<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 0-6512
TRANSTECH INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 22-1777533
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Centennial Avenue, Piscataway, New Jersey 08854
(Address of principal executive offices)
(908) 981-0777
(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 of 1934 during the past
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
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after
the distribution of securities under a plan confirmed by a court.
Yes______ No______
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
2,829,090 shares of common stock, $.50 par value, outstanding as of
August 4, 1995. In addition, at such date, the issuer held
1,885,750 shares of common stock, $.50 par value, in treasury.
Transitional Small Business Disclosure Format (Check One):
Yes No X
Page 1 of 50 pages
Exhibit index on page 33
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
I N D E X
Page(s)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1995
and December 31, 1994 3-4
Consolidated Statements of Operations for the
Six Months Ended June 30, 1995 and 1994 5-6
Consolidated Statements of Operations for the
Three Months Ended June 30, 1995 and 1994 7-8
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1995 and 1994 9-10
Notes to Consolidated Financial Statements 11-18
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 19-29
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 30-31
Item 6. Exhibits and Reports on Form 8-K 31
SIGNATURES 32
EXHIBIT INDEX 33
EXHIBITS 34-50
2
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In $000's)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
<S> <C> <C>
1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 1,231 $ 880
Marketable securities 1,683 2,465
Accounts and notes receivable
(net of allowance for doubtful
accounts of $33 and $23) 2,747 2,461
Inventories 4,697 4,780
Deferred income taxes 1,065 1,065
Prepaid expenses and other 547 529
Net assets of discontinued
operations 153 173
Total current assets 12,123 12,353
PROPERTY, PLANT AND EQUIPMENT
Land 939 939
Buildings and improvements 1,784 1,760
Machinery and equipment 10,602 10,332
13,325 13,031
Less: accumulated depreciation 6,057 5,614
Net property, plant and equipment 7,268 7,417
OTHER ASSETS
Notes receivable 875 968
Investment in leveraged lease 446 885
Assets held for sale 2,413 2,421
Cost in excess of net assets
acquired (net of accumulated
amortization of $1,212 and $875) 9,945 10,088
Debt issue costs (net of
accumulated amortization of
$457 and $396) 924 937
Covenants-not-to-compete (net
of accumulated amortization of
$150 and $130) 50 70
Clay deposits 1,077 1,077
Other 140 138
Total other assets 15,870 16,584
TOTAL ASSETS $35,261 $36,354
</TABLE>
3
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, Cont'd
(In $000's)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 4,153 $ 3,700
Accounts payable 898 1,453
Accrued salaries and wages 517 638
Accrued income taxes 2,860 2,318
Accrued miscellaneous expenses 856 916
Total current liabilities 9,284 9,025
OTHER LIABILITIES
Long-term debt 9,430 9,327
Accrued remediation and closure
costs 14,340 14,355
Long-term pension and retiree
health care benefit liability 3,320 3,222
Deferred income taxes 1,248 1,468
Total other liabilities 28,338 28,372
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 575 609
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.50 par value,
10,000,000 shares authorized:
4,714,840 shares issued 2,357 2,357
Additional paid-in capital 1,516 1,516
Retained earnings 4,268 5,420
Minimum pension liability
adjustment (132) (132)
Net unrealized gains on marketable
securities 69 201
Subtotal 8,078 9,362
Treasury stock, at cost -
1,885,750 shares (11,014) (11,014)
Total stockholders' equity
(deficit) (2,936) (1,652)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $35,261 $36,354
</TABLE>
4
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In $000's, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
<S> <C> <C>
REVENUES $9,047 $8,846
COST OF OPERATIONS
Direct operating costs 5,594 5,205
Selling, general and
administrative expenses 3,657 3,312
Total cost of operations 9,251 8,517
INCOME (LOSS) FROM OPERATIONS (204) 329
OTHER INCOME (EXPENSE)
Investment income (loss) 135 119
Interest expense (1,048) (927)
Gain (loss) of sale of securities 269 -
Income from (writedown of)
interest in leveraged lease (244) (609)
Other income (expense) 87 1,320
Total other income (expense) (801) (97)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
(CREDIT), EXTRAORDINARY ITEM
AND MINORITY INTEREST (1,005) 232
Income taxes (credit) 215 (150)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE EXTRAORDINARY
ITEM AND MINORITY INTEREST (1,220) 382
Extraordinary gain on elimination
of debt, net of income taxes - 95
Minority interest in (earnings)
loss of consolidated subsidiary 33 (286)
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS (1,187) 191
DISCONTINUED OPERATIONS:
Income (loss) from operations,
net of taxes (credits) of $18
and $(28), respectively 35 (54)
NET INCOME (LOSS) $(1,152) $ 137
</TABLE>
5
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS, Cont'd
(In $000's, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
<S> <C> <C>
INCOME (LOSS) PER COMMON SHARE:
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE EXTRAORDINARY
ITEM $(.42) $ .04
Extraordinary item - .03
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS (.42) .07
DISCONTINUED OPERATIONS:
Income (loss) from operations, net
of taxes (credits) .01 (.02)
NET INCOME (LOSS) $(.41) $ .05
NUMBER OF SHARES USED IN
CALCULATION 2,829,090 2,829,090
</TABLE>
6
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In $000's, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
1995 1994
<S> <C> <C>
REVENUES $4,548 $4,700
COST OF OPERATIONS
Direct operating costs 2,903 2,806
Selling, general and
administrative expenses 1,814 1,583
Total cost of operations 4,717 4,389
INCOME (LOSS) FROM OPERATIONS (169) 311
OTHER INCOME (EXPENSE)
Investment income (loss) 75 39
Interest expense (518) (465)
Gain (loss) of sale of securities 269 -
Income from (writedown of)
interest in leveraged lease (33) (609)
Other income (expense) 15 18
Total other income (expense) (192) (1,017)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
(CREDIT), EXTRAORDINARY ITEM
AND MINORITY INTEREST (361) (706)
Income taxes (credit) 208 (89)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE EXTRAORDINARY
ITEM AND MINORITY INTEREST (569) (617)
Extraordinary gain on elimination
of debt, net of income taxes - 6
Minority interest in (earnings)
loss of consolidated subsidiary 24 (19)
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS (545) (630)
DISCONTINUED OPERATIONS:
Income (loss) from operations, net
of taxes (credits) of $11 and
$(19), respectively 14 (36)
NET INCOME (LOSS) $ (531) $ (666)
</TABLE>
7
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS, Cont'd
(In $000's, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
1995 1994
<S> <C> <C>
INCOME (LOSS) PER COMMON SHARE:
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE EXTRAORDINARY
ITEM $(.19) $(.22)
Extraordinary item - -
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS (.19) (.22)
DISCONTINUED OPERATIONS:
Income (loss) from operations, net
of taxes (credits) - (.01)
NET INCOME (LOSS) $(.19) $(.23)
NUMBER OF SHARES USED IN
CALCULATION 2,829,090 2,829,090
</TABLE>
8
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In $000's)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 8,789 $ 8,485
Cash paid to suppliers and employees (9,066) (8,055)
Interest and dividends received 97 101
Interest paid (839) (832)
Other income received 96 59
Net operating cash flows from
discontinued operations (46) (59)
Net cash provided by (used in)
operating activities (969) (301)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale and maturity
of marketable securities 2,350 1,990
Purchase of marketable securities (1,476) -
Purchase of property, plant and
equipment (330) (147)
Proceeds from sale of property,
plant and equipment 7 8
Collections of notes receivable 107 89
Rent sharing payments from
computer leases 194 -
Purchase of intangible assets (48) -
(Increase) decrease in other assets (1) -
Net investing cash flows from
discontinued operations (2) 10
Net cash provided by (used in)
investing activities 801 1,950
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (178) (841)
Proceeds from issuance of long-term debt 697 54
Payment of remediation and closure costs - (18)
Net cash provided by (used in)
financing activities 519 (805)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 351 844
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THE YEAR 880 1,625
CASH AND CASH EQUIVALENTS AT END
OF THE QUARTER $ 1,231 $ 2,469
</TABLE>
9
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, Cont'd
(In $000's)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
<S> <C> <C>
RECONCILIATION OF NET INCOME (LOSS)
TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
NET INCOME (LOSS) $(1,152) $ 137
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES:
Extraordinary gain on elimination
of debt - (89)
Depreciation and amortization 750 762
(Gain) loss on sale of marketable
securities (269) -
(Gain) loss on sale of property,
plant and equipment 8 (2)
Increase (decrease) in deferred
income taxes (151) (137)
Leveraged lease (revenue) charge 244 609
Increase (decrease) in minority
interest in consolidated subsidiary (33) 286
(Increase) decrease in assets:
Accounts and notes receivable,
trade-net (301) (309)
Inventories 83 (341)
Prepaid expenses and other (83) 10
Increase (decrease) in liabilities:
Accounts payable and accrued
expenses (610) (39)
Accrued taxes 542 8
Accrued retiree health care
benefit liability 3 (1,196)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (969) $ (301)
</TABLE>
10
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements are presented in
accordance with the requirements of Form 10-QSB and consequently do
not include all of the disclosures normally required by generally
accepted accounting principles or those normally made in the
Company's annual Form 10-KSB filing. Accordingly, the reader of
this Form 10-QSB may wish to refer to the Company's Form 10-KSB for
the year ended December 31, 1994 for further information.
