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, 1998
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)
(732) 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: 2,829,190 shares of common stock,
$.50 par value, outstanding as of June 30, 1998. 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 30 pages
Exhibit index on page 30
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED June 30, 1998
I N D E X
Page(s)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30,
1998 and December 31, 1997 3 - 4
Consolidated Statements of Operations for the
Six Months Ended June 30, 1998 and 1997 5
Consolidated Statements of Operations for the
Three Months Ended June 30, 1998 and 1997 6
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1997 7 - 8
Notes to Consolidated Financial Statements 9 - 13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14 - 24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 25 - 27
Item 6. Exhibits and Reports on Form 8-K 28
SIGNATURES 29
EXHIBIT INDEX 30
EXHIBITS 31
2
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(In $000's)
ASSETS
June 30, December 31,
1998 1997
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 874 $ 311
Marketable securities 1,598 2,610
Accounts and notes receivable
(net of allowance for doubtful
accounts of $15) 166 125
Deferred income taxes 30 30
Prepaid expenses and other 359 331
----- -----
Total current assets 3,027 3,407
----- -----
PROPERTY, PLANT AND EQUIPMENT
Machinery and equipment 2,896 2,892
Less accumulated depreciation (2,771) (2,742)
----- -----
Net property, plant and equipment 125 150
----- -----
OTHER ASSETS
Notes receivable 173 178
Assets held for sale 1,313 1,581
Receivable, clay deposit 530 530
Escrowed funds from sale of
subsidiary 838 817
Deferred income taxes 305 302
Other 31 33
----- -----
Total other assets 3,190 3,441
----- -----
TOTAL ASSETS $ 6,342 $ 6,998
===== =====
See Notes to Consolidated Financial Statements
3
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
CONSOLIDATED BALANCE SHEETS, Cont'd
(In $000's)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
June 30, December 31,
1998 1997
(Unaudited)
CURRENT LIABILITIES
Current portion of long-term debt $ 24 $ 22
Accounts payable 166 256
Accrued income taxes and related
interest 4,099 4,192
Accrued miscellaneous expenses 215 157
------ ------
Total current liabilities 4,504 4,627
------ ------
OTHER LIABILITIES
Long-term debt 27 38
Accrued remediation and closure
costs 2,135 2,135
------ ------
Total other liabilities 2,162 2,173
------ ------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.50 par value,
10,000,000 shares authorized:
4,714,940 shares issued 2,357 2,357
Additional paid-in capital 1,516 1,516
Retained earnings 6,793 7,305
Net unrealized gains on marketable
securities 24 34
------ ------
Subtotal 10,690 11,212
Treasury stock, at cost -
1,885,750 shares (11,014) (11,014)
------ ------
Total stockholders' equity
(deficit) (324) 198
------ ------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 6,342 $ 6,998
====== ======
See Notes to Consolidated Financial Statements
4
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
CONSOLIDATED STATEMENTS OF OPERATIONS
(In $000's, except per share data)
(Unaudited)
For the Six Months Ended
June 30,
1998 1997
------ -----
REVENUES $ 405 $ 202
----- -----
COST OF OPERATIONS
Direct operating costs 320 179
Selling, general and
administrative expenses 824 1,046
----- -----
Total cost of operations 1,144 1,225
----- -----
INCOME (LOSS) FROM OPERATIONS (739) (1,023)
----- -----
OTHER INCOME (EXPENSE)
Investment income (loss) 104 144
Interest expense (3) (3)
Interest related to income taxes
payable (171) (378)
Gain (loss) from sale of property (1) (36)
Miscellaneous income (expense) 35 40
----- -----
Total other income (expense) (36) (233)
----- -----
INCOME (LOSS) BEFORE INCOME TAXES
(CREDIT) (775) (1,256)
Income taxes (credit) (263) -
----- ----
NET INCOME (LOSS) $ (512) $(1,256)
===== =====
INCOME (LOSS) PER COMMON SHARE:
NET INCOME (LOSS) $(.18) $(.44)
====== ======
NUMBER OF SHARES USED IN
CALCULATION 2,829,190 2,829,090
See Notes to Consolidated Financial Statements
5
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
CONSOLIDATED STATEMENTS OF OPERATIONS
(In $000's, except per share data)
(Unaudited)
For the Three Months Ended
June 30,
1998 1997
------ -----
REVENUES $ 200 $ 94
----- -----
COST OF OPERATIONS
Direct operating costs 135 55
Selling, general and
administrative expenses 412 550
----- -----
Total cost of operations 547 605
----- -----
INCOME (LOSS) FROM OPERATIONS (347) (511)
----- -----
OTHER INCOME (EXPENSE)
Investment income (loss) 51 68
Interest expense (1) (1)
Interest related to income taxes
payable (83) (334)
Gain (loss) from sale of property (1) (36)
Miscellaneous income (expense) 16 19
----- -----
Total other income (expense) (18) (284)
----- -----
INCOME (LOSS) BEFORE INCOME TAXES
(CREDIT) (365) (795)
Income taxes (credit) (123) -
----- ----
NET INCOME (LOSS) $ (242) $ (795)
===== =====
INCOME (LOSS) PER COMMON SHARE:
NET INCOME (LOSS) $(.08) $(.28)
====== ======
NUMBER OF SHARES USED IN
CALCULATION 2,829,190 2,829,090
See Notes to Consolidated Financial Statements
6
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In $000's)
(Unaudited)
For the Six Months Ended
June 30,
1998 1997
------ -----
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 364 $ 222
Cash paid to suppliers and employees (1,175) (1,018)
Interest and dividends received 91 141
Interest paid (3) (3)
Other income received 33 40
Income taxes paid - (14)
----- -----
Net cash provided by (used in)
operating activities (690) (632)
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale and maturity
of marketable securities 1,000 1,981
Purchase of marketable securities - (501)
Purchase of property, plant and
equipment (4) (32)
Proceeds from sale of property,
