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Quarter Report: 2009 September (Form 10-Q)
TRIMAS CORP - Quarter Report: 2009 September (Form 10-Q)
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TABLE OF CONTENTS
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
|
|
|
| (Mark One) |
|
|
ý |
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Quarterly Period Ended September 30, 2009 |
Or |
o |
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Transition Period
from to .
|
Commission file number 001-10716
TRIMAS CORPORATION
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
(State or other jurisdiction of
incorporation or organization) |
|
38-2687639
(IRS Employer Identification No.) |
39400 Woodward Avenue, Suite 130
Bloomfield Hills, Michigan 48304
(Address of principal executive offices, including zip code)
(248) 631-5450
(Registrant's telephone number, including area code)
Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
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|
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|
| Large accelerated filer o |
|
Accelerated filer ý |
|
Non-accelerated filer o
(Do not check if a smaller reporting company) |
|
Smaller reporting company o |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o No ý
As of November 9, 2009, the number of outstanding shares of the Registrant's common stock, $.01 par value, was 33,578,324 shares.
Table of Contents
TriMas Corporation
Index
1
Table of Contents
Forward-Looking Statements
This report contains forward-looking statements (as that term is defined by the federal securities laws) about our financial condition,
results of operations and business. You can find many of these statements by looking for words such as "may," "will," "expect," "anticipate," "believe," "estimate" and similar words used in this
report.
These
forward-looking statements are subject to numerous assumptions, risks and uncertainties. Because the statements are subject to risks and uncertainties, actual results may differ
materially from those expressed or implied by the forward-looking statements. We caution readers not to place undue reliance on the statements, which speak only as of the date of this report.
The
cautionary statements set forth above should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may
issue. We do not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statement to reflect events or
circumstances after the date of this report or to reflect the occurrence of unanticipated events.
You
should carefully consider the factors discussed in Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended
December 31, 2008, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only
risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deemed to be immaterial also may materially adversely affect our business, financial
position and results of operations or cash flows.
We
disclose important factors that could cause our actual results to differ materially from our expectations under Part I, Item 2., "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this report. These cautionary statements qualify all forward-looking statements
attributed to us or persons acting on our behalf. When we indicate that an event, condition or circumstance could or would have an adverse effect on us, we mean to include effects upon our business,
financial and other condition, results of operations, prospects and ability to service our debt.
2
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TriMas Corporation
Consolidated Balance Sheet
(Unaudited—dollars in thousands)
|
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|
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|
September 30,
2009 |
|
December 31,
2008 |
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
| |
Cash and cash equivalents |
|
$ |
24,770 |
|
$ |
3,910 |
|
| |
Receivables, net of reserves of approximately $6.0 million and $5.7 million as of September 30, 2009 and December 31, 2008,
respectively |
|
|
99,360 |
|
|
104,760 |
|
| |
Inventories |
|
|
141,830 |
|
|
188,950 |
|
| |
Deferred income taxes |
|
|
16,970 |
|
|
16,970 |
|
| |
Prepaid expenses and other current assets |
|
|
6,680 |
|
|
7,430 |
|
| |
Assets of discontinued operations held for sale |
|
|
2,700 |
|
|
26,200 |
|
| |
|
|
|
|
|
| |
|
Total current assets |
|
|
292,310 |
|
|
348,220 |
|
Property and equipment, net |
|
|
170,760 |
|
|
181,570 |
|
Goodwill |
|
|
196,520 |
|
|
202,280 |
|
Other intangibles, net |
|
|
168,700 |
|
|
178,880 |
|
Other assets |
|
|
15,720 |
|
|
19,270 |
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| |
|
|
|
|
|
| |
|
Total assets |
|
$ |
844,010 |
|
$ |
930,220 |
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| |
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
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|
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Current liabilities: |
|
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|
|
|
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| |
Current maturities, long-term debt |
|
$ |
6,640 |
|
$ |
10,360 |
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| |
Accounts payable |
|
|
79,650 |
|
|
111,810 |
|
| |
Accrued liabilities |
|
|
73,710 |
|
|
66,340 |
|
| |
Liabilities of discontinued operations |
|
|
1,240 |
|
|
1,340 |
|
| |
|
|
|
|
|
| |
|
Total current liabilities |
|
|
161,240 |
|
|
189,850 |
|
Long-term debt |
|
|
518,740 |
|
|
599,580 |
|
Deferred income taxes |
|
|
45,680 |
|
|
51,650 |
|
Other long-term liabilities |
|
|
44,610 |
|
|
34,240 |
|
| |
|
|
|
|
|
| |
|
Total liabilities |
|
|
770,270 |
|
|
875,320 |
|
| |
|
|
|
|
|
Preferred stock $0.01 par: Authorized 100,000,000 shares; |
|
|
|
|
|
|
|
| |
Issued and outstanding: None |
|
|
— |
|
|
— |
|
Common stock, $0.01 par: Authorized 400,000,000 shares; |
|
|
|
|
|
|
|
| |
Issued and outstanding: 33,578,324 shares at September 30, 2009 and 33,620,410 shares at December 31, 2008 |
|
|
330 |
|
|
330 |
|
Paid-in capital |
|
|
527,330 |
|
|
527,000 |
|
Accumulated deficit |
|
|
(499,020 |
) |
|
(510,160 |
) |
Accumulated other comprehensive income |
|
|
45,100 |
|
|
37,730 |
|
| |
|
|
|
|
|
| |
|
Total shareholders' equity |
|
|
73,740 |
|
|
54,900 |
|
| |
|
|
|
|
|
| |
|
Total liabilities and shareholders' equity |
|
$ |
844,010 |
|
$ |
930,220 |
|
| |
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
3
Table of Contents
TriMas Corporation
Consolidated Statement of Operations
(Unaudited—dollars in thousands, except for share amounts)
|
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|
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|
|
|
|
|
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|
|
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|
Three months ended
September 30, |
|
Nine months ended
September 30, |
|
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
Net sales |
|
$ |
203,730 |
|
$ |
260,730 |
|
$ |
615,090 |
|
$ |
808,160 |
|
Cost of sales |
|
|
(146,300 |
) |
|
(192,100 |
) |
|
(462,210 |
) |
|
(593,580 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Gross profit |
|
|
57,430 |
|
|
68,630 |
|
|
152,880 |
|
|
214,580 |
|
Selling, general and administrative expenses |
|
|
(37,280 |
) |
|
(41,160 |
) |
|
(112,930 |
) |
|
(128,740 |
) |
Gain (loss) on dispositions of property and equipment |
|
|
20 |
|
|
50 |
|
|
180 |
|
|
(160 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Operating profit |
|
|
20,170 |
|
|
27,520 |
|
|
40,130 |
|
|
85,680 |
|
| |
|
|
|
|
|
|
|
|
|
Other income (expense), net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest expense |
|
|
(10,760 |
) |
|
(13,570 |
) |
|
(34,560 |
) |
|
(42,160 |
) |
| |
Gain on extinguishment of debt |
|
|
1,180 |
|
|
— |
|
|
28,250 |
|
|
— |
|
| |
Other, net |
|
|
(190 |
) |
|
(480 |
) |
|
(1,710 |
) |
|
(3,010 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
Other income (expense), net |
|
|
(9,770 |
) |
|
(14,050 |
) |
|
(8,020 |
) |
|
(45,170 |
) |
| |
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax expense |
|
|
10,400 |
|
|
13,470 |
|
|
32,110 |
|
|
40,510 |
|
Income tax expense |
|
|
(3,890 |
) |
|
(5,410 |
) |
|
(12,230 |
) |
|
(15,150 |
) |
| |
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
6,510 |
|
|
8,060 |
|
|
19,880 |
|
|
25,360 |
|
Income (loss) from discontinued operations, net of income tax benefit (expense) |
|
|
(680 |
) |
|
260 |
|
|
(8,740 |
) |
|
280 |
|
| |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,830 |
|
$ |
8,320 |
|
$ |
11,140 |
|
$ |
25,640 |
|
| |
|
|
|
|
|
|
|
|
|
Earnings per share—basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Continuing operations |
|
$ |
0.19 |
|
$ |
0.24 |
|
$ |
0.59 |
|
$ |
0.76 |
|
| |
|
Discontinued operations, net of income tax benefit (expense) |
|
|
(0.02 |
) |
|
0.01 |
|
|
(0.26 |
) |
|
0.01 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Net income per share |
|
$ |
0.17 |
|
$ |
0.25 |
|
$ |
0.33 |
|
$ |
0.77 |
|
| |
|
|
|
|
|
|
|
|
|
Weighted average common shares—basic |
|
|
33,496,634 |
|
|
33,420,560 |
|
|
33,480,747 |
|
|
33,413,214 |
|
| |
|
|
|
|
|
|
|
|
|
Earnings per share—diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Continuing operations |
|
$ |
0.19 |
|
$ |
0.24 |
|
$ |
0.59 |
|
$ |
0.76 |
|
| |
|
Discontinued operations, net of income tax benefit (expense) |
|
|
(0.02 |
) |
|
0.01 |
|
|
(0.26 |
) |
|
0.01 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Net income per share |
|
$ |
0.17 |
|
$ |
0.25 |
|
$ |
0.33 |
|
$ |
0.77 |
|
| |
|
|
|
|
|
|
|
|
|
Weighted average common shares—diluted |
|
|
34,007,846 |
|
|
33,469,027 |
|
|
33,752,210 |
|
|
33,441,448 |
|
| |
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial statements.
4
Table of Contents
TriMas Corporation
Consolidated Statement of Cash Flows
(Unaudited—dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, |
|
|
|
2009 |
|
2008 |
|
Net income |
|
$ |
11,140 |
|
$ |
25,640 |
|
Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition impact: |
|
|
|
|
|
|
|
| |
(Gain) loss on dispositions of property and equipment |
|
|
(180 |
) |
|
40 |
|
| |
Depreciation |
|
|
22,440 |
|
|
20,740 |
|
| |
Amortization of intangible assets |
|
|
10,970 |
|
|
11,700 |
|
| |
Amortization of debt issue costs |
|
|
1,680 |
|
|
1,840 |
|
| |
Deferred income taxes |
|
|
3,740 |
|
|
9,360 |
|
| |
Gain on extinguishment of debt |
|
|
(28,250 |
) |
|
— |
|
| |
Non-cash compensation expense |
|
|
330 |
|
|
1,160 |
|
| |
Reductions in sale of receivables and receivables securitization |
|
|
(15,690 |
) |
|
(26,730 |
) |
| |
(Increase) decrease in receivables |
|
|
24,600 |
|
|
(19,270 |
) |
| |
(Increase) decrease in inventories |
|
|
51,690 |
|
|
(7,640 |
) |
| |
Decrease in prepaid expenses and other assets |
|
|
1,860 |
|
|
4,370 |
|
| |
Increase (decrease) in accounts payable and accrued liabilities |
|
|
(18,440 |
) |
|
4,690 |
|
| |
Other, net |
|
|
1,750 |
|
|
(3,110 |
) |
| |
|
|
|
|
|
| |
|
Net cash provided by operating activities, net of acquisition impact |
|
|
67,640 |
|
|
22,790 |
|
| |
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
| |
Capital expenditures |
|
|
(10,850 |
) |
|
(20,100 |
) |
| |
Acquisition of businesses, net of cash acquired |
|
|
— |
|
|
(6,350 |
) |
| |
Net proceeds from disposition of businesses and other assets |
|
|
23,100 |
|
|
2,260 |
|
| |
|
|
|
|
|
| |
|
Net cash provided by (used for) investing activities |
|
|
12,250 |
|
|
(24,190 |
) |
| |
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
| |
Repayments of borrowings on term loan facilities |
|
|
(2,370 |
) |
|
(4,270 |
) |
| |
Proceeds from term loan facilities |
|
|
— |
|
|
490 |
|
| |
Proceeds from borrowings on revolving credit facilities |
|
|
677,930 |
|
|
346,160 |
|
| |
Repayments of borrowings on revolving credit facilities |
|
|
(690,740 |
) |
|
(341,130 |
) |
| |
Retirement of senior subordinated notes |
|
|
(43,850 |
) |
|
— |
|
| |
|
|
|
|
|
| |
|
Net cash provided by (used for) financing activities |
|
|
(59,030 |
) |
|
1,250 |
|
| |
|
|
|
|
|
Cash and Cash Equivalents: |
|
|
|
|
|
|
|
| |
Increase (decrease) for the period |
|
|
20,860 |
|
|
(150 |
) |
| |
|
At beginning of period |
|
|
3,910 |
|
|
4,800 |
|
| |
|
|
|
|
|
| |
|
At end of period |
|
$ |
24,770 |
|
$ |
4,650 |
|
| |
|
|
|
|
|
| |
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
| |
|
Cash paid for interest |
|
$ |
25,460 |
|
$ |
32,240 |
|
| |
|
|
|
|
|
| |
|
Cash paid for taxes |
|
$ |
6,730 |
|
$ |
6,460 |
|
| |
|
|
|
|
|
The
accompanying notes are an integral part of these financial statements.
5
Table of Contents
TriMas Corporation
Consolidated Statement of Shareholders' Equity
Nine Months Ended September 30, 2009
(Unaudited—dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock |
|
Paid-in
Capital |
|
Accumulated
Deficit |
|
Accumulated
Other
Comprehensive
Income |
|
Total |
|
Balances, December 31, 2008 |
|
$ |
330 |
|
$ |
527,000 |
|
$ |
(510,160 |
) |
$ |
37,730 |
|
$ |
54,900 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income |
|
|
— |
|
|
— |
|
|
11,140 |
|
|
— |
|
|
11,140 |
|
| |
Amortization of defined benefit plan deferred losses (net of tax of $0.01 million) (Note 14) |
|
|
— |
|
|
— |
|
|
— |
|
|
10 |
|
|
10 |
|
| |
Foreign currency translation |
|
|
— |
|
|
— |
|
|
— |
|
|
8,230 |
|
|
8,230 |
|
| |
Net losses on derivative instruments (net of tax of $0.5 million) (Note 9) |
|
|
— |
|
|
— |
|
|
— |
|
|
(870 |
) |
|
(870 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,510 |
|
Non-cash compensation expense |
|
|
— |
|
|
330 |
|
|
— |
|
|
— |
|
|
330 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Balances, September 30, 2009 |
|
$ |
330 |
|
$ |
527,330 |
|
$ |
(499,020 |
) |
$ |
45,100 |
|
$ |
73,740 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial statements.
6
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
TriMas Corporation ("TriMas" or the "Company"), and its consolidated subsidiaries, is a global manufacturer and distributor of products for commercial, industrial and consumer markets.
The Company is principally engaged in five reportable segments with diverse products and market channels: Packaging, Energy, Aerospace & Defense, Engineered Components and Cequent. See
Note 11, "Segment Information," for further information on each of the Company's reportable segments.
The
accompanying consolidated financial statements include the accounts of the Company and its subsidiaries and in the opinion of management, contain all adjustments, including
adjustments of a normal and recurring nature, necessary for a fair presentation of financial position and results of operations. Results of operations for interim periods are not necessarily
indicative of results for the full year. Certain prior year amounts have been reclassified to conform with the current year presentation. The accompanying consolidated financial statements and notes
thereto should be read in conjunction with the Company's 2008 Annual Report on Form 10-K.
2. Discontinued Operations and Assets Held for Sale
During the fourth quarter of 2008, the Company entered into a binding agreement to sell certain assets within its specialty laminates, jacketings and insulation tapes line of business,
which were part of the Packaging segment. The sale was completed in February 2009 for proceeds of approximately $21.0 million. The Company's manufacturing facility is subject to a lease
agreement expiring in 2024 that was not assumed by the purchaser of the business. During first quarter 2009, upon the cease use date of the facility, the Company recorded a pre-tax charge
of approximately $10.7 million for future lease obligations on the facility, net of estimated sublease recoveries.
During
the fourth quarter of 2007, the Company committed to a plan to sell its property management line of business. Although the business has not yet been sold, the Company continues to
actively market the business and has adjusted its sales price expectations, consistent with the changes in the current economic conditions. As such, the Company continues to report the property
management business as discontinued operations and assets held for sale for all periods presented.
The
results of the aforementioned businesses are reported as discontinued operations for all periods presented.
Results
of discontinued operations are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
|
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
(dollars in thousands)
|
|
(dollars in thousands)
|
|
Net sales |
|
$ |
670 |
|
$ |
15,930 |
|
$ |
9,470 |
|
$ |
44,010 |
|
| |
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations before income tax expense |
|
$ |
(1,150 |
) |
$ |
410 |
|
$ |
(14,320 |
) |
$ |
440 |
|
Income tax (expense) benefit |
|
|
470 |
|
|
(150 |
) |
|
5,580 |
|
|
(160 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Income (loss) from discontinued operations, net of income tax expense |
|
$ |
(680 |
) |
$ |
260 |
|
$ |
(8,740 |
) |
$ |
280 |
|
| |
|
|
|
|
|
|
|
|
|
7
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
2. Discontinued Operations and Assets Held for Sale (Continued)
Assets
and liabilities of the discontinued operations held for sale are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2009 |
|
December 31,
2008 |
|
|
|
(dollars in thousands)
|
|
Receivables, net |
|
$ |
210 |
|
$ |
680 |
|
Inventories, net |
|
|
— |
|
|
7,750 |
|
Prepaid expenses and other assets |
|
|
— |
|
|
7,650 |
|
Property and equipment, net |
|
|
2,490 |
|
|
10,120 |
|
| |
|
|
|
|
|
| |
Total assets |
|
$ |
2,700 |
|
$ |
26,200 |
|
| |
|
|
|
|
|
Accounts payable |
|
$ |
70 |
|
$ |
90 |
|
Accrued liabilities and other |
|
|
1,170 |
|
|
1,250 |
|
| |
|
|
|
|
|
| |
Total liabilities |
|
$ |
1,240 |
|
$ |
1,340 |
|
| |
|
|
|
|
|
3. Mosinee Plant Closure
In March 2009, the Company announced plans to close its manufacturing facility in Mosinee, Wisconsin, moving production and distribution functions currently in Mosinee to
lower-cost manufacturing facilities or to third-party sourcing partners. As of September 30, 2009, the Company has moved a significant portion of the production and distribution
functions to other locations or third-parties, and expects to cease operations in Mosinee during the fourth quarter of 2009, with the move completed by mid 2010. In connection with this action, the
Company recorded a pre-tax charge within its Cequent segment of approximately $1.6 million in the first quarter of 2009, primarily related to cash costs for severance benefits for
approximately 160 employees to be involuntarily terminated as part of the closure. As of September 30, 2009, the Company had paid approximately $0.5 million of severance benefits, with
the remaining $1.1 million expected to be paid by mid 2010.
In
addition, the Company incurred pre-tax, non-cash charges of approximately $0.5 million and $2.2 million, respectively, in the three and nine
months ended September 30, 2009, related to accelerated depreciation expense as a result of shortening the expected useful lives on certain machinery and equipment assets that the Company will
no longer utilize following the closure.
The
Company's manufacturing facility in Mosinee is subject to a lease agreement expiring in 2022. The Company is currently assessing the potential recoverability of its future lease
obligations for this facility,
and will record an estimate of any future unrecoverable lease obligations upon the cease use date of the facility.
8
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
4. Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill for the nine months ended September 30, 2009 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
Energy |
|
Aerospace &
Defense |
|
Engineered
Components |
|
Cequent |
|
Total |
|
|
|
(dollars in thousands)
|
|
Balance, December 31, 2008 |
|
$ |
113,760 |
|
$ |
44,980 |
|
$ |
43,540 |
|
$ |
— |
|
$ |
— |
|
$ |
202,280 |
|
| |
Purchase accounting adjustments |
|
|
(740 |
) |
|
(5,990 |
) |
|
(2,410 |
) |
|
— |
|
|
— |
|
|
(9,140 |
) |
| |
Foreign currency translation and other |
|
|
2,730 |
|
|
650 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,380 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2009 |
|
$ |
115,750 |
|
$ |
39,640 |
|
$ |
41,130 |
|
$ |
— |
|
$ |
— |
|
$ |
196,520 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the second quarter of 2009, the Company identified a balance sheet gross-up of goodwill and deferred tax liabilities in the amount of $9.1 million and
$8.5 million, respectively, which were incorrectly established in purchase accounting for business combinations occurring prior to 2004. Management corrected the affected accounts in the second
quarter of 2009, which resulted in a non-cash charge to income tax expense of $0.6 million.
The
gross carrying amounts and accumulated amortization of the Company's other intangibles as of September 30, 2009 and December 31, 2008 are summarized below. The Company
amortizes these assets over periods ranging from 1 to 30 years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2009 |
|
As of December 31, 2008 |
|
Intangible Category by Useful Life
|
|
Carrying
Amount |
|
Accumulated
Amortization |
|
Carrying
Amount |
|
Accumulated
Amortization |
|
|
|
(dollars in thousands)
|
|
Customer relationships: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
5 - 12 years |
|
$ |
25,920 |
|
$ |
(17,960 |
) |
$ |
25,600 |
|
$ |
(16,140 |
) |
| |
15 - 25 years |
|
|
154,610 |
|
|
(59,190 |
) |
|
154,610 |
|
|
(53,010 |
) |
| |
|
|
|
|
|
|
|
|
|
Total customer relationships |
|
|
180,530 |
|
|
(77,150 |
) |
|
180,210 |
|
|
(69,150 |
) |
| |
|
|
|
|
|
|
|
|
|
Technology and other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
1 - 15 years |
|
|
25,770 |
|
|
(21,560 |
) |
|
25,570 |
|
|
(19,890 |
) |
| |
17 - 30 years |
|
|
42,340 |
|
|
(16,220 |
) |
|
42,000 |
|
|
(14,700 |
) |
| |
|
|
|
|
|
|
|
|
|
Total technology and other |
|
|
68,110 |
|
|
(37,780 |
) |
|
67,570 |
|
|
(34,590 |
) |
| |
|
|
|
|
|
|
|
|
|
Trademark/Trade names (indefinite life) |
|
|
34,990 |
|
|
— |
|
|
34,840 |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
$ |
283,630 |
|
$ |
(114,930 |
) |
$ |
282,620 |
|
$ |
(103,740 |
) |
| |
|
|
|
|
|
|
|
|
|
Amortization
expense related to technology and other intangibles was approximately $1.0 million for each of the three month periods ended September 30, 2009 and 2008,
respectively, and $3.0 million and $2.9 million for the nine months ended September 30, 2009 and 2008, respectively. These amounts are included in cost of sales in the
accompanying consolidated statement of operations. Amortization expense related to customer relationship intangibles was approximately $2.7 million for each of the three month periods ended
September 30, 2009 and 2008, respectively, and $8.0 million for each of the
9
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
4. Goodwill and Other Intangible Assets (Continued)
nine
month periods ended September 30, 2009 and 2008, respectively. These amounts are included in selling, general and administrative expenses in the accompanying consolidated statement of
operations.