The financial information has been prepared in accordance with
the Company's customary accounting practices except for certain
reclassifications to the 1994 financial statements in order to
conform to the presentation followed in preparing the 1995
financial statements. Quarterly financial information has not been
audited. In the opinion of management, the information presented
reflects all adjustments necessary for a fair statement of interim
results. All such adjustments are of a normal and recurring nature
except as disclosed herein.
NOTE 2 - DISCONTINUED OPERATIONS
On July 7, 1995, the Company executed a non-binding letter of
intent to sell certain machinery and equipment, and contract
rights, thereby effectively the on-going operations, of its wholly-
owned subsidiary, Cal-Lime, Inc. The sale is subject to the
execution of a definitive agreement and the fulfillment of
customary conditions, and is expected to be completed on or about
August 31, 1995. The Company expects proceeds from the sale of
$416,000 after transaction costs of $50,000 and income taxes of
$159,000, and expects to report a gain for financial reporting
purposes at time of sale.
The net assets of Cal-Lime to be sold have been classified as
current assets in the accompanying consolidated balance sheet as of
June 30, 1995 because of the pending sale. The Company intends to
liquidate the remaining assets of the subsidiary and has included
the property, buildings and equipment not part of this transaction,
having an aggregate book value of $368,155, under the caption of
assets held for sale on the accompanying balance sheet. Such value
approximates the estimated net realizable value of those assets.
The consolidated statements of operations have been restated to
report the net results of Cal-Lime's operations as income (loss)
from discontinued operations. Summarized results of the Cal-Lime's
operations for the six and three month periods ended June 30, 1995
11
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Cont'd
and 1994 are as follows (in $000's):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Six Months
Revenues $488 $349
Income (loss) before income tax 53 (82)
Income (tax) credit (18) 28
Net income (loss) 35 (54)
Three Months
Revenues $232 $166
Income (loss) before income tax 21 (55)
Income (tax) credit (7) 19
Net income (loss) 14 (36)
</TABLE>
NOTE 3 - MARKETABLE SECURITIES
Effective January 1, 1994, the Company adopted FASB Statement
No. 115 ("Accounting for Certain Investments in Debt and Equity
Securities"). In accordance with the statement, the Company
classifies all debt securities purchased with remaining maturities
of less than one year as securities held to maturity which are
carried at amortized cost. All other debt and equity securities
are classified as securities available for sale which are carried
at fair value as determined by quoted market prices. The aggregate
excess of fair value over cost of such securities as of June 30,
1995, of $104,000, net of deferred income taxes of $35,000 is
included as a separate component of stockholders' equity.
NOTE 4 - INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out
method) or market. Market for raw materials and purchased products
included in finished goods is based on replacement cost. Market
for work-in-process and manufactured products included in finished
goods is based on net realizable value. Appropriate consideration
is given to deterioration, obsolescence, excess quantities and
other factors in evaluating market value.
Finished goods inventory includes purchased and manufactured
products which may be used in valve assemblies or sold as
replacement parts. At June 30, 1995, inventories consisted of the
following (in $000):
<TABLE>
<CAPTION>
<S> <C>
Raw materials $ 539
Work-in-process 583
Finished goods 3,575
$4,697
</TABLE>
See Note 5 regarding the pledge of Hunt Valve Company, Inc.'s
inventories as security for its financing.
12
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Cont'd
NOTE 5 - LONG-TERM DEBT
At June 30, 1995, long-term debt consisted of the following (in
$000's):
<TABLE>
<CAPTION>
<S> <C>
Hunt Valve Company, Inc. ("Hunt"):
Revolving credit facility (a) $ 1,920
13% Senior secured notes (b) 10,645
Secured notes 294
Principal and interest at prime
plus 2% due monthly through
November 1996; secured by certain
equipment
Other secured notes 56
Principal and interest due
monthly through May 1998;
secured by certain equipment
Junior subordinated notes (c) 225
Principal and interest at prime
plus 2-1/2% due monthly through
September 1996
Parent and all other subsidiaries:
10.5% and 11% mortgages payable due in 417
monthly and semi-annual installments
through July 1996 and April 2000;
secured by land and buildings
Other 26
Total long-term debt 13,583
Less: current portion (4,153)
$ 9,430
</TABLE>
(a) Hunt has a $3 million revolving credit facility with a
financial institution. The facility's initial maturity
date of September 27, 1994 has been extended to August 27,
1995. The Company and the lender are negotiating an
extension of the facility. The impact that the Company's
outstanding issues with the Internal Revenue Service (See
the discussion of Taxes contained in Management's
Discussion and Analysis of Financial Condition and Results
of Operation of this Form 10-QSB) will have on discussions
with the financial institutions or alternative financing
sources cannot presently be determined. If Hunt is
unsuccessful in extending or replacing the current
revolving credit facility, Hunt would be unable to fund its
operations and fund the mandatory principal prepayments on
its senior secured notes now due on September 1, 1995.
Borrowings under the revolving credit facility bear
interest at that institution's prime rate plus 2%. Amounts
borrowed are limited to a percentage of eligible accounts
receivable, raw materials and finished goods inventories.
The amount borrowed against inventories may not exceed $1.5
13
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, cont'd
million. Borrowings under this facility are secured by
Hunt's accounts receivable, intangibles and inventory, and
certain other assets.
The terms of the agreement require that Hunt maintain
minimum levels of net worth and earnings, and certain
interest and debt coverage and debt-to-equity ratios. The
agreement also limits the amount of capital expenditures,
officers' compensation and payments to affiliates, and
prohibits the payment of dividends on common stock.
Additionally, the agreement requires certain prepayment
penalties in the event that Hunt terminates the agreement
prior to maturity.
(b) The senior secured notes are collateralized by a mortgage
on Hunt's real estate, a first lien on Hunt's machinery and
equipment, a pledge of Hunt's common stock, and a second
lien on Hunt's accounts receivable, intangibles and
inventory. The senior secured notes require annual
mandatory prepayments. The senior secured lenders have
agreed to defer the $1,000,000 prepayment initially due
September 30, 1994 to September 1, 1995.
The senior secured notes contain provisions which require
Hunt to maintain certain minimum current, debt-to-equity
and fixed charges coverage ratios, and specified levels of
net worth, and also limit capital expenditures and payments
to affiliates, and prohibit the payment of dividends on
common stock.
The senior secured notes also contain restrictions
regarding the payments of interest and principal on a
$500,000 subordinated note issued by Hunt to the Company in
March 1993. The subordinated note bears interest at prime
plus 1% and pays interest through an increase in the
principal of the subordinated note through December 31,
1995. Cash payments of interest and principal begin in
1996 if certain financial performance is achieved by Hunt.
The senior secured notes were issued with detachable stock
purchase warrants. A portion of the proceeds from issuance
of the senior secured notes has been allocated to the
common stock purchase warrants resulting in a reduction in
the recorded principal amount of the senior secured notes
which is being amortized as interest expense over the life
of the notes at an effective interest rate of 14.32%.
Unamortized discount on the senior secured notes at June
30, 1995 was $355,000.
The senior secured notes also grant the lenders the right
14
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Cont'd
to accelerate payment of the notes subsequent to September
3, 1995 if the lenders are not provided an unencumbered
first lien on certain of Hunt's intangible assets. The
accelerated payment paid to the lenders pursuant to this
provision may be subject to a premium, depending upon the
market interest rate, as defined in the agreement, in
effect at that time. If the lenders exercise their right
to accelerate payment, they would then forfeit their
respective common stock purchase warrants and any shares of
Hunt's common stock received as a result of the exercise of
such warrants.
Pursuant to a Rights Agreement among the senior secured
lenders who are also warrant holders, Hunt and HVHC, Inc.,
Hunt can also be required to repurchase the warrants from
the holders at a market price as specified in the
agreement, in the event (i) the warrant holders are not
provided a first lien on certain assets, and (ii) Hunt
fails to meet certain levels of earnings.
(c) Hunt's junior subordinated notes were issued in September
1991 to its former owners. During September 1993, Hunt
suspended all payments of scheduled interest and principal
payable under the terms of the junior subordinated notes
pending the resolution of certain default conditions
existing at that time. The negotiations with the note
holders resulted in the forgiveness of unpaid interest
accrued on the junior subordinated notes through February
28, 1994, and a $58,000 reduction in the aggregate
principal of the junior subordinated notes. In exchange,
the Company agreed to release certain pending claims
against the former owners and certain indemnification
rights granted by the former owners at the time the Company
acquired Hunt. The junior subordinated notes are to be
repaid through monthly principal installments of $8,323
with interest.
NOTE 6 - REMEDIATION AND CLOSURE COSTS
The Company and certain subsidiaries were previously active in
the resource recovery and waste management industries. These
activities included the operation of three landfills and a solvents
recovery facility. Although the sites are now closed, the Company
continues to own and/or remediate them and has both incurred and
accrued for the substantial costs associated therewith.
The Company's accruals for closure and remediation activities
equal the present value of its allocable share of the estimated
future costs related to a site less funds held in trust for such
purposes. Such estimates require a number of assumptions, and
15
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Cont'd
therefore may differ from the ultimate outcome. The costs of
litigation associated with a site are expensed as incurred.