plant and equipment 267 858
Collections of notes receivable 6 80
Rent sharing payments from
computer leases - 39
----- -----
Net cash provided by (used in)
investing activities 1,269 2,425
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (11) (9)
Payment of remediation and closure
costs (5) (5)
----- -----
Net cash provided by (used in)
financing activities (16) (14)
----- -----
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 563 1,779
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THE YEAR 311 260
----- -----
CASH AND CASH EQUIVALENTS AT END
OF THE QUARTER $ 874 $2,039
===== =====
7
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
CONSOLIDATED STATEMENTS OF CASH FLOWS, Cont'd
(In $000's)
(Unaudited)
For the Six Months Ended
June 30,
1998 1997
------ -----
RECONCILIATION OF NET INCOME (LOSS)
TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (512) $(1,256)
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO NET CASH PROVIDED
BY (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization 29 27
(Gain) loss on sale of property,
plant and equipment - 36
Increase (decrease) in deferred
income taxes 3 (712)
(Increase) decrease in assets:
Accounts and notes receivable,
-net (41) 39
Prepaid expenses and other (23) 83
Escrowed funds from sale of
subsidiary (21) (23)
Increase (decrease) in liabilities:
Accounts payable and accrued
expenses (33) 96
Accrued income taxes and related
interest (92) 1,078
----- -----
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (690) $ (632)
===== =====
See Notes to Consolidated Financial Statements
8
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(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, 1997 for further information.
The financial information has been prepared in accordance with the
Company's customary accounting practices except for certain reclassifications to
the 1997 financial statements in order to conform to the presentation followed
in preparing the 1998 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 - MARKETABLE SECURITIES
The Company classifies all equity securities and debt securities
purchased with remaining maturities of less than two years as available-for-sale
securities. Available-for-sale debt securities are carried at amortized cost,
which approximates fair value because of their short term to maturity. At June
30, 1998, available-for-sale debt securities consisted of $1,522,000 of U.S.
Government Securities with maturities through April 1999. Available-for-sale
equity securities are carried at fair value as determined by quoted market
prices. The portfolio of available- for-sale equity securities had a cost of
$38,000 and a market value of $76,000 as of June 30, 1998. The aggregate excess
of market value over cost of such securities as of June 30, 1998 of $38,000 is
presented as a separate component of stockholders' equity less deferred income
taxes of $14,000. The excess of fair value over cost consisted of gross
unrealized gains of $62,000 and gross unrealized losses of $24,000 as of June
30, 1998. The cost of marketable securities sold is determined on the specific
identification method and realized gains and losses are reflected in income.
Proceeds from sale of available-for-sale securities during the six months ended
June 30, 1998 amounted to $1,000,000. Dividend and interest income is accrued as
earned.
9
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Cont'd
NOTE 3 - ASSETS HELD FOR SALE
Assets held for sale consist primarily of real estate which is carried
at a cost of $1,313,000 as of June 30, 1998. The real estate included in this
category as of June 30, 1998 consists of approximately 430 acres in Deptford,
N.J., including approximately 100 acres upon which a landfill owned and
previously operated by the Company's subsidiary, Kinsley's Landfill, Inc., is
situated. The Company is pursuing the disposition of these properties. However,
based upon market conditions for real estate of this type, the Company is unable
to determine when such sales will be consummated.
During March 1998, the Company sold approximately two acres of property
in Readington Township, N.J., classified as assets held for sale, for net
proceeds, after expenses, of $267,000. No gain or loss related to the sale has
been reported since the proceeds approximated the carrying value of the
property.
NOTE 4 - RECEIVABLE, CLAY DEPOSIT
In 1988, Kin-Buc, Inc. ("Kin-Buc") purchased 150,000 cubic yards of
clay for use in the closure of the Kin-Buc Landfill for $1.2 million from Inmar
Associates, Inc. ("Inmar"), a corporation owned and controlled by a former
principal shareholder, director and officer of the Company, and applied this
amount against its accrual for remediation and closure costs. In 1992, the
Company reclassified approximately $1.1 million of this accrual, representing
the cost of the clay not required for such closure, to other long-term assets,
recognizing the Company's plan to market the clay to third parties. Pursuant to
the agreement for the purchase of the clay, Kin-Buc is entitled to a refund of
the purchase price of clay it is unable to mine or can not use. In October 1996,
the Company learned that Inmar had contracted to sell a substantial portion of
its land, upon which a substantial portion of the clay is situated. In November
1996, Kin-Buc brought suit against Inmar and the prospective buyer. For a
discussion of this suit, see Item 1 of Part II of this Form 10-QSB. In January
1997, the closing of the sale took place. In accordance with a court order
entered in another suit against Inmar, the net proceeds of the sale were paid
into the Court. In August 1998, in response to an application made by Inmar, the
Court terminated the order which mandated the payment of the proceeds into the
Court. However, the proceeds presently remain deposited with the Court.
