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 June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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 June 30, 1995
$1.00 par value 1,000
<PAGE>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
INDEX
Page No.
Part I Financial Information
Consolidated Balance Sheet -
June 30, 1995 and December 31, 1994 1
Consolidated Statement of Earnings -
Three Months and Six Months Ended
June 30, 1995 and 1994 2
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1995 and 1994 3
Consolidated Statement of Changes in Stockholders'
Equity - Six Months Ended June 30, 1995 and 1994 4
Notes to Consolidated Financial Statements 5-6
Management's Discussion and Analysis 7-11
Part II Other Information
Legal Proceedings 12-13
Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
PART I - FINANCIAL INFORMATION
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Balance Sheet
(thousands)
June 30, December 31,
1995 1994
ASSETS
Cash and cash equivalents $ 2,532 $ 2,756
Accounts receivable, net of allowance
for doubtful accounts of $1,202,000
at June 30, 1995 and $994,000 at
December 31, 1994 62,186 55,672
Inventories, net 72,023 66,069
Deferred income taxes 799 800
Prepaid expenses 9,493 7,523
Current assets 147,033 132,820
Long-term receivables 10,305 10,317
Property, plant and equipment, net 46,145 45,920
Intangibles 44,610 46,288
Other assets 6,376 7,160
Total assets $254,469 $242,505
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt $ 3,799 $ 3,549
Accounts payable 26,034 25,560
Accrued expenses 30,599 28,620
U.S. & foreign income taxes 370 -
Current liabilities 60,802 57,729
Long-term debt 141,874 139,756
Deferred income taxes 6,658 6,655
Other liabilities 5,059 6,488
Stockholders' equity:
Preferred stock, $1 par value,
authorized 100 shares:
Series A, issued 4 shares - 1994;
0 shares - 1995 - -
Common stock, $1 par value,
authorized 1,000 shares 1 1
Capital in excess of par value 18,834 18,366
Foreign currency translation adjustment (575) (723)
Retained earnings 21,816 14,233
Total stockholders' equity 40,076 31,877
Total liabilities and
stockholders' equity $254,469 $242,505
The accompanying notes are an integral part of the financial
statements.
-1-
<PAGE>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Statement of Operations
(thousands, except per share amounts)
Three Months Six Months
Ended Ended
June 30, June 30,
1995 1994 1995 1994
Sales $ 77,584 $57,808 $144,187 $113,424
Services 15,060 15,403 29,535 30,924
Royalties 7,645 4,872 14,213 8,851
100,289 78,083 187,935 153,199
Cost of sales 56,561 43,450 106,285 84,819
Cost of services 13,170 13,410 25,786 26,933
Selling, general,
and administrative
expenses 17,835 13,204 31,367 30,460
87,566 70,064 163,438 142,212
12,723 8,019 24,497 10,987
Other income (expense),
net (354) 526 (217) 402
12,369 8,545 24,280 11,389
Interest expense (4,565) (4,379) (8,863) (8,594)
Earnings before
income taxes 7,804 4,166 15,417 2,795
Income tax provision
(benefit) 3,406 1,849 6,534 (2,115)
Net earnings $ 4,398 $ 2,317 $ 8,883 $ 4,910
The accompanying notes are an integral part of the financial
statements.
