<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997 Commission File Number 0-4539
TRANS-INDUSTRIES, INC.
----------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2598139
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2637 Adams Road, Rochester Hills, MI 48309
-------------------------------------------
(Address) (Zip Code)
Registrant's Telephone Number, including Area Code (248) 852-1990
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 and Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
The number of shares outstanding of registrant's Common stock, par value $.10
per share, at June 30, 1997 was 3,072,000.
<PAGE> 2
TRANS-INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q - FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
PART I. Financial Information
Item 1. FINANCIAL STATEMENTS
A. Consolidated Statements of Operations ---
Three months ended June 30, 1997 and 1996.
Six months ended June 30, 1997 and 1996.
B. Consolidated Balance Sheets ---
June 30, 1997 and December 31, 1996.
C. Consolidated Statements of Cash Flows ---
Six months ended June 30, 1997 and 1996.
D. Notes to Consolidated Financial Statements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PART II. Other Information
Item 1. LEGAL PROCEEDINGS
Item 5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
2
<PAGE> 3
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
A.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
For 3 Months Ended: For 6 Months Ended:
---------------------------- --------------------------
6/30/97 6/30/96 6/30/97 6/30/96
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1. Gross sales less discounts, returns and allowances $9,289,721 $7,350,676 $17,279,497 $14,516,768
2. Cost of goods sold 6,020,470 4,783,596 11,058,965 9,307,153
---------- ---------- ----------- -----------
3. Gross Profit 3,269,251 2,567,080 6,220,532 5,209,615
4. Selling, general and administrative exp. 2,127,140 1,850,784 4,113,720 3,683,316
---------- ---------- ----------- -----------
5. Operating income/(loss) 1,142,111 716,296 2,106,812 1,526,299
6. Other (income)/ expense
Interest expense 157,451 204,263 333,174 421,752
Other income (13,962) (19,232) (183,052) (61,383)
---------- ---------- ----------- -----------
Total other (income)/expense 143,489 185,031 150,122 360,369
---------- ---------- ----------- -----------
7. Earnings/(loss) before income taxes 998,622 531,265 1,956,690 1,165,930
8. Income tax expense/(benefit) 335,000 182,000 672,000 393,000
---------- ---------- ----------- -----------
9. Net profit/(loss) $ 663,622 $ 349,265 $ 1,284,690 $ 772,930
========== ========== =========== ===========
10. Earnings per share $ .22 $ .12 $ .42 $ .26
========== ========== =========== ===========
11. Dividends per share -- -- -- --
========== ========== =========== ===========
</TABLE>
3
See Notes to Financial Statements
<PAGE> 4
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
B.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
------
Current Assets 6/30/97 12/31/96
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
Cash $ 240,755 $ 358,764
Accounts receivable 6,261,430 6,195,865
Inventories (Note 2) 6,350,188 6,162,592
Prepaid expenses 354,779 279,385
Deferred income taxes 373,000 373,000
----------- -----------
Total current assets 13,580,152 13,369,606
Property, Plant & Equipment, at Cost
Land 314,503 370,814
Land Improvements 126,660 126,660
Buildings 5,228,844 5,234,892
Machinery & equipment 6,931,902 6,582,016
----------- -----------
12,601,909 12,314,382
Less: accumulated
depreciation (7,915,422) (7,793,413)
----------- -----------
Net plant and equipment 4,686,487 4,520,969
----------- -----------
Other Assets
Investments in affiliates 10,000 10,000
Patents, licenses & trademarks,
net of accumulated amortization 261,442 287,267
Excess of cost of investment in
stock of subsidiary over equity in
underlying net assets of acquisition 200,568 222,854
Sundry 104,471 104,471
----------- -----------
Total assets $18,843,120 $18,515,167
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities 6/30/97 12/31/96
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
Notes Payable (Note 5) $ 2,403,052 $ 2,539,142
Current installments
- Long term debt (Note 5) 203,650 250,243
Accounts payable - trade 2,481,273 2,779,171
Accrued liabilities 1,277,010 1,400,727
Income taxes (18,000) 195,000
----------- -----------
Total current liabilities 6,346,985 7,164,283
Deferred income taxes - Non-current 126,000 126,000
Long term debt
Current portion shown above (Note 5) 3,869,445 3,992,566
Other non-current liabilities 317,145 310,547
Stockholders' Equity
Preferred stock of $1.00 par value
per share - authorized 500,000
shared; none issued -- --
Common stock of $.10 par value per
share - authorized 10,000,000 shares;
3,072,000 shares issued and 3,072,000
outstanding at 6/30/97 307,200 307,200
Additional paid-in capital 4,053,985 4,053,985
Retained earnings 3,846,374 2,561,684
Foreign currency translation (24,014) (1,098)
----------- -----------
8,183,545 6,921,771
----------- -----------
Total liabilities and stockholders' equity $18,843,120 $18,515,167
=========== ===========
</TABLE>
4
<PAGE> 5
TRANS-INDUSTRIES, INC.