These proceeds are substantially less than Kin-Buc's judgment against Inmar.
10
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Cont'd
During the fourth quarters of 1997 and 1996, the Company charged
$47,000 and $500,000, respectively, to operations to reduce the carrying value
of this asset to management's best estimate of the values it may ultimately
realize from resolution of these matters, considering the amount of the proceeds
held by the Superior Court and assuming the Company will be able to recover such
proceeds.
NOTE 5 - INCOME TAXES
In 1991, the Internal Revenue Service (the "Service") asserted numerous
adjustments to the tax liability of the Company and its subsidiaries for tax
years 1980 through 1988, along with interest and penalties thereon. In 1993,
after the conclusion of administrative proceedings, 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, as well as penalties of $2.5 million and interest on the asserted
deficiency and penalties. In addition, the Service challenged the carryback of
losses incurred by the Company in taxable years 1989 through 1991, thereby
bringing those years, which had been the subject of an ongoing audit, into the
deficiency notice. The Company filed a petition with the Tax Court contesting
many of the proposed adjustments asserted in the deficiency notice. For a
discussion of this matter, see "Taxes" contained in Management's Discussion and
Analysis of Financial Condition and Results of Operations of this Form 10-QSB.
NOTE 6 - LONG-TERM DEBT
At June 30, 1998, long-term debt consisted of the following (in $000's):
10.5% mortgage payable in $ 22
installments through April 2000;
secured by land and buildings
Other 29
--
Total long-term debt 51
Less: current portion 24
--
$ 27
====
11
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Cont'd
NOTE 7 - REMEDIATION AND CLOSURE COSTS
The Company and certain subsidiaries were previously active in the
resource recovery and waste management industries. These activities included the
hauling of waste and the operation of three landfills. Although the sites are
now closed, the Company continues to own and/or remediate two of the sites 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 therefore may differ from the ultimate outcome. The costs of
litigation associated with a site are expensed as incurred.
As of June 30, 1998, the Company has accruals totalling $11.3 million
for its estimated share of remediation and closure costs in regard to the
Company's former landfill operations, $9.2 million of which is held in trusts
and maintained by trustees for financing of the estimated $11.2 million required
to fund the closure plan related to the landfill owned by the Company's
subsidiary, Kinsley's Landfill, Inc.
On December 23, 1997, the Company entered into four agreements which
settled lawsuits related to the allocation of costs of remediation of the
landfill in Edison, New Jersey owned and operated by Kin-Buc, Inc., a
wholly-owned subsidiary of the Company, and which substantially relieved the
Company from future obligation with respect to the site. The Kin-Buc Landfill
ceased operations in 1977. 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 (the "EPA") in
September 1990. In November 1992, EPA issued an Administrative Order for the
remediation of certain areas neighboring the Kin-Buc Landfill.
At December 31, 1996, Kin-Buc had accrued approximately $10.7 million
for its share of the costs of such remediation and closure. The Company has
reversed the balance of such accrual as a result of the December 1997
settlements and recognized income of $10.6 million in the year ended December
31, 1997 due to the elimination of such accrual.
12
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Cont'd
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
related activities, possibly in excess of the Company's available financial
resources. A significant increase in such costs could have a material adverse
effect on the Company's financial position, results of operations and net cash
flows.
NOTE 8 - LEGAL PROCEEDINGS
See Item 1 of Part II of this Form 10-QSB for a discussion of recent
developments with respect to the Company's legal matters.
13
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The six months ended June 30, 1998 compared to the six months
ended June 30, 1997
Consolidated revenues by business segment for the six months ended June
30, 1998 and 1997 were as follows (in $000):
1998 1997
---- ----
Electricity Generation $134 $152
Environmental Services 506 502
--- ---
Subtotal 640 654
Intercompany (235) (452)
--- ---
Total $405 $202
=== ===
Consolidated net revenues for the six months ended June 30, 1998 were
$405,000, an increase of $203,000 or 100% compared to the same period of 1997.
Revenues from the operation which generates electricity using methane
gas as fuel were $134,000 for the six months ended June 30, 1998, a decrease of
$18,000 or 12% compared to the same period of the prior year. The electricity
generating facility consists of four diesel/generating units each capable of
generating approximately 48,000 kwh/day at full capacity. Methane gas is a
component of the landfill gas generated by a landfill site owned by the Company.
Engineering studies indicate sufficient quantities of gas at the landfill to
continue the operation of the facility for approximately 14 years. Electricity
generated is sold pursuant to a long term contract with a local utility.
Revenues are a function of the number of kilowatt hours sold, the rate received
per kilowatt and capacity payments. The Company sold 5.0 million kwh during the
six months ended June 30, 1998 compared to 5.4 million kwh sold in the same
period of the prior year. The combined rate received per Kilowatt and capacity
payment declined 5% in the current period when compared to the comparable period
last year.
The environmental services segment reported $506,000 of gross operating
revenues for the six months ended June 30, 1998 (prior to elimination of
intercompany sales) compared to $502,000 for 1997, an increase of 1%.
