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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarter ended June 30, 1996, or
_ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-8138
TRITON GROUP LTD.
Incorporated in Delaware IRS Employer Identification No: 33-0318116
Principal Executive Offices: Telephone: (619) 231-1818
550 West C Street, Suite 1880
San Diego, California 92101
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes x No
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Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes x No
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The number of shares of Triton Group Ltd.'s $ .0001 par value common stock
outstanding as of July 31, 1996 was 21,451,502.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRITON GROUP LTD.
Condensed Consolidated Balance Sheet
(Unaudited) (In thousands)
June 30 March 31
1996 1996
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ASSETS
Current assets:
Cash and cash equivalents $ 7,129 $ 7,934
Other current assets 143 1,348
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Total current assets 7,272 9,282
Investment in Mission West Properties 3,007 2,973
Other assets 2,626 2,628
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$ 12,905 $ 14,883
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 915
Accrued liabilities $ 444 1,146
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Total current liabilities 444 2,061
Other liabilities 2,811 2,887
Stockholders' equity:
Common stock 2 2
Additional paid-in capital 21,773 21,774
Accumulated deficit (12,125) (11,841)
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9,650 9,935
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$ 12,905 $ 14,883
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See notes to condensed consolidated financial statements.
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TRITON GROUP LTD.
Condensed Consolidated Statement of Operations
(Unaudited) (In thousands except per-share data)
Three Months Ended
June 30
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1996 1995
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General and administrative expenses $(384) $ (615)
Other income (expenses):
Net interest income (expense) and other 68 (675)
Equity in income (losses) of:
The Actava Group (1,759)
Mission West Properties 34 10
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Loss before income taxes (282) (3,039)
Income taxes (3) (8)
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Loss from continuing operations (285) (3,047)
Income from discontinued operations 75
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Net loss $(285) $(2,972)
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Per share:
Continuing operations $(.01) $ (.15)
Discontinued operations
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Net loss $(.01) $ (.15)
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See notes to condensed consolidated financial statements.
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TRITON GROUP LTD.
Condensed Consolidated Statement of Cash Flows
(Unaudited) (In thousands)
Three Months Ended
June 30
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1996 1995
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Cash flows from operating activities:
Net loss $ (285) $(2,972)
Adjustments to reconcile net loss
to net cash flows from operating activities:
Equity in (income) losses of
unconsolidated subsidiaries (34) 1,749
Income taxes, net 400
Other operating activities 29 287
Discontinued operations (1,048)
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Net cash provided (used) by operating activities 110 (1,984)
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Cash flows from investing activities:
Proceeds from sale of National Airmotive 11,250
Discontinued operations (50)
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Net cash provided by investing activities 11,200
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Cash flows from financing activities:
Repayment of debt (915) (1,392)
Discontinued operations 432
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Net cash used by financing activities (915) (960)
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Increase (decrease) in cash and cash equivalents (805) 8,139
Cash and cash equivalents at beginning of period 7,934 974
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Cash and cash equivalents at end of period $7,129 $ 9,113
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See notes to condensed consolidated financial statements.
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NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE (A) - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In August 1993, the Company announced a corporate strategy to return value
to its stockholders, in the form of cash and/or liquid securities over a
relatively short period of time. Since that time, several transactions and
events have occurred consistent with this strategy. Triton's remaining holdings
as of June 30, 1996 consisted of a 49.4% interest in Mission West Properties,
$7.1 million of cash and certain other non-operating assets and liabilities.
The Company has retained an investment banking firm to assist it in developing
and evaluating proposals from potential acquirors, acquisition candidates or
merger partners. Due to uncertainty surrounding the timing of asset
realization, the consolidated financial statements have been prepared on a going
concern basis assuming continuity of operations and the realization of assets
and liquidation of liabilities in the ordinary course of business.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the financial statement date
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The operating results for interim periods are not necessarily indicative of
the results to be expected for a full fiscal year. In the opinion of
management, the information furnished reflects all adjustments, consisting only
of normal recurring accruals, which are necessary for a fair statement of
operating results for the unaudited interim period.
The condensed balance sheet of the Company at March 31, 1996 has been
derived from the audited balance sheet at that date. For further information,
refer to the consolidated financial statements and footnotes thereto included in
Triton's Annual Report on Form 10-K as of and for the year ended March 31, 1996.
