FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
Commission file number 1-10716
TRIMAS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 38-2687639
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
315 East Eisenhower Parkway, Ann Arbor, Michigan 48108
(Address of principal executive offices) (Zip Code)
(313) 747-7025
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding at
Class July 31, 1997
Common Stock, $.01 Par Value 41,348,611
TRIMAS CORPORATION
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
June 30, 1997 and December 31, 1996 1
Consolidated Condensed Statements of
Income for the Three Months and Six
Months Ended June 30, 1997 and 1996 2
Consolidated Condensed Statements of
Cash Flows for the Six Months
Ended June 30, 1997 and 1996 3
Notes to Consolidated Condensed
Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 5
Part II. Other Information and Signature 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TRIMAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, December 31,
1997 1996
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 94,720,000 $105,890,000
Receivables 102,760,000 80,390,000
Inventories 93,180,000 92,210,000
Other current assets 5,480,000 4,130,000
Total current assets 296,140,000 282,620,000
Property and equipment 194,650,000 194,540,000
Excess of cost over net assets
of acquired companies 174,520,000 174,710,000
Other assets 41,460,000 44,800,000
Total assets $706,770,000 $696,670,000
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 29,740,000 $ 33,750,000
Other current liabilities 33,780,000 45,430,000
Total current liabilities 63,520,000 79,180,000
Deferred income taxes and other 42,170,000 39,920,000
Long-term debt 73,600,000 187,120,000
Total liabilities 179,290,000 306,220,000
Shareholders' equity:
Common stock, $.01 par value, authorized
100 million shares, outstanding 41.3
million shares in 1997; 36.6 million
shares in 1996 410,000 370,000
Paid-in capital 259,340,000 155,690,000
Retained earnings 270,640,000 238,290,000
Cumulative translation adjustments (2,910,000) (3,900,000)
Total shareholders' equity 527,480,000 390,450,000
Total liabilities and
shareholders' equity $706,770,000 $696,670,000
The accompanying notes are an integral part of the
consolidated financial statements.
1
TRIMAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended Three Months Ended
June 30, June 30,
1997 1996 1997 1996
Net sales $347,060,000 $307,900,000 $182,840,000 $160,200,000
Cost of sales (234,030,000) (206,980,000) (122,350,000) (106,740,000)
Selling, general and
administrative expenses (51,920,000) (45,860,000) (25,810,000) (22,870,000)
Operating profit 61,110,000 55,060,000 34,680,000 30,590,000
Interest expense (3,020,000) (5,520,000) (1,220,000) (2,830,000)
Other, net (principally
interest income) 2,680,000 2,840,000 1,290,000 1,450,000
(340,000) (2,680,000) 70,000 (1,380,000)
Income before income
taxes 60,770,000 52,380,000 34,750,000 29,210,000
Income taxes 23,050,000 20,430,000 13,200,000 11,390,000
Net income $ 37,720,000 $ 31,950,000 $ 21,550,000 $ 17,820,000
Earnings per common
share:
Primary $.95 $.86 $.52 $.48
Fully diluted $.91 $.80 $.52 $.45
Dividends declared per
common share $.13 $.11 $.07 $.06
Weighted average number
of common and common
equivalent shares
outstanding:
Primary 39,663,000 36,968,000 41,663,000 36,983,000
Fully diluted 41,673,000 42,065,000 41,673,000 42,065,000
The accompanying notes are an integral part of the
consolidated condensed financial statements.
2
TRIMAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
1997 1996
CASH FROM (USED FOR):
OPERATIONS:
Net income $ 37,720,000 $ 31,950,000
Adjustments to reconcile net income
to net cash from operations:
Depreciation and amortization 13,110,000 11,510,000
Deferred income taxes 1,500,000 2,200,000
(Increase) decrease in receivables (21,670,000) (20,010,000)
(Increase) decrease in inventories (970,000) (920,000)
Increase (decrease) in accounts
payable and other current
liabilities (11,610,000) 6,590,000
Other, net (1,040,000) (140,000)
Net cash from (used for)
operations 17,040,000 31,180,000
INVESTMENTS:
Capital expenditures (11,960,000) (11,140,000)
Contingent acquisition price paid
to MascoTech, Inc. (7,030,000)
Net cash from (used for)
investments (18,990,000) (11,140,000)
FINANCING:
Long-term debt:
Issuance 17,120,000
Retirement (21,660,000) (200,000)
Common stock dividends paid (4,680,000) (3,660,000)
Net cash from (used for)
financing (9,220,000) (3,860,000)
CASH AND CASH EQUIVALENTS:
Increase (decrease) for the period (11,170,000) 16,180,000
At beginning of period 105,890,000 92,390,000
At end of period $ 94,720,000 $108,570,000
SUPPLEMENTAL CASH FLOW INFORMATION:
Noncash financing transaction:
Conversion of convertible subordinated
debentures into common stock $106,000,000
The accompanying notes are an integral part of the
consolidated condensed financial statements.