Approximately $235,000 or 46% of the environmental services segment's revenues
for the period, compared
14
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Cont'd
to $452,000 or 90% for last year, were for services provided to other members of
the consolidated group and therefore eliminated in consolidation. Third party
sales during the period in 1998 and 1997 were $271,000 and $50,000,
respectively. The increase in sales to third parties during 1998 was primarily
due to commencement of a six month construction project during the second half
of 1997.
Consolidated direct operating costs for the six months ended June 30,
1998 were $320,000, an increase of $141,000 or 79% from $179,000 for the same
period in 1997. The costs of the electricity generating operation increased 5%
for the six months ended June 30, 1998 when compared to the same period in 1997
due to an increase in repair and maintenance costs related to the electric
generating equipment. Costs of the environmental services segment increased 122%
overall due primarily to the increase in sales volume.
Consolidated selling, general and administrative expenses for the six
months ended June 30, 1998 were $824,000, a decrease of $222,000 or 21% from
$1,046,000 for the same period in 1997. The decrease was primarily due to lower
professional fees and expenses incurred with respect to the Company's
environmental litigation. Significant professional fees and administrative costs
are incurred in support of the Company's ongoing litigation, marketing and asset
divestiture efforts (see Liquidity and Capital Resources Liquidity).
The Company's consolidated operating loss for the six months ended June
30, 1998 decreased to $739,000 from a loss of $1,023,000 for the same period in
1997.
Consolidated investment income decreased by $40,000 to $104,000 for the
six months ended June 30, 1998 from $144,000 for the comparable period last
year.
Consolidated interest expense of $3,000 for the six months ended June
30, 1998 was unchanged from $3,000 the same period last year.
Interest expense reported as "Interest related to income taxes payable"
represents the increase in the amount of interest accrued on estimated income
taxes payable as a result of the Company's tax
15
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Cont'd
litigation discussed below. Such interest expense for the six months ended June
30, 1998 was $171,000 versus $378,000 reported for the comparable period in
1997.
The consolidated gain (loss) on sale of property for the six months
ended June 30, 1997 includes a loss of $64,000 with respect to the sale in May
1997 of approximately 95 acres of property. The gain (loss) on sale of property
reported for the six months ended June 30, 1997 also includes $28,000 of
deferred income associated with a 1992 installment sale of real property.
Consolidated miscellaneous income for the six months ended June 30,
1998 decreased $5,000 to $35,000 when compared to the same period of 1997.
The consolidated loss before income tax credits was $775,000 for the
six months ended June 30, 1998, compared to a loss of $1,256,000 for the same
period last year.
Income tax credit for the six months ended June 30, 1998 equalled
$263,000. No provision for taxes has been recognized for the same period of
1997.
Consolidated net loss for the six months ended June 30, 1998 was
$512,000 or $.18 per share, compared to net loss of $1,256,000, or $.44 per
share, for the six months ended June 30, 1997.
The three months ended June 30, 1998 compared to the three
months ended June 30, 1997
Consolidated revenues by business segment for the three months ended
June 30, 1998 and 1997 were as follows (in $000):
1998 1997
---- ----
Electricity Generation $ 69 $ 91
Environmental Services 262 241
--- ---
Subtotal 331 312
Intercompany (131) (218)
--- ---
Total $200 $ 94
=== ===
16
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Cont'd
Consolidated net revenues for the three months ended June 30, 1998 were
$200,000, an increase of $106,000 or 113% compared to the same period of 1997.
Revenues from the operation which generates electricity using methane
gas as fuel were $69,000 or the three months ended June 30, 1998, a decrease of
$2,000 or 3% compared to the same period of the prior year. The Company sold 2.4
million kwh during the three months ended June 30, 1998 compared to 2.7 million
kwh sold in the same period of the prior year. The combined rate received per
Kilowatt and capacity payment increased 8% in the current period when compared
to the comparable period last year.
The environmental services segment reported $262,000 of gross operating
revenues for the three months ended June 30, 1998 (prior to elimination of
intercompany sales) compared to $241,000 for 1997, an increase of 9%.
Approximately $131,000 or 50% of the environmental services segment's revenues
for the period, compared to $218,000 or 89% for last year, were for services
provided to other members of the consolidated group and therefore eliminated in
consolidation. Third party sales during the period in 1998 and 1997 were
$131,000 and $23,000, respectively.
Consolidated direct operating costs for the three months ended June 30,
1998 were $135,000 an increase of $80,000 or 145% when compared to $55,000 for
the same period in 1997. The costs of the electricity generating operation
decreased for the three months ended June 30, 1998 when compared to the same
period in 1997 due to decrease in repair and maintenance costs related to the
electric generating equipment. Costs of the environmental services segment
increased due primarily to the increase in sales volume.
Consolidated selling, general and administrative expenses for the three
months ended June 30, 1998 were $412,000, a decrease of $138,000 from $550,000
for the same period in 1997. The decrease was primarily due to lower
professional fees and expenses incurred with respect to the Company's
environmental litigation.
The Company's consolidated operating loss for the three months ended
June 30, 1998 decreased to $347,000 from a loss of $511,000 for the same period
in 1997.
17
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Cont'd
Consolidated investment income decreased by $17,000 to $51,000 for the
three months ended June 30, 1998 from $68,000 for the comparable period last
year.