NOTE (B) - EARNINGS PER SHARE
The computation of earnings per share for the three months ended June 30,
1996 and 1995 is based upon the weighted average number of shares outstanding
during the applicable
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period, including dilutive stock options and warrants. The average number of
common shares and equivalents was 21,451,502 and 19,978,476, respectively,
for the three months ended June 30, 1996 and 1995.
NOTE (C) - INVESTMENT IN MISSION WEST PROPERTIES
Triton currently owns 49% (represented by 676,050 common shares) of the
outstanding common stock of Mission West Properties ("Mission West"), a real
estate company listed on the American Stock Exchange. Mission West owns and
manages ten commercial projects and one undeveloped land parcel. On July 1,
1996, Mission West announced that it had signed a definitive agreement to sell
substantially all of its real estate assets for approximately $42 million. Upon
successful completion of the transaction, Mission West would make a distribution
to its stockholders of a substantial portion of the remaining cash proceeds,
after satisfying outstanding mortgage indebtedness of approximately $31.3
million, applicable corporate taxes and transaction costs relating to the sale.
At June 30, 1996, Triton's investment in Mission West was carried in the
consolidated balance sheet at $3 million and the quoted market value of the
Mission West common shares owned by Triton on such date was $4.6 million. On
August 12, 1996, the quoted market value of such shares owned by Triton was $5.2
million. Triton accounts for this investment using the equity method of
accounting and its share of the earnings of Mission West are recorded on a one-
month delayed basis, enabling Triton to reflect the results of Mission West for
its quarter ended May 31, 1996 within Triton's first quarter ended June 30,
1996.
Condensed unaudited income statement information for Mission West for the
three months ended May 31, 1996 and 1995 is as follows (in thousands):
Three Months Ended
May 31
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1996 1995
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Net revenues $1,910 $1,896
Costs and expenses 1,795 1,856
Operating income 115 40
Net income 69 20
NOTE (D) - INCOME TAXES
Income taxes are determined and paid separately by Mission West whose
taxable earnings or losses cannot be offset against those of Triton. Triton is
in a net tax loss carryforward position and is unable to record current tax
benefits on its losses.
At June 30, 1996, Triton had regular net operating loss ("NOL")
carryforwards for
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Federal tax purposes of approximately $47 million and capital loss
carryforwards of approximately $120 million. Due to the change in ownership
requirements of the Internal Revenue Code, as a result of the Company's
reorganization in 1993, all but approximately $10 million of these loss
carryforwards are either "pre-ownership change" or were built in at the date
of the ownership change and are subject to an annual combined limitation of
approximately $2.4 million. The capital loss carryforward is limited to use
against future capital gains only. If the full amount of the limitation is
not used in any year, the amount not used increases the allowable limit in
the subsequent year. Triton has fully utilized its cumulative annual
limitation for alternative minimum tax purposes. The NOL carryforwards
expire between 2006 and 2011 if not used.
The Company has not recognized a financial statement benefit for its tax
loss carryforwards or any other deferred tax assets due to the uncertainty of
realizing the benefit of such assets in the future.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
BACKGROUND AND CORPORATE DIRECTION
Triton is an operating/holding company which has historically done business
through a number of operating subsidiaries in various industries. Triton
emerged from Chapter 11 bankruptcy in June 1993 and announced in August 1993
that its goal was to maximize the value of its remaining operating subsidiaries
and return such value to its stockholders in the form of either cash or liquid
securities. Refer to the Company's Annual Report on Form 10-K for the year
ended March 31, 1996 which addresses the progress that the Company made through
fiscal 1996 toward its goal since the emergence from Chapter 11 in 1993. On
November 1, 1995, the Board of Directors of the Company declared a special
distribution valued at approximately $2.57 per share consisting of $1.57 in cash
and .066 of a share of common stock of Metromedia International Group, Inc.
("Metromedia") for each outstanding share of Triton common stock. The special
distribution was completed on December 8, 1995 to stockholders of record on
November 17, 1995.