3
TRIMAS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
A. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included, and such adjustments are of a normal
recurring nature. The year-end condensed balance sheet data was derived
from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 1996.
B. Inventories by component are as follows:
June 30, December 31,
1997 1996
Finished goods $51,510,000 $53,380,000
Work in process 15,110,000 14,340,000
Raw material 26,560,000 24,490,000
$93,180,000 $92,210,000
C. Property and equipment reflects accumulated depreciation of $139.3 million
and $131.7 million as of June 30, 1997 and December 31, 1996,
respectively.
D. During the first quarter of 1997 the Company announced that it would
redeem for cash its outstanding issue of $115.0 million of 5%
Convertible Subordinated Debentures Due 2003. In March 1997, $9.0
million of Convertible Subordinated Debentures were redeemed for cash.
The remaining $106.0 million of Convertible Subordinated Debentures were
converted into 4.7 million shares of TriMas Corporation common stock at
the conversion price of $22 5/8 per share.
4
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Consolidated net sales during the second quarter of 1997 equaled $182.8
million, an increase of 14.1 percent over the comparable 1996 period and the
highest quarterly total in Company history. Record sales during the first half
of 1997 equaled $347.1 million, compared to $307.9 million in 1996. All four of
the Company's reporting segments recorded increased sales during the quarter and
six months ended June 30, 1997, as compared to the prior year periods.
Sales for the Specialty Container Products segment for the second quarter
and six months ended June 30, 1997 increased 21.9 percent and 26.5 percent
respectively. Second quarter sales equaled $57.3 million bringing the six month
total to $113.6 million. Increases in segment sales were principally due to the
results of businesses acquired in 1996. Year-to-date sales also reflect stronger
demand for cylinders from industrial gas distributors and moderately increased
demand for container closure products.
Second quarter sales by the Towing Systems segment increased 10.6 percent
to $62.4 million, compared to $56.4 million in the second quarter of 1996.
Improved weather conditions beginning in late May, which released some pent-up
demand from the first quarter, ongoing penetration of the specialty automotive
retail market, continuing new product introductions, and sales attributable to
Queensland Towbars Pty. Ltd., acquired in 1996, all contributed to the increase
in second quarter sales performance. First half segment
5
sales equaled $112.0 million, which compares to $105.6 million in 1996.
Second quarter 1997 sales for the Specialty Fasteners segment were $41.1
million, an increase of 10.9 percent over sales recorded in the comparable
period of 1996. Sales during the first half of 1997 of $79.2 million increased
8.3 percent compared to 1996. Continued strength in the aerospace markets
served by the segment, and strong demand for large diameter industrial fasteners
utilized in the heavy-duty truck market aided sales performance during both
periods.
Second quarter sales by the Corporate Companies segment increased 11.7
percent to $22.1 million, compared to $19.8 million in the second quarter of
1996. Sales during the first half of 1997 of $42.3 million increased 7.2 percent
compared to 1996. Sales of specialty insulation products, used in commercial
and industrial construction and maintenance markets, increased, as conditions in
those markets continued to improve.
The Company's consolidated gross margin for the first six months of 1997
was 32.6 percent, compared to 32.8 percent in 1996. During the second quarters
of 1997 and 1996 gross margin equaled 33.1 percent and 33.4 percent
respectively. Because of the seasonal factors relating to the Towing Systems
segment, gross margin recorded in the second quarter is typically higher than
that which is realized during the first quarter. The results of businesses
acquired during the second half of 1996 continue to affect the consolidated
measure of selling, general and administrative expenses as a percentage of net
sales, which at 15.0 percent through the first six months of 1997 is slightly
higher than the 14.9 percent recorded during the comparable period last year.
6
The Company is continuing to integrate its cost reduction, distribution
efficiency and marketing programs into these recently acquired businesses.
The Company's consolidated operating profit for the first six months of
1997 increased to $61.1 million and represented an operating margin of 17.6
percent compared to 1996's first six months operating profit of $55.1 million or
17.9 percent of net sales. Operating profit for the second quarter 1997 of
$34.7 million represented an operating margin of 19.0 percent, which
approximated the operating margin achieved during last year's second quarter.
Interest expense decreased in the six and three month periods ended
June 30, 1997 primarily because of the conversion in March 1997 of $106.0
million of the Company's issue of $115.0 million of 5% Convertible Subordinated
Debentures Due 2003 into 4.7 million shares of Company common stock.
Net income for the six months and three months ended June 30, 1997 was
$37.7 million and $21.6 million respectively, compared to $32.0 million and
$17.8 million in last year's comparable periods. Primary earnings per common
share for the first six months of 1997 increased 10.5 percent to $.95 based on
39.7 million shares outstanding, compared to 1996's primary earnings per common
share of $.86 based on 37.0 million shares outstanding. The increase in shares
outstanding resulted from the aforementioned conversion of subordinated debt
into Company common stock in March 1997. Fully diluted earnings per common
share increased 13.8 percent to $.91, based on 41.7 million shares outstanding,
versus $.80 last year, based on 42.1 million shares outstanding. Primary
earnings per common share for the second quarter
7
of 1997 increased 8.3 percent to $.52 compared to $.48 in 1996's second quarter.
