TriMas Corporation Reports Third Quarter Results
BLOOMFIELD HILLS, Mich., Nov. 14, 2005 -- TriMas Corporation today announced its financial results for the three months ended September 30, 2005. Compared to the prior year third quarter period, sales increased 5.4% to $270.9 million from $257.1 million. Third quarter 2005 operating income declined to $18.0 million from $20.9 million in third quarter 2004 and net income decreased from $2.2 million in third quarter 2004 to $0.2 million in third quarter 2005. For the quarter ended September 30, 2005 diluted earnings per share were $0.01 versus $0.11 in the year ago period.
Third Quarter Highlights
* The Company's third quarter 2005 net sales increased 5.4% to $270.9
million from $257.1 million for the three months ended September 30,
2004. Excluding an approximate $2.2 million favorable impact of
currency exchange, we estimate net sales increased $11.6 million or
4.5% compared to the prior year's third quarter. Overall, the impact
of steel cost increases recovered from customers during third quarter
2005 was comparable to the year-ago period. Net sales at Cequent
Transportation Accessories increased 1.2% compared to the prior year,
from $125.1 million in third quarter 2004 to $126.7 million in third
quarter 2005. Excluding the impact of steel price recoveries from
customers and favorable impacts of currency exchange, Cequent
Transportation Accessories' sales declined $2.0 million from the year
ago period. In third quarter 2005, net sales increased 3.8% at Rieke
Packaging Systems and 18.6% at Industrial Specialties when compared to
the year ago period. Net sales within Fastening Systems in the third
quarter 2005 approximated year ago levels.
* Overall, operating profit for the three months ended September 30, 2005
declined 14.0% from $20.9 million in the year ago period to $18.0
million. The impact of reduced sales volumes, increasing material
costs, and pricing compression, principally in our Cequent Towing
Products and Consumer Products business units, more than offset the
continued strong earnings performance in our Industrial Specialties and
Fastening Systems business segments. In Industrial Specialties,
operating profit improved 28.2% in third quarter 2005 compared to the
year ago period and Fastening Systems operating profit improved $3.2
million from an operating loss of $1.5 million in the year ago period
to operating profit of $1.7 million in the quarter ended September 30,
2005. Operating profit within our Rieke Packaging Systems business
segment declined approximately 20.0% compared to third quarter 2004 due
primarily to a decline in material margin and increased energy and
transportation costs due to higher fuel prices. On a consolidated
basis, operating profit as a percent of sales was 6.6% for the third
quarter 2005 compared to 8.1% for the same period a year ago.
* Expenses related to plant consolidation, business integration and
restructuring activities in the third quarter 2005 were $0.6 million, a
reduction of $2.9 million compared to $3.5 million in the third quarter
of 2004. In addition, labor, variable overhead and selling expenses
and other fixed costs were reduced approximately $6.9 million in third
quarter 2005 as compared to third quarter 2004. However, these
reductions in cost were more than offset by material margin erosion,
primarily in our Cequent Transportation Accessories segment.
* The Company reported net income of $0.2 million or $0.01 diluted
earnings per share in the quarter ended September 30, 2005, compared to
net income of $2.2 million or $0.11 diluted earnings per share in the
year ago period. In addition to lower operating profit, the decline in
net income compared to third quarter 2004 resulted from increased
interest costs, higher expense associated with increased use of the
receivables securitization facility and costs associated with renewing
the facility in July 2005, and currency exchange losses which were not
considered in operating profit.
Grant Beard, TriMas' President and Chief Executive Officer commented, "In the third quarter, we continued to address certain difficult challenges which have negatively impacted our anticipated earnings performance within Cequent Transportation Accessories. While market demand overall for Cequent Transportation Accessories' businesses remained relatively consistent with the first half of 2005, this demand level was down compared to the first nine months of 2004. This has translated into performance challenges, principally within two Cequent Transportation Accessories' businesses: Towing Products and Consumer Products. In response to these challenges, we have continued our earnings improvement focus within Cequent Transportation Accessories to: (1) reduce its fixed cost base, through the continued reduction of SG&A costs and shrinking of its manufacturing and distribution footprint; (2) lower variable cost through off-shore purchasing initiatives and reduction in SKU complexity; and (3) drive customer performance through improved order fill. Each of these actions is focused on making this business segment not only more profitable, but also more flexible in responding to changes in market forces or competitor actions. Notwithstanding the results of Cequent Transportation Accessories, we continued strong year-over-year earnings growth within our Industrial Specialties and Fastening Systems business segments, with Rieke Packaging Systems being down somewhat due to material cost recovery issues. The overall fundamentals within TriMas' businesses remain strong: our restructuring initiatives are behind us, steel prices are stabilizing and we have aligned our cost structure consistent with expected customer demand levels. We expect to drive earnings growth for TriMas as we work through the remainder of 2005."
