U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to .
Commission File Number 0 - 14835
TRANSNATIONAL INDUSTRIES, INC.
(Exact Name of small business issuer as
specified in its charter)
Delaware 22-2328806
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
Post Office Box 198
U.S. Route 1
Chadds Ford, Pennsylvania 19317
(Address of principal executive offices)
(610) 459-5200
(Issuer's telephone number)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (which is the period
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
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Common stock, $0.20 par value
Outstanding at April 30, 2000: 456,760
Transitional Small Business Disclosure Format (check one):
YES NO X
<PAGE>
TRANSNATIONAL INDUSTRIES, INC.
INDEX PAGE
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets -- April 30, 2000,
and January 31, 2000. 3-4
Condensed consolidated statements of operations -- Three
months ended April 30, 2000 and 1999. 5
Condensed consolidated statements of cash flows -- Three
months ended April 30, 2000 and 1999. 6
Notes to condensed consolidated financial statements --
April 30, 2000. 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Transnational Industries, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
April 30, January 31,
2000 2000
----------------------------
Assets (Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash $ 309 $ 107
Accounts receivable 943 2,173
Inventories 2,244 1,716
Deferred taxes 368 368
Other current assets 211 149
----------------------------
Total current assets 4,075 4,513
Machinery and equipment:
Machinery and equipment $ 2,880 $ 2,838
Less accumulated depreciation 1,997 1,932
----------------------------
Net machinery and equipment 883 906
Other assets:
Repair and maintenance inventories, less provision
for obsolescence 55 55
Computer software, less amortization 641 674
Excess of cost over net assets of business acquired,
less amortization 1,740 1,757
----------------------------
Total other assets 2,436 2,486
----------------------------
Total assets $7,394 $7,905
============================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
Transnational Industries, Inc.
Condensed Consolidated Balance Sheets (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
April 30, January 31,
2000 2000
--------------------------------
Liabilities and stockholders' equity (Unaudited) (Audited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 843 $ 1,043
Deferred maintenance revenue 579 751
Accrued expenses 456 398
Billings in excess of cost and estimated earnings 538 815
Current portion of long-term debt 329 323
--------------------------------
Total current liabilities 2,745 3,330
Long-term debt, less current portion 875 879
Stockholders' equity:
Series B cumulative convertible preferred stock,
$0.01 par value - authorized 100,000 shares;
issued and outstanding 318 shares
(liquidating value $162,578) 73 73
Common stock, $0.20 par value -authorized
1,000,000 shares; issued and outstanding 456,760
(excluding 45,710 shares held in treasury) 100 100
Additional paid-in capital 8,508 8,505
Accumulated deficit (4,770) (4,982)
--------------------------------
3,911 3,696
Less: Treasury stock (137) -
--------------------------------
Total stockholders' equity 3,774 3,696
--------------------------------
Total liabilities and stockholders' equity $ 7,394 $ 7,905
================================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
Transnational Industries, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
April 30,
----------------------
2000 1999
----------------------
<S> <C> <C>
Revenues $ 3,002 $ 2,550
Cost of Sales 2,066 1,808
----------------------
936 742
Gross Margin
Selling expenses 214 179
Research and development 225 189
General and administrative expenses 239 210
----------------------
678 578
----------------------
Operating income 258 164
Interest expense 32 20
----------------------
Income before income tax 226 144
Provision for income taxes 14 9
----------------------
Net income 212 135
Preferred dividend requirement 2 2
----------------------
Income applicable to common shares $ 210 $ 133
======================
Basic income per common share $ .46 $ .26
======================
Diluted income per common share $ .45 $ .26
======================
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
Transnational Industries, Inc.