-2-
<PAGE>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Statement of Cash Flows
(thousands)
Six Months Ended
June 30,
1995 1994
Cash and cash equivalents at beginning
of year $ 2,756 $ 6,417
Cash flows from operating activities:
Net earnings 8,883 4,910
Adjustments to reconcile net income
to cash flows from operating activities:
Change in deferred income taxes 4 (5,605)
Depreciation and amortization 4,487 4,946
Gain on sale of property and equipment (20) (5)
Other 1,131 811
Changes in assets and liabilities, net of
effects from acquired businesses:
(Increase) decrease in accounts receivable (6,502) 4,793
Increase in inventories (5,954) (2,039)
Increase in prepaid expenses (2,012) (2,893)
Increase in accounts payable 474 250
Increase in accrued expenses 2,269 258
Increase (decrease) in U.S. & foreign
income taxes (240) 430
Decrease in other liabilities (1,226) (203)
Other, net 143 (506)
Cash flows from operating activities 1,437 5,147
Cash flows from investing activities:
Purchases of property and equipment (3,242) (1,984)
Proceeds from sale of property and equipment 45 45
Cash flows from investing activities (3,197) (1,939)
Cash flows from financing activities:
Dividends paid (1,300) -
Increase in investment by Parent 4,468 2,601
Redemption of 4 shares of Series A
preferred stock (4,000) -
Repayment of long term-debt (242,479) (193,228)
Proceeds from new long-term debt 244,847 183,204
Cash flows from financing activities 1,536 (7,423)
Net decrease in cash and cash equivalents (224) (4,215)
Total cash and cash equivalents at June 30, $ 2,532 $ 2,202
The accompanying notes are an integral part of the financial
statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Statement of Changes in Stockholders' Equity
For the Six Months Ended June 30, 1995 and 1994
(thousands)
<C> <C> <C> <C>
Capital in
Preferred Common Excess of Retained
Stock Stock Par Value Earnings
<S>
BALANCE AT DECEMBER 31, 1993 $ - $ 1 $15,753 $ 3,018
Net earnings 4,910
Contribution from Parent 2,601
BALANCE AT JUNE 30, 1994 $ - $ 1 $18,354 $ 7,928
BALANCE AT DECEMBER 31, 1994 $ - $ 1 $18,366 $14,233
Net earnings 8,883
Contribution from Parent 4,468
Dividends (1,300)
Redemption of 4 shares of
Series A preferred stock (4,000)
BALANCE AT JUNE 30, 1995 $ - $ 1 $18,834 $21,816
</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 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 June 30, 1995 and
December 31, 1994 and the results of operations for the three-
month and six-month periods ended June 30, 1995 and 1994, and
cash flows and changes in stockholders' equity for the six-month
periods ended June 30, 1995 and 1994. Such results, however, may
not be indicative of the results for the full year.
For additional information regarding significant accounting
policies, and accounting matters applicable to the Company,
reference should be made to the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
Note 2 - Inventories
Inventories are summarized as follows (in thousands):
June 30, December 31,
1995 1994
Raw materials and supplies $14,405 $11,757
Work-in-process 14,628 11,733
Finished goods 24,473 24,616
Inventories applicable to
government contracts 18,517 17,963
$72,023 $66,069
Note 3 - Earnings Per Share
The Company is a wholly owned subsidiary of Talley Industries,
Inc. ("Talley"); 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 Talley to file a combined
tax return in the State of Arizona
-5-
<PAGE>
for the fiscal year ended March 31, 1983, and in April 1995, the
Supreme Court of the State of Arizona denied Talley's Petition
for Review. Based on the appellate court decision, Talley will
be liable for approximately $1.3 million in taxes and interest
for 1983. The Company believes the appellate court erred in its
decision and Talley 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 Talley 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 final purchase price was
approximately $4.8 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 preventive 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 estimated useful lives reduced
depreciation expense for the six months ended June 30, 1995 by
approximately $812,000 and accordingly increased earnings before
income taxes and extraordinary gain by the same amount.
