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, 1994
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. 1-4778
TALLEY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0180396
(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, 1994
$1.00 par value 10,047,011
<PAGE>
TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I Financial Information
Consolidated Balance Sheet -
March 31, 1994 and December 31, 1993 1
Consolidated Statement of Earnings -
Three Months Ended March 31, 1994 and 1993 2
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1994 and 1993 3
Consolidated Statement of Changes in Stockholders'
Equity - Three Months Ended March 31, 1994 and 1993 4
Notes to Consolidated Financial Statements 5-6
Management's Discussion and Analysis 7-11
Part II Other Information
Legal Proceedings 12
Defaults Upon Senior Securities 13
Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
PART I - FINANCIAL INFORMATION
TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(thousands)
March 31, December 31,
1994 1993
ASSETS
Cash and cash equivalents $ 10,645 $ 12,194
Accounts receivable, net of allowance
for doubtful accounts of $1,074,000
at March 31, 1994 and $1,091,000 at
December 31, 1993 52,622 60,579
Inventories, net 63,816 64,808
Deferred income taxes 1,400 900
Prepaid expenses 9,488 9,664
Current assets 137,971 148,145
Realty assets 114,974 117,869
Long-term receivables 12,615 9,900
Property, plant and equipment, net 48,810 49,937
Intangibles 44,388 44,928
Other assets 11,545 11,659
Total assets $370,303 $382,438
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt $ 3,187 $ 2,176
Current maturities of realty debt 15,307 16,795
Accounts payable 21,825 23,621
Accrued expenses 46,812 41,775
Current liabilities 87,131 84,367
Long-term debt 221,186 231,669
Long-term realty debt 13,016 11,446
Deferred income taxes 7,216 12,320
Other liabilities 5,926 6,094
Stockholders' equity:
Preferred stock, $1 par value,
authorized 5,000,000 shares:
Series A 71 71
Series B 1,548 1,548
Series D 120 120
Common stock, $1 par value,
authorized 20,000,000 shares 10,047 10,047
Capital in excess of par value 86,026 86,026
Foreign currency translation adjustment (660) (370)
Accumulated deficit (60,935) (60,429)
36,217 37,013
Less 28,000 shares at March 31, 1994
and 33,000 shares at December 31,
1993 of Common stock in treasury,
at cost (389) (471)
Total stockholders' equity 35,828 36,542
Total liabilities and
stockholders' equity $370,303 $382,438
The accompanying notes are an integral part of the financial
statements.
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<PAGE>
TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(thousands, except per share amounts)
Three Months Ended
March 31,
1994 1993
Sales $58,817 $60,204
Services 15,521 15,119
Royalties 3,979 1,794
78,317 77,117
Cost of sales 44,488 44,412
Cost of services 13,523 13,196
Selling, general, and administrative
expenses 17,608 13,715
75,619 71,323
Earnings from operations 2,698 5,794
Other income, net (1,551) (294)
1,147 5,500
Interest expense 7,125 6,177
Loss before income taxes (5,978) (677)
Income tax benefit (provision) 5,472 (394)
Net loss $( 506) $(1,071)
Loss applicable to common shares (after
deduction of preferred stock dividends) $(1,048) $(1,614)
Net loss per share of common stock and
common stock equivalents $(.10) $(.17)
Weighted average shares outstanding 10,018 9,608
The accompanying notes are an integral part of the financial
statements.