Consolidated Statements of Cash Flows
C. For the Six Months Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------
1997 1996
---- ----
( Unaudited) ( Unaudited)
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,284,690 $ 772,929
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Depreciation/Amortization 389,361 318,354
Decrease (increase) in accts. receiv. (65,565) 295,384
Decrease (increase) in inventory (187,596) 76,140
Decrease (increase) in prepaid exp. (75,394) 156,798
Increase (decrease) in accts. payable (297,898) (942,525)
Increase (decrease) in accr. liab. (123,717) 85,653
Increase (decrease) in income taxes (213,000) (333,000)
(Gain) loss on sale of fixed assets (136,689) (20,502)
------------ -----------
Net Cash Provided (Used) by Operations 574,192 409,231
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (606,079) (461,781)
Proceeds from sale of property and equipment 236,000 47,000
------------ -----------
Net Cash Provided (Used) by Investing (370,079) (414,781)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (repayment) of long-term
borrowings (163,116) (424,907)
Net proceeds (payment) of credit line (136,090) 371,224
------------ -----------
Net Cash Provided (Used) by Financing (299,206) (53,683)
Foreign currency translation (22,916) 11,037
------------ -----------
Net Increase in Cash (118,009) (48,196)
Cash at beginning of year 358,764 109,123
------------ -----------
Cash at end of quarter $ 240,755 $ 60,927
============ ===========
Supplemental Disclosures:
Interest paid $ 327,159 $ 384,473
Income taxes (refunded) paid, net $ 885,000 $ 726,000
</TABLE>
5
<PAGE> 6
D. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The financial information presented as of any date other than December 31
has been prepared from the Company's books and records without audit.
Financial information as of December 31 has been derived from the audited
financial statements of the Company. In the opinion of management, all
adjustments consisting of normal recurring adjustments, necessary for a fair
presentation of the financial information for the periods indicated, have
been included. For further information regarding the Company's accounting
policies, refer to the consolidated financial statements and related notes
included in the Company's annual report on form 10-K for the year ended
December 31, 1996.
2. Inventories
The major components of inventories are:
<TABLE>
<CAPTION>
6/30/97 12/31/96
---------- ----------
<S> <C> <C>
Raw Materials $3,559,179 $3,213,861
Work in Process 1,008,183 976,993
Finished Goods 1,782,826 1,971,738
---------- ----------
$6,350,188 $6,162,592
========== ==========
</TABLE>
3. Principles of Consolidation
There have been no significant changes in the principles of
consolidation since our most recent audited financial statements.
4. Significant Accounting Policies
There have been no significant changes in the accounting policies since
our most recent audited financial statements.
6
<PAGE> 7
D. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S><C>
5. Long-Term Debt
Long-term debt at June 30, 1997 consisted of the following:
Trans-Industries, Inc., $3,840,000 term note, payable in $ 3,543,723
monthly installments of $39,333 which
includes interest at 1/4% over the bank's
prime lending rate, and a balloon payment of
$3,137,124 in October 1999. The note is
secured by substantially all the assets of
Trans-Industries, Inc. and subsidiaries.
Transmatic Europe Ltd., mortgage note, payable in monthly 177,501
installments of $890 plus interest at 9.99%.
The mortgage is secured by certain property
and is due August 9, 2003.
Trans-Industries, Inc., $300,000 convertible subordinated 214,284
debentures, payable in annual installments of
$42,858 plus interest at 10%. Interest is
payable quarterly commencing March 15, 1992.
The debentures are due December 30, 2001.
Term note, payable in monthly installments of $896 116,430
including interest at a rate of 6%. The note
is due January 21, 2002.
Other 21,157
------------
4,073,095
Less current installments (203,650)
------------
Long-term debt $ 3,869,445
============
</TABLE>
7
<PAGE> 8
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Long-Term Debt (continued)
The Trans-Industries, Inc. term loan agreement contains restrictive
provisions relating principally to the maintenance of working capital,
net worth, ratio of debt to net worth, payment of dividends, and
acquisition of fixed assets. At June 30, 1997 the Company was in
compliance with all provisions.