Fully diluted earnings per common share for the second quarter of 1997 were also
$.52, a 15.6 percent increase compared to $.45 in last year's
second quarter.
Liquidity, Working Capital and Cash Flows
The Company's financial strategies include maintaining a relatively high
level of liquidity. Historically, TriMas Corporation has generated sufficient
cash flows from operating activities to fund capital expenditures, debt service
and dividends, while maintaining its strategic level of liquidity. At June 30,
1997 the current ratio was 4.7 to 1 and working capital equaled $232.6 million,
including $94.7 million of cash and cash equivalents. The Company had available
credit of $330.5 million under its domestic and foreign revolving credit
facilities at June 30, 1997.
Cash flows from operations provided $17.0 million and $31.2 million during
the first six months of 1997 and 1996 respectively. These operating cash flows
were net of increases in accounts receivable of $21.7 million in 1997 and $20.0
million in 1996. Due mainly to the seasonality of the Towing Systems segment,
second quarter sales are stronger than first quarter sales, which are stronger
than the preceding year's fourth quarter sales, thereby causing substantial
increases in receivables during the first half of any year. Historically, the
cash flow provided by the seasonal increase in receivables is realized later in
the year. A corresponding increase in accounts payable and accrued liabilities
provided cash flow of $6.6 million in the first six months of 1996. During
1997's first half a decrease in current
8
liabilities used cash of $11.6 million. Current liabilities declined primarily
because of interest payments on the Company's subordinated debt which was
converted and redeemed in March, estimated income tax payments, payments of
annual insurance premiums and reductions of accounts payable balances at certain
operating units.
Capital expenditures during the first six months equaled $12.0 million in
1997 and $11.1 million in 1996. In June 1997 the Company paid MascoTech, Inc.
$7.0 million related to a business acquisition made in 1993 as a result of that
acquired business having achieved specified levels of profitability during the
three year period ended December 31, 1996.
During the first quarter of 1997 $106.0 million of the Company's $115.0
million of 5% Convertible Subordinated Debentures Due 2003 were converted into
4.7 million shares of Company common stock and the remaining $9.0 was redeemed
for cash. Long-term debt issuances and retirements during the first half of
1997 also include the consolidation of borrowings, originally incurred or
acquired in connection with acquisitions made in 1996, under certain of the
Company's revolving credit facilities. Dividends paid on common stock totaled
$4.7 million in 1997 versus $3.7 million in 1996.
The Company believes its cash flows from operations, along with its
borrowing capacity and access to financial markets, are adequate to fund its
strategies for future growth, including working capital, expenditures for
manufacturing expansion and efficiencies, market share initiatives, and
corporate development activities.
9
Under a Stock Repurchase Agreement which expires in December 1998, Masco
Corporation and MascoTech, Inc. have the right to sell to the Company, at
approximate fair market value, shares of Company common stock following the
occurrence of certain events that would result in an increase in their
respective ownership percentage of the then outstanding shares of Company common
stock. In all cases, the Company has control over the amount of Company common
stock it would ultimately acquire. Neither Masco Corporation nor MascoTech,
Inc. have ever exercised their right to sell Company common stock to the
Company. To the extent these rights have been exercised at any balance sheet
date, the Company would reclassify from permanent capital an amount
representative of the repurchase obligation.
In February 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share. The Company will
adopt the provisions of this Statement during the fourth quarter of 1997 and it
is not expected to have a material effect on the Company's financial statements.
10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on May 14, 1997 at
which the two nominees for the Company's Board of Directors,
identified in the Company's proxy statement dated April 15, 1997,
were re-elected and the selection of Coopers & Lybrand L.L.P. to
audit the Company's financial statements for the year 1997 was
ratified. Following is a tabulation of shares voted:
Election of Directors
Eugene A. Gargaro, Jr. Helmut F. Stern
For 39,157,646 39,157,684
Withheld 88,057 88,019
Ratification of selection of Coopers & Lybrand L.L.P.
For 39,143,372
Against 43,367
Abstentions 58,964
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 Computation of Earnings Per Common Share
12 Computation of Ratios of Earnings to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K:
None were filed during the quarter ended June 30, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRIMAS CORPORATION
Date: August 13, 1997 By: /s/William E. Meyers
William E. Meyers
Vice President - Controller
(Chief accounting officer
and authorized signatory)
11
Exhibit Index
Exhibit
Number Description of Document
11 Computation of Earnings Per Common Share
12 Computation of Ratios of Earnings to Fixed Charges
27 Financial Data Schedule