<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 September 30, 1999 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 S. 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 September 30, 1999 was 3,139,737.
<PAGE> 2
TRANS-INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q - FOR THE QUARTER ENDED SEPTEMBER 30, 1999
INDEX
PART I. Financial Information
Item 1. FINANCIAL STATEMENTS
A. Consolidated Statements of Earnings ---
Three months ended September 30, 1999 and 1998.
Nine months ended September 30, 1999 and 1998.
B. Consolidated Statements of Comprehensive Income ---
Nine months ended September 30, 1999 and 1998.
C. Consolidated Balance Sheets ---
September 30, 1999 and December 31, 1998.
D. Consolidated Statements of Cash Flows ---
Nine months ended September 30, 1999 and 1998.
E. 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 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
2
<PAGE> 3
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
A.
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
<TABLE>
<CAPTION>
For 3 Months Ended: For 9 Months Ended:
------------------- -------------------
9/30/99 9/30/98 9/30/99 9/30/98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1. Gross sales less discounts, returns and allowances $ 9,698,966 $ 8,338,694 $ 28,127,015 $ 26,756,593
2. Cost of goods sold 7,063,248 5,817,274 20,043,610 17,915,620
------------ ------------ ------------ ------------
3. Gross Profit 2,635,718 2,521,420 8,083,405 8,840,973
4. Selling, general and administrative exp. 2,716,765 2,357,778 7,687,184 6,723,130
------------ ------------ ------------ ------------
5. Operating income/(loss) (81,047) 163,642 396,221 2,117,843
6. Other (income)/ expense
Interest expense 266,374 145,781 682,022 421,292
Other Income - Net Lawsuit Proceeds (599,294) 0 (599,294) (1,596,811)
Other income (6,978) (23,981) (72,124) (60,438)
------------ ------------ ------------ ------------
Total other (income)/expense (339,898) 121,800 10,604 (1,235,957)
------------ ------------ ------------ ------------
7. Earnings before income taxes 258,851 41,842 385,617 3,353,800
8. Income tax expense 121,000 26,000 214,000 515,000
------------ ------------ ------------ ------------
9. Net profit $ 137,851 $ 15,842 $ 171,617 $ 2,838,800
============ ============ ============ ============
10. Earnings per share: (note 6)
Basic $ .04 $ .01 $ .05 $ .92
Diluted $ .04 $ .01 $ .05 $ .90
============ ============ ============ ============
11. Dividends per share $ -- $ -- $ -- $ .10
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements
3
<PAGE> 4
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
B.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Net earnings $ 171,617 $ 2,838,800
Other comprehensive income (loss)
Equity adjustment from foreign
currency translation 93,173 57,141
------------ ------------
Comprehensive income $ 264,790 $ 2,895,941
============ ============
</TABLE>
See Notes to Financial Statements
4
<PAGE> 5
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
C.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
Current Assets 9/30/99 12/31/98
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
Cash $ 24,797 $ 193,579
Accounts receivable 9,834,204 8,658,444
Inventories (Note 2) 12,325,086 10,896,529
Prepaid expenses 856,514 584,419
Deferred income taxes 468,978 461,000
----------- -----------
Total current assets 23,509,579 20,793,971
Property, Plant & Equipment, at Cost
Land 306,881 306,881
Land Improvements 126,660 126,660
Buildings 5,704,630 5,457,543
Machinery & equipment 11,173,843 9,236,662
----------- -----------
17,312,014 15,127,746
Less: accumulated
depreciation (10,494,662) (9,396,048)
----------- -----------
Net plant and equipment 6,817,352 5,731,698
----------- -----------
Other Assets
Investments in affiliates 51,000 10,000
Patents, licenses & trademarks,
net of accumulated amortization 147,282 195,694
Excess of cost of investment in
stock of subsidiary over equity in
underlying net assets of acquisition 1,644,958 351,721
Sundry 48,930 3,375
----------- -----------
Total assets $32,219,101 $27,086,459
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities 9/30/99 12/31/98
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Notes Payable (Note 5) $ 8,825,650 $4,645,144
Current installments
- Long term debt (Note 5) 565,428 222,726
Accounts payable - trade 3,322,046 2,792,705
Accrued liabilities 1,349,249 1,621,198
Income taxes (165,855) 614,000
----------- ----------
Total current liabilities 13,896,518 9,895,773
Deferred income taxes - Non-current 325,000 325,000
Long term debt
Current portion shown above (Note 5) 4,049,296 3,175,917
Other non-current liabilities 333,868 340,140
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;
3,139,737 shares issued and
3,139,737 outstanding at 9/30/99 313,974 313,974
Additional paid-in capital 4,072,081 4,072,081
Retained earnings 9,203,723 9,032,106
Foreign currency translation 24,641 (68,532)
----------- -----------
13,614,419 13,349,629
----------- -----------
Total liabilities and stockholders'
equity $32,219,101 $27,086,459
=========== ===========
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
TRANS-INDUSTRIES, INC.