Consolidated interest expense of $1,000 for the three months ended June
30, 1998 was unchanged from the same period last year.
Interest expense reported as "Interest related to income taxes payable"
for the three months ended June 30, 1998 was $83,000 versus $334,000 reported
for the comparable period in 1997.
The consolidated gain (loss) on sale of property for the three months
ended June 30, 1997 includes a loss of $64,000 with respect to the sale in May
1997 of approximately 95 acres of property. The gain (loss) on sale of property
reported for the three months ended June 30, 1997 also includes $28,000 of
deferred income associated with a 1992 installment sale of real property.
Consolidated miscellaneous income for the three months ended June 30,
1998 decreased $3,000 to $16,000 when compared to the same period of 1997.
The consolidated loss before income tax credits was $365,000 for the
three months ended June 30, 1998, compared to a loss of $795,000 for the same
period last year.
Income tax credit for the three months ended June 30, 1998 equalled
$123,000. No provision for taxes has been recognized for the same period of
1997.
Consolidated net loss for the three months ended June 30, 1998 was
$242,000 or $.08 per share, compared to net loss of $795,000, or $.28 per share,
for the three months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
LIQUIDITY
Net cash used in operating activities for the six months ended June 30,
1998 increased to $690,000 from $632,000 when compared to the same period last
year. Net cash provided by investing activities decreased for the current period
to $1,269,000 from $2,425,000 reported for the same period of last year.
18
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Cont'd
The amount of cash used in financing activities increased to $16,000 from
$14,000 for the same period last year. Funds held by the Company in the
form of cash and cash equivalents decreased as of June 30, 1998 to $874,000
from $2,039,000 as of June 30, 1997. The sum of cash, cash equivalents and
marketable securities as of June 30, 1998 decreased $1,848,000 to $2,472,000
when compared to June 30 of last year.
Working capital deficit was $1,477,000 and the ratio of current assets
to current liabilities was .67 to 1 as of June 30, 1998, versus $(1,220,000) and
.74 to 1 as of December 31, 1997.
The Company faces significant short-term and long-term cash
requirements for (i) federal and state income tax obligations discussed below,
most of which will become due following the conclusion of litigation or a
settlement with the Internal Revenue Service (the "Service") of the Company's
tax liability for the years 1980 through 1991, (ii) funding its professional and
administrative costs, and (iii) funding remediation costs associated with sites
of past operations. In addition, the Company's past participation in the waste
handling and disposal industries subjects the Company to future events or
changes in environmental laws or regulations, which cannot be predicted at this
time, which could result in material increases in remediation and closure costs,
and other potential liabilities that may ultimately result in costs and
liabilities in excess of its available financial resources.
Although the Company has completed the sale of two business segments,
one in each 1995 and 1996, and continues to pursue the sale of property held for
sale and claims against insurance carriers for recoveries of past remediation
costs, no assurance can be given that the timing and amount of the proceeds from
such sources will be sufficient to meet the capital requirements of the Company
as they come due. In addition, the Company cannot ascertain whether its
remaining operations and funding sources will be adequate to satisfy its future
capital requirements, including its anticipated tax liabilities. In the event of
an unfavorable resolution of the tax and insurance litigation, or the proceeds
of asset sales are insufficient to meet the Company's future capital
requirements, including its tax liabilities, then, if other alternatives
19
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Cont'd
are unavailable at that time, the Company will be forced to consider
a plan of liquidation of its remaining assets, whether through
bankruptcy proceedings or otherwise.
TAXES
As discussed in greater detail below, the Company is currently
litigating with the Service in Tax Court over its tax liability for taxable
years 1980-88. Certain issues from taxable years 1989-91 are also part of the
Tax Court litigation because losses from those years were carried back to 1988.
The Company estimates that after taking into account partial settlements that
have been reached through January 22, 1998 of all but one of the adjustments
asserted by the Service, and taking into account available net operating losses
and tax credits as of June 30, 1998, approximately $3.2 million of federal
income tax and $127,000 of state income tax and $8.4 million of federal
interest, calculated through June 30, 1998, would be owed if the Company were
unsuccessful in its defense of the remaining unsettled issue in the Tax Court
litigation. (The tax liability estimates presented herein exclude penalties. The
Service has conceded all of the penalties that it had asserted in the Tax Court
litigation, but state tax authorities may assert that penalties are due.)
In 1991, the Service asserted numerous adjustments to the tax liability
of the Company and its subsidiaries for tax years 1980 through 1988, along with
interest and penalties thereon. In 1993, after the conclusion of administrative
proceedings, 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, as well as penalties of $2.5
million and interest on the asserted deficiency and penalties. In addition, the
Service challenged the carryback of losses incurred by the Company in taxable
years 1989 through 1991, thereby bringing those years, which had been the
subject of an ongoing audit, into the deficiency notice. In 1994, the Company
filed a petition with the Tax Court contesting many of the adjustments asserted
in the deficiency notice. On June 5, 1995, August 14, 1995, March 7, 1996, July
31, 1996 and January 22, 1998, respectively, the Company and the Service
executed a stipulation of partial settlement, first, second and third revised
stipulations for partial settlement, and a supplement to the third revised
20
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Cont'd
stipulation of settlement. These partial settlements resolved all but one of
the adjustments asserted in the deficiency notice.