Condensed Consolidated Statements
of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
April 30,
--------------------
2000 1999
---------- ---------
<S> <C> <C>
Net cash provided (used) by operating activities 380 (130)
Net cash provided (used) by investing activities (180) (53)
Net cash provided (used) for financing activities 2 (219)
---------- ---------
Increase (decrease) in cash 202 (402)
Cash at beginning of period 107 455
---------- ---------
Cash at end of period $ 309 $ 53
========== =========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
Transnational Industries, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
April 30, 2000
Note A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
Regulation S-B. 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 considered
necessary for a fair presentation have been included. All such adjustments are
of a normal recurring nature. Operating results for the three-month period ended
April 30, 2000, are not necessarily indicative of the results to be expected for
the fiscal year. For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended January 31, 2000, contained
in the Registrant's Annual Report on Form 10-KSB for the year ended January 31,
2000.
Note B - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (dollars in thousands except per share data):
<TABLE>
<CAPTION>
Three Months ended
April, 30
--------------------------
2000 1999
------------- ------------
<S> <C> <C>
Numerator (same for basic and dilutive):
Net income $ 212 $ 135
Preferred dividend requirement 2 2
------------- ------------
Net income available to common stockholders $ 210 $ 133
============= ============
Denominator:
Weighted average shares outstanding for basic earnings
per share 456,760 502,470
Dilutive effect of employee stock options 12,712 325
------------- ------------
Weighted average shares outstanding and assumed
conversions for dilutive earnings per share 469,472 502,795
============= ============
Basic earnings per share $ .46 $ .26
============= ============
Diluted earnings per share: $ .45 $ .26
============= ============
</TABLE>
7
<PAGE>
Common shares potentially issuable under the contractual conversion rights of
the Preferred B shares would have an antidilutive effect on earnings per share
and therefore have not been included in the above computations. Weighted average
common shares issuable under the contractual conversion rights of the Preferred
B shares amounted to 1,871 shares in each of three month periods ended April 30,
2000 and 1999.
Note C - Treasury Stock
Treasury Stock is shown at cost and consists of 45,710 shares of common stock.
The shares were acquired in February 2000 for cash of $3 per share or a total of
$137,130.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of operations
Revenues for the first quarter of the fiscal year ended January 31, 2001 (Fiscal
2001) were $3,002,000 compared to $2,550,000 for the first quarter of the fiscal
year ended January 31, 2000 (Fiscal 2000), an increase of $452,000 (18%). The
increase was primarily due to dome sales. Dome revenues were $1,726,000 in the
first quarter of Fiscal 2001 compared to $1,336,000 in the first quarter of
Fiscal 2000, an increase of $390,000 (29%). The increase in dome revenues was
attributable to higher revenue from ride simulation attractions, planetarium
domes, and the sale of a special theater dome to a major European automobile
maker for use in a visitor center. Otherwise, dome revenues from film theaters
and military training simulators decreased. ImmersaVision revenue amounted to
$581,000 in the first quarter of Fiscal 2001 compared to $474,000 in the first
quarter of Fiscal 2000, an increase of $107,000 (23%). Planetarium revenues were
$695,000 in the first quarter of Fiscal 2001 compared to $740,000 in the first
quarter of Fiscal 2000, a decrease of $45,000 (6%). The decrease in planetarium
revenues was due to lower volume from the sale of systems for the educational
market. Planetarium revenues include $313,000 for the sale of maintenance and
parts in the first quarter of Fiscal 2001 compared to $298,000 in the first
quarter of Fiscal 2000, an increase of $15,000 (5%). The increase in maintenance
and parts revenues was due to higher volume from preventive maintenance
agreements.
Revenues are expected to continue at the first quarter level for the remainder
of Fiscal 2001 as work continues on the order backlog. The backlog of unearned
revenue as of April 30, 2000 was approximately $9,400,000, most of which is
scheduled to be earned over the next twelve months. In addition, the Company is
in negotiation to book approximately $3,400,000 of new orders, of which
approximately 60% is expected to be completed within the next twelve months.
While revenues are expected to continue at higher than historical levels over
the next year, uncertainty in the timing and delivery of new sales may cause
revenue levels to fluctuate in interim periods.
