TriMas Corporation Reports Third Quarter Earnings
BLOOMFIELD HILLS, Mich., Nov. 15, 2004 -- TriMas Corporation today announced its financial results for the three months ended September 30, 2004. Compared to the prior year third quarter period, sales increased 8.9% to $257.1 million with operating profit of $20.9 million or 8.1% of sales. Net income was $2.2 million for the period versus $3.7 million in the year ago period with diluted earnings per share of $0.11 versus $0.18 in the third quarter of 2003. Compared to the third quarter of 2003, operating profit and net income were significantly impacted by continuing steel-related price and availability issues. In addition, the Company's Cequent Transportation Accessories group experienced lower than expected demand resulting from customer pull-ahead of orders into the second quarter to avoid steel-related price increases and exceptionally cool and wet summer weather.
First and Second Quarter Revisions
The Company also reported that in the course of its ongoing efforts to comply with requirements of Sarbanes-Oxley, it identified certain incorrect accounting entries made with respect to uninvoiced accounts payables owed at a Cequent business unit. These errors resulted in an overstatement of the Company's pre-tax income for the three and six months ended June 30, 2004 of approximately $2.1 million and $2.6 million, respectively, in relation to the $53.6 million in operating profit and $20.4 million in pre-tax income previously reported for the six months ended June 30, 2004. These errors did not involve outside vendors or customers, and were confined to one Cequent business unit location. As a result, TriMas will restate its first and second quarter financial results to correct for this error. "We take our responsibility seriously to ensure integrity in our financial statements and comply with the requirements of Sarbanes-Oxley. We have made changes to prevent an error of this nature from recurring in the future," commented Grant Beard, President and Chief Executive Officer.
Third Quarter Highlights
* The Company's third quarter net sales increased 8.9% to $257.1 million, from $236.0 million for the three months ended September 30, 2003. Across our business segments, sales at Rieke Packaging Systems increased 14.9%, at Fastening Systems 14.0%, at Industrial Specialties +9.8% and at Cequent +5.6% when compared to the third quarter a year ago.
* Operating profit in the quarter was $20.9 million. This included the impact of $5.8 million in steel-related costs and $0.7 million in fuel surcharges. These unexpected factors drove the company's operating profit down as compared to third quarter 2003 levels of $21.6 million.
* The Company earned net income of $2.2 million, or $0.11 per share.
* The Company spent $3.5 million during the quarter in consolidation, restructuring and integration efforts, principally in its Fastening Systems and Industrial Specialties segments.
"Rising steel costs and availability of steel continued to challenge us in the quarter. We recovered approximately 80% of steel cost increases from our customers which left us with a net price impact on operating profit of approximately $3.1 million in the third quarter. We have implemented initiatives for further steel cost recovery from our customers. We have also added steel suppliers to our vendor base to ensure consistent delivery to avoid a recurrence of the $2.7 million earnings impact we experienced from steel unavailability in the third quarter. Additionally, our Cequent customers pulled orders ahead into the second quarter in anticipation of further steel price increases. This sales acceleration, coupled with cool summer weather in key geographic areas, led to softer than expected third quarter sales and operating profits at Cequent. We responded by aligning production volumes and costs late in the quarter. These initiatives on steel realignment, customer pricing and cost controls should re-establish our momentum going forward. TriMas' fundamentals remain strong with our restructuring initiatives reaching completion in the fourth quarter and broad- based organic growth opportunities in front of all of our businesses," said Grant Beard.
Third Quarter Financial Summary
(in millions, except per share amounts and percentages)
For the Quarter Ended September 30
2004 2003 % Change
Sales $257.1 $236.0 8.9%
Gross profit 60.7 63.3 (4.1%)
Operating profit 20.9 21.6 (3.0%)
Net income (loss) $2.2 $3.7 (40.9%)
Earnings (loss) per share $0.11 $0.18 (38.9%)
Other Data
- Depreciation and amortization $10.1 $11.3 (10.6%)
- Other income (expense) (17.5) (16.9) 3.6%
- Adjusted EBITDA 30.9 33.9 (8.8%)
- Cash flows provided by (used for)
operating activities $(10.2) $28.5 N/A
Segment Results
Rieke Packaging Systems
Rieke's 2004 third quarter sales of $33.1 million were up 14.9% compared to the year ago period. Operating profit increased during the quarter ended September 30, 2004 to $8.8 million from $6.8 million in third quarter 2003, due to ramp-up of sales of new products as well as improved core product sales. Rieke launched another new pump dispensing product during the quarter, and expects to realize continued increasing sales from recent new product launches during the fourth quarter.