5. Accounts Receivable Securitization
TriMas is party to a 364-day receivable securitization facility through TSPC, Inc. ("TSPC"), a wholly-owned subsidiary, to sell trade accounts receivable of
substantially all of the Company's domestic business operations. TSPC from time to time may sell an undivided fractional ownership interest in the pool of receivables up to approximately
$55.0 million to a third party multi-seller receivables funding company. As of September 30, 2009 and December 31, 2008, the Company's funding under the facility was approximately
$0 and $20.0 million, respectively, with an additional $29.8 million and $30.9 million, respectively, available but not utilized. The Company had pledged receivables of
approximately $66.2 million and $79.5 million under the program as of September 30, 2009 and December 31, 2008, respectively, which are included in receivables in the
accompanying consolidated balance sheet. The net proceeds of sales are less than the face amount of accounts receivable sold by an amount that approximates the purchaser's financing costs, including a
usage fee (4.50% and 1.05% as of September 30, 2009 and 2008, respectively), a fee on the unused portion of the facility (2.25% and 0.50% as of September 30, 2009 and 2008,
respectively), and cost of funds fees (see below), which amounted to a total of $0.3 million and $0.6 million for the three months ended September 30, 2009 and 2008, respectively,
and $0.9 million and $1.9 million for the nine months ended September 30, 2009 and 2008, respectively. Such amounts are included in other expense, net in the accompanying
consolidated statement of operations. This facility expires on February 12, 2010.
The
cost of funds fees are determined by calculating the estimated present value of the receivables sold compared to their carrying amount. The estimated present value factor is based on
historical collection experience and a discount rate representing a spread over a commercial paper-based rate as prescribed under the terms of the securitization agreement. As of September 30,
2009 and 2008, the costs of funds fees were based on an average liquidation period of the portfolio of approximately 1.3 months, and an average discount rate of 2.6% and 2.2%, at
September 30, 2009 and 2008, respectively.
In
addition, the Company from time to time may sell an undivided interest in accounts receivable under factoring arrangements at three of its European subsidiaries. As of
September 30, 2009 and December 31, 2008, the Company's funding under these arrangements was approximately $4.3 million and $3.2 million, respectively. Sales of the
European subsidiaries' accounts receivable were sold at a discount from face value of approximately 1.2% and 3.4%, at September 30, 2009 and 2008, respectively. Costs associated with these
transactions were approximately $0.1 million for each of the three month periods ended September 30, 2009 and 2008, and $0.2 million and $0.3 million for the nine months
ended
September 30, 2009 and 2008, respectively, and are included in other expense, net in the accompanying consolidated statement of operations.
10
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
6. Inventories
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2009 |
|
December 31,
2008 |
|
|
|
(dollars in thousands)
|
|
Finished goods |
|
$ |
94,390 |
|
$ |
119,980 |
|
Work in process |
|
|
17,910 |
|
|
23,250 |
|
Raw materials |
|
|
29,530 |
|
|
45,720 |
|
| |
|
|
|
|
|
| |
Total inventories |
|
$ |
141,830 |
|
$ |
188,950 |
|
| |
|
|
|
|
|
7. Property and Equipment, Net
Property and equipment, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2009 |
|
December 31,
2008 |
|
|
|
(dollars in thousands)
|
|
Land and land improvements |
|
$ |
2,420 |
|
$ |
4,920 |
|
Buildings |
|
|
44,790 |
|
|
44,470 |
|
Machinery and equipment |
|
|
289,360 |
|
|
279,580 |
|
| |
|
|
|
|
|
|
|
|
336,570 |
|
|
328,970 |
|
Less: Accumulated depreciation |
|
|
165,810 |
|
|
147,400 |
|
| |
|
|
|
|
|
| |
Property and equipment, net |
|
$ |
170,760 |
|
$ |
181,570 |
|
| |
|
|
|
|
|
Depreciation
expense was approximately $6.9 million and $21.1 million, and $6.5 million and $19.7 million for the three and nine months ended
September 30, 2009 and 2008, respectively, of which $6.3 million and $18.9 million, and $5.6 million and $16.7 million, respectively, is included in cost of sales in
the accompanying statement of operations, and $0.6 million and $2.2 million, and $0.9 million and $3.0 million, respectively, is included in selling, general and
administrative expenses in the accompanying statement of operations.
8. Long-term Debt
The Company's long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2009 |
|
December 31,
2008 |
|
|
|
(dollars in thousands)
|
|
U.S. bank debt |
|
$ |
252,200 |
|
$ |
262,580 |
|
Non-U.S. bank debt and other |
|
|
17,040 |
|
|
18,220 |
|
97/8% senior subordinated notes, due June 2012 |
|
|
256,140 |
|
|
329,140 |
|
| |
|
|
|
|
|
|
|
|
525,380 |
|
|
609,940 |
|
Less: Current maturities, long-term debt |
|
|
6,640 |
|
|
10,360 |
|
| |
|
|
|
|
|
| |
Long-term debt |
|
$ |
518,740 |
|
$ |
599,580 |
|
| |
|
|
|
|
|
11
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
8. Long-term Debt (Continued)
U.S. Bank Debt
The Company is a party to a credit facility consisting of a $90.0 million revolving credit facility, a $60.0 million
deposit-linked supplemental revolving credit facility and a $260.0 million term loan facility (collectively, the "Credit Facility"). Under the Credit Facility, the Company is also able to issue
letters of credit, not to exceed $65.0 million in aggregate, against its revolving credit facility commitments.
At
September 30, 2009 and December 31, 2008, the Company had $0 and $8.5 million, respectively, outstanding under its revolving credit facility and had an additional
$118.8 million and $107.4 million, respectively, of capacity potentially available after giving effect to the $31.2 million and $34.1 million, respectively, letters of
credit issued and outstanding. However, including availability under its accounts receivable facility and after consideration of leverage restrictions contained in the Credit Facility, the Company had
approximately $130.9 million and $127.9 million of capacity available to it under its revolving credit facility and receivables securitization for general corporate purposes as of
September 30, 2009 and December 31, 2008, respectively.
The
weighted average interest rate on borrowings under the Credit Facility was 3.8% and 5.4% at September 30, 2009 and December 31, 2008, respectively.
The
bank debt is an obligation of the Company and its subsidiaries. Although the terms of the Credit Facility do not restrict the Company's subsidiaries from making distributions to it
in respect of its 97/8% senior subordinated notes, it does contain certain other limitations on the distribution of funds from TriMas Company LLC, the principal subsidiary, to
the Company. The restricted net assets of the guarantor subsidiaries, of approximately $336.2 million and $369.4 million at September 30, 2009 and December 31, 2008,
respectively, are presented in the financial information in Note 17, "Supplemental Guarantor Condensed Consolidating Financial Information." The
Credit Facility also contains various negative and affirmative covenants and other requirements affecting the Company and its subsidiaries. The Company was in compliance with its covenants at
September 30, 2009.
The
Company's term loan facility traded at approximately 92.5% and 58.0% of par value as of September 30, 2009 and December 31, 2008, respectively.
Non-U.S. Bank Debt
In the United Kingdom, the Company's subsidiary is party to a revolving debt agreement which is secured by a letter of credit under the
Credit Facility. At September 30, 2009, the balance outstanding under this arrangement was $0.7 million at an interest rate of 2.0%. At December 31, 2008, the balance outstanding
under this agreement was approximately $0.3 million at an interest rate of 3.5%.
In
Italy, the Company's subsidiary is party to a loan agreement for a term of seven years, at a rate 0.75% above EURIBOR (Euro Interbank Offered Rate), and is secured by land and
buildings of the subsidiary. At September 30, 2009, the balance outstanding under this agreement was $1.9 million at an interest rate of 1.5%. At December 31, 2008, the balance
outstanding under this agreement was approximately $2.2 million at an interest rate of 3.6%.
In
Australia, the Company's subsidiary is party to a debt agreement which matures December 31, 2010 and is secured by substantially all the assets of the subsidiary. At
September 30, 2009, the balance outstanding under this agreement was $14.1 million at a weighted average interest rate of 6.1%. At
12
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
8. Long-term Debt (Continued)
December 31,
2008, the balance outstanding under this agreement was approximately $15.3 million at an interest rate of approximately 5.9%.
Notes
During the three and nine months ended September 30, 2009, the Company utilized approximately $8.7 million and
$43.8 million, respectively, of cash on hand to retire $10.0 million and $73.2 million, respectively, of face value 97/8% senior subordinated notes due in 2012
(Notes). In connection with these transactions, the Company recorded a net gain in the three and nine months ended September 30, 2009 of approximately $1.2 million and
$28.3 million, respectively, after considering non-cash debt extinguishment costs of $0.1 million and $1.1 million, respectively.
The
Notes indenture contains negative and affirmative covenants and other requirements that are comparable to those contained in the Credit Facility. At September 30, 2009, the
Company was in compliance with all such covenant requirements.
The
Company's senior subordinated notes traded at approximately 90.3% and 51.5% of par value as of September 30, 2009 and December 31, 2008, respectively.
9. Derivative Instruments
The Company is exposed to interest rate risk associated with fluctuations of the interest rate on its variable rate debt. To manage this risk, the Company enters into interest rate swaps
to hedge cash flows associated with the variable rate debt. The Company formally documents qualifying hedged transactions and hedging instruments, and assesses, both at inception of the contract and
on an ongoing basis, whether the hedging instruments are effective in offsetting changes in cash flows of the hedged transaction. The Company does not enter into derivative instrument agreements for
speculative purposes.
In
February 2008, the Company entered into an interest rate swap agreement effective April 2008 to fix the LIBOR-based variable portion of the interest rate on $125.0 million
notional amount of its term loan facility at 2.73% through October 2009. In January 2009, the Company entered into two additional interest rate swap agreements. The first of these swaps was effective
in January 2009 and fixes the LIBOR-based variable portion of the interest rate on $75.0 million notional amount of its term loan facility at 1.39% through January 2011. The second of these
swaps is effective in October 2009 and fixes the LIBOR-based variable portion of the interest rate on $125.0 million notional amount of its term loan facility at 1.91% through July 2011. The
Company has formally designated these swap agreements as cash flow hedges and expects the hedges to be highly effective in offsetting fluctuations in the designated interest payments resulting from
changes in the benchmark interest rate.
13
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
9. Derivative Instruments (Continued)
As
of September 30, 2009 and December 31, 2008, the fair value carrying amounts of the Company's derivative instruments are recorded as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives |
|
Liability Derivatives |
|
|
|
Balance Sheet Caption |
|
September 30,
2009 |
|
December 31,
2008 |
|
September 30,
2009 |
|
December 31,
2008 |
|
|
|
|
|
(dollars in thousands)
|
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest rate contracts |
|
Accrued liabilities |
|
$ |
— |
|
$ |
— |
|
$ |
1,610 |
|
$ |
1,160 |
|
| |
Interest rate contracts |
|
Other long-term liabilities |
|
|
— |
|
|
— |
|
|
940 |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Total derivatives designated as hedging instruments |
|
|
|
$ |
— |
|
$ |
— |
|
$ |
2,550 |
|
$ |
1,160 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Activity related to derivative instruments within accumulated other comprehensive income for the three and nine months ended September 30,
2009 is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2009 |
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2009 |
|
|
|
|
|
Tax Effect |
|
|
|
|
|
Pre-tax |
|
After-tax |
|
Pre-tax |
|
Tax Effect |
|
After-tax |
|
|
|
(dollars in thousands)
|
|
(dollars in thousands)
|
|
Beginning Balance |
|
$ |
(1,830 |
) |
$ |
690 |
|
$ |
(1,140 |
) |
$ |
(1,160 |
) |
$ |
440 |
|
$ |
(720 |
) |
| |
Loss reclassified from accumulated other comprehensive income into interest expense |
|
|
940 |
|
|
(360 |
) |
|
580 |
|
|
1,950 |
|
|
(740 |
) |
|
1,210 |
|
| |
Gain (loss) on changes in the fair value of derivative instruments |
|
|
(1,660 |
) |
|
630 |
|
|
(1,030 |
) |
|
(3,340 |
) |
|
1,260 |
|
|
(2,080 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance |
|
$ |
(2,550 |
) |
$ |
960 |
|
$ |
(1,590 |
) |
$ |
(2,550 |
) |
$ |
960 |
|
$ |
(1,590 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Over
the next 12 months, the Company expects to reclassify approximately $1.6 million of pre-tax deferred losses from accumulated other comprehensive income to
interest expense as the related interest payments for the designated interest rate swaps are recognized.
The
following table sets forth the fair values of financial assets and liabilities as of September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Frequency |
|
Asset /
(Liability) |
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) |
|
Significant Other
Observable
Inputs
(Level 2) |
|
Significant
Unobservable
Inputs
(Level 3) |
|
|
|
|
|
(dollars in thousands)
|
|
Interest rate swap |
|
Recurring |
|
$ |
(2,550 |
) |
$ |
— |
|
$ |
(2,550 |
) |
$ |
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
14
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
10. Commitments and Contingencies
A civil suit was filed in the United States District Court for the Central District of California in December 1988 by the United States of America and the State of California against
more than 180 defendants, including TriMas, for alleged release into the environment of hazardous substances disposed of at the Operating Industries, Inc. site in California. This site served
for many years as a depository for municipal and industrial waste. The plaintiffs have requested, among other things, that the defendants clean up the contamination at that site. Consent decrees have
been entered into by the plaintiffs and a group of the defendants, including TriMas, providing that the consenting parties perform certain remedial work at the site and reimburse the plaintiffs for
certain past costs incurred by the plaintiffs at the site. The Company estimates that its share of the clean-up costs will not exceed $500,000, for which the Company has insurance
proceeds. Plaintiffs had sought other relief such as damages arising out of claims for negligence, trespass, public and private nuisance, and other causes of action, but the consent decree governs the
remedy. Based upon the Company's present knowledge and subject to future legal and factual developments, the Company does not believe that this matter will have a material adverse effect on its
financial position, results of operations or cash flows.
As
of September 30, 2009, the Company was a party to approximately 857 pending cases involving an aggregate of approximately 7,584 claimants alleging personal injury from exposure
to asbestos containing materials formerly used in gaskets (both encapsulated and otherwise) manufactured or distributed by certain of the Company's subsidiaries for use primarily in the petrochemical
refining and exploration industries.
The
following chart summarizes the number of claimants, number of claims filed, number of claims dismissed, number of claims settled, the average settlement amount per claim and the
total defense costs, exclusive of amounts reimbursed under the Company's primary insurance, at the applicable date and for the applicable periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claims
pending at
beginning of
period |
|
Claims filed
during
period |
|
Claims
dismissed
during
period |
|
Claims
settled
during
period |
|
Average
settlement
amount
per claim
during
period |
|
Total defense
costs during
period |
|
Fiscal year ended December 31, 2008 |
|
|
9,544 |
|
|
723 |
|
|
2,668 |
|
|
75 |
|
$ |
1,813 |
|
$ |
3,448,000 |
|
Nine months ended September 30, 2009 |
|
|
7,524 |
|
|
260 |
|
|
189 |
|
|
11 |
|
$ |
16,000 |
|
$ |
1,975,000 |
|
In
addition, the Company acquired various companies to distribute its products that had distributed gaskets of other manufacturers prior to acquisition. The Company believes that many of
its pending cases relate to locations at which none of its gaskets were distributed or used.
The
Company may be subjected to significant additional asbestos-related claims in the future, the cost of settling cases in which product identification can be made may increase, and the
Company may be subjected to further claims in respect of the former activities of its acquired gasket distributors. The Company is unable to make a meaningful statement concerning the monetary claims
made in the asbestos cases given that, among other things, claims may be initially made in some jurisdictions without specifying the amount sought or by simply stating the requisite or maximum
permissible
15
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
10. Commitments and Contingencies (Continued)
monetary
relief, and may be amended to alter the amount sought. The large majority of claims do not specify the amount sought. Of the 7,584 claims pending at September 30, 2009, 103 set forth
specific amounts of damages (other than those stating the statutory minimum or maximum). 77 of the 103 claims sought between $1.0 million and $5.0 million in total damages (which
includes compensatory and punitive damages), 21 sought between $5.0 million and $10.0 million in total damages (which includes compensatory and punitive damages) and 5 sought over
$10.0 million (which includes compensatory and punitive damages). Solely with respect to compensatory damages, 80 of the 103 claims sought between $250,000 and $600,000, 19 sought
between $1.0 million and $5.0 million and 4 sought over $5.0 million. Solely with respect to punitive damages, 77 of the 103 claims sought between $1.0 million and
$2.5 million, 21 sought between $2.5 million and $5.0 million and 5 sought over $5.0 million. In addition, relatively few of the claims have reached the discovery stage and
even fewer claims have gone past the discovery stage.
Total
settlement costs (exclusive of defense costs) for all such cases, some of which were filed over 20 years ago, have been approximately $5.4 million. All relief sought
in the asbestos cases is monetary in nature. To date, approximately 50% of the Company's costs related to settlement and defense of asbestos litigation have been covered by its primary insurance.
Effective February 14, 2006, the Company entered into a coverage-in-place agreement with its first level excess carriers regarding the coverage to be provided to the
Company for asbestos-related claims when the primary insurance is exhausted. The coverage-in-place agreement makes coverage available to the Company that might otherwise be
disputed by the carriers and provides a methodology for the administration of asbestos litigation defense and indemnity payments. The coverage in place agreement allocates payment responsibility among
the primary carrier, excess carriers and the Company's subsidiary.
Based
on the settlements made to date and the number of claims dismissed or withdrawn for lack of product identification, the Company believes that the relief sought (when specified)
does not bear a reasonable relationship to its potential liability. Based upon the Company's experience to date and other available information (including the availability of excess insurance), the
Company does not believe that these cases will have a material adverse effect on its financial position and results of operations or cash flows.
The
Company is subject to other claims and litigation in the ordinary course of business, but does not believe that any such claim or litigation will have a material adverse effect on
its financial position and results of operations or cash flows.
11. Segment Information
The Company reports five segments as described below. Within these reportable segments, there are no individual products or product families for which reported revenues accounted for
more than 10% of the Company's consolidated revenues.
Packaging—Steel and plastic closure caps, drum enclosures, rings and levers, and dispensing systems for industrial and consumer markets.
16
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
11. Segment Information (Continued)
Energy—Engines, engine replacement parts and other well site products for the oil and gas industry as well as metallic and non-metallic
industrial gaskets and fasteners for the petroleum refining, petrochemical and other industrial markets.
Aerospace & Defense—Highly engineered specialty fasteners and screws for the commercial and military aerospace industries and specialty
ordnance components for the defense industry.
Engineered Components—High-pressure and low-pressure cylinders for the transportation, storage and dispensing of compressed
gases, specialty fasteners for the automotive industry, spinal and trauma implant products for the medical industry, and specialty precision tools such as center drills, cutters, end mills, reamers
and punches.
Cequent—Custom-engineered towing, trailering and electrical products including trailer couplers, winches, jacks, trailer brakes and brake control
solutions, lighting accessories and roof racks for the recreational vehicle, agricultural/utility, marine, automotive and commercial trailer markets, functional vehicle accessories and cargo
management solutions including vehicle hitches and receivers, sway controls, weight distribution and fifth-wheel hitches, hitch-mounted accessories, and other accessory components.
The
Company's management uses Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") as a primary indicator of financial operating performance and as
a measure of cash generating capability. Adjusted EBITDA is defined as net income (loss) before cumulative effect of accounting change and before interest, taxes, depreciation, amortization,
non-cash asset and goodwill impairment charges and write-offs and non-cash losses on sale-leaseback of property and equipment.
17
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
11. Segment Information (Continued)
Segment
activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
|
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
(dollars in thousands)
|
|
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
39,730 |
|
$ |
43,350 |
|
$ |
106,130 |
|
$ |
128,910 |
|
Energy |
|
|
36,000 |
|
|
55,430 |
|
|
111,260 |
|
|
157,390 |
|
Aerospace & Defense |
|
|
16,060 |
|
|
24,550 |
|
|
56,530 |
|
|
65,770 |
|
Engineered Components |
|
|
15,860 |
|
|
34,690 |
|
|
51,100 |
|
|
103,160 |
|
Cequent |
|
|
96,080 |
|
|
102,710 |
|
|
290,070 |
|
|
352,930 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total |
|
$ |
203,730 |
|
$ |
260,730 |
|
$ |
615,090 |
|
$ |
808,160 |
|
| |
|
|
|
|
|
|
|
|
|
Operating Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
9,160 |
|
$ |
8,300 |
|
$ |
23,390 |
|
$ |
26,530 |
|
Energy |
|
|
3,200 |
|
|
8,170 |
|
|
9,380 |
|
|
24,670 |
|
Aerospace & Defense |
|
|
5,190 |
|
|
8,640 |
|
|
18,410 |
|
|
22,230 |
|
Engineered Components |
|
|
(60 |
) |
|
3,470 |
|
|
(1,010 |
) |
|
12,520 |
|
Cequent |
|
|
7,220 |
|
|
4,000 |
|
|
6,760 |
|
|
17,930 |
|
Corporate expenses |
|
|
(4,540 |
) |
|
(5,060 |
) |
|
(16,800 |
) |
|
(18,200 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Total |
|
$ |
20,170 |
|
$ |
27,520 |
|
$ |
40,130 |
|
$ |
85,680 |
|
| |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
12,540 |
|
$ |
11,640 |
|
$ |
32,760 |
|
$ |
36,420 |
|
Energy |
|
|
3,950 |
|
|
8,850 |
|
|
11,730 |
|
|
26,670 |
|
Aerospace & Defense |
|
|
5,760 |
|
|
9,080 |
|
|
20,180 |
|
|
23,560 |
|
Engineered Components |
|
|
980 |
|
|
4,510 |
|
|
2,150 |
|
|
15,630 |
|
Cequent |
|
|
12,200 |
|
|
8,560 |
|
|
21,700 |
|
|
30,940 |
|
Corporate (expenses) income |
|
|
(3,520 |
) |
|
(5,470 |
) |
|
11,360 |
|
|
(19,910 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Subtotal from continuing operations |
|
|
31,910 |
|
|
37,170 |
|
|
99,880 |
|
|
113,310 |
|
Discontinued operations |
|
|
(1,000 |
) |
|
1,080 |
|
|
(12,490 |
) |
|
2,400 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total company |
|
$ |
30,910 |
|
$ |
38,250 |
|
$ |
87,390 |
|
$ |
115,710 |
|
| |
|
|
|
|
|
|
|
|
|
18
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
11. Segment Information (Continued)
The following is a reconciliation of the Company's net income to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
|
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
(dollars in thousands)
|
|
Net income |
|
$ |
5,830 |
|
$ |
8,320 |
|
$ |
11,140 |
|
$ |
25,640 |
|
| |
Income tax expense |
|
|
3,420 |
|
|
5,560 |
|
|
6,650 |
|
|
15,310 |
|
| |
Interest expense |
|
|
10,930 |
|
|
13,630 |
|
|
35,050 |
|
|
42,320 |
|
| |
Debt extinguishment costs |
|
|
150 |
|
|
— |
|
|
1,140 |
|
|
— |
|
| |
Depreciation and amortization |
|
|
10,580 |
|
|
10,740 |
|
|
33,410 |
|
|
32,440 |
|
| |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA, total company |
|
$ |
30,910 |
|
$ |
38,250 |
|
$ |
87,390 |
|
$ |
115,710 |
|
| |
Adjusted EBITDA, discontinued operations |
|
|
(1,000 |
) |
|
1,080 |
|
|
(12,490 |
) |
|
2,400 |
|
| |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA, continuing operations |
|
$ |
31,910 |
|
$ |
37,170 |
|
$ |
99,880 |
|
$ |
113,310 |
|
| |
|
|
|
|
|
|
|
|
|
12. Equity Awards
The Company did not issue any stock option or restricted share grants during the third quarter of 2009.