Gross margins improved to 31.2% in the first quarter of Fiscal 2001 compared to
29.1% in the first quarter of Fiscal 2000. The margin improvement was
attributable to the higher dome sales with strong margins which improved from
volume related efficiencies. Planetarium and ImmersaVision gross margins
continued to lag dome margins. Selling expenses increased $35,000 (20%) in the
first quarter of Fiscal 2001 compared to the first quarter of Fiscal 2000 due to
staffing additions and organizational changes. Selling expenses in fiscal 2001
are expected to be at current or increasing levels as marketing efforts on
ImmersaVision continue to demand significant resource commitments. Research and
development expenses increased $36,000 (19%) in the first quarter of Fiscal 2001
as compared to the first quarter of Fiscal 2000. The increase in research and
development expenses was due to modifications and improvements of ImmersaVision
products to fulfill customer requirements, the continued creation of proprietary
programming tools for software content development for ImmersaVision, and
improvements to optical planetarium products. Research and development efforts
are expected to continue at increasing levels in future periods. General and
administrative expenses increased $29,000 (14%) due primarily to costs related
to information system improvements and strategic planning.
Interest expense amounted to $32,000 in the first quarter of Fiscal 2001
compared to $20,000 in the first quarter of Fiscal 2000, an increase of $12,000
9
<PAGE>
attributable to new capital leases and higher use of the bank line of credit.
The $32,000 reported in the first quarter of Fiscal 2001 consisted of $20,000
paid on bank debt agreements and $12,000 paid on capital leases. The $20,000
reported in the first quarter of Fiscal 2000 consisted of $16,000 paid on bank
debt agreements and $6,000 paid on capital leases offset by $2,000 earned on
cash invested. The Company continues to pay no federal income taxes as federal
taxable income is offset by the utilization of net operating loss carryforwards.
The provision for state income taxes amounted to $14,000 in the first quarter of
Fiscal 2001 compared to $9,000 in the first quarter of Fiscal 2000. As a result
of the above, net income of $212,000 was recorded in the first quarter of Fiscal
2001 compared to $135,000 in the first quarter of Fiscal 2000.
Liquidity and Capital Resources
Net cash provided by operating activities was $380,000 in first quarter of
Fiscal 2001, compared to $130,000 used in the first quarter of Fiscal 2000. The
$380,000 of net cash provided by operating activities in first quarter of Fiscal
2001 was produced by adding $39,000 of cash provided by changes in operating
assets and liabilities and $129,000 of non-cash charges to $212,000 of net
income. By way of comparison, in the first quarter of Fiscal 2000, the $130,000
of net cash used by operating activities resulted from the effects of $379,000
of cash used from changes in operating assets and liabilities which offset
$135,000 of net income and $114,000 of non-cash charges to net income. The
change in operating assets from time to time is primarily attributable to
progress payment terms on particular customer contracts, and the Company expects
changes in operating assets from period to period to remain both material and
variable.
The $380,000 provided by operations in the first quarter of Fiscal 2001,
supplemented by $2,000 provided from financing activities, was partially used by
$180,000 of investing activities. In addition to the $130,000 used by operations
in first quarter of Fiscal 2000, financing activities used $219,000 and
investing activities used $53,000. The net result was a $202,000 increase in
cash balances during the first quarter of Fiscal 2001 compared to a reduction of
$402,000 during the first quarter of Fiscal 2000.
Financing activities in the first quarter of Fiscal 2001 consisted of proceeds
of $80,000 from the revolving credit note offset by payments of $36,000 on
capital leases and monthly principal payments on the bank term note of $42,000.
Financing activities in the first quarter of Fiscal 2000 consisted of net
payments of $150,000 on the revolving credit note, payments of $21,000 on
capital leases and monthly principal payments on the bank term note of $48,000.
Total debt at April 30, 2000 was $1,204,000, an increase of $2,000 from the
$1,202,000 at January 31, 2000. In summary, the increase resulted from $80,000
of net proceeds on the revolving credit note offset by $42,000 of scheduled
payments applied to term debt and $36,000 of payments applied to capital lease
obligations.
