<PAGE> 1
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 quarterly period ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_________________________to_______________________
For QUARTER ENDED JUNE 30, 1995 Commission file number 1-9051
TRANSCISCO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
[TRANSCISCO LOGO]
Delaware 94-2989345
--------------------------------------------------------------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
601 California Street, Suite 1301
San Francisco, CA 94108
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(415) 477-9700
--------------------------------------------------------------------------------
(Registrant's Telephone Number,
including area code)
Indicate by check mark whether the registrant has (1) 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 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
----- -----
Indicate the number of common shares outstanding, as of the latest practicable
date.
Class Outstanding at July 31, 1995
---------------------------- -----------------------------------
Common Stock, $.01 par value 5,466,268 (excludes 478,726 shares
---------
held in Treasury)
1
<PAGE> 2
PART I - FINANCIAL STATEMENTS
ITEM 1. TRANSCISCO INDUSTRIES, INC.
FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)]
<TABLE>
<CAPTION>
JUNE 30 MARCH 31
------- --------
1995 1995
(Unaudited) (Note)
<S> <C> <C>
Assets:
Current Assets:
Cash and cash equivalents $ 2,008 $ 1,371
Receivables - trade 7,682 6,221
Inventories 3,346 3,460
Other current assets 618 419
-------- ---------
Total current assets 13,654 11,471
Property and equipment, net
of accumulated depreciation 17,631 17,561
Other 1,582 1,496
-------- ---------
$ 32,867 $ 30,528
======== =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 3,540 $ 2,744
Accrued compensation and benefits 897 1,202
Short-term borrowing 1,664 1,730
Other current liabilities 2,725 2,191
Current portion of long-term debt 2,007 1,862
-------- ---------
Total current liabilities 10,833 9,729
Other long-term liabilities 925 925
Deferred maintenance liability 1,772 1,108
Long-term debt 13,407 13,949
Interest payable 1,469 1,261
Deferred income tax 321 321
Shareholders' equity:
Common Stock $.01 par value
15,000,000 shares authorized,
issued and outstanding, 5,944,994 in
1995 and 5,598,815 in 1994 55 51
Paid-in capital in excess of par 17,431 17,022
Accumulated deficit (10,352) (10,844)
Less cost of Common Shares in Treasury:
478,726 in 1995 and 1994 (2,994) (2,994)
--------- ---------
Total shareholders' equity 4,140 3,235
--------- ---------
$ 32,867 $ 30,528
========= =========
</TABLE>
Note: The balance sheet at March 31, 1995 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to financial statements.
2
<PAGE> 3
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
1995 1994
---- ----
<S> <C> <C>
Revenues $ 10,835 $ 8,168
Costs and expenses:
Operations and support 8,399 6,696
Selling, general and
administrative costs 1,500 1,136
Interest income (34) (76)
Interest expense 460 414
Other (income) expense 18 (21)
---------- ----------
Total costs and expenses 10,343 8,149
---------- ----------
Net income $ 492 $ 19
========== ==========
Per share amounts: $ 0.09 $ 0.00
========== ==========
Shares used in calculations 5,460,630 5,239,995
</TABLE>
See accompanying notes.
3
<PAGE> 4
TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 492 $ 19
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Interest payable 208 263
Depreciation and amortization 302 291
Common stock issued for services 413 10
Changes in operating assets and liabilities:
Accounts receivable (1,461) (1,267)
Inventories 114 (388)
Other current assets (199) 23
Other assets (86) 57
Accounts payable 796 287
Accrued compensation and benefits (305) (68)
Deferred maintenance liability 664 148
Other current liabilities 534 (154)
------- -------
Net cash provided by (used in)
operating activities 1,472 (779)
------- -------
Cash flows from investing activities:
Capital expenditures, net (372) (147)
------- -------
Net cash (used in) investing activities (372) (147)
------- -------
Cash flows from financing activities:
Payments of long-term debt (397) (80)
Increase in long-term debt -- 36
Short-term borrowing (repayment) (66) 980
------- -------
Net cash provided by (used in) financing activities (463) 936
------- -------
Net increase in cash and cash equivalents 637 10
Cash and cash equivalents at beginning of period 1,371 725
------- -------
Cash and cash equivalents at the end of period $ 2,008 $ 735
======= =======
</TABLE>
See accompanying notes.