2006 Plan
Information related to stock options at September 30, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Stock Options |
|
Weighted Average
Option Price |
|
Average
Remaining
Contractual Life
(Years) |
|
Aggregate
Intrinsic Value |
|
Outstanding at January 1, 2009 |
|
|
— |
|
$ |
— |
|
|
|
|
|
|
|
| |
Granted |
|
|
578,000 |
|
|
1.14 |
|
|
|
|
|
|
|
| |
Exercised |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
| |
Cancelled |
|
|
(24,000 |
) |
|
1.01 |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2009 |
|
|
554,000 |
|
$ |
1.14 |
|
|
9.4 |
|
$ |
2,191,860 |
|
| |
|
|
|
|
|
|
|
|
|
Information
related to restricted shares at September 30, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Unvested
Restricted
Shares |
|
Weighted Average
Grant Date Fair
Value |
|
Average
Remaining
Contractual Life
(Years) |
|
Aggregate
Intrinsic Value |
|
Outstanding at January 1, 2009 |
|
|
160,908 |
|
$ |
8.89 |
|
|
|
|
|
|
|
| |
Granted |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
| |
Vested |
|
|
(58,983 |
) |
|
9.15 |
|
|
|
|
|
|
|
| |
Cancelled |
|
|
(39,329 |
) |
|
9.29 |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2009 |
|
|
62,596 |
|
$ |
8.40 |
|
|
1.3 |
|
$ |
319,240 |
|
| |
|
|
|
|
|
|
|
|
|
19
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
12. Equity Awards (Continued)
The
Company recognized approximately $0.1 million and $0.2 million of stock-based compensation expense related to the 2006 Plan during the three and nine months ended
September 30, 2009, respectively, and $0.3 million and $1.1 million for the three and nine months ended September 30, 2008, respectively. The stock-based compensation
expense is included in selling, general and administrative expenses in the accompanying statement of operations.
As
of September 30, 2009 and December 31, 2008, there was approximately $0.2 million and $0.7 million, respectively, of unrecognized compensation cost related
to unvested restricted shares that is expected to be recorded over a weighted-average period of 1.1 years and 1.4 years, respectively. As of September 30, 2009, there was
approximately $0.1 million of unrecognized compensation cost related to stock options that is expected to be recorded over a weighted-average period of 1.6 years.
2002 Plan
Information related to stock options at September 30, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options |
|
Weighted Average
Option Price |
|
Average
Remaining
Contractual Life
(Years) |
|
Aggregate
Intrinsic Value |
|
Outstanding at January 1, 2009 |
|
|
1,596,213 |
|
$ |
20.92 |
|
|
|
|
|
|
|
| |
Granted |
|
|
552,500 |
|
|
1.02 |
|
|
|
|
|
|
|
| |
Exercised |
|
|
(3,125 |
) |
|
1.01 |
|
|
|
|
|
|
|
| |
Cancelled |
|
|
(834,272 |
) |
|
19.69 |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2009 |
|
|
1,311,316 |
|
$ |
13.37 |
|
|
6.6 |
|
$ |
2,150,030 |
|
| |
|
|
|
|
|
|
|
|
|
The
Company recognized approximately $0.04 million and $0.1 million of stock-based compensation expense related to the 2002 Plan during the three and nine months ended
September 30, 2009, respectively, and $0.02 million and $0.07 million during the three and nine months ended September 30, 2008, respectively. The stock-based compensation
expense is included in selling, general and administrative expenses in the accompanying statement of operations.
As
of September 30, 2009 and December 31, 2008, there was approximately $0.2 million and $0.07 million, respectively, of unrecognized compensation cost
related to stock options that is expected to be recorded over a weighted-average period of 1.5 years and 1.4 years, respectively.
The
fair value of options which vested during each of the three month periods ended September 30, 2009 and 2008 was $0.04 million, and $0.2 million and
$0.4 million during the nine months ended September 30, 2009 and 2008, respectively.
As
of September 30, 2009, 727,433 stock options were exercisable under the 2002 Plan.
13. Earnings per Share
Net earnings are divided by the weighted average number of shares outstanding during the year to calculate basic earnings per share. Diluted earnings per share are calculated to give
effect to stock options and other stock-based awards. The calculation of diluted earnings per share included 32,806
20
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
13. Earnings per Share (Continued)
and
48,467 restricted shares for the three months ended September 30, 2009 and 2008, respectively, and 14,813 and 28,234 restricted shares for the nine months ended September 30, 2009
and 2008, respectively. The calculation of diluted earnings (loss) per share also included 256,650 and 478,406 options to purchase shares of common stock for the three and nine months ended
September 30, 2009, respectively. Options to purchase 1,606,101 shares of common stock were outstanding at September 30, 2008, but were not included in the calculation of diluted
earnings (loss) per share for the three and nine months ended September 30, 2008, because to do so would have been anti-dilutive.
14. Defined Benefit Plans
Net periodic pension and postretirement benefit costs for the Company's defined benefit pension plans and postretirement benefit plans cover foreign employees, union hourly employees and
certain salaried employees. The components of net periodic pension and postretirement benefit costs for the three and nine months ended September 30, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans |
|
Other Postretirement Benefits |
|
|
|
Three Months
Ended
September 30, |
|
Nine Months
Ended
September 30, |
|
Three Months
Ended
September 30, |
|
Nine Months
Ended
September 30, |
|
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
(dollars in thousands)
|
|
(dollars in thousands)
|
|
Service costs |
|
$ |
130 |
|
$ |
130 |
|
$ |
390 |
|
$ |
400 |
|
$ |
— |
|
$ |
20 |
|
$ |
— |
|
$ |
60 |
|
Interest costs |
|
|
390 |
|
|
430 |
|
|
1,170 |
|
|
1,270 |
|
|
30 |
|
|
100 |
|
|
80 |
|
|
310 |
|
Expected return on plan assets |
|
|
(380 |
) |
|
(460 |
) |
|
(1,150 |
) |
|
(1,380 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Amortization of prior service cost |
|
|
— |
|
|
— |
|
|
10 |
|
|
— |
|
|
(70 |
) |
|
— |
|
|
(200 |
) |
|
— |
|
Amortization of net loss |
|
|
80 |
|
|
80 |
|
|
230 |
|
|
240 |
|
|
(10 |
) |
|
10 |
|
|
(20 |
) |
|
30 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
220 |
|
$ |
180 |
|
$ |
650 |
|
$ |
530 |
|
$ |
(50 |
) |
$ |
130 |
|
$ |
(140 |
) |
$ |
400 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company contributed approximately $0.4 million and $1.2 million to its defined benefit pension plans during the three and nine
months ended September 30, 2009, respectively. The Company expects to contribute approximately $1.9 million to its defined benefit pension plans for the full year 2009.
15. New Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 168, "The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162," which superseded the existing accounting principles generally accepted in the United
States of America ("U.S. GAAP"), making the FASB Accounting Standards Codification ("ASC") the single official source of authoritative U.S. GAAP (other than rules and interpretive
releases issued by the Securities and Exchange Commission for non-governmental entities). The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts; instead, the FASB will issue Accounting Standards Updates, which will serve to update the ASC. The ASC was not intended to change U.S. GAAP, instead
simplifying it into one level of authoritative literature in a user-friendly research system, categorized by topic. The Company adopted the ASC
21
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
15. New Accounting Pronouncements (Continued)
during
the third quarter of 2009 by using the new guidelines and numbering system prescribed when referencing U.S.GAAP in this Form 10-Q. Although the ASC adoption changed the
Company's references to U.S. GAAP accounting standards, it did not impact the Company's results of operations, financial position or liquidity.
In
June 2009, the FASB issued amended guidance related to the transfer of financial assets. The new guidance, listed under ASC 860, "Transfers and Servicing," requires more information
about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risk related to transferred financial assets. ASC 860 eliminates the
concept of a qualifying special purpose entity, changes the requirements for derecognizing financial assets and requires additional disclosure. This standard is effective for interim and annual
periods ending after November 15, 2009. The Company is currently assessing the impact of this standard on its consolidated financial statements.
In
June 2009, the FASB issued amended guidance related to consolidation of variable interest entities. The new guidance, listed under ASC 810, "Consolidation," changes how a reporting
entity determines when a variable interest entity should be consolidated. It also requires additional disclosures about its involvement with variable interest entities and any significant changes in
risk exposure due to that involvement. This standard is effective for interim and annual periods ending after November 15, 2009. The Company is currently assessing the impact of this standard
on its consolidated financial statements.
In
August 2009, the FASB issued new guidance related to liabilities measured at fair value. The new guidance, listed under ASC 820, "Fair Value Measurements and Disclosures," provides
clarification on how to measure the fair value of a liability in which a quoted price in an active market for an identical liability is not available. This statement is effective for the Company's
fourth quarter of 2009. The Company is currently assessing the impact of this standard on its consolidated financial statements.
In
December 2008, the FASB issued amended guidance relating to the disclosure of employers' postretirement benefit plan assets. The new guidance, which is now part of ASC 715,
"Compensation—Retirement Benefits," requires more detailed disclosures about employers' pension plan assets. New disclosures will include additional information on investment strategies,
major categories of plan assets, concentrations of risk within plan assets and valuation techniques used to measure the fair value of plan assets. This new standard will only affect disclosures and
will have no impact on the Company's consolidated financial statements. This statement is effective for fiscal years ending after December 15, 2009.
16. Subsequent Events
The Company has evaluated all subsequent events through November 9, 2009, the date on which the financial statements were issued.
22
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
17. Supplemental Guarantor Condensed Consolidating Financial Information
Under an indenture dated September 6, 2002, TriMas Corporation ("Parent"), issued 97/8% Senior
Subordinated Notes due 2012 in a total principal amount of $437.8 million (face value), of which approximately $181.2 million has subsequently been retired through September 30,
2009. These Notes are guaranteed by substantially all of the Company's domestic subsidiaries ("Guarantor Subsidiaries"). All of the Guarantor Subsidiaries are 100% owned by the Parent and their
guarantee is full, unconditional, joint and several. The Company's non-domestic subsidiaries and TSPC, Inc. have not guaranteed the Notes ("Non-Guarantor Subsidiaries").
The Guarantor Subsidiaries have also guaranteed amounts outstanding under the Company's Credit Facility.
The
accompanying supplemental guarantor condensed, consolidating financial information is presented using the equity method of accounting for all periods presented. Under this method,
investments in subsidiaries are recorded at cost and adjusted for the Company's share in the subsidiaries' cumulative results of operations, capital contributions and distributions and other changes
in equity. Elimination entries relate primarily to the elimination of investments in subsidiaries and associated intercompany balances and transactions.
23
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
17. Supplemental Guarantor Condensed Consolidating Financial Information (Continued)
Supplemental Guarantor
Condensed Financial Statements
Consolidating Balance Sheet
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
Parent |
|
Guarantor |
|
Non-
Guarantor |
|
Eliminations |
|
Consolidated Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents |
|
$ |
— |
|
$ |
17,220 |
|
$ |
7,550 |
|
$ |
— |
|
$ |
24,770 |
|
| |
Trade receivables, net |
|
|
— |
|
|
83,070 |
|
|
16,290 |
|
|
— |
|
|
99,360 |
|
| |
Receivables, intercompany |
|
|
— |
|
|
— |
|
|
1,680 |
|
|
(1,680 |
) |
|
— |
|
| |
Inventories |
|
|
— |
|
|
118,900 |
|
|
22,930 |
|
|
— |
|
|
141,830 |
|
| |
Deferred income taxes |
|
|
— |
|
|
16,070 |
|
|
900 |
|
|
— |
|
|
16,970 |
|
| |
Prepaid expenses and other current assets |
|
|
— |
|
|
5,510 |
|
|
1,170 |
|
|
— |
|
|
6,680 |
|
| |
Assets of discontinued operations held for sale |
|
|
— |
|
|
2,700 |
|
|
— |
|
|
— |
|
|
2,700 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total current assets |
|
|
— |
|
|
243,470 |
|
|
50,520 |
|
|
(1,680 |
) |
|
292,310 |
|
Investments in subsidiaries |
|
|
336,220 |
|
|
102,120 |
|
|
— |
|
|
(438,340 |
) |
|
— |
|
Property and equipment, net |
|
|
— |
|
|
123,120 |
|
|
47,640 |
|
|
— |
|
|
170,760 |
|
Goodwill |
|
|
— |
|
|
148,220 |
|
|
48,300 |
|
|
— |
|
|
196,520 |
|
Intangibles and other assets |
|
|
3,080 |
|
|
176,940 |
|
|
4,400 |
|
|
— |
|
|
184,420 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Total assets |
|
$ |
339,300 |
|
$ |
793,870 |
|
$ |
150,860 |
|
$ |
(440,020 |
) |
$ |
844,010 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Current maturities, long-term debt |
|
$ |
— |
|
$ |
2,740 |
|
$ |
3,900 |
|
$ |
— |
|
$ |
6,640 |
|
| |
Accounts payable, trade |
|
|
— |
|
|
62,810 |
|
|
16,840 |
|
|
— |
|
|
79,650 |
|
| |
Accounts payable, intercompany |
|
|
— |
|
|
1,680 |
|
|
— |
|
|
(1,680 |
) |
|
— |
|
| |
Accrued liabilities |
|
|
7,410 |
|
|
56,660 |
|
|
9,640 |
|
|
— |
|
|
73,710 |
|
| |
Liabilities of discontinued operations |
|
|
— |
|
|
1,240 |
|
|
— |
|
|
— |
|
|
1,240 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total current liabilities |
|
|
7,410 |
|
|
125,130 |
|
|
30,380 |
|
|
(1,680 |
) |
|
161,240 |
|
Long-term debt |
|
|
256,140 |
|
|
249,810 |
|
|
12,790 |
|
|
— |
|
|
518,740 |
|
Deferred income taxes |
|
|
2,010 |
|
|
39,730 |
|
|
3,940 |
|
|
— |
|
|
45,680 |
|
Other long-term liabilities |
|
|
— |
|
|
42,980 |
|
|
1,630 |
|
|
— |
|
|
44,610 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total liabilities |
|
|
265,560 |
|
|
457,650 |
|
|
48,740 |
|
|
(1,680 |
) |
|
770,270 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total shareholders' equity |
|
|
73,740 |
|
|
336,220 |
|
|
102,120 |
|
|
(438,340 |
) |
|
73,740 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total liabilities and shareholders' equity |
|
$ |
339,300 |
|
$ |
793,870 |
|
$ |
150,860 |
|
$ |
(440,020 |
) |
$ |
844,010 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
24
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
17. Supplemental Guarantor Condensed Consolidating Financial Information (Continued)
Supplemental Guarantor
Condensed Financial Statements
Consolidating Balance Sheet
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
Parent |
|
Guarantor |
|
Non-
Guarantor |
|
Eliminations |
|
Consolidated Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents |
|
$ |
— |
|
$ |
340 |
|
$ |
3,570 |
|
$ |
— |
|
$ |
3,910 |
|
| |
Trade receivables, net |
|
|
— |
|
|
91,300 |
|
|
13,460 |
|
|
— |
|
|
104,760 |
|
| |
Receivables, intercompany |
|
|
— |
|
|
— |
|
|
4,090 |
|
|
(4,090 |
) |
|
— |
|
| |
Inventories |
|
|
— |
|
|
165,590 |
|
|
23,360 |
|
|
— |
|
|
188,950 |
|
| |
Deferred income taxes |
|
|
— |
|
|
16,250 |
|
|
720 |
|
|
— |
|
|
16,970 |
|
| |
Prepaid expenses and other current assets |
|
|
— |
|
|
6,280 |
|
|
1,150 |
|
|
— |
|
|
7,430 |
|
| |
Assets of discontinued operations held for sale |
|
|
— |
|
|
26,200 |
|
|
— |
|
|
— |
|
|
26,200 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total current assets |
|
|
— |
|
|
305,960 |
|
|
46,350 |
|
|
(4,090 |
) |
|
348,220 |
|
Investments in subsidiaries |
|
|
369,410 |
|
|
96,240 |
|
|
— |
|
|
(465,650 |
) |
|
— |
|
Property and equipment, net |
|
|
— |
|
|
133,150 |
|
|
48,420 |
|
|
— |
|
|
181,570 |
|
Goodwill |
|
|
— |
|
|
157,360 |
|
|
44,920 |
|
|
— |
|
|
202,280 |
|
Intangibles and other assets |
|
|
16,020 |
|
|
189,140 |
|
|
3,930 |
|
|
(10,940 |
) |
|
198,150 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Total assets |
|
$ |
385,430 |
|
$ |
881,850 |
|
$ |
143,620 |
|
$ |
(480,680 |
) |
$ |
930,220 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Current maturities, long-term debt |
|
$ |
— |
|
$ |
4,960 |
|
$ |
5,400 |
|
$ |
— |
|
$ |
10,360 |
|
| |
Accounts payable, trade |
|
|
— |
|
|
95,240 |
|
|
16,570 |
|
|
— |
|
|
111,810 |
|
| |
Accounts payable, intercompany |
|
|
— |
|
|
4,090 |
|
|
— |
|
|
(4,090 |
) |
|
— |
|
| |
Accrued liabilities |
|
|
1,390 |
|
|
57,320 |
|
|
7,630 |
|
|
— |
|
|
66,340 |
|
| |
Liabilities of discontinued operations |
|
|
— |
|
|
1,340 |
|
|
— |
|
|
— |
|
|
1,340 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total current liabilities |
|
|
1,390 |
|
|
162,950 |
|
|
29,600 |
|
|
(4,090 |
) |
|
189,850 |
|
Long-term debt |
|
|
329,140 |
|
|
258,070 |
|
|
12,370 |
|
|
— |
|
|
599,580 |
|
Deferred income taxes |
|
|
— |
|
|
58,610 |
|
|
3,980 |
|
|
(10,940 |
) |
|
51,650 |
|
Other long-term liabilities |
|
|
— |
|
|
32,810 |
|
|
1,430 |
|
|
— |
|
|
34,240 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total liabilities |
|
|
330,530 |
|
|
512,440 |
|
|
47,380 |
|
|
(15,030 |
) |
|
875,320 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total shareholders' equity |
|
|
54,900 |
|
|
369,410 |
|
|
96,240 |
|
|
(465,650 |
) |
|
54,900 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total liabilities and shareholders' equity |
|
$ |
385,430 |
|
$ |
881,850 |
|
$ |
143,620 |
|
$ |
(480,680 |
) |
$ |
930,220 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
25
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
17. Supplemental Guarantor Condensed Consolidating Financial Information (Continued)
Supplemental Guarantor
Condensed Financial Statements
Consolidating Statement of Operations
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2009 |
|
|
|
Parent |
|
Guarantor |
|
Non-
Guarantor |
|
Eliminations |
|
Total |
|
Net sales |
|
$ |
— |
|
$ |
156,710 |
|
$ |
56,810 |
|
$ |
(9,790 |
) |
$ |
203,730 |
|
Cost of sales |
|
|
— |
|
|
(111,940 |
) |
|
(44,150 |
) |
|
9,790 |
|
|
(146,300 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Gross profit |
|
|
— |
|
|
44,770 |
|
|
12,660 |
|
|
— |
|
|
57,430 |
|
Selling, general and administrative expenses |
|
|
(160 |
) |
|
(31,440 |
) |
|
(5,680 |
) |
|
— |
|
|
(37,280 |
) |
Gain (loss) on dispositions of property and equipment |
|
|
— |
|
|
(210 |
) |
|
230 |
|
|
— |
|
|
20 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Operating profit (loss) |
|
|
(160 |
) |
|
13,120 |
|
|
7,210 |
|
|
— |
|
|
20,170 |
|
Other income (expense), net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest expense |
|
|
(6,690 |
) |
|
(3,790 |
) |
|
(280 |
) |
|
— |
|
|
(10,760 |
) |
| |
Gain on extinguishment of debt |
|
|
1,180 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,180 |
|
| |
Other, net |
|
|
— |
|
|
30 |
|
|
(220 |
) |
|
— |
|
|
(190 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax (expense) benefit and equity in net income (loss) of subsidiaries |
|
|
(5,670 |
) |
|
9,360 |
|
|
6,710 |
|
|
— |
|
|
10,400 |
|
Income tax (expense) benefit |
|
|
1,980 |
|
|
(4,240 |
) |
|
(1,630 |
) |
|
— |
|
|
(3,890 |
) |
Equity in net income (loss) of subsidiaries |
|
|
9,520 |
|
|
5,080 |
|
|
— |
|
|
(14,600 |
) |
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
5,830 |
|
|
10,200 |
|
|
5,080 |
|
|
(14,600 |
) |
|
6,510 |
|
Loss from discontinued operations |
|
|
— |
|
|
(680 |
) |
|
— |
|
|
— |
|
|
(680 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
5,830 |
|
$ |
9,520 |
|
$ |
5,080 |
|
$ |
(14,600 |
) |
$ |
5,830 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2008 |
|
|
|
Parent |
|
Guarantor |
|
Non-
Guarantor |
|
Eliminations |
|
Total |
|
Net sales |
|
$ |
— |
|
$ |
211,540 |
|
$ |
59,910 |
|
$ |
(10,720 |
) |
$ |
260,730 |
|
Cost of sales |
|
|
— |
|
|
(154,070 |
) |
|
(48,750 |
) |
|
10,720 |
|
|
(192,100 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Gross profit |
|
|
— |
|
|
57,470 |
|
|
11,160 |
|
|
— |
|
|
68,630 |
|
Selling, general and administrative expenses |
|
|
— |
|
|
(35,010 |
) |
|
(6,150 |
) |
|
— |
|
|
(41,160 |
) |
Gain (loss) on dispositions of property and equipment |
|
|
— |
|
|
(190 |
) |
|
240 |
|
|
— |
|
|
50 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Operating profit |
|
|
— |
|
|
22,270 |
|
|
5,250 |
|
|
— |
|
|
27,520 |
|
Other income (expense), net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest expense |
|
|
(8,750 |
) |
|
(4,370 |
) |
|
(450 |
) |
|
— |
|
|
(13,570 |
) |
| |
Other, net |
|
|
— |
|
|
660 |
|
|
(1,140 |
) |
|
— |
|
|
(480 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax (expense) benefit and equity in net income (loss) of subsidiaries |
|
|
(8,750 |
) |
|
18,560 |
|
|
3,660 |
|
|
— |
|
|
13,470 |
|
Income tax (expense) benefit |
|
|
3,070 |
|
|
(7,140 |
) |
|
(1,340 |
) |
|
— |
|
|
(5,410 |
) |
Equity in net income (loss) of subsidiaries |
|
|
14,000 |
|
|
2,320 |
|
|
— |
|
|
(16,320 |
) |
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
8,320 |
|
|
13,740 |
|
|
2,320 |
|
|
(16,320 |
) |
|
8,060 |
|
Income from discontinued operations |
|
|
— |
|
|
260 |
|
|
— |
|
|
— |
|
|
260 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
8,320 |
|
$ |
14,000 |
|
$ |
2,320 |
|
$ |
(16,320 |
) |
$ |
8,320 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
26
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
17. Supplemental Guarantor Condensed Consolidating Financial Information (Continued)
Supplemental Guarantor
Condensed Financial Statements
Consolidating Statement of Operations
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2009 |
|
|
|
Parent |
|
Guarantor |
|
Non-
Guarantor |
|
Eliminations |
|
Total |
|
Net sales |
|
$ |
— |
|
$ |
491,730 |
|
$ |
148,100 |
|
$ |
(24,740 |
) |
$ |
615,090 |
|
Cost of sales |
|
|
— |
|
|
(368,500 |
) |
|
(118,450 |
) |
|
24,740 |
|
|
(462,210 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Gross profit |
|
|
— |
|
|
123,230 |
|
|
29,650 |
|
|
— |
|
|
152,880 |
|
Selling, general and administrative expenses |
|
|
(350 |