-6-
<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 (in
thousands):
Three Months Six Months
Ended Ended
June 30, June 30,
1995 1994 1995 1994
REVENUES:
Government Products
and Services $ 37,784 $35,454 $ 68,603 $ 71,712
Airbag Royalty 7,300 3,909 13,576 7,805
Industrial Products 46,521 30,835 89,941 60,035
Specialty Products 8,684 7,885 15,815 13,647
$100,289 $78,083 $187,935 $153,199
OPERATING INCOME:
Government Products
and Services $ 3,388 $ 3,231 $ 4,676 $ 7,417
Airbag Royalty 7,300 3,909 13,576 7,805
Industrial Products 6,034 2,323 12,330 3,043
Specialty Products 908 992 1,734 1,602
Total operating
income 17,630 10,455 32,316 19,867
Corporate expense (5,314) (1,943) (8,128) (8,527)
Non-segment interest
income 53 33 92 49
Interest expense (4,565) (4,379) (8,863) (8,594)
Earnings before
income taxes $ 7,804 $ 4,166 $ 15,417 $ 2,795
Revenues for the six-month period ended June 30, 1995 increased
$34.7 million from $153.2 million to $187.9 million, compared
with the corresponding period in the prior year. The increase is
primarily the result of continued improvement in the stainless
steel market, along with increased airbag royalties received
pursuant to the expanding demand for automotive airbags. These
increases were partially offset by decreasing revenue in the
Government Products and Services segment. The pretax earnings
for the six months ended June 30, 1995 was $15.4 million compared
with $2.8 million pretax earnings in the first six months of the
previous year.
-7-
<PAGE>
Net earnings for the six months ended June 30, 1995 was $8.9
million, compared to $4.9 million net earnings for the first six
months in 1994.
Earnings from both the Industrial Products segment and the Airbag
Royalty segment improved compared with the prior year. Earnings
from the Industrial Products segment increased $9.3 million from
$3.0 million to $12.3 million, while royalties in the Airbag
Royalty segment increased by $5.8 million from $7.8 million in
the first six months of 1994 to $13.6 million for the first six
months of 1995. Earnings from the Government Products and
Services segment for the first six months of 1995, when compared
with the first six months of 1994, were $2.7 million lower, while
earnings from the Company's Specialty Products segment improved
$.1 million.
Government Products and Services. Revenue and earnings in the
first six months of 1995 decreased $3.1 million and $2.7
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. This segment continues to be impacted by the
reduction of U.S. Defense spending.
Airbag Royalties. Revenue from airbag royalties increased from
$7.8 million in the first six months of 1994 to $13.6 million in
the first six months of 1995. The 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 six months of 1995 Industrial
Products sales and earnings increased $29.9 million and $9.3
million, respectively, when compared with the first six 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 six months of 1995, sales
for the Specialty Products segment increased 16%, from $13.6
million to $15.8 million, while earnings increased from $1.6
million to $1.7 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.
-8-
<PAGE>
Other. Interest expense in the first six months of 1995
increased slightly to $8.9 million, from $8.6 million in the
comparable period in 1994. Corporate overhead for 1995 and 1994
is above historical levels due to high litigation costs incurred
in connection with the airbag Asset Purchase Agreement and
License Agreement. The overhead expenses decreased slightly in
1995 from $8.5 million to $8.1 million when compared with the
comparable period in 1994. The income tax provision for the
first six months of 1995 was $6.5 million compared to a tax
benefit of $2.1 million in the comparable period in 1994. The
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 June 30, 1995, the Company had $2.5 million in cash and cash
equivalents and net working capital of $86.2 million. Cash
generated from operating activities for the six months ended June
30, 1995 was $1.4 million, primarily the result of increased
earnings which were partially offset by increases in trade
receivables, inventories and prepaid expenses. Cash generated
from operations during the first six months of 1994 was $5.1
million. Cash used in investing activities during the six months
ended June 30, 1995 was $3.2 million, consisting primarily of
capital expenditures. Cash generated from financing activities
of $1.5 million reflects a net increase in the revolving credit
facility offset by a dividend to the Company's parent.
In October 1993, the Company and its parent Talley 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.
In connection with this refinancing, the Company obtained a
secured credit facility with institutional lenders.
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 June 30, 1995 availability under the total facility was
approximately $51.3 million, of which approximately $32.0 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.