As of June 30, 1995, the Company has accrued $23.5 million for
its estimated share of remediation and closure costs in regard to
the Company's former landfills and waste handling operations, $9.2
million of which is held in trusts and maintained by Trustees for
financing of the $11.3 million Kinsley Landfill closure plan.
The most significant portion of the balance of the accrual
relates to remediation efforts at the Kin-Buc Landfill. The
Company and other respondents have been remediating the Kin-Buc
Landfill under an Amended Unilateral Administrative Order issued by
the United States Environmental Protection Agency ("EPA") in
September 1990. In November 1992, EPA issued an Administrative
Order for the remediation of certain areas neighboring the Kin-Buc
Landfill. (For a discussion of this matter, see Remediation and
Closure Costs contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations of this Form 10-QSB).
The accrual also includes approximately $1.5 million related to
a site in Carlstadt, New Jersey. The Company was previously named,
along with a group of waste generators, to an order issued by the
EPA which required remediation of the site. In May 1995, the
Company entered into a tentative agreement with substantially all
of the waste generators who have been remediating the site to
settle litigation brought by them to allocate a portion of the cost
of such remediation to the Company and others. This agreement
would substantially relieve the Company from future obligations for
the site in exchange for a cash payment, proceeds from the
settlement of certain insurance claims and an assignment of
Carlstadt-related claims filed against the Company's excess
insurance carriers. (See Part II, Item 1 of this Form 10-QSB for
a further discussion of this matter). The Company will reverse
substantially all of the accrual related to this site when and if
the agreement is approved by the court and becomes final.
The impact of future events or changes in environmental laws and
regulations, which cannot be predicted at this time, could result
in material increases in remediation and closure costs related to
the Company's past waste handling activities, possibly in excess of
the Company's available financial resources.
NOTE 7 - LONG-TERM PENSION AND RETIREE HEALTH CARE BENEFIT
LIABILITY
In addition to a defined benefit pension plan for eligible union
employees, Hunt maintains an employee benefit program which
provides health care benefits to substantially all employees,
eligible union retirees and their eligible dependents. The retiree
16
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Cont'd
health care benefit obligation is unfunded.
Effective January 1, 1993, the Company adopted FASB Statement
No. 106 ("Employers' Accounting for Post-retirement Benefits Other
Than Pensions") which requires employers to recognize the costs and
obligations of post-retirement benefits other than pensions over
the period ending with the date an employee is fully eligible to
receive benefits. Under FASB Statement No. 106, an employer's
post-retirement benefit obligation and costs are primarily measured
by discounting the projected future costs of health benefits based
on an estimate of health care cost trend rates.
The components of the net retiree health care benefit cost for
the six months ended June 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Service cost $ 32,000 $ 22,000
Interest cost on accumulated
retiree health care benefit
obligation 116,000 112,000
Net provision for retiree health care
benefit cost 148,000 134,000
Amortization of adjustment to
purchase price 43,000 42,000
Total associated expense $191,000 $176,000
</TABLE>
The pension and retiree health care benefit liability
consisted of the following as of June 30, 1995 and December 31,
1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Accrued pension costs $ 523,000 $ 519,000
Less current portion (110,000) (106,000)
Accrued retiree health care
obligation 3,007,000 2,908,000
Less current portion (100,000) (99,000)
$3,320,000 $3,222,000
</TABLE>
Upon adoption of FASB Statement No. 106 as of January 1, 1993,
future health care benefit costs were estimated assuming retiree
health care costs would initially increase at a 14% annual rate,
decreasing ratably over nine years to a 7% annual rate thereafter.
As of January 1, 1994, future health care benefit costs were
estimated assuming retiree health care costs would initially
increase at a 12% annual rate, decreasing ratably over nine years
to a 5% annual rate thereafter. As a result of these actuarial
changes, the Company's accumulated post-retirement obligation was
reduced by approximately $1,427,000. The Company elected to
17
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Cont'd
recognize the gain currently, and reported $1,300,000 of such gain
as miscellaneous income for the quarter ended March 31, 1994. The
weighted average discount rate used to estimate the accumulated
retiree health care benefit obligation was 8.0%.
NOTE 8 - LEGAL PROCEEDINGS
See Item 1 of Part II of this Form 10-QSB for a discussion of
legal matters.
18
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Results of operations for the six months ended June 30, 1995
compared to the six months ended June 30, 1994
Consolidated revenues by business segment for the six months
ended June 30, 1995 and 1994 were as follows (in $000):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Valve Manufacturing $8,834 $8,530
Other 213 316
Total $9,047 $8,846
</TABLE>
Consolidated revenues increased 2.3%, or $201,000 for the six
months ended June 30, 1995, compared to the same period of 1994.
Revenues from the Company's Hunt Valve Company, Inc. subsidiary
("Hunt") represented 98% and 96% of consolidated revenue for the
period in 1995 and 1994, respectively. Hunt experienced a
$304,000, or 4% increase in year-to-date revenues when compared to
1994. Revenues from commercial valves and hydraulic systems
produced and serviced by the Hunt Valve division increased by 25%,
or $1,132,000. Revenues from products with military-related
applications manufactured by Hunt's Waeco and Union Flonetics
divisions decreased 26%, or $841,000. Orders received for both
commercial and military-related products increased for the
current period when compared to the same period last year. The
decline in military-related product sales is due to the timing of
the customers' requested shipment dates.
During October 1994, Hunt consummated the purchase of certain
tangible and intangible assets and contract rights from P.J.
Valves, Inc. The transaction provides Hunt with additional product
lines, primarily a line of ball valves designed for military-
related applications. The revenue figures presented above include
sales of approximately $1,139,000 related to the acquired product
lines during the first six months of 1995.
Revenues from operations which generate electricity from methane
gas were $106,000, a decrease of $69,000 or 39% compared to the
same period last year. The decrease is the result of a series of
unrelated equipment failures which subjected two of the four
electric generating units to significant down-time for repairs.
Full capacity is expected to be restored during August 1995. The
environmental services subsidiary contributed $107,000 to revenues,
after elimination of intercompany sales, versus $141,000 for the
same period last year. Approximately 63% of the environmental
services subsidiary's revenues for the period were to either other
members of the consolidated group or third parties providing
19
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, Cont'd
services to another member of the consolidated group, and were,
therefore, eliminated in consolidation, versus 46% for the same
period last year.
Consolidated direct operating costs for the six months ended
June 30, 1995 were $5,594,000, an increase of 7%, or $389,000, when
compared to the same period of 1994. Hunt's direct costs increased
10% when compared to the same period last year, due in part to the
increase in sales volume, indirect labor costs and start-up costs
attributable to the introduction of new product lines. The
Company's non-Hunt operations experienced an overall 39%, or
$95,000 decrease in expenses, due primarily to the decrease in
sales volume and expenses incurred during 1994 for the overhaul of
certain electric generation equipment.
Consolidated selling, general and administrative expenses for
the six months ended June 30, 1995 increased $345,000 or 10%, from
the same period last year to $3,657,000. Hunt experienced a 6%
increase in selling, general and administrative expenses, due
primarily to an increase in salary expense. Selling, general and
administrative expenses for non-Hunt operations increased 16%
compared to last year due to a 66%, or $239,000 increase in
professional fees primarily regarding issues stemming from the
Company's ongoing environmental and tax litigation.
The Company's consolidated operating income for the six months
ended June 30, 1995 decreased to a $204,000 loss from income of
$329,000 in 1994. Operating loss for operations other than Hunt
increased to $1,222,000 from an operating loss of $1,041,000 for
the same period last year.
Investment income increased by $16,000 to $135,000 for the six
months ended June 30, 1995 from the comparable period last year due
to an increase in funds invested in cash equivalents due to the
sale of certain marketable securities during the period.
Consolidated interest expense increased $121,000 to $1,048,000
for the six months ended June 30, 1995 compared to the same period
last year, due primarily to a $104,000 increase in the amount of
interest accrued during the period on amounts reserved for income
taxes, as discussed below.
The Company charged $244,000 against income for the six months
ended June 30, 1995 to reflect a reduction in the carrying value of
its investment in computer equipment. The charge reflects a
decline in the current market value for IBM mainframe computer
equipment. The Company incurred a $609,000 charge related to the
revaluation of this equipment during the comparable period in 1994.
20
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, Cont'd
Consolidated miscellaneous income for the six months ended June
30, 1995 decreased $1,233,000 to $87,000 when compared to the same
period of 1994. Miscellaneous income for the 1994 period includes
$1,300,000 of gain resulting from a reduction in Hunt's long-term
retiree health care benefit liability. The amount of the liability
is determined primarily by discounting the projected future costs
of health benefits based on an estimate of health care cost trend
rates. Calculations performed by the Company's actuaries in 1994
projected a decline in the estimate of future costs to be incurred
by the Company due in part to a reduction in the number of expected
participants and, more significantly, a reduction in the assumed
rate of increase in the cost of health care.
The consolidated loss from continuing operations before income
tax credits, extraordinary item and minority interest in a
subsidiary was $1,005,000 for the six months ended June 30, 1995,
compared to income of $232,000 for the same period last year.
Income tax expense for the six months ended June 30, 1995
equalled $215,000, an $365,000 increase over the $150,000 credit
for 1994. The current period's expense is higher than that
calculated using the statutory rates due to the current provision
for alternative minimum taxes. Alternative minimum taxes result
from the recognition of $2.7 million of deferred taxable income
associated with the Company's investment in computer equipment. No
deferred tax benefit has been recognized since realization is not
assured.