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<PAGE>
TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(thousands)
Three Months Ended
March 31,
1994 1993
Cash and cash equivalents at beginning
of year $12,194 $10,168
Cash flows from operating activities:
Loss from continuing operations (506) (1,071)
Adjustments to reconcile net income
to cash flows from operating activities:
Change in deferred income taxes (5,604) 87
Depreciation and amortization 2,400 2,596
Original issue discount amortization on
12.25% debentures 2,120 -
Gain on sale of property and equipment (4) (77)
Other 157 926
Changes in assets and liabilities, net of
effects from acquired businesses:
(Increase) decrease in accounts receivable 5,535 (3,497)
Decrease in inventories 992 2,084
(Increase) decrease in prepaids 176 (445)
Decrease in realty assets 2,895 2,163
Decrease in accounts payable (1,796) (2,682)
Increase in accrued expenses 5,037 2,579
Other, net (223) 1,062
Cash flows from operating activities 11,179 3,725
Cash flows from investing activities:
Purchases of property and equipment (875) (773)
Reduction of long-term receivables 96 1,632
Increase in long-term receivables (337) (350)
Proceeds from sale of property and equipment 8 101
Cash flows from investing activities (1,108) 610
Cash flows from financing activities:
Repayment of long-term debt (96,649) (25,897)
Repayment of realty debt (28) (2,287)
Proceeds from new long-term debt 85,057 25,755
Cash flows from financing activities (11,620) (2,429)
Net increase (decrease) in cash and cash
equivalents (1,549) 1,906
Total cash and cash equivalents at March 31, $10,645 $12,074
The accompanying notes are an integral part of the financial
statements.
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<PAGE>
<TABLE>
<CAPTION>
TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the Three Months Ended March 31, 1994 and 1993
(thousands)
Capital in
Preferred Stock Common Excess of Treasury Retained
Series A Series B Series D Stock Par Value Stock Earnings
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 $ 71 $1,548 $ 120 $ 9,519 $83,537 $ -0- $(53,931)
Net loss (1,071)
Debt of ESOP guaranteed 84
Stock grants 140 403
BALANCE AT MARCH 31, 1993 $ 71 $1,548 $ 120 $ 9,659 $84,024 $ -0- $(55,002)
BALANCE AT DECEMBER 31, 1993 $ 71 $1,548 $ 120 $10,047 $86,026 $ (471) $(60,429)
Net earnings (506)
Treasury stock issued 82
BALANCE AT MARCH 31, 1994 $ 71 $1,548 $ 120 $10,047 $86,026 $ (389) $(60,935)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
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 March 31, 1994 and
December 31, 1993 and the results of operations for the
three-month periods ended March 31, 1994 and 1993, and cash flows
and changes in stockholders' equity for the three-month periods
ended March 31, 1994 and 1993. 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 to
Shareholders for the year ended December 31, 1993.
Note 2 - Inventories
Inventories are summarized as follows (in thousands):
March 31, December 31,
1994 1993
Raw materials and supplies $11,778 $10,293
Work-in-process 8,695 9,584
Finished goods 26,542 26,470
Inventories applicable to
government contracts 16,801 18,461
$63,816 $64,808
Note 3 - Earnings Per Share
Common stock equivalents for the three months ended March 31,
1994 and 1993 were anti-dilutive and excluded from the
computation of earnings per share. Dividends payable on
anti-dilutive preferred stock were deducted from net earnings
before calculating the earnings per share amount for the quarter.
Earnings per common share assuming full dilution are not reported
in either of the periods because the impact would be minimal.
Note 4 - Sale of Subsidiary
In July 1993 the Company completed the sale of the net assets of
its precision potentiometer business for a cash purchase price of
$2.8 million, which approximated the book value of the net assets
sold. Sales and pretax earnings of the business sold for the six
months ended June 30, 1993 were $2.3 million and $.4 million,
respectively.
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<PAGE>
TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 5 - Income Tax Benefit
Pursuant to recent legislation passed in the State of Arizona
regarding the rules for filing consolidated state income tax
returns, the Company has reversed $5.6 million of state income
tax accruals to reflect the change in the law. The new law is
retroactive to the beginning of 1986.
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<PAGE>
TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following is management's discussion and analysis of certain
significant factors which have affected the Company.
