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 September 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 September 30, 1995
$1.00 par value 1,000
<PAGE>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
INDEX
Page No.
Part I Financial Information
Consolidated Balance Sheet -
September 30, 1995 and December 31, 1994 1
Consolidated Statement of Earnings -
Three Months and Nine Months Ended
September 30, 1995 and 1994 2
Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 3
Consolidated Statement of Changes in Stockholders'
Equity - Nine Months Ended September 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)
September 30, December 31,
1995 1994
ASSETS
Cash and cash equivalents $ 2,554 $ 2,756
Accounts receivable, net of allowance
for doubtful accounts of $1,268,000
at September 30, 1995 and $994,000
at December 31, 1994 58,982 55,672
Inventories 77,983 66,069
Deferred income taxes 799 800
Prepaid expenses 8,737 7,523
Current assets 149,055 132,820
Long-term receivables 10,428 10,317
Property, plant and equipment, net 46,009 45,920
Intangibles 44,187 46,288
Other assets 5,908 7,160
Total assets $255,587 $242,505
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt $ 3,788 $ 3,549
Accounts payable 30,626 25,560
Accrued expenses 34,801 28,010
U.S. & foreign income taxes 414 610
Current liabilities 69,629 57,729
Long-term debt 128,624 139,756
Deferred income taxes 6,661 6,655
Other liabilities 4,359 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 20,847 18,366
Foreign currency translation adjustment (411) (723)
Retained earnings 25,877 14,233
Total stockholders' equity 46,314 31,877
Total liabilities and
stockholders' equity $255,587 $242,505
The accompanying notes are an integral part of the financial
statements.
-1-
<PAGE>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Statement of Earnings
(thousands, except per share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
1995 1994 1995 1994
Sales $69,207 $61,300 $213,394 $174,724
Services 14,706 14,459 44,241 45,383
Royalties 6,658 4,284 20,871 13,135
90,571 80,043 278,506 233,242
Cost of sales 52,908 43,673 159,193 128,492
Cost of services 12,938 12,677 38,724 39,610
Selling, general and
administrative expenses 12,839 14,702 44,206 45,162
78,685 71,052 242,123 213,264
11,886 8,991 36,383 19,978
Other income (expense), net (802) 149 (1,019) 551
11,084 9,140 35,364 20,529
Interest expense 4,227 4,294 13,090 12,888
Earnings before income taxes 6,857 4,846 22,274 7,641
Income tax provision
(benefit) 2,796 1,859 9,330 (256)
Net earnings $ 4,061 $ 2,987 $ 12,944 $ 7,897
The accompanying notes are an integral part of the financial
statements.
-2-
<PAGE>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Statement of Cash Flows
(thousands)
Nine Months Ended
September 30,
1995 1994
Cash and cash equivalents at beginning
of year $ 2,756 $ 6,417
Cash flows from operating activities:
Net earnings 12,944 7,897
Adjustments to reconcile net income
to cash flows from operating activities:
Change in deferred income taxes 7 (5,601)
Depreciation and amortization 6,558 7,318
Gain on sale of property and equipment (123) (127)
Other 2,690 1,813
Changes in assets and liabilities, net of
effects from acquired businesses:
(Increase) decrease in accounts receivable (3,421) 9,603
Increase in inventories (11,816) (163)
Increase in prepaid expenses (1,371) (720)
Increase in accounts payable 5,066 1,645
Increase (decrease) in accrued expenses 5,359 (678)
Increase (decrease) in U.S. & foreign
income taxes (196) 540
Decrease in other liabilities (1,099) -
Other, net (177) (963)
Cash flows from operating activities 14,421 20,564
Cash flows from investing activities:
Purchase of assets of acquired business - (5,425)
Purchases of property and equipment (5,078) (2,532)
Proceeds from sale of property and equipment 797 202
Cash flows from investing activities (4,281) (7,755)
Cash flows from financing activities:
Increase in investment by Parent 6,481 4,279
Dividends paid (1,300) -
Redemption of 4 shares of Series A
preferred stock (4,000) -
Repayment of long term-debt (364,170) (294,225)
Proceeds from new long-term debt 352,647 273,204
Cash flows from financing activities (10,342) (16,742)
Net decrease in cash and cash equivalents (202) (3,933)
Total cash and cash equivalents at Sept. 30, $ 2,554 $ 2,484
The accompanying notes are an integral part of the financial
statements.