The extraordinary gain on elimination of debt, net of income
taxes, reported for the six months ended June 30, 1994, recognizes
the gain stemming from the restructuring of Hunt's junior
subordinated notes.
The minority interest in earnings/losses of consolidated
subsidiary reflects the value of Hunt's losses attributable to the
nominal exercise price warrants held by its senior lenders. The
warrants represent an aggregate 19.34% equity interest in Hunt.
Income (loss) from discontinued operations relates to the
operations of the Company's subsidiary which markets alkali
products. On July 7, 1995, the subsidiary executed a non-binding
letter of intent to sell certain machinery and equipment, and
contract rights, and thereby effectively the on-going operations of
the segment to a competitor. The decision to sell the segment was
influenced by the recent loss of two contracts (effective May 1,
1995 and July 1, 1995) which accounted for approximately 64% of the
subsidiary's revenues for the twelve months ended June 30, 1995.
Management believes the loss of such revenues would likely have
resulted in the need to infuse capital into the segment in order to
21
<PAGE>
TRANSTECH INDSUTRIES, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, Cont'd
meet its on-going expenses. The terms of the agreement call for a
cash payment of $600,000 for certain machinery and equipment,
contract rights, rights to the subsidiary's name and a non-compete
covenant. The Company intends to liquidate the remaining fixed
assets of the subsidiary and has included the book value of the
property, buildings and equipment not part of this transaction
under the caption assets held for sale on the accompanying balance
sheet. The amount reported as income (loss) from discontinued
operations of $35,000 and $(54,000) for the six months ended June
30, 1995 and 1994, respectively, is reported net of a provision for
income taxes (credit) of $18,000 and $(28,000), respectively.
Consolidated net loss for the six months ended June 30, 1995 was
$1,152,000, or $.41 per share, compared to net income of $137,000,
or $.05 per share, for the six months ended June 30, 1994.
Results of operations for the three months ended June 30, 1995
compared to the three months ended June 30, 1994
Consolidated revenues by business segment for the three months
ended June 30, 1995 and 1994 were as follows (in $000):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Valve Manufacturing $4,451 $4,547
Other 97 153
Total $4,548 $4,700
</TABLE>
Consolidated revenues decreased 3%, or $152,000 for the three
months ended June 30, 1995, compared to the same period of 1994.
Revenues from Hunt's operations represented approximately 97% of
consolidated revenue for both periods. Hunt experienced a $96,000,
or 2% decrease in revenues for the quarter when compared to 1994.
Revenues from the division that produces and services commercial
product lines increased by 32%, or $718,000. Revenues from the
divisions that produces products with military-related applications
decreased 36%, or $822,000. The revenue figures presented for the
second quarter of 1995 above include sales of approximately
$477,000 related to the product lines acquired from P.J. Valves,
Inc. in October, 1994.
Revenues from operations which generate electricity from methane
gas were $44,000, a decrease of $35,000 or 44% compared to the same
period last year. The decline is the result of down-time for
repairs to the electric generating equipment due to the
continuation of a series of equipment failures. The environmental
services subsidiary contributed $53,000 to revenues versus $73,000
for the same period last year. Approximately 62% of the
22
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, Cont'd
environmental services subsidiary's revenues for the period were to
either other members of the consolidated group or third parties
providing services to another member of the consolidated group,
and, were, therefore, eliminated in consolidation, versus 43% for
the same period last year.
Consolidated direct operating costs for the three months ended
June 30, 1995 were $2,903,000, an increase of 3%, or $97,000, when
compared to the same period of 1994. Hunt's direct costs increased
6% when compared to the same period last year, due in part to
increases in indirect costs and to start-up costs attributable to
the introduction of new product lines. The Company's other
operations experienced an overall 46%, or $67,000 decrease in
expenses, due primarily to a decrease in costs associated with last
year's overhaul of certain electric generation equipment.
Consolidated selling, general and administrative expenses for
the three months ended June 30, 1995 increased $231,000 or 15%,
from the same period last year to $1,814,000. Hunt experienced a
8% increase in selling, general and administrative expenses, due
primarily to an increase in salary, professional fees and travel
expense. Selling, general and administrative expenses for non-Hunt
operations increased 43% compared to last year due primarily to a
$250,000 increase in professional fees.
The Company's consolidated operating income for the three months
ended June 30, 1995 decreased to a loss of $169,000 from income of
$311,000 in 1994. Operating loss for operations other than Hunt
increased to $603,000 from an operating loss of $429,000 for the
same period last year.
Investment income increased by $36,000 to $75,000 for the three
months ended June 30, 1995 from the comparable period last year due
to an increase in funds invested in cash equivalents due to the
sale of certain marketable securities during the period.
Consolidated interest expense increased $53,000 to $518,000 for
the three months ended June 30, 1995 compared to the same period
last year, due primarily to a $43,000 increase in the amount of
interest accrued during the period on amounts reserved for income
taxes, as discussed below.
The Company charged $33,000 and $609,000 against income for the
three months ended June 30, 1995 and 1994, respectively, to reflect
a reduction in the carrying value of its investment in computer
equipment. The charges reflect a decline in the current market
value of IBM mainframe computer equipment.
Consolidated miscellaneous income for the three months ended
23
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, Cont'd
June 30, 1995 decreased $3,000 to $15,000 when compared to the same
period of 1994.
The consolidated loss from continuing operations before income
tax (credits), extraordinary item and minority interest in a
subsidiary was $361,000 for the three months ended June 30, 1995,
compared to a loss of $706,000 for the same period last year.
Income tax expense for the three months ended June 30, 1995
equalled $208,000, a $297,000 increase over the $89,000 credit for
1994. The current period's expense is higher than that calculated
using the statutory rates due to alternative minimum taxes
resulting from the recognition of $1.4 million of deferred taxable
income related to the investment in computer equipment.
The extraordinary gain on elimination of debt, net of income
taxes, reported in the quarter ended June 30, 1994, is an
adjustment to the gain reported in the first quarter for the
restructuring of Hunt's junior subordinated notes.
The minority interest in earnings/losses of consolidated
subsidiary reflects the value of Hunt's earnings attributable to
the nominal exercise price warrants held by its senior lenders. The
warrants represent an aggregate 19.34% equity interest in Hunt.
Income (loss) from discontinued operations relates to the
operations of the Company's subsidiary which markets alkali
products. The amount reported as income (loss) from discontinued
operations of $14,000 and $(36,000) for the three months ended June
30, 1995 and 1994, respectively, is reported net of a provision for
income taxes (credit) of $11,000 and $(19,000), respectively.
Consolidated net loss for the three months ended June 30, 1995
was $531,000, or $.19 per share, compared to a net loss of
$666,000, or $.23 per share, for the three months ended June 30,
1994.
Liquidity and Capital Resources
Liquidity
Net cash used by operating activities for the three months ended
June 30, 1995 increased to $969,000 from $301,000 when compared to
the same period last year, due primarily to an increase in
operating expenses. Net cash provided by investing activities
decreased for the current period to $801,000 from $1,950,000,
primarily due to an increase in the purchases of marketable
securities. The amount of cash provided by financing activities
increased to $519,000 from a use of $805,000 for the same period
24
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, Cont'd
last year. Funds held by the Company in the form of cash and cash
equivalents decreased as of June 30, 1995 to $1,231,000 from
$2,469,000. The sum of cash, cash equivalents and marketable
securities as of June 30, 1995 decreased $478,000 to $2,914,000
when compared to last year.
Working capital, when calculated excluding Hunt, was $1.4
million and the ratio of current assets to current liabilities,
again excluding Hunt, was 1.4 to 1 as of June 30, 1995, versus $1.7
million and 1.6 to 1 as of December 31, 1994. Working capital,
when calculated including Hunt, was $2.8 million with a ratio of
1.3 to 1, compared to $4.2 million and a ratio of 1.3 to 1 at
December 31, 1994.
The Company will be facing significant cash requirements due to
(i) the settlement of certain issues in the litigation before the
United States Tax Court as described below, and (ii) the
recognition in 1995 to 1997 of deferred taxable income generated
from the Company's investment in computer equipment. The Company
is evaluating various alternative actions, including the sale of
assets, to address its projected tax obligations and to meet ongoing
operating expenses.
In addition, the uncertainty of the outcome of the Company's
ongoing tax and environmental litigation, discussed below and in
the notes to the Company's consolidated financial statements for
the year ended December 31, 1994, in the Company's Annual Report on
Form 10-KSB, and the impact of future events or changes in
environmental laws or regulations, which cannot be predicted at
this time, could result in material increases in remediation and
closure costs, tax and other potential liabilities. The Company may
ultimately incur costs and liabilities in excess of its available
financial resources.
