<PAGE>
Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 33-49869-01
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0739329
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2702 North 44th Street, Phoenix, Arizona 85008
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(602) 957-7711
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirement for the past 90 days.
YES[ X ] NO[ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock March 31, 1995
$1.00 par value 1,000
<PAGE>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
INDEX
Page No.
Part I Financial Information
Consolidated Balance Sheet -
March 31, 1995 and December 31, 1994 1
Consolidated Statement of Earnings -
Three Months Ended March 31, 1995 and 1994 2
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1995 and 1994 3
Consolidated Statement of Changes in Stockholder's
Equity - Three Months Ended March 31, 1995
and 1994 4
Notes to Consolidated Financial Statements 5-7
Management's Discussion and Analysis 8-12
Part II Other Information
Legal Proceedings 13
Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
PART I - FINANCIAL INFORMATION
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Balance Sheet
(thousands)
March 31, December 31,
1995 1994
ASSETS
Cash and cash equivalents $ 1,992 $ 2,756
Accounts receivable, net of allowance
for doubtful accounts of $1,089,000
at March 31, 1995 and $994,000
at December 31, 1994 60,593 55,018
Due from affiliates 469 654
Inventories, net 70,659 66,069
Deferred income taxes 800 800
Prepaid expenses 6,776 7,523
Current assets 141,289 132,820
Long-term receivables 10,317 10,317
Property, plant and equipment, net 45,425 45,920
Intangibles 45,828 46,288
Other assets 7,015 7,160
Total assets $249,874 $242,505
LIABILITIES AND STOCKHOLDER'S EQUITY
Current maturities of long-term debt $ 3,554 $ 3,549
Accounts payable 23,575 25,560
Accrued expenses 31,052 28,010
U.S. and foreign income taxes 196 610
Current liabilities 58,377 57,729
Long-term debt 142,081 139,756
Deferred income taxes 6,655 6,655
Other liabilities 5,428 6,488
Stockholder's equity:
Preferred stock, $1 par value,
authorized 100 shares:
Series A, issued 4 shares - -
Common stock, $1 par value,
authorized 1,000 shares 1 1
Capital in excess of par 20,621 18,366
Foreign currency translation (707) (723)
Retained earnings 17,418 14,233
Total stockholder's equity 37,333 31,877
Total liabilities & stockholder's
equity $249,874 $242,505
The accompanying notes are an integral part of the financial
statements.
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TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Statement of Earnings
(thousands)
Three Months
Ended
March 31,
1995 1994
Sales $66,603 $55,616
Services 14,475 15,521
Royalties 6,568 3,979
87,646 75,116
Cost of sales 49,724 41,369
Cost of services 12,616 13,523
Selling, general, and administrative
expenses 13,532 17,256
75,872 72,148
11,774 2,968
Other income, net 137 (124)
11,911 2,844
Interest expense 4,298 4,215
Earnings (loss) before income taxes 7,613 (1,371)
Income tax provision (benefit) 3,128 (3,964)
Net earnings $ 4,485 $ 2,593
The accompanying notes are an integral part of the financial
statements.
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<PAGE>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Statement of Cash Flows
(thousands)
Three Months Ended
March 31,
1995 1994
Cash and cash equivalents at beginning
of period $ 2,756 $ 6,417
Cash flows from operating activities:
Net earnings 4,485 2,593
Adjustments to reconcile net income
to cash flows from operating activities:
Change in deferred income taxes - (5,604)
Depreciation and amortization 2,184 2,397
Gain on sale of property and
equipment (16) (4)
Other 487 (17)
Changes in assets and liabilities,
net of effects from acquired businesses:
(Increase) decrease in accounts
receivable (5,390) 5,550
(Increase) decrease in inventories (4,590) 973
Decrease in prepaids 417 250
Decrease in accounts payable (1,985) (1,684)
Increase in accrued expenses 2,635 4,290
Increase (decrease) in other
liabilities (1,067) 9
Other, net - (226)
Cash flows from operating activities (2,840) 8,527
Cash flows from investing activities:
Purchases of property and equipment (1,238) (875)
Proceeds from sale of property and
equipment 29 8
Cash flows from investing activities (1,209) (867)
Cash flows from financing activities:
Dividends paid (1,300) -
Increase in investment by Parent 2,255 1,508
Repayment of long term-debt (108,938) (96,649)
Proceeds from new long-term debt 111,268 85,057
Cash flows from financing activities 3,285 (10,084)
Net decrease in cash and cash equivalents (764) (2,424)
Total cash and cash equivalents at March 31, $ 1,992 $ 3,993
The accompanying notes are an integral part of the financial
statements.