) |
|
(97,070 |
) |
|
(15,510 |
) |
|
— |
|
|
(112,930 |
) |
Gain (loss) on dispositions of property and equipment |
|
|
— |
|
|
(70 |
) |
|
250 |
|
|
— |
|
|
180 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Operating profit (loss) |
|
|
(350 |
) |
|
26,090 |
|
|
14,390 |
|
|
— |
|
|
40,130 |
|
Other income (expense), net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest expense |
|
|
(22,160 |
) |
|
(11,650 |
) |
|
(750 |
) |
|
— |
|
|
(34,560 |
) |
| |
Gain on extinguishment of debt |
|
|
28,250 |
|
|
— |
|
|
— |
|
|
— |
|
|
28,250 |
|
| |
Other, net |
|
|
— |
|
|
500 |
|
|
(2,210 |
) |
|
— |
|
|
(1,710 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense and equity in net income (loss) of subsidiaries |
|
|
5,740 |
|
|
14,940 |
|
|
11,430 |
|
|
— |
|
|
32,110 |
|
Income tax expense |
|
|
(2,010 |
) |
|
(6,930 |
) |
|
(3,290 |
) |
|
— |
|
|
(12,230 |
) |
Equity in net income (loss) of subsidiaries |
|
|
7,410 |
|
|
8,140 |
|
|
— |
|
|
(15,550 |
) |
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
11,140 |
|
|
16,150 |
|
|
8,140 |
|
|
(15,550 |
) |
|
19,880 |
|
Loss from discontinued operations |
|
|
— |
|
|
(8,740 |
) |
|
— |
|
|
— |
|
|
(8,740 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
11,140 |
|
$ |
7,410 |
|
$ |
8,140 |
|
$ |
(15,550 |
) |
$ |
11,140 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2008 |
|
|
|
Parent |
|
Guarantor |
|
Non-
Guarantor |
|
Eliminations |
|
Total |
|
Net sales |
|
$ |
— |
|
$ |
653,750 |
|
$ |
191,130 |
|
$ |
(36,720 |
) |
$ |
808,160 |
|
Cost of sales |
|
|
— |
|
|
(478,150 |
) |
|
(152,150 |
) |
|
36,720 |
|
|
(593,580 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Gross profit |
|
|
— |
|
|
175,600 |
|
|
38,980 |
|
|
— |
|
|
214,580 |
|
Selling, general and administrative expenses |
|
|
— |
|
|
(110,600 |
) |
|
(18,140 |
) |
|
— |
|
|
(128,740 |
) |
Gain (loss) on dispositions of property and equipment |
|
|
— |
|
|
(490 |
) |
|
330 |
|
|
— |
|
|
(160 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Operating profit |
|
|
— |
|
|
64,510 |
|
|
21,170 |
|
|
— |
|
|
85,680 |
|
Other income (expense), net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest expense |
|
|
(26,280 |
) |
|
(14,540 |
) |
|
(1,340 |
) |
|
— |
|
|
(42,160 |
) |
| |
Other, net |
|
|
|
|
|
2,290 |
|
|
(5,300 |
) |
|
— |
|
|
(3,010 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax (expense) benefit and equity in net income (loss) of subsidiaries |
|
|
(26,280 |
) |
|
52,260 |
|
|
14,530 |
|
|
— |
|
|
40,510 |
|
Income tax (expense) benefit |
|
|
9,200 |
|
|
(19,600 |
) |
|
(4,750 |
) |
|
— |
|
|
(15,150 |
) |
Equity in net income (loss) of subsidiaries |
|
|
42,720 |
|
|
9,780 |
|
|
— |
|
|
(52,500 |
) |
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
25,640 |
|
|
42,440 |
|
|
9,780 |
|
|
(52,500 |
) |
|
25,360 |
|
Income from discontinued operations |
|
|
— |
|
|
280 |
|
|
— |
|
|
— |
|
|
280 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
25,640 |
|
$ |
42,720 |
|
$ |
9,780 |
|
$ |
(52,500 |
) |
$ |
25,640 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
27
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
17. Supplemental Guarantor Condensed Consolidating Financial Information (Continued)
Supplemental Guarantor
Condensed Financial Statements
Consolidating Statement of Cash Flows
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2009 |
|
|
|
Parent |
|
Guarantor |
|
Non-Guarantor |
|
Eliminations |
|
Total |
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net cash provided by (used for) operating activities |
|
$ |
(14,320 |
) |
$ |
53,360 |
|
$ |
28,600 |
|
$ |
— |
|
$ |
67,640 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Capital expenditures |
|
|
— |
|
|
(9,210 |
) |
|
(1,640 |
) |
|
— |
|
|
(10,850 |
) |
| |
Net proceeds from disposition of businesses and other assets |
|
|
— |
|
|
22,380 |
|
|
720 |
|
|
— |
|
|
23,100 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net cash provided by (used for) investing activities |
|
|
— |
|
|
13,170 |
|
|
(920 |
) |
|
— |
|
|
12,250 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Repayments of borrowings on term loan facilities |
|
|
— |
|
|
(1,950 |
) |
|
(420 |
) |
|
— |
|
|
(2,370 |
) |
| |
Proceeds from borrowings on revolving credit facilities |
|
|
— |
|
|
674,780 |
|
|
3,150 |
|
|
— |
|
|
677,930 |
|
| |
Repayments of borrowings on revolving credit facilities |
|
|
— |
|
|
(683,300 |
) |
|
(7,440 |
) |
|
— |
|
|
(690,740 |
) |
| |
Retirement of senior subordinated notes |
|
|
(43,850 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(43,850 |
) |
| |
Intercompany transfers (to) from subsidiaries |
|
|
58,170 |
|
|
(39,180 |
) |
|
(18,990 |
) |
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net cash provided by (used for) financing activities |
|
|
14,320 |
|
|
(49,650 |
) |
|
(23,700 |
) |
|
— |
|
|
(59,030 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Increase for the period |
|
|
— |
|
|
16,880 |
|
|
3,980 |
|
|
— |
|
|
20,860 |
|
| |
|
At beginning of period |
|
|
— |
|
|
340 |
|
|
3,570 |
|
|
— |
|
|
3,910 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
At end of period |
|
$ |
— |
|
$ |
17,220 |
|
$ |
7,550 |
|
$ |
— |
|
$ |
24,770 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
28
Table of Contents
TRIMAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
17. Supplemental Guarantor Condensed Consolidating Financial Information (Continued)
Supplemental Guarantor
Condensed Financial Statements
Consolidating Statement of Cash Flows
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2008 |
|
|
|
Parent |
|
Guarantor |
|
Non-Guarantor |
|
Eliminations |
|
Total |
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net cash provided by (used for) operating activities |
|
$ |
(16,680 |
) |
$ |
27,040 |
|
$ |
12,430 |
|
$ |
— |
|
$ |
22,790 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Capital expenditures |
|
|
— |
|
|
(16,560 |
) |
|
(3,540 |
) |
|
— |
|
|
(20,100 |
) |
| |
Acquisition of businesses, net of cash acquired |
|
|
— |
|
|
(3,490 |
) |
|
(2,860 |
) |
|
— |
|
|
(6,350 |
) |
| |
Net proceeds from disposition of businesses and other assets |
|
|
— |
|
|
320 |
|
|
1,940 |
|
|
— |
|
|
2,260 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net cash used for investing activities |
|
|
— |
|
|
(19,730 |
) |
|
(4,460 |
) |
|
— |
|
|
(24,190 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Repayments of borrowings on senior credit facilities |
|
|
— |
|
|
(1,950 |
) |
|
(2,320 |
) |
|
— |
|
|
(4,270 |
) |
| |
Proceeds from term loan facilities |
|
|
— |
|
|
— |
|
|
490 |
|
|
— |
|
|
490 |
|
| |
Proceeds from borrowings on revolving credit facilities |
|
|
— |
|
|
338,090 |
|
|
8,070 |
|
|
— |
|
|
346,160 |
|
| |
Repayments of borrowings on revolving credit facilities |
|
|
— |
|
|
(335,900 |
) |
|
(5,230 |
) |
|
— |
|
|
(341,130 |
) |
| |
Intercompany transfers (to) from subsidiaries |
|
|
16,680 |
|
|
(7,900 |
) |
|
(8,780 |
) |
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net cash provided by (used for) financing activities |
|
|
16,680 |
|
|
(7,660 |
) |
|
(7,770 |
) |
|
— |
|
|
1,250 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Increase (decrease) for the period |
|
|
— |
|
|
(350 |
) |
|
200 |
|
|
— |
|
|
(150 |
) |
| |
|
At beginning of period |
|
|
— |
|
|
550 |
|
|
4,250 |
|
|
— |
|
|
4,800 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
At end of period |
|
$ |
— |
|
$ |
200 |
|
$ |
4,450 |
|
$ |
— |
|
$ |
4,650 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
29
Table of Contents
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition contains forward-looking statements regarding
industry outlook and our expectations regarding the performance of our business. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the
risks and uncertainties described under the heading "Forward Looking Statements," at the beginning of this report. Our actual results may differ materially from those contained in or implied by any
forward-looking statements. You should read the following discussion together with the Company's reports on file with the Securities and Exchange Commission.
Introduction
We are an industrial manufacturer and distributor of highly engineered products serving focused markets in a diverse range of
commercial, industrial and consumer applications. We have five reportable segments: Packaging, Energy, Aerospace & Defense, Engineered Components and Cequent. In reviewing our financial
results, consideration should be given to certain critical events, particularly our acquisitions and consolidation, integration and restructuring efforts in several of our business operations.
Key Factors and Risks Affecting our Reported Results. Our businesses and results of operations depend upon general economic
conditions and we serve
some customers in cyclical industries that are highly competitive and themselves adversely impacted by unfavorable economic conditions. During the fourth quarter of 2008, worldwide credit markets and
global economic conditions deteriorated significantly, resulting in declines in demand for the Company's products and services. These conditions have persisted during the first nine months of 2009,
resulting in reductions in sales and earnings from comparable prior periods across all of the Company's reportable segments. We expect that revenue and earnings will continue to trend below historical
levels until the current unfavorable economic conditions improve.
Critical
factors affecting our ability to succeed include: our ability to successfully pursue organic growth through product development, cross-selling and extending
product-line offerings, and our ability to quickly and cost-effectively introduce new products; our ability to acquire and integrate companies or products that will supplement
existing product lines, add new distribution channels, expand our geographic coverage or enable us to better absorb overhead costs; our ability to manage our cost structure more efficiently through
improved supply base management, internal sourcing and/or purchasing of materials, selective outsourcing and/or purchasing of support functions, working capital management, and greater leverage of our
administrative and overhead functions. If we are unable to do any of the foregoing successfully, our financial condition and results of operations could be materially and adversely impacted.
There
is some seasonality in the businesses within our Cequent reportable segment, where sales of towing and trailering products are generally stronger in the second and third quarters,
as trailer original equipment manufacturers ("OEMs"), distributors and retailers acquire product for the spring and summer selling seasons. No other reportable segment experiences significant seasonal
fluctuation in its businesses. We do not consider sales order backlog to be a material factor in our business. A growing portion of our sales may be derived from international sources, which exposes
us to certain risks, including currency risks.
The
demand for some of our products, particularly in the Cequent segment, is heavily influenced by consumer sentiment. We experienced decreases in sales and earnings in 2008 as a result
of an uncertain credit market and interest rate environment and rising energy costs, among other things. Sales and earnings have declined further as a result of the worsening of the global economic
conditions in 2009. We expect the current end market conditions in the Cequent segment will continue to remain weak and/or decline until the U.S. economy recovers from existing recessionary forces,
employment
30
Table of Contents
levels
increase and consumer credit availability improves, thereby increasing consumer discretionary spending.
We
are sensitive to price movements in our raw materials supply base. Our largest material purchases are for steel, copper, aluminum, polyethylene and other resins and energy.
Historically, we have experienced increasing costs of steel and resin and have worked with our suppliers to manage cost pressures and disruptions in supply. We have also initiated pricing programs to
pass increased steel, copper, aluminum and resin costs to customers. Although we may experience delays in our ability to implement price increases, we generally are able to recover such increased
costs. Although there have been no significant disruptions in the supply of steel since 2005, we may experience disruptions in supply in the future and we may not be able to pass along higher costs
associated with such disruptions to our customers in the form of price increases. We will continue to take actions as necessary to manage risks associated with increasing steel or other raw material
costs. However, such increased costs may adversely impact our earnings.
We
report shipping and handling expenses, associated with certain businesses within our Cequent segment, for its sales distribution network, as an element of selling, general and
administrative expenses in our consolidated statement of operations. As such, gross margins for the Cequent segment may not be comparable to other companies which include all costs related to their
distribution network in cost of sales.
We
have substantial debt, interest and lease payment requirements that may restrict our future operations and impair our ability to meet our obligations and, in a rising interest rate
environment, our performance may be adversely affected by our degree of leverage.
Recent Consolidation, Integration and Restructuring Activities. During the past several years, we have undertaken significant
consolidation,
integration and other cost-savings programs to enhance our efficiency and achieve cost reduction opportunities which exist in our businesses. In addition to major consolidation projects,
there have also been a series of ongoing initiatives to eliminate duplicative and excess manufacturing and distribution facilities, sales forces, and back office and other support functions in order
to continue to optimize our cost structure in response to competitor actions and market conditions.
In
the fourth quarter of 2008, in response to the deteriorating recent economic conditions, we accelerated our Profit Improvement Plan, which included further consolidation of
distribution and manufacturing activities, continued integration of certain business activities, movement of production to lower-cost environments and expansion of strategic sourcing
initiatives. We have also implemented reductions in salaried headcount and in fixed and variable spending to better align the fixed cost structure of these operating segments with the reality of our
current market environment and to maintain or improve operating margins. We have implemented commercial actions to protect and gain market share through continued introduction of new and innovative
products and by providing superior delivery and service to our customers. Further, we also have pricing initiatives in place to recover inflationary cost increases and we are continuing actions to
leverage our businesses' strong brand names.
The
key element of our Profit Improvement Plan implemented during the first nine months of 2009 is the restructuring of our legacy towing, trailering and electrical businesses within our
Cequent reportable segment into one business, rationalizing facilities and the management team. This restructuring plan includes the previously announced closure of the Mosinee, WI manufacturing
facility by the end of 2009, with the production and distribution functions previously located in Mosinee being relocated to lower-cost manufacturing facilities or to third-party sourcing
partners.
31
Table of Contents
During
the first nine months of 2008, we restructured our organizational structure within our corporate office. These actions comprised the majority of the restructuring charges incurred
during the first nine months of 2008.
Key Indicators of Performance. In evaluating our business, our management considers Adjusted EBITDA as a key indicator of
financial operating
performance and as a measure of cash generating capability. We define Adjusted EBITDA as net income (loss) before cumulative effect of accounting change, interest, taxes, depreciation, amortization,
non-cash asset and goodwill impairment charges and write-offs and non-cash losses on sale-leaseback of property and equipment. In evaluating Adjusted
EBITDA, our management deems it important to consider the quality of our underlying earnings by separately identifying certain costs undertaken to improve our results, such as costs related to
consolidating facilities and businesses in an effort to eliminate duplicative costs or achieve efficiencies, costs related to integrating acquisitions and restructuring costs related to expense
reduction efforts. Although we may undertake new consolidation, restructuring and integration efforts in the future as a result of our acquisition activity, our management separately considers these
costs in evaluating underlying business performance. Caution must be exercised in considering these items as they include substantially (but not necessarily entirely) cash costs and there can be no
assurance that we will ultimately realize the
benefits of these efforts. Moreover, even if the anticipated benefits are realized, they may be offset by other business performance or general economic issues.
Management
believes that consideration of Adjusted EBITDA together with a careful review of our results reported under GAAP is the best way to analyze our ability to service and/or incur
indebtedness, as we are a highly leveraged company. We use Adjusted EBITDA as a key performance measure because we believe it facilitates operating performance comparisons from period to period and
company to company by excluding potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in
effective tax rates or net operating losses), and the impact of purchase accounting as well as depreciation and amortization expense. Because Adjusted EBITDA facilitates internal comparisons of our
historical operating performance on a more consistent basis, we also use Adjusted EBITDA for business planning purposes, in measuring our performance relative to that of our competitors and in
evaluating acquisition opportunities.
In
addition, we believe Adjusted EBITDA and similar measures are widely used by investors, securities analysts, ratings agencies and other interested parties as a measure of financial
performance and debt-service capabilities. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of
our results as reported under GAAP. Some of these limitations are:
- •
- it does not reflect our cash expenditures for capital equipment or other contractual commitments;
- •
- although depreciation, amortization and asset impairment charges and write-offs are non-cash
charges, the assets being depreciated, amortized or written off may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements;
- •
- it does not reflect changes in, or cash requirements for, our working capital needs;
- •
- it does not reflect the significant interest expense or the cash requirements necessary to service interest or principal
payments on our indebtedness;
- •
- it does not reflect certain tax payments that may represent a reduction in cash available to us;
32
Table of Contents
- •
- it includes amounts resulting from matters we consider not to be indicative of underlying performance of our fundamental
business operations, as discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and
- •
- other companies, including companies in our industry, may calculate these measures differently and as the number of
differences in the way two different companies calculate these measures increases, the degree of their usefulness as a comparative measure correspondingly decreases.
Because
of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our Company. We compensate for these
limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. We carefully review our operating profit margins (operating profit as a percentage of net sales) at
a segment level, which are discussed in detail in our year-to-year comparison of operating results.
The
following is a reconciliation of our net income to Adjusted EBITDA and cash flows from operating activities for the three and nine months ended September 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
(dollars in thousands)
|
|
Net income |
|
$ |
5,830 |
|
$ |
8,320 |
|
$ |
11,140 |
|
$ |
25,640 |
|
| |
Income tax expense |
|
|
3,420 |
|
|
5,560 |
|
|
6,650 |
|
|
15,310 |
|
| |
Interest expense |
|
|
10,930 |
|
|
13,630 |
|
|
35,050 |
|
|
42,320 |
|
| |
Debt extinguishment costs |
|
|
150 |
|
|
— |
|
|
1,140 |
|
|
— |
|
| |
Depreciation and amortization |
|
|
10,580 |
|
|
10,740 |
|
|
33,410 |
|
|
32,440 |
|
| |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA, total company |
|
$ |
30,910 |
|
$ |
38,250 |
|
$ |
87,390 |
|
$ |
115,710 |
|
| |
Interest paid |
|
|
(3,630 |
) |
|
(5,140 |
) |
|
(25,460 |
) |
|
(32,240 |
) |
| |
Taxes paid |
|
|
(2,420 |
) |
|
(1,130 |
) |
|
(6,730 |
) |
|
(6,460 |
) |
| |
(Gain) loss on dispositions of property and equipment |
|
|
(20 |
) |
|
(50 |
) |
|
(180 |
) |
|
40 |
|
| |
Gain on extinguishment of debt |
|
|
(1,330 |
) |
|
— |
|
|
(29,390 |
) |
|
— |
|
| |
Receivables sales and securitization, net |
|
|
(9,740 |
) |
|
(23,100 |
) |
|
(15,690 |
) |
|
(26,730 |
) |
| |
Net change in working capital |
|
|
21,700 |
|
|
(9,300 |
) |
|
57,700 |
|
|
(27,530 |
) |
| |
|
|
|
|
|
|
|
|
|
Cash flows provided by (used for) operating activities |
|
$ |
35,470 |
|
$ |
(470 |
) |
$ |
67,640 |
|
$ |
22,790 |
|
| |
|
|
|
|
|
|
|
|
|
The
following details certain items relating to our consolidation, restructuring and integration efforts that are included in the determination of net income under GAAP and are not added
back to net income in determining Adjusted EBITDA, but that we would consider in evaluating the quality of our Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
Nine months
ended
September 30, |
|
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
(dollars in
thousands)
|
|
(dollars in
thousands)
|
|
Facility and business consolidation costs(a) |
|
$ |
60 |
|
$ |
— |
|
$ |
120 |
|
$ |
720 |
|
Business unit restructuring costs(b) |
|
|
2,290 |
|
|
710 |
|
|
6,590 |
|
|
2,970 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
$ |
2,350 |
|
$ |
710 |
|
$ |
6,710 |
|
$ |
3,690 |
|
| |
|
|
|
|
|
|
|
|
|
- (a)
- Includes
employee training, severance and relocation costs, equipment move and plant rearrangement costs associated with facility and business
consolidations.
- (b)
- Principally
employee severance costs and exit costs associated with business unit restructuring.
