1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, 1995 COMMISSION FILE NUMBER 1-10716 TRIMAS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) <TABLE> <S> <C> DELAWARE 38-2687639 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 315 EAST EISENHOWER PARKWAY 48108 ANN ARBOR, MICHIGAN (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) </TABLE> REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 313-747-7025 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: <TABLE> <CAPTION> NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - -------------------------------------------------------------------------------------------- <S> <C> COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE, INC. 5% CONVERTIBLE SUBORDINATED DEBENTURES DUE NEW YORK STOCK EXCHANGE, INC. 2003 </TABLE> 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 1, 1996 (BASED ON THE CLOSING SALE PRICE OF $22 3/8 OF THE REGISTRANT'S COMMON STOCK AS REPORTED ON THE NEW YORK STOCK EXCHANGE COMPOSITE TAPE ON SUCH DATE) WAS APPROXIMATELY $353,497,000. NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK AT MARCH 1, 1996: 36,651,021 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FILED FOR ITS 1996 ANNUAL MEETING OF STOCKHOLDERS ARE INCORPORATED BY REFERENCE INTO PART III OF THIS REPORT. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
2 TABLE OF CONTENTS <TABLE> <CAPTION> ITEM PAGE - ----- ----- <C> <S> <C> PART I 1. Business........................................................................ 2 2. Properties...................................................................... 8 3. Legal Proceedings............................................................... 8 4. Submission of Matters to a Vote of Security Holders............................. 8 Supplementary Item. Executive Officers of Registrant............................ 8 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters........... 9 6. Selected Financial Data......................................................... 10 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................................... 11 8. Financial Statements and Supplementary Data..................................... 15 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure...................................................................... 31 PART III 10. Directors and Executive Officers of the Registrant.............................. 32 11. Executive Compensation.......................................................... 32 12. Security Ownership of Certain Beneficial Owners and Management.................. 32 13. Certain Relationships and Related Transactions.................................. 32 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................ 33 Signatures...................................................................... 35 FINANCIAL STATEMENT SCHEDULES TriMas Corporation and Subsidiaries Financial Statement Schedule................ F-1 </TABLE> 1
3 PART I ITEM 1. BUSINESS. TriMas Corporation is a diversified proprietary products company with leadership positions in commercial, industrial and consumer niche markets. TriMas Corporation's operations are conducted through sixteen operating businesses principally manufacturing industrial container closures, pressurized gas cylinders, specialty industrial gaskets, towing systems products, specialty fasteners, specialty products for fiberglass insulation, specialty tapes and precision cutting tools. TriMas Corporation's businesses are managed as decentralized autonomous profit centers which emphasize entrepreneurial management, high value-added products and services and strong cash flows. TriMas Corporation was incorporated under the laws of the State of Delaware in 1986 as Campbell Industries, Inc., and, in October, 1988, adopted the name TriMas Corporation in connection with the transactions described below. Immediately prior to such transactions, the Company was principally a manufacturer of industrial fasteners as a result of an acquisition in December, 1986. Except as the context otherwise indicates, the terms "TriMas" and the "Company" refer to TriMas Corporation and its consolidated subsidiaries. Effective October 1, 1988, the Company acquired various businesses and cash from MascoTech, Inc. ("MascoTech") in exchange for securities of the Company. In a related transaction, Masco Corporation ("Masco"), which prior to the above described acquisition had an equity ownership interest in the Company, acquired additional shares of Company Common Stock, $.01 par value per share (the "Company Common Stock"), in exchange for cash. The Company became a public corporation in February, 1989 when approximately 28 percent of the then outstanding Company Common Stock was distributed by Masco to its stockholders as a special dividend. MascoTech currently holds approximately 41 percent of Company Common Stock and Masco currently holds approximately 5 percent of Company Common Stock. In January, 1990, the Company acquired three businesses from Masco which are engaged in the manufacture of trailer hitches, tow bars and accessories, winches, jacks and couplers as well as flame-retardant facings and jacketings and pressure-sensitive tapes used in conjunction with insulation products. In June, 1990, the Company acquired the operating assets and business of Draw-Tite, Inc. Draw-Tite is engaged in the manufacture and sale of trailer hitches and other related towing systems products. In October, 1991, the Company acquired all of the capital stock of Monogram Aerospace Fasteners, Inc., a manufacturer of highly engineered specialty fasteners for the domestic and international aerospace industry. In November, 1993, the Company acquired from MascoTech all of the capital stock of Lamons Metal Gasket Co., a manufacturer and distributor of specialty industrial gaskets. INDUSTRY SEGMENTS While each of the Company's businesses operates as an autonomous entity, they are grouped into four distinct categories for financial reporting purposes: Specialty Fasteners, Towing Systems, Specialty Container 2
4 Products and Corporate Companies. The following table details the entities which compose each of the Company's operating segments. <TABLE> <CAPTION> COMPANY DATE ACQUIRED PRINCIPAL PRODUCTS - -------------------------------------- -------------- ---------------------------------------- <S> <C> <C> Specialty Fasteners: Lake Erie Screw Corporation......... December, 1986 Fasteners Commonwealth Industries............. October, 1988 Heat treating Eskay Screw Corporation............. October, 1988 Fasteners Monogram Aerospace Fasteners, Inc.............................. October, 1991 Fasteners Towing Systems: Fulton Performance Products, Inc.... January, 1990 Jacks, winches and couplers Reese Products, Inc................. January, 1990 Vehicle hitches and related accessories Draw-Tite, Inc...................... June, 1990 Vehicle hitches and related accessories Specialty Container Products: Norris Cylinder Company............. October, 1988 Compressed gas cylinders Rieke Corporation................... October, 1988 Industrial container closures and related products Lamons Metal Gasket Co.............. November, 1993 Specialty industrial gaskets Corporate Companies: Kee Services, Inc................... October, 1988 Vacuum heat treating Keo Cutters, Inc.................... October, 1988 Precision cutting tools Punchcraft Company.................. October, 1988 Punches and dies Reska Spline Products, Inc.......... October, 1988 Master gears and gages Richards Micro-Tool, Inc............ October, 1988 Precision cutting tools Compac Corporation.................. January, 1990 Insulation facing and specialty tapes </TABLE> Although all of the businesses have been acquired since the Company was formed in 1986, each business had a long operating history prior to its acquisition by the Company. The following table sets forth net sales and operating profit information for the past three years for each of the Company's industry segments. <TABLE> <CAPTION> (IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31, ------------------------------------ 1995 1994 1993 -------- -------- -------- <S> <C> <C> <C> NET SALES: Specialty Fasteners.................................... $141,050 $138,720 $122,740 Towing Systems......................................... 175,000 163,130 139,790 Specialty Container Products........................... 165,670 163,880 118,970 Corporate Companies.................................... 71,770 69,750 61,730 -------- -------- -------- Total net sales..................................... $553,490 $535,480 $443,230 ======== ======== ======== OPERATING PROFIT (BEFORE GENERAL CORPORATE EXPENSE): Specialty Fasteners.................................... $ 27,290 $ 24,280 $ 19,250 Towing Systems......................................... 31,080 25,660 22,150 Specialty Container Products........................... 39,040 39,060 28,820 Corporate Companies.................................... 8,420 9,850 7,110 -------- -------- -------- Total operating profit.............................. $105,830 $ 98,850 $ 77,330 ======== ======== ======== </TABLE> For further business segment information see Note 11 of the Notes to Consolidated Financial Statements of the Company. 3
5 SPECIALTY FASTENERS Lake Erie Screw Corporation, Eskay Screw Corporation, Monogram Aerospace Fasteners, Inc. and Commonwealth Industries form the Company's Specialty Fasteners segment. Lake Erie and Eskay are manufacturers of both standard and custom-designed ferrous, nonferrous and special alloy fasteners sold to commercial and industrial markets. Monogram Fasteners manufactures permanent blind bolt and temporary fasteners used in aircraft construction and assembly. Commonwealth provides specialized metallurgical services for fastener products used in a variety of markets. Lake Erie specializes in manufacturing both standard and custom-designed large diameter fasteners, generally in sizes 1/4" to 1 1/4". Lake Erie's design and engineering capabilities enable the company to formulate fastener product programs to meet demanding metallurgical and performance specifications for a wide variety of customers. With this emphasis on design and engineering, coupled with its ability to offer just-in-time delivery, the Company believes that Lake Erie has established a premier reputation in the industry for product quality and service. Lake Erie products are sold to distributors and manufacturers in the agricultural, transportation, construction, fabricated metal products, and commercial and industrial maintenance markets. Lake Erie is a leading manufacturer of private brand products for the equipment maintenance aftermarket, supplying national and regional private brand distributor organizations. Eskay manufactures both ferrous and nonferrous standard and specialty-designed small diameter fasteners, generally in sizes 3/8" and smaller. Eskay's strategy is to focus on niche markets which require high value-added products for critical applications. Eskay's ES-Form(R) and ES-Form(R)II, Plask(R)I and Plask(R)II, Plask H/L(R), and Tri-Plask(R) self-threading specialty fasteners, for example, are designed for use in applications where the absence of drilling chip contamination is critical. A typical application would be electronic or electrical assemblies installed within metallic or plastic housings and requiring no chip contamination to qualify for UL or other certification. Eskay products are marketed directly to distributors and manufacturers in the electrical and electronic equipment, appliance, fabricated metal products, furniture, transportation and agricultural