A summary of period-to-period changes in the consolidated
statement of earnings is shown below (in thousands):
Three Months
Ended
March 31,
1994 1993
REVENUES:
Government Products and Services $ 36,258 $ 39,426
Airbag Royalties 3,896 1,722
Industrial Products 29,200 26,089
Specialty Products 5,762 7,180
Realty 3,201 2,700
$ 78,317 $ 77,117
OPERATING INCOME:
Government Products and Services $ 4,186 $ 5,684
Airbag Royalty 3,896 1,722
Industrial Products 720 537
Specialty Products 610 773
Realty (1,742) ( 299)
Total operating income 7,670 8,417
Corporate expense (6,584) (3,036)
Non-segment interest income 61 119
Interest expense (7,125) (6,177)
Loss before income taxes and
extraordinary gains $ (5,978) $ ( 677)
Revenues for the three-month period ended March 31, 1994 increased
$1.2 million from $77.1 million to $78.3 million, compared with the
corresponding period in the prior year. The slight increase in the
three-month comparison is primarily the result of increasing
revenue in the Airbag Royalties segment and the Steel Operations,
offset by decreased revenue in the Government Products and Services
segment due to scheduled price reductions under certain extended
range munitions contracts and the timing of completion and
shipments under other contracts. The pretax loss for the three
months ended March 31, 1994 was $6.0 million compared with $.7
million pretax loss in the first three months of the previous year.
The loss in the first quarter of 1994 includes a $4.5 million
provision for litigation costs related to resolution of claims in
connection with the airbag royalties being received from the
licensee. Net loss for the three months ended March 31, 1994 was
$.5 million, which reflects a tax benefit resulting from reversal
of state income tax accruals 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 $2.2 million from $1.7
million in the first three months of 1993 to $3.9 million for the
first three months of 1994, while earnings from the Industrial
segment improved $.2 million. Earnings from the Government
Products and Services segment and the Specialty Products segment
for the first three months of 1994, when compared with the first
three months of 1993, were $1.5 million and $.2 million lower,
respectively. Losses in the Realty segment increased by $1.4
million for the first three months of 1994, when compared with the
prior year, as a result of increased property maintenance and
development costs.
The gross profit percentage, excluding airbag royalties, of 22.0%,
for the three months ended March 31, 1994 was down from the gross
profit percentage of 23.5% for the comparable period in 1993. The
decrease from the prior year is due to the mix of contracts and
lower gross profit on 1994 sales of real estate.
Government Products and Services. Revenue and earnings in the
first quarter of 1994 decreased $3.2 million and $1.5 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 following the recovery
of the Company's investment in a new production facility, and also
due to the timing of completion and shipments under other
contracts. Revenue and earnings from the Company's architectural
and engineering services company are approximately equal to the
comparable period in the prior year.
Airbag Royalties. Revenue from airbag royalties increased from
$1.7 million in the first three months of 1993 to $3.9 million in
the first three months of 1994. This increase was due to an
increase in airbags manufactured and sold. (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 1994
Industrial Products sales and earnings increased $3.1 million and
$.2 million, respectively, when compared with the first three
months of 1993. Increases in sales resulted from improvement in
orders for stainless steel bars and rods and increased demand for
ceramic insulator products due to harsh winter weather conditions
and improved market share. The improvement in earnings resulted
from the sales increases and cost reduction and streamlining
efforts at the Company's steel and ceramic insulator operations.
These increases partially were offset by lower welder products
sales and earnings.
Specialty Products. During the first three months of 1994, sales
for the Specialty Products segment decreased 19.7%, from $7.2
million to $5.8 million, while earnings decreased slightly from $.8
million to $.6 million, when compared with the same period in 1993.
The decrease in sales and earnings when compared with the prior
year is a result of the timing of sales, which are expected to
improve during the remainder of 1994.
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<PAGE>
Realty. Sales of real estate in the first three months of 1994
were $3.2 million compared with $2.7 million for the comparable
period in 1993. The operating loss increased from $.3 million in
the first three months of 1993 to $1.7 million in the first three
months of 1994, due to increased property maintenance and
development costs. On March 28, 1994, a fully consolidated real
estate joint venture, in which the Company has a $29.2 million
interest, instituted Chapter 11 proceedings in the United States
Bankruptcy Court for the District of Arizona. At the same time the
joint venture filed a proposed plan of reorganization that would
provide for the conversion of substantially all outstanding debt of
the joint venture into equity in a new company to be formed to
continue the project. A subsidiary of the Company, if the plan is
accepted, would own approximately two-thirds of the equity in the
new company.