33
Table of Contents
Segment Information and Supplemental Analysis
The following table summarizes financial information for our five current reportable segments for the three months ended
September 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
2009 |
|
As a Percentage
of Net Sales |
|
2008 |
|
As a Percentage
of Net Sales |
|
|
|
(dollars in thousands)
|
|
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
39,730 |
|
|
19.5 |
% |
$ |
43,350 |
|
|
16.6 |
% |
Energy |
|
|
36,000 |
|
|
17.7 |
% |
|
55,430 |
|
|
21.3 |
% |
Aerospace & Defense |
|
|
16,060 |
|
|
7.9 |
% |
|
24,550 |
|
|
9.4 |
% |
Engineered Components |
|
|
15,860 |
|
|
7.8 |
% |
|
34,690 |
|
|
13.3 |
% |
Cequent |
|
|
96,080 |
|
|
47.2 |
% |
|
102,710 |
|
|
39.4 |
% |
| |
|
|
|
|
|
|
|
|
|
| |
Total |
|
$ |
203,730 |
|
|
100.0 |
% |
$ |
260,730 |
|
|
100.0 |
% |
| |
|
|
|
|
|
|
|
|
|
Gross Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
14,330 |
|
|
36.1 |
% |
$ |
14,220 |
|
|
32.8 |
% |
Energy |
|
|
9,270 |
|
|
25.8 |
% |
|
14,680 |
|
|
26.5 |
% |
Aerospace & Defense |
|
|
7,190 |
|
|
44.8 |
% |
|
10,920 |
|
|
44.5 |
% |
Engineered Components |
|
|
1,780 |
|
|
11.2 |
% |
|
5,740 |
|
|
16.5 |
% |
Cequent |
|
|
24,860 |
|
|
25.9 |
% |
|
23,070 |
|
|
22.5 |
% |
| |
|
|
|
|
|
|
|
|
|
| |
Total |
|
$ |
57,430 |
|
|
28.2 |
% |
$ |
68,630 |
|
|
26.3 |
% |
| |
|
|
|
|
|
|
|
|
|
Selling, General and Administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
5,150 |
|
|
13.0 |
% |
$ |
6,130 |
|
|
14.1 |
% |
Energy |
|
|
6,010 |
|
|
16.7 |
% |
|
6,500 |
|
|
11.7 |
% |
Aerospace & Defense |
|
|
2,000 |
|
|
12.5 |
% |
|
2,280 |
|
|
9.3 |
% |
Engineered Components |
|
|
1,750 |
|
|
11.0 |
% |
|
2,130 |
|
|
6.1 |
% |
Cequent |
|
|
17,830 |
|
|
18.6 |
% |
|
19,060 |
|
|
18.6 |
% |
Corporate expenses |
|
|
4,540 |
|
|
N/A |
|
|
5,060 |
|
|
N/A |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total |
|
$ |
37,280 |
|
|
18.3 |
% |
$ |
41,160 |
|
|
15.8 |
% |
| |
|
|
|
|
|
|
|
|
|
Operating Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
9,160 |
|
|
23.1 |
% |
$ |
8,300 |
|
|
19.1 |
% |
Energy |
|
|
3,200 |
|
|
8.9 |
% |
|
8,170 |
|
|
14.7 |
% |
Aerospace & Defense |
|
|
5,190 |
|
|
32.3 |
% |
|
8,640 |
|
|
35.2 |
% |
Engineered Components |
|
|
(60 |
) |
|
-0.4 |
% |
|
3,470 |
|
|
10.0 |
% |
Cequent |
|
|
7,220 |
|
|
7.5 |
% |
|
4,000 |
|
|
3.9 |
% |
Corporate expenses |
|
|
(4,540 |
) |
|
N/A |
|
|
(5,060 |
) |
|
N/A |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total |
|
$ |
20,170 |
|
|
9.9 |
% |
$ |
27,520 |
|
|
10.6 |
% |
| |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
12,540 |
|
|
31.6 |
% |
$ |
11,640 |
|
|
26.9 |
% |
Energy |
|
|
3,950 |
|
|
11.0 |
% |
|
8,850 |
|
|
16.0 |
% |
Aerospace & Defense |
|
|
5,760 |
|
|
35.9 |
% |
|
9,080 |
|
|
37.0 |
% |
Engineered Components |
|
|
980 |
|
|
6.2 |
% |
|
4,510 |
|
|
13.0 |
% |
Cequent |
|
|
12,200 |
|
|
12.7 |
% |
|
8,560 |
|
|
8.3 |
% |
Corporate expenses |
|
|
(3,520 |
) |
|
N/A |
|
|
(5,470 |
) |
|
N/A |
|
| |
|
|
|
|
|
|
|
|
|
| |
Subtotal from continuing operations |
|
|
31,910 |
|
|
15.7 |
% |
|
37,170 |
|
|
14.3 |
% |
| |
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
(1,000 |
) |
|
N/A |
|
|
1,080 |
|
|
N/A |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total company |
|
$ |
30,910 |
|
|
15.2 |
% |
$ |
38,250 |
|
|
14.7 |
% |
| |
|
|
|
|
|
|
|
|
|
34
Table of Contents
The following table summarizes financial information for our five current reportable segments for the nine months ended September 30, 2009
and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
2009 |
|
As a Percentage
of Net Sales |
|
2008 |
|
As a Percentage
of Net Sales |
|
|
|
(dollars in thousands)
|
|
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
106,130 |
|
|
17.3 |
% |
$ |
128,910 |
|
|
16.0 |
% |
Energy |
|
|
111,260 |
|
|
18.1 |
% |
|
157,390 |
|
|
19.5 |
% |
Aerospace & Defense |
|
|
56,530 |
|
|
9.2 |
% |
|
65,770 |
|
|
8.1 |
% |
Engineered Components |
|
|
51,100 |
|
|
8.3 |
% |
|
103,160 |
|
|
12.8 |
% |
Cequent |
|
|
290,070 |
|
|
47.2 |
% |
|
352,930 |
|
|
43.7 |
% |
| |
|
|
|
|
|
|
|
|
|
| |
Total |
|
$ |
615,090 |
|
|
100.0 |
% |
$ |
808,160 |
|
|
100.0 |
% |
| |
|
|
|
|
|
|
|
|
|
Gross Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
37,680 |
|
|
35.5 |
% |
$ |
43,710 |
|
|
33.9 |
% |
Energy |
|
|
27,330 |
|
|
24.6 |
% |
|
44,710 |
|
|
28.4 |
% |
Aerospace & Defense |
|
|
24,870 |
|
|
44.0 |
% |
|
29,400 |
|
|
44.7 |
% |
Engineered Components |
|
|
4,340 |
|
|
8.5 |
% |
|
19,620 |
|
|
19.0 |
% |
Cequent |
|
|
58,660 |
|
|
20.2 |
% |
|
77,140 |
|
|
21.9 |
% |
| |
|
|
|
|
|
|
|
|
|
| |
Total |
|
$ |
152,880 |
|
|
24.9 |
% |
$ |
214,580 |
|
|
26.6 |
% |
| |
|
|
|
|
|
|
|
|
|
Selling, General and Administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
14,490 |
|
|
13.7 |
% |
$ |
17,470 |
|
|
13.6 |
% |
Energy |
|
|
17,880 |
|
|
16.1 |
% |
|
20,030 |
|
|
12.7 |
% |
Aerospace & Defense |
|
|
6,450 |
|
|
11.4 |
% |
|
7,150 |
|
|
10.9 |
% |
Engineered Components |
|
|
5,240 |
|
|
10.3 |
% |
|
6,890 |
|
|
6.7 |
% |
Cequent |
|
|
52,070 |
|
|
18.0 |
% |
|
59,000 |
|
|
16.7 |
% |
Corporate expenses |
|
|
16,800 |
|
|
N/A |
|
|
18,200 |
|
|
N/A |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total |
|
$ |
112,930 |
|
|
18.4 |
% |
$ |
128,740 |
|
|
15.9 |
% |
| |
|
|
|
|
|
|
|
|
|
Operating Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
23,390 |
|
|
22.0 |
% |
$ |
26,530 |
|
|
20.6 |
% |
Energy |
|
|
9,380 |
|
|
8.4 |
% |
|
24,670 |
|
|
15.7 |
% |
Aerospace & Defense |
|
|
18,410 |
|
|
32.6 |
% |
|
22,230 |
|
|
33.8 |
% |
Engineered Components |
|
|
(1,010 |
) |
|
-2.0 |
% |
|
12,520 |
|
|
12.1 |
% |
Cequent |
|
|
6,760 |
|
|
2.3 |
% |
|
17,930 |
|
|
5.1 |
% |
Corporate expenses |
|
|
(16,800 |
) |
|
N/A |
|
|
(18,200 |
) |
|
N/A |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total |
|
$ |
40,130 |
|
|
6.5 |
% |
$ |
85,680 |
|
|
10.6 |
% |
| |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
$ |
32,760 |
|
|
30.9 |
% |
$ |
36,420 |
|
|
28.3 |
% |
Energy |
|
|
11,730 |
|
|
10.5 |
% |
|
26,670 |
|
|
16.9 |
% |
Aerospace & Defense |
|
|
20,180 |
|
|
35.7 |
% |
|
23,560 |
|
|
35.8 |
% |
Engineered Components |
|
|
2,150 |
|
|
4.2 |
% |
|
15,630 |
|
|
15.2 |
% |
Cequent |
|
|
21,700 |
|
|
7.5 |
% |
|
30,940 |
|
|
8.8 |
% |
Corporate (expenses) income |
|
|
11,360 |
|
|
N/A |
|
|
(19,910 |
) |
|
N/A |
|
| |
|
|
|
|
|
|
|
|
|
| |
Subtotal from continuing operations |
|
|
99,880 |
|
|
16.2 |
% |
|
113,310 |
|
|
14.0 |
% |
| |
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
(12,490 |
) |
|
N/A |
|
|
2,400 |
|
|
N/A |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total company |
|
$ |
87,390 |
|
|
14.2 |
% |
$ |
115,710 |
|
|
14.3 |
% |
| |
|
|
|
|
|
|
|
|
|
35
Table of Contents
The principal factors impacting us during the three and nine months ended September 30, 2009 compared with the three and nine
months ended September 30, 2008, were:
- •
- the continued impact of the current global economic recession, resulting in lower sales volumes and reduced earnings
across all of our reportable segments;
- •
- costs incurred and savings realized related to our Profit Improvement Plan, primarily in our Cequent segment;
- •
- compression of gross profit margins in certain of our segments due to lower absorption of fixed costs and, during the
first quarter of 2009, sales of higher-cost inventory; and
- •
- increases in the value of the U.S. dollar as compared to the currencies in other countries where we operate.
Three Months Ended September 30, 2009 Compared with Three Months Ended September 30, 2008
Overall, net sales decreased approximately $57.0 million, or approximately 21.9%, for the three months ended
September 30, 2009, as compared with the three months ended September 30, 2008. Although a few of our businesses benefitted from new product introductions and new sales promotions during
the third quarter of 2009, net sales declined in each of our five reportable segments, generally due to lower sales volumes resulting from the current global economic recession. In addition, net sales
were unfavorably impacted by approximately $3.1 million as a result of currency exchange, as our reported results in U.S. dollars were negatively impacted by weaker foreign currencies.
Gross
profit margin (gross profit as a percentage of sales) approximated 28.2% and 26.3% for the three months ended September 30, 2009 and 2008, respectively, as we were able to
increase our gross profit margin by 190 basis points despite lower sales volumes, reduced absorption of fixed costs and unfavorable currency exchange. The increase in profit margin is attributed
primarily to the realization of savings resulting from our cost reduction and alternate sourcing initiatives that began in the fourth quarter of 2008, with the largest impact experienced in our
Packaging and Cequent segments.
Operating
profit margin (operating profit as a percentage of sales) approximated 9.9% and 10.6% for the three months ended September 30, 2009 and 2008, respectively. Operating
profit decreased approximately $7.3 million, or 26.7%, to $20.2 million for the three months ended September 30, 2009, from $27.5 million for the three months ended
September 30, 2008. Although our operating profit margin increased within our Packaging and Cequent segments as a result of our cost reduction and alternate sourcing initiatives, and we reduced
gross selling, general and administrative expenses in each of our segments in response to the current economic conditions, company-wide operating profit margin declined primarily as a
result of net sales declining by a greater percentage of 21.9% than the 9.4% decline in selling, general and administrative spending.
Adjusted
EBITDA margin from continuing operations (Adjusted EBITDA as a percentage of sales) approximated 15.7% and 14.3% for the three months ended September 30, 2009 and 2008,
respectively. Adjusted EBITDA decreased approximately $5.3 million for the three months ended September 30, 2009,
as compared to the three months ended September 30, 2008. After consideration of the $1.3 million gross gain on extinguishment of debt in the third quarter of 2009, an increase in
year-over-year depreciation expense of approximately $0.4 million and approximately $0.3 million greater gains on transactions denominated in foreign currencies
in the three months ended September 30, 2009 as compared with the three months ended September 30, 2008, the change in Adjusted EBITDA is consistent with the change in operating profit
between years.
See
below for a discussion of operating results by segment.
36
Table of Contents
Packaging. Net sales decreased approximately $3.6 million, or 8.4%, to $39.7 million in the three months ended
September 30,
2009, as compared to $43.3 million in the three months ended September 30, 2008. Overall, sales decreased approximately $1.9 million due to currency exchange, as our reported
results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies. Sales of our specialty dispensing products and new product introductions
increased by approximately $5.0 million in the three months ended September 30, 2009 compared to the three months ended September 30, 2008, due primarily to increased sales into
the personal care markets, pharmaceuticals, and the food industries. Sales of our industrial closures, rings and levers decreased by approximately $6.7 million in the three months ended
September 30, 2009 compared to the three months ended September 30, 2008, primarily as a result of the continued general economic slowdown.
Packaging's
gross profit increased approximately $0.1 million to $14.3 million, or 36.1% of sales, in the three months ended September 30, 2009, as compared to
$14.2 million, or 32.8% of sales, in the three months ended September 30, 2008. Gross profit increased by approximately $2.0 million due to the implementation of cost reduction
and productivity projects, better matching resources with actual sales volumes, and lower costs for certain commodities due to alternate sourcing or improved internal processing collectively increased
gross profit by approximately $2.0 million year-over-year. These improvements were essentially offset by approximately $1.1 million of reduced gross profit
resulting from lower sales volumes and $0.8 million of unfavorable currency exchange.
Packaging's
selling, general and administrative expenses decreased approximately $1.0 million to $5.1 million, or 13.0% of sales, in the three months ended
September 30, 2009, as compared to $6.1 million, or 14.1% of sales, in the three months ended September 30, 2008, due primarily to reduced discretionary spending to better align
the fixed cost structure with current business requirements resulting from the general economic decline.
Packaging's
operating profit increased approximately $0.9 million to $9.2 million, or 23.1% of sales, in the three months ended September 30, 2009, as compared to
$8.3 million, or 19.1% of sales, in three months ended September 30, 2008. The increase in operating profit between years is primarily attributed to our implemented initiatives for
productivity, cost reduction, alternate sourcing of commodities and reduced selling, general and administrative spending, the impact of which was partially offset by lower sales volumes of the
industrial products and unfavorable currency exchange.
Packaging's
Adjusted EBITDA increased approximately $0.9 million to $12.5 million, or 31.6% of sales, in the three months ended September 30, 2009, as compared to
$11.6 million, or 26.9% of sales, in the three months ended September 30, 2008, consistent with the change in operating profit between years.
Energy. Net sales for the three months ended September 30, 2009 decreased approximately $19.4 million, or 35.1%, to
$36.0 million, as compared to $55.4 million in the three months ended September 30, 2008. Sales of specialty gaskets and related fastening hardware decreased approximately
$5.1 million as a result of reduced levels of turn-around activity at petrochemical refineries and decreased sales demand from the chemical industry, as customers continue to defer
maintenance and new programs that require our replacement and specialty gaskets and hardware. Sales within our engine business decreased by approximately $14.3 million, due to reductions of
drilling activity in North America and customers deferring completion of previously drilled wells. Sales of compressor products increased slightly, as the Company continues to develop new products to
add to its well-site content.
Gross
profit within Energy decreased approximately $5.4 million to $9.3 million, or 25.8% of sales, in the three months ended September 30, 2009, as compared to
$14.7 million, or 26.5% of sales, in the three months ended September 30, 2008. Gross profit decreased approximately $5.1 million as a result of the reduction in sales levels
between years. The remaining decrease in gross profit is primarily attributable to lower absorption of fixed costs resulting from the decline in sales volumes.
37
Table of Contents
Selling,
general and administrative expenses within Energy decreased approximately $0.5 million to $6.0 million, or 16.7% of net sales, in the three months ended
September 30, 2009, as compared to $6.5 million, or 11.7% of net sales, in the three months ended September 30, 2008. This decrease was primarily due to reduced sales commissions,
compensation and other administrative costs in an effort to match spending and headcount to current production volumes. These decreases were partially offset by the opening of two new branches within
our specialty gasket business, one in Salt Lake City, Utah, and one in Rotterdam, Netherlands, in 2009, which increased selling, general and administrative expenses in the third quarter of 2009 by
approximately $0.3 million.
Overall,
operating profit within Energy decreased approximately $5.0 million to $3.2 million, or 8.9% of sales, in the three months ended September 30, 2009, as
compared to $8.2 million, or 14.7% of sales, in the three months ended September 30, 2008, due principally to lower sales volumes and lower absorption of fixed costs, which were
partially offset by reductions in commissions, salaries and other administrative costs in light of the lower sales volumes.
Energy's
Adjusted EBITDA decreased $4.9 million to $4.0 million, or 11.0% of sales, in the three months ended September 30, 2009, as compared to $8.9 million,
or 16.0% of sales, in the three months ended September 30, 2008, consistent with the decrease in operating profit between years.
Aerospace & Defense. Net sales for the three months ended September 30, 2009 decreased approximately
$8.5 million, or 34.6%, to
$16.1 million, as compared to $24.6 million in the three months ended September 30, 2008. Sales in our aerospace business decreased approximately $6.8 million, primarily
due to lower blind-bolt fastener sales resulting from delays of new programs by our aircraft manufacturer customers and reductions in on-hand inventory levels by our
distribution customers in response to the current economic uncertainty. This decrease was partially offset by sales of new products of approximately $0.5 million during the third quarter of
2009, which increase our content on certain aircraft. Sales in our defense business decreased approximately $1.7 million. Our defense business did not sell any cartridge cases in the third
quarter of 2009 due to the ongoing relocation of the defense facility, which began in the second quarter of 2009. Our defense business sold $3.9 million of cartridge cases in the third quarter
of 2008 in advance of the facility relocation. The decrease in cartridge case sales was partially offset by new product sales of approximately $1.9 million and an increase of approximately
$0.3 million in revenue associated with managing the relocation and closure of the defense facility.
Gross
profit within Aerospace & Defense decreased approximately $3.7 million to $7.2 million, or 44.8% of sales, in the three months ended September 30, 2009,
from $10.9 million, or 44.5% of sales, in the three months ended September 30, 2008, due primarily to the decline in sales levels between years. Gross profit, as a percentage of sales,
improved during the three months ended September 30, 2009 as compared to the three months ended September 30, 2008, due to a more favorable product sales mix.
Selling,
general and administrative expenses decreased approximately $0.3 million to $2.0 million, or 12.5% of sales, in the three months ended September 30, 2009,
as compared to $2.3 million, or 9.3% of sales, in the three months ended September 30, 2008 due primarily to reduced discretionary spending in light of the decrease in sales levels
between years.
Operating
profit within Aerospace & Defense decreased approximately $3.4 million to $5.2 million, or 32.3% of sales, in the three months ended September 30,
2009, as compared to $8.6 million, or 35.2% of sales, in the three months ended September 30, 2008, primarily due lower sales volumes, which were
partially offset by new product sales in our aerospace business, a more favorable product sales mix and reduced discretionary spending in our selling, general and administrative expenses.
Aerospace &
Defense's Adjusted EBITDA decreased approximately $3.3 million to $5.8 million, or 35.9% of sales, in the three months ended September 30, 2009,
as compared to $9.1 million, or 37.0%
38
Table of Contents
of
sales, in the three months ended September 30, 2008, consistent with the decrease in operating profit between years.
Engineered Components. Net sales for the three months ended September 30, 2009 decreased approximately $18.8 million,
or 54.3%, to
$15.9 million, as compared to $34.7 million in the three months ended September 30, 2008. Sales within our specialty fittings business increased by approximately
$0.2 million, due to new product offerings for automotive fuel systems, which more than offset the lower sales of our core tube nut products which have been significantly impacted by the
continued weak domestic automotive market demand. Sales in our industrial cylinder and precision tool cutting businesses decreased by approximately $16.8 million and $1.5 million,
respectively, due primarily to the global economic recession, which has significantly impacted industrial applications and products. Finally, sales in our medical device business decreased
$0.8 million due to certain contract manufacturing awards that did not recur in the third quarter of 2009.
Gross
profit within Engineered Components decreased approximately $3.9 million to $1.8 million, or 11.2% of sales, in the three months ended September 30, 2009, from
$5.7 million, or 16.5% of sales, in the three months ended September 30, 2008. Gross profit decreased approximately $3.1 million as a result of the decline in sales levels between
years. The remaining decrease in gross profit was primarily due to lower absorption of fixed costs as a result of lower production and/or sales levels.
Selling,
general and administrative expenses decreased approximately $0.4 million to $1.7 million, or 11.0% of sales, in the three months ended September 30, 2009,
as compared to $2.1 million, or 6.1% of sales, in the three months ended September 30, 2008 due primarily to reduced sales commissions and discretionary spending in light of the
significant decrease in sales levels between years.
Operating
profit within Engineered Components decreased $3.5 million to approximately $0, in the three months ended September 30, 2009, as compared to operating profit of
$3.5 million, or 10.0% of sales, in the three months ended September 30, 2008, primarily due to lower sales volumes and lower absorption of fixed costs, which were partially offset by
reduced sales commissions and discretionary spending in selling, general and administrative expenses.
Engineered
Components' Adjusted EBITDA decreased $3.5 million to $1.0 million, or 6.2% of sales, in the three months ended September 30, 2009, as compared to
$4.5 million, or 13.0% of sales, in the three months ended September 30, 2008, consistent with the decrease in operating profit between years.
Cequent. Net sales decreased approximately $6.6 million to $96.1 million in the three months ended September 30,
2009, as
compared to $102.7 million in the three months ended September 30, 2008. Net sales were unfavorably impacted by approximately $1.1 million of currency exchange, as our reported
results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies. Sales in our retail business decreased $1.6 million, primarily as a
result of reduced sales volumes to existing retail customers due to the economic uncertainty. This reduction in sales volume driven by the economic uncertainty was partially offset by considerable
additional business at a few large customers and the addition of several new customers during 2009. Sales within our performance products business (includes the legacy towing, trailering and
electrical businesses) decreased by $5.0 million, due to the continued soft demand in the majority of the end markets we serve due to the current uncertain economic conditions. Sales in our
Australia/Asia Pacific business increased approximately $1.1 million, due primarily to increases in certain original equipment manufacturer and aftermarket sales resulting from new government
stimulus incentives announced during the third quarter of 2009.
Cequent's
gross profit increased approximately $1.8 million to $24.9 million, or 25.9% of sales, in the three months ended September 30, 2009, from approximately
$23.1 million, or 22.5% of sales, in the three months ended September 30, 2008. The increase is primarily a result of cost reduction and
39
Table of Contents
alternate
sourcing efforts initiated starting in the fourth quarter of 2008 as a part of our Profit Improvement Plan to resize the business and its fixed cost structure, to be more in line with the
current demand given the economic uncertainty. Gross profit increased despite approximately $1.7 million of costs incurred in the third quarter of 2009 associated with implementing the
Performance Improvement Plan, the majority of which related to period costs associated with the ramping-down of production, lower absorption of fixed costs, and move costs to other
facilities associated with the closure of our Mosinee, WI manufacturing facility, which will cease operations during the fourth quarter of 2009. In addition, gross profit was unfavorably impacted by
an approximate $1.5 million due to the decline in sales between periods and $0.3 million of unfavorable currency exchange.