Third Quarter Financial Summary
(unaudited - dollars in millions,
except per share amounts) For the Quarter Ended September 30
2005 2004 % Change
Sales $270.9 $257.1 5.4%
Operating profit $18.0 $20.9 (13.9%)
Net income $0.2 $2.2 (90.9%)
Diluted earnings per share $0.01 $0.11 (90.9%)
Other Data:
- Depreciation and amortization $10.4 $10.1 3.0%
- Interest expense $18.8 $17.4 8.0%
- Other expense, net $1.6 $0.1 N/A
- Income tax benefit (expense) $2.7 $(1.3) N/A
- Restructuring, consolidation
and integration expenses $0.6 $3.5 (82.9%)
- Cash provided by (used for)
operating activities $5.5 $(10.2) N/A
Segment Results
Rieke Packaging Systems
Rieke's third quarter 2005 sales of $34.3 million represented an increase of 3.8% compared to the year ago period as sales momentum established in the second half of 2004 continued in Rieke's new specialty dispensing product applications. Operating profit declined 20.0% to $7.1 million, or 20.6% of sales, during the third quarter 2005 from $8.8 million, or 26.7% of sales, in third quarter 2004, due to a decline in material margins and increased energy and transportation costs due to higher fuel costs. Sales of new pump dispensing products increased approximately $2.0 million to $7.2 million in third quarter 2005 from $5.2 million during third quarter 2004 and Rieke expects to realize increasing sales from both recent and anticipated additional new product launches during the remainder of 2005.
Cequent Transportation Accessories
Cequent's third quarter 2005 sales of $126.7 million represented an increase in nominal dollars of 1.2% compared to net sales of $125.1 million in the third quarter 2004. Excluding the impact of steel price increases recovered from customers and favorable effects of currency exchange, we estimate net sales decreased 1.6%, or $2.0 million, compared to the prior year's third quarter. The decline in sales is due to lower demand compared to the year ago period, primarily within our towing and trailer products business units. Operating profit declined $4.7 million to $8.0 million, or 6.3% of sales in the three months ended September 30, 2005 from $12.7 million, or 10.1% of sales in the same period a year ago. The decrease in operating profit between years is a result of a decline in volume due to lower demand, continued severe competitor pricing pressure in the retail channel, inability to fully recover steel and other material cost increases, offset by reductions in labor, variable overhead and selling expense, and fixed costs of $5.3 million in response to reduced levels of sales activity and lower gross margins due to pricing compression.
Industrial Specialties
In the third quarter 2005, sales within Industrial Specialties increased 18.6% to $70.9 million from $59.8 million during the third quarter 2004, as each of the group's six businesses continued to experience strong demand driven by new products, market share gains and economic expansion. Steel cost increases recovered from customers in this segment during third quarter 2005 were comparable to the year-ago period. Notably, sales in our specialty engine and replacement parts business increased 51.1% compared to third quarter 2004 as a result of high levels of drilling activity in the U.S. and Canada. Sales in our industrial cylinder business increased 39.5% compared to the third quarter 2004 due to market share gains attributed to enhanced customer service and shorter manufacturing lead-times. Sales within our specialty gasket business increased 16.3% compared to third quarter 2004 as a result of significant oil refinery "turnaround" activity at several major customers. Operating profit in the third quarter 2005 increased 28.2% to $7.1 million, or 10.1% of sales, from $5.6 million, or 9.3% of sales, in the year ago period as the group benefited from higher sales volumes during the quarter.