On December 11, 1995, Triton announced that it had retained an investment
banking firm to assist the Company in developing and evaluating proposals from
potential acquirors, acquisition candidates or merger partners. Management has
continued to focus on realizing value for Triton's remaining assets while
evaluating a number of broader corporate opportunities. While a specific
transaction has not been selected, Management is encouraged by the number and
range of alternatives presented. Due to uncertainty surrounding the timing of
the Company's ongoing activities, the accompanying consolidated financial
statements have been prepared on a going concern basis assuming continuity of
operations and the realization of assets and liquidation of liabilities in the
ordinary course of business.
CURRENT FINANCIAL POSITION
Triton's principal remaining assets consist of approximately $7.1 million
of cash, its 49% interest in Mission West with a quoted market value of $5.2
million at August 12, 1996 and certain other assets. Triton's ability to
realize the value of its ownership in the Mission West shares on a short-term
basis is limited by, among other things, market conditions and securities law
restrictions. As described in Note (c) - Investment in Mission West Properties,
Mission West is currently under contract to sell substantially all of its real
estate assets. If the transaction were completed, Mission West would make a
substantial distribution to its stockholders.
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The Company's other assets include claims in the Chapter 11 proceedings of
Liquor Barn, Inc., an interest in Series A Preferred Stock of Ridgewood
Properties, Inc. ("Ridgewood") and an investment in an insurance captive.
Triton values its Liquor Barn claims at approximately $.5 million which are
expected to be realized in calendar 1996.
Triton's interest in the Ridgewood preferred stock has a face value of $3.6
million (450,000 shares with a redemption price of $8 per share) and is carried
in the Company's consolidated balance sheet at $2 million. Triton receives a
quarterly dividend of $45,000 on this investment and the preferred stock is
redeemable at any time by Ridgewood at its face value plus accrued dividends.
If the stock is not redeemed by Ridgewood by September 1, 1996, Triton would
earn an increased quarterly dividend of $90,000 or could elect to convert the
preferred stock into 1,350,000 Ridgewood common shares, which would represent
approximately 55% of the Ridgewood common shares then outstanding. Management
is currently evaluating various alternatives for realizing the value of this
asset.
Triton's wholly owned insurance captive, La Jolla Insurance Co. Ltd. ("La
Jolla"), incorporated in Bermuda, currently has cash of approximately $3.4
million and statutory reserves totalling $3 million. Management is currently
pursuing alternatives to maximize the value of the net assets of La Jolla.
Triton's current quarterly cash requirements include approximately $.3
million of corporate level general and administrative expenses. Management of
Triton believes that its current cash balances combined with the expected cash
flows are sufficient to cover its cash requirements.
Mission West finances its own operations and its debt covenants impose
restrictions on dividends or other distributions to stockholders. Triton does
not guarantee any of the debt of Mission West.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996
The Company no longer has any consolidated subsidiaries so the operating
results for all periods presented reflect only the corporate operations,
consisting primarily of general and administrative expenses, corporate
transactions and Triton's share of the results of Mission West.
The consolidated loss from continuing operations for the three months ended
June 30, 1996 was $285,000 compared to a loss during the comparable period in
the prior year of $3 million. The prior year included $1.8 million of equity
losses from The Actava Group Inc. ("Actava"), which was 25% owned by Triton
during the prior three-month period but which was sold in October 1995, and
$675,000 of net interest expense related primarily to secured
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debt that was repaid in the last year. Additionally, general and
administrative expenses in the current year of $384,000 compare to similar
expenses of $615,000 during the comparable period in the prior year,
primarily reflecting a reduction in salaries and professional fees consistent
with the reduced operations of the Company. The Company's equity in earnings
from Mission West of $34,000 in the current year compares to earnings of
$10,000 in the prior year.
The net loss for the current three-month period of $285,000 compares to
a net loss in the comparable period in the prior year of $3 million. The prior
year included income from discontinued operations of $75,000 reflecting the
combined net operating results of National Airmotive Corporation and Western
Metal Lath sold by the Company in June 1995 and November 1995, respectively.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No reports on Form 8-K were filed during the quarter ended June 30, 1996.
SIGNATURES
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 hereunto duly authorize.
TRITON GROUP LTD.
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Registrant
Date: August 14, 1996 By: /s/ Mark G. Foletta
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Mark G. Foletta
Senior Vice President and
Chief Financial Officer
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<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FILED FOR THE PERIOD ENDING JUNE 30, 1996, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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