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<TABLE>
<CAPTION>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Statement of Changes in Stockholder's Equity
For the Three Months Ended March 31, 1995 and 1994
(thousands)
Capital in
Preferred Common Excess of Retained
Stock Stock Par Value Earnings
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 $ - $ 1 $15,753 $ 3,018
Net earnings 2,593
Contribution from Parent 1,508
BALANCE AT MARCH 31, 1994 $ - $ 1 $17,261 $ 5,611
BALANCE AT December 31, 1994 $ - $ 1 $18,366 $14,233
Net earnings 4,485
Contribution from Parent 2,255
Dividends (1,300)
BALANCE AT March 31, 1995 $ - $ 1 $20,621 $17,418
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
Note 1 - General
In July 1993, Talley Manufacturing and Technology, Inc. (the
Company), a wholly owned subsidiary of Talley Industries, Inc.,
("Talley") was formed with the issuance of 1,000 shares of common
stock. The formation of the Company was in anticipation of an
offering, in October, 1993, of Senior Notes by the Company and
Senior Discount Debentures by Talley. The Senior Notes are
guaranteed by substantially all of the Company's subsidiaries (the
"Subsidiary Guarantors"). Concurrently with the issuance of these
securities, Talley contributed the capital stock of its operating
subsidiaries (other than its real estate subsidiaries) to the
Company, which also assumed a substantial portion of Talley's
indebtedness and liabilities. At the same time, the Company
entered into a new credit facility with certain institutional
lenders which is also guaranteed by the Subsidiary Guarantors. The
net proceeds from the Senior Notes, the Senior Discount Debentures
and the new credit facility were used to repay substantially all of
the indebtedness of the Company and its subsidiaries, including the
indebtedness assumed from Talley, and substantially all of the
indebtedness remaining with Talley.
Upon completion of the reorganization of entities under the common
control of Talley described above and the new financing, the
Company is a holding company which owns all of the capital stock of
the operating subsidiaries of Talley (other than the real estate
subsidiaries). Accordingly, all corporate costs, assets and
liabilities are included in the Company's financial statements and
interest expense includes the interest on indebtedness of the
operating subsidiaries and all indebtedness assumed by the Company
in connection with the reorganization. In connection with the
reorganization, Talley and the Company entered into a tax sharing
agreement and a cost sharing agreement which require the Company to
reimburse Talley for certain ongoing general and administrative
expenses which will be incurred by Talley and to make certain tax
payments to Talley.
The financial statements of the Company have been prepared using
the historical amounts included in the consolidated financial
statements of Talley and its subsidiaries, giving effect to the
reorganization described above. Although the Subsidiary Guarantors
guaranteed the Senior Notes, separate financial statements of the
Subsidiary Guarantors are not included because the Subsidiary
Guarantors are jointly and severally liable with the Company under
the Senior Notes, the aggregate assets, liabilities, earnings and
equity of the Subsidiary Guarantors are substantially equivalent to
the assets, liabilities, earnings and equity of the Company on a
consolidated basis, and separate financial statements and other
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<PAGE>
disclosures concerning the Subsidiary Guarantors would not be
material to investors. In addition, with the exception of the net
assets of the real estate operations and certain debt and related
interest expense, the consolidated financial statements of Talley
are substantially identical to those of the Company.
Although the financial statements of the Company separately report
its assets, liabilities (including contingent liabilities) and
stockholder's equity, legal title to such assets and legal
responsibility for such liabilities was not affected by such
attribution during periods prior to the reorganization.
Accordingly, the Talley consolidated financial statements and
related notes should be read in connection with these financial
statements.
In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of March 31, 1995 and December 31,
1994 and the results of operations for the three-month periods
ended March 31, 1995 and 1994, and cash flows and changes in
stockholder's equity for the three-month periods ended March 31,
1995 and 1994. Such results, however, may not be indicative of the
results for the full year.
