,000 202,660,000
Cumulative translation adjustments.......................... (3,090,000) 6,050,000
-------------- --------------
Total shareholders' equity............................. 667,630,000 353,400,000
-------------- --------------
Total liabilities and shareholders' equity............. $1,789,910,000 $1,807,310,000
-------------- --------------
-------------- --------------
The accompanying notes are an integral part of the consolidated financial
statements.
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MASCOTECH, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
--------------- --------------- ---------------
Net sales................................... $ 1,582,880,000 $ 1,455,320,000 $ 1,266,210,000
Cost of sales............................... (1,257,480,000) (1,159,050,000) (1,054,520,000)
--------------- --------------- ---------------
Gross profit......................... 325,400,000 296,270,000 211,690,000
Selling, general and administrative
expenses.................................. (179,680,000) (184,430,000) (168,100,000)
--------------- --------------- ---------------
Operating profit..................... 145,720,000 111,840,000 43,590,000
--------------- --------------- ---------------
Other income (expense), net:
Interest expense, Masco Corporation....... (6,990,000) (7,800,000) (7,800,000)
Other interest expense.................... (74,370,000) (78,190,000) (104,680,000)
Equity and interest income from
affiliates............................. 21,000,000 15,750,000 29,390,000
Gain from change in investment of equity
affiliates............................. 9,490,000 16,700,000 --
Gain from disposition of operations....... -- -- 21,500,000
Other, net................................ 26,330,000 9,950,000 5,530,000
--------------- --------------- ---------------
(24,540,000) (43,590,000) (56,060,000)
--------------- --------------- ---------------
Income (loss) from continuing
operations before income taxes
(credit) and extraordinary loss... 121,180,000 68,250,000 (12,470,000)
Income taxes (credit)................ 50,290,000 29,210,000 (2,120,000)
--------------- --------------- ---------------
Income (loss) from continuing
operations before extraordinary
loss.............................. 70,890,000 39,040,000 (10,350,000)
Discontinued operations (net of income
taxes):
Income (loss) from operations of
discontinued
segment................................ 2,630,000 (610,000) 1,380,000
Loss on disposition....................... (22,270,000) -- --
--------------- --------------- ---------------
Income (loss) before extraordinary loss..... 51,250,000 38,430,000 (8,970,000)
Extraordinary loss (net of income taxes).... (3,650,000) -- --
--------------- --------------- ---------------
Net income (loss).................... $ 47,600,000 $ 38,430,000 $ (8,970,000)
--------------- --------------- ---------------
--------------- --------------- ---------------
Preferred stock dividends................... $ 14,930,000 $ 9,300,000 $ 9,600,000
--------------- --------------- ---------------
--------------- --------------- ---------------
Earnings (loss) attributable to
common stock...................... $ 32,670,000 $ 29,130,000 $ (18,570,000)
--------------- --------------- ---------------
--------------- --------------- ---------------
1993
-------------------
ASSUMING
FULL 1992 1991
PRIMARY DILUTION PRIMARY PRIMARY
------- -------- ------- -------
Earnings (loss) per common and common equivalent share:
Continuing operations................................... $ .97 $ .91 $ .49 $(.33)
Discontinued operations:
Income (loss) from operations of discontinued
segment............................................ .05 .04 (.01) .02
Loss on disposition.................................. (.39) * -- --
------- -------- ------- -------
Income (loss) before extraordinary loss................. .63 .63 .48 (.31)
Extraordinary loss...................................... (.06) * -- --
------- -------- ------- -------
Earnings (loss) attributable to common stock............ $ .57 $ .57 $ .48 $(.31)
------- -------- ------- -------
------- -------- ------- -------
- -------------------------
* Anti-dilutive
The accompanying notes are an integral part of the consolidated financial
statements.
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MASCOTECH, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
------------- ------------- -------------
CASH FROM (USED FOR):
OPERATIONS:
Net income (loss)............................... $ 47,600,000 $ 38,430,000 $ (8,970,000)
Gain, sale of assets............................ -- -- (21,500,000)
Gain from change in investment.................. (9,490,000) (16,700,000) --
Depreciation and amortization................... 59,810,000 59,920,000 59,040,000
Equity earnings, net of dividends............... (12,000,000) (5,250,000) (4,460,000)
Deferred taxes.................................. 15,590,000 3,130,000 3,270,000
(Decrease) in valuation allowance for marketable
securities.................................... -- -- (13,730,000)
(Increase) decrease in receivables.............. (5,900,000) (23,930,000) 9,780,000
(Increase) decrease in inventories.............. (2,990,000) (2,920,000) 25,120,000
(Increase) decrease in prepaid expenses......... (11,650,000) 4,010,000 (4,470,000)
(Decrease) in accounts payable and accrued
liabilities................................... (5,900,000) (12,930,000) (530,000)
Other, net, including extraordinary loss........ 8,180,000 13,540,000 2,950,000
Discontinued operations, net.................... 16,700,000 830,000 (3,340,000)
------------- ------------- -------------
Net cash from operating activities............ 99,950,000 58,130,000 43,160,000
------------- ------------- -------------
FINANCING:
Increase in debt................................ -- 11,670,000 14,720,000
Payment or repurchase of debt................... (150,020,000) (135,490,000) (122,430,000)
Issuance of preferred stock..................... 209,520,000 -- --
Retirement of preferred stock................... (100,000,000) -- --
Payment of dividends............................ (16,020,000) (9,300,000) (7,280,000)
Other, net...................................... 3,770,000 (2,240,000) --
------------- ------------- -------------
Net cash used for financing activities........ (52,750,000) (135,360,000) (114,990,000)
------------- ------------- -------------
INVESTMENTS:
Cash received from redemption of TriMas
subordinated debentures....................... -- 88,000,000 40,000,000
Cash paid Masco Corporation..................... (87,500,000) -- --
Cash received from dispositions:
Energy-related segment........................ 93,450,000 -- --
Masco Capital................................. -- -- 49,450,000
Other operations.............................. -- -- 52,110,000
Masco Capital distributions, net................ -- -- 21,220,000
Capital expenditures............................ (59,540,000) (60,000,000) (48,630,000)
Decrease in marketable securities, net.......... 2,980,000 3,150,000 26,190,000
Other, net...................................... 10,610,000 4,130,000 7,050,000
------------- ------------- -------------
Net cash (used for) from investing
activities................................. (40,000,000) 35,280,000 147,390,000
------------- ------------- -------------
CASH AND CASH INVESTMENTS:
Increase (decrease) for the year................ 7,200,000 (41,950,000) 75,560,000
At January 1.................................... 76,000,000 117,950,000 42,390,000
------------- ------------- -------------
At December 31................................ $ 83,200,000 $ 76,000,000 $ 117,950,000
------------- ------------- -------------
------------- ------------- -------------
The accompanying notes are an integral part of the consolidated financial
statements.
20
22
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES:
Principles of Consolidation. The consolidated financial statements include
the accounts of the Company and all majority-owned subsidiaries. All significant
intercompany transactions have been eliminated. Corporations that are 20 to 50
percent owned are accounted for by the equity method of accounting. Capital
transactions by equity affiliates at amounts differing from the Company's
carrying amount are reflected in other income or expense and the investment in
affiliates account.
Certain amounts for the years ended December 31, 1992 and 1991 have been
reclassified to conform to the presentation adopted in 1993. The statements of
income and cash flows for 1993, 1992 and 1991 and related notes have been
reclassified to present the Energy-related segment as discontinued operations.
In addition, the balance sheet as of December 31, 1993 reflects the
Energy-related segment as discontinued operations (see "Discontinued Operations"
note). The balance sheet as of December 31, 1992 has not been reclassified for
discontinued operations. Effective June 23, 1993 the Company changed its name to
MascoTech, Inc. from Masco Industries, Inc.
The Company has a corporate services agreement with Masco Corporation,
which at December 31, 1993 owned approximately 42 percent of the Company's
Common Stock. Under the terms of the agreement, the Company pays fees to Masco
Corporation for various corporate staff support and administrative services,
research and development and facilities. Such fees, which are determined
principally as a percentage of net sales, including net sales related to
discontinued operations, aggregated approximately $11 million in each of 1993,
1992 and 1991.
Cash and Cash Investments. The Company considers all highly liquid debt
instruments with an initial maturity of three months or less to be cash and cash
investments. The carrying amount reported in the balance sheet for cash and cash
investments approximates fair value. At December 31, 1993, the Company has $33
million on deposit with a German bank that is subject to currency exchange rate
fluctuations.
Receivables. Receivables are presented net of allowances for doubtful
accounts of $5.1 million and $7.2 million at December 31, 1993 and 1992,
respectively.
Inventories. Inventories are stated at the lower of cost or net realizable
value, with cost determined principally by use of the first-in, first-out
method.
Property and Equipment, Net. Property and equipment additions, including
significant betterments, are recorded at cost. Upon retirement or disposal of
property and equipment, the cost and accumulated depreciation are removed from
the accounts, and any gain or loss is included in income. Repair and maintenance
costs are charged to expense as incurred.
Depreciation and Amortization. Depreciation is computed principally using
the straight-line method over the estimated useful lives of the assets. Annual
depreciation rates are as follows: buildings and land improvements, 2 1/2 to 10
percent, and machinery and equipment, 6 2/3 to 33 1/3 percent. Deferred
financing costs are amortized over the lives of the related debt securities. The
excess of cost over net assets of acquired companies is amortized using the
straight-line method over the period estimated to be benefitted, not exceeding
40 years. At each balance sheet date management assesses whether there has been
a permanent impairment of the excess of cost over net assets of acquired
companies by comparing anticipated undiscounted future cash flows from operating
activities with the carrying amount of the excess of cost over net assets of
acquired companies. The factors considered by management in performing this
assessment include current operating results, business prospects, market trends,
potential product obsolescence, competitive activities and other economic
factors. Based on this assessment there was no permanent impairment related to
excess of cost over net assets of acquired companies at December 31, 1993.
21
23
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1993 and 1992, accumulated amortization of the excess of
cost over net assets of acquired companies and patents was $98.4 million and
$105.1 million, respectively. Amortization expense was $22.2 million, $22.8
million and $21.2 million in 1993, 1992 and 1991, respectively, including
amortization expense of approximately $1.6 million in each year related to
discontinued operations.
Income Taxes. In January, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes."
SFAS No. 109 is an asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS No. 109 generally allows
consideration of all expected future events other than enactments of changes in
the tax law or tax rates. Previously, the Company used the SFAS No. 96 asset and
liability approach that gave no recognition to future events other than the
recovery of assets and settlement of liabilities at their carrying amounts.
There was no income statement impact from the adoption of SFAS No. 109 and the
required balance sheet reclassification was immaterial. Provision is made for
U.S. income taxes on the undistributed earnings of foreign subsidiaries unless
such earnings are considered permanently reinvested.
Earnings (Loss) Per Common Share. Primary earnings (loss) per common share
are based on the weighted average number of shares of common stock and common
stock equivalents outstanding (including the dilutive effect of options and
warrants, utilizing the treasury stock method) of 57.4 million, 60.9 million and
59.7 million in 1993, 1992 and 1991, respectively, and earnings (loss) after
deducting preferred stock dividends of $14.9 million, $9.3 million and $9.6
million in 1993, 1992 and 1991, respectively.
Fully diluted earnings (loss) per common share are only presented when the
assumed conversion of convertible debentures is dilutive. Fully diluted earnings
per share in 1993 were calculated based on 68.8 million weighted average common
shares outstanding. Convertible securities did not have a dilutive effect on
earnings (loss) in 1992 or 1991. The shares of Dividend Enhanced Convertible
Stock DECSSM (the "DECS") issued in 1993 (see "Shareholders' Equity" note) are
common stock equivalents, but are not included in the calculation of primary or
fully diluted shares outstanding as such inclusion would be anti-dilutive.
In late 1993, approximately 10.4 million shares were issued as a result of
the conversion of the 6% Convertible Subordinated Debentures (see "Shareholders'
Equity" note). If such conversion had taken place at the beginning of 1993, the
primary earnings per common and common equivalent share amounts would have
approximated the amounts presented for earnings per common and common equivalent
share, assuming full dilution, for the year ended December 31, 1993.
Adoption of Statements of Financial Accounting Standards. The Company
expects that the adoption of Statements of Financial Accounting Standards
("SFAS") No. 112 "Employers' Accounting for Postemployment Benefits", SFAS No.
114 "Accounting by Creditors for Impairment of a Loan" and SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities" will not have
a material impact on the financial position or the results of operations of the
Company when adopted in 1994 and 1995.
SUPPLEMENTARY CASH FLOWS INFORMATION:
Significant transactions not affecting cash were: in 1993: in addition to
the payment by the Company of $87.5 million, the non-cash portion of the
issuance of Company Preferred Stock and warrants in exchange for Company Common
Stock, Company Preferred Stock and Masco Corporation's holdings of Emco Limited
common stock and convertible debentures (see "Shareholders' Equity" note);
conversion of $187 million of convertible debentures into Company Common Stock
22
24
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(see "Shareholders' Equity" note); and conversion of the Company's TriMas
Corporation ("TriMas") convertible preferred stock holdings into TriMas common
stock (see "Equity and Other Investments in Affiliates" note); and in 1991: an
exchange of certain operating assets (see "Dispositions of Other Operations"
note); and the assumption of liabilities of $18 million in partial exchange for
the acquisition of Creative Industries Group (see "Equity and Other Investments
in Affiliates" note).
Income taxes paid were $32 million in 1993 and $23 million in 1992. Income
tax refunds of $8 million were received in 1991. Interest paid was $82 million,
$91 million and $115 million in 1993, 1992 and 1991, respectively.
DISCONTINUED OPERATIONS:
In late November, 1993, the Company adopted a formal plan to divest its
Energy-related business segment, which consisted of seven business units.
Accordingly, the consolidated statements of income and cash flows and related
notes have been reclassified to present such Energy-related segment as
discontinued operations. During 1993, two such business units were sold for
approximately $93 million, including the sale of one business unit to the
Company's equity affiliate, TriMas for $60 million cash. The expected loss from
the planned disposition of the Company's Energy-related segment resulted in a
fourth quarter 1993 pre-tax charge of approximately $41 million (approximately
$22 million after-tax), including a provision for the businesses not yet sold
and the deferral of a portion of the gain (approximately $6 million after-tax)
related to the sale of the business to TriMas. The Company expects to sell the
remaining business units in privately negotiated transactions in 1994.
Selected financial information for discontinued operations is as follows as
at December 31, 1993 and for the period up to the decision to discontinue in
1993 and for the years ended December 31, 1992 and 1991:
(IN THOUSANDS)
1993 1992 1991
------------ -------- --------
Net sales.................................... $191,930 $201,520 $200,780
------------ -------- --------
------------ -------- --------
Operating income............................. $ 5,540 $ 3,050 $ 1,070
Other income (expense)....................... (480) (960) 910
------------ -------- --------
Pre-tax income............................... 5,060 2,090 1,980
Income taxes................................. 2,430 2,700 600
------------ -------- --------
Income (loss) from discontinued operations... $ 2,630 $ (610) $ 1,380
------------ -------- --------
------------ -------- --------
AT
DECEMBER 31,
1993
------------
Receivables.................................. $ 34,890
Inventories.................................. 39,320
Non-current assets........................... 40,690
Current liabilities.......................... (14,550)
Other, principally provision for disposition
costs...................................... (32,840)
------------
Net assets of discontinued operations........ $ 67,510
------------
------------
The unusual relationship of income taxes to pre-tax income in 1992 results
principally from foreign losses for which no tax benefit was recorded. Operating
and pre-tax income include charges of $6 million in 1991, principally related to
the discontinuance of product lines and the cost of restructuring several
businesses.
