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, 1996 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, 1996 Common Stock, $.01 Par Value 36,670,013
TRIMAS CORPORATION INDEX Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheets - June 30, 1996 and December 31, 1995 1 Consolidated Condensed Statements of Income for the Three Months and Six Months Ended June 30, 1996 and 1995 2 Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995 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 June 30, December 31, 1996 1995 (Unaudited) Assets Current assets: Cash and cash equivalents $108,570,000 $ 92,390,000 Receivables 92,110,000 71,200,000 Inventories 86,410,000 85,490,000 Other current assets 2,350,000 2,510,000 Total current assets 289,440,000 251,590,000 Property and equipment 176,020,000 173,700,000 Excess of cost over net assets of acquired companies 142,730,000 144,860,000 Other assets 44,960,000 46,210,000 Total assets $653,150,000 $616,360,000 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 27,800,000 $ 24,390,000 Other current liabilities 33,590,000 29,740,000 Total current liabilities 61,390,000 54,130,000 Deferred income taxes and other 37,950,000 36,360,000 Long-term debt 187,040,000 187,200,000 Total liabilities 286,380,000 277,690,000 Shareholders' equity: Common stock, $.01 par value, authorized 100 million shares, outstanding 36.6 million shares 370,000 370,000 Paid-in capital 154,920,000 155,430,000 Retained earnings 213,310,000 185,370,000 Cumulative translation adjustments (1,830,000) (2,500,000) Total shareholders' equity 366,770,000 338,670,000 Total liabilities and shareholders' equity $653,150,000 $616,360,000 The accompanying notes are an integral part of the consolidated financial statements. 1
TRIMAS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) <TABLE> <CAPTION> Six Months Ended Three Months Ended June 30, June 30, 1996 1995 1996 1995 <S> <C> <C> <C> <C> Net sales $307,900,000 $299,520,000 $160,200,000 $151,920,000 Cost of sales (206,980,000) (201,390,000) (106,740,000) (101,390,000) Selling, general and administrative expenses (45,860,000) (44,230,000) (22,870,000) (21,100,000) Operating profit 55,060,000 53,900,000 30,590,000 29,430,000 Interest expense (5,520,000) (7,440,000) (2,830,000) (3,700,000) Other, net (principally interest income) 2,840,000 3,130,000 1,450,000 1,650,000 (2,680,000) (4,310,000) (1,380,000) (2,050,000) Income before income taxes 52,380,000 49,590,000 29,210,000 27,380,000 Income taxes 20,430,000 19,590,000 11,390,000 10,820,000 Net income $ 31,950,000 $ 30,000,000 $ 17,820,000 $ 16,560,000 Earnings per common share: Primary $.86 $.81 $.48 $.45 Fully diluted $.80 $.76 $.45 $.42 Dividends declared per common share $.11 $.09 $.06 $.05 Weighted average number of common and common equivalent shares outstanding: Primary 36,968,000 36,994,000 36,983,000 37,001,000 Fully diluted 42,065,000 42,088,000 42,065,000 42,088,000 </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) Six Months Ended June 30, 1996 1995 CASH FROM (USED FOR): OPERATIONS: Net income $ 31,950,000 $ 30,000,000 Adjustments to reconcile net income to net cash from operations: Depreciation and amortization 11,510,000 10,850,000 Deferred income taxes 2,200,000 1,400,000 (Increase) decrease in receivables (20,010,000) (20,370,000) (Increase) decrease in inventories (920,000) (2,950,000) Increase (decrease) in accounts payable and other current liabilities 6,590,000 4,090,000 Other, net (140,000) (3,110,000) Net cash from (used for) operations 31,180,000 19,910,000 INVESTMENTS: Capital expenditures (11,140,000) (9,930,000) Net cash from (used for) investments (11,140,000) (9,930,000) FINANCING: Retirement of long-term debt (200,000) (270,000) Common stock dividends paid (3,660,000) (2,930,000) Net cash from (used for) financing (3,860,000) (3,200,000) CASH AND CASH EQUIVALENTS: Increase (decrease) for the period 16,180,000 6,780,000 At beginning of period 92,390,000 107,670,000 At end of period $108,570,000 $114,450,000 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, 1995. Certain amounts in the 1995 financial statements have been reclassified to conform with the current presentation. B. Inventories by component are as follows: June 30, December 31, 1996 1995 Finished goods $46,980,000 $47,490,000 Work in process 13,990,000 14,200,000 Raw material 25,440,000 23,800,000 $86,410,000 $85,490,000 C. Property and equipment reflects accumulated depreciation of $125.1 million and $116.8 million as of June 30, 1996 and December 31, 1995, respectively. 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 1996 equaled $160.2 million, an increase of 5.5 percent over the comparable 1995 period and the highest quarterly total in Company history. Record sales during the first half of 1996 equaled $307.9 million, compared to $299.5 million in 1995. The Company's Towing Systems, Specialty Container Products and Corporate Companies segments all recorded increased sales during the six months and quarter ended June 30, 1996. Second quarter sales by the Towing Systems segment increased to $56.4 million, compared to $55.1 million in the second quarter of 1995. Increased sales to both independent hitch installers and to the specialty automotive retail market were partially offset by lower sales to the marine aftermarket. Ongoing new product introductions also aided second quarter sales performance. Unfavorable weather conditions which began during the first quarter continued into the second quarter and negatively affected segment sales performance. First half segment sales equaled $105.6 million, which compares to $103.3 million in 1995. Second quarter 1996 sales for the Specialty Fasteners segment were $37.1 million, which equaled sales recorded in the comparable period of 1995. Sales during the first half of 1996 of $73.1 million decreased $3.0 million compared to 1995 because first quarter sales were below last year's level. First half sales were negatively impacted by reduced sales to the heavy-duty truck and appliance markets, and decreased demand for automotive related metallurgical services. Increasing build rates at aerospace manufacturers has lead to an increase in segment sales of aerospace fasteners. 5