Note 2 - Inventories
Inventories are summarized as follows (in thousands):
March 31, December 31,
1995 1994
Raw materials and supplies $15,337 $11,757
Work-in-process 11,728 11,733
Finished goods 24,134 24,616
Inventories applicable to
government contracts 19,460 17,963
$70,659 $66,069
Note 3 - Earnings Per Share
Talley Manufacturing and Technology, Inc. is a wholly owned
subsidiary of Talley Industries, Inc.; accordingly, earnings per
share information is not presented.
Note 4 - Income Taxes
In September 1994, the Arizona Court of Appeals reversed a 1992
Arizona Tax Court ruling that entitled the Company to file a
combined tax return in the State of Arizona for the fiscal year
ended March 31, 1983, and in April 1995, the Supreme Court of the
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<PAGE>
State of Arizona denied the Company's Petition for Review. Based
on the appellate court decision, the Company will be liable for
approximately $1.1 million in taxes and interest for 1983. The
Company believes the appellate court erred in its decision and the
Company intends to vigorously litigate tax and interest assessments
for 1984 and 1985, of $5.3 million. Legislation adopted in 1994 in
Arizona specifically allows companies to file combined tax returns
in Arizona for periods from January 1, 1986, and on December 8,
1994 the Arizona Department of Revenue withdrew its assessments
against the Company for 1986 and subsequent years. Management
believes that the final resolution of the above matter will not
result in a material adverse impact on the results of operations or
financial position of the Company.
Note 5 - Acquisition
In July 1994, a subsidiary of the Company acquired certain assets
of a manufacturer of metal buttons. The purchase price was
approximately $5.7 million, including cash of $2.1 million, 323,232
shares of Talley Common stock scheduled for issuance two years
after closing and certain liabilities assumed and acquisition costs
incurred.
Note 6 - Depreciation of Plant and Equipment
During the first quarter of 1995, the Company completed a review of
the fixed asset lives at its stainless steel production facility.
The Company determined that as a result of actions taken to
increase its preventative maintenance and programs initiated with
its suppliers to increase the quality of their products, actual
lives for certain asset categories were generally longer than the
useful lives used for depreciation purposes. Therefore, the
Company extended the estimated useful lives of certain categories
of plant and equipment at its stainless steel production facility,
effective January 1, 1995. The effect of this change in estimate
reduced depreciation expense for the quarter ended March 31, 1995
by approximately $354,000 and accordingly increased earnings before
income taxes and extraordinary gain by the same amount.
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<PAGE>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following table summarizes the Company's consolidated revenue
and earnings (loss), by segment for the periods shown:
Three Months
Ended
(Dollars in Thousands) March 31,
1995 1994
REVENUES:
Government Products and Services $30,819 $36,258
Airbag Royalty 6,276 3,896
Industrial Products 43,420 29,200
Specialty Products 7,131 5,762
$87,646 $75,116
OPERATING INCOME:
Government Products and Services $ 1,288 $ 4,186
Airbag Royalty 6,276 3,896
Industrial Products 6,296 720
Specialty Products 826 610
Total operating income 14,686 9,412
Corporate expense (2,814) (6,584)
Non-segment interest income 39 16
Interest expense (4,298) (4,215)
Earnings (loss) before income taxes $ 7,613 $(1,371)
Revenues for the three-month period ended March 31, 1995
increased $12.5 million from $75.1 million to $87.6 million,
compared with the corresponding period in the prior year. The
increase in the three-month comparison is primarily the result of
increasing revenue in the Airbag Royalties segment, a result of
the expanding demand for automotive airbags, and the Steel
Operations, the result of continued improvement in the stainless
steel market. These increases were partially offset by
decreasing revenue in the Government Products and Services
segment. The pretax earnings for the three months ended March
31, 1995 was $7.6 million compared with $1.4 million pretax loss
in the first three months of the previous year. The loss in the
first quarter of 1994 includes a $4.0 million provision for
litigation costs related to resolution of claims in connection
with the airbag royalties being received from the licensee. Net
income was $4.5 million for the first quarter of 1995, compared
with $2.6 million net income for the first quarter of 1994 which
included a tax benefit of $5.6 million, pursuant to a retroactive
change in tax laws in the State of Arizona.
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<PAGE>
Earnings from both the Airbag Royalty segment and the Industrial
Products segment improved compared with the prior year.