-3-
<PAGE>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Statement of Changes in Stockholders' Equity
For the Nine Months Ended September 30, 1995 and 1994
(thousands)
Capital in
Common Excess of Retained
Stock Par Value Earnings
BALANCE AT DECEMBER 31, 1993 $ 1 $15,753 $ 3,018
Net earnings 7,897
Contribution from Parent 4,279
BALANCE AT SEPTEMBER 30, 1994 $ 1 $20,032 $10,915
BALANCE AT DECEMBER 31, 1994 $ 1 $18,366 $14,233
Net earnings 12,944
Contribution from Parent 6,481
Dividends (1,300)
Redemption of 4 shares of
Series A preferred stock (4,000)
BALANCE AT SEPTEMBER 30, 1995 $ 1 $20,847 $25,877
The accompanying notes are an integral part of the financial
statements.
-4-
<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 September 30, 1995
and December 31, 1994 and the results of operations for the
three-month and nine-month periods ended September 30, 1995 and
1994, and cash flows and changes in stockholders' equity for the
nine-month periods ended September 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):
September 30, December 31,
1995 1994
Raw materials and supplies $16,392 $11,757
Work-in-process 14,312 11,733
Finished goods 27,140 24,616
Inventories applicable to
government contracts 20,139 17,963
$77,983 $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.
-5-
<PAGE>
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 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 paid approximately $1.3 million
in taxes and interest for the period ending March 31, 1983. The
Company believes the appellate court erred in its decision;
however, Talley held discussions with state authorities in an
effort to resolve the dispute for the periods ending on December
31, 1984 and 1985. The tax and related interest assessment in
dispute is approximately $5.0 million. If Talley is unsuccessful
in reaching an agreement with the state, it intends to vigorously
litigate the tax and interest assessment. 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 nine months ended September 30, 1995
by approximately $1.2 million and accordingly increased earnings
before income taxes 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, by segment for the periods shown (in thousands):
Three Months Nine Months
Ended Ended
September 30, September 30,
1995 1994 1995 1994
REVENUES:
Government Products
and Services $30,494 $33,909 $ 99,097 $105,621
Airbag Royalty 6,401 4,168 19,977 11,973
Industrial Products 45,593 33,825 135,534 93,860
Specialty Products 8,083 8,141 23,898 21,788
$90,571 $80,043 $278,506 $233,242
OPERATING INCOME:
Government Products
and Services $ 1,901 $ 4,662 $ 6,577 $ 12,079
Airbag Royalty 6,401 4,168 19,977 11,973
Industrial Products 5,419 2,079 17,749 5,122
Specialty Products 809 942 2,543 2,544
Total operating
income 14,530 11,851 46,846 31,718
Corporate expense (3,497) (2,711) (11,625) (11,238)
Non-segment interest
income 51 - 143 49
Interest expense (4,227) (4,294) (13,090) (12,888)
Earnings before
income taxes $ 6,857 $ 4,846 $ 22,274 $ 7,641
Revenues for the nine-month period ended September 30, 1995
increased $45.3 million from $233.2 million to $278.5 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 as a result of 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 nine months ended September 30, 1995 were
$22.3 million compared with $7.6 million pretax earnings in the
first nine months of the previous year.
-7-
<PAGE>
Net earnings for the nine months ended September 30, 1995 were
$12.9 million, compared to $7.9 million net earnings for the
nine 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 $12.6 million from
$5.1 million to $17.7 million, while royalties in the Airbag
Royalty segment increased by $8.0 million from $12.0 million in
the first nine months of 1994 to $20.0 million for the first nine
months of 1995. Earnings from the Government Products and
Services segment for the nine months ended September 30, 1995,
when compared with the comparable nine months of 1994, were $5.5
million lower, while earnings from the Company's Specialty
Products segment are comparable to prior year.