Cequent Transportation Accessories
Cequent's 2004 third quarter sales of $125.1 million represented an increase of 5.6% compared to the prior year period. However, after adjusting for steel surcharges recovered from customers, sales were flat compared with the third quarter 2003, reflecting the apparent acceleration of purchases into the second quarter by customers seeking to avoid further steel-related price increases and the effects of one of the coolest summers on record. Comparing both second and third quarter together, Cequent's sales were up 12.8% as compared to 2003. Its two-quarter operating profit increased to $35.6 million from $29.4 million a year ago, up 20.9%. Cequent's cost structure was adjusted down during the latter part of the third quarter when the higher forecast sales levels did not materialize.
Industrial Specialties Group
Sales of the Industrial Specialties group increased 9.8%, or $5.4 million to $59.8 million, during the quarter as the group's six businesses experienced good demand as compared to the third quarter a year ago. The group's quarterly operating profit remained basically flat, held down by the cost of Compac's move to its new Hackettstown, NJ plant, which is being completed this week.
Fastening Systems Group
Sales of the Fastening Systems group increased 14.0% as compared to the 2003 third quarter. However, steel issues depressed the group's earnings by an estimated $2.0 million as they restricted production output as well as resulted in the non-recovery of price surcharges. The group reported an overall operating loss for the quarter of $1.5 million, as compared to a $1.3 million profit in the third quarter 2003. This decrease reflected the impact of unrecovered steel price increases, lost sales due to steel unavailability, and closure and other costs related to the consolidation of its Lakewood, OH plant into remaining facilities in Frankfort, IN and Wood Dale, IL. Direct consolidation-related costs approximated $1.5 million. The Fastening Systems group's restructuring activities were completed this month.
Financial Position
TriMas ended the third quarter with total assets of $1,578.4 million, debt of $775.9 million and $7.8 million outstanding under its receivables securitization facility. Net cash used for operating activities for the nine months ended September 30, 2004 was $(2.7) million compared to net cash provided by operations of $35.1 million in the same period a year ago, as the impact of improvement in net income from operations was offset by substantial working capital requirements resulting from steel surcharges, higher sales levels, increased levels of capital spending in the first half of 2004, and the January 2004 acquisition of Bargman.
Conference Call
TriMas will broadcast its third quarter earnings conference call on Monday, November 15, 2004 at 3:30 p.m. EST. President and Chief Executive Officer Grant Beard and Chief Financial Officer Benson Woo will discuss the Company's recent financial performance and respond to questions from the investment community.
To participate by phone, please dial: (800) 670-3545. Callers should ask to be connected to the TriMas third quarter conference call.
If you are unable to participate during the live teleconference, a replay of the conference call will be available beginning November 15th at 6:30 p.m. EST through November 22nd at 6:30 p.m. EST. To access the replay, please dial: (800) 633-8284 and use reservation number 21213760.
A Note on Adjusted EBITDA
The Company defines Adjusted EBITDA as net income (loss) before interest, taxes, depreciation, amortization, impairment of goodwill, non-cash losses on sale-leaseback of property and equipment and legacy stock award expense. Lease expense and non-recurring charges are included in Adjusted EBITDA and include both cash and non-cash charges related to restructuring and integration expenses. In evaluating our business, management considers and uses Adjusted EBITDA as a key indicator of financial operating performance and as a measure of cash generating capability. Management believes this measure is useful as an analytical indicator of leverage capacity and debt servicing ability, and uses it to measure financial performance as well as for planning purposes. However, Adjusted EBITDA should not be considered as an alternative to net income, cash flow from operating activities or any other measures calculated in accordance with U.S. GAAP, or as an indicator of operating performance. The definition of Adjusted EBITDA used here may differ from that used by other companies.
Cautionary Notice Regarding Forward-Looking Statements
This release contains "forward-looking" statements, as that term is defined by the federal securities laws, about our financial condition, results of operations and business. Forward-looking statements include certain anticipated, believed, planned, forecasted, expected, targeted and estimated results along with TriMas' outlook concerning future results. When used in this release, the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts," or future or conditional verbs, such as "will," "should," "could," or "may," and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, management's examination of historical operating trends and data, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs and projections will be achieved. These forward-looking statements are subject to numerous assumptions, risks and uncertainties and accordingly, 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 release. 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 statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Risks and uncertainties that could cause actual results to vary materially from those anticipated in the forward- looking statements included in this release include general economic conditions in the markets in which we operate and industry-based factors such as: technological developments that could competitively disadvantage us, increases in our raw material, energy, and healthcare costs, our dependence on key individuals and relationships, exposure to product liability, recall and warranty claims, compliance with environmental and other regulations, and competition within our industries. In addition, factors more specific to us could cause actual results to vary materially from those anticipated in the forward-looking statements included in this release such as our substantial leverage, limitations imposed by our debt instruments, our ability to successfully pursue our stated growth strategies and opportunities, as well as our ability to identify attractive and other strategic acquisition opportunities and to successfully integrate acquired businesses and complete actions we have identified as providing cost-saving opportunities.
