<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934 for the quarter ended September 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
--- ---
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
--- ---
The number of shares of Triton Group Ltd.'s $ .0001 par value common stock
outstanding as of November 11, 1996 was 21,553,502.
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRITON GROUP LTD.
Condensed Consolidated Balance Sheet
(Unaudited) (In thousands)
<TABLE>
<CAPTION>
September 30 March 31
1996 1996
------------ --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,532 $ 7,934
Other current assets 277 1,348
------------ --------
Total current assets 6,809 9,282
Investment in Mission West Properties 2,963 2,973
Other assets 2,625 2,628
------------ --------
$ 12,397 $ 14,883
------------ --------
------------ --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 915
Accrued liabilities $ 398 1,146
------------ --------
Total current liabilities 398 2,061
Other liabilities 2,715 2,887
Stockholders' equity:
Common stock 2 2
Additional paid-in capital 21,774 21,774
Accumulated deficit (12,492) (11,841)
------------ --------
9,284 9,935
------------ --------
$ 12,397 $ 14,883
------------ --------
------------ --------
</TABLE>
See notes to condensed consolidated financial statements.
2
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TRITON GROUP LTD.
Condensed Consolidated Statement of Operations
(Unaudited) (In thousands except per-share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
September 30 September 30
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
General and administrative expenses $ (409) $ (668) $ (793) $(1,283)
------- ------- ------- -------
Other income (expenses):
Net interest income (expense) and other 87 (338) 155 (1,013)
Equity in losses of:
The Actava Group Inc. (2,992) (4,751)
Mission West Properties (44) (53) (10) (43)
------- ------- ------- -------
Loss before income taxes (366) (4,051) (648) (7,090)
Income taxes (3) (8)
------- ------- ------- -------
Loss from continuing operations (366) (4,051) (651) (7,098)
Income (loss) from discontinued operations (43) 32
------- ------- ------- -------
Net loss $ (366) $(4,094) $ (651) $(7,066)
------- ------- ------- -------
------- ------- ------- -------
Per share:
Continuing operations $(.02) $(.20) $(.03) $(.35)
Discontinued operations
------- ------- ------- -------
Net loss $(.02) $(.20) $(.03) $(.35)
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
See notes to condensed consolidated financial statements.
3
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TRITON GROUP LTD.
Condensed Consolidated Statement of Cash Flows
(Unaudited) (In thousands)
<TABLE>
<CAPTION>
Six Months Ended
September 30
------------------------------
1996 1995
------------ --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (651) $ (7,066)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Equity in losses 10 4,794
Other operating activities 154 (727)
Discontinued operations 3,017
------------ --------
Net cash provided (used) by operating activities (487) 18
------------ --------
Cash flows from investing activities:
Proceeds from sale of subsidiaries 11,250
Other (2)
------------ --------
Net cash provided by investing activities 11,248
------------ --------
Cash flows from financing activities:
Repayment of long-term debt (915) (2,943)
Discontinued operations (3,194)
------------ --------
Net cash used by investing activities (915) (6,137)
------------ --------
Increase (decrease) in cash and cash equivalents (1,402) 5,129
Cash and cash equivalents at beginning of period 7,934 974
------------ --------
Cash and cash equivalents at end of period $ 6,532 $ 6,103
------------ --------
------------ --------
</TABLE>
See notes to condensed consolidated financial statements.
4
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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 September 30, 1996 consisted of a 49.4% interest in Mission
West Properties, $6.5 million of cash and certain other non-operating assets
and liabilities. In December 1995, the Company retained an investment
banking firm to assist it in developing and evaluating proposals from
potential acquirors, acquisition candidates or merger partners.
On September 23, 1996, the Company announced that it had entered into a
letter of intent to merge with Security Systems Holdings, Inc. ("SSH"), the
Orange, Connecticut-based parent of Alarmguard, Inc. ("Alarmguard"). The
letter of intent calls for the issuance of a number of new shares of Triton
to stockholders of SSH such that the ownership of the combined entity would
be divided 40% to Triton's current stockholders and 60% to the current
stockholders of SSH. The transaction remains subject to the satisfactory
completion of documentation, due diligence and other customary conditions,
and is subject to the affirmative vote of the stockholders of both companies.
If consummated, it is expected that the transaction would close in early
1997.
The condensed 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.
