FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1995 Commission file number 1-10716 TRIMAS CORPORATION (Exact name of registrant as specified in its charter) Delaware 38-2687639 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 315 East Eisenhower Parkway, Ann Arbor, Michigan 48108 (Address of principal executive offices) (Zip Code) (313) 747-7025 (Telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares Outstanding at Class October 31, 1995 Common Stock, $.01 Par Value 36,644,441
TRIMAS CORPORATION INDEX Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheets - September 30, 1995 and December 31, 1994 1 Consolidated Condensed Statements of Income for the Three Months and Nine Months Ended September 30, 1995 and 1994 2 Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 1995 and 1994 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 9
PART I. FINANCIAL INFORMATION Item 1. Financial Statements TRIMAS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS September 30, December 31, 1995 1994 (Unaudited) Assets Current assets: Cash and cash equivalents $ 80,870,000 $107,670,000 Receivables 76,500,000 64,190,000 Inventories 82,440,000 79,560,000 Other current assets 3,100,000 3,590,000 Total current assets 242,910,000 255,010,000 Property and equipment 169,490,000 168,380,000 Excess of cost over net assets of acquired companies 146,010,000 149,160,000 Notes receivable 8,620,000 9,960,000 Other assets 37,520,000 32,630,000 Total assets $604,550,000 $615,140,000 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 22,060,000 $ 21,590,000 Accrued liabilities 34,770,000 34,370,000 Current portion of long-term debt 210,000 280,000 Total current liabilities 57,040,000 56,240,000 Deferred income taxes and other 32,510,000 29,700,000 Long-term debt 187,190,000 238,600,000 Total liabilities 276,740,000 324,540,000 Shareholders' equity: Common stock, $.01 par value, authorized 100 million shares, outstanding 36.6 million shares 370,000 370,000 Paid-in capital 154,900,000 155,210,000 Retained earnings 174,400,000 136,310,000 Cumulative translation adjustments (1,860,000) (1,290,000) Total shareholders' equity 327,810,000 290,600,000 Total liabilities and shareholders' equity $604,550,000 $615,140,000 The accompanying notes are an integral part of the consolidated financial statements. 1
TRIMAS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) <TABLE> Nine Months Ended Three Months Ended September 30, September 30, 1995 1994 1995 1994 <S> <C> <C> <C> <C> Net sales $431,400,000 $414,990,000 $131,880,000 $133,590,000 Cost of sales (290,750,000) (280,830,000) (89,360,000) (90,010,000) Selling, general and administrative expenses (63,720,000) (63,460,000) (19,490,000) (20,710,000) Operating profit 76,930,000 70,700,000 23,030,000 22,870,000 Interest expense (10,800,000) (9,310,000) (3,360,000) (3,380,000) Other income (expense), net 5,070,000 2,710,000 1,940,000 1,300,000 (5,730,000) (6,600,000) (1,420,000) (2,080,000) Income before income taxes 71,200,000 64,100,000 21,610,000 20,790,000 Income taxes 27,980,000 25,960,000 8,390,000 8,420,000 Net income $ 43,220,000 $ 38,140,000 $ 13,220,000 $ 12,370,000 Earnings per common share: Primary $1.17 $1.03 $.36 $.33 Fully diluted $1.09 $.97 $.34 $.32 Dividends declared per common share $.14 $.11 $.05 $.04 Weighted average number of common and common equivalent shares outstanding: Primary 36,995,000 37,033,000 36,998,000 37,022,000 Fully diluted 42,078,000 42,116,000 42,080,000 42,104,000 </TABLE> The accompanying notes are an integral part of the consolidated condensed financial statements. 2
TRIMAS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, 1995 1994 CASH FROM (USED FOR): OPERATIONS: Net income $43,220,000 $38,140,000 Adjustments to reconcile net income to net cash from operations: Depreciation and amortization 16,280,000 15,810,000 Deferred income taxes 2,100,000 1,100,000 (Increase) decrease in receivables (10,970,000) (12,300,000) (Increase) decrease in inventories (2,880,000) (1,170,000) Increase (decrease) in accounts payable and accrued liabilities 700,000 5,580,000 Other, net (4,230,000) (120,000) Net cash from (used for) operations 44,220,000 47,040,000 INVESTMENTS: Capital expenditures (14,780,000) (16,660,000) Net cash from (used for) investments (14,780,000) (16,660,000) FINANCING: Retirement of long-term debt (51,480,000) (290,000) Common stock dividends paid (4,760,000) (3,660,000) Net cash from (used for) financing (56,240,000) (3,950,000) CASH AND CASH EQUIVALENTS: Increase (decrease) for the period (26,800,000) 26,430,000 At beginning of period 107,670,000 69,770,000 At end of period $80,870,000 $96,200,000 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, 1994. Certain amounts in the 1994 financial statements have been reclassified to conform with the current presentation. B. Inventories by component are as follows: September 30, December 31, 1995 1994 Finished goods $42,720,000 $44,860,000 Work in process 12,530,000 10,440,000 Raw material 27,190,000 24,260,000 $82,440,000 $79,560,000 C. Property and equipment reflects accumulated depreciation of $113.3 million and $103.3 million as of September 30, 1995 and December 31, 1994, respectively. 