TriMas Corporation
Balance Sheet
September 30, 2004 and December 31, 2003
(unaudited - dollars in thousands)
September 30, December 31,
2004 2003
Assets
Current assets:
Cash and cash equivalents $3,190 $6,780
Receivables 150,150 118,970
Inventories 166,560 124,090
Deferred income taxes 10,900 10,900
Prepaid expenses and other current assets 10,230 8,440
Total current assets 341,030 269,180
Property and equipment, net 204,730 187,420
Goodwill 658,880 658,900
Other intangibles 312,820 322,750
Other assets 60,910 61,780
Total assets $1,578,370 $1,500,030
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities, long-term debt $2,990 $10,920
Accounts payable 121,050 94,130
Accrued liabilities 79,700 75,100
Due to Metaldyne 310 4,400
Total current liabilities 204,050 184,550
Long-term debt 772,900 725,060
Deferred income taxes 151,030 149,030
Other long-term liabilities 34,730 37,770
Due to Metaldyne 6,480 6,960
Total liabilities 1,169,190 1,103,370
Commitments and contingencies (Note 9)
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:
20,010,000 shares 200 200
Paid-in capital 399,500 399,870
Retained deficit (24,890) (38,240)
Accumulated other comprehensive
income 34,370 34,830
Total shareholders' equity 409,180 396,660
Total liabilities and
shareholders' equity $1,578,370 $1,500,030
TriMas Corporation
Statement of Operations
For the Three and Nine Months Ended
September 30, 2004 and 2003
(unaudited - dollars in thousands, except for per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Net sales $257,100 $235,990 $802,210 $704,110
Cost of sales (196,370) (172,650) (602,130) (519,700)
Gross profit 60,730 63,340 200,080 184,410
Selling, general and
administrative expenses (40,100) (41,670) (128,250) (123,190)
Gain (loss) on
dispositions of property
and equipment 300 (90) 120 (18,120)
Operating profit 20,930 21,580 71,950 43,010
Other expense, net:
Interest expense (17,430) (16,720) (50,020) (49,110)
Other income
(expense), net (60) (200) (740) (710)
Other expense, net (17,490) (16,920) (50,760) (49,820)
Income (loss) before
income tax (expense) benefit 3,440 4,660 21,190 (6,810)
Income tax (expense) benefit (1,270) (990) (7,840) 2,040
Net income (loss) $2,170 $3,670 $13,350 $(4,770)
Basic earnings (loss)
per share $0.11 $0.18 $0.67 $(0.24)
Diluted earnings (loss)
per share $0.11 $0.18 $0.67 $(0.24)
Weighted average common
shares - basic 20,010,000 20,000,560 20,010,000 20,221,310
Weighted average common
shares - diluted 20,010,000 20,000,560 20,010,000 20,221,310
TriMas Corporation
Company and Business Segment Financial Information
For the Three and Nine Months Ended
September 30, 2004 and 2003
(in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Rieke Packaging Systems
Net sales $33.1 $28.8 $98.2 $92.1
Operating profit $8.8 $6.8 $24.1 $21.9
Cequent Transportation Accessories
Net sales $125.1 $118.5 $405.2 $343.3
Operating profit $12.7 $14.9 $49.4 $36.4
Industrial Specialties Group
Net sales $59.8 $54.4 $184.0 $162.9
Operating profit $5.6 $5.8 $20.0 $11.6
Fastening Systems
Net sales $39.1 $34.3 $114.8 $105.8
Operating (loss) profit $(1.5) $1.3 $(5.8) $(8.2)
Corporate expenses and management fee $(4.7) $(6.0) $(15.8) $(15.0)
Legacy stock award expense $ - $(1.2) $ - $(3.7)
Total Company
Net sales $257.1 $236.0 $802.2 $704.1
Operating profit $20.9 $21.6 $71.9 $43.0
Adjusted EBITDA $30.9 $33.9 $101.8 $98.3
About TriMas
Headquartered in Bloomfield Hills, Mich., TriMas is a diversified growth company of high-end, specialty niche businesses manufacturing a variety of products for commercial, industrial and consumer markets worldwide. TriMas is organized into four strategic business groups: Cequent Transportation Accessories, Rieke Packaging Systems, Fastening Systems, and Industrial Specialties. TriMas has nearly 5,000 employees at 80 different facilities in 10 countries. For more information, visit http://www.trimascorp.com/ .