Taxes
In 1991, the Internal Revenue Service (the "Service") asserted
numerous and, in some cases, significant adjustments in connection
with its audit of the Company's federal income tax returns for the
years 1982 through 1988. In 1993, the Service issued a deficiency
notice to the Company, asserting adjustments to income of $33.3 million
and a corresponding deficiency in federal income taxes of
approximately $13.5 million, penalties of $2.5 million and a
significant amount of accrued interest. The Company filed a petition
with the tax court contesting many of the adjustments that were
proposed in the deficiency notice. On June 5, 1995 the Company
and the Service executed a stipulation of settlement of many of the
adjustments asserted in the deficiency notice, thereby narrowing
the issues to be contested in court. The Company has accepted $3.7
25
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, Cont'd
million of the $33.3 million of total proposed adjustments to
income. The adjustments accepted by the Company relate principally to
issues on which the Service would likely prevail in court. The
Service conceded adjustments totalling $23.1 million of taxable
income. The Company's net operating loss and tax credit carryforwards
will partly offset the increased taxable income resulting from the
settlement, reducing the Company's estimated current liability from
the settled adjustments to approximately $1,460,000 ($185,000 of taxes
and $1,275,000 of interest as of June 30, 1995). Estimated state
income taxes arising from the settlement approximate $680,000
($277,000 of tax and $403,000 of interest as of June 30, 1995).
The Service has agreed that the Company will not owe penalties or
penalty interest with respect to any of the issues in tax court
litigation. The above estimates exclude punitive interest charges
and penalties that may be assessed by the states involved. Payment of the
federal tax liability will be due after the conclusion of the tax
court proceeding. The required date for the payment of the state
tax liability varies by state. The first of such payments, in the
amount of approximately $473,000 as of June 30, 1995, is due within
ninety days following the Company's acceptance of the adjustments
asserted by the Service. The Company's aggregate accrual for taxes and
interest relating to the deficiency totalled $2,413,000 at June 30,
1995.
The Service has conducted an audit of the Company's federal
income tax returns for the years 1989 through 1992, and has
questioned certain deductions claimed by the Company in connection
with its investment in leveraged computer leases. The Service also has
challenged certain real property deductions and certain expenses which
the Service believes should have been capitalized. If the computer lease
deductions are eventually disallowed, the Company's taxable income
for 1989 would be materially increased and its taxable income from
the computer leases for 1994 through 1997 would be reduced
by a corresponding amount. The deductions challenged by
the Service for 1989 through 1992 will be addressed in the pending
Tax Court litigation because those deductions were carried-back
and deducted in the years covered by such litigation. Settlement
discussions regarding these issues are underway.
The use of the Company's net operating loss and tax credit
carry-forwards to offset the settlement adjustments described above
will result in increased future tax liabilities as the Company
recognizes an estimated $15.8 million of taxable income from the
reversal of the deferred tax liabilities generated by the Company's
investment in computer leases. Approximately $5.8, $6.5 and $3.5
million of taxable income is anticipated for 1995, 1996 and for the
first seven months of 1997, respectively, on account of the deferrred
taxes.
26
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, Cont'd
Capital
Hunt's financing agreements limit payments to the Company during
1995 to management fees (subject to Hunt's maintenance of certain
covenants) and payments pursuant to a tax sharing agreement.
Lenders participating in the financing of Hunt have security
interests in substantially all of Hunt's assets.
Hunt has a secured revolving credit facility with a finance
company available for general funding requirements. Borrowings are
limited to a percentage of eligible receivables and inventories.
At June 30, 1995, approximately $2.0 million was borrowed under
this facility. The maximum borrowing limit under the facility is
$3 million.
The revolving credit facility's initial maturity date of
September 27, 1994 has been extended to August 27, 1995. Hunt and
the finance company are negotiating an amendment to the facility
which would extend the maturity date of the facility to December
27, 1995 and provide conditions which, if satisfied, would further
extend the maturity date to December 27, 1996 at the option of the
finance company. If Hunt is unsuccessful in extending or replacing
the current revolving credit facility, Hunt would be unable to fund
its operations and fund mandatory principal prepayments due under
its senior secured note. The impact the Company's outstanding
issues with the Internal Revenue Service, and its ability to meet
the ongoing tax obligations created by the computer leases, may
have on discussions with the lenders cannot presently be determined
(see Managements Discussion and Analysis - Liquidity and Capital
Resources - Taxes).
In February 1995, Hunt's senior secured lenders agreed to defer
the $1,000,000 installment initially due September 30, 1994 to
September 1, 1995. Hunt is negotiating an amendment to its senior
secured loan agreement with the objective of reducing the amount of
amortization currently scheduled for the period of September 1,
1995 through September 30, 1997.
Remediation and Closure Costs
The Company and other responsible parties have been remediating
the Kin-Buc Landfill under an Amended Unilateral Administrative
Order issued by the United States Environmental Protection Agency
("EPA") in September 1990 (the "1990 Order"). In November 1992,
EPA issued an Administrative Order (the "1992 Order", and, together
with the 1990 Order, the "Orders") for the remediation of certain
areas neighboring the Kin-Buc Landfill.
27
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION OF ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, Cont'd
During May 1993, a $22 million contract was awarded for the
construction of a containment system and leachate treatment plant
at the Kin-Buc Landfill in accordance with the engineered design
and standards accepted by the EPA in satisfaction of certain
requirements of the 1990 Order. The contract was to be financed
with funds available in the trust established in 1993 from proceeds
provided from a negotiated settlement with certain parties to a
suit the Company initiated in 1990 with the intent of obtaining
contribution toward the cost of remediation. During May 1994, the
Company met with representatives of EPA to discuss the impact
delays in securing settlement proceeds would have on the Company's
ability to finance the construction within the time frame required
by EPA. In July 1994, after meeting with EPA, SCA Services, Inc.
("SCA"), an affiliate of WMX Technologies, Inc. ("WMX") and a
respondent to the Orders, entered into a contract with the
contractor installing the containment system and treatment plant,
thereby alleviating the potential for delays in this phase of the
construction due to financial limitations. WMX, formerly known as
Waste Management, Inc., had previously provided EPA with a
financial guaranty of SCA's and the Company's obligations under the
Orders. In August 1994, a contract was awarded by SCA for certain
activities mandated by the 1992 Order.
The execution of the contracts between SCA and the contractors
has not relieved the Company of liability for such costs since the
Company entered into an agreement with SCA and certain affiliates
("SCA Group") in 1986 which obligates the Company to bear 75% of
the costs incurred by the parties for the remediation of the site.
The Company filed a demand for arbitration in 1993 seeking
rescission or reformation of the agreement with the SCA Group.
During March 1995, the SCA Group filed a demand for arbitration
seeking reimbursement from the Company of $10.7 million, which
equals 75% of the $14.3 million of remediation expenses purportedly
funded by WMX through December 31, 1994. The status of such
arbitration demands, as yet unresolved, is described in Part II,
Item 1 of this report.
The contractors have essentially completed the construction
required under the Orders, and the Company is awaiting EPA's
acknowledgment of same. Operation of the treatment plant and
maintenance of the facilities is being conducted by an affiliate of
SCA.
A study of an area, approximating one acre, adjacent to the
enclosed mound is about to begin with the intent to determine the
extent of apparent contamination as well as the nature and possible
source of the possible contamination. Such property may be added
to the scope of remediation addressed in the Orders. Other areas
within the vicinity of the site may become the subject of future
28
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, Cont'd
studies due to the historic use of the area for disposal.
Additional material adjustments to the Company's current accrual
may become necessary as the above costs are refined and weighed
against allocations to other respondents and potentially
responsible parties.
Accounting Principles
Effective January 1, 1994, the Company adopted Financial
Accounting Standards Board ("FASB") Statement No. 115 ("Accounting
for Certain Investments in Debt and Equity Securities"). In
accordance with the statement, the Company classifies all debt
securities purchased with remaining maturities of less than one
year as securities held to maturity which are carried at amortized
cost. All other debt and equity securities are classified as
securities available for sale which are carried at fair value as
determined by quoted market prices. The aggregate excess of fair
value over cost of such securities as of June 30, 1995, of
$104,000, net of deferred income taxes of $35,000, is included as
a separate component of stockholders' equity.
29
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In 1991, the Internal Revenue Service (the "Service") asserted
numerous and, in some cases, significant adjustments in connection
with its audit of the Company's federal income tax returns for the
years 1982 through 1988. In 1993, the Service issued a deficiency
notice to the Company, asserting a deficiency in federal income
taxes of approximately $13.5 million, penalties of $2.5 million and
a significant amount of accrued interest. The Company filed a
petition with the tax court contesting many of the proposed
adjustments in the deficiency notice. On June 5, 1995, the Service
and the Company executed a stipulation of settlement, and agreed to
settle certain of the adjustments asserted in the deficiency
notice, thereby narrowing the issues to be contested in court. The
proposed adjustments covered by the settlement represent
approximately $6.5 million of the $13.5 million of tax liability
asserted in the deficiency notice and the accepted adjustments
relate principally to issues on which the Service would likely
prevail in court. (See Part I, Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations - Taxes,
for further information about this matter.)