Government Products and Services. Revenue and earnings for the
nine months ended September 30, 1995 decreased $6.5 million and
$5.5 million, respectively, when compared with the same period in
the prior year. These decreases reflect the continuing reduction
in U.S. Defense spending along with the timing of completion and
shipments under certain other contracts.
Airbag Royalties. Revenue from airbag royalties increased from
$12.0 million in the first nine months of 1994 to $20.0 million
in the comparable nine 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 nine-month period ended September
30, 1995 Industrial Products sales and earnings increased $41.7
million and $12.6 million, respectively, when compared with the
comparable period in 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.
Specialty Products. During the first nine months of 1995,
sales for the Specialty Products segment increased 9.6%, from
$21.8 million to $23.9 million, while earnings are comparable to
the same period in 1994. The increase in sales 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 for the nine months ended September
30, 1995 increased slightly to $13.1 million, from $12.9 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 increased slightly
in the first nine months of 1995 from $11.2 million to $11.6
million when compared with the comparable period in 1994. The
income tax provision for the first nine months of 1995 was $9.3
million compared to a tax benefit of $.3 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 September 30, 1995, the Company had $2.6 million in cash and
cash equivalents and net working capital of $79.4 million. Cash
generated from operating activities for the nine months ended
September 30, 1995 was $14.4 million, primarily the result of
increased earnings which were partially offset by increases in
trade receivables, inventories and prepaid expenses, net of
increases in accounts payable and accrued expenses. Cash
generated from operations during the nine months of 1994 was
$20.6 million. Cash used in investing activities during the nine
months ended September 30, 1995 was $4.3 million, consisting
primarily of capital expenditures. Cash used in financing
activities of $10.3 million reflects a net decrease in the
revolving credit facility and a dividend to the Company's parent,
as well as the redemption of preferred stock.
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 $40.0 million and a five-year $20.0 million term loan
facility. At September 30, 1995 availability under the total
facility was approximately $48.6 million, of which approximately
$19.5 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 $10.0 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 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 early in 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, the Company had been identified as a
potentially responsible party by another company in connection
with the Laurel Park Landfill in Naugatuck, Connecticut.
Management's review indicated that the Company sent ordinary
rubbish and off-specification plastic parts to this landfill and
did not send any hazardous waste to the site. In October 1995
the Company settled the matter, including a payment by the
Company that was not material to the results of operations or
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 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 the period
ending March 31, 1983. The Company believes the appellate court
erred in its decision; however, Talley held discussions with
state authorities in an effort to resolve the dispute for the
periods ending on December 31, 1984 and 1985. The tax and
related interest assessment in dispute is approximately $5.0
million. If Talley is unsuccessful in reaching an agreement with
the state, it intends to vigorously litigate the tax and interest
assessment. 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, the Company had been identified as a
potentially responsible party by another company in connection
with the Laurel Park Landfill in Naugatuck, Connecticut.
Management's review indicated that the Company sent ordinary
rubbish and off-specification plastic parts to this landfill and
did not send any hazardous waste to the site. In October 1995
the Company settled the matter, including a payment by the
Company that was not material to the results of operations or
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., September 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.
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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: November 8, 1995 By Kenneth May
Kenneth May
Vice President, Controller
Principal Accounting
Officer
Date: November 8, 1995 By Mark S. Dickerson
Mark S. Dickerson
Vice President
and Secretary
-15-
<PAGE>
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,554,000
<SECURITIES> 0
<RECEIVABLES> 60,038,000
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<TOTAL-ASSETS> 255,587,000
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<COMMON> 1,000
0
0
<OTHER-SE> 46,313,000
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<INCOME-TAX> 9,330,000
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</TABLE>