Fastening Systems
In third quarter 2005, sales within Fastening Systems were $39.1 million and approximately flat compared to third quarter 2004. Sales within our aerospace fasteners business during the quarter improved 43.7% compared to third quarter 2004 due to an overall increase in the commercial and business jet build rates in 2005, as manufacturers and distributors continue to replenish inventory stocks. Excluding the impact of steel cost increases recovered from customers, we estimate sales of industrial fasteners in the quarter declined approximately 8% or $2.4 million compared to the third quarter 2004, due primarily to reduced demand for industrial fasteners used in agriculture, heavy equipment and heavy truck as customer inventory adjustments continued. In addition, sales during the second half of 2004 were unusually strong as Lake Erie Products worked down an order backlog that was due to demand spikes with Caterpillar and John Deere. Further, we estimate sales in third quarter 2005 were $1.4 million less than the year-ago period due to a decline in steel cost increases recovered from customers. Operating profit improved $3.2 million to $1.7 million, or 4.4% of sales, from an operating loss of $1.5 million in third quarter 2004 as a result of operational improvements related to integration activities completed in 2004. In addition, during the third quarter 2005, Fastening Systems provided $1.5 million in reserves for uncollectible accounts due to bankruptcy filings by two customers. However, the year ago period also included approximately $1.5 million of increased costs related to the consolidation of its Lakewood, Ohio manufacturing facility into our Frankfort, Indiana facility, which was largely completed by the fourth quarter 2004.
Financial Position
TriMas ended the third quarter with total assets of $1,501.5 million, debt of $729.0 million and $24.9 million outstanding under its receivables securitization facility. Net cash provided by operating activities for the quarter ended September 30, 2005 was $5.5 million, as the Company focused on inventory reduction and collection of receivables. For the same period a year ago, net cash used for operating activities was $10.2 million. Improved cash flow during the quarter was used to pay down approximately $30.8 million outstanding under the Company's receivables securitization facility and bank revolver. The Company's capital expenditures for the three months ended September 30, 2005 and 2004, were $5.6 million and $8.8 million, respectively.
TriMas Corporation
Condensed Consolidated Balance Sheet
(Unaudited - dollars in thousands)
September 30, December 31,
2005 2004
Assets
Current assets:
Cash and cash equivalents $2,240 $3,090
Receivables, net 119,050 93,390
Inventories, net 164,030 180,040
Deferred income taxes and other current assets 25,000 25,980
Total current assets 310,320 302,500
Property and equipment, net 188,890 198,610
Goodwill 652,210 657,980
Other intangibles, net 293,580 304,910
Other assets 56,480 58,200
Total assets $1,501,480 $1,522,200
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities, long-term debt $2,890 $2,990
Accounts payable 116,840 135,230
Accrued liabilities 77,090 70,830
Total current liabilities 196,820 209,050
Long-term debt 726,160 735,030
Deferred income taxes 131,670 133,540
Other long-term liabilities 42,930 39,420
Total liabilities 1,097,580 1,117,040
Total shareholders' equity 403,900 405,160
Total liabilities and shareholders' equity $1,501,480 $1,522,200
TriMas Corporation
Consolidated Statement of Operations
(Unaudited - dollars in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Net sales $ 270,940 $ 257,100 $ 858,320 $ 802,210
Cost of sales (210,800) (196,370) (663,470) (602,130)
Gross profit 60,140 60,730 194,850 200,080
Selling, general and
administrative
expenses (42,140) (39,800) (125,810) (128,130)
Operating profit 18,000 20,930 69,040 71,950
Other expense, net:
Interest expense (18,840) (17,430) (55,790) (50,020)
Foreign exchange
gain (loss) (340) 170 (2,470) 690
Other, net (1,260) (230) (2,970) (1,430)
Other expense, net (20,440) (17,490) (61,230) (50,760)
Income (loss) before
income tax benefit