23
25
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DISPOSITIONS OF OTHER OPERATIONS:
In separate transactions from late 1989 to early 1991, the Company divested
itself of three subsidiaries and received consideration of approximately $160
million, of which $108 million was received in 1990. The remaining $52 million
was received in 1991. In addition, in 1991 the Company disposed of certain
equity affiliates, and exchanged operating assets aggregating approximately $27
million.
These transactions, including the disposition of Masco Capital Corporation
(see "Equity and Other Investments in Affiliates" note), resulted in an
approximate $22 million pre-tax gain in 1991.
INVENTORIES:
(IN THOUSANDS)
AT DECEMBER 31
--------------------
1993 1992
-------- --------
Finished goods........................................... $ 39,400 $ 80,220
Work in process.......................................... 38,240 49,970
Raw material............................................. 62,400 92,090
-------- --------
$140,040 $222,280
-------- --------
-------- --------
EQUITY AND OTHER INVESTMENTS IN AFFILIATES:
Equity and other investments in affiliates consist primarily of the
following common stock interests in publicly traded affiliates:
AT DECEMBER 31
--------------------
1993 1992 1991
---- ---- ----
TriMas Corporation.......................................... 43% 28% 41%
Emco Limited................................................ 43% -- --
Titan Wheel International, Inc. ............................ 21% 47% 20%
24
26
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amount of investments in affiliates at December 31, 1993 and
1992 and quoted market values at December 31, 1993 for publicly traded
affiliates (which may differ from the amounts that could have been realized upon
disposition) are as follows:
(IN THOUSANDS)
1993
QUOTED 1993 1992
MARKET CARRYING CARRYING
VALUE AMOUNT AMOUNT
-------- -------- --------
Common stock:
TriMas Corporation.............................. $387,830 $ 40,550 $ 42,630
Emco Limited.................................... 65,190 50,470 --
Titan Wheel International, Inc. ................ 37,580 15,500 4,130
-------- -------- --------
Common stock holdings............................. 490,600 106,520 46,760
-------- -------- --------
Convertible debt:
Emco Limited.................................... 33,520 30,700 --
-------- -------- --------
Convertible debt holdings......................... 33,520 30,700 --
-------- -------- --------
Investments in publicly traded affiliates......... $524,120 137,220 46,760
--------
--------
Other non public affiliates....................... 33,290 34,700
-------- --------
Total............................................. $170,510 $ 81,460
-------- --------
-------- --------
In 1988, the Company transferred several businesses to TriMas, a publicly
traded, diversified manufacturer of commercial, industrial and consumer
products. In exchange, the Company received $128 million principal amount of 14%
Subordinated Debentures (which were subsequently redeemed resulting in
prepayment premium income to the Company of $9 million in 1992 and $4 million in
1991), $70 million (liquidation value) of 10% Convertible Participating
Preferred Stock and 9.3 million shares of TriMas common stock.
During the second quarter of 1992, TriMas sold 9.2 million shares of newly
issued common stock at $9.75 per share in a public offering, which reduced the
Company's common equity ownership interest in TriMas to 28 percent from 41
percent. As a result, the Company recognized a pre-tax gain of $16.7 million
from the change in the Company's common equity ownership interest in TriMas. In
late 1993, the TriMas 10% Convertible Participating Preferred Stock held by the
Company was converted at a conversion price of $9 per share into 7.8 million
shares of TriMas common stock, increasing the Company's common equity ownership
interest in TriMas to 43 percent.
In 1993, the Company sold a business unit to TriMas for $60 million cash
(see "Discontinued Operations" note).
Included in notes receivable are approximately $10.7 million of notes which
resulted from the sale by the Company of one million shares of its TriMas common
stock holdings to members of the Company's executive management group in
mid-1989. The notes have an effective interest rate of nine percent, payable at
maturity in mid-1994. Ownership and resale of certain of such shares is
restricted and subject to the continuing employment of these executives.
TriMas' Board of Directors declared a 100 percent stock distribution (one
additional share for every share held) to its shareholders effective July 19,
1993. TriMas share amounts and per share prices have been restated to reflect
this distribution.
The Company's holdings in Emco Limited ("Emco") were acquired from Masco
Corporation in 1993 (see "Shareholders' Equity" note). Emco is a major, publicly
traded, Canadian-based
25
27
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
manufacturer and distributor of building and other industrial products with
annual sales of approximately $800 million.
At December 31, 1992, the Company had an approximate 47 percent common
equity ownership interest in Titan Wheel International, Inc. ("Titan"), a
manufacturer of wheels and other products for agricultural, construction and
other off-highway equipment markets. In May, 1993, Titan completed an initial
public offering of three million shares of common stock at $15 per share
(including 292,000 shares held by the Company), reducing the Company's common
equity ownership interest in Titan to 24 percent. The Company's ownership
interest was further reduced in late 1993 to 21 percent as a result of the
issuance of additional common shares by Titan in connection with an acquisition
by Titan. These transactions resulted in 1993 gains aggregating approximately
$12.8 million pre-tax (principally in the second quarter) as a result of the
sale of shares held by the Company and from the change in the Company's common
equity ownership interest in Titan.
During the second quarter of 1991, the Company acquired the remaining 50
percent equity ownership interest of Creative Industries Group, which had sales
in 1990 of approximately $150 million.
In 1991, Masco Capital Corporation ("Masco Capital") sold its principal
asset and used the proceeds to repay its outstanding bank borrowings and to make
loan repayments and distributions to its shareholders, whereby the Company
received approximately $65 million (including repayment of $44 million advanced
during 1991). In addition, the Company subsequently sold its 50 percent equity
ownership interest in Masco Capital to the other shareholder, Masco Corporation,
for approximately $50 million (which resulted in a pre-tax gain of approximately
$5 million) and contingent amounts based on the future value of certain assets
held by Masco Capital.
In addition to its equity and other investments in publicly traded
affiliates, the Company retains interests in privately held manufacturers of
automotive components, including the Company's 50 percent common equity
ownership interests in Autostyle, Inc., a manufacturer of reaction injection
molded automotive components, and Elbi-Hi Ram, Inc., a manufacturer of
electrical and electronic automotive components.
Approximate combined condensed financial data of the Company's equity
affiliates (including Emco after date of investment, Creative Industries Group
through date of acquisition (second quarter 1991) and Masco Capital through date
of disposition) are as follows:
(IN THOUSANDS)
AT DECEMBER 31
----------------------
1993 1992
--------- ---------
Current assets......................................... $ 657,680 $ 261,730
Current liabilities.................................... (222,580) (128,300)
--------- ---------
Working capital...................................... 435,100 133,430
Property and equipment, net............................ 349,740 214,760
Excess of cost over net assets of acquired companies... 170,760 113,660
Other assets........................................... 69,540 33,210
Long-term debt......................................... (628,520) (271,220)
Deferred income taxes and other long-term
liabilities.......................................... (34,950) (24,900)
--------- ---------
Shareholders' equity................................. $ 361,670 $ 198,940
--------- ---------
--------- ---------
26
28
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31
----------------------------------
1993 1992 1991
---------- -------- --------
Net sales..................................... $1,412,620 $655,120 $684,990
---------- -------- --------
---------- -------- --------
Operating profit.............................. $ 119,780 $ 77,860 $ 82,000
---------- -------- --------
---------- -------- --------
Net income before preferred stock dividends... $ 57,280 $ 30,200 $ 24,300
---------- -------- --------
---------- -------- --------
Equity and interest income from affiliates consists of the following:
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31
----------------------------------
1993 1992 1991
---------- -------- --------
The Company's equity in affiliates' earnings
available for common shareholders........... $ 12,890 $ 5,250 $ 4,470
Dividends on TriMas preferred stock........... 5,250 7,000 7,000
Interest income............................... 2,860 3,500 17,920
---------- -------- --------
Equity and interest income from affiliates.... $ 21,000 $ 15,750 $ 29,390
---------- -------- --------
---------- -------- --------
PROPERTY AND EQUIPMENT, NET:
(IN THOUSANDS)
AT DECEMBER 31
--------------------
1993 1992
-------- --------
Cost:
Land and land improvements............................. $ 33,720 $ 39,740
Buildings.............................................. 158,750 182,460
Machinery and equipment................................ 605,600 669,800
-------- --------
798,070 892,000
Less accumulated depreciation............................ 307,880 354,580
-------- --------
$490,190 $537,420
-------- --------
-------- --------
Depreciation expense totalled $48 million, $46 million and $47 million in
1993, 1992 and 1991, respectively. These amounts include depreciation expense of
approximately $8 million in each year related to discontinued operations.
ACCRUED LIABILITIES:
(IN THOUSANDS)
AT DECEMBER 31
--------------------
1993 1992
-------- --------
Salaries, wages and commissions.......................... $ 22,970 $ 23,800
Income taxes............................................. 5,930 5,370
Interest................................................. 20,420 20,760
Insurance................................................ 11,010 12,150
Property, payroll and other taxes........................ 9,360 10,340
Other.................................................... 33,570 45,010
-------- --------
$103,260 $117,430
-------- --------
-------- --------
27
29
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LONG-TERM DEBT:
(IN THOUSANDS)
AT DECEMBER 31
----------------------
1993 1992
-------- ----------
Held by Masco Corporation:
6% Convertible Subordinated Debentures, due 2011...... -- $ 130,000
Held by Banks and Others:
Bank revolving credit agreement, due 1997............. $295,000 410,000
10% Senior Subordinated Notes, due
March, 1995 (noncallable).......................... 233,150 233,150
10 1/4% Senior Subordinated Notes, due 1997........... 250,000 250,000
6% Convertible Subordinated Debentures, due 2011...... -- 56,890
Bank term loan, due 1996.............................. -- 31,090
Other................................................. 13,040 18,690
-------- ----------
791,190 1,129,820
Less current portion of long-term debt.................. 2,830 64,430
-------- ----------
Long-term debt.......................................... $788,360 $1,065,390
-------- ----------
-------- ----------
In 1993, the Company entered into a new $675 million revolving credit
agreement with a group of banks, replacing its prior bank credit agreement
(which had consisted of a revolving credit facility and a bank term loan at
December 31, 1992). Amounts outstanding under the revolving credit agreement are
due in January, 1997; however, under certain circumstances, the due date may be
extended to July, 1998. The interest rates applicable to the revolving credit
agreement are principally at alternative floating rates provided for in the
agreement (approximately four percent at December 31, 1993).
The revolving credit agreement requires the maintenance of a specified
level of shareholders' equity, with limitations on the ratio of senior debt to
earnings, long-term debt (at December 31, 1993 additional borrowing capacity of
approximately $380 million was available under this agreement), intangible
assets and the acquisition of Company Capital Stock. Under the most restrictive
of these provisions, $120 million of retained earnings was available at December
31, 1993 for the payment of cash dividends and the acquisition of Company
Capital Stock.
The 6% Convertible Subordinated Debentures were converted into Company
Common Stock in late 1993 (see "Shareholders' Equity" note).
The senior subordinated notes contain limitations on the payment of cash
dividends and the acquisition of Company Capital Stock. In late 1993, the
Company called for redemption, on February 1, 1994, the $250 million of 10 1/4%
Senior Subordinated Notes. During 1992, the Company repurchased, in open-market
transactions, approximately $67 million of its 10% Senior Subordinated Notes at
prices approximating face value.
In early 1994, the Company issued, in a public offering, $345 million of
4 1/2% Convertible Subordinated Debentures due December 15, 2003. These
debentures are convertible into Company Common Stock at $31 per share. The net
proceeds were used to redeem the $250 million of 10 1/4% Subordinated Notes
(called in late 1993 for redemption on February 1, 1994) and to reduce other
indebtedness. In the fourth quarter of 1993, the Company recognized a $5.8
million pre-tax extraordinary charge ($3.7 million after-tax) related to the
call premium (1.25%) and unamortized prepaid debenture expense associated with
the call for early extinguishment of the $250 million of 10 1/4% Subordinated
Notes. The 10 1/4% Subordinated Notes are classified as non-current as the
Company had the intent and the ability to maintain these borrowings on a
long-term basis (due to the issuance of the 4 1/2% Convertible Subordinated
Debentures). The maturities of long-term debt during the next five years are as
follows (in millions): 1994 -- $3; 1995 -- $234; 1996 -- $1; 1997 -- $303; and
1998 -- $0.
28
30
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHAREHOLDERS' EQUITY:
(IN THOUSANDS)
CUMULATIVE
PREFERRED COMMON PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
STOCK STOCK CAPITAL EARNINGS ADJUSTMENTS EQUITY
--------- -------- -------- -------- --------- ------------
Balance, January 1, 1991...... $ 780 $ 59,450 $ 83,800 $192,100 $19,880 $ 356,010
Net (loss).................. -- -- -- (8,970) -- (8,970)
Preferred stock dividends... -- -- -- (9,600) -- (9,600)
Adjustment related to sale
of foreign operations.... -- -- -- -- (5,130) (5,130)
Translation adjustments,
net...................... -- -- -- -- (5,620) (5,620)
--------- -------- -------- -------- --------- ------------
Balance, December 31, 1991.... 780 59,450 83,800 173,530 9,130 326,690
Net income.................. -- -- -- 38,430 -- 38,430
Preferred stock dividends... -- -- -- (9,300) -- (9,300)
Translation adjustments,
net...................... -- -- -- -- (3,080) (3,080)
Exercise of stock options... -- 70 590 -- -- 660
--------- -------- -------- -------- --------- ------------
Balance, December 31, 1992.... 780 59,520 84,390 202,660 6,050 353,400
Net income.................. -- -- -- 47,600 -- 47,600
Preferred stock dividends... -- -- -- (14,930) -- (14,930)
Common stock dividends...... -- -- -- (3,210) -- (3,210)
Retirement of 12%
Preferred................ (780) -- (76,720) -- -- (77,500)
Issuance of 10% Preferred... 1,000 -- 99,000 -- -- 100,000
Issuance of warrants........ -- -- 70,800 -- -- 70,800
Issuance of DECS............ 10,800 -- 198,720 -- -- 209,520
Retirement of common stock.. -- (10,000) (90,000) -- -- (100,000)
Retirement of 10%
Preferred................ (1,000) -- (99,000) -- -- (100,000)
Conversion of convertible
debentures............... -- 10,370 174,120 -- -- 184,490
Translation adjustments,
net...................... -- -- -- -- (9,140) (9,140)
Exercise of stock options... -- 620 5,980 -- -- 6,600
--------- -------- -------- -------- --------- ------------
Balance, December 31, 1993.... $10,800 $ 60,510 $367,290 $232,120 $(3,090) $ 667,630
--------- -------- -------- -------- --------- ------------
--------- -------- -------- -------- --------- ------------
On March 31, 1993, the Company acquired from Masco Corporation 10 million
shares of Company Common Stock, recorded at $100 million, $77.5 million of the
Company's previously outstanding 12% Exchangeable Preferred Stock, and Masco
Corporation's holdings of Emco Limited common stock and convertible debentures,
recorded at $80.8 million. In exchange, Masco Corporation received $100 million
(liquidation value) of the Company's 10% Exchangeable Preferred Stock,
seven-year warrants to purchase 10 million shares of Company Common Stock at $13
per share, recorded at $70.8 million, and $87.5 million in cash. The
transferable warrants are not exercisable by Masco Corporation if an exercise
would increase Masco Corporation's common equity ownership interest in the
Company above 35 percent. The cash portion of this transaction is included in
the accompanying statement of cash flows as cash used for investing activities
of $87.5 million. As part of this transaction, as modified in late 1993, Masco
Corporation agreed to purchase from the Company, at the Company's option through
March, 1997, up to $200 million of subordinated debentures. In late 1993, the
Company redeemed the 10% Exchangeable Preferred Stock for its $100 million
liquidation value.