markets. Monogram Fasteners manufactures highly engineered specialty fasteners for the domestic and international aerospace industry. Monogram Fasteners is the leader in the development of blind bolt fastener technology for the aerospace industry. Its Visu-Lok(R), Visu-Lok(R)II and Radial-Lok(TM) blind bolts, which allow sections of aircraft to be joined together when access is provided to only one side of the airframe, are lighter in weight and provide certain cost efficiencies over conventional two-sided fastening devices. Monogram Fasteners' Composi-Lok(R) and Composi-Lok(R)II blind bolts are designed to solve unique fastening problems associated with the assembly of composite aircraft structures, and are therefore particularly well suited to take advantage of the increasing use of composite materials in aircraft construction. Commonwealth Industries provides commercial heat treating and specialized metallurgical and finishing services for fastener products used in the automotive, industrial, agricultural and construction markets. The Company's fasteners are sold through its own sales personnel and independent sales representatives. Although the overall market for fasteners and metallurgical services is highly competitive, these businesses primarily provide products and services for specialized market niches, and principally compete as quality and service oriented suppliers in their respective market segments. TOWING SYSTEMS The Towing Systems segment comprises Draw-Tite, Inc., Reese Products, Inc. and Fulton Performance Products, Inc. These three companies are leading producers of vehicle hitches, jacks, winches, couplers and related accessories. Draw-Tite, Reese and Fulton give TriMas the leading position in the design and manufacture of towing systems products for domestic and imported passenger cars, light trucks and recreational vehicles. The Company believes that product lines offered by its Towing Systems companies are the most extensive in the industry, permitting TriMas to provide custom-designed products for virtually every towing vehicle and need. 4
6 Each company conducts extensive testing of its products to assure reliable and safe performance. Engineering, product design and fatigue testing are performed utilizing computer aided design and finite element analysis. In addition, on-road performance research is conducted on hitches with instrumentation equipped trailers and towing vehicles. Extensive product testing programs have improved product safety and reliability and reduced manufacturing costs. The Company believes that Draw-Tite is the largest North American manufacturer and distributor of premium towing systems products, including hitches and towing accessories, such as hitch balls, sway controls, wiring harnesses and brake controls. Draw-Tite has two manufacturing facilities and seven regional distribution centers in the United States, as well as a sales and distribution center in Canada. Draw-Tite sales are principally to independent installers through its own sales organization. Rapid delivery and customer service are emphasized, with most Draw-Tite orders shipped within twenty-four hours of receipt. Reese manufactures premium towing systems products, including weight-distributing hitches and towing accessories, which are sold to independent installers, distributors, recreational vehicle manufacturers and automotive aftermarket retailers. Sales in the United States are made by both Reese sales personnel and independent sales representatives and are distributed from five regional distribution centers. Reese also manufactures and distributes hitches and towing accessories in Canada and Australia, and the Company believes that Reese is the largest manufacturer of such products in Australia. Fulton is a major manufacturer of winches, jacks, couplers and accessories for marine, recreational vehicle, agricultural and industrial markets. These products are sold by Fulton marketing personnel to distributors, manufacturers and aftermarket retailers. Sales by companies which form the Towing Systems segment are stronger during the spring and summer of the year impacting the Company's net sales and operating profits primarily in the second quarter. SPECIALTY CONTAINER PRODUCTS The Company's Specialty Container Products segment consists of Rieke Corporation, Norris Cylinder Company and Lamons Metal Gasket Co., leading suppliers of products for the containment and dispensing of fluids and gases for the chemical, agricultural, refining, food, petrochemical, health care and other industries. The Company believes that Rieke is the largest manufacturer in North America of steel and plastic industrial container closures and dispensing products. Rieke's manufacturing and distribution facilities in the United States, Canada and Mexico, as well as distribution capabilities in Europe and the Far East, allow Rieke to service most major world markets for its products. Industrial container closures are manufactured using metal forming and plastic injection molding technologies, supplemented by automated material handling systems. Rieke believes its investment in new product development and manufacturing programs has enabled it to develop and produce precise quality, high performance products while maintaining cost-efficient production capabilities. For more than seventy-five years, Rieke's new product development programs have provided innovative and attractive proprietary product opportunities, which have been an integral part of its success. Among these products are the ViseGrip(R) steel flange and plug closure, the Poly-ViseGrip(R) plastic closure, the all plastic, environmentally safe, self-venting FlexSpout(R) flexible pouring spout and the ViseGrip drum closure. Rieke sells its products through its own sales personnel primarily to industrial container manufacturers who also utilize Rieke's specialty tooling to install the closures. A significant portion of Rieke's products are specified by end-users of industrial containers. Rieke believes it has been successful in having end-users specify its products because of Rieke's history of new product development, its product quality and performance characteristics and its customer service standards. Norris is one of the world's leading suppliers of a complete line of large and intermediate size, high-pressure and low-pressure cylinders for the transportation, storage and dispensing of compressed gases. Norris is one of two United States manufacturers of large high-pressure seamless compressed gas cylinders, used 5
7 principally for shipping, storing and dispensing oxygen, nitrogen, argon, helium and other gases for industrial and health care markets. In addition, Norris offers a complete line of low-pressure welded cylinders used to contain and dispense acetylene gas for the welding and cutting industries. The Company believes that Norris is the largest United States manufacturer of large and intermediate size high-pressure cylinders and is a major source of acetylene cylinders. The Company believes that Norris is the leading product innovator in its industry. Among Norris' product developments are the Ultrapure(R) seamless stainless steel cylinder for the semiconductor and pharmaceutical industries, the Pacesetter cylinder, which was the first asbestos-free acetylene cylinder available to satisfy increasing concerns about asbestos in the workplace environment, and the Ultralight high-pressure cylinder designed to hold 30 percent more gas than standard cylinders of similar size, weight and diameter. In addition, Norris has directed a portion of its research and new product development efforts to specially-designed cylinders for natural gas powered vehicles and related refueling facilities. Norris markets cylinders primarily to major industrial gas producers and distributors, welding equipment distributors and equipment manufacturers. Cylinder products are sold by Norris personnel organized in five geographic sales regions. Sales for export markets and to national accounts are made by personnel at Norris' corporate office. Lamons manufactures and distributes metallic and nonmetallic industrial gaskets for refining, petrochemical and other industrial applications principally in the United States and, through a wholly owned subsidiary, in Canada. Gaskets are supplied both for original installations and replacement and maintenance. The Company believes that Lamons is the largest gasket supplier to the United States petroleum refining and petrochemical industries. Sales are made direct from the factory to major customers, through seven company-owned distribution facilities in major regional markets, or through a large network of independent distributors. Lamons has maintained its market leadership position through superior customer service and delivery and high product quality. CORPORATE COMPANIES The Company has six businesses that compose its Corporate Companies segment. The largest of these companies is Compac Corporation, believed by the Company to be the leading manufacturer of flame-retardant facings and jacketings used in conjunction with fiberglass insulation as temperature and vapor barriers. These products are principally used for commercial and industrial construction applications, and are sold to most major manufacturers of fiberglass insulation. Compac's product line also includes pressure-sensitive specialty tape products which are marketed to insulation manufacturers as well as to numerous other customers. Pressure-sensitive products for the insulation industry are utilized for sealing pipe jacketing, ducts and fiberglass wrappings to increase the efficiency and cost effectiveness of heating and cooling installations. Combined with Compac's facing and jacketing products, pressure-sensitive specialty tapes enable Compac to offer customers the only complete systems approach to insulation installation. With important product positions in several specialty tape markets, Compac is pursuing further opportunities to expand its presence in the industry. Utilizing existing pressure-sensitive adhesive technologies, Compac continues to develop new product programs to expand its pressure-sensitive product positions into subsegments of existing markets, including the medical supply industry. The other businesses that constitute the Corporate Companies segment produce a variety of specialty precision tools such as center drills, cutters, end mills, reamers, master gears, gages and punches and provide specialty metal finishing services. Principal markets served by these companies include the automotive, aerospace, appliance, medical and electronics industries, with such diverse products as miniature precision cutting tools for orthopedic surgery and ophthalmic surgical products to high volume industrial cutting tools and master gages. 6