Investing activities in the first quarter of Fiscal 2001 consisted of $43,000 of
various machinery and equipment additions and the purchase of treasury stock at
a cost of $137,000. The $53,000 invested in capital assets in the first quarter
of Fiscal 2000 consisted of $18,000 in computer software and $35,000 of various
machinery and equipment additions.
At April 30, 2000 there was a $435,000 balance on the revolving credit note
compared to $355,000 at January 31, 2000. This resulted in unused borrowing
capacity of $365,000 at April 30, 2000 compared to $445,000 at January 31, 2000.
10
<PAGE>
Cash balances of $309,000 provided additional liquidity at April 30, 2000
compared to $107,000 at January 31, 2000. The next source of liquidity, accounts
receivable, decreased to $943,000 at April 30, 2000 compared to $2,173,000 at
January 31, 2000. This resulted in a $1,108,000 decrease in liquidity available
from cash, borrowing capacity and accounts receivable at April 30, 2000 compared
to January 31, 2000. Contributing to the decrease in liquidity available from
cash, borrowing capacity and accounts receivable was a $799,000 reduction in
funding from contracts in progress as revenue exceeded billings by $744,000 at
April 30, 2000 compared to the $54,000 by which billings exceeded revenue
recorded at January 31, 2000. This illustrates the effect of customer progress
payments on cash flow. As expected, contracts in progress are absorbing
liquidity in fiscal 2001. In May 2000, contract billings amounted to
approximately $1,550,000 and accounts receivable rose to approximately
$2,200,000. This will relieve some of the pressure on liquidity. However,
liquidity pressures expect to continue as the payment terms on many large
contracts require performance milestones and, as expected, fewer contracts are
providing advance payments from customers. To provide additional liquidity for
the growth of the Company, a modification of the Company's revolving credit
agreement increasing the borrowing limit to $1,100,000 is expected to occur in
June 2000.
The modified debt agreements combined with current assets and cash flow from
operations, assuming reasonably consistent revenue levels, should provide the
Company with adequate liquidity for the foreseeable future.
Forward-Looking Information
The statements in this Quarterly Report on Form 10-QSB that are not statements
of historical fact constitute "forward-looking statements." Said forward-looking
statements involve risks and uncertainties which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performances or achievements, expressly predicted or implied by
such forward-looking statements. These forward-looking statements are identified
by their use of forms of such terms and phrases as (without limitation)
"expects," "intends," "goals," "estimates," "projects," "plans," "anticipates,"
"should," "future," "believes," and "scheduled."
The important factors which may cause actual results to differ from the
forward-looking statements contained herein include, but are not limited to, the
following: general economic and business conditions; competition; success of
operating initiatives; operating costs; advertising and promotional efforts; the
existence or absence of adverse publicity; changes in business strategy or
development plans; the ability to retain key management; availability, terms and
deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; labor and employee benefit costs;
availability and costs of raw materials and supplies; and changes in, or failure
to comply with, government regulations. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this filing will
prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and expectations of the Company will be achieved.
11
<PAGE>
II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description of Document
10.1 Purchase and sale of shares of Transnational Industries Inc. between
the Estate of Alan W. Drew and Transnational Industries Inc. dated
January 28, 2000.
10.2 Goldbelt Electric Theater LLC Operating Agreement between Goldbelt,
Incorporated and Spitz Inc. dated April 10, 2000.
27 Financial Data Schedule (Filed electronically herewith)
(b) The Registrant did not file any reports on Form 8-K during the three months
ended April 30, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TRANSNATIONAL INDUSTRIES, INC.
/s/ Paul L. Dailey, Jr.
-------------------------
Date: June 14, 2000 Paul L. Dailey, Jr.
Secretary-Treasurer
Signing on Behalf of Registrant
and as Chief Financial Officer
12