4
<PAGE> 5
TRANSCISCO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1995
1) Basis for Presentation:
The accompanying unaudited financial statements have been prepared in
accordance with generally 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 the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended June 30, 1995, are
not necessarily indicative of the results that may be expected for the year
ended March 31, 1996. For further information, refer to the financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended March 31, 1995.
2) Refer to Item 2, Part I for discussion concerning bank and other debt.
3) Refer to Item 1, Part II for legal proceedings.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF THE COMPANY'S OPERATING RESULTS FOR THE THREE MONTHS ENDED
JUNE 30, 1995 AS COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1994
REVENUES
The revenues of Transcisco Industries, Inc. (the "Company") for the three month
period ending June 30, 1995 increased by approximately 33% over the comparable
three month period for 1994. Revenue from Transcisco Rail Services ("TRS"),
which comprised 68% of total Company's revenues, increased by $347,000 to $7.4
million due primarily to an increase in program repair work. Revenues from
Transcisco Leasing Company ("TLC") increased by $2.2 million, or 166%, due
primarily to significant growth in TLC's managed railcar fleet, which jumped
151% during the last twelve months to over 8,800 railcars at June 30, 1995.
Revenues from Transcisco Trading Company ("TTC") increased by $255,000 due to an
increase in licensing and sales of its Uni-Temp railcar heating technology to
SovFinAmTrans ("SFAT"), Russia's leading private petroleum and petrochemical
rail transportation firm.
OPERATIONS AND SUPPORT EXPENSES
Operation and support expenses include the cost of direct and indirect labor,
materials and overhead costs associated with the repair and maintenance of
railroad rolling stock. When compared to the comparable period of 1994,
operations and support expenses increased $1.7 million in the Quarter ended June
30, 1995. This increase was a result of higher sales in all
5
<PAGE> 6
business units. However, the percentage of sales represented by operations and
support expenses declined in the three months ended June 30, 1995 to 78% from
83% in the comparable period of 1994. This increase in profit margins was a
result of higher sales relative to the fixed overhead components of operations
and support expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses include the sales, finance, human
resources, legal, purchasing and administrative operations of the Company. These
expenses increased by $364,000 in the three month period ended June 30, 1995
over the comparable period of 1994. The increase was caused by higher personnel
and marketing costs incurred to facilitate growth in the Company's customer
base, particularly at TLC.
ACCOUNTING FOR INVESTMENT IN SOVFINAMTRANS
Transcisco Trading Company is a 20% shareholder of SFAT, Russia's leading
private rail transportation firm. SFAT was founded in 1989. Due to uncertainty
in the political and economic arenas in Russia, management decided to
discontinue recording equity earnings on the investment in SFAT effective June
30, 1991. While SFAT continues to be profitable and does not appear to be
materially affected by the changes in Russia, it is management's belief that
this policy has been prudent. Dividends received from SovFinAmTrans amounted to
$51,000 in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The ratio of current assets to current liabilities was 1.25 to 1.0 at June 30,
1995 compared to 1.18 to 1.0 at March 31, 1995. Working capital increased by
$1,016,000 as a result of several factors, including an increase in maintenance
reserves (resulting from growth in TLC's fleet under management), lower
inventory, and increased profitability (which resulted from higher sales, as
previously described).