(expense) (2,440) 3,440 7,810 21,190
Income tax benefit
(expense) 2,670 (1,270) (1,020) (7,840)
Net income $ 230 $ 2,170 $ 6,790 $ 13,350
Basic earnings
per share $ 0.01 $ 0.11 $ 0.34 $ 0.67
Diluted earnings
per share $ 0.01 $ 0.11 $ 0.34 $ 0.67
Weighted average
common shares -
basic 20,010,000 20,010,000 20,010,000 20,010,000
Weighted average
common shares -
diluted 20,010,000 20,010,000 20,010,000 20,010,000
TriMas Corporation
Consolidated Statement of Cash Flows
(Unaudited - dollars in thousands)
Nine Months Ended September 30,
2005 2004
Cash Flows from Operating Activities:
Net income $ 6,790 $ 13,350
Adjustments to reconcile net income to
net cash provided by operating activities,
net of acquisition impact:
Gain (loss) on dispositions of
property and equipment 390 (120)
Depreciation and amortization 31,400 30,590
Amortization of debt issue costs 3,720 3,470
Non-cash compensation expense 240 410
Net proceeds from sale of receivables
and receivables securitization 400 7,780
Payment to Metaldyne to fund
contractual liabilities (330) (4,610)
Increase in receivables (26,060) (37,690)
Decrease (increase) decrease in inventories 16,010 (40,650)
Increase in prepaid expenses and other assets (910) (4,160)
Increase (decrease) in accounts payable and
accrued liabilities (12,900) 30,640
Other, net 1,000 (1,730)
Net cash provided by (used for)
operating activities,
net of acquisition impact 19,750 (2,720)
Cash Flows from Investing Activities:
Capital expenditures (15,010) (35,620)
Proceeds from sales of fixed assets 3,490 450
Acquisition of businesses, net of cash acquired - (5,500)
Net cash used for investing activities (11,520) (40,670)
Cash Flows from Financing Activities:
Repayments of borrowings on senior
credit facility (2,160) (2,170)
Proceeds from borrowings on
revolving credit facility 722,580 593,300
Repayments of borrowings on
revolving credit facility (729,400) (543,300)
Payments on notes payable (100) (8,030)
Net cash (used for) provided
by financing activities (9,080) 39,800
Cash and Cash Equivalents:
Decrease for the period (850) (3,590)
At beginning of period 3,090 6,780
At end of period $ 2,240 $ 3,190
Supplemental disclosure of cash flow information:
Cash paid for interest $ 40,310 $ 36,020
Cash paid for taxes $ 8,400 $ 8,710
TriMas Corporation
Consolidated Statement of Shareholders' Equity
For the Nine Months Ended September 30, 2005
(Unaudited - dollars in thousands)
Accumulated
Other
Common Paid-in Retained Comprehensive
Stock Capital Deficit Income (Loss) Total
Balances,
December 31,
2004 $200 $399,450 $(40,430) $45,940 $405,160
Comprehensive
income (loss):
Net income - - 6,790 - 6,790
Foreign
currency
translation (5,230) (5,230)
Total
comprehensive
income (loss) - - 6,790 (5,230) 1,560
Net adjustment in
settlement of
contractual
obligations
assumed from
Metaldyne - (3,060) - - (3,060)
Non-cash
compensation
expense - 240 - - 240
Balances,
September 30,
2005 $200 $396,630 $(33,640) $40,710 $403,900
TriMas Corporation
Company and Business Segment Financial Information
Three Months Ended Nine Months Ended
(unaudited - in millions) September 30, September 30,
2005 2004 2005 2004
Rieke Packaging Systems
Net sales $ 34.32 $33.07 $103.64 $ 98.16
Operating profit $7.06 $8.83 $ 22.85 $ 24.10
Cequent Transportation Accessories
Net sales $126.66 $125.12 $409.69 $405.21
Operating profit $7.98 $12.66 $ 30.74 $ 49.39
Industrial Specialties
Net sales $ 70.87 $59.78 $222.62 $184.06
Operating profit $7.14 $5.57 $ 25.69 $ 20.04
Fastening Systems
Net sales $ 39.09 $39.13 $122.37 $114.78
Operating profit (loss) $1.73 $ (1.45) $5.55 $ (5.80)
Total Company
Net sales $270.94 $257.10 $858.32 $802.21
Corporate expenses
and management fee $(5.91) $ (4.68) $(15.79) $(15.78)
Operating profit $ 18.00 $20.93 $ 69.04 $ 71.95
Other Data:
- Depreciation and
amortization $ 10.38 $10.08 $ 31.40 $ 30.59
- Interest expense $ 18.84 $17.43 $ 55.79 $ 50.02
- Other expense, net $1.60 $0.06 $5.44 $0.74
- Income tax expense
(benefit) $(2.67) $1.27 $1.02 $7.84
- Restructuring,
consolidation
and integration
expenses $0.57 $3.54 $3.53 $ 13.32
- Asbestos litigation
defense costs $0.60 $ - $1.50 $-
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/.