In July, 1993, the Company issued 10.8 million shares of 6% Dividend
Enhanced Convertible Stock (DECS) at $20 per share ($216 million aggregate
liquidation amount) in a public offering (classified as
29
31
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Convertible Preferred Stock). The net proceeds from this issuance were used to
reduce the Company's indebtedness. On July 1, 1997, each of the then outstanding
shares of the DECS will convert into one share of Company Common Stock, if not
previously redeemed by the Company or converted at the option of the holder, in
both cases for Company Common Stock.
Each share of the DECS is convertible at the option of the holder anytime
prior to July 1, 1997 into .806 of a share of Company Common Stock, equivalent
to a conversion price of $24.81 per share of Company Common Stock. Dividends are
cumulative and each share of the DECS has 4/5 of a vote, voting together as one
class with holders of Company Common Stock.
Beginning July 1, 1996, the Company, at its option, may redeem the DECS at
a call price payable in shares of Company Common Stock principally determined by
a formula based on the then current market price of Company Common Stock.
Redemption by the Company, as a practical matter, will generally not result in a
call price that exceeds one share of Company Common Stock or is less than .806
of a share of Company Common Stock (resulting from the holder's conversion
option).
The Company's 6% Convertible Subordinated Debentures were called for
redemption in late 1993. Substantially all holders, including Masco Corporation,
exercised their right to convert these debentures into Company Common Stock (at
a conversion price of $18 per share), resulting in the issuance of approximately
10.4 million shares of Company Common Stock.
The Company's consideration for a 1987 acquisition included two million
shares of Company Common Stock which were subject to a stock value guarantee
agreement. During the second quarter of 1993, the Company's stock value
guarantee obligation was settled, resulting in no material financial impact to
the Company.
The Company commenced paying cash dividends on its Common Stock in August,
1993 and declared three and paid two quarterly dividends in 1993, each in the
amount of $.02 per common share.
STOCK OPTIONS AND AWARDS:
For the three years ended December 31, 1993, stock option data pertaining
to stock option plans for key employees of the Company and affiliated companies
are as follows:
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1993 1992 1991
------ ------- ------
Options outstanding, January 1....................... 4,540 3,770 2,220
Options granted...................................... 30 900 1,730
Option price per share.......................... $13-26 $6 1/8-10 3/4 $4 1/2
Options cancelled.................................... -- 60 180
Option price per share.......................... -- $4 1/2 $4 1/2-9 1/8
Options exercised.................................... 760 70 --
Option price per share.......................... $4 1/2-9 1/8 $9 1/8 --
------ ------- ------
Options outstanding, December 31..................... 3,810 4,540 3,770
------ ------- ------
------ ------- ------
Options exercisable, December 31..................... 680 880 740
------ ------- ------
------ ------- ------
As of December 31, 1993, options have been granted and are outstanding with
exercise prices ranging from $4 1/2 to $26 per share, the fair market value at
the dates of grant.
Pursuant to restricted stock incentive plans, the Company granted long-term
incentive awards, net, for 202,000, 251,000 and 675,000 shares of Company Common
Stock during 1993, 1992 and 1991, respectively, to key employees of the Company
and affiliated companies. The unamortized costs of
30
32
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
incentive awards, aggregating approximately $20 million at December 31, 1993,
are being amortized over the ten-year vesting periods.
At December 31, 1993 and 1992, a combined total of 5,631,000 and 5,759,000
shares, respectively, of Company Common Stock were available for the granting of
options and incentive awards under the above plans.
EMPLOYEE BENEFIT PLANS:
Pension and Profit-Sharing Benefits. The Company sponsors defined-benefit
pension plans for most of its employees. In addition, substantially all salaried
employees participate in noncontributory profit-sharing plans, to which payments
are approved annually by the Directors. Aggregate charges to income under these
plans were $10.9 million in 1993, $10.3 million in 1992 and $8.3 million in
1991, including approximately $.9 million in each year related to discontinued
operations.
Net periodic pension cost for the Company's defined-benefit pension plans
includes the following components for the three years ended December 31, 1993:
(IN THOUSANDS)
1993 1992 1991
------- ------- -------
Service cost -- benefits earned during the year.... $ 4,110 $ 4,150 $ 4,140
Interest cost on projected benefit obligations..... 5,540 5,090 4,590
Actual return on assets............................ (7,730) (3,820) (5,450)
Net amortization and deferral...................... 1,600 (1,800) 430
------- ------- -------
Net periodic pension cost.......................... $ 3,520 $ 3,620 $ 3,710
------- ------- -------
------- ------- -------
Major assumptions used in accounting for the Company's defined-benefit
pension plans are as follows:
1993 1992 1991
----- ------ ------
Discount rate for obligations........................ 7.0% 8.25% 8.25%
Rate of increase in compensation levels.............. 5.0% 6.0% 6.0%
Expected long-term rate of return on plan assets..... 13.0% 13.0% 13.0%
31
33
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status of the Company's defined-benefit pension plans at
December 31, 1993 and 1992 is as follows:
(IN THOUSANDS)
1993 1992
-------------------------- --------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
RECONCILIATION OF FUNDED STATUS BENEFITS ASSETS BENEFITS ASSETS
- -------------------------------------------- ----------- ----------- ----------- -----------
Actuarial present value of benefit
obligations:
Vested benefit obligation.............. $23,040 $ 34,280 $20,780 $24,160
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Accumulated benefit obligation......... $24,450 $ 38,650 $22,120 $31,200
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Projected benefit obligation........... $35,270 $ 39,920 $32,020 $33,030
Assets at fair value........................ 29,550 26,560 27,530 23,570
----------- ----------- ----------- -----------
Projected benefit obligation in excess
of plan assets....................... (5,720) (13,360) (4,490) (9,460)
Reconciling items:
Unrecognized net loss.................. 7,140 8,810 5,920 5,140
Unrecognized prior service cost........ 460 3,250 1,240 3,400
Unrecognized net (asset) obligation at
transition........................... (1,340) (160) (1,940) 70
Adjustment required to recognize
minimum liability.................... -- (10,840) -- (6,900)
----------- ----------- ----------- -----------
(Accrued) prepaid pension cost......... $ 540 $ (12,300) $ 730 $(7,750)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Postretirement Benefits. The Company provides postretirement medical and
life insurance benefits for certain of its active and retired employees.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions" ("SFAS 106") for its postretirement benefit plans. This
statement requires the accrual method of accounting for postretirement health
care and life insurance based on actuarially determined costs to be recognized
over the period from the date of hire to the full eligibility date of employees
who are expected to qualify for such benefits. In conjunction with the adoption
of SFAS 106, the Company elected to recognize the transition obligation on a
prospective basis and accordingly, the net transition obligation is being
amortized over 20 years. Net periodic postretirement benefit cost includes the
following components for the year ended December 31, 1993:
(IN THOUSANDS)
1993
--------------
Service cost.......................................................... $ 300
Interest cost......................................................... 1,900
Net amortization...................................................... 1,200
-------
Net periodic postretirement benefit cost.............................. $3,400
-------
-------
The incremental cost in 1993 of accounting for postretirement health care
and life insurance benefits under SFAS 106 amounted to approximately $1.7
million.
32
34
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Postretirement benefit obligations, none of which are funded, are
summarized as follows for the year ended December 31, 1993:
(IN THOUSANDS)
1993
------------
Accumulated postretirement benefit obligations:
Retirees.............................................................. $ 19,400
Fully eligible active plan participants............................... 1,400
Other active participants............................................. 6,400
------------
Total accumulated postretirement benefit obligation..................... 27,200
Unrecognized net loss................................................. (2,900)
Unamortized transition obligation..................................... (22,500)
------------
Accrued postretirement benefits......................................... $ 1,800
------------
------------
The discount rate used in determining the accumulated postretirement
benefit obligation was seven percent. The assumed health care cost trend rate in
1993 was 12 percent, decreasing to an ultimate rate in the year 2000 of seven
percent. If the assumed medical cost trend rates were increased by one percent,
the accumulated postretirement benefit obligation would increase by $2.6 million
and the aggregate of the service and interest cost components of net periodic
postretirement benefit cost would increase by $.2 million.
SEGMENT INFORMATION:
The Company's business segments involve the production and sale of the
following:
Transportation-Related Products:
Precision products, generally produced using advanced
metalworking technologies with significant proprietary content,
and aftermarket products for the transportation industry.
Specialty Products:
Architectural -- Doors, windows, security grilles and office
panels and partitions for commercial and
residential markets.
Other -- Products manufactured principally for the defense
industry.
Amounts related to the Company's Energy-related segment have been presented
as discontinued operations.
Corporate assets consist primarily of cash and cash investments, equity and
other investments in affiliates and notes receivable.
33
35
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
ASSETS EMPLOYED
NET SALES OPERATING PROFIT (B) AT DECEMBER 31
---------------------------------- ---------------------------- ----------------------------------
1993 1992 1991 1993 1992 1991 1993 1992 1991
---------- ---------- ---------- -------- -------- -------- ---------- ---------- ----------
The Company's operations
by industry segment are:
Transportation-Related
Products (A)............ $1,195,000 $1,058,000 $ 874,000 $160,000 $124,000 $ 74,000 $ 883,000 $ 851,000 $ 808,000
Specialty Products:
Architectural........... 289,000 291,000 273,000 (4,000) 2,000 (16,000) 313,000 321,000 322,000
Other................... 99,000 106,000 119,000 5,000 3,000 1,000 104,000 109,000 114,000
---------- ---------- ---------- -------- -------- -------- ---------- ---------- ----------
Total............. $1,583,000 $1,455,000 $1,266,000 161,000 129,000 59,000 1,300,000 1,281,000 1,244,000
---------- ---------- ----------
---------- ---------- ----------
Other expense, net........ (25,000) (44,000) (56,000)
General corporate
expense................. (15,000) (17,000) (15,000)
-------- -------- --------
Income (loss) from
continuing operations
before income taxes
(credit) and
extraordinary loss...... $121,000 $ 68,000 $(12,000)
-------- -------- --------
-------- -------- --------
Corporate assets.......... 422,000 318,000 449,000
Discontinued operations... 68,000 208,000 210,000
---------- ---------- ----------
Total assets...... $1,790,000 $1,807,000 $1,903,000
---------- ---------- ----------
---------- ---------- ----------
DEPRECIATION AND
PROPERTY ADDITIONS AMORTIZATION
---------------------------- ----------------------------------------
1993 1992 1991 1993 1992 1991
-------- -------- -------- ---------- ---------------- ----------
The Company's operations by industry segment are:
Transportation-Related Products...................... $52,000 $47,000 $37,000 $42,000 $42,000 $41,000
Specialty Products:
Architectural...................................... 5,000 8,000 8,000 12,000 13,000 12,000
Other.............................................. 3,000 5,000 4,000 6,000 5,000 6,000
------- ------- ------- ------- ------- -------
Total........................................ $60,000 $60,000 $49,000 $60,000 $60,000 $59,000
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
- ---------------
(A) Included within this segment are sales to one customer of $324 million, $268
million and $217 million in 1993, 1992 and 1991, respectively; sales to
another customer of $222 million, $216 million and $201 million in 1993,
1992 and 1991, respectively; and sales to a third customer of $186 million,
$184 million and $126 million in 1993, 1992 and 1991, respectively.
(B) Included in 1991 operating profit (principally Transportation-Related
Products and Architectural Products) are charges of $27 million to reflect
the expenses related to the discontinuance of product lines, and the costs
of restructuring several businesses. Other expense, net in 1992 and 1991,
includes approximately $15 million and $14 million, respectively, to reflect
disposition costs related to idle facilities and other long-term assets.
34
36
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER INCOME (EXPENSE), NET:
(IN THOUSANDS)
1993 1992 1991
------- ------- --------
Other, net:
Gains from sales of marketable securities
(including the effect of valuation
allowances).................................. $11,550 $ 4,020 $ 12,010
Interest income................................. 9,570 9,260 7,890
Dividend income................................. 3,150 1,750 1,910
Other, net...................................... 2,060 (5,080) (16,280)
------- ------- --------
$26,330 $ 9,950 $ 5,530
------- ------- --------
------- ------- --------
Gains realized from sales of marketable securities are determined on a
specific identification basis at the time of sale.
INCOME TAXES:
(IN THOUSANDS)
1993 1992 1991
-------- -------- --------
Income (loss) from continuing operations before
income taxes (credit) and extraordinary loss:
Domestic...................................... $105,470 $ 57,880 $(34,780)
Foreign....................................... 15,710 10,370 22,310
-------- -------- --------
$121,180 $ 68,250 $(12,470)
-------- -------- --------
-------- -------- --------
Provision for income taxes:
Federal, current.............................. $ 17,940 $ 12,750 $(19,410)
State and local............................... 8,350 5,170 4,560
Foreign....................................... 8,410 8,160 9,460
Deferred, principally federal................. 15,590 3,130 3,270
-------- -------- --------
Income taxes (credit) on income (loss) from
continuing operations before income taxes
(credit) and extraordinary loss.......... $ 50,290 $ 29,210 $ (2,120)
-------- -------- --------
-------- -------- --------
35
37
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the net deferred taxes as at December 31, 1993 were as
follows:
(IN THOUSANDS)
1993
--------
Deferred tax assets:
Charges for restructuring and other costs, net................... $ 7,450
Inventory........................................................ 8,430
Other, principally deductions reported in different periods for
financial reporting and tax purposes.......................... 18,330
--------
34,210
--------
Deferred tax liabilities:
Depreciation and amortization.................................... 90,350
Other, principally equity in undistributed earnings of
affiliates.................................................... 18,450
--------
108,800
--------
Net deferred tax liability....................................... $ 74,590
--------
--------
The following is a reconciliation of tax computed at the U.S. federal
statutory rate to the provision for income taxes (credit) allocated to income
(loss) from continuing operations before income taxes (credit) and extraordinary
loss:
(IN THOUSANDS)
1993 1992 1991
------- ------- -------
U.S. federal statutory rate........................ 35% 34% 34%
Tax (credit) at U.S. federal statutory rate........ $42,410 $23,210 $(4,240)
State and local taxes, net of federal tax
benefit.......................................... 5,430 3,390 3,030
Higher effective foreign tax rate.................. 2,910 4,670 1,870
U.S. tax benefit relating to foreign operations.... (90) (190) (2,000)
Dividends-received deduction....................... (2,290) (2,320) (2,360)
Amortization in excess of tax, net................. 3,820 4,780 4,210
Other, net......................................... (1,900) (4,330) (2,630)
------- ------- -------
Income taxes (credit) on income (loss) from
continuing operations before income taxes
(credit) and extraordinary loss............... $50,290 $29,210 $(2,120)
------- ------- -------
------- ------- -------
Provisions for deferred income taxes by temporary difference components for
the years ended December 31, 1992 and 1991 were as follows:
(IN THOUSANDS)
1992 1991
------- -------
Accelerated depreciation and amortization.................. $ 4,060 $ 550
Marketable securities valuation............................ (970) 4,660
Charges for restructuring and other costs, net............. (2,350) (1,300)
Deductions reported in different periods for financial
reporting and tax purposes............................... 60 (5,770)
Alternative minimum tax.................................... 680 5,180
Other, net................................................. 1,650 (50)
------- -------
$ 3,130 $ 3,270
------- -------
------- -------
36
38
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS:
In accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments," the following methods
were used to estimate the fair value of each class of financial instruments:
Notes Receivable and Other Assets. Fair values of financial instruments
included in notes receivable and other assets were estimated using various
methods including quoted market prices and discounted future cash flows based on
the incremental borrowing rates for similar types of investments. In addition,
for variable-rate notes receivable that fluctuate with the prime rate, the
carrying amounts approximate fair value.