8 GENERAL INFORMATION CONCERNING INDUSTRY SEGMENTS Except for the Company's businesses which form the Towing Systems segment, no material portion of the Company's business is seasonal. No material portion of the Company's business has special working capital requirements. The Company does not consider backlog orders to be a material factor in its industry segments, and no material portion of its business 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. In general, raw materials required by the Company are obtainable from various sources and in the quantities desired. Except for Rieke's facilities in Canada and Mexico, Lamons' Canadian facilities and the Canadian and Australian operations of Reese, all of the Company's manufacturing operations are in the United States. Approximately six percent of the Company's net sales for 1995, approximately five percent of the Company's net sales for 1994 and approximately seven percent of the Company's net sales for 1993, were attributable to export sales from the United States. Further financial information concerning the Company's operations in its industry segments as of and for each of the three years in the period ended December 31, 1995 is set forth in the notes to the Company's consolidated financial statements. 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 that the loss of any such rights would have a material effect on the Company's industry segments or its present business as a whole. COMPETITION The major markets for the Company's products in its industry segments are highly competitive. Competition is based primarily on performance, quality, service and price, with the relative importance of such factors varying among products. 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. EMPLOYEES The Company currently employs approximately 3,500 people. Satisfactory relations have generally prevailed between the Company and its employees. 7
9 ITEM 2. PROPERTIES. The following table identifies the Company's manufacturing facilities by location and the industry segments utilizing such facilities: <TABLE> <S> <C> California.................................. Commerce (a)(a) Illinois.................................... Wood Dale (a) Indiana..................................... Auburn (c), Elkhart (b), Frankfort (a), Mongo (b) Louisiana................................... Baton Rouge (c) Massachusetts............................... Plymouth (d) Michigan.................................... Canton (b), Detroit (a), Warren (d)(d)(d)(d) New Jersey.................................. Edison (d), Netcong (d) Ohio........................................ Lakewood (a)(a)(a) Texas....................................... Houston (c)(c)(c), Longview (c) Wisconsin................................... Mosinee (b) Australia................................... Hampton Park, Victoria (b) Canada...................................... Brampton, Ontario (c), Fort Erie, Ontario (c), Oakville, Ontario (b), Sarnia, Ontario (c) Mexico...................................... Mexico City (c) </TABLE> 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. The Company's largest manufacturing facility, consisting of approximately 430,000 square feet, is located in Lakewood, Ohio. This facility is owned by the Company and is used to manufacture specialty fasteners. The Company's other manufacturing facilities range in size from approximately 10,000 to 250,000 square feet. Most of these other facilities are owned by the Company and are not subject to significant encumbrances. The Company's executive offices are leased facilities in Ann Arbor, Michigan. The Company's buildings, machinery and equipment have been generally well maintained, are in good operating condition, and are adequate for the Company's current production requirements. ITEM 3. LEGAL PROCEEDINGS. The Company is subject to claims and litigation in the ordinary course of its business, but does not believe any such claim or litigation is material. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. SUPPLEMENTARY ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT (PURSUANT TO INSTRUCTION 3 TO ITEM 401(B) OF REGULATION S-K). <TABLE> <CAPTION> NAME POSITION AGE OFFICER SINCE - ---------------------------------------------------- ------------------------- --- ------------- <S> <C> <C> <C> Richard A. Manoogian................................ Chairman of the Board 59 1989 Brian P. Campbell................................... President 55 1986 William E. Meyers................................... Vice President-Controller 63 1987 Peter C. DeChants................................... Vice President-Treasurer 43 1990 </TABLE> Each of the 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 the Chairman of the Board and the Chief Executive Officer of each of Masco Corporation and MascoTech, Inc., affiliates of the Company. Masco Corporation is a manufacturer of home improvement and building products. MascoTech, Inc. manufactures products principally for the original equipment and aftermarket transportation markets. Each of the Company's executive officers has been employed in the capacity shown for more than five years. 8
10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The New York Stock Exchange ("NYSE") is the principal market on which the Company's Common Stock is traded (under the symbol TMS). The following table indicates the high and low sale prices for Company Common Stock as reported on the NYSE Composite Tape and Common Stock dividends declared for the periods indicated. <TABLE> <CAPTION> MARKET PRICE ------------ DIVIDENDS HIGH LOW DECLARED ---- ---- --------- <S> <C> <C> <C> 1994 First Quarter...................................................... $28 1/2 $22 3/4 $ .03 Second Quarter..................................................... 27 1/8 21 5/8 .04 Third Quarter...................................................... 24 7/8 21 1/2 .04 Fourth Quarter..................................................... 23 5/8 18 3/8 .04 ---- Total........................................................... $ .15 ==== 1995 First Quarter...................................................... $22 3/4 $19 5/8 $ .04 Second Quarter..................................................... 24 1/4 20 1/4 .05 Third Quarter...................................................... 25 1/2 20 .05 Fourth Quarter..................................................... 22 1/4 18 3/8 .05 ---- Total........................................................... $ .19 ==== </TABLE> On March 1, 1996 there were approximately 2,770 holders of record of Company Common Stock. The Company expects that its practice of paying quarterly dividends on its Common Stock will continue, although future dividends will continue to depend upon the Company's earnings, capital requirements, financial condition and other factors. 9
11 ITEM 6. SELECTED FINANCIAL DATA. The following table sets forth summary consolidated financial information for the years and dates indicated: <TABLE> <CAPTION> (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1995 1994 1993(A) 1992(B) 1991(C) -------- -------- -------- -------- -------- <S> <C> <C> <C> <C> <C> Net sales................................. $553,490 $535,480 $443,230 $388,230 $339,440 Operating profit.......................... $ 98,680 $ 91,400 $ 70,020 $ 58,620 $ 53,980 Income before extraordinary charge........ $ 56,020 $ 50,100 $ 38,000 $ 29,780 $ 20,260 Earnings available for common stock before extraordinary charge.................... $ 56,020 $ 50,100 $ 32,750 $ 22,780 $ 13,260 Earnings per common share before extraordinary charge: Primary.............................. $1.51 $1.35 $1.05 $.87 $.67 Fully diluted........................ $1.42 $1.28 $1.01 $.87 $.67 Dividends declared per common share(D).... $.19 $.15 $.115 $.05 At December 31: Working capital......................... $197,460 $198,770 $163,770 $131,820 $119,120 Total assets............................ $616,360 $615,140 $564,130 $446,620 $448,760 Long-term debt.......................... $187,200 $238,600 $238,890 $178,490 $266,570 Shareholders' equity.................... $338,670 $290,600 $244,850 $215,440 $115,570 </TABLE> - ------------------------- (A) Reflects the acquisition of one business in 1993. (B) Net income, earnings available for common stock and earnings per common share in 1992 were $24.0 million, $17.0 million and $.65, respectively, after being reduced $5.7 million, $5.7 million and $.22, respectively, for an extraordinary charge related to the early extinguishment of subordinated debt. (C) Net income, earnings available for common stock and earnings per common share in 1991 were $17.8 million, $10.8 million and $.54, respectively, after being reduced $2.5 million, $2.5 million and $.13, respectively, for an extraordinary charge related to the early extinguishment of subordinated debt. (D) In the third quarter of 1992 the Company initiated a regular quarterly dividend on its common stock. 10
12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. During 1995 TriMas achieved record net sales and operating earnings for the eighth consecutive year as it continued its focus on operating and financial strategies to improve operating performance and shareholder returns. These strategies include internal and external programs to strengthen the Company's competitive positions in key markets, including increased levels of manufacturing efficiency and customer service, new product development and market share initiatives, and the acquisition of selected companies which can enhance future growth and profitability. The discussion which follows should be reviewed in conjunction with the financial statements and related footnotes to assist in understanding the Company's results of operations, its financial position, cash flows, capital structure and other relevant financial information. ANALYSIS OF 1995 OPERATIONS COMPARED TO 1994 OPERATIONS Record net sales of $553.5 million in 1995 increased 3.4 percent over 1994 net sales of $535.5 million. TriMas' strategic diversification of products and markets has balanced its operating risk over a broad range of industries, moderating the cyclical impact of individual markets. As in 1994, the results of the Company's strategic diversification, including emphasis on niche markets, manufacturing efficiencies and market share initiatives, played an important role in 1995's performance. The Company's gross margin percentage increased to 32.9 percent in 1995, up from 32.5 percent in 1994. The improvement in 1995's gross margin reflects the incremental profit impact of increased sales as well as the effects of ongoing cost reduction and manufacturing efficiency initiatives. Selling, general and administrative expenses increased less than one percent in 1995 compared to 1994, and as a percentage of net sales declined to 15.1 percent, compared to 15.4 percent for 1994. Consolidated operating profit, after general corporate expense, equaled $98.7 million during 1995, compared to $91.4 million in 1994, an increase of 8.0 percent, with operating profit margins of 17.8 percent and 17.1 percent in 1995 and 1994, respectively. A record year was experienced by the Specialty Fasteners segment in both sales and operating profit as operating profit increased 12.4 percent to $27.3 million, compared to $24.3 million in 1994, while sales of $141.1 million were 1.7 percent higher than 1994 sales of $138.7 million. Higher levels of demand for aerospace fasteners and from farm equipment and other off-road vehicle manufacturers were partially offset by softness in demand from the construction market and from customers for heat treating services. As a result of higher sales levels and improved operating efficiencies, the segment operating profit margin increased to 19.3 percent in 1995, compared to 17.5 percent in 1994. In 1995 inventory turnover was 5.0 times as compared to 5.5 times in 1994. Capital expenditures during the year, primarily for Lake Erie Screw Corporation and TriMas Fasteners, Inc., were $10.8 million, compared to 1994's $9.1 million. Record operating profit of the Towing Systems segment increased 21.1 percent to $31.1 million, compared to $25.7 million in 1994. Record segment sales increased 7.3 percent to $175.0 million, compared to $163.1 million in 1994. Operating performance of the segment was favorably impacted by market share initiatives and manufacturing efficiencies resulting from both 1994 and 1995 capital expenditure programs. The segment's 1995 operating profit margin equaled 17.8 percent, compared to 15.7 percent in 1994. Inventory turnover during the year was 3.2 times as compared to 3.1 times in 1994. Capital expenditures decreased to $4.8 million, compared to $6.7 million in 1994. Sales of the Specialty Container Products segment equaled $165.7 million in 1995, a 1.1 percent increase compared to $163.9 million in 1994. Segment operating profit totaled $39.0 million, compared to $39.1 million in the prior year. The segment's operating profit margin in 1995 was 23.6 percent, compared to 23.8 percent in 1994. The segment's inventory turnover was 6.3 times in both 1995 and 1994. Capital expenditures for the segment, primarily to further improve manufacturing efficiencies and service capabilities, were $5.8 million, compared to $5.4 million in 1994. 11