Royalties in the Airbag Royalty segment increased by $2.4
million from $3.9 million in the first three months of 1994 to
$6.3 million for the first three months of 1995, while earnings
from the Industrial segment and Specialty Products segment
improved $5.6 million and $.2 million, respectively. Earnings
from the Government Products and Services segment for the first
three months of 1995, when compared with the first three months
of 1994, were $2.9 million lower.
The gross profit percentage, excluding airbag royalties, of
23.4%, for the three months ended March 31, 1995 was down from
the gross profit percentage of 24.8% for the comparable period in
1994. The decrease from the prior year is due to the change in
the mix of government contracts and revenues from other
operations.
Government Products and Services. Revenue and earnings in the
first quarter of 1995 decreased $5.4 million and $2.9 million,
respectively, when compared with the same period in the prior
year. These decreases are primarily due to a scheduled pricing
reduction under the extended range munitions program, and also
due to the timing of completion and shipments under other
contracts.
Airbag Royalties. Revenue from airbag royalties increased from
$3.9 million in the first three months of 1994 to $6.3 million in
the first three months of 1995. This increased royalty is
primarily the result of increasing airbag implementation rates,
both in terms of the number of vehicles containing airbags and
the number of airbags installed in a given vehicle. (Also see
"Other Matters" as a separate caption within Management's
Discussion and Analysis of Financial Condition and Results of
Operations)
Industrial Products. In the first three months of 1995
Industrial Products sales and earnings increased $14.2 million
and $5.6 million, respectively, when compared with the first
three months of 1994. Increases in sales resulted from increased
orders and higher selling prices for stainless steel bars and
rods and increased demand for ceramic insulator products along
with an increase in market share. These increases partially were
offset by lower welder products sales and earnings.
Specialty Products. During the first three months of 1995,
sales for the Specialty Products segment increased 22%, from $5.8
million to $7.1 million, while earnings increased from $.6
million to $.8 million, when compared with the same period in
1994. The increase in sales and earnings when compared with the
prior year is primarily a result of the acquisition of a
manufacturer of metal buttons in July 1994.
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<PAGE>
Other. Interest expense in the first three months of 1995
increased slightly to $4.3 million, from $4.2 million in the
comparable period in 1994. Corporate overhead decreased from
$6.6 million to $2.8 million over the comparable period in 1994
due to a $4 million provision in the prior year for litigation
costs related to resolution of claims in connection with airbag
royalties being received from the licensee. The income tax
provision for the first three months of 1995 was $3.1 million
compared to a tax benefit of $4 million in the comparable period
in 1994. The net income tax benefit in 1994 is the result of
favorable state tax legislation which resulted in a $5.6 million
reversal of state income taxes previously accrued.
Financial Condition, Liquidity and Capital Resources
At March 31, 1995, the Company had $2 million in cash and cash
equivalents and net working capital of $82.9 million. Cash used
in operating activities for the three months ended March 31, 1995
was $2.8 million. Cash generated from operations during the
first three months of 1994 was $8.5 million, due primarily to
decreases in receivables and increases in accrued expenses. Cash
used for investing activities during the three months ended March
31, 1995 was $1.2 million for capital expenditures. Cash flow
from financing activities of $3.3 million reflects an increase in
investment from parent company and increase in proceeds from the
revolving credit facilities.
The Company along with its parent, Talley, in October 1993,
completed a major refinancing program. This refinancing program
included an offering of $185 million of debt securities,
consisting of $70 million gross proceeds of senior discount
debentures due 2005, issued by Talley to yield 12.25% and $115
million of senior notes due 2003, with an interest rate of 10.75%
issued by the Company, which was newly formed to hold the stock
of all the operating subsidiaries of Talley (except for the
subsidiaries holding Talley's real estate operations). In
connection with this refinancing, the Company obtained a secured
credit facility with institutional lenders, of which
approximately $48 million was initially borrowed in connection
with the refinancing discussed above.
Borrowings under the secured credit facility may not exceed the
collateral base as defined in the governing credit agreement.
The facility consists of a five-year revolving credit facility of
up to $40 million and a five-year $20 million term loan facility.
At March 31, 1995 availability under the facility, based
primarily on inventory and receivable levels, was $38.6 million,
of which $29.7 million was borrowed. Upon the occurrence of
certain specified events, at any time following the third
anniversary of the secured credit facility, the agent thereunder
may elect to terminate the facility.