Long-Term Debt. The carrying amount of bank debt and certain other
long-term debt instruments approximate fair value as the floating rates inherent
in this debt reflect changes in overall market interest rates. The fair values
of the Company's subordinated debt instruments are based on quoted market
prices. The fair values of certain other debt instruments are estimated by
discounting future cash flows based on the Company's incremental borrowing rate
for similar types of debt instruments.
The carrying amounts and fair values of the Company's financial instruments
as at December 31, 1993 and 1992 are as follows:
(IN THOUSANDS)
1993 1992
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
Cash and cash investments............. $ 83,200 $ 83,200 $ 76,000 $ 76,000
Notes receivable and other assets..... $ 72,650 $ 80,220 $ 60,150 $ 68,050
Long-term debt:
Bank debt........................... $295,000 $295,000 $441,090 $441,090
6% Convertible Subordinated -- -- $186,890 $160,730
Debentures.......................
10% Senior Subordinated Notes....... $233,150 $243,640 $233,150 $237,230
10 1/4% Senior Subordinated Notes... $250,000 $254,380 $250,000 $251,880
Other long-term debt................ $ 9,120 $ 9,150 $ 10,780 $ 10,780
37
39
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INTERIM AND OTHER SUPPLEMENTAL FINANCIAL DATA (UNAUDITED):
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE QUARTERS ENDED
----------------------------------------------------------
DECEMBER 31ST SEPTEMBER 30TH JUNE 30TH MARCH 31ST
------------- -------------- --------- ----------
1993:
Net sales..................... $ 392,600 $373,680 $ 412,530 $404,070
Gross profit.................. $ 76,440 $ 78,600 $ 85,610 $ 84,750
Income from continuing
operations before
extraordinary loss:
Income...................... $ 18,510 $ 15,000 $ 21,310 $ 16,070
Per common and common
equivalent share:
Primary.................. $.23 $.17 $.34 $.22
Assuming full dilution... $.22 $.17 $.31 $.22
Net income (loss):
Income (loss)............... $ (6,980) $ 15,320 $ 21,740 $ 17,520
Income (loss) attributable
to common stock.......... $ (11,660) $ 9,900 $ 19,240 $ 15,190
Per common and common
equivalent share:
Primary.................. $(.20) $.18 $.35 $.25
Assuming full dilution... $(.15) $.18 $.32 $.24
Market price per common share:
High........................ $28 1/8 $22 5/8 $21 $17 1/4
Low......................... $18 3/4 $19 1/2 $15 3/4 $11 3/8
1992:
Net sales..................... $ 377,790 $358,240 $ 381,470 $337,820
Gross profit.................. $ 70,560 $ 76,320 $ 79,340 $ 70,050
Income from continuing
operations:
Income...................... $ 7,190 $ 10,300 $ 13,510 $ 8,040
Per common and common
equivalent share......... $.08 $.13 $.18 $.10
Net income:
Income...................... $ 8,480 $ 9,640 $ 12,020 $ 8,290
Income attributable to
common stock............. $ 6,160 $ 7,310 $ 9,700 $ 5,960
Per common and common
equivalent share......... $.10 $.12 $.16 $.10
Market price per common share:
High........................ $12 1/8 $13 5/8 $13 7/8 $11
Low......................... $ 8 3/8 $10 3/8 $ 8 5/8 $ 4 3/4
38
40
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Certain amounts presented above have been reclassified to present a segment
of the Company's business as discontinued operations (see "Discontinued
Operations" note).
Results for the second quarters of 1993 and 1992 include pre-tax income of
approximately $9 million and $25 million, respectively, as a result of gains
associated with the sale of common stock through public offerings by equity
affiliates and, in 1992, a prepayment premium related to the redemption of
debentures held by the Company. This income was largely offset by costs and
expenses related to cost reduction initiatives, the restructuring of certain
operations and product lines, adjustments to the carrying value of certain
long-term assets, and other costs and expenses.
Results for the third quarter of 1993 were reduced by a charge of
approximately $.04 per common share reflecting the recently increased 1993
federal corporate income tax rate.
The fourth quarter of 1993 net loss includes the effect of a $5.8 million
pre-tax extraordinary charge ($3.7 million after-tax or $.06 per common share)
related to the early extinguishment of subordinated debt (see "Long-Term Debt"
note). The fourth quarter of 1993 net loss also includes an after-tax charge of
approximately $22 million ($.38 per common share) related to the disposition of
a segment of the Company's business (see "Discontinued Operations" note).
The 1993 results include the benefit of approximately $11.5 million pre-tax
income ($6.7 million after-tax or $.12 per common share), primarily in the third
and fourth quarters, resulting from net gains from sales of marketable
securities.
The 1992 results include the benefit of approximately $4 million pre-tax
income ($2 million after-tax or $.04 per common share), primarily in the fourth
quarter, resulting from net gains from sales of marketable securities.
The 1993 income (loss) per common share amounts for the quarters do not
total to the full year amounts due to the changes in the number of common shares
outstanding during the year and the dilutive effect of first, second and third
quarter 1993 results.
The calculation of earnings per common and common equivalent share for the
fourth quarter of 1993 results in dilution for income from continuing
operations, assuming full dilution. Therefore, the fully diluted earnings per
share computation is used for all computations, even though the result is
anti-dilutive for one of the per share amounts.
39
41
MASCOTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
The following supplemental unaudited financial data combine the Company
with Masco Capital Corporation (through date of disposition) and TriMas and have
been presented for analytical purposes. The Company had a common equity
ownership interest in TriMas of approximately 43 percent at December 31, 1993
and 28 percent at December 31, 1992. The interests of the other common
shareholders are reflected below as "Equity of other shareholders of TriMas."
All significant intercompany transactions have been eliminated.
(IN THOUSANDS)
AT DECEMBER 31
--------------------------
1993 1992
----------- -----------
Current assets...................................... $ 770,810 $ 813,570
Current liabilities................................. (252,810) (334,790)
----------- -----------
Working capital................................... 518,000 478,780
Property and equipment, net......................... 652,420 682,310
Excess of cost over net assets of acquired
companies......................................... 526,260 591,330
Other assets........................................ 298,290 145,710
Bank and other debt................................. (1,027,250) (1,243,880)
Deferred income taxes and other long-term
liabilities....................................... (161,500) (196,420)
Equity of other shareholders of TriMas.............. (138,590) (104,430)
----------- -----------
Equity of shareholders of MascoTech............... $ 667,630 $ 353,400
----------- -----------
----------- -----------
FOR THE YEARS ENDED DECEMBER 31
----------------------------------------
1993 1992 1991
---------- ----------- -----------
Net sales................................ $2,022,240 $ 1,841,570 $ 1,604,180
---------- ----------- -----------
---------- ----------- -----------
Operating profit......................... $ 215,740 $ 170,460 $ 86,260
---------- ----------- -----------
---------- ----------- -----------
Income (loss) from continuing operations
before extraordinary loss.............. $ 70,890 $ 39,040 $ (10,350)
---------- ----------- -----------
---------- ----------- -----------
40
42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding executive officers required by this Item is set forth
as a Supplementary Item at the end of Part I hereof (pursuant to Instruction 3
to Item 401(b) of Regulation S-K). Other information required by this Item will
be contained in the Company's definitive Proxy Statement for its 1994 Annual
Meeting of Stockholders, to be filed on or before April 30, 1994, and such
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this Item will be contained in the Company's
definitive Proxy Statement for its 1994 Annual Meeting of Stockholders, to be
filed on or before April 30, 1994, and such information is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this Item will be contained in the Company's
definitive Proxy Statement for its 1994 Annual Meeting of Stockholders, to be
filed on or before April 30, 1994, and such information is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this Item will be contained in the Company's
definitive Proxy Statement for its 1994 Annual Meeting of Stockholders, to be
filed on or before April 30, 1994, and such information is incorporated herein
by reference.
41
43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) LISTING OF DOCUMENTS.
(1) Financial Statements. The Company's Consolidated Financial
Statements included in Item 8 hereof, as required at December 31,
1993 and 1992, and for the years ended December 31, 1993, 1992 and
1991, consist of the following:
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules.
(i) Financial Statement Schedules of the Company appended
hereto, as required for the years ended December 31,
1993, 1992 and 1991, consist of the following:
II. Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees Other than
Related Parties
V. Property, Plant and Equipment
VI. Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment
VIII. Valuation and Qualifying Accounts
X. Supplementary Income Statement Information
(ii) (A) TriMas Corporation and Subsidiaries Consolidated
Financial Statements appended hereto, as required
at December 31, 1993 and 1992, and for the years
ended December 31, 1993, 1992 and 1991, consist
of the following:
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(ii) (B) TriMas Corporation and Subsidiaries Financial
Statement Schedules appended hereto, as required
for the years ended December 31, 1993, 1992 and
1991, consist of the following:
V. Property, Plant and Equipment
VI. Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment
VIII. Valuation and Qualifying Accounts
X. Supplementary Income Statement Information
(3) Exhibits.
3.i Restated Certificate of Incorporation of MascoTech,
Inc. and amendments thereto.
3.ii Bylaws of MascoTech, Inc., as amended.(3)
4.a Indenture dated as of November 1, 1986 between Masco
Industries, Inc. (now known as MascoTech, Inc.) and
Morgan Guaranty Trust Company of New York, as Trustee,
and Directors' resolutions establishing the Company's
4 1/2% Convertible Subordinated Debentures Due 2003.
42
44
4.b Indenture dated as of February 1, 1987 between Masco Industries,
Inc. (now known as MascoTech, Inc.) and Chemical Bank (successor
by merger to Manufacturers Hanover Trust Company), as Trustee, and
Directors' resolutions establishing the Company's 10% Senior
Subordinated Notes Due 1995.(4)
4.c Credit Agreement dated as of September 2, 1993 by and among Masco-
Tech, Inc., the banks party thereto, NBD Bank, N.A., as Agent, and
Comerica Bank, The Bank of New York, The First National Bank of
Chicago, Morgan Guaranty Trust Company of New York and NationsBank
of North Carolina, N.A., as Co-Agents.(2)
Note: Other instruments, notes or extracts from agreements defining the
rights of holders of long-term debt of MascoTech, Inc. or its
subsidiaries have not been filed since (i) in each case the total
amount of long-term debt permitted thereunder does not exceed 10%
of MascoTech, Inc.'s consolidated assets, and (ii) such
instruments, notes and extracts will be furnished by MascoTech,
Inc. to the Securities and Exchange Commission upon request.
10.a Assumption and Indemnification Agreement dated as of May 1, 1984
between Masco Industries, Inc. (now known as MascoTech, Inc.) and
Masco Corporation.(8)
10.b Corporate Services Agreement dated as of January 1, 1987 between
Masco Industries, Inc. (now known as MascoTech, Inc.) and Masco
Corporation.(6)
10.c Corporate Opportunities Agreement dated as of May 1, 1984 between
Masco Industries, Inc. (now known as MascoTech, Inc.) and Masco
Corporation.(8)
10.d Stock Repurchase Agreement dated as of May 1, 1984 between Masco
Industries, Inc. (now known as MascoTech, Inc.) and Masco
Corporation and related forfeiture letter dated September 20,
1985, Amendment to Stock Repurchase Agreement dated as of December
20, 1990 and Agreement dated as of November 23, 1993 including an
amendment to Stock Repurchase Agreement.
Note: Exhibits 10.e through 10.o constitute the management contracts and
executive compensatory plans or arrangements in which certain of
the Directors and executive officers of the Company participate.
10.e MascoTech, Inc. 1991 Long-Term Stock Incentive Plan (Restated Sep-
tember 14, 1993).
10.f MascoTech, Inc. 1984 Restricted Stock Incentive Plan (Restated
September 14, 1993).
10.g MascoTech, Inc. 1984 Stock Option Plan (Restated September 14,
1993).
10.h Masco Corporation 1991 Long Term Stock Incentive Plan.(7)
10.i Masco Corporation 1988 Restricted Stock Incentive Plan (Restated
September 11, 1990).(8)
10.j Masco Corporation 1988 Stock Option Plan (Restated September 11,
1990).(8)
10.k Masco Corporation 1984 Restricted Stock (Industries) Incentive
Plan (Restated September 11, 1990).(8)
10.1 Masco Corporation 1984 Stock Option Plan (Restated September 11,
1990).(8)
43
45
10.m Masco Corporation Restricted Stock Incentive Plan (Restated
September 11, 1990).(8)
10.n Supplemental Executive Retirement and Disability Plan.(6)
10.o Form of Agreement dated June 29, 1989 between Masco Industries,
Inc. (now known as MascoTech, Inc.) and certain of its
officers.(9)
10.p Assumption and Indemnification Agreement dated as of December 27,
1988 between Masco Industries, Inc. (now known as MascoTech, Inc.)
and TriMas Corporation.(6)
10.q Corporate Opportunities Agreement dated as of December 27, 1988
among Masco Industries, Inc. (now known as MascoTech, Inc.), Masco
Corporation and TriMas Corporation.(6)
10.r Stock Repurchase Agreement dated as of December 27, 1988 among
Masco Industries, Inc. (now known as MascoTech, Inc.), Masco
Corporation and TriMas Corporation.(6)
10.s Registration Agreement dated as of December 27, 1988 among Masco
Industries, Inc.(now known as MascoTech, Inc.), Masco Corporation
and TriMas Corporation together with Amendment to Registration
Agreement dated as of January 5, 1993 (which also relates to the
Form of Agreement filed as Exhibit 10.o).(6)
10.t Credit Agreement dated February 1, 1993 among TriMas Corporation,
certain banks and NationsBank of North Carolina, N.A., as
agent.(6)
10.u Stock Purchase Agreement between Masco Corporation and Masco In-
dustries, Inc. (now known as MascoTech, Inc.) dated as of December
23, 1991 (regarding Masco Capital Corporation).(7)
10.v Exchange Agreement dated December 18, 1990 between Masco Indus-
tries, Inc. (now known as MascoTech, Inc.) and Masco
Corporation.(8)
10.w Amended and Restated Securities Purchase Agreement dated as of No-
vember 23, 1993 between MascoTech, Inc. and Masco Corporation,
including form of Note.(1)
10.x Registration Agreement dated as of March 31, 1993 between Masco
Industries, Inc. (now known as MascoTech, Inc.) and Masco Corpora-
tion.(5)
11 Computation of Earnings (Loss) Per Common Share.
12 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
21 List of Subsidiaries.
23.a Consent of Coopers & Lybrand relating to MascoTech, Inc.'s
Financial Statements and Financial Statement Schedules.
23.b Consent of Coopers & Lybrand relating to TriMas Corporation's
Financial Statements and Financial Statement Schedules.
- -------------------------
(1) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Current Report on Form 8-K dated November 22, 1993.
(2) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended September 30, 1993.
(3) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Current Report on Form 8-K dated June 22, 1993.
44
46
(4) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Registration Statement on Form S-3 dated March 9, 1993.
(5) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Current Report on Form 8-K dated February 1, 1993.
(6) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1992.
(7) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1991.
(8) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1990.
(9) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1989.
(B) REPORTS ON FORM 8-K.
The following Current Reports on Form 8-K were filed by MascoTech, Inc. in
the calendar quarters ended December 31, 1993 and March 31, 1994:
1. Report on Form 8-K dated November 22, 1993 reporting under Item 2
"Acquisition or Disposition of Assets" the Company's plan to dispose of its
energy-related businesses and to treat such businesses as discontinued
operations for financial reporting purposes. The following financial statements
and financial information were filed with such report:
(i) MascoTech, Inc. and Subsidiaries unaudited pro forma consolidated
condensed balance sheet as of September 30, 1993, and unaudited pro
forma consolidated condensed statements of income for the year
ended December 31, 1992 and the nine-month period ended September
30, 1993.