Other. Interest expense in the first three months of 1994
increased to $7.1 million, from $6.2 million in the comparable
period in 1993, mainly due to a major portion of the Company's debt
being refinanced from variable rates to higher fixed rates.
Corporate overhead increased from $3.0 million to $6.6 million over
the comparable period in 1993 due to a $4.5 million provision for
litigation costs related to resolution of claims in connection with
airbag royalties being received from the licensee. Income tax
benefit for the first three months of 1994 was $5.5 million
compared to a tax provision of $.4 million in the comparable period
in 1993. The net income tax benefit in 1994 is the result of a
favorable state tax legislation which resulted in a $5.6 million
reversal of taxes previously accrued. Interest income was less in
1994 due to a reduction in long term realty receivables.
Financial Condition, Liquidity and Capital Resources
At March 31, 1994, Talley had $10.7 million in cash and cash
equivalents and net working capital of $50.8 million. Cash flow
from operating activities for the three months ended March 31, 1994
was $11.2 million, generally the result of the Company's successful
efforts toward collection of trade receivables, as compared with
$3.7 million generated from operations during the first three
months of 1993. Cash used in investing activities during the three
months ended March 31, 1994 was $1.1 million, consisting of a net
increase in long-term receivables of $.2 million and $.9 million of
capital expenditures. Cash used in financing activities of $11.6
million reflects a reduction in debt from cash generated from
operations and from cash available at the beginning of the year.
In October 1993, 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 the Company to yield 12.25%
and $115 million of Senior Notes due 2003, with an interest rate of
10.75% issued by Talley Manufacturing and Technology, Inc. ("Talley
Manufacturing"). In connection with this refinancing, Talley
Manufacturing obtained a secured credit facility with institutional
lenders, of which approximately $48 million was initially borrowed.
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<PAGE>
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, 1994 availability under the facility, based primarily on
inventory and receivable levels, was $54.6 million, of which $36.8
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.
The proceeds from the offering and the initial borrowings under the
secured credit facility were used to repay substantially all of the
Company's previously outstanding non-real estate debt. The Company
anticipates that the new capital structure will support the long-
term growth of Talley's core businesses and permit the
implementation of its strategy to use proceeds received from the
increasing airbag royalties and from the orderly sale of the assets
of its real estate operations to reduce its total indebtedness.
As a holding company with no significant operating or income-
producing assets beyond its stock interests in Talley Manufacturing
and the subsidiaries holding its real estate operations, Talley
will be dependent primarily upon distributions from those
subsidiaries in order to meet its debt service and other
obligations. Talley will be entitled to receive certain
distributions from Talley Manufacturing (absent certain defaults
under Talley Manufacturing indebtedness) for a period of five
years, to be used to fund certain carrying and other costs
associated with the orderly disposition of Talley's real estate
assets. Additional funding is also available for the real estate
costs from the anticipated redemption of preferred stock of Talley
Manufacturing purchased for an agreed upon amount by Talley in
connection with the October 1993 refinancing and from a portion of
the net cash proceeds from the sale of real estate assets. Talley
will be required to use certain funds received from Talley
Manufacturing and certain funds from real estate sales to make
offers to redeem certain indebtedness of Talley. Because the cash
available to Talley is required to be used for these specific
purposes, and because certain debt covenants limit Talley's ability
to incur additional indebtedness, Talley will be dependent upon the
payment of dividends from Talley Manufacturing (which payments will
generally be limited by debt covenants of Talley Manufacturing) and
to future sales of equity securities as its primary sources of
discretionary liquidity. To the extent such sources do not provide
adequate funds, Talley may be unable to fund expected costs and
improvements associated with its real estate holdings or to make
cash interest payments on its outstanding indebtedness when
required. Nevertheless, and particularly in light of the absence
of requirements for Talley to make cash payments of interest on
outstanding indebtedness until April 15, 1999, the Company believes
that Talley will have funds available in sufficient amounts, and at
the required times, to permit Talley to meet its obligations.
