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, 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 October 31, 1996 Common Stock, $.01 Par Value 36,652,804
TRIMAS CORPORATION INDEX Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheets - September 30, 1996 and December 31, 1995 1 Consolidated Condensed Statements of Income for the Three Months and Nine Months Ended September 30, 1996 and 1995 2 Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 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 September 30, December 31, 1996 1995 (Unaudited) Assets Current assets: Cash and cash equivalents $109,330,000 $ 92,390,000 Receivables 81,460,000 71,200,000 Inventories 87,150,000 85,490,000 Other current assets 2,700,000 2,510,000 Total current assets 280,640,000 251,590,000 Property and equipment 179,680,000 173,700,000 Excess of cost over net assets of acquired companies 166,160,000 144,860,000 Other assets 45,820,000 46,210,000 Total assets $672,300,000 $616,360,000 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 30,380,000 $ 24,390,000 Other current liabilities 40,260,000 29,740,000 Total current liabilities 70,640,000 54,130,000 Deferred income taxes and other 39,330,000 36,360,000 Long-term debt 183,550,000 187,200,000 Total liabilities 293,520,000 277,690,000 Shareholders' equity: Common stock, $.01 par value, authorized 100 million shares, outstanding 36.6 million shares 370,000 370,000 Paid-in capital 154,930,000 155,430,000 Retained earnings 225,530,000 185,370,000 Cumulative translation adjustments (2,050,000) (2,500,000) Total shareholders' equity 378,780,000 338,670,000 Total liabilities and shareholders' equity $672,300,000 $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) Nine Months Ended Three Months Ended September 30, September 30, 1996 1995 1996 1995 Net sales $457,520,000 $431,400,000 $149,620,000 $131,880,000 Cost of sales (308,810,000) (290,750,000) (101,830,000) (89,360,000) Selling, general and administrative expenses (69,030,000) (63,720,000) (23,170,000) (19,490,000) Operating profit 79,680,000 76,930,000 24,620,000 23,030,000 Interest expense (8,150,000) (10,800,000) (2,630,000) (3,360,000) Other, net (principally interest income) 4,520,000 5,070,000 1,680,000 1,940,000 (3,630,000) (5,730,000) (950,000) (1,420,000) Income before income taxes 76,050,000 71,200,000 23,670,000 21,610,000 Income taxes 29,660,000 27,980,000 9,230,000 8,390,000 Net income $ 46,390,000 $ 43,220,000 $ 14,440,000 $ 13,220,000 Earnings per common share: Primary $1.25 $1.17 $.39 $.36 Fully diluted $1.17 $1.09 $.37 $.34 Dividends declared per common share $.17 $.14 $.06 $.05 Weighted average number of common and common equivalent shares outstanding: Primary 36,971,000 36,995,000 36,977,000 36,998,000 Fully diluted 42,072,000 42,078,000 42,072,000 42,080,000 The accompanying notes are an integral part of the consolidated condensed financial statements. 2
TRIMAS CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, 1996 1995 CASH FROM (USED FOR): OPERATIONS: Net income $46,390,000 $43,220,000 Adjustments to reconcile net income to net cash from operations: Depreciation and amortization 17,390,000 16,280,000 Deferred income taxes 3,100,000 2,100,000 (Increase) decrease in receivables (5,580,000) (10,970,000) (Increase) decrease in inventories (230,000) (2,880,000) Increase (decrease) in accounts payable and other current liabilities 4,950,000 700,000 Other, net (1,290,000) (4,230,000) Net cash from (used for) operations 64,730,000 44,220,000 INVESTMENTS: Capital expenditures (16,740,000) (14,780,000) Acquisitions, net of cash acquired (21,470,000) Net cash from (used for) investments (38,210,000) (14,780,000) FINANCING: Long-term debt: Issuance 18,480,000 Retirement (22,200,000) (51,480,000) Common stock dividends paid (5,860,000) (4,760,000) Net cash from (used for) financing (9,580,000) (56,240,000) CASH AND CASH EQUIVALENTS: Increase (decrease) for the period 16,940,000 (26,800,000) At beginning of period 92,390,000 107,670,000 At end of period $109,330,000 $80,870,000 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: September 30, December 31, 1996 1995 Finished goods $47,050,000 $47,490,000 Work in process 16,050,000 14,200,000 Raw material 24,050,000 23,800,000 $87,150,000 $85,490,000 C. Property and equipment reflects accumulated depreciation of $129.3 million and $116.8 million as of September 30, 1996 and December 31, 1995, respectively. D. During the third quarter of 1996 the Company acquired two businesses for the aggregate amount of $21,470,000 in cash (net of cash acquired), the assumption of certain liabilities and the issuance of a short-term note. The operating results of these two businesses did not have a material effect on the Company's consolidated results for the third quarter or nine months ended September 30, 1996. 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 1996 were a record $149.6 million, an increase of 13.5 percent over the comparable period in 1995. All four of the Company's reporting segments recorded increased sales during the 1996 third quarter compared with last year. Record sales for the first nine months of 1996 were $457.5 million, compared to $431.4 million in 1995. Operating results of Queensland Towbars Pty. Ltd. and The Englass Group Limited, acquired during the third quarter of 1996, did not have a material effect on consolidated results. Sales by the Towing Systems segment increased 15.7 percent during the current quarter to $48.0 million compared to $41.5 million during last year's third quarter. The continuing strength of the specialty automotive retail market and increased demand from independent hitch installers contributed to this segment's improved sales. Ongoing new product introductions and delayed seasonal demand created in previous quarters by unfavorable weather conditions also aided third quarter sales performance. Segment sales for the current year-to-date period were $153.6 million compared to $144.8 million in 1995. Third quarter 1996 sales by the Specialty Fasteners segment increased 5.9 percent to $35.3 million compared to $33.3 million during the corresponding period of a year ago. Segment sales during the first nine months of 1996 decreased modestly to $108.4 million compared to $109.5 million one year ago. Increasing aircraft build rates at aerospace manufacturers continue to translate into increased segment sales of aerospace fasteners. Third quarter sales performance was also impacted by modest recoveries in demand for fasteners from heavy-duty truck manufacturers and automotive related metallurgical services, two markets whose softness had negatively affected both the first and second quarters of 1996. 5