The Company's cash requirements were primarily satisfied through cash on hand,
operating earnings and short-term borrowing. Short term borrowings at June 30,
1995 were $1,664,000. The Company, through its subsidiary, TRS has a $2 million
line of credit with Congress Financial Corporation secured by valid first liens
on all of the assets of TRS, tangible and intangible except machinery and
equipment and real estate. Management believes the availability of working
capital from this loan facility combined with the attainment of projected
operating cash flow should be sufficient to meet the Company's working capital
requirements in the near future.
Pursuant to the Company's Plan of Reorganization, the required quarterly
principal payments to the Company's Class F Creditors increased in Fiscal 1995
to $325,500 from $13,000 in the previous twelve month period. The Company has
acquired exclusive options (which expire August 7, 1995) to refinance the bulk
(in dollar value) of the Class F claims at a significant discount. In addition,
the Company is negotiating with two principal lenders to provide debt in
connection with the refinancing. The Company believes that, even if such
refinancing does not occur, it will be able to satisfy the requirements of the
Class F repayment schedule primarily through cash flow generated from the
operations of its three business units.
6
<PAGE> 7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
DANIELS ET AL V. PLM INTERNATIONAL, INC., ET AL. On November 23, 1987, Shirley
B. Daniels and Barney and Rachel Milione instituted a purported class action,
known as the "Daniels" case, in the Superior Court of California, County of San
Francisco, against PLM International, Inc., Transcisco Industries, Inc., and
various corporate and individual defendants. The action purported to arise out
of the February 1988 consolidation wherein the Company exchanged three of its
subsidiaries in return for cash, a note receivable from PLM International, Inc.
("PLMI") and approximately 36% of PLMI Common Stock. In addition, the assets of
21 investor-owned public limited partnerships were contributed to PLMI in return
for an approximately 64% of the common stock in PLMI (the "Consolidation"). The
plaintiffs claimed that certain aspects of the Consolidation constituted a
breach of alleged fiduciary duties owed by the defendants to the limited
partners of the various limited partnerships which were party to the
transaction. The plaintiffs sought damages in an unspecified amount and
attorneys' fees, costs of the suit, rescinding and invalidating the
Consolidation, imposing a constructive trust on the shares of PLMI common stock
received by the Company in connection with the Consolidation and such other
relief as the court may deem appropriate. The plaintiffs filed a motion for
class certification, and by order dated October 9, 1990, the court granted the
plaintiff's motion to certify the class. The action was originally set for trial
on July 29, 1991; however, the trial date was continued a number of times, and
was settled in July, 1993.
On September 21, 1990 Shirley B. Daniels and Barney and Rachel Milione
instituted a purported class action in the United States District Court for the
Northern District of California, against PLMI, the Company and various corporate
and individual defendants. The plaintiffs claimed damages arising from alleged
violations of the federal securities laws, namely Section 10(b) of the
Securities Exchange Act of 1934 ("Exchange Act") and Rule 10(b)-5 thereunder as
to all defendants; and Section 20(a) of the Exchange Act, as to the Company and
all individual defendants. The relief sought in the Complaint is substantially
similar to that sought in the Daniels case brought in the state court discussed
above. By order dated January 11, 1991 pursuant to stipulation of the parties,
the federal court action was stayed, with such stay to remain in effect until 60
days after written notice is given by any party of intention to proceed in the
federal court action, or 30 days after a full and final adjudication or other
resolution of all of the issues raised in the Daniels state court action.
Transcisco and the Class Representatives agreed to settle all matters raised in
the State Court Action and the Federal Action. The Settlement calls for
Transcisco to pay $750,000 to plaintiffs over ten consecutive quarters, and is
subject to several other conditions. The Settlement was approved by the
Bankruptcy Court. On November 4, 1993, the Company made its initial payment in
the amount of $187,500 to the Daniels' claimants. Seven more installment
payments of $62,500 each were made in each of the following quarters starting in
December 1993, leaving the balance owing as of $125,000 ($62,500 is due
September 30, 1995 and December 31, 1995). As part of the settlement, the Great
American Insurance Company ("Great American") made a payment to the Daniels'
claimants in the approximate amount of $2.7 million, with reservation of rights.