Selling,
general and administrative expenses decreased approximately $1.3 million to $17.8 million, or 18.6% of sales, in the three months ended September 30, 2009,
as compared to $19.1 million, or 18.6% of sales, in the three months ended September 30, 2008. The decrease is primarily due to reductions in salaries, sales promotions, sales
commissions and other discretionary spending, all as a part of our Profit Improvement Plan, as the company reduces its fixed cost structure and minimizes its spending levels in response to the current
economic downturn. Total expense decreased despite approximately $0.3 million of costs incurred associated with implementing the Profit Improvement Plan.
Cequent's
operating profit increased approximately $3.2 million to approximately $7.2 million, or 7.5% of sales, in the three months ended September 30, 2009, from
$4.0 million, or 3.9% of net sales, in the three months ended September 30, 2008. The increase in operating profit is due primarily to the cost reductions and alternate sourcing
arrangements that have been implemented as part of the Profit Improvement Plan. The increase was partially offset by lower sales volumes, unfavorable foreign currency exchange, and certain costs
incurred in connection with the implementation of the Profit Improvement Plan, the majority of which relate to the closure of the Mosinee, WI facility.
Cequent's
Adjusted EBITDA increased approximately $3.6 million to $12.2 million, or 12.7% of sales, for the three months ended September 30, 2009, from
$8.6 million, or 8.3% of sales, for the three months ended September 30, 2008. After consideration of approximately $0.4 million of higher depreciation expense in the three months
ended September 30, 2009 compared with the three months ended September 30, 2008, due primarily to accelerated depreciation incurred in the third quarter of 2009 in connection with
certain machinery and equipment that will no longer be utilized following the closure of the Mosinee facility, the change in Adjusted EBITDA is consistent with the increase in operating profit between
years.
Corporate Expenses (Income). Corporate expenses (income) included in operating profit and Adjusted EBITDA consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30, |
|
|
|
2009 |
|
2008 |
|
|
|
(in millions)
|
|
Corporate operating expenses |
|
$ |
2.0 |
|
$ |
2.6 |
|
Employee costs and related benefits |
|
|
2.5 |
|
|
2.5 |
|
| |
|
|
|
|
|
| |
Corporate expenses—operating profit |
|
$ |
4.5 |
|
$ |
5.1 |
|
Receivables sales and securitization expenses |
|
|
0.4 |
|
|
0.7 |
|
Gain on extinguishment of debt |
|
|
(1.3 |
) |
|
— |
|
Depreciation |
|
|
— |
|
|
(0.1 |
) |
Other, net |
|
|
(0.1 |
) |
|
(0.2 |
) |
| |
|
|
|
|
|
| |
Corporate expenses (income)—Adjusted EBITDA |
|
$ |
3.5 |
|
$ |
5.5 |
|
| |
|
|
|
|
|
40
Table of Contents
Corporate
expenses included in operating profit decreased approximately $0.6 million to $4.5 million for the three months ended September 30, 2009, from
$5.1 million for the three months ended September 30, 2008. The decrease between years is due primarily to decreased professional services fees due to reduced consulting services
utilized in the third quarter of 2009 compared with the third quarter of 2008. Receivables sales and securitization expenses decreased by approximately $0.3 million for the three months ended
September 30, 2009 compared with the three months ended September 30, 2008 as we utilized our revolving credit borrowings as our primary source of liquidity in 2009 as compared with our
securitization facility in 2008. In addition, during the third quarter of 2009, we retired approximately $10.0 million face value of our senior subordinated notes, resulting in a net gain of
approximately $1.2 million after considering non-cash debt extinguishment costs of $0.1 million.
Interest Expense. Interest expense decreased approximately $2.8 million, to $10.8 million, for the three months ended
September 30, 2009, as compared to $13.6 million for the three months ended September 30, 2008. The decrease is primarily attributable to approximately $1.9 million of
lower interest expense incurred on our senior subordinated notes, as we have retired approximately $81.2 million of these notes between December 2008 and September 30, 2009. The
remainder of the decrease in interest expense resulted from a decrease in our effective weighted-average interest rate on variable rate U.S. borrowings to approximately 3.8% during the third quarter
of 2009, from approximately 5.0% during the third quarter of 2008. These declines were partially offset by an increase in our weighted-average U.S. borrowings from approximately $282.5 million
in the three months ended September 30, 2008 to approximately $309.4 million in the three months ended September 30, 2009, as we utilized our revolving credit facility in 2009 as
our primary source to fund operations (as it was our lowest cost source of borrowings), as compared to utilizing our receivables securitization facility as the primary source of operational funding in
the third quarter of 2008, when it was the lowest cost alternative.
Other Expense, Net. Other expense, net decreased approximately $0.3 million, to $0.2 million for the three months
ended
September 30, 2009, as compared to $0.5 million for the three months ended September 30, 2008. In the third quarter of 2009, we incurred approximately $0.4 million of
expenses in connection with the use of our receivables securitization facility and sales of receivables to fund working capital needs and recognized approximately $0.5 million of gains on
transactions denominated in foreign currencies. In the third quarter of 2008, we incurred approximately $0.7 million of expenses in connection with the use of our receivables securitization
facility and sales of receivables to fund working capital needs and recognized approximately $0.2 million of gains on transactions denominated in foreign currencies. There were no other
individually significant amounts incurred or changes in amounts incurred in either of the three month periods ended September 30, 2009 and 2008.
Income Taxes. The effective income tax rates for the three months ended September 30, 2009 and 2008
were 37% and 40%, respectively. The decrease in the effective tax rate in the three months ended September 30, 2009 compared to the same period a year ago is primarily due to a shift in
pre-tax income from higher-taxed jurisdictions to lower-taxed jurisdictions, which was partially offset by recording a valuation allowance against a loss carry-forward of approximately
$1.0 million. In the three months ended September 30, 2009, the Company reported domestic and foreign pre-tax income of approximately $2.9 million and
$7.5 million, respectively. In the three months ended September 30, 2008, the Company reported domestic and foreign pre-tax income of approximately $8.9 million and
$4.6 million, respectively.
41
Table of Contents
Discontinued Operations. The results of discontinued operations consist of our N.I. Industries property management line of
business, which is
currently held for sale, and our specialty tapes and laminates business, which was sold in February 2009. Loss from discontinued operations, net of income tax benefit, was $0.7 million for the
three months ended September 30, 2009, as compared to income from discontinued operations, net of income tax expense, of $0.3 million for the three months ended September 30,
2008. See Note 2, "Discontinued Operations and Assets Held for Sale," to our consolidated financial statements included in Part I,
Item 1 of this report on Form 10-Q.
Nine Months Ended September 30, 2009 Compared with Nine Months Ended September 30, 2008
Overall, net sales decreased approximately $193.1 million, or approximately 23.9%, for the nine months ended
September 30, 2009, as compared with the nine months ended September 30, 2008. Although a few of our businesses benefitted from new product introductions during the first three quarters
of 2009, net sales declined in each of our five reportable segments, generally due to lower sales volumes resulting from the continued global economic recession. In addition, net sales were
unfavorably impacted by approximately $16.8 million as a result of currency exchange, as our reported results in U.S. dollars were negatively impacted by weaker foreign currencies.
Gross
profit margin (gross profit as a percentage of sales) approximated 24.9% and 26.6% for the nine months ended September 30, 2009 and 2008, respectively, declining primarily
as a result of the lower sales volumes and lower absorption of fixed costs associated with lower production and/or sales levels. In addition, gross profit was negatively impact by approximately
$4.8 million as a result of currency exchange, as our reported results in U.S. dollars were negatively impacted by weaker foreign currencies.
Operating
profit margin (operating profit as a percentage of sales) approximated 6.5% and 10.6% for the nine months ended September 30, 2009 and 2008, respectively. Operating
profit decreased approximately $45.6 million, or 53.3%, to $40.0 million for the nine months ended September 30, 2009, from $85.7 million for the nine months ended
September 30, 2008. Consistent with the decrease in gross profit, operating profit also declined primarily as a result of the lower sales volumes and lower absorption of fixed costs associated
with lower production and/or sales levels. However, we did reduce our selling, general and administrative expenses by approximately $15.8 million in the first three quarters of 2009 compared to
the first three quarters of 2008, primarily as a result of realization of savings associated with our Profit Improvement Plan in the third quarter of 2009 and concerted efforts to reduce discretionary
spending in response to the current economic conditions.
Adjusted
EBITDA margin from continuing operations (Adjusted EBITDA as a percentage of sales) approximated 16.2% and 14.0% for the nine months ended September 30, 2009 and 2008,
respectively. Adjusted EBITDA decreased approximately $13.4 million for the nine months ended September 30, 2009, as compared to the nine months ended September 30, 2008. After
consideration of the $29.4 million gross gain on extinguishment of debt, an increase in year-over-year depreciation expense of approximately $1.4 million, gains
on transactions denominated in foreign currencies in the nine months ended September 30, 2009 of approximately $0.4 million as compared to losses on transactions denominated in foreign
currencies in the nine months ended September 30, 2008 of approximately $0.4 million, and $0.6 million lower year-over-year expense for receivables sales
and securitization, the change in Adjusted EBITDA is consistent with the change in operating profit between years.
See
below for a discussion of operating results by segment.
Packaging. Net sales decreased approximately $22.8 million, or 17.7%, to $106.1 million in the nine months ended
September 30,
2009, as compared to $128.9 million in the nine months ended September 30, 2008. Overall, sales decreased approximately $7.9 million due to currency exchange, as our reported
results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar
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relative
to foreign currencies. Sales of our specialty dispensing products and new product introductions increased by approximately $9.9 million in the nine months ended September 30,
2009 compared to the
nine months ended September 30, 2008, due primarily to increased sales into the personal care markets, pharmaceuticals, and the food industries. Sales of our industrial closures, rings and
levers decreased by approximately $24.8 million in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, primarily as a result of the
continued general economic slowdown.
Packaging'
gross profit decreased approximately $6.0 million to $37.7 million, or 35.5% of sales, in the nine months ended September 30, 2009, as compared to
$43.7 million, or 33.9% of sales, in the nine months ended September 30, 2008. The decrease in gross profit between years is primarily attributed to lower sales volumes of our industrial
products and unfavorable currency exchange, the impact of which was partially offset by lower steel and resin costs year-over-year.
Packaging'
selling, general and administrative expenses decreased approximately $3.0 million to $14.5 million, or 13.7% of sales, in the nine months ended
September 30, 2009, as compared to $17.5 million, or 13.6% of sales, in the nine months ended September 30, 2008. Discretionary spending has been reduced from 2008 levels, and
additional selling, and general and administrative cost reduction plans have been implemented to better align the fixed cost structure with current business requirements resulting from the general
economic decline.
Packaging'
operating profit decreased approximately $3.1 million to $23.4 million, or 22.0% of sales, in the nine months ended September 30, 2009, as compared to
$26.5 million, or 20.6% of sales, in nine months ended September 30, 2008. The decrease in operating profit between years is primarily attributed to lower sales volumes of our industrial
products and unfavorable currency exchange, which were partially offset by lower steel and resin costs, and reduced selling, general and administrative costs as a result of our cost reduction plans.
Packaging'
Adjusted EBITDA decreased approximately $3.6 million to $32.8 million, or 30.9% of sales, in the nine months ended September 30, 2009, as compared to
$36.4 million, or 28.3% of sales, in the nine months ended September 30, 2008, consistent with the change in operating profit between years after consideration of increased foreign
currency transaction losses of approximately $0.2 million during the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 and
$0.4 million reduced depreciation expense in the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008.
Energy. Net sales for the nine months ended September 30, 2009 decreased approximately $46.1 million, or 29.3%, to
$111.3 million, as compared to $157.4 million in the nine months ended September 30, 2008. Sales of specialty gaskets and related fastening hardware decreased approximately
$16.3 million as a result of reduced levels of turn-around activity at petrochemical refineries and decreased sales demand from the chemical industry, as customers continue to defer
maintenance and new programs that require our replacement and specialty gaskets and hardware. Sales of slow speed and compressor engines and related products decreased by approximately
$29.8 million, due to a reduction of drilling activity in North America and customers deferring completion of previously drilled wells.
Sales of compressor products increased slightly, as the Company continues to develop new products to add to its well-site content.
Gross
profit within Energy decreased approximately $17.4 million to $27.3 million, or 24.6% of sales, in the nine months ended September 30, 2009, as compared to
$44.7 million, or 28.4% of sales, in the nine months ended September 30, 2008. Gross profit decreased approximately $13.1 million as a result of the reduction in sales levels
between years. The remaining decrease in gross profit is primarily attributable to lower absorption of fixed costs as a result of the lower sales volumes.
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Selling,
general and administrative expenses within Energy decreased approximately $2.1 million to $17.9 million, or 16.1% of net sales, in the nine months ended
September 30, 2009, as compared to $20.0 million or 12.7% of net sales, in the nine months ended September 30, 2008. This decrease was primarily due to reduced sales commissions,
compensation and other administrative costs in an effort to match spending and headcount to current production volumes. These decreases were partially offset by the opening of two new branches within
our specialty gasket business, one in Salt Lake City, Utah, and one in Rotterdam, Netherlands, in 2009, which has increased selling, general and administrative expenses in the first three quarters of
2009 by approximately $0.7 million.
Overall,
operating profit within Energy decreased approximately $15.3 million to $9.4 million, or 8.4% of sales, in the nine months ended September 30, 2009, as
compared to $24.7 million, or 15.7% of sales, in the nine months ended September 30, 2008, due principally to lower sales volumes and lower absorption of fixed costs, which were
partially offset by reductions in commissions, salaries and other administrative costs in light of lower sales volumes.
Energy'
Adjusted EBITDA decreased $15.0 million to $11.7 million, or 10.5% of sales, in the nine months ended September 30, 2009, as compared to
$26.7 million, or 16.9% of sales, in the nine months ended September 30, 2008, consistent with the decrease in operating profit between years.
Aerospace & Defense. Net sales for the nine months ended September 30, 2009 decreased approximately
$9.3 million, or 14.0%, to
$56.5 million, as compared to $65.8 million in the nine months ended September 30, 2008. Sales in our aerospace business decreased approximately $8.9 million, primarily due
to lower blind-bolt fastener sales resulting from program delays beginning in the first quarter of 2009 at commercial airframe manufacturers and inventory reductions by our distribution
customers, who are adjusting inventory levels in response to the delayed programs and the current economic uncertainty. This decrease was partially offset by sales of new products, primarily titanium
screws, of approximately $4.4 million during the first three quarters of 2009, which increased our content on certain aircraft. Sales in our defense business decreased approximately
$0.4 million. Revenue associated with managing the relocation and closure of the defense facility increased $2.7 million in the nine months ended September 30, 2009 compared to
the nine months ended September 30, 2008. In addition, we had approximately $1.9 million of new product sales during the nine months ended September 30, 2009. These increases in
revenue were more than offset by a decrease in cartridge sales of approximately $5.0 million in the nine months ended September 30, 2009 compared with the nine months ended
September 30, 2008, as our customer had been building its inventory throughout 2008 in advance of the relocation of the facility, which began in late second quarter 2009.
Gross
profit within Aerospace & Defense decreased approximately $4.5 million to $24.9 million, or 44.0% of sales, in the nine months ended September 30, 2009,
from $29.4 million, or 44.7% of sales, in the nine months ended September 30, 2008. Gross profit decreased approximately $4.1 million as a result of the decline in sales levels
between years. This decrease in gross profit was also impacted by lower absorption of fixed costs as a result of lower production and/or sales levels, primarily within our aerospace business.
Selling,
general and administrative expenses decreased approximately $0.7 million to $6.5 million, or 11.4% of sales, in the nine months ended September 30, 2009, as
compared to $7.2 million, or 10.9% of sales, in the nine months ended September 30, 2008 due primarily to reduced sales commissions and expenses and discretionary spending in light of
the decrease in sales levels between years.
Operating
profit within Aerospace & Defense decreased approximately $3.8 million to $18.4 million, or 32.6% of sales, in the nine months ended September 30,
2009, as compared to $22.2 million, or 33.8% of sales, in the nine months ended September 30, 2008, primarily due to lower
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sales
volumes and lower absorption of fixed costs, which were partially offset by reduced selling, general and administrative expenses.
Aerospace &
Defense' Adjusted EBITDA decreased $3.4 million to $20.2 million, or 35.7% of sales, in the nine months ended September 30, 2009, as compared to
$23.6 million, or 35.8% of sales, in the nine months ended September 30, 2008, consistent with the decrease in operating profit between years after consideration of approximately
$0.4 million of higher depreciation expense in the first nine months of 2009 compared to the first nine months of 2008 resulting from the full-run-rate impact of
procurement of additional machinery and equipment in our aerospace business during mid-2008.
Engineered Components. Net sales for the nine months ended September 30, 2009 decreased
approximately $52.1 million, or 50.5%, to $51.1 million, as compared to $103.2 million in the nine months ended September 30, 2008. Sales within our specialty fittings
business declined $3.1 million due to lower sales of our core tube nut products which have been significantly impacted by the continued weak domestic automotive market demand, this decrease was
partially offset by new product offerings for automotive fuel systems. Sales in our industrial cylinder and precision tool cutting businesses decreased $40.7 million and $4.3 million,
respectively, due primarily to the global economic recession, which as significantly impacted industrial applications and products. Finally, sales in our medical device business decreased
$4.0 million due to certain contract manufacturing awards that did not recur in the first nine months of 2009.
Gross
profit within Engineered Components decreased approximately $15.3 million to $4.3 million, or 8.5% of sales, in the nine months ended September 30, 2009, from
$19.6 million, or 19.0% of sales, in the nine months ended September 30, 2008. Gross profit decreased approximately $9.9 million as a result of the decline in sales levels between
years. This decrease in gross profit was also impacted by sales of higher-cost inventory, primarily related to steel, in excess of the businesses' ability to secure price increases and
lower absorption of fixed costs as a result of lower production and/or sales levels.
Selling,
general and administrative expenses decreased approximately $1.7 million to $5.2 million, or 10.3% of sales, in the nine months ended September 30, 2009, as
compared to $6.9 million, or 6.7% of sales, in the nine months ended September 30, 2008 due primarily to lower sales commissions and reduced discretionary spending in light of the
decrease in sales levels between years.
Operating
profit within Engineered Components decreased approximately $13.5 million to a loss of $1.0 million, or (2.0%) of sales, in the nine months ended
September 30, 2009, as compared to $12.5 million, or 12.1% of sales, in the nine months ended September 30, 2008, primarily due to lower sales volumes and lower absorption of
fixed costs, which were partially offset by reduced sales commissions and discretionary spending within selling, general and administrative expenses.
Engineered
Components' Adjusted EBITDA decreased approximately $13.5 million to $2.1 million, or 4.2% of sales, in the nine months ended September 30, 2009, as
compared to $15.6 million, or 15.2% of sales, in the nine months ended September 30, 2008, consistent with the decrease in operating profit between years.
Cequent. Net sales decreased approximately $62.9 million to $290.1 million in the nine months ended September 30,
2009, as
compared to $352.9 million in the nine months ended September 30, 2008. Net sales were unfavorably impacted by approximately $8.1 million of currency exchange, as our reported
results in U.S. dollars were negatively impacted as a result of the stronger U.S. dollar relative to foreign currencies. Sales in our retail business decreased $0.4 million, due to reduced
sales volumes to existing retail customers due to the economic uncertainty, which was mostly offset by considerable additional business at a few large customers and the addition of several new
customers during 2009. Sales within our performance products business (includes the legacy towing, trailering and electrical businesses) decreased by $50.5 million, due to the continued soft
demand in the majority of the end markets we serve due to the current uncertain economic conditions. Sales in our Australia/Asia Pacific
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business
decreased approximately $3.9 million, due primarily to decreases in certain original equipment manufacturer revenue and the overall global economic recession, which improved in the
third quarter of 2009 due to the government incentive stimulus, which bolstered revenues during the quarter.
Cequent'
gross profit decreased approximately $18.4 million to $58.7 million, or 20.2% of sales, in the nine months ended September 30, 2009, from approximately
$77.1 million, or 21.9% of sales, in the nine months ended September 30, 2008. Of the decline in gross profit between years, approximately $13.7 million is attributed to the
decline in sales between periods and $1.5 million is attributed to unfavorable currency exchange. The remaining decrease in gross profit was due to sales of higher-cost inventory in
excess of the businesses' ability to secure sales price increases during the first two quarters of 2009, lower absorption of fixed costs as a result of lower production and/or sales levels and
accelerated depreciation expense related to machinery and equipment in our Mosinee, WI manufacturing facility that will no longer be utilized following the closure of the facility during the fourth
quarter of 2009.
Selling,
general and administrative expenses decreased approximately $6.9 million to $52.1 million, or 18.0% of sales, in the nine months ended September 30, 2009,
as compared to $59.0 million, or 16.7% of sales, in the nine months ended September 30, 2008, due primarily to reductions in salaries, sales promotions, sales commissions and other
discretionary spending, all as a part of our Profit Improvement Plan to better align the spending and cost structure with the current demand and production levels. These decreases were partially
offset by severance charges of approximately $1.6 million incurred in the first quarter of 2009 associated with the involuntary termination of employees located at our Mosinee, WI manufacturing
facility, which is scheduled to be closed during the fourth quarter of 2009.
Cequent'
operating profit declined approximately $11.1 million to $6.8 million, or 2.3% of sales, in the nine months ended September 30, 2009, from
$17.9 million, or 5.1% of net sales, in the nine months ended September 30, 2008. The decline in operating profit between years was primarily due to lower sales volumes, unfavorable
foreign currency exchange, sales of higher-cost inventory,
lower absorption of fixed costs and costs associated with the closure of the Mosinee, WI manufacturing facility, which were partially offset by cost reductions as part of the Profit Improvement Plan.
Cequent'
Adjusted EBITDA decreased approximately $9.2 million to $21.7 million, or 7.5% of sales, for the nine months ended September 30, 2009, from
$30.9 million, or 8.8% of sales, for the nine months ended September 30, 2008. In the nine months ended September 30, 2009, Cequent recognized gains of approximately
$0.5 million on transactions denominated in foreign currencies, as compared to losses of $0.4 million in the nine months ended September 30, 2008. In addition, depreciation
expense was approximately $1.1 million higher in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008, primarily as a result of
accelerated depreciation incurred in the first nine months of 2009 in connection with certain machinery and equipment that will no longer be utilized following the closure of the Mosinee facility.
After consideration of these two items, the change in Adjusted EBITDA is consistent with the decline in operating profit between years.