The Company has previously reported in its Form 10-KSB for the
year ended December 31, 1994 about litigation brought by a group of
generators and transporters of waste handled at a site in
Carlstadt, New Jersey (the "Carlstadt Site") against the Company,
Inmar Associates, Inc. ("Inmar"), a company owned and controlled by
Marvin H. Mahan, a former officer, director and principal
shareholder of the Company, and Mr. Mahan, the purpose of which was
to allocate to the Company, Inmar and Mr. Mahan a portion of the
costs of remediating the Carlstadt Site under orders of the EPA
mandating such remediation. During May 1995, Transtech, Inmar and
Mr. Mahan accepted a tentative settlement with these generators and
transporters and other parties who have contributed to the costs of
the remediation pursuant to which Transtech, Inmar and Mr. Mahan
would (i) pay $4.1 million of proceeds from settlements with
primary insurers of a coverage action brought by the Company and
Inmar against their primary and excess insurers, (ii) pay an
additional $145,000, $72,500 from Transtech and $72,500 from Inmar
and Mr. Mahan, and (iii) assign their Carlstadt Site-related
insurance claims against an excess insurer, in exchange for a
complete release from these parties of all liability arising from
or on account of environmental contamination at the Carlstadt Site
and the parties' remediation of the same. The settlement was
submitted to the Court for approval but an excess insurer objected
to the proposed assignment of Carlstadt Site-related claims. A
hearing on the matter is scheduled for August 28, 1995. The
settlement will be final and binding upon all parties when and if
it is approved.
30
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART II. OTHER INFORMATION, Cont'd
During August 1993, the Company served a demand for arbitration
(the "Transtech Arbitration") on WMX Technologies, Inc. ("WMX"),
formerly named Waste Management, Inc., and the SCA Group. The
Company is seeking reformation or rescission of a 1986 agreement,
including a formula for apportionment of the costs of remediation
of the Kin-Buc Landfill contained therein, and reimbursement of
overpayments made in accordance therewith. WMX brought an action
in the Supreme Court for the State of New York in September 1993
seeking to enjoin the Transtech Arbitration. The Transtech
Arbitration has been stayed pending a decision by the Court. In
February 1995, the Court assigned WMX's and the SCA Group's motion
to permanently enjoin the Transtech Arbitration to a special
referee to report and recommend with regard to the claim that the
Transtech Arbitration should be enjoined permanently on the grounds
that the statute of limitations has run. The hearing before the
referee has been scheduled for August 16, 1995. In March 1995, the
SCA Group filed a demand for arbitration (the "SCA Arbitration")
seeking reimbursement from the Company of $10.7 million, which
equals 75% of the $14.3 million of remediation expenses purportedly
funded by WMX through December 31, 1994. In March 1995, the
Company brought an action in the Supreme Court for the State of New
York seeking to stay the SCA Group's motion to enjoin the Transtech
Arbitration. In response thereto, the Court entered an order
permitting the SCA Arbitration to commence, with the consent of the
arbitrator, who would make limited factual determinations regarding
the amount of funds expended on the remediation and the
reasonableness of such expenditures, subject to and without
prejudice to the Company's rights to seek reformation or rescission
of the Settlement Agreement. The American Arbitration Association
has not yet set a firm date for the arbitration to commence.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 10 - Material Contracts
Exhibit 11 - Computation of Earnings (Loss) Per Common Share
b) Reports on Form 8-K
None
31
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
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.
TRANSTECH INDUSTRIES, INC.
(Registrant)
Date: August 14, 1995 By: /s/Robert V. Silva
Robert V. Silva, President
and Chief Executive Officer
and
Date: August 14, 1995 By: /s/Andrew J. Mayer, Jr.
Andrew J. Mayer, Jr.
Vice President-Finance, Chief
Financial Officer and Secretary
32
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
EXHIBIT INDEX
EXHIBIT PAGE
NO. NO.
10 Material Contracts
10(am) Amendment No. 12 dated as of April 27, 1995
between Hunt Valve Company, Inc. and LaSalle
Business Credit, Inc. to Loan and Security
Agreement dated January 30, 1987, as amended
through Amendment No. 5 and Restatement of Loan
and Security Agreement dated September 27, 1991,
and as amended through Amendment No. 11 dated as
of February 27, 1995; 34-38
10(an) Letter Agreement dated as of April 27, 1995
between Hunt Valve Company, Inc., Rhode Island
Hospital Trust National Bank, as Trustee for the
Textron Collective Investment Trust B, Balboa
Life Insurance Company and Balboa Insurance
Company, as consented to by LaSalle Business
Credit, Inc. 39-41
10(ao) Amendment No. 13 dated as of June 27, 1995
between Hunt Valve Company, Inc. and LaSalle
Business Credit, Inc. to Loan and Security
Agreement dated January 30, 1987, as amended
through Amendment No. 5 and Restatement of Loan
and Security Agreement dated September 27, 1991,
and as amended through Amendment No. 12 dated as
of April 27, 1995; 42-46
10(ap) Letter Agreement dated as of June 27,1995 between
Hunt Valve Company, Inc., Rhode Island Hospital
Trust National Bank, as Trustee for the Textron
Collective Investment Trust B, Balboa Life
Insurance Company and Balboa Insurance Company,
as consented to by LaSalle Business Credit, Inc. 47-49
11 Computation of Earnings (Loss) Per Common Share 50
33
<PAGE>
AMENDMENT NO. 12
TO THE LOAN AND SECURITY AGREEMENT
BETWEEN HUNT VALVE COMPANY, INC.
AND LASALLE BUSINESS CREDIT. INC.
This Amendment No. 12 dated as of April 27, 1995 ("Amendment")
to the Loan Agreement (defined below) is entered into by and
between Hunt Valve Company, Inc. ("Borrower") and LaSalle Business
Credit, Inc. ("LaSalle") (formerly known as StanChart Business
Credit, Inc.).
WITNESSETH
WHEREAS, the Borrower and LaSalle are parties to a Loan and
Security Agreement originally dated as of January 30, 1987, as
previously amended by amendments through Amendment No. 5 and
Restatement of Loan and Security Agreement, dated as of September
27, 1991, by Amendment No. 6, dated as of April 8, 1994, by
Amendment No. 7, dated as of September 27, 1994, by Amendment No.
8, dated as of December 16, 1994, by Amendment No. 9, dated as of
January 25, 1995, by Amendment No. 10, dated as of February 27,
1995, and by Amendment No. 11, dated as of March 27, 1995 (as
amended heretofore and hereafter, the "Loan Agreement"), under
which the Initial Term shall expire April 27, 1995;
WHEREAS, Borrower has requested that LaSalle extend the
Expiration Date of the Initial Term of the Loan Agreement from
April 27, 1995 to June 27, 1995;
WHEREAS, Borrower has represented to LaSalle that Borrower's
request for LaSalle's agreement to such extension is conditioned on
the extension of the due date for Borrower's $1,000,000 required
(mandatory) principal prepayment to the Term Lender under the terms
of the Term Notes (and pursuant to the Note Agreement, dated as of
August 15, 1991, as amended, under which the Term Notes have been
issued) from May 1, 1995 (as previously extended) to June 30, 1995;
WHEREAS, the Term Lender has agreed to extend the due date of
such $1,000,000 required (mandatory) prepayment to June 30, 1995,
WHEREAS, Borrower has acknowledged that its payment of any
part of such $1,000,000 required (mandatory) prepayment to the Term
Lender prior to the due date thereof of June 30, 1995, would
constitute an Event of Default under the Loan Agreement;
WHEREAS, LaSalle has agreed to such waivers and amendments of
the Loan agreement, on the terms and conditions set forth in this
Amendment, subject to the satisfaction by Borrower as required
hereunder of certain preconditions to such waivers and to
effectiveness of such amendments as set forth below;
WHEREAS, terms, unless otherwise defined herein, are used
herein with the meanings assigned to them in the Loan Agreement;
NOW THEREFORE, in consideration of the mutual promises and
agreements of the parties hereinafter set forth and for other good
and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
<PAGE>
SECTION I - AMENDMENTS.
Upon fulfillment of the conditions to effectiveness under
Section III of this Amendment, the Loan Agreement shall be, and is
hereby, amended to be and read as follows:
A. Section 1.26 of the Loan Agreement, the definition of
"Expiration Date", shall be amended to read as follows:
"1.26 The Term 'Expiration Date' shall mean June 27, 1995, or such
later date as may be agreed by LaSalle and Borrower pursuant to
Section 3.1 hereof. "
B. The first paragraph of Section 3.1 of the Loan Agreement shall
be amended to read as follows:
"3.1 This Agreement shall have a term (the 'Initial Term')
commencing on the Effective Date and expiring on June 27, 1995, or
any other scheduled Expiration Date, the then-scheduled Expiration
date may be extended for a period of one (1) year or less only upon
mutual written consent of Borrower and LaSalle. In no event shall
the Expiration Date be extended to a date after September 27,
1996."
SECTION II - RENEWAL FEE.
Borrower shall pay to LaSalle a renewal fee in the amount of
$1,000, which shall be W earned and payable in two $500
installments on May 1, 1995 and June 1, 1995.
SECTION III - CONDITIONS OF EFFECTIVENESS OF THIS AMENDMENT.