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<PAGE>
The Company anticipates that the present capital structure will
support the long-term growth of its core businesses and permit
the implementation of its strategy to use the portion of airbag
royalties retained by the Company (after certain permitted
distributions to Talley) and other available cash flow to reduce
its total indebtedness.
The Company is permitted (and intends) to distribute cash to its
parent, Talley, for specified purposes and under certain other
circumstances. These distributions will be made using funds
available from operations and the secured credit facility. The
payments include (but are not limited to) certain airbag
royalties in excess of $10 million in any year (or in excess of
such greater amount as would be required for the Company to meet
a specified fixed charge coverage ratio) which will be used to
redeem the Senior Discount Debentures issued by Talley and an
annual distribution of up to $1.3 million for a period of five
years to fund certain carrying and other costs associated with
Talley's real estate operations. In addition, the Company is a
party to a cost sharing agreement and a tax sharing agreement
which will require the Company to reimburse Talley for certain
ongoing general and administrative expenses and to make certain
tax payments to Talley.
The Company believes that the combination of cash flow from
operations, funds available under the credit facility described
above (or any successor facility) and increasing revenue from
airbag royalties (to the extent retained by the Company as
described above) will provide sufficient liquidity to meet its
working capital, debt service and other capital requirements and
to meet its other ongoing business needs over the next five
years.
Other Matters
As more fully explained in the Commitments and Contingencies note
to the December 31, 1994 Consolidated Financial Statements,
litigation between the Company and TRW, Inc. (TRW), the buyer of
the Company's airbag business and licensee of the Company's
technology related thereto, has been pending since 1989. In mid-
February 1994 TRW filed a new declaratory judgment action
asserting claims already made in the existing action and further
claiming the Company, through the actions of a subsidiary,
breached a non-compete provision of the Asset Purchase Agreement
by rendering services to competitors of TRW, and requesting among
other things a court order that a contemporaneous notice and a
$26.5 million one-time payment that TRW sent to the Company was
valid, entitling it to terminate that airbag royalty and obtain
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<PAGE>
a paid up license to use the Company's airbag technology. On
March 1, the Company answered TRW's complaint and also filed
counterclaims alleging that TRW had wrongfully terminated the
license agreement, had intentionally interfered with the
Company's business relationships and had failed to exert
reasonable efforts to exploit the exclusive license granted to
TRW by the Company.
On March 14, 1994 the Company filed a Motion for an Order
requiring TRW to make payment of all quarterly royalties until
the lawsuit is finally resolved. The Company sought the Order to
avoid the potential harm from cash flow interruption and/or
potential loan covenant defaults caused by TRW's failure to pay
scheduled royalty payments. A three day hearing on the Company's
Motion was completed on May 3, 1994 and on May 19, 1994 the Court
granted the Company's motion for a preliminary injunction. The
Court ordered TRW to continue paying royalties to the Company
pending conclusion of the lawsuit. On August 24, 1994 the Court
refused TRW's motion to suspend the injunction. A trial of
certain of the claims in the matter is presently in process.
While it is not possible to predict the outcome of litigation,
the Company believes that it has meritorious defenses to TRW's
claims and that it will ultimately prevail. Therefore,
management anticipates that the above-described action will be
resolved without any material adverse impact on the results of
operations, liquidity or financial position of the Company.
As previously reported, a subsidiary of the Company is conducting
an investigation of alleged groundwater contamination at a
facility in Athens, Georgia, in cooperation with the current
owner of the site. The site was owned by the subsidiary until
March 1988. No lawsuit has been filed in this matter, but the
Georgia Environmental Protection Division listed the site on its
Hazardous Site Inventory in March, 1995. Based on remediation
estimates received, management believes that any reasonably
anticipated losses from the alleged contamination will not result
in a material adverse impact on the results of operations or the
financial position of the Company.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As more fully explained in the Commitments and Contingencies note
to the December 31, 1994 Consolidated Financial Statements,
litigation between the Company and TRW, Inc. (TRW), the buyer of
the Company's airbag business and licensee of the Company's
technology related thereto, has been pending since 1989. In mid-
February 1994 TRW filed a new declaratory judgment action
asserting claims already made in the existing action and further
claiming the Company, through the actions of a subsidiary,
breached a non-compete provision of the Asset Purchase Agreement
by rendering services to competitors of TRW, and requesting among
other things a court order that a contemporaneous notice and a
$26.5 million one-time payment that TRW sent to the Company was
valid, entitling it to terminate that airbag royalty and obtain
a paid up license to use the Company's airbag technology. On
March 1, the Company answered TRW's complaint and also filed
counterclaims alleging that TRW had wrongfully terminated the
license agreement, had intentionally interfered with the
Company's business relationships and had failed to exert
reasonable efforts to exploit the exclusive license granted to
TRW by the Company.