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<PAGE>
Other Matters
As more fully explained in the Commitments and Contingencies note
to the December 31, 1993 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 Talley'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. The Company expects a ruling from the
Court on this Motion in the near future. Without regard to how the
Court rules on the Motion, the Company intends to ask the Court for
an early hearing on the merits of TRW's attempted termination of
royalty payments. The Company believes that a final hearing will
show that TRW's claims are without merit and that the Court will
enter a final Order confirming the Company's right to continue
receiving royalty payments.
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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, 1993 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 Talley'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. The Company expects a ruling from the
Court on this Motion in the near future. Without regard to how the
Court rules on the Motion, the Company intends to ask the Court for
an early hearing on the merits of TRW's attempted termination of
royalty payments. The Company believes that a final hearing will
show that TRW's claims are without merit and that the Court will
enter a final Order confirming the Company's right to continue
receiving royalty payments.
On March 28, 1994, a fully consolidated real estate joint venture,
in which the Company has a $29.2 million interest, instituted
Chapter 11 proceedings in the United States Bankruptcy Court for
the District of Arizona. At the same time the joint venture filed
a proposed plan of reorganization that would provide for the
conversion of substantially all outstanding debt of the joint
venture into equity in a new company to be formed to continue the
project. A subsidiary of the Company, if the plan is accepted,
would own approximately two-thirds of the equity in the new
company.
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<PAGE>
Item 3. Defaults Upon Senior Securities
(b) The Company has not made any dividend payments on its
preferred and common shares since the first quarter of 1991,
and the ability to pay dividends in the future is limited by
the provisions of the Company's debt agreements. Dividends
on the shares of Series A, Series B and Series D Preferred
stock are cumulative and must be paid in the event of
liquidation and before any distribution to holders of Common
stock. These dividends are in arrears.
The Company's preferred stockholders have certain voting
rights with respect to the election of two directors which
were triggered by the dividend arrearages. The preferred
stock does not provide any other voting rights or remedies to
the preferred stockholders in the event of a dividend
arrearage. Dividends on Series D Preferred Stock currently
accrue at $4.50 per share annually. As of February 28, 1998,
dividends of $15.75 per share are to be paid annually to
holders of any Series D Preferred Stock still outstanding at
that time. Annual dividends of $1.10 per share, and $1.00
per share, accrue with respect to outstanding shares of
Series A Preferred Stock and Series B Preferred Stock,
respectively. Cumulative dividends on preferred shares that
have not been declared or paid are approximately: Series A -
$234,000 ($3.30 per share), Series B - $4,645,000 ($3.00 per
share) and Series D - $1,624,000 ($13.50 per share).
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.3* Talley Industries, Inc. Directors Benefit Plan as
established by the Company effective January 1,
1994.
11* Computation of Earnings per Common and Common
Equivalent Share.
* 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, 1994.
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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 INDUSTRIES, INC.
(Registrant)
Date: May 12, 1994 By Kenneth May
Kenneth May
Vice President, Controller
Principal Accounting
Officer
Date: May 12, 1994 By Mark S. Dickerson
Mark S. Dickerson
Vice President, General
Counsel and Secretary
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TALLEY INDUSTRIES, INC.
DIRECTORS BENEFIT PLAN
Effective January 1, 1994, TALLEY INDUSTRIES, INC., a
Delaware corporation (the "Company"), establishes the TALLEY
INDUSTRIES, INC. DIRECTORS BENEFIT PLAN (the "Plan") for the
purpose of providing deferred compensation and death benefits to
certain members of the Company's Board of Directors.
1. Definitions. When a word or phrase shall appear
in this Plan with the initial letter capitalized, and the word
and phrase does not commence a sentence, the word or phrase shall
generally be a term defined in this Section 1. The following
words and phrases with the initial letter capitalized shall have
the meanings set forth in this Section 1, unless a clearly
different meaning is required by the context in which the word or
phrase is used:
(a) "Affiliate" shall mean a corporation that is
a member of a "controlled group of corporations" (with-
in the meaning of Section 414(b) of the Code) and a
group of trades and businesses under common control
(within the meaning of Section 414(c) of the Code) of
which the Company is a member.