A Lower Court ruled that Great American had an obligation to provide coverage,
but Great American appealed that ruling to the Ninth Circuit Court of Appeals.
The Ninth Circuit Court of Appeals ruled in June 1995 that the case was not
appropriately heard in federal courts, but was instead a matter for California
courts. Great American has not filed any action in state court as of the date of
this report.
7
<PAGE> 8
In the event that Great American files a lawsuit and prevails in the state
courts, Great American will seek reimbursement from Mr. Hungerford (an
individual defendant in the Daniels' action). To the extent Mr. Hungerford pays
any amounts to Great American, he may be entitled to indemnification from the
Company for such sums actually paid.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE
<S> <C>
3.1 Joint Plan of Reorganization. *
3.2 Restated Certificate of Incorporation, as Amended *
3.3 By-Laws, as Amended. *
4.1 Indenture dated as of May 15, 1986 between the Company and
Bank of America National Trust and Savings Association, Trustee. *
4.2 Supplemental Indenture dated February 1, 1988 between the Company
and Bank of America National Trust and Savings Association, Trustee. *
4.3 Tripartite Agreement, and Instrument of Resignation, Appointment and
Acceptance dated as of July 26, 1991, by and among the Company, Yasuda
Bank and Trust Company (U.S.A.) and First Interstate Bank of California. *
10.1 Lease agreement for 601 California Street. *
10.2 Transcisco Industries, Inc., Amended and Restated (1994) Stock Option
Plan (including implementing agreement: Transcisco Industries, Inc.,
Stock Option Agreement). *
10.3 Plan and Agreement of Reorganization. *
10.4 Employment Agreement between the Company and George A. Tedesco. *
10.5 Form of Non-Qualified Deferred Executive Compensation Plan. I. *
10.6 Profit Sharing and Tax Advantaged Savings Plan dated February 1, 1987. *
10.7 Employment Agreement between TRS and Mr. Jahnke, dated April 13, 1995. *
10.8 Transcisco Industries, Inc. Directors' (1994) Stock Option Plan. *
10.9 Employment Agreement as amended, dated May 1, 1995 between
Mr. William F. Bryant and Transcisco Leasing Company. *
</TABLE>
(continued)
8
<PAGE> 9
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE
<S> <C>
10.10 Agreement between Deucalion Securities, Inc., Steven L. Pease and
the Company dated January 3, 1995. *
10.11 Employment Agreement between the Company and Philip C. Kantz
dated as of February 23, 1994. *
21.1 List of Subsidiaries of the Company. *
23.1 Consent of Independent Auditors. *
</TABLE>
* = incorporated by reference.
(B) REPORTS ON FORM 8-K
None were filed for the quarter ended June 30, 1995.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TRANSCISCO INDUSTRIES, INC.
July 31, 1995 /s/ GREGORY S. SAUNDERS
------------- --------------------------------------------
Date Gregory S. Saunders - on behalf of the
Registrant and as Vice President, Controller
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-01-1995
<CASH> 2,008
<SECURITIES> 0
<RECEIVABLES> 7,682
<ALLOWANCES> 0
<INVENTORY> 3,346
<CURRENT-ASSETS> 13,654
<PP&E> 17,631
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,867
<CURRENT-LIABILITIES> 10,833
<BONDS> 0
<COMMON> 55
0
0
<OTHER-SE> 4,085
<TOTAL-LIABILITY-AND-EQUITY> 32,867
<SALES> 10,835
<TOTAL-REVENUES> 10,835
<CGS> 8,399
<TOTAL-COSTS> 8,399
<OTHER-EXPENSES> 1,484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 460
<INCOME-PRETAX> 492
<INCOME-TAX> 0
<INCOME-CONTINUING> 492
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 492
<EPS-PRIMARY> .09
<EPS-DILUTED> 0
</TABLE>