This Amendment shall not be effective unless and until:
(a) execution of this Amendment by the parties listed as
signatories below;
(b) execution and delivery of a Company General Certificate
for Borrower, including as Exhibits Borrower's current Certificate
of Incorporation and current By-laws (or statement that they have
not been changed since the date of the last Company General
Certificate delivered to LaSalle by Borrower), resolutions of
Borrower's Board of Directors adopting this Amendment and related
instruments and documents and relevant good standing certificates;
(c) delivery of a Reaffirmation of the Amended and
Restated Guaranty of HVHC, Inc.;
(d) delivery to LaSalle of an executed copy of a letter
agreement between the Term Lender and Borrower extending the due
date of the $1,000,000 required (mandatory) prepayment due to the
Term Lender from May 1, 1995 to June 30, 1995, consenting to the
extension by LaSalle of the expiration date of the Loan Agreement,
and to the extension of the due date of Borrower's principal and
other obligations pursuant to such extension of the expiration
date, from May 1, 1995 to June 30, 1995, under Section 2.4 of the
Note Agreement, and otherwise in form and substance satisfactory to
LaSalle; and
<PAGE>
(e) delivery of any other agreements, consents, filings or
other documents relating to the Loan Agreement and documents
delivered thereunder which are reasonably requested by LaSalle in
relation to this Amendment.
SECTION IV - GENERAL.
(a) Except as herein amended or modified, the Loan Agreement,
as previously amended, shall remain unchanged and in full force and
effect and is hereby ratified, approved, and confirmed in all
respects.
(b) After the date hereof all references in the Loan Agreement
to "Agreement", "hereof", or the like shall refer to the Loan
Agreement as herein amended or modified.
(c) Borrower agrees to furnish to LaSalle upon request, such
resolutions, opinions, certificates, documents and assurances which
LaSalle may request in connection with this Amendment.
(d) This Amendment shall be binding upon Borrower and LaSalle
and their respective successors and assigns, and shall inure to the
benefit of LaSalle and Borrower and their respective successors and
assigns.
(e) This Amendment may be executed in any number of
counterparts and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but
one and the same Amendment.
(f) This Amendment shall be governed by and construed in
accordance with the laws of the State of Illinois.
Dated as of the date and year first above written
HUNT VALVE COMPANY, INC.
By: /S/ROBERT V. SILVA
Title: CHAIRMAN & CEO
LASALLE BUSINESS CREDIT, INC.
By: /S/ WILLIAM A. STAPEL
Title: VICE PRESIDENT
GUARANTY REAFFIRMATION
THE UNDERSIGNED hereby acknowledges and accepts the terms and
conditions of the above-stated Amendment No. 12 and reaffirms the
terms and conditions of that certain Amended and Restated General
Continuing Guaranty dated September 27, 1991.
Dated: April 27, 1995 HVHC, INC.
By: /S/ ROBERT V. SILVA
Its: CHAIRMAN & CEO
<PAGE>
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK
BALBOA LIFE INSURANCE COMPANY
BALBOA INSURANCE COMPANY
April 27, 1995
Hunt Valve Company, Inc.
1913 E. State Street
Salem, Ohio 44460
Re: Note Agreement
Gentlemen:
Reference is made to the Note Agreement, dated as of August
15, 1991, among Hunt Valve Company, Inc. (the "Company), Rhode
Island Hospital Trust National Bank, as Trustee for the Textron
Collective Investment Trust B ("RIHT"), Balboa Life ("Balboa";
RIHT, Balboa Life and Balboa collectively referred to as the
"Purchasers"), as amended by the First Amendment, dated as of March
31, 1993 but effective as of September 30, 1992, and by the
Second Amendment, dated as of July 30, 1993 but effective as of
September 30, 1992 (as so amended, the "Note Agreement").
Capitalized terms used but not defined herein have the meanings
given to them in the Note Agreement.
In connection therewith, the Company has advised the
Purchasers that the Company desires to extend the expiration date
of its secured revolving credit facility (the "LaSalle Facility")
with LaSalle Business Credit, Inc. (f/k/a StanChart Business
Credit, Inc.) ("LaSalle") from April 27, 1995 to June 27, 1995.
The Company has further advised the Purchasers that the Company's
request for LaSalle's agreement to such extension is conditioned on
the extension of the due date for the Company's $1,000,000 required
(mandatory) principal prepayment to the Purchasers under the terms
of the Note Agreement from May 1, 1995 to July 1, 1995.
<PAGE>
Hunt Valve Company, Inc.
April _, 1995
Page Two
The Purchasers hereby advise the Company as follows:
1. Notwithstanding any provision to the contrary in the
Intercreditor Agreement, dated as of September 27, 1991, between
the Purchasers and LaSalle, the Purchasers hereby consent to the
extension by the Company and LaSalle of the expiration date of the
LaSalle Facility, and the extension of the due date of the
Company's principal and other Obligations (as defined in the
LaSalle Facility) pursuant to such extension of the expiration
date, from April 27, 1995 to June 27, 1995.
2. The Purchasers hereby agree that Section 2.1 of the Note
Agreement is amended to provide that the due date for the required
prepayment of $1,000,000 with respect to the Notes, previously
extended to May 1, 1995, is further e tended to July 1, 1995.
3. The Purchasers hereby agree that Section 2.4 of the Note
Agreement is amended as follows: (a) the current reference to "May
1, 1995", is hereby changed to "July 1, 1995" and (b) the current
reference to "April 3, 1995", is hereby changed to "July 3, 1995".
4. The provisions of this letter are limited as specified and
shall not constitute a modification or waiver of any other
provision of the Note Agreement.
5. Purchasers agreement to extend the due date for the
Company's $1,000,000 principal payment as set forth above is
contingent upon LaSalle's agreement to extend the expiration date
of the LaSalle Facility as set forth herein.
Very truly yours,
RHODE ISLAND HOSPITAL TRUST
NATIONAL BANK, as Trustee for
the Textron Collective
Investment Trust B
By: /S/ DAVID E. MAKIN
Title: ASSISTANT VICE PRESIDENT
<PAGE>
Hunt Valve Company, Inc.
April _, 1995
Page Three
BALBOA LIFE INSURANCE COMPANY
By: /S/ LAWRENCE G. KNOWLES, JR.
Title: SECOND VICE PRESIDENT
BALBOA INSURANCE COMPANY
By: /S/ LAWRENCE G. KNOWLES, JR.
Title: SECOND VICE PRESIDENT
AGREED AND CONSENTED TO:
HUNT VALVE COMPANY
By: /S/ ROBERT V. SILVA
Title: CHAIRMAN
PARAGRAPH 2 ABOVE HEREBY IS
CONSENTED TO:
LASALLE BUSINESS CREDIT, INC.
By: /S/ WILLIAM A. STAPEL
Title: VICE PRESIDENT
<PAGE>
AMENDMENT NO. 13
TO THE LOAN AND SECURITY AGREEMENT
BETWEEN HUNT VALYE COMPANY, INC.
AND LASALLE BUSINESS CREDIT. INC.
This Amendment No. 13 dated as of June 27, 1995 ("Amendment")
to the Loan Agreement (defined below) is entered into by and
between Hunt Valve Company, Inc. ("Borrower") and LaSalle Business
Credit, Inc. ("LaSalle") (formerly 'Known as StanChart Business
Credit, Inc.).
WITNESSETH
WHEREAS, the Borrower and LaSalle are parties to a Loan and
Security Agreement originally dated as of January 30. 1987, as
previously amended by amendments through Amendment No. 5 and
Restatement of Loan and Security Agreement, dated as of September
27, 1991, by Amendment No. 6, dated as of April 8. 1994, by
Amendment No. 7, dated as of September 27, 1994, by Amendment No.
8, dated as of December 16, 1994, by Amendment No. 9, dated as of
January 25, 1995, by Amendment No. 10, dated as of February 27,
1995, by Amendment No. 11, dated as of March 27, 1995, and by
Amendment No. 12, dated April 27, 1995 (as amended heretofore and
hereafter, the "Loan Agreement"), under which the Initial Term
shall expire June 27, 1995;
WHEREAS, Borrower has requested that LaSalle extend the
Expiration Date of the Initial Term of the Loan Agreement from June
27, 1995 to July 27, 1995;
WHEREAS, Borrower has represented to LaSalle that Borrower's
request for LaSalle's agreement to such extension is conditioned on
the extension of the due date for Borrower's $1,000,000 required
(mandatory) principal prepayment to the Term Lender under the terms
of the Term Notes (and pursuant to the Note Agreement, dated as of
August 15 1991, as amended, under which the Term Notes have been
issued) from July 1, 1995 (as previously extended) to July 31,
1995;
WHEREAS, the Term Lender has agreed to extend the due date of
such $1,000,000 required (mandatory) prepayment to July 31, 1995
WHEREAS, Borrower has acknowledged that its payment of any
part of such $1,000,000 required (mandatory) prepayment to the Term
Lender prior to the due date thereof of July 31, 1995, would
constitute an Event of Default under the Loan Agreement;
WHEREAS, LaSalle has agreed to such waivers and amendments of
the Loan agreement. on the terms and conditions set forth in this
Amendment, subject to the satisfaction by Borrower as required
hereunder of certain preconditions to such waivers and to
effectiveness of such amendments as set forth below;
<PAGE>
WHEREAS, terms unless otherwise defined herein, are used
herein with the meanings assigned to them in the Loan Agreement;
NOW THEREFORE, in consideration of the mutual promises and
agreements of the parties hereinafter set forth and for other good
and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
SECTION I - AMENDMENTS.
Upon fulfillment of the conditions to effectiveness under
Section III of this Amendment, the Loan Agreement shall be, and is
hereby, amended to be and read as follows:
A. Section 1.26 of the Loan Agreement, the definition of
"Expiration Date", shall be amended to read as follows:
"1.26 The Term 'Expiration Date' shall mean July 27, 1995,
or such later date as may be agreed by LaSalle and Borrower
pursuant to Section 3.1 hereof."