The Company also has a secured $6,500,000 line of credit of which
$2,403,052 was utilized at June 30, 1997. Interest is charged at the
bank's prime lending rate. This line of credit expires on July 1, 1999.
The line is secured by substantially all of the assets of
Trans-Industries, Inc. and its domestic subsidiaries.
6. Stock Changes
In December of 1996, 28,000 shares that were held as Treasury Stock were
retired.
8
<PAGE> 9
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For Six Months Ended June 30, 1997
Sales and Earnings
Sales for the quarter ended June 30, 1997 were $9,289,721 compared to
$7,350,676 for the same period a year ago. This increase of $1,939,045 is
primarily attributable to an increase in sales of the Company's electronic
variable message signs sold to the transit industry and to the commercial
markets.
During the second quarter of 1997, the Company realized a net profit of
$663,622 on sales of $9,289,721. For the same period of the prior year, the
Company reported net profit of $349,265 on sales of $7,350,676. This increase
in net profit of $314,357 can be attributed to the increased sales volume
achieved. Net profit per share for the second quarter was $.22 and $.12 for
1997 and 1996, respectively. Net profit per share was computed on the adjusted
weighted average number of shares outstanding during the quarter for 1997 and
1996, which were 3,072,000 and 3,027,000, respectively.
Inventories
Inventory valuation is based upon the lower of cost or market. At June
30, 1997, consolidated inventories were $6,350,188 compared to $5,898,277 a
year ago. This increase of $451,911 is to accommodate the growth in sales
volume.
Interest
Interest expense amounted to approximately $157,000 and $204,000 for the
second quarter of 1997 and 1996, respectively. This decrease of $47,000 was
the result of average debt levels being less during the second quarter of 1997
compared to 1996.
Financial Conditions
Current financial resources coupled with anticipated funds from operations
are expected to meet funding requirements for the remainder of the year, based
upon present needs.
9
<PAGE> 10
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDING
The Company is the plaintiff in a patent infringement lawsuit. During
November of 1993, an advisory jury recommended a decision in favor of the
Company. In April of 1994, the judge concurred with the advisory jury and
ordered that the defendant be enjoined from any further manufacture, use, or
sale of the accused patented device. It was also ordered that the defendant
pay approximately $3 million in damages. During 1994, the defendant appealed
the case based on the lower courts interpretation of the law. On May 2, 1995,
the Company was notified that the U.S. Circuit Court of Appeals changed the
District Courts ruling that the defendant literally infringed the patent
instead of infringement by equivalents. Further the court of appeals remanded
the case back to the Federal District Court for further determination of
damages. A final outcome is expected to be reached in 1997. Because this
decision can be further appealed by the defendant, the ultimate award to the
Company will be recorded in the financial statements when realized.
Additionally, any award received by the Company will be net of certain
contingent legal fees related to the lawsuit.
Item 5. OTHER INFORMATION
On August 6, 1997 the Company repurchased all remaining convertible
subordinated debentures outstanding. This purchase eliminates the possibility
of any dilution of common stock which would have resulted from the conversion
of these debentures.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Form 8K dated April 19, 1995, and Form 8K/A dated May 23, 1995; change
in registrants certifying accountant.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANS-INDUSTRIES, INC.
Date: 8/8/97 /s/ Kai Kosanke
------ ---------------------------
Kai Kosanke, Treasurer
and Chief Financial Officer
Date: 8/8/97 /s/ Paul Clemo
------ ---------------------------
Paul Clemo
Assistant Treasurer
11
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
EX-27
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 240,755
<SECURITIES> 0
<RECEIVABLES> 6,261,430
<ALLOWANCES> 0
<INVENTORY> 6,350,188
<CURRENT-ASSETS> 13,580,152
<PP&E> 12,601,909
<DEPRECIATION> 7,915,422
<TOTAL-ASSETS> 18,843,120
<CURRENT-LIABILITIES> 6,346,985
<BONDS> 3,869,445
0
0
<COMMON> 307,200
<OTHER-SE> 7,876,345
<TOTAL-LIABILITY-AND-EQUITY> 18,843,120
<SALES> 17,279,497
<TOTAL-REVENUES> 17,462,549
<CGS> 11,058,965
<TOTAL-COSTS> 4,113,720
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 333,174
<INCOME-PRETAX> 1,956,690
<INCOME-TAX> 672,000
<INCOME-CONTINUING> 1,284,690
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,284,690
<EPS-PRIMARY> .42
<EPS-DILUTED> .00
</TABLE>