-9-
<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
Litigation
On June 27, 1995, the federal district court for the District of
Arizona entered judgment against TRW Inc. in favor of the Company
in TRW Inc. vs. Talley Industries, Inc. et al. The court
dismissed, in their entirety, TRW's claims against the Company
while the jury reached a verdict in favor of the Company on its
counterclaims against TRW, awarding the Company a total of $138
million. The award (which is in addition to (i) royalty payments
of $24.4 million paid prior to the judgment and during the
pendency of this action pursuant to an earlier preliminary
injunction order, and (ii) attorneys' fees and recoverable costs
relating to this litigation which the Company will seek to
recover under the governing 1989 agreements) represents the
jury's determination of the present value of the royalties that
would otherwise have been paid to the Company by TRW for the
period April 1, 1995 through April 2001.
-10-
<PAGE>
The litigation in which this judgment was entered arose out of
the Asset Purchase Agreement dated February 4, 1989 and the
License Agreement dated April 21, 1989, between TRW and the
Company pursuant to which TRW acquired the Company's airbag
business. The court dismissed TRW's claims that the Company had
breached a non-compete provision contained in the Asset Purchase
Agreement, by rendering services to competitors of TRW, and that
TRW thereby became entitled to terminate airbag royalty payments
to the Company (which it purported to do in February 1994) and
obtain a paid-up license to use the Company's airbag technology.
The jury found in fact that TRW had improperly terminated and
repudiated the 1989 license agreement.
TRW has filed its notice to appeal the judgment to the Ninth
Circuit Court of Appeals, and on July 26, 1995 the federal
district court for the District of Arizona granted a stay of
enforcement of the judgment pending appeal upon the posting of a
$175 million bond and the continuation of quarterly payments in
the amount of royalties that would be due under the License
Agreement. Upon affirmation of the judgment on appeal, TRW would
be required to pay the judgment plus interest (which the court
ruled will accrue from June 27, 1995 at the rate specified by the
1989 license agreement - prime rate plus five percent), offset by
the continued royalty payments ordered by the court. TRW has
sought and the Ninth Circuit Court has denied emergency review of
the court's order requiring the continued payment of the
quarterly payments pending appeal. The denial of emergency
relief by the Ninth Circuit Court of Appeals is without prejudice
to an appeal by TRW from the district court's order.
Certain other claims asserted by TRW and the Company against each
other are the subject of a separate action which remains pending.
In that action, TRW has challenged certain representations by the
Company that the airbag manufacturing plant sold to TRW by the
Company in 1989 met applicable government requirements, and that
the associated real estate was sufficient to permit construction
of certain additional facilities. The Company's claims against
TRW include claims that TRW intentionally interfered with certain
of its business relationships, failed to exert reasonable efforts
to exploit the exclusive technology license granted to TRW by the
Company in 1989 and denied the Company certain contractually
provided audit rights. It is currently anticipated that these
remaining claims will come to trial in January 1996. Management
anticipates that the above-described claims will be resolved
without any 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.
-11-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On June 27, 1995, the federal district court for the District of
Arizona entered judgment against TRW Inc. in favor of the Company
in TRW Inc. vs. Talley Industries, Inc. et al. The court
dismissed, in their entirety, TRW's claims against the Company
while the jury reached a verdict in favor of the Company on its
counterclaims against TRW, awarding the Company a total of $138
million. The award (which is in addition to (i) royalty payments
of $24.4 million paid prior to the judgment and during the
pendency of this action pursuant to an earlier preliminary
injunction order, and (ii) attorneys' fees and recoverable costs
relating to this litigation which the Company will seek to
recover under the governing 1989 agreements) represents the
jury's determination of the present value of the royalties that
would otherwise have been paid to the Company by TRW for the
period April 1, 1995 through April 2001.