B. The first paragraph of Section 3.1 of the Loan Agreement
shall be amended to read as follows:
"3.1 This Agreement shall have a term (the 'Initial Term')
commencing on the Effective Date and expiring on July 27, 1995, or
any other scheduled Expiration Date, the then-scheduled Expiration
date may be extended for a period of one (1) year or less only upon
mutual written consent of Borrower and LaSalle. In no event shall
the Expiration Date be extended to a date after September 27,
1996."
SECTION II - RENEWAL FEE.
Borrower shall pay to LaSalle a renewal fee in the amount of
$500, which shall be earned and payable on July 1, 1995.
SECTION III - CONDITIONS OF EFFECTIVENESS OF THIS AMENDMENT.
This Amendment shall not be effective unless and until:
(a) execution of this Amendment by the parties listed as
signatories below;
(b) execution and delivery of a Company General Certificate
for Borrower, including as Exhibits Borrower's current Certificate
of Incorporation and current By-laws (or statement that they have
not been changed since the date of the last Company General
Certificate delivered to LaSalle by Borrower), resolutions of
Borrower's Board of Directors adopting this Amendment and related
instruments and documents and relevant good standing certificates;
(c) delivery of a Reaffirmation of the Amended and Restated
Guaranty of HVHC, Inc.;
(d) delivery to LaSalle of an executed copy of a letter
agreement between the Term Lender and Borrower extending the due
date of the $1,000,000 required (mandatory) prepayment due to the
Term Lender from July 1, 1995 to July 31, 1995, consenting to the
extension by LaSalle of the expiration date of the Loan Agreement,
<PAGE>
and to the extension of the due date of Borrower's principal and
other obligations pursuant to such extension of the expiration
date, from July 1, 1995 to July 31, 1995, under Section 2.4 of the
Note Agreement, and otherwise in form and substance satisfactory to
LaSalle; and
(e) delivery of any other agreements, consents, filings or
other documents relating to the Loan Agreement and documents
delivered thereunder which are reasonably requested by LaSalle in
relation to this Amendment.
SECTION IV - GENERAL.
(a) Except as herein amended or modified, the Loan Agreement,
as previously amended, shall remain unchanged and in full force and
effect and is hereby ratified~ approved, and confirmed in all
respects.
(b) After the date hereof all references in the Loan Agreement
to "Agreement", "hereof", or the like shall refer to the Loan
Agreement as herein amended or modified.
(c) Borrower agrees to furnish to LaSalle upon request, such
resolutions, opinions. certificates documents and assurances which
LaSalle may request in connection with this Amendment.
(d) This Amendment shall be binding upon Borrower and LaSalle
and their respective successors and assigns, and shall inure to the
benefit of LaSalle and Borrower and their respective successors and
assigns.
(e) This Amendment may be executed in any number of
counterparts and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but
one and the same Amendment.
(f) This Amendment shall be governed by and construed in
accordance with the laws of the State of Illinois.
Dated as of the date and year first above written
HUNT VALVE COMPANY, INC.
By: /S/ ROBERT V. SILVA
Title: CHAIRMAN
LASALLE BUSINESS CREDIT, INC.
By: /S/ WILLIAM A. STAPEL
Title: VICE PRESIDENT
GUARANTY REAFFIRMATION
THE UNDERSIGNED hereby acknowledges and accepts the terms and
conditions of the above-stated Amendment No. 13 and reaffirms the
terms and conditions of that certain Amended and Restated General
Continuing Guaranty dated September 27, 1991.
Dated: June 27, 1995 HVHC, INC.
By: /S/ ROBERT V. SILVA
Its: PRESIDENT
a:\client1\mbc\huntamnd.13(6/26/95)
<PAGE>
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK
BALBOA LIFE INSURANCE COMPANY
BALBOA INSURANCE COMPANY
June 27, 1995
Hunt Valve Company, Inc.
1913 E. State Street
Salem, Ohio 44460
Re: Note Agreement
Gentlemen:
Reference is made to the Note Agreement, dated as of August
15, 1991, among Hunt Valve Company, Inc. (the "Company), Rhode
Island Hospital Trust National Bank, as Trustee for the Textron
Collective Investment Trust B ("RIHT"), Balboa Life ("Balboa";
RIHT, Balboa Life and Balboa collectively referred to as the
"Purchasers"), as amended by the First Amendment, dated as of March
31, 1993 but effective as of September 30, 1992, and by the Second
Amendment, dated as of July 30, 1993 but effective as of September
30, 1992 (as so amended, the "Note Agreement"). Capitalized terms
used but not defined herein have the meanings given to them in the
Note Agreement.
In connection therewith, the Company has advised the
Purchasers that the Company desires to extend the expiration date
of its secured revolving credit facility (the "LaSalle Facility")
with LaSalle Business Credit, Inc. (f/k/a StanChart Business
Credit, Inc.) ("LaSalle") from June 27, 1995 to July 27, 1995. The
Company has further advised the Purchasers that the Company's
request for LaSalle's agreement to such extension is conditioned on
the extension of the due date for the Company's $1,000,000 required
(mandatory) principal prepayment to the Purchasers under the terms
of the Note Agreement from July 1, 1995 to August 1, 1995.
<PAGE>
Hunt Valve Company, Inc.
June 27, 1995
Page Two
The Purchasers hereby advise the Company as follows:
1. Notwithstanding any provision to the contrary in the
Intercreditor Agreement, dated as of September 27, 1991,
between the Purchasers and LaSalle, the Purchasers hereby
consent to the extension by the Company and LaSalle of
the expiration date of the LaSalle Facility, and the
extension of the due date of the Company's principal and
other Obligations (as defined in the LaSalle Facility)
pursuant to such extension of the expiration date, from
June 27, 1995 to July 27, 1995.
2. The Purchasers hereby agree that Section 2.1 of the Note
Agreement is amended to provide that the due date for the
required prepayment of $1,000,000 with respect to the
Notes, previously extended to July 1, 1995, is further
extended to August 1, 1995.
3. The Purchasers hereby agree that Section 2.4 of the Note
Agreement is amended as follows: (a) the current
reference to "July 1, 1995", is hereby changed to "August
1, 1995" and (b) the current reference to "July 3, 1995",
is hereby changed to "August 3, 1995".
4. The provisions of this letter are limited as specified
and shall not constitute a modification or waiver of any
other provision of the Note Agreement.
5. Purchasers agreement to extend the due date for the
Company's $1,000,000 pricipal payment as set forth above
is contingent upon LaSalle's agreement to extend the
expiration date of the LaSalle Facility as set forth
herein.
Very truly yours,
RHODE ISLAND HOSPITAL TRUST
NATIONAL BANK, as Trustee for the
Textron Collective Investment
Trust B
By: /S/ DAVID E. MAKIN
Title: ASSISTANT VICE PRESIDENT
<PAGE>
Hunt Valve Company, Inc.
June 27, 1995
Page Three
BALBOA LIFE INSURANCE COMPANY
By: /S/ LAWRENCE G. KNOWLES, JR.
Title:
BALBOA INSURANCE COMPANY
By:/S/ LAWRENCE G. KNOWLES, JR.
Title:
AGREED AND CONSENTED TO:
HUNT VALVE COMPANY
By:/S/ ROBERT V. SILVA
Title: CHAIRMAN
PARAGRAPH 2 ABOVE HEREBY IS
CONSENTED TO:
LASALLE BUSINESS CREDIT, INC.
By: WILLIAM A. STAPEL
Title: VICE PRESIDENT
c:\wpwin\gracie\hunt\notelett.dec.18-20
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
<S> <C> <C>
PRIMARY:
Weighted average common shares
outstanding 2,829,090 2,829,090
Dilutive effect of common stock
equivalents - -
2,829,090 2,829,090
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE EXTRAORDINARY
ITEM $(.42) $.04
Extraordinary item - .03
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS (.42) .07
DISCONTINUED OPERATIONS:
Income (loss) from operations, net
of taxes (credits) .01 (.02)
NET INCOME (LOSS) per common
and common equivalent share $(.41) $(.05)
FULLY DILUTED*
<FN>
* For the six months ended June 30, 1995 and 1994, fully diluted
earnings per share did not differ significantly from primary
earnings per share and therefore is not presented.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRANSTECH
INDUSTRIES, INC.'S REPORT ON FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 1995 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> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,231
<SECURITIES> 1,683
<RECEIVABLES> 2,780
<ALLOWANCES> 33
<INVENTORY> 4,697
<CURRENT-ASSETS> 12,123
<PP&E> 13,325
<DEPRECIATION> 6,057
<TOTAL-ASSETS> 35,261
<CURRENT-LIABILITIES> 9,284
<BONDS> 9,430
<COMMON> 2,357
0
0
<OTHER-SE> (5,293)
<TOTAL-LIABILITY-AND-EQUITY> 35,261
<SALES> 9,047
<TOTAL-REVENUES> 9,047
<CGS> 5,594
<TOTAL-COSTS> 5,594
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 1,048
<INCOME-PRETAX> (1,005)
<INCOME-TAX> 215
<INCOME-CONTINUING> (1,187)
<DISCONTINUED> 35
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,152)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
</TABLE>