2. Report on Form 8-K dated January 11, 1994 reporting under Item 5 "Other
Events" the reclassification of certain of the Company's financial statements
and financial information to reflect the treatment of the Company's
energy-related businesses as discontinued operations in connection with the
Company's previously reported plan to dispose of such businesses. The following
financial statements and financial information were filed with such report:
(i) Selected Financial Data;
(ii) MascoTech, Inc. and Subsidiaries Audited Consolidated Financial
Statements as of December 31, 1992 and 1991 and for the three
years in the period ended December 31, 1992 and notes thereto; and
(iii) MascoTech, Inc. and Subsidiaries Unaudited Consolidated Condensed
Financial Statements as of September 30, 1993 and December 31,
1992 and for the three month and nine month periods ended
September 30, 1993 and 1992 and notes thereto.
3. Report on Form 8-K dated March 2, 1994 reporting under Item 5 "Other
Events" certain financial information related to 1993. The following financial
statements were filed with such report:
(i) MascoTech, Inc. and Subsidiaries Audited Consolidated Financial
Statements as of December 31, 1993 and 1992 and for the three years
in the period ended December 31, 1993 and notes thereto.
45
47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ TIMOTHY WADHAMS
--------------------------------------
TIMOTHY WADHAMS
Vice President -- Controller
and Treasurer
March 22, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
PRINCIPAL EXECUTIVE OFFICER:
/s/ RICHARD A. MANOOGIAN Chairman of the Board and Chief
- ------------------------------------- Executive Officer
RICHARD A. MANOOGIAN
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
/s/ TIMOTHY WADHAMS Vice President -- Controller
- ------------------------------------- and Treasurer
TIMOTHY WADHAMS
/s/ ERWIN H. BILLIG Director
- -------------------------------------
ERWIN H. BILLIG
March 22, 1994
/s/ PETER A. DOW Director
- -------------------------------------
PETER A. DOW
/s/ EUGENE A. GARGARO, JR. Director
- -------------------------------------
EUGENE A. GARGARO, JR.
/s/ JOHN A. MORGAN Director
- -------------------------------------
JOHN A. MORGAN
/s/ RICHARD G. MOSTELLER Director
- -------------------------------------
RICHARD G. MOSTELLER
46
48
MASCOTECH, INC.
FINANCIAL STATEMENT SCHEDULES
PURSUANT TO ITEM 14(A)(2) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1993
MASCOTECH, INC.
FINANCIAL STATEMENT SCHEDULES
Schedules, as required for the years ended December 31, 1993, 1992 and 1991:
PAGE
----
II. Amounts Receivable from Related Parties and Underwriters, Promoters, and
Employees Other than Related Parties........................................... F-2
V. Property, Plant and Equipment.................................................... F-3
VI. Accumulated Depreciation, Depletion and Amortization of Property, Plant and
Equipment...................................................................... F-4
VIII. Valuation and Qualifying Accounts................................................ F-5
X. Supplementary Income Statement Information....................................... F-6
TriMas Corporation and Subsidiaries Consolidated Financial Statements and Financial
Statement Schedules.................................................................... F-7
F-1
49
MASCOTECH, INC.
SCHEDULE II. AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------- ----------- ---------- ------------------------- -------------------------
DEDUCTIONS BALANCE AT END OF PERIOD
------------------------- --------------------------
BALANCE AT
BEGINNING AMOUNTS AMOUNTS
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
- ----------------------- ----------- ---------- ---------- ----------- ----------- -----------
(A) (B)
Erwin H. Billig........ $2,800,000 $160,000 $900,000 -- $2,060,000 --
Lee M. Gardner......... 840,000 50,000 890,000 -- -- --
James W. Hook.......... 280,000 20,000 -- -- 300,000 --
Richard A. Manoogian... 11,210,000 630,000 -- -- 11,840,000 --
Timothy Wadhams........ 1,680,000 90,000 1,770,000 -- -- --
----------- ---------- ---------- ----------- ----------- -----------
16,810,000 950,000 3,560,000 -- 14,200,000 --
Discount on Notes
Receivable(C)........ (890,000) 750,000 -- -- (140,000) --
----------- ---------- ---------- ----------- ----------- -----------
$15,920,000 $1,700,000 $3,560,000 -- $14,060,000 --
----------- ---------- ---------- ----------- ----------- -----------
----------- ---------- ---------- ----------- ----------- -----------
All amounts receivable are related to an incentive program of the Company
that has been disclosed in previous proxy statements of the Company and that
will be described in the Company's definitive Proxy Statement for its 1994
Annual Meeting of Stockholders to be filed on or before April 30, 1994.
NOTES:
(A) Represents accrual of interest.
(B) Amounts receivable (including interest of $3,400,000) from employees are due
June 30, 1994. The stated rate of interest is 7%.
(C) Represents the discount pertaining to the difference between the stated rate
of interest of 7% and the effective rate of interest of approximately 9%.
Activity in 1992 includes discount amortization of $550,000, interest of
$710,000 and the cancellation of the receivable balance of $1,350,000 for an
ex-employee.
Activity in 1991 includes discount amortization of $340,000 and interest of
$1,040,000.
F-2
50
MASCOTECH, INC.
SCHEDULE V. PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
------------ ------------ ----------- ------------ ------------- ------------
BALANCE AT OTHER BALANCE
BEGINNING ADDITIONS CHANGES AT END
CLASSIFICATION OF PERIOD AT COST RETIREMENTS ADD (DEDUCT) OF PERIOD
- ---------------------------------- ------------ ----------- ------------ ------------- ------------
(A) (B) (C)
1993:
Land and land improvements...... $ 39,740,000 $ 250,000 $ 1,830,000 $ (4,440,000) $ 33,720,000
Buildings....................... 182,460,000 4,690,000 4,170,000 (24,230,000) 158,750,000
Machinery and equipment......... 580,030,000 12,460,000 13,590,000 (67,790,000) 511,110,000
Office, delivery and other
equipment.................... 57,200,000 2,890,000 2,650,000 (12,390,000) 45,050,000
Construction in progress........ 32,570,000 39,250,000 420,000 (21,960,000) 49,440,000
------------ ----------- ------------ ------------- ------------
$892,000,000 $59,540,000 $ 22,660,000 $(130,810,000) $798,070,000
------------ ----------- ------------ ------------- ------------
------------ ----------- ------------ ------------- ------------
1992:
Land and land improvements...... $ 39,470,000 $ 250,000 $ 80,000 $ 100,000 $ 39,740,000
Buildings....................... 180,580,000 3,170,000 1,380,000 90,000 182,460,000
Machinery and equipment......... 557,620,000 26,140,000 17,610,000 13,880,000 580,030,000
Office, delivery and other
equipment.................... 54,160,000 5,150,000 4,700,000 2,590,000 57,200,000
Construction in progress........ 21,170,000 33,750,000 600,000 (21,750,000) 32,570,000
------------ ----------- ------------ ------------- ------------
$853,000,000 $68,460,000 $ 24,370,000 $ (5,090,000) $892,000,000
------------ ----------- ------------ ------------- ------------
------------ ----------- ------------ ------------- ------------
1991:
Land and land improvements...... $ 41,190,000 $ 460,000 $ 5,470,000 $ 3,290,000 $ 39,470,000
Buildings....................... 189,250,000 11,140,000 25,360,000 5,550,000 180,580,000
Machinery and equipment......... 560,550,000 46,360,000 69,770,000 20,480,000 557,620,000
Office, delivery and other
equipment.................... 55,860,000 7,310,000 8,920,000 (90,000) 54,160,000
Construction in progress........ 24,560,000 19,370,000 1,540,000 (21,220,000) 21,170,000
------------ ----------- ------------ ------------- ------------
$871,410,000 $84,640,000 $111,060,000 $ 8,010,000 $853,000,000
------------ ----------- ------------ ------------- ------------
------------ ----------- ------------ ------------- ------------
NOTES:
(A) Includes property, plant and equipment additions of $20 million in 1991
obtained through the acquisition of companies.
(B) Includes property, plant and equipment from the disposition of certain
operations in 1991.
(C) Adjustments and reclassifications to present the Energy-related segment as
discontinued operations in 1993, and the effect of foreign currency
translation.
F-3
51
MASCOTECH, INC.
SCHEDULE VI. ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY,
PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
------------ ----------- ----------- ----------- ----------- -----------
ADDITIONS
BALANCE AT CHARGED TO OTHER BALANCE
BEGINNING COSTS AND CHANGES AT END
DESCRIPTION OF PERIOD EXPENSES RETIREMENTS ADD (DEDUCT) OF PERIOD
- ------------------------------ ------------ ----------- ----------- ------------ ------------
(A) (B)
1993:
Land improvements........... $ 2,520,000 $ 250,000 $ 10,000 $ (200,000) $ 2,560,000
Buildings................... 43,970,000 4,620,000 940,000 (9,230,000) 38,420,000
Machinery and equipment..... 275,960,000 29,450,000 8,440,000 (56,500,000) 240,470,000
Office, delivery and other
equipment................ 32,130,000 4,990,000 2,140,000 (8,550,000) 26,430,000
------------ ----------- ----------- ------------ ------------
$354,580,000 $39,310,000 $11,530,000 $(74,480,000) $307,880,000
------------ ----------- ----------- ------------ ------------
------------ ----------- ----------- ------------ ------------
1992:
Land improvements........... $ 2,310,000 $ 250,000 $ 20,000 $ (20,000) $ 2,520,000
Buildings................... 39,280,000 5,490,000 150,000 (650,000) 43,970,000
Machinery and equipment..... 255,500,000 34,810,000 11,100,000 (3,250,000) 275,960,000
Office, delivery and other
equipment................ 29,680,000 5,770,000 4,170,000 850,000 32,130,000
------------ ----------- ----------- ------------ ------------
$326,770,000 $46,320,000 $15,440,000 $ (3,070,000) $354,580,000
------------ ----------- ----------- ------------ ------------
------------ ----------- ----------- ------------ ------------
1991:
Land improvements........... $ 2,430,000 $ 280,000 $ 350,000 $ (50,000) $ 2,310,000
Buildings................... 38,410,000 4,890,000 6,910,000 2,890,000 39,280,000
Machinery and equipment..... 246,200,000 35,090,000 32,350,000 6,560,000 255,500,000
Office, delivery and other
equipment................ 28,370,000 7,210,000 6,170,000 270,000 29,680,000
------------ ----------- ----------- ------------ ------------
$315,410,000 $47,470,000 $45,780,000 $ 9,670,000 $326,770,000
------------ ----------- ----------- ------------ ------------
------------ ----------- ----------- ------------ ------------
Notes:
(A) Includes accumulated depreciation of property, plant and equipment from
the disposition of operations in 1991.
(B) Adjustments and reclassifications to present the Energy-related segment as
discontinued operations in 1993, and the effect of foreign currency
translation.
F-4
52
MASCOTECH, INC.
SCHEDULE VIII. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
---------------------------- ---------- --------------------------- ----------- ------------
ADDITIONS
---------------------------
CHARGED
BALANCE AT CHARGED TO (CREDITED)
BEGINNING COSTS AND TO OTHER BALANCE AT
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
---------------------------- ---------- ------------ ----------- ---------- -------------
(A) (B)
Allowance for doubtful
accounts, deducted from
accounts receivable in the
balance sheet:
1993........................ $7,190,000 $2,470,000 $(1,820,000) $2,710,000 $ 5,130,000
---------- ------------ ----------- ---------- -------------
---------- ------------ ----------- ---------- -------------
1992........................ $7,810,000 $3,040,000 -- $3,660,000 $ 7,190,000
---------- ------------ ----------- ---------- -------------
---------- ------------ ----------- ---------- -------------
1991........................ $8,220,000 $7,730,000 $(2,800,000) $5,340,000 $ 7,810,000
---------- ------------ ----------- ---------- -------------
---------- ------------ ----------- ---------- -------------
Notes:
(A) Allowance of companies reclassified for discontinuance of
Energy-related segment in 1993, and other adjustments, net in 1991.
(B) Deductions, representing uncollectible accounts written off, less
recoveries of accounts written off in prior years.
F-5
53
MASCOTECH, INC.
SCHEDULE X. SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
COLUMN A COLUMN B
- ------------------------------------------------------ -----------------------------------------
CHARGED TO COSTS AND EXPENSES
-----------------------------------------
ITEM 1993 1992 1991
- ------------------------------------------------------ ----------- ----------- -----------
Maintenance and repairs............................... $46,070,000 $44,000,000 $41,100,000
----------- ----------- -----------
----------- ----------- -----------
Depreciation and amortization of intangible assets,
preoperating costs and similar deferrals:
Amortization of patents.......................... $ 180,000 $ 180,000 $ 260,000
----------- ----------- -----------
----------- ----------- -----------
Amortization of deferred charges................. $ 5,880,000 $ 6,600,000 $ 4,800,000
----------- ----------- -----------
----------- ----------- -----------
Amortization of excess of cost over net assets of
acquired companies............................. $14,540,000 $14,260,000 $14,500,000
----------- ----------- -----------
----------- ----------- -----------
Notes:
Other captions provided for under this schedule are excluded, as the
amounts related to such captions are not material.
Amounts reflect the reclassification of the Company's Energy-related
segment as discontinued operations.
F-6
54
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Shareholders of TriMas Corporation:
We have audited the consolidated financial statements and the financial
statement schedules of TriMas Corporation and subsidiaries listed in Item
14(a)(2)(ii) of this Form 10-K. These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of TriMas
Corporation and subsidiaries as of December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.
COOPERS & LYBRAND
Detroit, Michigan
February 8, 1994
F-7
55
TRIMAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------
1993 1992 1991
------------- ------------- -------------
Net sales....................................... $ 443,230,000 $ 388,230,000 $ 339,440,000
Cost of sales................................... (301,130,000) (266,110,000) (231,190,000)
Selling, general and administrative expenses.... (72,080,000) (63,500,000) (54,270,000)
------------- ------------- -------------
Operating profit........................... 70,020,000 58,620,000 53,980,000
Interest expense:
MascoTech, Inc............................. (3,490,000) (17,920,000)
Other...................................... (9,420,000) (9,400,000) (9,690,000)
Other income (expense), net..................... 3,270,000 4,070,000 7,740,000
------------- ------------- -------------
Income before income taxes and
extraordinary charge..................... 63,870,000 49,800,000 34,110,000
Income taxes.................................... 25,870,000 20,020,000 13,850,000
------------- ------------- -------------
Income before extraordinary charge......... 38,000,000 29,780,000 20,260,000
Extraordinary charge related to the early
extinguishment of debt, net of income taxes... (5,740,000) (2,510,000)
------------- ------------- -------------
Net income................................. $ 38,000,000 $ 24,040,000 $ 17,750,000
------------- ------------- -------------
------------- ------------- -------------
Preferred stock dividends, MascoTech, Inc....... $ 5,250,000 $ 7,000,000 $ 7,000,000
------------- ------------- -------------
------------- ------------- -------------
Earnings available for common stock............. $ 32,750,000 $ 17,040,000 $ 10,750,000
------------- ------------- -------------
------------- ------------- -------------
Primary earnings per common share:
Before extraordinary charge................ $1.05 $.87 $.67
----- ---- ----
----- ---- ----
Earnings per common share.................. $1.05 $.65 $.54
----- ---- ----
----- ---- ----
Fully diluted earnings per common share:
Before extraordinary charge................ $1.01 $.87 $.67
----- ---- ----
----- ---- ----
Earnings per common share.................. $1.01 $.65 $.54
----- ---- ----
----- ---- ----
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
56
TRIMAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
----------------------------
1993 1992
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 69,770,000 $ 64,770,000
Receivables.................................................... 58,710,000 46,550,000
Inventories.................................................... 76,700,000 60,800,000
Prepaid expenses............................................... 9,790,000 9,010,000
------------ ------------
Total current assets...................................... 214,970,000 181,130,000
Property and equipment........................................... 162,230,000 144,890,000
Excess of cost over net assets of acquired companies............. 152,210,000 110,310,000
Notes receivable................................................. 8,160,000 10,220,000
Other assets..................................................... 26,560,000 20,070,000
------------ ------------
Total assets.............................................. $564,130,000 $466,620,000
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................... $ 20,330,000 $ 16,850,000
Amounts payable to affiliates.................................. 1,150,000 7,110,000
Accrued liabilities............................................ 29,400,000 25,240,000
Current portion of long-term debt.............................. 320,000 110,000
------------ ------------
Total current liabilities................................. 51,200,000 49,310,000
Deferred income taxes and other.................................. 29,190,000 23,380,000
Long-term debt................................................... 238,890,000 178,490,000
------------ ------------
Total liabilities......................................... 319,280,000 251,180,000
------------ ------------
Shareholders' equity:
Preferred stock, $1 par value, authorized 5 million shares,
outstanding 70,000 shares in 1992........................... 70,000
Common stock, $.01 par value, authorized 100 million shares,
outstanding 36.6 million shares in 1993; 14.4 million shares
in 1992..................................................... 370,000 140,000
Paid-in capital.................................................. 154,190,000 153,740,000
Retained earnings................................................ 91,700,000 62,500,000
Cumulative translation adjustments............................... (1,410,000) (1,010,000)
------------ ------------
Total shareholders' equity................................ 244,850,000 215,440,000
------------ ------------
Total liabilities and shareholders' equity................ $564,130,000 $466,620,000
------------ ------------
------------ ------------
The accompanying notes are an integral part of the consolidated financial
statements.