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Corporate Expenses (Income). Corporate expenses (income) included in operating profit and Adjusted EBITDA consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
Nine months
ended
September 30, |
|
|
|
2009 |
|
2008 |
|
|
|
(in millions)
|
|
Corporate operating expenses |
|
$ |
7.4 |
|
$ |
8.8 |
|
Employee costs and related benefits |
|
|
9.4 |
|
|
9.4 |
|
| |
|
|
|
|
|
| |
Corporate expenses—operating profit |
|
$ |
16.8 |
|
$ |
18.2 |
|
Receivables sales and securitization expenses |
|
|
1.6 |
|
|
2.2 |
|
Gain on repurchase of bonds |
|
|
(29.4 |
) |
|
— |
|
Depreciation |
|
|
(0.1 |
) |
|
(0.1 |
) |
Other, net |
|
|
(0.3 |
) |
|
(0.4 |
) |
| |
|
|
|
|
|
| |
Corporate expenses (income)—Adjusted EBITDA |
|
$ |
(11.4 |
) |
$ |
19.9 |
|
| |
|
|
|
|
|
Corporate
expenses included in operating profit decreased approximately $1.4 million to $16.8 million for the nine months ended September 30, 2009, from
$18.2 million for the nine months ended September 30, 2008. During the first nine months of 2009, we recorded a charge of approximately $2.9 million
associated with the termination of our former chief executive officer. During the first nine months of 2008, we recorded a charge of approximately $1.6 million related to severance under our
corporate office restructuring. This net increase in employee costs and related benefits of approximately $1.3 million was more than offset by $0.8 million of reduced
non-cash equity compensation expense, and significant reductions in discretionary and overall spending levels due to the reduction in corporate office headcount and in response to the
general economic conditions in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. In addition, during the first nine months of 2009, we
retired approximately $73.2 million face value of our senior subordinated notes, resulting in a net gain of approximately $28.3 million after considering non-cash debt
extinguishment costs of $1.1 million.
Interest Expense. Interest expense decreased approximately $7.6 million, to $34.6 million, for the nine months ended
September 30, 2009, as compared to $42.2 million for the nine months ended September 30, 2008. The decrease in interest expense is primarily the result of a decrease in our
effective weighted average interest rate on variable rate U.S. borrowings to approximately 3.9% during the nine months ended September 30, 2009, from approximately 5.4% during the nine months
ended September 30, 2008. Partially offsetting this reduction in interest rates was an increase in our weighted-average U.S. borrowings from approximately $297.8 million in the nine
months ended September 30, 2008 to approximately $315.7 million in the nine months ended September 30, 2009, as we utilized our revolving credit facility as our primary source to
fund operations in the first nine months of 2009 (as it was our lowest cost source of borrowings), as compared to utilizing our securitization facility as the primary source of operational funding in
the first nine months of 2008 when it was the more cost-effective alternative. In addition, we recorded approximately $2.0 million lower interest expense related to our senior
subordinated notes in the first nine months of 2009 compared to the first nine months of 2008, as we retired approximately $81.2 million between December 2008 and the third quarter of 2009.
Other Expense, Net. Other expense, net decreased approximately $1.3 million, to $1.7 million for the nine months ended
September 30, 2009, as compared to $3.0 million for the three months ended September 30, 2008. In the first nine months of 2009, we incurred approximately $1.6 million of
expenses in connection with the use of our receivables securitization facility and sales of receivables to fund working capital needs and recorded approximately $0.3 million of gains on
transactions
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denominated
in foreign currencies. In the first nine months of 2008, we incurred approximately $2.2 million of expenses in connection with the use of our receivables securitization facility and
sales of receivables to fund working capital needs and recorded approximately $0.4 million of losses on transactions denominated in foreign currencies. There were no other individually
significant amounts incurred or changes in amounts incurred in either of the nine month periods ended September 30, 2009 and 2008.
Income Taxes. The effective income tax rates for the nine months ended September 30, 2009 and 2008 were 38% and 37%,
respectively. The
increase in the effective tax rate in the nine months ended September 30, 2009 compared to the same period a year ago is primarily due to recording a valuation allowance against a loss
carry-forward of approximately $1.0 million and $0.6 million of expense related to a deferred tax correction. These increases were mostly offset by a shift in pre-tax income
from higher-taxed jurisdictions to lower-taxed jurisdictions. In the nine months ended September 30, 2009, the Company reported domestic and foreign pre-tax income of approximately
$17.5 million and $14.6 million, respectively. In the nine months ended September 30, 2008, the Company reported domestic and foreign pre-tax income of approximately
$24.4 million and $16.1 million, respectively.
Discontinued Operations. The results of discontinued operations consist of our N.I. Industries property management line of
business, which is
currently held for sale, and our specialty tapes and laminates business, which was sold in February 2009. Loss from discontinued operations, net of income tax benefit, was $8.7 million for the
nine months ended September 30, 2009, as compared to income from discontinued operations, net of income tax expense, of $0.3 million for the nine months ended September 30, 2008.
See Note 2, "Discontinued Operations and Assets Held for Sale," to our consolidated financial statements included in Part I, Item 1
of this report on Form 10-Q.
Liquidity and Capital Resources
Cash provided by operating activities for the nine months ended September 30, 2009 was approximately $67.6 million, as
compared to $22.8 million for the nine months ended September 30, 2008. Significant changes in cash flows provided by operating activities and the reasons for such changes are as
follows:
- •
- For the nine months ended September 30, 2009, the Company generated $23.6 million of cash, based on the
reported net income from operations of $11.1 million and after considering the effects of non-cash items related to gains/losses on dispositions of property and equipment,
depreciation and amortization, changes in deferred taxes, debt extinguishments, stock compensation and other non-cash items. For the nine months ended September 30, 2008, the
Company generated $67.4 million in cash flows based on the reported net income from operations of $25.6 million and after considering the effects of non-cash impacts related
to depreciation, amortization and other non-cash items.
- •
- For the nine months ended September 30, 2009, activity related to the sale of receivables and use of our
receivables securitization facility resulted in a net cash use of approximately $15.7 million, as we reduced amounts outstanding under the facility relative to December 31, 2008. During
the first nine months of 2009, we relied on our revolving credit facility as the principal source of funding our working capital requirements and ordinary course needs, as it was our lowest cost
source of borrowings. For the nine months ended September 30, 2008, activity related to the sale of receivables and use of our receivables securitization facility resulted in a net cash use of
approximately $26.7 million. Although we relied on our receivables securitization facility as the primary source of funding working capital requirements and ordinary course needs during the
first nine months of 2008, as it was our lowest cost source of
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borrowings,
we lowered our borrowings outstanding from December 31, 2007 to September 30, 2008, as we generated sufficient cash to lower the borrowing requirements.
- •
- Reductions in receivables resulted in a source of cash of approximately $24.6 million for the nine months ended
September 30, 2009, while increases in receivables resulted in a use of cash of approximately $19.3 million for the nine months ended September 30, 2008. As compared to first nine
months of 2008, sales in the first nine months of 2009 decreased approximately 24%, and the gross level of accounts receivable at September 30, 2009 declined a comparable amount.
- •
- For the nine months ended September 30, 2009, we reduced our investment in inventory consistent with our management
strategy to improve inventory turns and to better align inventory levels with end market demand, which resulted in a cash source of approximately $51.7 million. For the nine months ended
September 30, 2008, we used approximately $7.6 million of cash relative to our investment in inventory.
- •
- For the nine months ended September 30, 2009, accounts payable and accrued liabilities resulted in a net use of
cash of approximately $18.4 million, as compared to a net source of cash of $4.7 million for the nine months ended September 30, 2008. The reduction in accounts payable and
accrued liabilities is a result of lowering our purchases in the process of aligning our inventory levels with end market demand.
- •
- Management of prepaid expenses and other assets resulted in a source of cash of approximately $1.9 million and
$4.4 million for the nine months ended September 30, 2009 and 2008, respectively, primarily as a result of ongoing initiatives to reduce the relative level of investment in manufacturing
supplies, spare parts and tooling assets.
Net
cash provided by investing activities for the nine months ended September 30, 2009 was approximately $12.3 million, as compared to net cash used of $24.2 million
for the nine months ended September 30, 2008. During the first nine months of 2009, we generated approximately $23.1 million of cash from business and asset dispositions, primarily
related to the sale of our specialty laminates business. We also incurred approximately $10.9 million in capital expenditures to support our growth initiatives, which we decreased from 2008
levels in response to the current economic recession. During the first nine months of 2008, our investing activities used cash of approximately $24.2 million. We paid approximately
$2.4 million for the acquisition of Parkside Towbars, net of cash acquired, and paid approximately $3.8 million of additional purchase price for the medical device company acquired in
the third quarter of 2007. We received approximately $2.3 million in cash related to asset dispositions. In addition, we incurred approximately $20.1 million in capital expenditures to
support our growth initiatives.
Net
cash used by financing activities for the nine months ended September 30, 2009 was approximately $59.0 million, as compared to net cash provided by financing activities
of approximately $1.3 million for the nine months ended September 30, 2008. During the first three quarters of 2009, we used approximately $43.8 million of available cash to
retire $73.2 million face value of our 97/8% senior subordinated notes due 2012 via open market purchases. As previously noted, during the first three quarters of 2009, we
significantly increased the use of our revolving credit facility as the primary source of funding our working capital requirements, as it was our lowest cost source of borrowing, as compared to the
first nine months of 2008, when we relied more heavily on our receivables securitization facility. However, on a net basis, we reduced amounts outstanding on our revolving credit facilities at
September 30, 2009 by approximately $12.8 million from December 31, 2008. In contrast, we increased amounts outstanding on our revolving credit facilities during the first nine
months of 2008 by approximately $5.0 million.
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Our Debt and Other Commitments
Our credit facility is comprised of a $90.0 million revolving credit facility, a $60.0 million deposit-linked
supplemental revolving credit facility and a $260.0 million term loan facility. At September 30, 2009, approximately $252.2 million was outstanding on the term loan and $0 was
outstanding on the revolving credit facilities. Under the credit facility, up to $90.0 million in the aggregate of our revolving credit facility is available to be used for one or more
permitted acquisitions subject to certain conditions and other outstanding borrowings and issued letters of credit. Our credit facility also provides for an uncommitted $100.0 million
incremental term loan facility that, subject to certain conditions, is available to fund one or more permitted acquisitions or to repay a portion of our senior subordinated notes.
Amounts
drawn under our revolving credit facilities fluctuate daily based upon our working capital and other ordinary course needs. Availability under our revolving credit facilities
depends upon, among other things, compliance with our credit agreement's financial covenants. Our credit facilities contain negative and affirmative covenants and other requirements affecting us and
our subsidiaries, including among others: restrictions on incurrence of debt (except for permitted acquisitions and subordinated indebtedness), liens, mergers, investments, loans, advances, guarantee
obligations, acquisitions, asset dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted junior payments, stock repurchases, transactions with
affiliates, restrictive agreements and
amendments to charters, by-laws, and other material documents. The terms of our credit agreement require us and our subsidiaries to meet certain restrictive financial covenants and ratios
computed quarterly, including a leverage ratio (total consolidated indebtedness plus outstanding amounts under the accounts receivable securitization facility over consolidated EBITDA, as defined),
interest expense ratio (consolidated EBITDA, as defined, over cash interest expense, as defined) and a capital expenditures covenant. The most restrictive of these financial covenants and ratios are
the leverage ratio and interest expense ratio. Our permitted leverage ratio under our amended and restated credit agreement is 4.75 to 1.00 for July 1, 2009 to September 30, 2009, 4.50
to 1.00 for October 1, 2009 to September 30, 2010, 4.25 to 1.00 for July 1, 2010 to September 30, 2011 and 4.00 to 1.00 from October 1, 2011 and thereafter. Our
actual leverage ratio was 3.80 to 1.00 at September 30, 2009. Our permitted interest expense ratio under our amended and restated credit agreement is 2.20 to 1.00 for July 1, 2009 to
December 31, 2009, 2.30 to 1.00 for January 1, 2010 to December 31, 2010, 2.40 to 1.00 for January 1, 2011 to September 30, 2011 and 2.50 to 1.00 for
October 1, 2011 and thereafter. Our actual interest expense ratio was 3.00 to 1.00 at September 30, 2009. At September 30, 2009, we were in compliance with our financial
covenants.
The
following are the reconciliations of net income (loss), which is a GAAP measure of our operating results, to Consolidated Bank EBITDA, and interest expense, as reported, to
Consolidated
50
Table of Contents
Cash
Interest Expense, both as defined in our credit agreement as in effect on September 30, 2009, for the twelve month period ended September 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2008 |
|
Less:
Nine Months Ended
September 30, 2008 |
|
Add:
Nine Months Ended
September 30, 2009 |
|
Twelve Months
Ended
September 30,
2009 |
|
|
|
(dollars in thousands)
|
|
Net income (loss), as reported |
|
$ |
(136,190 |
) |
$ |
25,640 |
|
$ |
11,140 |
|
$ |
(150,690 |
) |
Bank stipulated adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest expense, net (as defined) |
|
|
55,920 |
|
|
42,300 |
|
|
35,040 |
|
|
48,660 |
|
| |
Income tax expense (benefit)(1) |
|
|
(12,610 |
) |
|
15,310 |
|
|
6,650 |
|
|
(21,270 |
) |
| |
Depreciation and amortization |
|
|
44,070 |
|
|
32,440 |
|
|
33,410 |
|
|
45,040 |
|
| |
Interest equivalent costs(2) |
|
|
2,610 |
|
|
2,210 |
|
|
1,220 |
|
|
1,620 |
|
| |
Non-cash expenses related to stock option grants(3) |
|
|
1,030 |
|
|
1,160 |
|
|
340 |
|
|
210 |
|
| |
Other non-cash expenses or losses(4) |
|
|
188,340 |
|
|
2,440 |
|
|
2,290 |
|
|
188,190 |
|
| |
Non-recurring expenses or costs for cost savings projects(5) |
|
|
4,250 |
|
|
2,860 |
|
|
5,420 |
|
|
6,810 |
|
| |
Debt extinguishment costs(6) |
|
|
140 |
|
|
— |
|
|
1,140 |
|
|
1,280 |
|
| |
Negative EBITDA from discontinued operations(7) |
|
|
3,950 |
|
|
210 |
|
|
850 |
|
|
4,590 |
|
| |
Permitted dispositions(8) |
|
|
(100 |
) |
|
(1,810 |
) |
|
12,020 |
|
|
13,730 |
|
| |
Permitted acquisitions(9) |
|
|
40 |
|
|
40 |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
| |
Consolidated Bank EBITDA, as defined |
|
$ |
151,450 |
|
$ |
122,800 |
|
$ |
109,520 |
|
$ |
138,170 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2009 |
|
|
|
(dollars in
thousands)
|
|
Total long-term debt |
|
$ |
525,380 |
|
Aggregate funding under the receivables securitization facility |
|
|
— |
|
| |
|
|
|
Total Consolidated Indebtedness, as defined |
|
$ |
525,380 |
|
| |
|
|
|
Consolidated Bank EBITDA, as defined |
|
$ |
138,170 |
|
| |
|
|
|
Actual leverage ratio |
|
|
3.80x |
|
| |
|
|
|
Covenant requirement |
|
|
4.75x |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2008 |
|
Less:
Nine Months Ended
September 30, 2008 |
|
Add:
Nine Months Ended
September 30, 2009 |
|
Twelve Months
Ended
September 30,
2009 |
|
|
|
(dollars in thousands)
|
|
Interest expense, as reported |
|
$ |
55,920 |
|
$ |
42,300 |
|
$ |
35,040 |
|
$ |
48,660 |
|
Bank stipulated adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest equivalent costs(2) |
|
|
2,610 |
|
|
2,210 |
|
|
1,220 |
|
|
1,620 |
|
| |
Interest income |
|
|
(720 |
) |
|
(520 |
) |
|
(210 |
) |
|
(410 |
) |
| |
Non-cash amounts attributable to amortization of financing costs |
|
|
(2,630 |
) |
|
(1,870 |
) |
|
(2,830 |
) |
|
(3,590 |
) |
| |
Pro forma adjustment for dispositions |
|
|
(1,120 |
) |
|
(850 |
) |
|
— |
|
|
(270 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Total Consolidated Cash Interest Expense, as defined |
|
$ |
54,060 |
|
$ |
41,270 |
|
$ |
33,220 |
|
$ |
46,010 |
|
| |
|
|
|
|
|
|
|
|
|
51
Table of Contents
|
|
|
|
|
|
|
September 30,
2009 |
|
|
|
(dollars in
thousands)
|
|
Consolidated Bank EBITDA, as defined |
|
$ |
138,170 |
|
Total Consolidated Cash Interest Expense, as defined |
|
|
46,010 |
|
| |
|
|
|
Actual interest expense ratio |
|
|
3.00x |
|
| |
|
|
|
Covenant requirement |
|
|
2.20x |
|
| |
|
|
|
- (1)
- Amount
includes tax (expense) benefits associated with discontinued operations.
- (2)
- Interest-equivalent
costs associated with the Company's receivables securitization facility.
- (3)
- Non-cash
expenses resulting from the grant of restricted shares of common stock and common stock options.
- (4)
- Principally,
non-cash charges associated with tangible and intangible asset impairments, including goodwill.
- (5)
- Non-recurring
costs and expenses relating to cost savings projects, including restructuring and severance expenses, not to exceed $50,000,000 in
the aggregate.
- (6)
- Costs
incurred in connection with the retirement of $73.2 million face value of our senior subordinated notes during the nine months ended
September 30, 2009.
- (7)
- Not
to exceed $10,000,000 in any fiscal year; actual amount reported for the nine month period ended September 30, 2009 was $0.9 million
- (8)
- EBITDA
from permitted dispositions, as defined.
- (9)
- EBITDA
from permitted acquisitions, as defined.
Three of our international businesses are also parties to loan agreements with banks, denominated in their local currencies. In the United
Kingdom, we are party to a revolving debt agreement with a bank in the amount of £1.0 million, (approximately $0.7 million outstanding at September 30, 2009) which is
secured by a letter of credit under our credit facilities. In Italy, we are party to a €5.0 million note agreement with a bank (approximately $1.9 million outstanding at
September 30, 2009) with a term of seven years, which expires December 12, 2012 and is secured by land and buildings of our local business unit. In Australia, we are party to a debt
agreement with a bank in the amount of $23.0 million Australian dollars (approximately $14.1 million outstanding at September 30, 2009) for a term of five years which expires
December 31, 2010. Borrowings under this arrangement are secured by substantially all the assets of the local business which is also subject to financial ratio and reporting covenants.
Financial ratio covenants include: capital adequacy ratio (tangible net worth over total tangible assets), interest coverage ratio (EBIT over gross interest cost) and we are in compliance with such
covenants at September 30, 2009. In addition to the financial ratio covenants there are other financial restrictions such as: restrictions on dividend payments, U.S. parent loan repayments,
negative
pledge and undertakings with respect to related entities. As of September 30, 2009, total borrowings in the amount of $16.7 million were outstanding under these arrangements.
Another
important source of liquidity is our $55.0 million accounts receivable securitization facility, under which we have the ability to sell eligible accounts receivable to a
third-party multi-seller receivables funding company. At September 30, 2009, we had $0 utilized under our accounts receivable facility and available funding of $29.8 million based on
eligible receivables.
At
September 30, 2009, our available revolving credit capacity of $150 million under our credit facility is reduced by approximately $31.2 million of letters of
credit outstanding as of that date. The letters of credit are used for a variety of purposes, including support of certain operating lease agreements, vendor payment terms and other subsidiary
operating activities, and to meet various states' requirements to self-insure workers' compensation claims, including incurred but not reported claims.
52
Table of Contents
After
consideration of our outstanding letters of credit at September 30, 2009 (as we had no amounts outstanding under our revolving credit facility), we had $118.8 million of revolving
credit capacity available, in addition to $29.8 million of available liquidity under our accounts receivable securitization facility discussed above. However, after consideration of our
leverage covenant, we had an aggregate available funding under our credit and securitization facilities of $130.9 million at September 30, 2009.
Our
available revolving credit capacity under our credit facility, after consideration of approximately $31.2 million in letters of credit outstanding related thereto, is
approximately $118.8 million, while our available liquidity under our accounts receivable securitization facility ranges from $29.8 million to $49.0 million, depending on the
level of our receivables outstanding at a given point in time during the year. We rely upon our cash flow from operations and available liquidity under the credit and securitization facilities to fund
our debt service obligations and other contractual commitments, working capital and capital expenditure requirements. Generally, we use available liquidity under these facilities to fund capital
expenditures and daily working capital requirements during the first half of the year, as we experience some seasonality in our Cequent reportable segment. Sales of towing and trailering products
within this operating segment are generally stronger in the second and third quarters, as trailer original equipment manufacturers (OEMs), distributors and retailers acquire product for the spring and
summer selling seasons. None of our other operating segments experience any material seasonal fluctuation in their respective businesses. During the second half of the year, the investment in working
capital is reduced and amounts outstanding under our credit and securitization facilities are paid down. At the end of each quarter, we generally use cash on hand to pay down amounts outstanding under
our credit and securitization facilities.
Cash
management related to our credit and securitization facilities is centralized. We monitor our cash position and available liquidity on a daily basis and forecast our cash needs on a
weekly basis within the current quarter, and on a monthly basis outside the current quarter over the remainder of the year. Our business and related cash forecasts are updated monthly. Given aggregate
available funding under
our credit and securitization facilities of $130.9 million at September 30, 2009, after consideration of the aforementioned leverage restrictions, and based on forecasted cash sources
and requirements inherent in our business plans, we believe that our liquidity and capital resources, including anticipated cash flows from operations, will be sufficient to meet our debt service,
capital expenditure and other short-term and long-term obligation needs for the foreseeable future.
We
also have $256.5 million (face value) 97/8% senior subordinated notes (the "Notes") outstanding at September 30, 2009, due in 2012. During the first nine
months of 2009, we retired $73.2 million face value of Notes via open market purchases. We may choose to repurchase Notes via open market or in privately negotiated transactions
on terms we believe favorable. These transactions may be effected for cash (from cash and cash equivalents, borrowings under our credit facility, or proceeds from sale of debt or equity securities),
in exchange for common stock, or a combination of both. We will evaluate any such transaction in light of then prevailing market conditions and our then current and prospective liquidity and capital
resources, including projected and potential needs and prospects for access to capital markets. Any such transactions may, individually or in aggregate, be material.
Principal
payments required under our amended and restated credit facility term loan are: $0.7 million due each calendar quarter through June 30, 2013, and
$242.5 million due on August 2, 2013 (or February 28, 2012 if the Company's existing senior subordinated notes are still outstanding as of that date). Although we have no
significant debt maturities under our credit facility or senior subordinate notes until 2012, we may choose to explore options to refinance our existing debt obligations prior to their maturity dates.
Our
credit facility is guaranteed on a senior secured basis by us and all of our domestic subsidiaries, other than our special purpose receivables subsidiary, on a joint and several
basis. In
53
Table of Contents
addition,
our obligations and the guarantees thereof are secured by substantially all the assets of us and the guarantors.