13 The Corporate Companies segment experienced record sales during 1995 of $71.8 million, an increase of 2.9 percent compared to $69.8 million in 1994. Operating profit decreased 14.5 percent to $8.4 million, compared to $9.9 million in 1994. Significant price increases for certain raw materials were the primary cause of the reduced operating profit. Operating profit margin in 1995 equaled 11.7 percent, compared to 14.1 percent in 1994. In 1995 inventory turnover was 5.4 times as compared to 5.6 times in 1994. Capital expenditures during the year decreased to $2.0 million, compared to $3.0 million in 1994. Primary earnings per common share increased 11.9 percent to $1.51 in 1995 based on 37.0 million average common shares and equivalents outstanding, compared to $1.35 in 1994. Fully diluted earnings per common share in 1995 were $1.42 based on 42.1 million average common shares and equivalents outstanding, compared to $1.28 in 1994, an increase of 10.9 percent. ANALYSIS OF 1994 OPERATIONS COMPARED TO 1993 OPERATIONS TriMas achieved net sales of $535.5 million in 1994, an increase of 20.8 percent over 1993 net sales of $443.2 million. As in 1993, the results of the Company's strategic diversification, including emphasis on niche markets, manufacturing efficiencies and market share initiatives, played an important role in 1994's sales performance. The Company's gross margin percentage increased to 32.5 percent in 1994, up from 32.1 percent in 1993. The improvement in 1994's gross margin reflects the incremental profit impact of increased sales volumes as well as the effects of ongoing cost reduction and manufacturing efficiency initiatives. Selling, general and administrative expenses increased 14.5 percent in 1994 compared to 1993, but as a percentage of net sales decreased to 15.4 percent, compared to 16.3 percent for 1993. Consolidated operating profit, after general corporate expense, equaled $91.4 million during 1994, compared to $70.0 million in 1993, an increase of 30.5 percent, with operating profit margins of 17.1 percent and 15.8 percent in 1994 and 1993, respectively. The Specialty Fasteners segment operating profit increased 26.1 percent to $24.3 million, compared to $19.3 million in 1993, while sales of $138.7 million were 13.0 percent higher than 1993 sales of $122.7 million. Higher levels of economic activity contributed to segment sales increases during 1994, reflected by increased sales to the heavy-duty truck, distribution and other original equipment markets. As a result of higher sales levels and improved operating efficiencies, the segment operating profit margin increased to 17.5 percent in 1994, compared to 15.7 percent in 1993. In 1994 inventory turnover was 5.5 times as compared to 5.1 times in 1993. Capital expenditures during the year, primarily for Lake Erie Screw Corporation and TriMas Fasteners, Inc., were $9.1 million, compared to 1993's $9.2 million. Operating profit of the Towing Systems segment increased 15.8 percent to $25.7 million, compared to $22.2 million in 1993. Segment sales increased 16.7 percent to $163.1 million, compared to $139.8 million in 1993. Operating performance of the segment was favorably impacted by higher domestic vehicle sales, market share initiatives and manufacturing efficiencies resulting from both 1993 and 1994 capital expenditure programs. The segment's 1994 operating profit margin equaled 15.7 percent, compared to 15.8 percent in 1993. Inventory turnover during the year was 3.1 times as compared to 3.0 times in 1993. Capital expenditures decreased to $6.7 million, compared to $7.9 million in 1993. In 1994 operating profit of the Specialty Container Products segment increased 35.5 percent to $39.1 million, compared to $28.8 million in 1993. Segment sales of $163.9 million were 37.7 percent higher than 1993's $119.0 million. Lamons Metal Gasket Co. was acquired in November 1993 and a full year of its operations were included in 1994 segment results. The segment's operating profit margin in 1994 of 23.8 percent was affected by full year acquisition related expenses at Lamons. Although Lamons' historical operating profit margin has been lower relative to the combined historical margin of the other two segment companies, its margins have consistently met or exceeded the high standards of the Company's acquisition criteria. In 1993 the segment's operating margin equaled 24.2 percent. The segment's inventory turnover was 6.3 times in 1994, compared to 6.6 times during 1993. Capital expenditures for the segment, primarily to 12
14 further improve manufacturing efficiencies and service capabilities, were $5.4 million, compared to $7.8 million in 1993. The Corporate Companies segment operating profit increased 38.5 percent to $9.9 million, compared to $7.1 million in 1993. Segment sales of $69.8 million increased 13.0 percent, compared to $61.7 million in 1993. The Precision Cutting Tools group and Compac Corporation both benefited from the generally stronger economy. Compac Corporation's continued expansion in specialty industrial tape niche markets and the cost savings associated with the successful consolidation of two industrial tape manufacturing facilities during the latter part of the year also contributed to 1994's sales and earnings increases. All of these factors contributed to the segment's 1994 operating profit margin of 14.1 percent exceeding that achieved in 1993 of 11.5 percent. In 1994 inventory turnover was 5.6 times as compared to 5.3 times in 1993. Capital expenditures during the year increased to $3.0 million, compared to $1.3 million in 1993. Primary earnings per common share increased 28.6 percent to $1.35 in 1994 based on 37.0 million average common shares and equivalents outstanding, compared to $1.05 and 31.1 million shares and equivalents outstanding in 1993. The increase in primary shares outstanding was principally the result of the conversion of the Company's $100 Convertible Participating Preferred Stock in December 1993. Fully diluted earnings per common share in 1994 were $1.28, based on 42.1 million average common shares and equivalents outstanding, compared to $1.01 and 39.1 million shares and equivalents outstanding in 1993. The increase in fully diluted shares in 1994 was principally the result of the issuance of the 5% Convertible Subordinated Debentures Due 2003 in August 1993, which are convertible into 5.1 million common shares. LIQUIDITY, WORKING CAPITAL AND CASH FLOWS Among the Company's financial strategies are maintaining relatively high levels of liquidity and cash flow, which continued in 1995. Historically, TriMas Corporation has generated significant cash flows from operating activities to fund capital expenditures, debt service, dividends and other operating requirements. Cash flow generation has been enhanced by the Company's continuing efforts to improve operating efficiencies, cost reductions and the management of working capital requirements to support increased sales volumes. One of the Company's strengths is its ability to generate cash from operations in excess of requirements for capital investments and dividends. "Free Cash Flow": Free Cash Flow is cash from operations remaining after the Company has satisfied its capital investment initiatives to enhance manufacturing efficiencies, expand productive capacity and avail itself of other competitive opportunities. As one of its financial strategies, the Company focuses on maximizing Free Cash Flow to achieve management's primary objective--maximizing long-term shareholder value. The consolidated statements of cash flows are summarized as follows (in thousands): <TABLE> <CAPTION> YEAR ENDED DECEMBER 31, -------------------------------- 1995 1994 1993 -------- -------- -------- <S> <C> <C> <C> Cash flows from (used for): Operations.................................................. $ 66,250 $ 67,670 $ 50,100 Capital expenditures........................................ (23,470) (24,310) (26,280) -------- -------- -------- "Free Cash Flow".............................................. 42,780 43,360 23,820 Cash flows from (used for): Acquisitions................................................ (60,280) Financing................................................... (58,060) (5,460) 41,460 -------- -------- -------- Increase (decrease) in cash and cash equivalents.............. $(15,280) $ 37,900 $ 5,000 ======== ======== ======== </TABLE> In 1995 the Company again experienced strong operating cash flows as operating activities provided $66.3 million. Increased cash flow from income and noncash charges for depreciation and amortization during 1995 were partially offset by working capital needs to support 1995's internal sales growth as new product successes and marketing initiatives contributed to record sales levels in all four segments. Capital expenditures to reduce 13
15 product costs, improve quality, increase manufacturing efficiencies and expand productive capacity equaled $23.5 million in 1995, $24.3 million in 1994 and $26.3 million in 1993. During the three year period approximately $18.6 million of capital expenditures were for capacity expansion in the Specialty Fasteners segment at the Company's TriMas Fasteners, Inc. facility in Indiana. The Company continues its active corporate development efforts to complement internal growth through significant investments for the acquisition of additional companies which meet TriMas' selective criteria. In 1993 the Company acquired Lamons Metal Gasket Co. for $60.3 million cash. In 1995 the Company used a portion of its significant cash resources to retire $51.5 million of long-term debt. The majority of this amount, $50.0 million, was the repayment of borrowings under the Company's bank revolving credit agreement which were originally incurred to finance prior acquisitions. The Company borrowed $60.0 million in 1993 under its bank revolving credit agreement to finance the acquisition of Lamons. Also in 1993 the Company issued $115.0 million of 5% Convertible Subordinated Debentures Due 2003. The net proceeds of the offering of $112.0 million, together with $3.0 million of available cash resources, were used to redeem $115.0 million of borrowings under the Company's bank revolving credit agreement. Common stock dividends paid in 1995, 1994 and 1993 equaled $6.6 million, $5.1 million and $3.2 million, respectively. In 1993 the Company paid $12.3 million in preferred stock dividends representing dividends accrued through the first three quarters of 1993 and the full year 1992. 