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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 and six months ended
September 30, 1996 and 1995 is based upon the weighted average number of
shares outstanding during the applicable period, including dilutive stock
options and warrants. The average number of common shares and equivalents
was 21,465,684 and 21,458,593, respectively, for the three and six months
ended September 30, 1996 and 19,978,476 for the three and six months ended
September 30, 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. On October 14, 1996, Mission West announced that it had exercised a
"fiduciary out" pursuant to this agreement and entered into a new definitive
agreement to sell all of its real estate assets for an aggregate purchase
price of $46.5 million. The new transaction, which is scheduled to close
before the end of December 1996, is subject to customary conditions. Upon
successful completion of this 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 million and applicable corporate taxes and transaction
costs relating to the sale.
At September 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 $5.2 million.
On November 11, 1996, the quoted market value of such shares owned by Triton
was $6.2 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 August 31, 1996 within Triton's second
quarter
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ended September 30, 1996.
Condensed unaudited income statement information for Mission West for the
six months ended August 31, 1996 and 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
August 31
------------------------------
1996 1995
------------ --------
<S> <C> <C>
Net revenues $3,777 $3,821
Costs and expenses 3,807 3,959
Operating loss (30) (138)
Net loss (20) (88)
</TABLE>
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 September 30, 1996, Triton had regular net operating loss ("NOL")
carryforwards for 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. As of March 31, 1996, for alternative minimum tax
purposes, Triton has fully utilized its post-ownership change NOL carryforwards
and the cumulative annual limitation for its pre-ownership change NOL
carryforwards. 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.
7
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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.
While management has continued to focus on realizing value for Triton's
remaining assets, 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. As discussed
in Note (a) - Basis of Presentation to the Condensed Financial Statements,
the Company announced that on September 23, 1996 it has entered into a letter
of intent to merge with SSH, the Connecticut-based parent of Alarmguard. The
accompanying condensed 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.
8
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CURRENT FINANCIAL POSITION
Triton's principal remaining assets consist of approximately $6.5 million
of cash, its 49% interest in Mission West with a quoted market value of $6.2
million at November 11, 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 is completed, Mission West
will make a substantial distribution to its stockholders, including the
Company.
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 $500,000 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
currently accrues a quarterly dividend of $90,000 on this investment and the
preferred stock is redeemable at any time by Ridgewood at its face value plus
accrued dividends. The preferred stock is convertible at any time 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 totally $3 million. This cash is not
included in the Condensed Consolidated Balance Sheet due to the presents of
the statutory reserves. Management is currently pursuing alternatives to
maximize the value of the net assets of La Jolla.
Triton's current quarterly cash requirements include approximately
$400,000 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.
9
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 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 equity share of the results of Mission West.
The consolidated loss from continuing operations for the three months
ended September 30, 1996 was $366,000 compared to a loss during the
comparable period in the prior year of $4.1 million. The prior year included
$3 million of equity losses from The Actava Group Inc. ("Actava"), which was
25% owned by Triton during the prior six-month period but which was sold in
October 1995, and $338,000 of net interest expense related primarily to
secured debt that was repaid in the last year. Additionally, general and
administrative expenses in the current year of $409,000 declined from similar
expenses of $668,000 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 losses from
Mission West of $44,000 in the current period compared to losses of $53,000
in the prior year.
The net loss for the current three-month period of $366,000 compared to a
net loss in the comparable period in the prior year of $4.1 million. The
prior year included a loss from discontinued operations of $43,000 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.
SIX MONTHS ENDED SEPTEMBER 30, 1996
The consolidated loss from continuing operations for the six months ended
September 30, 1996 of $651,000 compared to a loss of $7.1 million during the
comparable period in the prior year. The prior year included $4.8 million in
equity losses of Actava and $1 million of net interest expense which compared
to $155,000 of net interest income in the current six-month period.
Additionally, general and administrative expenses of $793,000 in the current
six month period compared to similar expenses of $1.3 million during the
comparable period in the prior year. The reduction in net interest expense
and general administrative expenses in the current year are for the same
reasons which influenced the three-month operating results.
The net loss for the six months ended September 30, 1996 of $651,000
compared to a net loss of $7.1 million in the prior year. The prior year
also included income from discontinued operations of $32,000, reflecting the
operating results of Western Metal prior to disposition.
10
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 27.1 Financial Data Schedules
(b) No reports on Form 8-K were filed during the quarter ended
September 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 thereunto duly authorized.
TRITON GROUP LTD.
-----------------------------
Registrant
Date: November 14, 1996 By: /s/ Mark G. Foletta
-----------------------------
Mark G. Foletta
Senior Vice President and
Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FILED FOR THE PERIOD ENDING SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,532
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,809
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,397
<CURRENT-LIABILITIES> 398
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 9,282
<TOTAL-LIABILITY-AND-EQUITY> 12,397
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (793)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (648)
<INCOME-TAX> (3)
<INCOME-CONTINUING> (651)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (651)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