Taking into account the settlements to date, the Company has accepted
approximately $5.9 million of the $33.3 million of total adjustments to income
asserted by the Service for the 1980-88 period. Many of the adjustments accepted
by the Company relate to issues on which the Service would likely have prevailed
in Tax Court. The Service has conceded adjustments totalling $26.7 million of
taxable income and $2.5 million of penalties, leaving only one issue, involving
several taxable years, unresolved from the 1980-88 period. The Company cannot
predict the outcome of further settlement negotiations or litigation with the
Service over the one remaining issue.
All of the adjustments from the 1989-91 period were settled in the
revised stipulations of partial settlement, except for the adjustment relating
to computer equipment acquired in 1989. The computer leasing issue was settled
in the supplement to the third stipulation of settlement that was executed on
January 22, 1998. The computer equipment issue was resolved by the Company
agreeing to the disallowance of approximately $3.8 million of deductions for
1989 and no other adjustments to deductions or income in respect of the computer
equipment transaction for 1989 or subsequent years.
The Company has net operating loss and tax credit carryforwards and
carrybacks that will partly offset the tax liability resulting from the settled
adjustments to taxable income. Taking into account such carryforwards and
carrybacks, the estimated federal income tax and interest that is owed on
account of the settlements reached to date is approximately $4.0 with interest
through June 30, 1998 ($1.5 million of taxes and $2.5 million of interest). The
settlements also will result in approximately $237,000 of state income tax (not
including penalties and penalty interest that may be assessed) $110,000 of which
was paid to one state during the second quarter of 1996. This state had a tax
amnesty program in effect pursuant to which all interest and penalties for back
taxes were waived upon payment of the tax liability. In conjunction with the
$110,000 payment, the Company reversed approximately $240,000 of interest that
was previously accrued on the $110,000 tax liability. Payment of the federal tax
liability and the remaining state tax liability from both the
21
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Cont'd
settled issues and the remaining unsettled issue will be due after the
conclusion of the Tax Court case. The above $4.0 million estimated tax liability
to be paid at that time (plus additional interest from July 1, 1998 forward)
exceeds the Company's current liquid assets (i.e., cash and marketable
securities).
The remaining issue in the case relates to the timing of significant
deductions that were taken by the Company for certain landfill closing costs in
several taxable years from the 1980-88 period. The incremental amount of federal
income tax and interest that the Company would owe if it were unsuccessful in
its defense of this issue from the 1980-88 period is approximately $1.7 million
of federal income taxes and $5.9 million of interest, calculated through June
30, 1998. (This is in addition to the tax of $1.7 million and interest of $2.5
million, discussed above, that the Company owes as a result of the partial
settlements entered into to date.) No additional state income tax or interest is
anticipated on account of the remaining unsettled issue.
REMEDIATION AND CLOSURE COSTS
As of June 30, 1998, the Company has accrued $11.3 million for its
estimated share of remediation and closure costs related to the Company's former
landfill and waste handling operations. Approximately $9.2 million is held in
trust and maintained by trustees for the post-closure activities of one site
located in Deptford, New Jersey (see Note 7 to the Company's Consolidated
Financial Statements).
On December 23, 1997, the Company entered into four agreements which
settled lawsuits related to the allocation of costs of remediation of the
Kin-Buc Landfill and substantially relieved the Company from future obligation
with respect to the site. The Company and other responsible parties have been
remediating the Kin-Buc Landfill, located in Edison, New Jersey, 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. The Company initiated a suit in 1990 against generators
and transporters of waste deposited at a site with the intent of obtaining
contribution toward the cost of remediation.
22
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Cont'd
The Company carried an accrued remediation liability of approximately
$10 million related to the Kin-Buc Landfill, essentially all of which has been
reversed as a result of the settlements described above. The Company recognized
income in an amount equal to the reduction of such accrued remediation liability
in the year ended December 31, 1997.
The substantial expense of the Company's prosecution and defense of
claims in the litigation relating to the Kin-Buc Landfill as well as the
substantial expense of the Company's efforts in respect to the settlements
described above, which the Company has incurred through 1997, will no longer be
borne by the Company. There may be some continuing expenses in respect of the
Kin-Buc Landfill, but not of the magnitude experienced in the past.
ASSETS HELD FOR SALE/CLAIMS FOR PAST REMEDIATION COSTS
Assets held for sale consist primarily of real estate which is carried
at a cost of $1,313,000 and $1,581,000 as of June 30, 1998 and December 31,
1997, respectively. The real estate included in this category as of December 31,
1997 consisted of approximately 430 acres located in Deptford, N.J. (including
approximately 100 acres upon which the landfill owned and operated by the
Company's subsidiary Kinsley's Landfill, Inc. is situated) and approximately two
acres located in Readington Township, N.J. During the fourth quarter of 1997 the
Company charged $33,000 to operations to reduce the carrying value of the
Readington Township, N.J. property to $268,000, the approximate proceeds
received by the Company from the March 1998 sale of such property. The Company
is actively pursuing the disposition of the remaining properties. However, based
upon market conditions for real estate of this type the Company is unable to
determine when such sales will ultimately be consummated.