(b) "Beneficiary" shall mean the person or per-
sons designated to receive benefits under this Plan in
the event of the death of the Participant as provided
in Section 9.
(c) "Board" shall mean the Board of Directors of
the Company.
(d) "Code" shall mean the Internal Revenue Code
of 1986, as the same may be amended from time to time.
(e) "Committee" shall mean the administrative
committee appointed by the Board pursuant to Section 10
to administer the terms and provisions of this Plan.
(f) "Company" shall mean Talley Industries, Inc.
and each corporation that succeeds to substantially all
the business of the Company and elects to continue the
Plan hereunder.
(g) "Director" shall mean an individual who is
serving as a member of the Board and who is not an
employee of the Company or an Affiliate.
(h) "Effective Date" shall mean January 1, 1994.
(i) "Group Life Insurance Plan" shall mean the
Talley Industries, Inc. Group Insurance Plan, which
provides life insurance coverage, as in effect on
January 1, 1994, and as the same may be amended from
time to time.
(j) "Participant" shall mean each Director who on
or after the Effective Date has satisfied the eligibil-
ity requirements specified in Section 3 and whose
participation has not terminated pursuant to Section 5.
(k) "Plan" shall mean the Talley Industries, Inc.
Directors Benefit Plan, as set forth herein and as the
same may be amended from time to time.
(l) "Year of Service" shall mean a fiscal year of
the Company during which the Director has completed
more than six (6) calendars months as a Director.
2. Construction. The masculine gender, where appear-
ing in the Plan, shall include the feminine gender (and vice
versa), and the singular shall include the plural, unless the
context clearly indicates to the contrary. Headings and subhead-
ings are for the purpose of reference only and are not to be
considered in the construction of this Plan. If any provision of
this Plan is determined to be for any reason invalid or unen-
forceable, the remaining provisions shall continue in full force
and effect. All of the provisions of this Plan shall be con-
strued and enforced according to the laws of the State of Illi-
nois and shall be administered according to the laws of such
state, except as otherwise required by Federal law. It is the
intention of the Company that the Plan as adopted by the Company
shall not be subject to the Employee Retirement Income Security
Act of 1974 because this Plan covers only individuals who are not
employees of the Company. The Plan shall be construed in a
manner consistent with the Company's intention.
3. Eligibility. A Director shall become a Partici-
pant on the first day of the month coinciding with or next
following the date on which he has completed at least five (5)
Years of Service as a Director.
4. Crediting of Service. Except as provided herein,
all Years of Service completed by a Director shall be taken into
account under this Plan. Years of Service completed by a Direc-
tor while an employee of the Company or an Affiliate shall not be
taken into account.
5. Termination of Participation. A Participant's
participation in the Plan shall terminate (a) upon the Partici-
pant's commencement of employment with the Company as an employee
or (b) upon the Participant's resignation from the Board prior to
attaining the age of seventy (70) years.
6. Pre-Retirement Death Benefits. Upon commencing
participation, a Participant shall be covered by the Group Life
Insurance Plan and such coverage shall continue until the Partic-
ipant no longer qualifies as a Director.
In the event of a Participant's death while still
serving as a Director, the Participant's Beneficiary shall be
entitled to receive the life insurance proceeds payable from the
Group Life Insurance Plan on account of the Participant's death
in accordance with the terms of said plan.
7. Termination Benefit. A Participant who resigns
from the Board on or after attaining the age of seventy (70)
years shall be entitled to a lump sum payment from the Company
equal to Fifty Thousand Dollars ($50,000.00). Such benefit shall
be paid as soon as practicable after the Participant's resigna-
tion from the Board but in no event more than sixty (60) days
after the effective date of such resignation.
8. Funding. Except as otherwise provided in Section
6, (a) benefits payable under the Plan shall constitute unfunded
general obligations of the Company payable from its general
assets, (b) the Company shall not be required to establish any
special fund or trust for purposes of paying benefits under the
Plan, (c) no Participant shall have any vested right to any
particular asset of the Company as a result of participation in
the Plan, and (d) each Participant shall be a general creditor of
the Company.