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Consolidated net sales during the third quarter of 1995 equaled $131.9 million. Sales volumes in the quarter continued to reflect the softness, which began during the second quarter, in the general economy and in certain markets served by the Company's products. Current quarter sales declined 1.3 percent compared to last year's third quarter sales of $133.6 million. Sales during the first three quarters of 1995 were $431.4 million, an increase of 4.0 percent over the comparable period in 1994, and represent the highest total in Company history for the first nine months. Sales by the Towing Systems segment increased modestly during the current quarter to $41.5 million compared to $40.7 million during last year's third quarter. Consumers remain cautious on discretionary purchases, including recreational products, which has caused some segment customers to limit their purchases. Segment sales for the current year-to-date period of $144.8 million increased 6.3 percent over last year's comparable period. Because of the seasonality of the demand for the products provided by this segment, its sales are concentrated in the first half of each year. Third quarter 1995 sales by the Specialty Fasteners segment decreased modestly to $33.3 million compared to $34.0 million during the corresponding period of a year ago. Demand for aerospace fasteners, which remains stronger than it was a year ago, was offset by the effects of current softness in demand for fasteners from appliance manufacturers and from customers for heat treating services. Segment sales during the first nine months of 1995 increased 4.3 percent to $109.5 million compared to $104.9 million one year ago. 5
Sales by the Specialty Container Products segment equaled $39.2 million during the current quarter compared to $40.9 million during last year's third quarter. Lower demand from the subsegments of the construction, chemical and industrial maintenance markets served by this segment affected performance. Year-to-date sales increased 1.0 percent to $123.5 million compared to $122.3 million in 1994. Current quarter sales by the Corporate Companies segment were flat compared to 1994, both equaled $17.9 million. During the first nine months sales were up 4.0 percent to $53.6 million compared to $51.5 million during 1994's corresponding period. The Company's consolidated gross margin for the third quarter of 1995 was 32.2 percent compared to 32.6 percent for the third quarter of 1994, reflecting, in part, the reduced sales volumes in segments where fixed costs are a greater percentage of total cost. For the first nine months of 1995 and 1994, the gross margins were 32.6 percent and 32.3 percent, respectively. Maintaining high gross margins remains an important operating strategy of the Company. The Company's consolidated operating profit for the current third quarter was $23.0 million compared to $22.9 million in 1994. The operating margin achieved during the current quarter increased to 17.5 percent from 17.1 percent in 1994's third quarter. Successful cost reduction programs continue to have a positive effect on the operating margin. During the first nine months of 1995 operating profit increased 8.8 percent to $76.9 million and represented an operating margin of 17.8 percent, compared to operating profit of $70.7 million or 17.0 percent of net sales in 1994. During the latter part of the third quarter of 1995 the Company used excess cash to retire $50 million of long-term revolving credit borrowings. The effect of this retirement was offset by higher prevailing interest rates resulting in interest expense during the current quarter equalling that 6
incurred during the 1994 third quarter. Interest expense during the first nine months of 1995 increased because of higher rates. Higher interest rates and increased average cash balances resulted in more interest income, the major component of other income, in both 1995 periods. Net income for the nine months and three months ended September 30, 1995 was $43.2 million and $13.2 million respectively, compared to $38.1 million and $12.4 million in last year's comparable periods. Primary earnings per common share increased 13.6 percent to $1.17 for the first nine months of 1995 compared to 1994's primary earnings per common share of $1.03. Fully diluted earnings per common share increased 12.4 percent to $1.09 versus $.97 last year. Primary and fully diluted earnings per common share for the third quarter of 1995 were $.36 and $.34, compared to $.33 and $.32 last year. 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. During the latter part of the third quarter of 1995 the Company used excess cash to retire $50 million of long-term revolving credit borrowings. At September 30, 1995 the current ratio was 4.3 to 1 and working capital equaled $185.9 million, including $80.9 million of cash and cash equivalents. The Company had available credit of $278.0 million under its revolving credit facility at September 30, 1995. Cash flows from operations provided $44.2 million and $47.0 million during the first nine months of 1995 and 1994, respectively. These operating 7
cash flows were net of increases in receivables of $11.0 million in 1995 and $12.3 million in 1994. These increases in receivables during the first nine months of each year were due mainly to the seasonality of the Towing Systems segment, and increased sales volumes. Historically, the cash flow provided by the seasonal increase in receivables is realized later in the year. Increases in accounts payable and accrued liabilities provided $.7 million and $5.6 million in the first nine months of 1995 and 1994, respectively. Capital expenditures during the first nine months equaled $14.8 million in 1995 and $16.7 million in 1994. The retirement of the revolving credit borrowings and an increase in the common dividend rate are reflected in the increase in cash used for financing activities during the first nine months of 1995. 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. 8
PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11 Computation of Earnings Per Common Share 12 Computation of Ratios of Earnings to Fixed Charges 27 Financial Data Schedule (b) Reports on Form 8-K: None were filed during the quarter ended September 30, 1995. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRIMAS CORPORATION Date: November 9, 1995 By: /s/William E. Meyers William E. Meyers Vice President - Controller (Chief accounting officer and authorized signatory) 9
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