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. At December 31, 1995, the Company's current ratio was 4.6 to 1 and working capital totaled $197.5 million, including $92.4 million of cash and cash equivalents. At December 31, 1994, the current ratio was 4.5 to 1 and working capital totaled $198.8 million, including $107.7 million of cash and cash equivalents. The Company's working capital turnover was 2.7 times in 1995, compared to 3.0 times in 1994. Excluding cash, the working capital turnover was 5.4 times in 1995 as compared to 5.6 times in 1994. The Company's inventory turned over 4.5 times in 1995, compared to 4.6 times in 1994, while the accounts receivable days-sales year end balance equaled 52 days in 1995, compared to 51 days in 1994. The Company has a $350.0 million revolving credit facility, maturing in 2000, with a group of domestic and international banks. The facility permits the Company to borrow under several different interest rate options. At December 31, 1995, the Company had available credit of $278.0 million under the credit agreement. In October 1995 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. The Company will adopt the disclosure requirements of this Statement in 1996 and it will not have a material effect on its financial statements. CORPORATE DEVELOPMENT The Company maintains an active acquisition program, which has made important contributions to the Company's growth. During 1993 the Company acquired Lamons Metal Gasket Co. from MascoTech, Inc. for $60.3 million cash and the assumption of certain liabilities, plus contingent payments based upon Lamons achieving specified levels of future earnings. The Company utilizes well-disciplined criteria in selecting acquisitions, including the long-term enhancement of its financial strength and shareholder value. The initial earnings benefit of acquisitions to the Company is less than the corresponding increase in sales since earnings are reduced by acquisition related costs such as interest and added depreciation and amortization. Generally, the anticipated earnings improvement for the Company comes from subsequent growth of acquired companies, since future incremental sales are not burdened with these fixed acquisition costs. 14
16 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 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 schedule of TriMas Corporation and subsidiaries listed in Item 14(a) of this Form 10-K. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule 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, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Detroit, Michigan February 7, 1996 15
17 TRIMAS CORPORATION CONSOLIDATED STATEMENTS OF INCOME <TABLE> <CAPTION> FOR THE YEARS ENDED DECEMBER 31, ----------------------------------------------- 1995 1994 1993 ------------- ------------- ------------- <S> <C> <C> <C> Net sales....................................... $ 553,490,000 $ 535,480,000 $ 443,230,000 Cost of sales................................... (371,470,000) (361,520,000) (301,130,000) Selling, general and administrative expenses.... (83,340,000) (82,560,000) (72,080,000) ------------ ------------ ------------ Operating profit.............................. 98,680,000 91,400,000 70,020,000 Interest expense................................ (13,530,000) (12,930,000) (9,420,000) Other, net (principally interest income)........ 6,690,000 5,030,000 3,270,000 ------------ ------------ ------------ Income before income taxes.................... 91,840,000 83,500,000 63,870,000 Income taxes.................................... 35,820,000 33,400,000 25,870,000 ------------ ------------ ------------ Net income.................................... $ 56,020,000 $ 50,100,000 $ 38,000,000 ============ ============ ============ Preferred stock dividends, MascoTech, Inc....... $ 5,250,000 ============ Earnings available for common stock............. $ 56,020,000 $ 50,100,000 $ 32,750,000 ============ ============ ============ Earnings per common share: $1.51 $1.35 $1.05 Primary....................................... ============ ============ ============ $1.42 $1.28 $1.01 Fully diluted................................. ============ ============ ============ </TABLE> The accompanying notes are an integral part of the consolidated financial statements. 16
18 TRIMAS CORPORATION CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> DECEMBER 31, ---------------------------- 1995 1994 ------------ ------------ <S> <C> <C> ASSETS Current assets: Cash and cash equivalents...................................... $ 92,390,000 $107,670,000 Receivables.................................................... 71,200,000 64,190,000 Inventories.................................................... 85,490,000 79,560,000 Other current assets........................................... 2,510,000 3,590,000 ------------ ------------ Total current assets................................... 251,590,000 255,010,000 Property and equipment........................................... 173,700,000 168,380,000 Excess of cost over net assets of acquired companies............. 144,860,000 149,160,000 Other assets..................................................... 46,210,000 42,590,000 ------------ ------------ Total assets........................................... $616,360,000 $615,140,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable............................................... $ 24,390,000 $ 21,590,000 Other current liabilities...................................... 29,740,000 34,650,000 ------------ ------------ Total current liabilities.............................. 54,130,000 56,240,000 Deferred income taxes and other.................................. 36,360,000 29,700,000 Long-term debt................................................... 187,200,000 238,600,000 ------------ ------------ Total liabilities...................................... 277,690,000 324,540,000 ------------ ------------ Shareholders' equity: Common stock, $.01 par value, authorized 100 million shares, outstanding 36.6 million shares............................. 370,000 370,000 Paid-in capital................................................ 155,430,000 155,210,000 Retained earnings.............................................. 185,370,000 136,310,000 Cumulative translation adjustments............................. (2,500,000) (1,290,000) ------------ ------------ Total shareholders' equity............................. 338,670,000 290,600,000 ------------ ------------ Total liabilities and shareholders' equity............. $616,360,000 $615,140,000 ============ ============ </TABLE> The accompanying notes are an integral part of the consolidated financial statements. 17
19 TRIMAS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> FOR THE YEARS ENDED DECEMBER 31, --------------------------------------------- 1995 1994 1993 ------------ ------------ ------------- <S> <C> <C> <C> CASH FROM (USED FOR): OPERATIONS: Net income................................... $ 56,020,000 $ 50,100,000 $ 38,000,000 Adjustments to reconcile net income to net cash from operations: Depreciation and amortization........... 21,480,000 20,580,000 18,470,000 Deferred income taxes................... 5,560,000 3,210,000 500,000 (Increase) decrease in receivables...... (4,670,000) (7,280,000) (4,250,000) (Increase) decrease in inventories...... (5,930,000) (2,860,000) (8,120,000) Increase (decrease) in accounts payable and accrued liabilities............... (2,500,000) 5,110,000 3,770,000 Other, net.............................. (3,710,000) (1,190,000) 1,730,000 ------------ ------------ ------------- Net cash from operations.............. 66,250,000 67,670,000 50,100,000 ------------ ------------ ------------- INVESTMENTS: Capital expenditures......................... (23,470,000) (24,310,000) (26,280,000) Acquisitions, net of cash acquired........... (60,280,000) ------------ ------------ ------------- Net cash from (used for) investments........................ (23,470,000) (24,310,000) (86,560,000) ------------ ------------ ------------- FINANCING: Long-term debt: Issuance................................ 60,000,000 Retirement.............................. (51,470,000) (330,000) (115,150,000) Issuance of convertible subordinated debt, net........................................ 112,030,000 Preferred stock dividends paid to MascoTech, Inc........................................ (12,250,000) Common stock dividends paid.................. (6,590,000) (5,130,000) (3,170,000) ------------ ------------ ------------- Net cash from (used for) financing.... (58,060,000) (5,460,000) 41,460,000 ------------ ------------ ------------- CASH AND CASH EQUIVALENTS: Increase (decrease) for the year................ (15,280,000) 37,900,000 5,000,000 At beginning of the year........................ 107,670,000 69,770,000 64,770,000 ------------ ------------ ------------- At end of the year........................... $ 92,390,000 $107,670,000 $ 69,770,000 ============ ============ ============= </TABLE> The accompanying notes are an integral part of the consolidated financial statements. 18
20 TRIMAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of TriMas Corporation and its wholly owned subsidiaries (the "Company"). All significant intercompany transactions have been eliminated. Certain amounts in prior period financial statements have been reclassified to conform with current year presentation. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. AFFILIATES As of December 31, 1995, MascoTech, Inc.'s common stock ownership in the Company approximated 41.5 percent, and Masco Corporation's common stock ownership approximated 5.3 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. At December 31, 1995, the Company had $79.5 million invested in prime commercial paper of several United States issuers having the highest rating given by one of the two principal rating agencies. RECEIVABLES Receivables are presented net of an allowance for doubtful accounts of $1.5 million and $2.0 million at December 31, 1995 and 1994. 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 benefited, not exceeding 19
21 TRIMAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1. ACCOUNTING POLICIES (CONTINUED) 40 years. At December 31, 1995 and 1994, accumulated amortization of the excess of cost over net assets of acquired companies and other intangible assets was $31.3 million and $26.8 million. Amortization expense was $5.0 million, $5.3 million and $4.5 million in 1995, 1994 and 1993. 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, 1995. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values of financial instruments classified in the balance sheet as current assets and current liabilities approximate fair values. The fair value of notes receivable, portions of which are classified as both receivables and other assets, based on discounted cash flows using current interest rates approximates the carrying value of $12.0 million at December 31, 1995. The carrying amount of borrowings from banks approximates fair value as the floating rates applicable to this debt reflect changes in overall market interest rates. The fair value of the Company's Convertible Subordinated Debentures, based on quoted market prices, was $112.7 million at both December 31, 1995 and 1994, as compared to the carrying value on such dates of $115.0 million. INCOME TAXES The Company has not provided for taxes on $15.5 million of undistributed earnings of foreign subsidiaries at December 31, 1995, because such earnings are generally 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 Primary earnings per common share in 1995, 1994 and 1993 were calculated on the basis of 37.0 million, 37.0 million and 31.1 million weighted average common and common equivalent shares outstanding. Fully diluted earnings per common share in 1995, 1994 and 1993 were calculated on the basis of 42.1 million, 42.1 million and 39.1 million weighted average common and common equivalent shares outstanding. NOTE 2. ACQUISITION During 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 $46.6 million is being amortized on a straight-line basis over 40 years. 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. 20