In 1995, the Company commenced suit to obtain indemnification from its
excess insurers during the period 1965 through 1986 against costs incurred in
connection with the remediation of the Kin-Buc Landfill, a site located in
Piscataway, N.J., and for the defense of litigation related thereto. The
defendant insurers, which include various London and London Market insurance
companies, First State Insurance Company and International Insurance Company,
have answered the complaint against them and discovery is proceeding. All of the
policies of excess insurance issued by the
23
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION, Cont'd
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Cont'd
defendant insurers cover Transtech, its present subsidiaries and former
subsidiaries, some of which Transtech no longer controls. They also cover
companies presently or formerly owned or controlled by a former principal
shareholder, director and officer of the Company.
The Company can not assure that the timing and amount of the net
proceeds from the sale of such assets held for sale and the successful
litigation or settlement of the insurance claims will be sufficient to meet the
capital requirements of the Company discussed above.
On June 30, 1998 Kinsley's Landfill, Inc. ("Kinsley"), a subsidiary of
the Company entered into two agreements with respect to its electricity
generation operations. Pursuant to a Gas Lease and Easement Agreement (the "Gas
Lease"), Kinsley granted to the lessee the exclusive right to extract and
utilize all gas produced at the landfill site for an initial lease term of 12
years with provisions for two 5 year extensions. The Gas Lease requires the
lessee to make an initial payment of $10,000 and additional quarterly payments
of $75,000 through December 31, 2007.
Pursuant to a landfill gas sale agreement (the "Gas Sale Agreement")
Kinsley has agreed to purchase gas from the lessee for $.10 per million BTU's of
gas. This Gas Sale Agreement will terminate upon the expiration of the Gas Lease
or Kinsley's sale of its electric generators.
In connection with these agreements, Kinsley is actively negotiating
separate agreements for the sale of its electric generators and operation and
maintenance agreements pursuant to which Kinsley would service, for a fee, the
electric generators for the purchaser and formalize the agreement regarding
operation and maintenance of the gas collection system for the benefit of the
lessee.
YEAR 2000 DATA CONVERSION
The Company does not anticipate any significant disruption to business
operations due to Year 2000 software failures. The Company does not know the
extent its customers' may be effected by such failures.
24
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In 1988 the Company's subsidiary, Kin-Buc, Inc. ("Kin-Buc") purchased
150,000 cubic yards of clay for use in the closure of the Kin-Buc Landfill for
$1.2 million from Inmar Associates, Inc. ("Inmar"), a corporation owned and
controlled by Marvin H. Mahan, a former principal shareholder, director and
officer of the Company. The agreement for the purchase of the clay provided that
Kin-Buc would be entitled to a refund of the purchase price of clay it was
unable to use. The Company used a small portion of the clay and was planning to
sell the remainder to third parties.
In May 1996 Inmar applied to the Superior Court, Essex County, New
Jersey for an order vacating a 1983 order of that Court in a suit entitled STATE
OF NEW JERSEY, DEPARTMENT OF ENVIRONMENTAL PROTECTION V. INMAR ASSOCIATES ET
AL., Docket No. C-1852-83E. That order prohibited Inmar from selling its real
property until all of Inmar's and Mahan's obligations for the environmental
cleanup of a site in Carlstadt, New Jersey are fulfilled. In August 1996 the
Superior Court denied Inmar's application for relief from the 1983 order, but
permitted it to reapply if a sale of a specific piece of real property was
upcoming.
In October 1996 Kin-Buc learned that Inmar had contracted to sell a
substantial portion of its land in Edison, New Jersey, upon which a substantial
amount of the clay is situated, to Edison Expansion, Inc. ("Expansion"), an
unrelated company. In November 1996 Inmar reapplied to the Superior Court for
permission to complete this sale and Kin-Buc brought suit entitled KIN-BUC, INC.
V. INMAR ASSOCIATES, INC. AND EDISON EXPANSION, INC., Docket No. MRS-C-249-96,
in Superior Court, Morris County, New Jersey against Inmar and Expansion for,
among other things, a declaratory judgment that Kin-Buc's rights in the clay
would survive a sale of the land to Expansion, and, alternatively, a money
judgment against Inmar. Inmar's reapplication for relief from the 1983 order had
been moved, on the Court's motion, to the Superior Court, Morris County, where
Kin-Buc's action was pending.
In December 1996 the Superior Court permitted Inmar to sell the land to
Expansion, but ordered that the net proceeds of the sale be paid into the Court
to secure the fulfillment of any Carlstadt cleanup obligations which Inmar or
Mahan may be held liable to perform. Inmar appealed this order to the Appellate
Division of the Superior Court. A closing of the sale of the land
25
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS Cont'd
to Expansion took place in January 1997, and the net proceeds of the sale,
totalling approximately $530,000, were paid into the Superior Court pending the
outcome of Inmar's appeal.
In August 1997 Kin-Buc obtained a default judgment against Inmar in the
amount of approximately $1.1 million, representing a refund of the purchase
price of the clay Kin-Buc did not use. In October 1997 the Superior Court
dismissed Kin-Buc's suit against Expansion, recognizing that Kin-Buc had already
obtained a remedy in the form of a money judgment against Inmar.