The litigation in which this judgment was entered arose out of
the Asset Purchase Agreement dated February 4, 1989 and the
License Agreement dated April 21, 1989, between TRW and the
Company pursuant to which TRW acquired the Company's airbag
business. The court dismissed TRW's claims that the Company had
breached a non-compete provision contained in the Asset Purchase
Agreement, by rendering services to competitors of TRW, and that
TRW thereby became entitled to terminate airbag royalty payments
to the Company (which it purported to do in February 1994) and
obtain a paid-up license to use the Company's airbag technology.
The jury found in fact that TRW had improperly terminated and
repudiated the 1989 license agreement.
TRW has filed its notice to appeal the judgment to the Ninth
Circuit Court of Appeals, and on July 26, 1995 the federal
district court for the District of Arizona granted a stay of
enforcement of the judgment pending appeal upon the posting of a
$175 million bond and the continuation of quarterly payments in
the amount of royalties that would be due under the License
Agreement. Upon affirmation of the judgment on appeal, TRW would
be required to pay the judgment plus interest (which the court
ruled will accrue from June 27, 1995 at the rate specified by the
1989 license agreement - prime rate plus five percent), offset by
the continued royalty payments ordered by the court. TRW has
sought and the Ninth Circuit Court has denied emergency review of
the court's order requiring the continued payment of the
quarterly payments pending appeal. The denial of emergency
relief by the Ninth Circuit Court of Appeals is without prejudice
to an appeal by TRW from the district court's order.
-12-
<PAGE>
Certain other claims asserted by TRW and the Company against each
other are the subject of a separate action which remains pending.
In that action, TRW has challenged certain representations by the
Company that the airbag manufacturing plant sold to TRW by the
Company in 1989 met applicable government requirements, and that
the associated real estate was sufficient to permit construction
of certain additional facilities. The Company's claims against
TRW include claims that TRW intentionally interfered with certain
of its business relationships, failed to exert reasonable efforts
to exploit the exclusive technology license granted to TRW by the
Company in 1989 and denied the Company certain contractually
provided audit rights. It is currently anticipated that these
remaining claims will come to trial in January 1996. Management
anticipates that the above-described claims will be resolved
without any material adverse impact on the results of operations
or financial position of the Company.
In September 1994, the Arizona Court of Appeals reversed a 1992
Arizona Tax Court ruling that entitled Talley 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 Talley's Petition for Review. Based on the
appellate court decision, the Company will be liable for
approximately $1.3 million in taxes and interest for 1983. The
Company believes the appellate court erred in its decision and
Talley 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 Talley 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.
-13-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27* Financial Data Schedule for Talley Manufacturing
and Technology, Inc., June 30, 1995.
* Documents marked with an asterisk are filed with this report.
(b) Reports on Form 8-K:
A report dated June 27, 1995 related to the judgment in the
case of TRW Inc. v. Talley Industries, Inc., et al was filed
on July 12, 1995.
-14-
<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: August 10, 1995 By Kenneth May
Kenneth May
Vice President, Controller
Principal Accounting
Officer
Date: August 10, 1995 By Mark S. Dickerson
Mark S. Dickerson
Vice President
and Secretary
-15-
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,532,000
<SECURITIES> 0
<RECEIVABLES> 63,388,000
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<INVENTORY> 72,023,000
<CURRENT-ASSETS> 147,033,000
<PP&E> 137,475,000
<DEPRECIATION> 91,330,000
<TOTAL-ASSETS> 254,469,000
<CURRENT-LIABILITIES> 60,802,000
<BONDS> 141,874,000
<COMMON> 1,000
0
0
<OTHER-SE> 40,075,000
<TOTAL-LIABILITY-AND-EQUITY> 254,469,000
<SALES> 144,187,000
<TOTAL-REVENUES> 187,935,000
<CGS> 106,285,000
<TOTAL-COSTS> 132,071,000
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<INTEREST-EXPENSE> 8,863,000
<INCOME-PRETAX> 15,417,000
<INCOME-TAX> 6,534,000
<INCOME-CONTINUING> 8,883,000
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,883,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