22 TRIMAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3. SUPPLEMENTAL CASH FLOWS INFORMATION <TABLE> <CAPTION> (IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31, ----------------------------- 1995 1994 1993 ------- ------- ------- <S> <C> <C> <C> Interest paid.................................................... $13,560 $12,110 $ 7,470 ======= ======= ======= Income taxes paid................................................ $30,690 $30,440 $21,540 ======= ======= ======= Significant noncash transactions: Common stock dividends declared, payable in subsequent year.... $ 1,830 $ 1,460 $ 1,100 ======= ======= ======= Assumption of liabilities as partial consideration for the assets of companies acquired................................ $ 7,380 ======= </TABLE> NOTE 4. INVENTORIES <TABLE> <CAPTION> (IN THOUSANDS) AT DECEMBER 31, ------------------ 1995 1994 ------- ------- <S> <C> <C> Finished goods............................................................ $47,490 $44,860 Work in process........................................................... 14,200 10,440 Raw material.............................................................. 23,800 24,260 ------- ------- $85,490 $79,560 ======= ======= </TABLE> NOTE 5. PROPERTY AND EQUIPMENT <TABLE> <CAPTION> (IN THOUSANDS) AT DECEMBER 31, -------------------- 1995 1994 -------- -------- <S> <C> <C> Cost: Land and land improvements............................................ $ 13,380 $ 13,500 Buildings............................................................. 65,560 63,770 Machinery and equipment............................................... 211,540 194,380 -------- -------- 290,480 271,650 Less accumulated depreciation........................................... 116,780 103,270 -------- -------- $173,700 $168,380 ======== ======== </TABLE> Depreciation expense was $16.4 million, $15.2 million and $13.9 million in 1995, 1994 and 1993. 21
23 TRIMAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6. OTHER CURRENT LIABILITIES <TABLE> <CAPTION> (IN THOUSANDS) AT DECEMBER 31, ------------------ 1995 1994 ------- ------- <S> <C> <C> Employee wages and benefits............................................... $16,010 $15,320 Interest.................................................................. 2,820 3,180 Property taxes............................................................ 1,890 2,330 Dividends................................................................. 1,830 1,460 Current income taxes...................................................... 1,080 1,540 Other..................................................................... 6,110 10,820 ------- ------- $29,740 $34,650 ======= ======= </TABLE> NOTE 7. LONG-TERM DEBT <TABLE> <CAPTION> (IN THOUSANDS) AT DECEMBER 31, -------------------- 1995 1994 -------- -------- <S> <C> <C> Borrowings from banks................................................... $ 72,000 $122,000 5% Convertible Subordinated Debentures Due 2003......................... 115,000 115,000 Other................................................................... 410 1,880 -------- -------- 187,410 238,880 Less current maturities................................................. 210 280 -------- -------- $187,200 $238,600 ======== ======== </TABLE> Borrowings from banks are owing under the Company's $350.0 million revolving credit facility, maturing in 2000, with a group of domestic and international banks. During 1995 the Company repaid $50.0 million of these borrowings which were originally incurred to finance prior acquisitions. The facility permits the Company to borrow under several different interest rate options. At December 31, 1995, the blended interest rate on these borrowings equaled 6.1 percent. The facility contains certain restrictive covenants, the most restrictive of which, at December 31, 1995, required $239.4 million of shareholders' equity. The Company had available credit of $278.0 million under its revolving credit facility at December 31, 1995. The 5% Convertible Subordinated Debentures are convertible into Company common stock at $22 5/8 per share, subject to adjustment for certain events. The Debentures are redeemable, at a premium, at the Company's option after August 1, 1996. 22
24 TRIMAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8. SHAREHOLDERS' EQUITY <TABLE> <CAPTION> (IN THOUSANDS) CUMULATIVE PREFERRED COMMON PAID-IN RETAINED TRANSLATION STOCK STOCK CAPITAL EARNINGS ADJUSTMENTS TOTAL --------- ------ -------- -------- ----------- -------- <S> <C> <C> <C> <C> <C> <C> Balance, January 1, 1993.......... $ 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 Net income...................... 50,100 50,100 Common stock dividends.......... (5,490) (5,490) Other........................... 1,020 120 1,140 --- ---- -------- -------- ------- -------- Balance, December 31, 1994........ -0- 370 155,210 136,310 (1,290) 290,600 Net income...................... 56,020 56,020 Common stock dividends.......... (6,960) (6,960) Other........................... 220 (1,210) (990) --- ---- -------- -------- ------- -------- Balance, December 31, 1995........ $ -0- $370 $155,430 $185,370 $(2,500) $338,670 === ==== ======== ======== ======= ======== </TABLE> During 1993 the 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. In December 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 $.18 ($.19) in 1995, $.14 ($.15) in 1994 and $.11 ($.115) in 1993. 23
25 TRIMAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9. STOCK OPTIONS AND AWARDS At the Company's Annual Meeting held in May 1995 stockholders approved the TriMas Corporation 1995 Long Term Stock Incentive Plan which replaced the Company's 1988 Restricted Stock Incentive Plan and its 1988 Stock Option Plan. Company common stock available for grant under the 1995 plan includes the 2,000,000 shares initially established, plus additional shares resulting from certain reacquisitions of shares by the Company. For the three years ended December 31, 1995, stock option data pertaining to stock option plans for key employees of the Company are as follows (option prices are the fair market value at the dates of grant): <TABLE> <CAPTION> FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------- 1995 1994 1993 --------- ------- ------- <S> <C> <C> <C> Options outstanding, January 1............................. 594,200 604,000 606,000 Options granted............................................ 4,864 Option price per share................................... $19 3/4-$23 1/2 Options exercised.......................................... 23,000 9,800 2,000 Option price per share................................... $8 7/8 $8 7/8 $8 7/8 Options outstanding, December 31........................... 576,064 594,200 604,000 Option price per share................................... $7 1/2-$23 1/2 $7 1/2-$8 7/8 $7 1/2-$8 7/8 Exercisable, December 31................................... 260,464 218,000 167,200 </TABLE> Pursuant to restricted stock incentive plans, the Company granted long-term incentive awards of Company common stock, net, for 290,588 shares in 1995, 88,118 shares in 1994 and 129,212 shares in 1993, to key employees of the Company. The unamortized costs of incentive awards, aggregating $12.7 million at December 31, 1995, are being amortized over the ten year vesting periods. At December 31, 1995 and 1994, a combined total of 2,055,803 and 331,826 shares of Company common stock were available for the granting of options and incentive awards under the aforementioned plans. 24
26 TRIMAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 10. RETIREMENT PLANS The Company has noncontributory retirement benefit plans, both defined benefit and profit-sharing plans, and other defined contribution plans for most of its employees. The annual expense for all plans was: <TABLE> <CAPTION> (IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31, ---------------------------- 1995 1994 1993 ------ ------ ------ <S> <C> <C> <C> Defined contribution plans....................................... $3,470 $3,320 $2,300 Defined benefit plans............................................ 1,690 890 500 ------ ------ ------ $5,160 $4,210 $2,800 ====== ====== ====== </TABLE> 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. Net periodic pension cost of defined benefit plans includes the following components: <TABLE> <CAPTION> (IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31, ------------------------------- 1995 1994 1993 ------- ------- ------- <S> <C> <C> <C> Service cost.................................................. $ 2,000 $ 2,490 $ 2,030 Interest cost................................................. 3,570 3,310 2,920 Actual (return)/loss on assets................................ (5,360) 1,820 (5,900) Net amortization and deferral................................. 1,480 (6,730) 1,450 ------ ------ ------ $ 1,690 $ 890 $ 500 ====== ====== ====== </TABLE> Weighted average rate assumptions used were as follows: <TABLE> <CAPTION> 1995 1994 1993 ----- ----- ----- <S> <C> <C> <C> Discount rate...................................................... 7.3% 8.5% 7.0% Rate of increase in compensation levels............................ 5.1% 5.1% 5.1% Expected long-term rate of return on plan assets................... 10.7% 12.5% 12.1% </TABLE> 25
27 TRIMAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 10. RETIREMENT PLANS (CONTINUED) The following table sets forth the funded status of the defined benefit plans: <TABLE> <CAPTION> (IN THOUSANDS) AT DECEMBER 31, -------------------------------------------------------- 1995 1994 -------------------------- -------------------------- PLANS PLANS PLANS PLANS WHERE WHERE WHERE WHERE ASSETS ACCUMULATED ASSETS ACCUMULATED EXCEED BENEFITS EXCEED BENEFITS ACCUMULATED EXCEED ACCUMULATED EXCEED BENEFITS ASSETS BENEFITS ASSETS ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> Actuarial present value of: Vested benefit obligation.................... $30,680 $11,530 $23,460 $ 8,170 ======= ======= ======= ======= Accumulated benefit obligation............... $31,000 $12,960 $23,860 $ 9,540 ======= ======= ======= ======= Projected benefit obligation................. $39,900 $13,980 $30,840 $10,310 Plan assets at fair value...................... 33,640 7,790 30,390 7,310 ------- ------- ------- ------- Projected benefit obligation (in excess of) or less than plan assets........................ (6,260) (6,190) (450) (3,000) Unrecognized net (asset) or obligation......... (1,160) 420 (1,340) 440 Unrecognized prior service cost................ 440 1,670 480 1,750 Unrecognized net (gain) or loss................ 7,910 3,230 2,910 810 Requirement to recognize minimum liability..... (4,300) (2,350) ------- ------- ------- ------- Prepaid pension cost or (pension liability).............................. $ 930 $(5,170) $ 1,600 $(2,350) ======= ======= ======= ======= </TABLE> The Company provides postretirement health care and life insurance benefits for certain eligible retired employees under unfunded plans. Some of the plans have cost-sharing provisions. Net periodic postretirement benefit costs during 1995, 1994 and 1993 were $.8 million, $.8 million and $1.0 million. The aggregate accumulated postretirement benefit obligation of these unfunded plans was $7.1 million and $5.4 million at December 31, 1995 and 1994. The discount rates used in determining the accumulated postretirement benefit obligations and the net periodic postretirement benefit costs were 7.3 percent, 8.5 percent and 7.0 percent in 1995, 1994 and 1993. The assumed health care cost trend rate in 1995 was 12.0 percent, decreasing to an ultimate rate in the years subsequent to 2000 of seven percent. A one percent increase in the assumed health care cost trend rates would have increased the net periodic postretirement benefit cost by $.1 million during 1995 and would have increased the accumulated postretirement benefit obligation at December 31, 1995, by $.9 million. The Company is amortizing the unrecognized transition accumulated postretirement benefit obligation and subsequent plan net gains and losses in accordance with Statement of Financial Accounting Standards No. 106. The accrued postretirement benefit obligation was $3.1 million and $2.8 million at December 31, 1995 and 1994. 26