F-9
57
TRIMAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------
1993 1992 1991
------------- ------------ ------------
CASH FROM (USED FOR):
OPERATIONS:
Net income................................... $ 38,000,000 $ 24,040,000 $ 17,750,000
Adjustments to reconcile net income to net
cash from operations:
Extraordinary charge.................... 5,740,000 2,510,000
Depreciation and amortization........... 18,470,000 16,920,000 14,010,000
Deferred income taxes................... 500,000 1,140,000 2,260,000
(Increase) decrease in receivables...... (4,250,000) 1,040,000 2,100,000
(Increase) decrease in inventories...... (8,120,000) 1,470,000 (1,790,000)
Increase (decrease) in accounts payable
and accrued liabilities............... 3,770,000 3,470,000 3,150,000
Other, net.............................. 1,730,000 3,980,000 (4,200,000)
------------- ------------ ------------
Net cash from operations.............. 50,100,000 57,800,000 35,790,000
------------- ------------ ------------
INVESTMENTS:
Capital expenditures......................... (26,280,000) (20,480,000) (15,330,000)
Acquisitions, net of cash acquired........... (60,280,000) (50,190,000)
------------- ------------ ------------
Net cash from (used for)
investments........................ (86,560,000) (20,480,000) (65,520,000)
------------- ------------ ------------
FINANCING:
Long-term debt:
Issuance................................ 60,000,000 50,000,000
Retirement.............................. (115,150,000) (140,000) (160,000)
Issuance of convertible subordinated debt,
net........................................ 112,030,000
Issuance of common shares, net............... 85,150,000
Retirement of subordinated debt, MascoTech,
Inc., including redemption premium......... (96,970,000) (43,920,000)
Preferred stock dividends paid to
MascoTech, Inc............................. (12,250,000) (7,000,000) (7,000,000)
Common stock dividends paid.................. (3,170,000) (720,000)
------------- ------------ ------------
Net cash from (used for) financing.... 41,460,000 (19,680,000) (1,080,000)
------------- ------------ ------------
CASH AND CASH EQUIVALENTS:
Increase (decrease) for the year................ 5,000,000 17,640,000 (30,810,000)
At beginning of the year........................ 64,770,000 47,130,000 77,940,000
------------- ------------ ------------
At end of the year........................... $ 69,770,000 $ 64,770,000 $ 47,130,000
------------- ------------ ------------
------------- ------------ ------------
The accompanying notes are an integral part of the consolidated financial
statements.
F-10
58
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of TriMas
Corporation and its majority owned subsidiaries (the "Company"). All significant
intercompany transactions have been eliminated.
AFFILIATES
As of December 31, 1993 MascoTech, Inc.'s common stock ownership in the
Company approximated 43 percent, and Masco Corporation's common stock ownership
approximated 5 percent. The Company has a corporate services agreement with
Masco Corporation. Under the terms of the agreement, the Company pays a fee to
Masco Corporation for various corporate support staff, administrative services,
and research and development services. Such fee equals .8 percent of the
Company's net sales, subject to certain adjustments.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or net realizable value, with
cost determined principally by use of the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment additions, including significant betterments, are
recorded at cost. Upon retirement or disposal of property and equipment, the
cost and accumulated depreciation are removed from the accounts and any gain or
loss is included in income. Maintenance and repair costs are charged to expense
as incurred.
DEPRECIATION AND AMORTIZATION
Depreciation is computed principally using the straight-line method over
the estimated useful lives of the assets. Annual depreciation rates are as
follows: buildings and land improvements, 2 1/2 to 5 percent, and machinery and
equipment, 6 2/3 to 33 1/3 percent. The excess of cost over net assets of
acquired companies is being amortized using the straight-line method over the
periods estimated to be benefitted, not exceeding 40 years. At December 31, 1993
and 1992 accumulated amortization of the excess of cost over net assets of
acquired companies and other intangible assets was $21.5 million and $17.0
million, respectively. Amortization expense was $4.5 million, $4.2 million, and
$3.4 million in 1993, 1992 and 1991, respectively.
As of each balance sheet date management assesses whether there has been an
impairment in the value of excess of cost over net assets of acquired companies
by comparing anticipated undiscounted future cash flows from the related
operating activities with the carrying value. The factors considered by
management in performing this assessment include current operating results,
trends and prospects, as well as the effects of obsolescence, demand,
competition and other economic factors. Based on this assessment there was no
impairment at December 31, 1993.
F-11
59
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company uses the liability method of accounting for income taxes.
Deferred income taxes result from temporary differences between the tax basis of
assets and liabilities and the basis as reported in the consolidated financial
statements. The Company has not provided for taxes on $9.4 million of
undistributed earnings of foreign subsidiaries at December 31, 1993, because
such earnings are considered permanently reinvested.
FOREIGN CURRENCY TRANSLATION
Net assets of the Company's operations outside of the United States are
translated into U.S. dollars using current exchange rates with the effects of
translation adjustments deferred and included as a separate component of
shareholders' equity. Revenues and expenses are translated at the average rates
of exchange during the period.
EARNINGS PER COMMON SHARE
On June 7, 1993 the Company's Board of Directors adopted a resolution for a
stock split, effected in the form of a 100 percent stock distribution, with
issuance to shareholders on July 6, 1993. Accordingly, information in the
consolidated financial statements and related notes, including the number of
common shares and per common share amounts, has been adjusted to reflect this
distribution.
Primary earnings per common share in 1993, 1992 and 1991 were calculated on
the basis of 31.1 million, 26.0 million and 19.8 million weighted average common
and common equivalent shares outstanding. Fully diluted earnings per common
share in 1993, 1992 and 1991 were calculated on the basis of 39.1 million, 33.9
million and 27.6 million weighted average common and common equivalent shares
outstanding.
On December 15, 1993 MascoTech, Inc. converted all of the $100 Convertible
Participating Preferred Stock into 7.8 million shares of Company common stock.
On a pro forma basis, as if the conversion had occurred on January 1, 1993,
primary and fully diluted earnings per common share for 1993 would have been
$1.03 and $1.01, respectively.
NOTE 2. ACQUISITIONS
In 1993 the Company acquired all of the capital stock of Lamons Metal
Gasket Co. ("Lamons") from MascoTech, Inc. for $60.3 million cash and the
assumption of certain liabilities. The acquisition was accounted for as a
purchase. The excess of cost over net assets acquired of approximately $45.4
million is being amortized on a straight-line basis over 40 years. The results
of operations of Lamons have been included in the consolidated financial
statements from the effective date of the transaction. Additional purchase price
amounts, contingent upon the achievement of specified levels of future
profitability by Lamons, may be payable to MascoTech, Inc. beginning in 1997.
These payments, if required, will be recorded as additional excess of cost over
net assets of acquired businesses.
Lamons is engaged in the manufacture of specialty metallic and non-metallic
gaskets used in the refinery, chemical and petrochemical industries. The
acquisition was financed through partial use of the Company's bank credit
facility.
F-12
60
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. ACQUISITIONS (CONTINUED)
On a pro forma, unaudited basis, as if the Lamons acquisition had occurred
as of January 1, 1992, net sales, net income, earnings available for common
stock, primary earnings per common share and fully diluted earnings per common
share for 1993 would have been $475.6 million, $40.6 million, $35.4 million,
$1.14 and $1.08, respectively, and net sales, income before extraordinary
charge, net income, earnings available for common stock, primary earnings per
common share before extraordinary charge, fully diluted earnings per common
share before extraordinary charge, primary earnings per common share and fully
diluted earnings per common share for 1992 would have been $437.8 million, $33.7
million, $27.9 million, $20.9 million, $1.02, $.99, $.80 and $.80, respectively.
During 1991 the Company acquired all of the capital stock of Monogram
Aerospace Fasteners, Inc. for $50.2 million cash and the assumption of certain
operating liabilities. The acquisition was accounted for as a purchase. The
excess of cost over net assets acquired of $13.4 million is being amortized on a
straight-line basis over 40 years. The results of operations of Monogram
Aerospace Fasteners, Inc. have been included in the consolidated financial
statements from the date of acquisition.
NOTE 3. SUPPLEMENTAL CASH FLOWS INFORMATION
(IN THOUSANDS)
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------
1993 1992 1991
------- ------- -------
Interest paid................................................ $ 7,470 $13,770 $27,490
------- ------- -------
------- ------- -------
Income taxes paid............................................ $21,540 $13,620 $ 7,940
------- ------- -------
------- ------- -------
Significant noncash transactions:
Preferred stock dividends declared, payable to MascoTech,
Inc. in subsequent year................................. $ 7,000 $ 7,000
------- -------
------- -------
Common stock dividends declared, payable in
subsequent year......................................... $ 1,100 $ 720
------- -------
------- -------
Assumption of liabilities as partial consideration for the
assets of companies acquired............................ $ 7,310 $ 4,590
------- -------
------- -------
NOTE 4. RECEIVABLES
(IN THOUSANDS)
AT DECEMBER 31,
------------------
1993 1992
------- -------
Accounts receivable....................................................... $54,320 $41,440
Current portion of notes receivable....................................... 4,390 5,110
------- -------
$58,710 $46,550
------- -------
------- -------
Accounts receivable are presented net of an allowance for doubtful accounts
of $1.8 million and $1.4 million at December 31, 1993 and 1992, respectively.
Accounts receivable at December 31, 1993 include approximately $3.2 million due
from MascoTech, Inc. relating to the acquisition of Lamons Metal Gasket Co.
F-13
61
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. INVENTORIES
(IN THOUSANDS)
AT DECEMBER 31,
------------------
1993 1992
------- -------
Finished goods............................................................ $41,950 $33,230
Work in process........................................................... 12,230 11,600
Raw material.............................................................. 22,520 15,970
------- -------
$76,700 $60,800
------- -------
------- -------
NOTE 6. PROPERTY AND EQUIPMENT
(IN THOUSANDS)
AT DECEMBER 31,
--------------------
1993 1992
-------- --------
Cost:
Land and land improvements............................................ $ 13,170 $ 12,380
Buildings............................................................. 58,250 50,840
Machinery and equipment............................................... 183,090 161,430
-------- --------
254,510 224,650
Less accumulated depreciation........................................... 92,280 79,760
-------- --------
$162,230 $144,890
-------- --------
-------- --------
Depreciation expense was $13.9 million, $12.7 million and $10.6 million in
1993, 1992 and 1991, respectively.
NOTE 7. NOTES RECEIVABLE
Notes receivable are net of an allowance for doubtful accounts of $.7
million at both December 31, 1993 and 1992, and consist principally of the
long-term portion of notes receivable arising from the sale of certain products
in the normal course of business. These notes bear various fixed interest rates
and mature through 2000. At December 31, 1993 the carrying value of these notes
receivable approximated their estimated fair value as calculated using the
interest rates in effect on that date.
NOTE 8. ACCRUED LIABILITIES
(IN THOUSANDS)
AT DECEMBER 31,
------------------
1993 1992
------- -------
Employee wages and benefits............................................... $ 9,830 $ 6,530
Property taxes............................................................ 2,630 2,740
Interest.................................................................. 2,620 970
Current income taxes...................................................... 2,050 2,130
Other..................................................................... 12,270 12,870
------- -------
$29,400 $25,240
------- -------
------- -------
F-14
62
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. LONG-TERM DEBT
(IN THOUSANDS)
AT DECEMBER 31,
--------------------
1993 1992
-------- --------
Borrowings from banks................................................... $122,000 $177,000
5% Convertible Subordinated Debentures.................................. 115,000
Other................................................................... 2,210 1,600
-------- --------
239,210 178,600
Less current maturities................................................. 320 110
-------- --------
$238,890 $178,490
-------- --------
-------- --------
In August, 1993 the Company issued $115.0 million of 5% Convertible
Subordinated Debentures Due 2003. The Debentures are convertible into Company
common stock at $22 5/8 per share, subject to adjustment in certain events. The
Debentures are redeemable, at a premium, at the Company's option after August 1,
1996.
The Company has a $350.0 million revolving credit facility maturing in 1998
with a group of domestic and international banks. The facility permits the
Company to borrow under several different interest rate options. The facility
contains certain restrictive covenants, the most restrictive of which, at
December 31, 1993, requires $186.4 million of shareholders' equity.
Borrowings from banks at December 31, 1993 and 1992 include $122.0 million
and $147.0 million, respectively, owing under the Company's revolving credit
facilities. At December 31, 1993 the blended interest rate on borrowings
equalled 3.5 percent. The Company had available credit of $228.0 million under
the credit facility at December 31, 1993.
At December 31, 1992 the Company had borrowed $30.0 million from several
banks under short term, uncommitted credit facilities. As the Company had the
ability and the intent to maintain these borrowings on a long-term basis,
borrowings under these short term facilities were classified as long-term debt.
NOTE 10. SUBORDINATED DEBT HELD BY AFFILIATE
On December 31, 1991 the Company utilized available cash to retire $40.0
million of the $128.0 million 14 percent Subordinated Debentures due 2008, held
by MascoTech, Inc., and recognized a $3.9 million pre-tax extraordinary charge
($2.5 million after tax, or $.13 per common share) relative to the payment of
the redemption premium associated with the early extinguishment.
Effective January 1, 1992 the Company exchanged the remaining $88.0 million
of 14 percent Subordinated Debentures for a new issue of $88.0 million 12
percent Subordinated Debentures due 1999.
In April, 1992 the Company retired the $88.0 million 12 percent
Subordinated Debentures and recognized a $9.0 million pre-tax extraordinary
charge ($5.7 million after tax, or $.22 per common share) relative to the
payment of the redemption premium associated with the early extinguishment.
At December 31, 1993 there were no outstanding Subordinated Debentures held
by MascoTech, Inc.