Sales for the Specialty Container Products segment for the second quarter and first six months ended June 30, 1996 increased 12.9 percent and 6.5 percent respectively. Second quarter sales equaled $47.0 million bringing the six month total to $89.8 million. Export sales of specialty compressed gas cylinders to the medical industry in the Far East contributed to the second quarter increase. Increasing demand for specialty gasket products used by industrial processing industries also added to this segment's sales performance. The Corporate Companies segment sales increased 10.3 percent for the first six months of 1996 to $39.4 million. Sales of specialty insulation products increased as the commercial construction market continued to improve. The Company's consolidated gross margin for the first six months of both 1996 and 1995 equaled 32.8 percent. During the second quarters of 1996 and 1995 gross margin equaled 33.4 percent and 33.3 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 Company's consolidated operating profit for the first six months of 1996 increased to $55.1 million and represented an operating margin of 17.9 percent compared to 1995's first six months operating profit of $53.9 million or 18.0 percent of net sales. Operating profit for the second quarter 1996 of $30.6 million represented an operating margin of 19.1 percent. Interest expense decreased in the six and three month periods ended June 30, 1996 primarily because of the $51.5 million reduction of long-term debt in the third quarter of 1995, and because of lower prevailing interest rates. Consequently, lower levels of cash and cash equivalents and lower interest rates during 1996 resulted in lower interest income during the current periods. 6
Net income for the six months and three months ended June 30, 1996 was $32.0 million and $17.8 million respectively, compared to $30.0 million and $16.6 million in last year's comparable periods. Primary earnings per common share increased 6.2 percent to $.86 for the first six months of 1996 compared to 1995's primary earnings per common share of $.81, both based on 37.0 million shares outstanding. Fully diluted earnings per common share increased 5.3 percent to $.80 versus $.76 last year, both based on 42.1 million shares outstanding. Primary and fully diluted earnings per common share for the second quarter of 1996 were $.48 and $.45, compared to $.45 and $.42 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. At June 30, 1996 the current ratio was 4.7 to 1 and working capital equaled $228.1 million, including $108.6 million of cash and cash equivalents. The Company had available credit of $278.0 million under its revolving credit facility at June 30, 1996. Cash flows from operations provided $31.2 million and $19.9 million during the first six months of 1996 and 1995 respectively. These operating cash flows were net of increases in accounts receivable of $20.0 million in 1996 and $20.4 million in 1995 due mainly to the seasonality of the Towing Systems segment, as well as the increased sales levels. 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 and $4.1 million in the first 7
six months of 1996 and 1995 respectively. Capital expenditures during the first six months equaled $11.1 million in 1996 and $9.9 million in 1995. Common stock dividends totaled $3.7 million in 1996 versus $2.9 million in 1995. In late June, the Company acquired Queensland Towbar Pty. Ltd., Australia's second largest manufacturer of vehicle hitches and towing products. During July, the Company acquired The Englass Group Limited, a United Kingdom-based supplier of specialty dispensing and packaging products. Annualized combined sales of Queensland Towbar and Englass are in excess of $20.0 million. 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 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders was held on May 15, 1996 at which the two nominees for the Company's Board of Directors, identified in the Company's proxy statement dated April 11, 1996, were re-elected and the selection of Coopers & Lybrand L.L.P. to audit the Company's financial statements for the year 1996 was ratified. Following is a tabulation of shares voted: Election of Directors Richard A. Manoogian Herbert S. Amster For 34,202,762 34,204,655 Withheld 47,037 45,144 Ratification of selection of Coopers & Lybrand L.L.P. For 34,215,645 Against 9,998 Abstentions 24,156 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 4 Credit Agreement dated July 23, 1996 among TriMas Corporation Limited, TriMas Corporation, Certain Banks and NationsBank, N.A. (London Branch) as Agent 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, 1996. 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 14, 1996 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 4 Credit Agreement dated July 23, 1996 among TriMas Corporation Limited, TriMas Corporation, Certain Banks and NationsBank, N.A. (London Branch) as Agent 11 Computation of Earnings Per Common Share 12 Computation of Ratios of Earnings to Fixed Charges 27 Financial Data Schedule