28 TRIMAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 11. 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 nonmetallic 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. 27
29 TRIMAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 11. BUSINESS SEGMENT INFORMATION (CONTINUED) <TABLE> <CAPTION> (IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31, ------------------------------------ 1995 1994 1993 -------- -------- -------- <S> <C> <C> <C> NET SALES Specialty Fasteners.................................. $141,050 $138,720 $122,740 Towing Systems....................................... 175,000 163,130 139,790 Specialty Container Products......................... 165,670 163,880 118,970 Corporate Companies.................................. 71,770 69,750 61,730 -------- -------- -------- Total net sales................................... $553,490 $535,480 $443,230 ======== ======== ======== OPERATING PROFIT Specialty Fasteners.................................. $ 27,290 $ 24,280 $ 19,250 Towing Systems....................................... 31,080 25,660 22,150 Specialty Container Products......................... 39,040 39,060 28,820 Corporate Companies.................................. 8,420 9,850 7,110 -------- -------- -------- Total operating profit............................ 105,830 98,850 77,330 Other income (expense), net............................ (6,840) (7,900) (6,150) General corporate expense.............................. (7,150) (7,450) (7,310) -------- -------- -------- Income before income taxes........................ $ 91,840 $ 83,500 $ 63,870 ======== ======== ======== IDENTIFIABLE ASSETS AT DECEMBER 31 Specialty Fasteners.................................. $146,200 $137,190 $131,110 Towing Systems....................................... 151,160 148,890 142,340 Specialty Container Products......................... 149,790 150,360 144,890 Corporate Companies.................................. 56,230 55,210 53,060 Corporate............................................ 112,980 123,490 92,730 -------- -------- -------- Total assets...................................... $616,360 $615,140 $564,130 ======== ======== ======== CAPITAL EXPENDITURES Specialty Fasteners.................................. $ 10,840 $ 9,140 $ 9,170 Towing Systems....................................... 4,790 6,720 7,930 Specialty Container Products......................... 5,780 5,420 14,870 Corporate Companies.................................. 2,030 3,000 1,320 Corporate............................................ 30 30 20 -------- -------- -------- Total capital expenditures........................ $ 23,470 $ 24,310 $ 33,310(A) ======== ======== ======== DEPRECIATION AND AMORTIZATION Specialty Fasteners.................................. $ 7,230 $ 6,970 $ 6,490 Towing Systems....................................... 5,610 5,390 5,250 Specialty Container Products......................... 6,140 5,790 4,410 Corporate Companies.................................. 2,430 2,360 2,240 Corporate............................................ 70 70 80 -------- -------- -------- Total depreciation and amortization............... $ 21,480 $ 20,580 $ 18,470 ======== ======== ======== </TABLE> Operations are located principally in the United States. Export sales equaled less than ten percent of total sales for each of the three years presented. (A) Including $7.0 million from a business acquired. 28
30 TRIMAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12. INCOME TAXES <TABLE> <CAPTION> (IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31, ------------------------------- 1995 1994 1993 ------- ------- ------- <S> <C> <C> <C> Income before income taxes: Domestic..................................................... $86,900 $79,040 $60,630 Foreign...................................................... 4,940 4,460 3,240 ------- ------- ------- $91,840 $83,500 $63,870 ======= ======= ======= Provision for income taxes: Federal...................................................... $23,810 $24,240 $20,980 State and local.............................................. 4,460 4,100 2,870 Foreign...................................................... 1,990 1,850 1,520 Deferred, principally federal................................ 5,560 3,210 500 ------- ------- ------- $35,820 $33,400 $25,870 ======= ======= ======= </TABLE> The following is a reconciliation of the U.S. federal statutory tax rate to the effective tax rate: <TABLE> <CAPTION> FOR THE YEARS ENDED DECEMBER 31, --------------------------- 1995 1994 1993 ----- ----- ----- <S> <C> <C> <C> U.S. federal statutory tax rate................................. 35.0% 35.0% 35.0% State and local taxes, net of federal tax benefit............... 3.1 3.2 2.9 Foreign taxes in excess of U.S. federal tax rate................ .3 .3 .6 Nondeductible amortization of excess of cost over net assets of acquired companies............................................ .7 .8 1.7 Other, net...................................................... (.1) .7 .3 ---- ---- ---- Effective tax rate......................................... 39.0% 40.0% 40.5% ==== ==== ==== </TABLE> Items that gave rise to deferred taxes: <TABLE> <CAPTION> (IN THOUSANDS) AT DECEMBER 31, ------------------------------------------------------------ 1995 1994 ---------------------------- ---------------------------- DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX ASSETS LIABILITIES ASSETS LIABILITIES ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> Property and equipment......................... $ 21,040 $ 19,620 Intangible assets.............................. 3,840 2,600 Inventory...................................... $1,080 $ 740 Other.......................................... 2,110 4,600 5,500 4,520 ------ ------- ------ ------- $3,190 $ 29,480 $6,240 $ 26,740 ====== ======= ====== ======= </TABLE> 29
31 TRIMAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED) NOTE 13. INTERIM FINANCIAL INFORMATION (UNAUDITED) <TABLE> <CAPTION> (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) QUARTERS ENDED --------------------------------------------- DECEMBER SEPTEMBER JUNE MARCH 31ST 30TH 30TH 31ST -------- --------- -------- -------- <S> <C> <C> <C> <C> 1995: Net sales......................................... $122,090 $ 131,880 $151,920 $147,600 Gross profit...................................... $ 41,370 $ 42,520 $ 50,530 $ 47,600 Net income........................................ $ 12,800 $ 13,220 $ 16,560 $ 13,440 Primary earnings per common share................. $.35 $.36 $.45 $.36 Fully diluted earnings per common share........... $.33 $.34 $.42 $.34 Weighted average common and common equivalent shares outstanding: Primary...................................... 36,978 36,998 37,001 36,996 Fully diluted................................ 42,061 42,080 42,088 42,090 1994: Net sales......................................... $120,490 $ 133,590 $146,940 $134,460 Gross profit...................................... $ 39,800 $ 43,580 $ 49,320 $ 41,260 Net income........................................ $ 11,960 $ 12,370 $ 14,940 $ 10,830 Primary earnings per common share................. $.32 $.33 $.40 $.29 Fully diluted earnings per common share........... $.31 $.32 $.38 $.28 Weighted average common and common equivalent shares outstanding: Primary...................................... 37,001 37,022 37,038 37,040 Fully diluted................................ 42,084 42,104 42,120 42,123 </TABLE> Earnings per common share in the fourth quarter of 1995 and 1994 were improved by $.07 and $.06, net, resulting from various year end adjustments to accrual estimates recorded earlier in each year. Quarterly earnings per common share amounts for both 1995 and 1994 do not total to the full year amounts due to rounding. QUARTERLY COMMON STOCK PRICE AND DIVIDEND INFORMATION: <TABLE> <CAPTION> MARKET PRICE 1995 -------------- DIVIDENDS QUARTER HIGH LOW DECLARED ---------------------------------------------- ----- ----- --------- <S> <C> <C> <C> Fourth........................................ $22 1/4 $18 3/8 $ .05 Third......................................... 25 1/2 20 .05 Second........................................ 24 1/4 20 1/4 .05 First......................................... 22 3/4 19 5/8 .04 </TABLE> <TABLE> <CAPTION> MARKET PRICE 1994 -------------- DIVIDENDS QUARTER HIGH LOW DECLARED ---------------------------------------------- ----- ----- --------- <S> <C> <C> <C> Fourth........................................ $23 5/8 $18 3/8 $ .04 Third......................................... 24 7/8 21 1/2 .04 Second........................................ 27 1/8 21 5/8 .04 First......................................... 28 1/2 22 3/4 .03 </TABLE> 30
32 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. 31
33 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 1996 Annual Meeting of Stockholders, to be filed on or before April 29, 1996, 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 1996 Annual Meeting of Stockholders, to be filed on or before April 29, 1996, 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 1996 Annual Meeting of Stockholders, to be filed on or before April 29, 1996, 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 1996 Annual Meeting of Stockholders, to be filed on or before April 29, 1996, and such information is incorporated herein by reference. 32
34 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, 1995 and 1994, and for the years ended December 31, 1995, 1994 and 1993, consist of the following: Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (2) Financial Statement Schedules. Financial Statement Schedules of the Company appended hereto, as required for the years ended December 31, 1995, 1994 and 1993, consist of the following: II. Valuation and Qualifying Accounts (3) Exhibits. <TABLE> <S> <C> 3.a Restated Certificate of Incorporation of TriMas Corporation.(4) 3.b Bylaws of TriMas Corporation, as amended.(2) 4.a Indenture dated as of August 1, 1993 between TriMas Corporation and Continental Bank, National Association (the Corporate Trust and Agency Business of which is now known as First Trust of Illinois), as Trustee, and Directors' resolutions establishing TriMas Corporation's 5% Convertible Subordinated Debentures Due 2003.(4) 4.b Credit Agreement dated February 1, 1993 among TriMas Corporation, Certain Banks and NationsBank of North Carolina, N.A. (now known as NationsBank, N.A. (Carolinas)), as Agent(1), and First Amendment dated June 30, 1995.(6) Note: Other instruments, notes or extracts from agreements defining the rights of holders of long-term debt of TriMas Corporation 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 percent of TriMas Corporation's consolidated assets, and (ii) such instruments, notes and extracts will be furnished by TriMas Corporation to the Securities and Exchange Commission upon request. 10.a Assumption and Indemnification Agreement, dated December 27, 1988, between TriMas Corporation and Masco Industries, Inc. (now known as MascoTech, Inc.).(1) 10.b Corporate Services Agreement, dated December 27, 1988, between TriMas Corporation and Masco Corporation.(1) 10.c Corporate Opportunities Agreement, dated December 27, 1988, among TriMas Corporation, Masco Corporation and Masco Industries, Inc. (now known as MascoTech, Inc.).(1) 10.d Stock Repurchase Agreement, dated December 27, 1988, among TriMas Corporation, Masco Corporation and Masco Industries, Inc. (now known as MascoTech, Inc.).(1) 10.e Registration Agreement, dated December 27, 1988, among TriMas Corporation, Masco Corporation and Masco Industries, Inc. (now known as MascoTech, Inc.), and amendment dated as of January 5, 1993(1) and amendment dated as of May 26, 1994.(5) Note: Exhibits 10.f through 10.s constitute the management contracts and executive compensatory plans or arrangements in which certain of the executive officers and directors of the Company participate. </TABLE> 33