Sales by the Specialty Container Products segment equaled $46.5 million during the current quarter compared to $39.2 million during last year's third quarter, an increase of 18.6 percent. Year-to-date sales increased 10.3 percent to $136.3 million compared to $123.5 million in 1995. Third quarter and year-to-date segment sales were aided by increased export sales of compressed gas cylinders to both South America and the Far East. Nine month and third quarter sales by the Corporate Companies segment increased 10.5 percent and 10.9 percent, respectively, over 1995. During the first nine months of 1996 sales were $59.3 million compared to $53.6 million during 1995's corresponding period. Sales during the third quarters of 1996 and 1995 were $19.8 million and $17.9 million. Sales of specialty insulation products increased during both the third quarter and first nine months of 1996 as the commercial construction market continued to improve. The Company's consolidated operating profit for the first nine months of 1996 increased to $79.7 million, or 17.4 percent of net sales, compared to $76.9 million in 1995, or a 17.8 percent operating margin. The current year operating margin has been affected by sales promotions offered by the Towing Systems companies and mix of products sold. Interest expense decreased in the nine month period ended September 30, 1996 primarily because of the $51.5 million reduction of long-term debt in the third quarter of 1995. Interest expense for the quarter and nine months in 1996 was also affected by lower prevailing interest rates. Also, lower levels of cash and cash equivalents and lower interest rates during 1996 reduced interest income during the current periods. Net income for the nine and three months ended September 30, 1996 was $46.4 million and $14.4 million, compared to $43.2 million and $13.2 million in last year's comparable periods. Primary earnings per common share increased 6.8 percent to $1.25 for the first nine months of 1996 compared to 6
1995's primary earnings per common share of $1.17, both based on 37.0 million shares outstanding. Fully diluted earnings per common share increased 7.3 percent to $1.17 versus $1.09 last year, both based on 42.1 million shares outstanding. Primary and fully diluted earnings per common share for the third quarter of 1996 were $.39 and $.37, compared to $.36 and $.34 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 September 30, 1996 the current ratio was 4.0 to 1 and working capital equaled $210.0 million, including $109.3 million of cash and cash equivalents. The Company had available credit of approximately $314.0 million under its domestic and international revolving credit facilities at September 30, 1996. Cash flows from operations provided $64.7 million and $44.2 million during the first nine months of 1996 and 1995. These operating cash flows were net of increases in accounts receivable of $5.6 million in 1996 and $11.0 million in 1995. These increases in receivables during the first nine months of each year were due mainly to the seasonality of the Towing Systems segment, and to the 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 $4.9 million and $.7 million in the first nine months of 1996 and 1995. Capital expenditures during the first nine months equaled $16.7 million in 1996 and $14.8 million in 1995. During the third quarter of 1996 the Company used an aggregate of $21.5 million, net of cash acquired, to purchase The Englass Group Limited in 7
the United Kingdom and Queensland Towbars Pty. Ltd. in Australia. In connection with the acquisition of Englass, the Company established a 20.0 million British pounds revolving credit facility in the United Kingdom to fund a portion of the purchase price and provide funds for ongoing working capital and capital expenditure needs and other growth initiatives. During the third quarters of 1996 and 1995 the Company used excess cash to retire $22.2 million and $51.5 million of domestic long-term debt. The increase in the common dividend rate is reflected in cash used for financing activities during the first nine months of 1996. In late October, the Company acquired Heinrich Stolz GmbH & Co. KG, a leading European manufacturer of a wide variety of specialty container closures for industrial packaging markets, headquartered in Neunkirchen, Germany. 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: 4 Credit Agreement dated October 30, 1996 between Stolz Verwaltungsgesellschaft mit beschrankter Haftung, a German subsidiary of TriMas Corporation, and Bank of America National Trust and Savings Association (the "Bank"); and related Guaranty from TriMas Corporation in favor of the Bank. 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, 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: November 12, 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 October 30, 1996 between Stolz Verwaltungsgesellschaft mit beschrankter Haftung, a German subsidiary of TriMas Corporation, and Bank of America National Trust and Savings Association (the "Bank"); and related Guaranty from TriMas Corporation in favor of the Bank. 11 Computation of Earnings Per Common Share 12 Computation of Ratios of Earnings to Fixed Charges 27 Financial Data Schedule