Our
exposure to interest rate risk results from the variable rates under our credit facility. Borrowings under the credit facility bear interest, at various rates, as more fully
described in Note 8, "Long-term Debt," to the accompanying consolidated financial statements as of September 30, 2009. In April 2008, we entered into an interest rate swap
agreement to fix the LIBOR-based variable portion of our interest rate on $125.0 million notional amount of its term loan facility at 2.73%. The swap extends through October 2009. In January
2009, the Company entered into two new interest rate swap agreements to fix the LIBOR-based variable portion of its interest rate on $75.0 million notional amount of its term loan facility at
1.39% and $125.0 million notional amount of its term loan facility at 1.91%. The $75.0 million notional amount interest rate swap commences in January 2009 and extends through January
2011. The $125.0 million notional amount interest rate swap commences in October 2009 and extends through July 2011. These interest rate swaps are designated as cash flow hedges whereby the
effective portion of the hedge gains and losses are deferred as changes in the cash flows of the interest rate swaps are expected to exactly offset the changes in the cash flows of
variable rate debt attributable to fluctuations in the LIBOR. The cumulative fair value of the swaps was a liability of $2.6 million at September 30, 2009.
Based
on variable rate-based borrowings outstanding at September 30, 2009, a 1% increase or decrease in the per annum interest rate for borrowings under our U.S. and
foreign revolving credit facilities would change our interest expense by approximately $0.7 million annually.
We
have other cash commitments related to leases. We account for these lease transactions as operating leases and annual rent expense for continuing operations and discontinued
operations related thereto approximates $15.7 million and $2.4 million, respectively. Of the $15.7 million annual rent expense for continuing operations, approximately
$0.7 million relates to our Mosinee, WI facility, which we announced our intention to cease production in by the end of 2009. We expect to continue to utilize leasing as a financing strategy in
the future to meet capital expenditure needs and to reduce debt levels.
Market Risk
We conduct business in several locations throughout the world and are subject to market risk due to changes in the value of foreign
currencies. We do not currently use derivative financial instruments to manage these risks. The functional currencies of our foreign subsidiaries are the local currency in the country of domicile. We
manage these operating activities at the local level and revenues and costs are generally denominated in local currencies; however, results of operations and assets and liabilities reported in U.S.
dollars will fluctuate with changes in exchange rates between such local currencies and the U.S. dollar.
Common Stock
We voluntarily transferred our stock exchange listing in the U.S. from The New York Stock Exchange to The NASDAQ Global
Market® effective August 24, 2009. The company's stock continues to trade under the symbol "TRS."
Off-Balance Sheet Arrangements
The Company is party to an agreement to sell, on an ongoing basis, the trade accounts receivable of certain business operations to a
wholly-owned, bankruptcy-remote, special purpose subsidiary, TSPC, Inc. ("TSPC"). On February 13, 2009, the Company completed the renewal of its receivables securitization facility. Key
terms of the renewal include a 364-day term, committed funding of up to $55.0 million and a cost of funds under the facility equal to a commercial paper-based rate plus a usage
54
Table of Contents
fee
of 4.5%. TSPC, subject to certain conditions, may from time to time sell an undivided fractional ownership interest in the pool of domestic receivables, up to approximately $55.0 million,
to a third party multi-seller receivables funding company, or conduit. The proceeds of the sale are less than the face amount of accounts receivable sold by an amount that approximates the purchaser's
financing costs. Under the terms of the agreement, new receivables can be added to the pool as collections reduce receivables previously sold. The facility is an important source of liquidity. At
September 30, 2009, we had $0 utilized and $29.8 million available under this facility based on eligible receivables and before consideration of leverage restrictions.
The
facility is subject to customary termination events, including, but not limited to, breach of representations or warranties, the existence of any event that materially adversely
affects the collectability of receivables or performance by a seller and certain events of bankruptcy or insolvency. The facility expires in February 2010. In future periods, if we are unable to renew
or replace this facility, it could materially and adversely affect our available liquidity capacity.
Credit Rating
We and certain of our outstanding debt obligations are rated by Standard & Poor's and Moody's. On March 27, 2009,
Standard & Poor's reaffirmed its ratings on our credit facilities, corporate credit and senior subordinated notes ratings of BB-, B+ and B- respectively, but revised its
outlook to negative from stable. On August 28, 2009, Moody's affirmed their rating of our senior secured credit at Ba3 but downgraded our corporate family and probability of default ratings to
B3 from B2 as well as the rating for our senior subordinated notes to Caa2 from Caa1. The outlook was also revised to negative from stable. If our credit ratings were to decline, our ability to access
certain financial markets may become limited, the perception of us in the view of our customers, suppliers and security holders may worsen and as a result, we may be adversely affected.
Outlook
The global economy continues to be in a state of weak economic activity, led by the recession in the United States and followed by
declines in other major markets around the world. The financial market crisis in the fourth quarter of 2008 set off a series of events that generated conditions more severe than those experienced in
several decades. The characteristics of the financial crisis are unique, given the housing crisis and downward pressures on valuations of mortgage-backed and related securities, which have combined to
foster a crisis in business and consumer confidence. Although several other factors contributed to current economic and financial conditions, the influence of these financial developments was very
prominent. The interrelationships among financial markets worldwide ultimately resulted in a synchronous global economic downturn, the effects of which became evident in the fourth quarter of 2008 as
major markets around the world all suffered setbacks.
While
we believe that the year-over-year downward trend in economic activity will continue through the end of 2009, with our revenue down an anticipated 20 to 25%
compared to 2008, we believe that there will be some stabilization of demand and revenue levels in certain of our businesses the first half of 2010 as compared with the first half of 2009. However,
there are a range of possible outcomes due to the uncertain financial markets environment, and we can offer no assurances that the economy will stabilize or improve. Consumer and business spending
remains severely constrained by credit conditions and economic weakness.
Although
we anticipate business will continue to be challenging as we move into 2010, we believe that the effect of actions currently in place and those completed within the last
12 months under our Profit Improvement Plan to aggressively restructure certain of our businesses and initiate cost reductions in other businesses will continue to help compensate for lower or
flat year-over-year sales due to weak end market demand. In addition to our Performance Improvement Plan, which has
55
Table of Contents
focused
on reductions in operating costs, we also are focused on liquidity actions to improve our balance sheet and have implemented or may implement the following actions to preserve and/or improve
liquidity including:
- •
- Closed on the sale of our specialty tapes and laminates business in February 2009, generating $21 million cash
proceeds;
- •
- Successfully renewed our receivables securitization facility in February 2009, which provides committed funding of up to
$55 million;
- •
- Reduced our level of investment in inventory and working capital overall, aligning production activities consistent with
expectations of significantly reduced end market demand;
- •
- We continue to implement a European holding company structure to use available foreign cash to fund international market
growth strategies;
- •
- We may choose to monetize various non-core assets, including completing the sale of the property management
business;
- •
- We may choose to transact additional purchases of our Notes via open market transactions on terms we believe are
favorable. We will evaluate any such transaction in light of then prevailing market conditions and our then current and prospective liquidity and capital resources, including projected and potential
needs and prospects for access to capital markets; and
- •
- We may choose to explore options to refinance some or all of our existing long-term debt and/or receivables
securitization facility prior to their maturity dates or issue additional equity securities.
Longer-term,
we believe these liquidity and other operational actions will position our Company for future profitable growth by enabling strategies focused on reduced cycle
times and securing our position as best cost producer. We will continue to focus on efficient deployment of capital in support of new products in growing end markets, geographic expansion, and
product-line and bolt-on acquisitions that we expect will provide further opportunities for growth and enhanced returns.
Impact of New Accounting Standards
See Note 15, "New Accounting Pronouncements," included in Part I,
Item 1, "Notes to Unaudited Consolidated Financial Statements," within this Form 10-Q.
Critical Accounting Policies
Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate
assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, our
evaluation of business and macroeconomic trends, and information from other outside sources, as appropriate.
During
the quarter ended September 30, 2009, there were no material changes to the items that we disclosed as our critical accounting policies in Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's 2008 Annual Report on
Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, we are exposed to market risk associated with fluctuations in foreign currency exchange rates. We are
also subject to interest risk as it relates to long-term debt. See Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," for details about our primary market risks, and the objectives and strategies used to manage these risks.
56
Table of Contents
Also
see Note 8, "Long-term Debt," in Part I, Item 1, "Notes to Unaudited Consolidated
Financial Statements," included within this Form 10-Q for additional information.
Item 4. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the
reports that the Company files or submits under the Securities and Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized, and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosures.
As of September 30, 2009, an evaluation was carried out by management, with the participation of our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) of the
Securities Exchange Act of 1934, (the "Exchange Act")) pursuant to Rule 13a-15 of the Exchange Act. Our disclosure controls and procedures are designed only to provide reasonable
assurance that they will meet their objectives. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2009, the Company's
disclosure controls and procedures are effective to provide reasonable assurance that they would meet their objectives.
There have been no changes in the Company's internal control over financial reporting during the quarter ended September 30,
2009 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
57
Table of Contents
PART II. OTHER INFORMATION
TRIMAS CORPORATION
Item 1. Legal Proceedings
See Note 10, "Commitments and Contingencies" included in Part I,
Item 1, "Notes to Unaudited Consolidated Financial Statements," within this Form 10-Q.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part 1,
Item 1A., "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2008, which could
materially affect our business, financial condition or future results. There have been no significant changes in our risk factors as disclosed in our 2008 Form 10-K except with
respect to labor relations as follows:
On
July 10, 2009, we reached a mutually agreeable settlement with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union
("Union") regarding the duration of a neutrality agreement we have with the Union. The agreement commits us to remain generally neutral in Union organizing drives through the duration of the
agreement.
On
August 17, 2009, the Union began an organizing drive under the terms of the neutrality agreement at our facility located in Houston, Texas, which is included in our Energy segment. Since the
Union obtained a simple majority of authorization cards during the organizing drive, the Company, on November 4, 2009, recognized the Union at this facility. The recognition requires us and the
Union to negotiate a first collective bargaining agreement within 180 days from the date of recognition. Under the neutrality agreement, there is no threat of strike or work slowdown during the
first collective bargaining agreement.
We
are not aware of any present active union organizing drives at any of our other facilities. We cannot predict the impact of any further unionization of our workplace.
There
are currently two union collective bargaining agreements in our Engineered Components segment that are set to expire in November 2009. If negotiations are not concluded prior to the expiration
dates of the collective bargaining agreements, we could be subject to work stoppages or strikes.
The
risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that
we currently deemed to be immaterial also may materially adversely affect our business, financial position and results of operations or cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
58
Table of Contents
Item 5. Other Information
Not applicable.
Item 6. Exhibits.
Exhibits Index:
|
|
|
|
| |
3.1 |
(l) |
Fourth Amended and Restated Certificate of Incorporation of TriMas Corporation. |
| |
|
|
|
| |
3.2 |
(l) |
Second Amended and Restated By-laws of TriMas Corporation. |
| |
|
|
|
| |
4.1 |
(a) |
Indenture relating to the 97/8% senior subordinated notes, dated as of September 6, 2002, by and among TriMas Corporation, each of the Guarantors named therein and The Bank of New York as
trustee. |
| |
|
|
|
| |
4.2 |
(a) |
Form of note (included as Exhibit 4.1(a) above). |
| |
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4.3 |
(a) |
Registration Rights Agreement relating to the 97/8% senior subordinated notes issued September 6, 2002 dated as of September 6, 2002 by and among TriMas Corporation and the parties
named therein. |
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4.4 |
(b) |
Registration Rights Agreement relating to the 97/8% senior subordinated notes issued December 10, 2002 dated as of December 10, 2002 by and among TriMas Corporation and the parties
named therein. |
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|
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4.5 |
(c) |
Supplemental Indenture dated as of March 4, 2003. |
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4.6 |
(d) |
Supplemental Indenture No. 2 dated as of May 9, 2003. |
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4.7 |
(e) |
Supplemental Indenture No. 3 dated as of August 6, 2003. |
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4.8 |
(p) |
Supplemental Indenture No. 4 dated as of February 28, 2008. |
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10.1 |
(a) |
Stock Purchase Agreement dated as of May 17, 2002 by and among Heartland Industrial Partners, L.P., TriMas Corporation and Metaldyne Company LLC. |
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10.2 |
(a) |
Amended and Restated Shareholders Agreement, dated as of July 19, 2002 by and among TriMas Corporation and Metaldyne Corporation. |
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10.3 |
(j) |
Amendment No. 1 to Amended and Restated Shareholders Agreement dated as of August 31, 2006. |
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10.4 |
(i) |
Credit Agreement dated as of September 6, 2002, as amended and restated as of August 2, 2006 among TriMas Corporation, TriMas Company LLC, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral
Agent, and Comerica Bank, as Syndication Agent. |
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10.5 |
(a) |
Receivables Purchase Agreement, dated as of September 6, 2002, by and among TriMas Corporation, the Sellers party thereto and TSPC, Inc., as Purchaser. |
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10.6 |
(w) |
Amendment No. 1 as of February 13, 2009 to Receivables Purchase Agreement. |
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10.7 |
(a) |
Receivables Transfer Agreement, dated as of September 6, 2002, by and among TSPC, Inc., as Transferor, TriMas Corporation, individually, as Collection Agent, TriMas Company LLC, individually as Guarantor,
the CP Conduit Purchasers, Committed Purchasers and Funding Agents party thereto, and JPMorgan Chase Bank as Administrative Agent. |
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|
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10.8 |
(k) |
Amendment dated as of September 3, 2005, to Receivables Transfer Agreement. |
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10.9 |
(h) |
Amendment dated as of July 5, 2005, to Receivables Transfer Agreement. |
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Table of Contents
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10.10 |
(n) |
Amendment dated as of December 31, 2007, to Receivables Transfer Agreement. |
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10.11 |
(o) |
Amendment dated as of February 22, 2008, to Receivables Transfer Agreement. |
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10.12 |
(w) |
Amendment dated as of February 13, 2009, to Receivables Transfer Agreement. |
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10.13 |
(h) |
TriMas Receivables Facility Amended and Restated Fee Letter dated July 1, 2005. |
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10.14 |
(p) |
TriMas Receivables Facility Amended and Restated Fee Letter dated February 22, 2008. |
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10.15 |
(w) |
TriMas Receivables Facility Amended and Restated Fee Letter dated February 13, 2009. |
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10.16 |
(a) |
Lease Assignment and Assumption Agreement, dated as of September 21, 2002, by and among Heartland Industrial Group, L.L.C., TriMas Company LLC and the Guarantors named therein. |
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10.17 |
(a) |
TriMas Corporation 2002 Long Term Equity Incentive Plan. |
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10.18 |
(t) |
First Amendment to the TriMas Corporation 2002 Long Term Equity Incentive Plan. |
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10.19 |
(t) |
Second Amendment to the TriMas Corporation 2002 Long Term Equity Incentive Plan. |
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10.20 |
(t) |
Third Amendment to the TriMas Corporation 2002 Long Term Equity Incentive Plan. |
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10.21 |
(t) |
Fourth Amendment to the TriMas Corporation 2002 Long Term Equity Incentive Plan. |
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10.22 |
(d) |
Asset Purchase Agreement among TriMas Corporation, Metaldyne Corporation and Metaldyne Company LLC dated May 9, 2003. |
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10.23 |
(d) |
Form of Sublease Agreement (included as Exhibit A in Exhibit 10.22(e) above). |
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10.24 |
(f) |
2003 Form of Stock Option Agreement. |
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10.25 |
(s) |
2008 Annual Value Creation Program. |
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10.26 |
(t) |
409A Amendment to TriMas Corporation Annual Value Creation Plan effective September 10, 2008. |
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10.27 |
(g) |
Form of Indemnification Agreement. |
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10.28 |
(j) |
Amendment No. 1 to Stock Purchase Agreement, dated as of August 31, 2006 by and among Heartland Industrial Partners, L.P., TriMas Corporation and Metaldyne Corporation. |
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10.29 |
(s) |
Amendment No. 2 to Stock Purchase Agreement, dated as of November 27, 2006 by and among Heartland Industrial Partners, L.P., TriMas Corporation and Metaldyne Corporation. |
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10.30 |
(j) |
Advisory Agreement, dated September 6, 2002 between Heartland Industrial Partners, L.P. and TriMas Corporation. |
| |
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10.31 |
(k) |
First Amendment to Advisory Agreement, dated as of November 1, 2006 between Heartland Industrial Group, L.L.C. and TriMas Corporation. |
| |
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10.32 |
(k) |
Second Amendment to Advisory Agreement, dated as of November 1, 2006 between Heartland Industrial Group, L.L.C. and TriMas Corporation. |
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10.33 |
(k) |
Management Rights Agreement. |
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10.34 |
(t) |
Executive Severance/Change of Control Policy. |
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|
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|
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10.35 |
(m) |
TriMas Corporation 2006 Long Term Equity Incentive Plan. |
| |
|
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|
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10.36 |
(m) |
First Amendment to the TriMas Corporation 2006 Long Term Equity Incentive Plan. |
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10.37 |
(m) |
Second Amendment to the TriMas Corporation 2006 Long Term Equity Incentive Plan. |
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10.38 |
(t) |
Third Amendment to the TriMas Corporation 2006 Long Term Equity Incentive Plan. |
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10.39 |
(t) |
Fourth Amendment to the TriMas Corporation 2006 Long Term Equity Incentive Plan |
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10.40 |
(q) |
Separation Agreement dated April 10, 2008. |
| |
|
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10.41 |
(r) |
Letter Agreement dated April 28, 2008. |
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10.42 |
(s) |
Letter Agreement dated July 1, 2008. |
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10.43 |
(z) |
ISDA 2002 Master Agreement between JPMorgan Chase Bank, N. A. and TriMas Company LLC dated as of January 29, 2009. |
| |
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10.44 |
(t) |
Interest Rate Swap Transaction letter Agreement between JPMorgan Chase Bank, N.A. and TriMas Company, LLC effective as of April 29, 2008. |
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|
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|
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10.45 |
(w) |
Asset Purchase Agreement between Lamtec Corporation, Compac Corporation and TriMas Company LLC dated as of December 8, 2008. |
| |
|
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|
| |
10.46 |
(u) |
Offer Letter from TriMas Corporation to David M. Wathen dated as of January 12, 2009. |
| |
|
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|
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10.47 |
(v) |
Separation Agreement dated as of January 13, 2009. |
| |
|
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|
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10.48 |
(y) |
Separation Agreement dated as of March 5, 2009. |
| |
|
|
|
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10.49 |
(x) |
TriMas Corporation Long Term Equity Incentive Plan Non-Qualified Stock Option Agreement. |
| |
|
|
|
| |
10.50 |
(y) |
The TriMas Incentive Compensation Plan. |
| |
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|
| |
31.1 |
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| |
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31.2 |
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| |
|
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32.2 |
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
- (a)
- Incorporated
by reference to the Exhibits filed with our Registration Statement on Form S-4, filed on October 4, 2002 (File
No. 333-100351).
- (b)
- Incorporated
by reference to the Exhibits filed with Amendment No. 2 to our Registration Statement on Form S-4, filed on
January 28, 2003 (File No. 333-100351).
- (c)
- Incorporated
by reference to the Exhibits filed with our Annual Report on Form 10-K filed March 31, 2003 (File
No. 333-100351).
- (d)
- Incorporated
by reference to the Exhibits filed with our Registration Statement on Form S-4, filed September 9, 2003 (File
No. 333-105950).
- (e)
- Incorporated
by reference to the Exhibits filed with our Quarterly Report on Form 10-Q filed on August 14, 2003 (File
No. 333-100351).
- (f)
- Incorporated
by reference to the Exhibits filed with our Quarterly Report on Form 10-Q filed on November 12, 2003 (File
No. 333-100351).
- (g)
- Incorporated
by reference to the Exhibits filed with Amendment No. 3 to our Registration Statement on Form S-1/A, filed on
September 29, 2004 (File No. 333-113917).
61
Table of Contents
- (h)
- Incorporated
by reference to the Exhibits filed with our Form 8-K filed on July 6, 2005 (File No. 333-100351).
- (i)
- Incorporated
by reference to the Exhibits filed with our Form 8-K filed on August 3, 2006 (File
No. 333-100351).
- (j)
- Incorporated
by reference to the Exhibits filed with Amendment No. 1 to our Registration Statement on Form S-1, filed on
September 19, 2006 (File No. 333-136263).
- (k)
- Incorporated
by reference to the Exhibits filed with Amendment No. 3 to our Registration Statement on Form S-1, filed on
January 18, 2007 (File No. 333-136263).
- (l)
- Incorporated
by reference to the Exhibits filed with our Quarterly Report on Form 10-Q Quarterly Report, filed on August 3, 2007
(File No. 333-100351).
- (m)
- Incorporated
by reference to the Exhibits filed with the Registration Statement on Form S-8, filed on August 31, 2007 (File
No. 333-145815).
- (n)
- Incorporated
by reference to the Exhibits filed with our Form 8-K filed on January 4, 2008 (File
No. 001-10716).
- (o)
- Incorporated
by reference to the Exhibits filed with our Form 8-K filed on February 26, 2008 (File
No. 001-10716).
- (p)
- Incorporated
by reference to the Exhibits filed with our Annual Report on Form 10-K filed on March 13, 2008 (File
No. 001-10716).
- (q)
- Incorporated
by reference to the Exhibits filed with our Form 8-K filed on April 10, 2008 (File No. 001-10716).
- (r)
- Incorporated
by reference to the Exhibits filed with our Form 8-K filed on September 2, 2008 (File
No. 001-10716).
- (s)
- Incorporated
by reference to the Exhibits filed with our Quarterly Report on Form 10-Q filed on August 7, 2008 (File
No. 001-10716).
- (t)
- Incorporated
by reference to the Exhibits filed with our Quarterly Report on Form 10-Q filed on November 10, 2008 (File
No. 001-10716).
- (u)
- Incorporated
by reference to the Exhibits filed with our Form 8-K filed on January 14, 2009 (File
No. 001-10716).
- (v)
- Incorporated
by reference to the Exhibits filed with our Form 8-K Report filed on February 5, 2009 (File
No. 001-10716).
- (w)
- Incorporated
by reference to the Exhibits filed with our Form 8-K filed on February 17, 2009 (File
No. 001-10716).
- (x)
- Incorporated
by reference to the Exhibits filed with our Form 8-K filed on March 6, 2009 (File No. 001-10716).
- (y)
- Incorporated
by reference to the Exhibits filed with our Form 8-K filed on March 10, 2009 (File No. 001-10716).
- (z)
- Incorporated
by reference to the Exhibits filed with our Annual Report on Form 10-K filed on March 10, 2009 (File
No. 001-10716).
62
Table of Contents
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
|
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|
|
| |
|
TRIMAS CORPORATION (Registrant) |
Date: November 9, 2009 |
|
By: |
|
/s/ A. MARK ZEFFIRO
A. Mark Zeffiro
Chief Financial Officer |
63