9. Designation of Beneficiary. Each Participant
shall have the right to designate on forms supplied by and
delivered to the Committee, a Beneficiary or Beneficiaries to
receive his benefits hereunder in the event of his death. Each
Participant may change his Beneficiary designation from time to
time by execution and delivery of a new form. Upon receipt of
such designation by the Committee, such designation or change of
designation shall become effective as of the date of notice,
regardless of whether the Participant is living at the time
notice is received. There shall be no liability on the part of
the Company or the Committee with respect to any payment autho-
rized by the Committee in accordance with the most recent valid
Beneficiary designation of the Participant in its possession
before receipt of a more recent and valid Beneficiary designa-
tion. If no designated Beneficiary is living when benefits
become payable, or if there is no designated Beneficiary, the
Beneficiary shall be the Participant's spouse; or if no spouse if
then living, such Participant's children, including any legally
adopted children, in equal shares by right of representation; or
if no children are living upon the death of the Participant, the
estate of the Participant.
10. Administration. The Plan shall be administered by
the Company's Vice President of Human Resources. If the Vice
President of Human Resources is unavailable or the position is
vacant, the Plan shall be administered by the person charged with
the performance of the duties of that position by the Board.
The Vice President of Human Resources may delegate his
duties and responsibilities hereunder.
11. Amendment and Termination of the Plan. The Board
shall have the power to amend, modify, suspend or terminate this
Plan in writing at any time. No amendment, modification, suspen-
sion or termination shall deprive a Participant or person claim-
ing benefits through the Participant of any benefit accrued under
this Plan prior to the date of such amendment, modification,
suspension or termination.
12. Assignment. No Participant or Beneficiary shall
have any right to assign, pledge, hypothecate, anticipate or in
any way create a lien on any amounts payable hereunder. No
amounts payable hereunder shall be subject to assignment or
transfer or otherwise be alienable, either by voluntary or
involuntary act, or by operation of law, except as may be other-
wise required by law in connection with marital separation or
dissolution or child support obligations, or be subject to
attachment, execution, garnishment, sequestration or other
seizure under any legal, equitable or other process or be liable
in any way for the debts or defaults of Participants and Benefi-
ciaries.
13. Withholding. Any taxes required to be withheld
from payments to Participants hereunder shall be deducted and
withheld by the Company or by its agent for payment hereunder.
14. Other Benefit Plans of the Company. Nothing
contained in this Plan shall prevent a Participant prior to his
death, or his spouse or Beneficiary entitled to benefits after
his death, from receiving, in addition to any payments provided
for under this Plan, any payments provided for under any employee
benefit plan of the Company by reason of his participation in
such benefit plans. Nothing in this Plan shall be construed as
preventing the Company or any of its Affiliates from establishing
any other or different plans providing for current or deferred
compensation for employees and/or Directors.
15. Miscellaneous. Nothing contained in this Plan
shall be construed as a contract of employment, as a contract for
a position on the Board, or as a right of any Participant to
continue as a member of the Board. All of the provisions of this
Plan shall be binding upon all persons who shall be entitled to
any benefit hereunder, their heirs and personal representatives.
DATED: February 22, 1994
TALLEY INDUSTRIES, INC.
By William H. Mallender
Its Chairman and CEO
190387
EXHIBIT 11
TALLEY INDUSTRIES, INC. AND SUBSIDIARIES
Computation of Earnings Per Common
and Common Equivalent Share
(thousands, except per share amounts)
1 9 9 4 1 9 9 3
Fully Fully
Primary Diluted Primary Diluted
Three months ended March 31:
Loss from continuing
operations $ (506) $ ( 506) $(1,071) $(1,071)
Preferred stock dividend (542) ( 542) (543) (543)
Net loss $(1,048) $(1,048) $(1,614) $(1,614)
Average common shares
outstanding during period 10,018 10,018 9,608 9,608
Shares for computation 10,018 10,018 9,608 9,608
Net loss per share $(.10) $(.10) $(.17) $(.17)