F-15
63
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. SHAREHOLDERS' EQUITY
(IN THOUSANDS)
CUMULATIVE
PREFERRED COMMON PAID-IN RETAINED TRANSLATION
STOCK STOCK CAPITAL EARNINGS ADJUSTMENTS TOTAL
--------- ------ -------- -------- ----------- --------
Balance, January 1, 1991......... $ 70 $100 $ 68,600 $ 36,150 $ 80 $105,000
Net income..................... 17,750 17,750
Preferred stock dividends...... (7,000) (7,000)
Other.......................... (350) 170 (180)
--------- ------ -------- -------- ----------- --------
Balance, December 31, 1991....... 70 100 68,250 46,900 250 115,570
Net income..................... 24,040 24,040
Common shares issued........... 40 85,110 85,150
Common stock dividends......... (1,440) (1,440)
Preferred stock dividends...... (7,000) (7,000)
Other.......................... 380 (1,260) (880)
--------- ------ -------- -------- ----------- --------
Balance, December 31, 1992....... 70 140 153,740 62,500 (1,010) 215,440
Net income..................... 38,000 38,000
Common stock distribution...... 150 (150)
Common stock dividends......... (3,550) (3,550)
Preferred stock dividends...... (5,250) (5,250)
Preferred stock conversion..... (70) 80 (10)
Other.......................... 610 (400) 210
--------- ------ -------- -------- ----------- --------
Balance, December 31, 1993....... $-0- $370 $154,190 $ 91,700 $(1,410) $244,850
--------- ------ -------- -------- ----------- --------
--------- ------ -------- -------- ----------- --------
During 1993, dividends on the $100 Convertible Participating Preferred
Stock, held by MascoTech, Inc., converted from an annual to a quarterly payment
schedule. Therefore, the Company paid $12.3 million in preferred stock dividends
in 1993 representing dividends accrued through the first three quarters of 1993
and the full year 1992. On December 15, 1993 MascoTech, Inc. converted all of
the preferred stock into 7.8 million shares of Company common stock.
On the basis of amounts paid (declared), cash dividends per common share
were $.11 ($.11 1/2) in 1993 and $.02 1/2 ($.05) in 1992.
NOTE 12. STOCK OPTIONS AND AWARDS
The Company has a Stock Option Plan and a Restricted Stock Incentive Plan
which permit the grant of up to a combined total of 2,000,000 shares of Company
common stock for stock options or awards to key employees of the Company and its
affiliates. Shares available for grant through these two plans were 419,944 and
549,156 at December 31, 1993 and December 31, 1992, respectively.
F-16
64
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. STOCK OPTIONS AND AWARDS (CONTINUED)
Stock option data are as follows (option prices are the fair market value
at the dates of grant):
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------
1993 1992 1991
------- ------- -------
Options outstanding, January 1............................... 606,000 622,000 160,000
Options granted.............................................. 462,000
Option price per share..................................... $8 7/8
Options cancelled............................................ 16,000
Option price per share..................................... $8 7/8
Options exercised............................................ 2,000
Option price per share..................................... $8 7/8
Options outstanding, December 31............................. 604,000 606,000 622,000
Option price per share..................................... $7 1/2-$8 7/8 $7 1/2-$8 7/8 $7 1/2-$8 7/8
Exercisable, December 31..................................... 167,200 64,000 48,000
Restricted long-term incentive stock awards of a net total of 974,056
shares have been granted as of December 31, 1993, with the related costs being
expensed over the ten year vesting period. At December 31, 1993 non-vested
incentive stock awards had an aggregate carrying value of $7.8 million.
NOTE 13. RETIREMENT PLANS
The Company has noncontributory retirement benefit plans, both defined
benefit plans and profit-sharing and other defined contribution plans, for most
of its employees. At December 31, 1993 the combined assets of the Company's
defined benefit plans exceeded the combined accumulated benefit obligation by
$5.7 million.
The annual expense for all plans was:
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
------ ------ ------
Defined contribution plans.................................... $2,300 $2,210 $1,630
Defined benefit plans......................................... 500 200 320
------ ------ ------
$2,800 $2,410 $1,950
------ ------ ------
------ ------ ------
Contributions to profit-sharing and other defined contribution plans are
generally determined as a percentage of the covered employee's annual salary.
Defined benefit plans provide retirement benefits for salaried employees
based primarily on years of service and average earnings for the five highest
consecutive years of compensation. Defined benefit plans covering hourly
employees generally provide benefits of stated amounts for each year of service.
These plans are funded based on an actuarial evaluation and review of the
assets, liabilities and requirements of each plan. Plan assets are held by a
trustee and invested principally in cash equivalents and marketable equity and
fixed income instruments.
F-17
65
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. RETIREMENT PLANS (CONTINUED)
Net periodic pension cost of defined benefit plans includes the following
components:
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1993 1992 1991
------- ------- -------
Service cost................................................. $ 2,030 $ 1,710 $ 1,510
Interest cost................................................ 2,920 2,680 2,440
Actual return on assets...................................... (5,900) (2,920) (4,740)
Net amortization and deferral................................ 1,450 (1,270) 1,110
------- ------- -------
$ 500 $ 200 $ 320
------- ------- -------
------- ------- -------
Net amortization and deferral consists of amortization of the net asset or
overfunded position at the date of adoption and deferral and amortization of
subsequent net gains and losses caused by the actual plan and investment
experience differing from that assumed.
Weighted average rate assumptions used were as follows:
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1993 1992 1991
----- ----- -----
Discount rate..................................................... 7.0% 8.2% 8.2%
Rate of increase in compensation levels........................... 5.1% 6.0% 6.0%
Expected long-term rate of return on plan assets.................. 12.5% 12.1% 12.0%
The following table sets forth the funded status of the defined benefit
plans:
(IN THOUSANDS)
AT DECEMBER 31,
--------------------------------------------------------
1993 1992
-------------------------- --------------------------
PLANS WHERE PLANS WHERE PLANS WHERE PLANS WHERE
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
Actuarial present value of:
Vested benefit obligation................. $27,450 $ 6,870 $21,720 $ 5,480
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Accumulated benefit obligation............ $27,970 $ 7,580 $22,180 $ 5,750
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Projected benefit obligation.............. $37,110 $ 7,580 $28,430 $ 6,600
Plan assets at fair value................... 35,440 5,790 30,680 4,930
----------- ----------- ----------- -----------
Projected benefit obligation (in excess of)
or less than plan assets.................. (1,670) (1,790) 2,250 (1,670)
Unrecognized net (asset) or obligation...... (1,870) (360) (2,350) (130)
Unrecognized prior service cost............. 590 740 540 380
Unrecognized net (gain) or loss............. 4,580 1,500 2,170 410
----------- ----------- ----------- -----------
Prepaid pension cost or (pension
liability)........................... $ 1,630 $ 90 $ 2,610 $(1,010)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Several of the Company's subsidiaries and divisions provide certain
postretirement health care and life insurance benefits for eligible retired
employees under unfunded plans. Some of the plans have cost-sharing provisions.
Prior to 1993, the expense recognized for postretirement health care and life
insurance benefits was based on actual expenditures. Effective January 1, 1993
the estimated costs
F-18
66
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. RETIREMENT PLANS (CONTINUED)
of these postretirement benefits are being accrued in accordance with the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions. The new accounting method has no effect on the Company's cash flows
related to these retiree benefits.
The Company has decided to amortize the unrecognized accumulated
postretirement benefit obligation existing at January 1, 1993 over 20 years as
permitted by the new Standard.
Net periodic postretirement benefit cost for 1993 includes the following
components:
(IN THOUSANDS)
Service cost.................................................................. $210
Interest cost................................................................. 520
Amortization of transition obligation......................................... 240
------
$970
------
------
Rate assumptions used were as follows:
Discount rate................................................................. 7.0%
Rate of increase in health care costs (1993-2000)............................. 12.0%
Long-term rate of increase in health care costs subsequent to the year 2000... 7.0%
The following sets forth the plans' status reconciled with the amount
recognized in the Company's balance sheet as of December 31, 1993:
Accumulated postretirement benefit obligation:
(IN THOUSANDS)
Retirees............................................................ $ (2,270)
Fully eligible active plan participants............................. (920)
Other active plan participants...................................... (3,100)
--------------
(6,290)
Unrecognized transition obligation....................................... 4,560
Unrecognized net (gain) or loss.......................................... (560)
--------------
Accrued postretirement benefit obligation at December 31, 1993...... $ (2,290)
--------------
--------------
A one percentage point increase each year in the assumed rate of increase
in health care costs would have increased the aggregate of the service and
interest cost components of net periodic postretirement benefit cost by
approximately $.1 million during 1993, and would have increased the accumulated
postretirement benefit obligation at December 31, 1993 by approximately $.8
million.
NOTE 14. OTHER INCOME (EXPENSE), NET
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER
31,
------------------------------
1993 1992 1991
------ ------ ------
Interest income................................................ $3,570 $3,600 $7,140
Other, net..................................................... (300) 470 600
------ ------ ------
$3,270 $4,070 $7,740
------ ------ ------
------ ------ ------
F-19
67
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15. BUSINESS SEGMENT INFORMATION
The Company's operations in its business segments consist principally
of the manufacture and sale of the following:
Specialty Fasteners: Cold formed fasteners and related metallurgical
processing.
Towing Systems: Vehicle hitches, jacks, winches, couplers and related
towing accessories.
Specialty Container Products: Industrial container closures, pressurized
gas cylinders and metallic and non-metallic gaskets.
Corporate Companies: Specialty drills, cutters and specialized metal
finishing services, and flame-retardant facings and jacketings and
pressure-sensitive tapes.
Corporate assets consist primarily of cash and cash equivalents and
notes receivable.
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
-------- -------- --------
NET SALES
Specialty Fasteners............................................... $122,740 $113,020 $ 84,860
Towing Systems.................................................... 139,790 122,960 105,530
Specialty Container Products...................................... 118,970 94,090 97,530
Corporate Companies............................................... 61,730 58,160 51,520
-------- -------- --------
Total net sales................................................. $443,230 $388,230 $339,440
-------- -------- --------
-------- -------- --------
OPERATING PROFIT
Specialty Fasteners............................................... $ 19,250 $ 17,340 $ 12,930
Towing Systems.................................................... 22,150 17,670 13,940
Specialty Container Products...................................... 28,820 22,830 25,920
Corporate Companies............................................... 7,110 6,670 5,990
-------- -------- --------
Total operating profit.......................................... 77,330 64,510 58,780
Other income (expense), net......................................... (6,150) (8,820) (19,870)
General corporate expense........................................... (7,310) (5,890) (4,800)
-------- -------- --------
Income before income taxes and extraordinary charge............. $ 63,870 $ 49,800 $ 34,110
-------- -------- --------
-------- -------- --------
IDENTIFIABLE ASSETS AT DECEMBER 31
Specialty Fasteners............................................... $131,110 $127,570 $131,870
Towing Systems.................................................... 142,340 133,240 126,670
Specialty Container Products...................................... 144,890 73,240 72,730
Corporate Companies............................................... 53,060 52,710 51,850
-------- -------- --------
471,400 386,760 383,120
Corporate......................................................... 92,730 79,860 65,640
-------- -------- --------
Total assets.................................................... $564,130 $466,620 $448,760
-------- -------- --------
-------- -------- --------
CAPITAL EXPENDITURES
Specialty Fasteners............................................... $ 9,170 $ 3,830 $ 21,810
Towing Systems.................................................... 7,930 10,240 4,400
Specialty Container Products...................................... 16,050 3,480 6,420
Corporate Companies............................................... 1,320 2,900 1,690
-------- -------- --------
34,470 20,450 34,320
Corporate......................................................... 20 30
-------- -------- --------
Total capital expenditures...................................... $ 34,490(A) $ 20,480 $ 34,320(B)
-------- -------- --------
-------- -------- --------
DEPRECIATION AND AMORTIZATION
Specialty Fasteners............................................... $ 6,490 $ 6,230 $ 3,970
Towing Systems.................................................... 5,250 4,950 4,650
Specialty Container Products...................................... 4,410 3,530 3,370
Corporate Companies............................................... 2,240 2,130 1,950
-------- -------- --------
18,390 16,840 13,940
Corporate......................................................... 80 80 70
-------- -------- --------
Total depreciation and amortization............................. $ 18,470 $ 16,920 $ 14,010
-------- -------- --------
-------- -------- --------
Operations are located principally in the United States.
(A) Includes $8.2 million from business acquired.
(B) Includes $19.0 million from business acquired.
F-20
68
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16. INCOME TAXES
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER
31,
-----------------------------
1993 1992 1991
------- ------- -------
Income before taxes and extraordinary charge:
Domestic..................................................... $60,630 $46,340 $30,400
Foreign...................................................... 3,240 3,460 3,710
------- ------- -------
$63,870 $49,800 $34,110
------- ------- -------
------- ------- -------
Provision for income taxes:
Federal...................................................... $20,980 $15,160 $ 8,340
State and local.............................................. 2,870 2,280 1,830
Foreign...................................................... 1,520 1,440 1,420
Deferred, principally federal................................ 500 1,140 2,260
------- ------- -------
Income taxes on income before income taxes and
extraordinary charge.................................... 25,870 20,020 13,850
Tax (credit) related to extraordinary charge................. (3,230) (1,410)
------- ------- -------
Net income taxes.......................................... $25,870 $16,790 $12,440
------- ------- -------
------- ------- -------
Provision for deferred income taxes by temporary difference
components:
Depreciation.............................................. $ 1,130 $ 1,790 $ 2,130
Inventory................................................. 100 (50) (1,080)
Other, net................................................ (730) (600) 1,210
------- ------- -------
$ 500 $ 1,140 $ 2,260
------- ------- -------
------- ------- -------
The following is a reconciliation of the U.S. federal statutory tax rate to
the effective tax rate applicable to income before income taxes and
extraordinary charge:
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1993 1992 1991
---- ---- ----
U.S. federal statutory tax rate...................................... 35.0% 34.0% 34.0%
State and local taxes, net of federal tax benefit.................... 2.9 3.0 3.4
Foreign taxes in excess of U.S. federal tax rate..................... .6 .9 .6
Nondeductible amortization of excess of cost over net assets of
acquired companies................................................. 1.7 2.1 2.7
Other, net........................................................... .3 .2 (.1)
---- ---- ----
Effective tax rate before extraordinary charge.................. 40.5% 40.2% 40.6%
---- ---- ----
---- ---- ----
F-21
69
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16. INCOME TAXES (CONTINUED)
Items that gave rise to deferred taxes:
(IN THOUSANDS)
AT DECEMBER 31,
--------------------------------------------------
1993 1992
----------------------- -----------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX TAX TAX TAX
ASSETS LIABILITIES ASSETS LIABILITIES
-------- ----------- -------- -----------
Property and equipment.................................. $18,040 $16,280
Inventory............................................... $ 170 $ 470
Accrued liabilities..................................... 3,260 2,450
Other................................................... 4,200 3,550 2,320 2,420
-------- ----------- -------- -----------
$7,630 $21,590 $5,240 $18,700
-------- ----------- -------- -----------
-------- ----------- -------- -----------
At December 31, 1993 capital loss carryforwards, for tax purposes only,
equalled $3.2 million and expire in 1995.
NOTE 17. INTERIM FINANCIAL INFORMATION (UNAUDITED)
QUARTERS ENDED
------------------------------------------------
DECEMBER SEPTEMBER JUNE MARCH
31ST 30TH 30TH 31ST
-------- --------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1993:
Net sales..................................... $108,000 $109,710 $118,600 $106,920
Gross profit.................................. $36,070 $ 35,020 $ 38,240 $ 32,770
Net income.................................... $ 8,480 $ 9,450 $ 11,650 $ 8,420
Earnings available for common stock........... $ 8,480 $ 7,700 $ 9,900 $ 6,670
Primary earnings per common share............. $.23 $.26 $.34 $.23
Fully diluted earnings per common share....... $.22 $.25 $.32 $.23
Weighted average common and common equivalent
shares outstanding:
Primary.................................. 37,004 29,189 29,171 29,131
Fully diluted............................ 42,120 40,016 36,974 36,926
1992:
Net sales..................................... $84,860 $100,600 $106,950 $ 95,820
Gross profit.................................. $27,010 $ 30,730 $ 34,870 $ 29,510
Before extraordinary charge:
Income..................................... $ 6,340 $ 8,280 $ 9,550 $ 5,610
Earnings available for common stock........ $ 4,590 $ 6,530 $ 7,800 $ 3,860
Primary earnings per common share.......... $.16 $.22 $.30 $.19
Fully diluted earnings per common share.... $.16 $.22 $.28 $.19
After extraordinary charge:
Net income................................. $ 6,340 $ 8,280 $ 3,810 $ 5,610
Earnings available for common stock........ $ 4,590 $ 6,530 $ 2,060 $ 3,860
Primary earnings per common share.......... $.16 $.22 $.08 $.19
Fully diluted earnings per common share.... $.16 $.22 $.08 $.19
Weighted average common and common equivalent
shares outstanding:
Primary.................................. 29,073 29,027 26,161 19,810
Fully diluted............................ 36,895 36,832 33,951 27,640
F-22
70
TRIMAS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
NOTE 17. INTERIM FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
Quarterly earnings per common share amounts for 1993 do not total to the
full year amount due to the change in the number of common shares outstanding
occurring during the year.