On March 14, 1994 the Company filed a Motion for an Order
requiring TRW to make payment of all quarterly royalties until
the lawsuit is finally resolved. The Company sought the Order to
avoid the potential harm from cash flow interruption and/or
potential loan covenant defaults caused by TRW's failure to pay
scheduled royalty payments. A three day hearing on the Company's
Motion was completed on May 3, 1994 and on May 19, 1994 the Court
granted the Company's motion for a preliminary injunction. The
Court ordered TRW to continue paying royalties to the Company
pending conclusion of the lawsuit. On August 24, 1994 the Court
refused TRW's motion to suspend the injunction. A trial of
certain of the claims in the matter is presently in process.
While it is not possible to predict the outcome of litigation,
the Company believes that it has meritorious defenses to TRW's
claims and that it will ultimately prevail. Therefore,
management anticipates that the above-described action will be
resolved without any material adverse impact on the results of
operations, liquidity or financial position of the Company.
In September 1994, the Arizona Court of Appeals reversed a 1992
Arizona Tax Court ruling that entitled the Company to file a
combined tax return in the State of Arizona for the fiscal year
ended March 31, 1983, and in April 1995, the Supreme Court of the
State of Arizona denied the Company's Petition for Review. Based
on the appellate court decision, the Company will be liable for
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<PAGE>
approximately $1.1 million in taxes and interest for 1983. The
Company believes the appellate court erred in its decision and
the Company intends to vigorously litigate tax and interest
assessments for 1984 and 1985, of $5.3 million. Legislation
adopted in 1994 in Arizona specifically allows companies to file
combined tax returns in Arizona for periods from January 1, 1986,
and on December 8, 1994 the Arizona Department of Revenue
withdrew its assessments against the Company for 1986 and
subsequent years. Management believes that the final resolution
of the above matter will not result in a material adverse impact
on the results of operations or financial position of the
Company.
As previously reported, a subsidiary of the Company is conducting
an investigation of alleged groundwater contamination at a
facility in Athens, Georgia, in cooperation with the current
owner of the site. The site was owned by the subsidiary until
March 1988. No lawsuit has been filed in this matter, but the
Georgia Environmental Protection Division listed the site on its
Hazardous Site Inventory in March, 1995. Based on remediation
estimates received, management believes that any reasonably
anticipated losses from the alleged contamination will not result
in a material adverse impact on the results of operations or the
financial position of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27* Financial Data Schedule for Talley Manufacturing
and Technology, Inc., March 31, 1995.
* Documents marked with an asterisk are filed with this report.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the three
months ended March 31, 1995.
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<PAGE>
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.
TALLEY MANUFACTURING AND
TECHNOLOGY, INC.
(Registrant)
Date: May 8, 1995 By Kenneth May
Kenneth May
Vice President, Controller
Principal Accounting
Officer
Date: May 8, 1995 By Mark S. Dickerson
Mark S. Dickerson
Vice President, General
Counsel and Secretary
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S BALANCE SHEET AND
STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,992,000
<SECURITIES> 0
<RECEIVABLES> 61,062,000
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<PP&E> 134,896,000
<DEPRECIATION> 89,471,000
<TOTAL-ASSETS> 249,874,000
<CURRENT-LIABILITIES> 58,377,000
<BONDS> 142,081,000
<COMMON> 1,000
0
0
<OTHER-SE> 37,332,000
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<SALES> 66,603,000
<TOTAL-REVENUES> 87,646,000
<CGS> 49,724,000
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<OTHER-EXPENSES> 13,395,000
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<INCOME-TAX> 3,128,000
<INCOME-CONTINUING> 4,485,000
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,485,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