35 <TABLE> <S> <C> 10.f TriMas Corporation 1995 Long Term Stock Incentive Plan (Restated December 5, 1995). 10.g TriMas Corporation 1988 Stock Option Plan (Restated December 5, 1995). 10.h TriMas Corporation 1988 Restricted Stock Incentive Plan (Restated December 5, 1995). 10.i MascoTech, Inc. 1984 Restricted Stock Incentive Plan (Restated December 6, 1995). 10.j MascoTech, Inc. 1984 Stock Option Plan (Restated December 6, 1995). 10.k Masco Corporation 1988 Restricted Stock Incentive Plan (Restated December 6, 1995). 10.l Masco Corporation 1988 Stock Option Plan (Restated December 6, 1995). 10.m Masco Corporation 1984 Restricted Stock (Industries) Incentive Plan (Restated December 6, 1995). 10.n Masco Corporation 1984 Stock Option Plan (Restated December 6, 1995). 10.o Masco Corporation Restricted Stock Incentive Plan (Restated December 6, 1995). 10.p Masco Corporation 1991 Long Term Stock Incentive Plan (Restated December 6, 1995). 10.q MascoTech, Inc. 1991 Long Term Stock Incentive Plan (Restated December 6, 1995). 10.r TriMas Corporation Supplemental Executive Retirement and Disability Plan.(5) 10.s TriMas Corporation Benefits Restoration Plan.(5) 10.t Purchase Agreement dated January 26, 1990 between Masco Corporation and TriMas Corporation.(4) 10.u Purchase Agreement dated November 23, 1993 between MascoTech, Inc. and TriMas Corporation.(3) 11 Computation of Earnings per Common Share. 12 Computation of Ratios of Earnings to Fixed Charges. 21 List of Subsidiaries. 23 Consent of Coopers & Lybrand L.L.P. relating to TriMas Corporation's Financial Statements and Financial Statement Schedule. 27 Financial Data Schedule. </TABLE> - ------------------------- (1) Incorporated by reference to the Exhibits filed with TriMas Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. (2) Incorporated by reference to the Exhibits filed with TriMas Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993. (3) Incorporated by reference to the Exhibits filed with TriMas Corporation's Current Report on Form 8-K dated November 23, 1993. (4) Incorporated by reference to the Exhibits filed with TriMas Corporation's Annual Report on Form 10-K for the year ended December 31, 1993. (5) Incorporated by reference to the Exhibits filed with TriMas Corporation's Annual Report on Form 10-K for the year ended December 31, 1994. (6) Incorporated by reference to the Exhibits filed with TriMas Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995. THE COMPANY WILL FURNISH TO ANY OF ITS SHAREHOLDERS A COPY OF ANY OF THE ABOVE EXHIBITS UPON THE WRITTEN REQUEST OF SUCH SHAREHOLDER AND THE PAYMENT TO THE COMPANY OF THE REASONABLE EXPENSES INCURRED BY THE COMPANY IN FURNISHING SUCH COPY OR COPIES. (B) REPORTS ON FORM 8-K. None. 34
36 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. TRIMAS CORPORATION By /s/ BRIAN P. CAMPBELL ----------------------------------- Brian P. Campbell President March 27, 1996 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. <TABLE> <C> <S> <C> PRINCIPAL EXECUTIVE OFFICER: /s/ RICHARD A. MANOOGIAN Chairman of the Board - --------------------------------------------- Richard A. Manoogian PRINCIPAL FINANCIAL OFFICER: /s/ WILLIAM E. MEYERS Vice President -- Controller - --------------------------------------------- William E. Meyers PRINCIPAL ACCOUNTING OFFICER: /s/ WILLIAM E. MEYERS Vice President -- Controller - --------------------------------------------- William E. Meyers /s/ BRIAN P. CAMPBELL President and Director March 27, 1996 - --------------------------------------------- Brian P. Campbell /s/ HERBERT S. AMSTER Director - --------------------------------------------- Herbert S. Amster /s/ EUGENE A. GARGARO, JR. Director - --------------------------------------------- Eugene A. Gargaro, Jr. /s/ JOHN A. MORGAN Director - --------------------------------------------- John A. Morgan /s/ HELMUT F. STERN Director - --------------------------------------------- Helmut F. Stern </TABLE>
37 TRIMAS CORPORATION FINANCIAL STATEMENT SCHEDULE PURSUANT TO ITEM 14(A)(2) OF FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION Schedule, as required, for the years ended December 31, 1995, 1994 and 1993: <TABLE> <CAPTION> PAGES --- <C> <S> <C> II. Valuation and Qualifying Accounts................................................. F-2 </TABLE> F-1
38 TRIMAS CORPORATION SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 <TABLE> <CAPTION> 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 - -------------------------------- ---------- ------------ ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> (A) (B) Allowances for doubtful accounts, deducted from accounts receivable in the balance sheet: 1995....................... $2,040,000 $ 270,000 $ -- $780,000 $1,530,000 ========= ============ ========== ========== ========= 1994....................... $1,800,000 $ 620,000 $ -- $380,000 $2,040,000 ========= ============ ========== ========== ========= 1993....................... $1,430,000 $ 800,000 $160,000 $590,000 $1,800,000 ========= ============ ========== ========== ========= Allowance for doubtful accounts, deducted from notes receivable in the balance sheet: 1995....................... $ 650,000 $ (300,000) $ -- $ -- $ 350,000 ========= ============ ========== ========== ========= 1994....................... $ 650,000 $ -- $ -- $ -- $ 650,000 ========= ============ ========== ========== ========= 1993....................... $ 650,000 $ -- $ -- $ -- $ 650,000 ========= ============ ========== ========== ========= </TABLE> Notes: (A) Allowance of companies acquired, and other adjustments, net. (B) Doubtful accounts charged off, less recoveries. F-2
39 EXHIBIT INDEX <TABLE> <CAPTION> EXHIBIT PAGE NUMBER DESCRIPTION NO. ------- ------------------------------------------------------------------------ ---- <S> <C> <C> 3.a Restated Certificate of Incorporation of TriMas Corporation.(4) 3.b Bylaws of TriMas Corporation, as amended.(2) 4.a Indenture dated as of August 1, 1993 between TriMas Corporation and Continental Bank, National Association (the Corporate Trust and Agency Business of which is now known as First Trust of Illinois), as Trustee, and Directors' resolutions establishing TriMas Corporation's 5% Convertible Subordinated Debentures Due 2003.(4) 4.b Credit Agreement dated February 1, 1993 among TriMas Corporation, Certain Banks and NationsBank of North Carolina, N.A. (now known as NationsBank, N.A. (Carolinas)), as Agent(1), and First Amendment dated June 30, 1995.(6) NOTE: Other instruments, notes or extracts from agreements defining the rights of holders of long-term debt of TriMas Corporation 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 percent of TriMas Corporation's consolidated assets, and (ii) such instruments, notes and extracts will be furnished by TriMas Corporation to the Securities and Exchange Commission upon request. 10.a Assumption and Indemnification Agreement, dated December 27, 1988, between TriMas Corporation and Masco Industries, Inc. (now known as MascoTech, Inc.).(1) 10.b Corporate Services Agreement, dated December 27, 1988, between TriMas Corporation and Masco Corporation.(1) 10.c Corporate Opportunities Agreement, dated December 27, 1988, among TriMas Corporation, Masco Corporation and Masco Industries, Inc. (now known as MascoTech, Inc.).(1) 10.d Stock Repurchase Agreement, dated December 27, 1988, among TriMas Corporation, Masco Corporation and Masco Industries, Inc. (now known as MascoTech, Inc.).(1) 10.e Registration Agreement, dated December 27, 1988, among TriMas Corporation, Masco Corporation and Masco Industries, Inc. (now known as MascoTech, Inc.), and amendment dated as of January 5, 1993(1) and amendment dated as of May 26, 1994.(5) NOTE: Exhibits 10.f through 10.s constitute the management contracts and executive compensatory plans or arrangements in which certain of the executive officers and directors of the Company participate. 10.f TriMas Corporation 1995 Long Term Stock Incentive Plan (Restated December 5, 1995). 10.g TriMas Corporation 1988 Stock Option Plan (Restated December 5, 1995). 10.h TriMas Corporation 1988 Restricted Stock Incentive Plan (Restated December 5, 1995). 10.i MascoTech, Inc. 1984 Restricted Stock Incentive Plan (Restated December 6, 1995). 10.j MascoTech, Inc. 1984 Stock Option Plan (Restated December 6, 1995). 10.k Masco Corporation 1988 Restricted Stock Incentive Plan (Restated December 6, 1995). 10.l Masco Corporation 1988 Stock Option Plan (Restated December 6, 1995). </TABLE>
40 <TABLE> <CAPTION> EXHIBIT PAGE NUMBER DESCRIPTION NO. ------- ------------------------------------------------------------------------ ---- <S> <C> <C> 10.m Masco Corporation 1984 Restricted Stock (Industries) Incentive Plan (Restated December 6, 1995). 10.n Masco Corporation 1984 Stock Option Plan (Restated December 6, 1995). 10.o Masco Corporation Restricted Stock Incentive Plan (Restated December 6, 1995). 10.p Masco Corporation 1991 Long Term Stock Incentive Plan (Restated December 6, 1995). 10.q MascoTech, Inc. 1991 Long Term Stock Incentive Plan (Restated December 6, 1995). 10.r TriMas Corporation Supplemental Executive Retirement and Disability Plan.(5) 10.s TriMas Corporation Benefits Restoration Plan.(5) 10.t Purchase Agreement dated January 26, 1990 between Masco Corporation and TriMas Corporation.(4) 10.u Purchase Agreement dated November 23, 1993 between MascoTech, Inc. and TriMas Corporation.(3) 11 Computation of Earnings per Common Share. 12 Computation of Ratios of Earnings to Fixed Charges. 21 List of Subsidiaries. 23 Consent of Coopers & Lybrand L.L.P. relating to TriMas Corporation's Financial Statements and Financial Statement Schedule. 27 Financial Data Schedule. </TABLE> - ------------------------- (1) Incorporated by reference to the Exhibits filed with TriMas Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. (2) Incorporated by reference to the Exhibits filed with TriMas Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993. (3) Incorporated by reference to the Exhibits filed with TriMas Corporation's Current Report on Form 8-K dated November 23, 1993. (4) Incorporated by reference to the Exhibits filed with TriMas Corporation's Annual Report on Form 10-K for the year ended December 31, 1993. (5) Incorporated by reference to the Exhibits filed with TriMas Corporation's Annual Report on Form 10-K for the year ended December 31, 1994. (6) Incorporated by reference to the Exhibits filed with TriMas Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.