Earnings per common share in the fourth quarter of 1993 and 1992 were
improved by $.04 and $.03, net, respectively, resulting from various year-end
adjustments to accrual estimates recorded earlier in each year.
QUARTERLY COMMON STOCK PRICE AND DIVIDEND INFORMATION:
MARKET PRICE
1993 ---------------- DIVIDENDS
QUARTER HIGH LOW DECLARED
---------------------------------------- ----- ----- ---------
Fourth.................................. $24 5/8 $18 1/4 $ .03
Third................................... 20 17 .03
Second.................................. 18 3/4 15 5/8 .03
First................................... 16 1/2 14 1/4 .025
MARKET PRICE
1992 -------------- DIVIDENDS
QUARTER HIGH LOW DECLARED
---------------------------------------- ----- ----- ---------
Fourth.................................. $14 7/8 $11 1/4 $.025
Third................................... 12 1/4 10 5/8 .025
Second.................................. 12 1/4 9 3/4 --
First................................... 12 5/8 8 7/8 --
F-23
71
TRIMAS CORPORATION AND SUBSIDIARIES
SCHEDULE V. PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ---------------------------------------------- ------------ ----------- ----------- ------------ ------------
OTHER
BALANCE AT CHANGES BALANCE
BEGINNING ADDITIONS ADD AT END
CLASSIFICATION OF PERIOD AT COST RETIREMENTS (DEDUCT) OF PERIOD
- ---------------------------------------------- ------------ ----------- ----------- ------------ ------------
(A) (B)
1993:
Land and land improvements.................. $ 12,380,000 $ 820,000 $ 480,000 $ 450,000 $ 13,170,000
Buildings................................... 50,840,000 3,500,000 1,830,000 5,740,000 58,250,000
Machinery and equipment..................... 135,040,000 13,310,000 1,120,000 6,330,000 153,560,000
Office, delivery and other equipment........ 15,140,000 3,040,000 620,000 540,000 18,100,000
Construction in progress.................... 11,250,000 13,820,000 (13,640,000) 11,430,000
------------ ----------- ----------- ------------ ------------
$224,650,000 $34,490,000 $4,050,000 $ (580,000) $254,510,000
------------ ----------- ----------- ------------ ------------
------------ ----------- ----------- ------------ ------------
1992:
Land and land improvements.................. $ 12,490,000 $ 60,000 $ 120,000 $ (50,000) $ 12,380,000
Buildings................................... 47,750,000 2,880,000 400,000 610,000 50,840,000
Machinery and equipment..................... 127,030,000 5,040,000 960,000 3,930,000 135,040,000
Office, delivery and other equipment........ 14,360,000 1,210,000 580,000 150,000 15,140,000
Construction in progress.................... 5,690,000 11,290,000 10,000 (5,720,000) 11,250,000
------------ ----------- ----------- ------------ ------------
$207,320,000 $20,480,000 $2,070,000 $ (1,080,000) $224,650,000
------------ ----------- ----------- ------------ ------------
------------ ----------- ----------- ------------ ------------
1991:
Land and land improvements.................. $ 9,000,000 $ 3,040,000 $ 10,000 $ 460,000 $ 12,490,000
Buildings................................... 44,890,000 2,990,000 10,000 (120,000) 47,750,000
Machinery and equipment..................... 106,560,000 17,900,000 1,080,000 3,650,000 127,030,000
Office, delivery and other equipment........ 11,490,000 3,730,000 1,670,000 810,000 14,360,000
Construction in progress.................... 2,870,000 6,660,000 (3,840,000) 5,690,000
------------ ----------- ----------- ------------ ------------
$174,810,000 $34,320,000 $2,770,000 $ 960,000 $207,320,000
------------ ----------- ----------- ------------ ------------
------------ ----------- ----------- ------------ ------------
Notes:
(A) Including fixed asset additions of $8,210,000 in 1993 and $18,990,000 in
1991 obtained through the acquisition of companies.
(B) Adjustments and reclassifications between accounts.
F-24
72
TRIMAS CORPORATION AND SUBSIDIARIES
SCHEDULE VI. ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
---------- ---------- ----------- ----------- ---------- ----------
ADDITIONS OTHER
BALANCE AT CHARGED TO CHANGES BALANCE
BEGINNING COST AND ADD AT END
CLASSIFICATION OF PERIOD EXPENSES RETIREMENTS (DEDUCT) OF PERIOD
- ------------------------------------------------- ----------- ----------- ----------- --------- -----------
(A)
1993:
Land improvements.............................. $ 600,000 $ 20,000 $ 10,000 $ (10,000) $ 600,000
Buildings...................................... 10,530,000 2,170,000 180,000 180,000 12,700,000
Machinery and equipment........................ 62,180,000 9,420,000 520,000 (460,000) 70,620,000
Office, delivery and other equipment........... 6,450,000 2,320,000 530,000 120,000 8,360,000
----------- ----------- ----------- --------- -----------
$79,760,000 $13,930,000 $ 1,240,000 $(170,000) $92,280,000
----------- ----------- ----------- --------- -----------
----------- ----------- ----------- --------- -----------
1992:
Land improvements.............................. $ 410,000 $ 100,000 $ 90,000 $ 600,000
Buildings...................................... 9,010,000 1,860,000 $ 60,000 (280,000) 10,530,000
Machinery and equipment........................ 54,640,000 8,670,000 700,000 (430,000) 62,180,000
Office, delivery and other equipment........... 4,880,000 2,120,000 500,000 (50,000) 6,450,000
----------- ----------- ----------- --------- -----------
$68,940,000 $12,750,000 $1,260,000 $(670,000) $79,760,000
----------- ----------- ----------- --------- -----------
----------- ----------- ----------- --------- -----------
1991:
Land improvements.............................. $ 290,000 $ 100,000 $ 20,000 $ 410,000
Buildings...................................... 7,280,000 1,760,000 $ 10,000 (20,000) 9,010,000
Machinery and equipment........................ 48,410,000 6,920,000 820,000 130,000 54,640,000
Office, delivery and other equipment........... 4,420,000 1,820,000 1,340,000 (20,000) 4,880,000
----------- ----------- ----------- --------- -----------
$60,400,000 $10,600,000 $2,170,000 $110,000 $68,940,000
----------- ----------- ----------- --------- -----------
----------- ----------- ----------- --------- -----------
Note:
(A) Adjustments and reclassifications between accounts.
F-25
73
TRIMAS CORPORATION AND SUBSIDIARIES
SCHEDULE VIII. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
--------- --------- ------------------------ ---------- ----------
ADDITIONS
--------------------------
CHARGED CHARGED
BALANCE AT (CREDITED) (CREDITED) BALANCE
BEGINNING TO COST TO OTHER AT END
DESCRIPTION OF PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ----------------------------- ---------- ------------ ---------- ---------- ----------
(A) (B)
Allowance for doubtful
accounts, deducted from
accounts receivable in the
balance sheet:
1993.................... $1,430,000 $ 800,000 $ 160,000 $590,000 $1,800,000
---------- ------------ ---------- ---------- ----------
---------- ------------ ---------- ---------- ----------
1992.................... $1,750,000 $ 440,000 $(310,000) $450,000 $1,430,000
---------- ------------ ---------- ---------- ----------
---------- ------------ ---------- ---------- ----------
1991.................... $1,560,000 $ 420,000 $ 410,000 $640,000 $1,750,000
---------- ------------ ---------- ---------- ----------
---------- ------------ ---------- ---------- ----------
Allowance for doubtful
accounts, deducted from
notes receivable in the
balance sheet:
1993.................... $ 650,000 $ -- $ -- $ -- $ 650,000
---------- ------------ ---------- ---------- ----------
---------- ------------ ---------- ---------- ----------
1992.................... $ 650,000 $ -- $ -- $ -- $ 650,000
---------- ------------ ---------- ---------- ----------
---------- ------------ ---------- ---------- ----------
1991.................... $1,220,000 $ (350,000) $(220,000) $ -- $ 650,000
---------- ------------ ---------- ---------- ----------
---------- ------------ ---------- ---------- ----------
Notes:
(A) Allowance of companies acquired, and other adjustments, net.
(B) Doubtful accounts charged off, less recoveries.
F-26
74
TRIMAS CORPORATION AND SUBSIDIARIES
SCHEDULE X. SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
COLUMN A COLUMN B
-------- ------------------------------------------
CHARGED TO COSTS AND EXPENSES
------------------------------------------
ITEM 1993 1992 1991
---- ----------- ----------- ----------
Maintenance and repairs............................. $11,780,000 $10,470,000 $9,730,000
----------- ----------- ----------
----------- ----------- ----------
Other captions provided under this schedule are excluded as the amounts
related to such captions are not material, or they are disclosed in the notes to
the financial statements.
F-27
75
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------
3.i Restated Certificate of Incorporation of MascoTech, Inc. and amendments thereto.
3.ii Bylaws of MascoTech, Inc., as amended.(3)
4.a Indenture dated as of November 1, 1986 between Masco Industries, Inc. (now known as
MascoTech, Inc.) and Morgan Guaranty Trust Company of New York, as Trustee, and
Directors' resolutions establishing the Company's 4 1/2% Convertible Subordinated
Debentures Due 2003.
4.b Indenture dated as of February 1, 1987 between Masco Industries, Inc. (now known as
MascoTech, Inc.) and Chemical Bank (successor by merger to Manufacturers Hanover
Trust Company), as Trustee, and Directors' resolutions establishing the Company's
10% Senior Subordinated Notes Due 1995.(4)
4.c Credit Agreement dated as of September 2, 1993 by and among MascoTech, Inc., the
banks party thereto, NBD Bank, N.A., as Agent, and Comerica Bank, The Bank of New
York, The First National Bank of Chicago, Morgan Guaranty Trust Company of New York
and NationsBank of North Carolina, N.A., as Co-Agents.(2)
Note: Other instruments, notes or extracts from agreements defining the rights of holders
of long-term debt of MascoTech, Inc. or its subsidiaries have not been filed since
(i) in each case the total amount of long-term debt permitted thereunder does not
exceed 10% of MascoTech, Inc.'s consolidated assets, and (ii) such instruments,
notes and extracts will be furnished by MascoTech, Inc. to the Securities and
Exchange Commission upon request.
10.a Assumption and Indemnification Agreement dated as of May 1, 1984 between Masco
Industries, Inc. (now known as MascoTech, Inc.) and Masco Corporation.(8)
10.b Corporate Services Agreement dated as of January 1, 1987 between Masco Industries,
Inc. (now known as MascoTech, Inc.) and Masco Corporation.(6)
10.c Corporate Opportunities Agreement dated as of May 1, 1984 between Masco Industries,
Inc. (now known as MascoTech, Inc.) and Masco Corporation.(8)
10.d Stock Repurchase Agreement dated as of May 1, 1984 between Masco Industries, Inc.
(now known as MascoTech, Inc.) and Masco Corporation and related forfeiture letter
dated September 20, 1985, Amendment to Stock Repurchase Agreement dated as of
December 20, 1990 and Agreement dated as of November 23, 1993 including an
amendment to Stock Repurchase Agreement.
Note: Exhibits 10.e through 10.o constitute the management contracts and executive
compensatory plans or arrangements in which certain of the Directors and executive
officers of the Company participate.
10.e MascoTech, Inc. 1991 Long-Term Stock Incentive Plan (Restated September 14, 1993).
10.f MascoTech, Inc. 1984 Restricted Stock Incentive Plan (Restated September 14, 1993).
10.g MascoTech, Inc. 1984 Stock Option Plan (Restated September 14, 1993).
10.h Masco Corporation 1991 Long Term Stock Incentive Plan.(7)
10.i Masco Corporation 1988 Restricted Stock Incentive Plan (Restated September 11,
1990).(8)
10.j Masco Corporation 1988 Stock Option Plan (Restated September 11, 1990).(8)
10.k Masco Corporation 1984 Restricted Stock (Industries) Incentive Plan (Restated
September 11, 1990).(8)
10.1 Masco Corporation 1984 Stock Option Plan (Restated September 11, 1990).(8)
10.m Masco Corporation Restricted Stock Incentive Plan (Restated September 11, 1990).(8)
10.n Supplemental Executive Retirement and Disability Plan.(6)
10.o Form of Agreement dated June 29, 1989 between Masco Industries, Inc. (now known as
MascoTech, Inc.) and certain of its officers.(9)
10.p Assumption and Indemnification Agreement dated as of December 27, 1988 between
Masco Industries, Inc. (now known as MascoTech, Inc.) and TriMas Corporation.(6)
76
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------
10.q Corporate Opportunities Agreement dated as of December 27, 1988 among Masco
Industries, Inc. (now known as MascoTech, Inc.), Masco Corporation and TriMas
Corporation.(6)
10.r Stock Repurchase Agreement dated as of December 27, 1988 among Masco Industries,
Inc. (now known as MascoTech, Inc.), Masco Corporation and TriMas Corporation.(6)
10.s Registration Agreement dated as of December 27, 1988 among Masco Industries,
Inc.(now known as MascoTech, Inc.), Masco Corporation and TriMas Corporation
together with Amendment to Registration Agreement dated as of January 5, 1993
(which also relates to the Form of Agreement filed as Exhibit 10.o).(6)
10.t Credit Agreement dated February 1, 1993 among TriMas Corporation, certain banks and
NationsBank of North Carolina, N.A., as agent.(6)
10.u Stock Purchase Agreement between Masco Corporation and Masco Industries, Inc. (now
known as MascoTech, Inc.) dated as of December 23, 1991 (regarding Masco Capital
Corporation).(7)
10.v Exchange Agreement dated December 18, 1990 between Masco Industries, Inc. (now
known as MascoTech, Inc.) and Masco Corporation.(8)
10.w Amended and Restated Securities Purchase Agreement dated as of November 23, 1993
between MascoTech, Inc. and Masco Corporation, including form of Note.(1)
10.x Registration Agreement dated as of March 31, 1993 between Masco Industries, Inc.
(now known as MascoTech, Inc.) and Masco Corporation.(5)
11 Computation of Earnings (Loss) Per Common Share.
12 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
21 List of Subsidiaries.
23.a Consent of Coopers & Lybrand relating to MascoTech, Inc.'s Financial Statements and
Financial Statement Schedules.
23.b Consent of Coopers & Lybrand relating to TriMas Corporation's Financial Statements
and Financial Statement Schedules.
- -------------------------
(1) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Current Report on Form 8-K dated November 22, 1993.
(2) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended September 30, 1993.
(3) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Current Report on Form 8-K dated June 22, 1993.
(4) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Registration Statement on Form S-3 dated March 9, 1993.
(5) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Current Report on Form 8-K dated February 1, 1993.
(6) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1992.
(7) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1991.
(8) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1990.
(9) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1989.