In April 1998 the Appellate Division ruled on Inmar's appeal of the
December 1996 order which provided, among other things, for payment into the
Superior Court of the proceeds of the sale of Inmar's land. Referring to a
specific section of the State's environmental laws, the Appellate Division
remanded Inmar's application for relief from the 1983 order for consideration of
whether four specific methods of securing the fulfillment of cleanup obligations
set forth in that section are the only permissible methods of securing such
obligations. In June 1998 Inmar applied to the Superior Court, on remand,
for an order vacating the December 1996 order, releasing the proceeds of the
sale of Inmar's land and removing the prohibition on the sale of
Inmar's other real property imposed by the 1983 order.
On August 3, 1998 the Superior Court granted Inmar's application and
vacated its December 1996 order, released the proceeds and removed the
prohibition on the sale of Inmar's other real property. As of August 10, 1998,
the proceeds were still on deposit with the Superior Court.
There is substantial uncertainty that Inmar is financially capable of
responding to Kin-Buc's judgment against it and there is no assurance that
Kin-Buc will be able to satisfy its judgment, in part, out of the proceeds if
and when they are released to Inmar.
In 1991, the Internal Revenue Service (the "Service") asserted numerous
adjustments to the tax liability of the Company and its subsidiaries for tax
years 1980 through 1988, along with interest and penalties thereon. In 1993,
after the conclusion of administrative proceedings, 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, as well as penalties of $2.5 million and interest on the asserted
deficiency and penalties. In addition, the Service
26
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS Cont'd
challenged the carryback of losses incurred by the Company in taxable years 1989
through 1991, thereby bringing those years, which had been the subject of an
ongoing audit, into the deficiency notice. In 1994, the Company filed a petition
with the Tax Court contesting many of the proposed adjustments asserted in the
deficiency notice. On June 5, 1995, August 14, 1995, March 7, 1996, July 31,
1996 and January 22, 1998, respectively, the Company and the Service executed a
stipulation of partial settlement, first, second and third revised stipulations
of partial settlement and a supplement to the third revised stipulation of
partial settlement. These partial settlements resolved all but one of the
adjustments asserted in the deficiency notice.
The Service's audit of the Company's 1989-91 federal income tax
returns, resulted in the Service's challenging the deductions claimed by the
Company in connection with its investment in computer equipment under lease. The
Service also asserted a number of smaller adjustments which were settled in 1995
and 1996.
The stipulation of settlement executed on January 22, 1998 resolved the
computer equipment issue by the Company's agreeing to the disallowance of
approximately $3.8 million of deductions for 1989 and no other adjustments to
deductions and income in respect of the computer equipment transaction for 1989
or subsequent years.
The remaining issue in the case relates to the timing of significant
deductions taken by the Company for certain landfill closing costs in several
taxable years from the 1980-88 period. The Company cannot predict the outcome of
further settlement negotiations or litigation with the Service over the
remaining issue. See Part I, Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations for a discussion of the impact of
the tax litigation on the Company's capital resources.
The Company is a party to other pending legal proceedings, all of which
have been reported in the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997 and Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1998. Reference is made thereto for a description of such
litigation.
27
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
PART II - OTHER INFORMATION, Cont'd
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 11 - Computation of Earnings (Loss) Per Common Share
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K
NONE
28
<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, 1998 By: /s/ Robert V. Silva
Robert V. Silva, President
and Chief Executive Officer
and
Date: August 14, 1998 By: /s/ Andrew J. Mayer, Jr.
Andrew J. Mayer, Jr.
Vice President-Finance, Chief
Financial Officer and Secretary
29
<PAGE>
TRANSTECH INDUSTRIES, INC.
AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED June 30, 1998
EXHIBIT INDEX
EXHIBIT PAGE
NO. NO.
11 Computation of Earnings (Loss) Per Common Share 31
27 Financial Data Schedule N/A
30
Exhibit 11. Computation of Net Income (Loss) Per Share.
TRANSTECH INDUSTRIES, INC.
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
For the Six Months Ended
June 30,
BASIC: 1998 1997
---- ----
Weighted Average Common Shares
Outstanding 2,829,190 2,829,090
========= =========
Net Income (Loss) $(512,000) $(1,256,000)
======= =========
Basic Net Income (Loss)
Per Common Share:
Net Income (Loss) per share $(.18) $(.44)
=== ===
DILUTED:
Weighted Average Common
Shares Outstanding 2,829,190 2,829,090
Dilutive Stock Options Based
Upon the Treasury Stock
Method - -
--------- --------
2,829,190 2,829,090
Net Income (Loss) $(512,000) $(1,256,000)
======= =========
Diluted Net Income (Loss)
Per Common Share:
Net Income (Loss) Per Share $(.18) $(.14)
=== ===
For the Three Months Ended
June 30,
BASIC: 1998 1997
---- ----
Weighted Average Common Shares
Outstanding 2,829,190 2,829,090
========= =========
Net Income (Loss) $(242,000) $(795,000)
======= =======
Basic Net Income (Loss)
Per Common Share:
Net Income (Loss) per share $(.08) $(.28)
=== ===
DILUTED:
Weighted Average Common
Shares Outstanding 2,829,190 2,829,090
Dilutive Stock Options Based
Upon the Treasury Stock
Method - -
--------- --------
2,829,190 2,829,090
Net Income (Loss) $(242,000) $(795,000)
======= =======
Diluted Net Income (Loss)
Per Common Share:
Net Income (Loss) Per Share $(.08) $(.28)
=== ===
31
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