Consolidated Statements of Cash Flows
D. For the Nine Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1999 1998
---- ----
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 171,617 $ 2,838,800
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation/Amortization 956,995 714,391
Decrease (increase) in accts. receivable (1,095,328) (400,086)
Decrease (increase) in inventory (1,220,397) (1,738,384)
Decrease (increase) in prepaid expense (269,805) (270,858)
Increase (decrease) in accts. payable 468,841 867,926
Increase (decrease) in accr. liable (336,790) (233,085)
Increase (decrease) in income taxes (779,855) (244,000)
Dividends -0- (307,440)
Other (242,562) (181,729)
----------- -----------
Net Cash Provided (Used) by Operations (2,347,284) 1,045,535
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (1,699,888) (777,087)
Acquisition of Business (1,357,816) -0-
----------- -----------
Net Cash Provided (Used) by Investing (3,057,704) (777,087)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (repayment) of long-term
borrowings 962,527 (543,690)
Net proceeds (payment) of credit line 4,180,506 363,636
Common stock issued through ESOP -0- 16,619
----------- -----------
Net Cash Provided (Used) by Financing 5,143,033 (163,435)
Foreign currency translation 93,173 57,141
----------- -----------
Net increase (decrease) in Cash (168,782) 162,154
Cash at beginning of year 193,579 132,297
----------- -----------
Cash at end of quarter $ 24,797 $ 294,451
=========== ===========
Supplemental Disclosures:
Interest paid $ 624,579 $ 399,130
Income taxes paid $ 900,578 $ 1,572,000
</TABLE>
See Notes to Financial Statements
6
<PAGE> 7
E. 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, 1998.
2. Inventories
The major components of inventories are:
<TABLE>
<CAPTION>
9/30/99 12/31/98
------- --------
<S> <C> <C>
Raw Materials $4,821,302 $4,078,689
Work in Process 4,989,172 4,346,320
Finished Goods 2,514,612 2,471,520
----------- -----------
$12,325,086 $10,896,529
=========== ===========
</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.
7
<PAGE> 8
E. TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Long-Term Debt
Long-term debt at September 30, 1999 consisted of the following:
<TABLE>
<S> <C>
Trans-Industries, Inc., $3,840,000 term note, payable in $3,128,017
monthly installments of $39,036 which includes interest at
bank's prime lending rate, and a balloon payment of $1,723,141
in October 2004. The note is secured by substantially all the
assets of Trans-Industries, Inc. and subsidiaries.
Term note, payable in monthly installments of $896 107,395
including interest at a rate of 6%. The note is due January 21,
2002.
Term note, payable in monthly installments of $16,667 plus interest 966,667
at bank's prime lending rate less 1/4 point.
The note is due July 1, 2004.
Transmatic Europe mortgage note, payable in monthly 186,156
installments of $2,400 including interest at a rate of
7.9%. This note is due April 14, 2009.
Other 226,489
----------
4,614,724
Less current installments (565,428)
----------
Long-term debt $4,049,296
==========
</TABLE>
The Trans-Industries, Inc. term loan agreement contains restrictive
provisions relating principally to the maintenance of working capital,
tangible net worth, and ratio of debt to earnings. At September 30, 1999
the Company was not in compliance and received a waiver from the bank.
The Company also has an unsecured $10,000,000 line of credit of which
$8,825,650 was utilized at September 30, 1999. Interest is charged at the
bank's prime lending rate, less 1/4 point. This line of credit expires on
July 1, 2000.
8
<PAGE> 9
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Earnings Per Share
The following is a reconciliation of the numerator and denominator of the
basic and diluted earnings per share computations.
<TABLE>
<CAPTION>
EARNINGS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------
<S> <C> <C> <C>
Qtr. ended September 30, 1999
-----------------------------
Basic earnings per share:
Earnings available to common
stockholders $137,851 3,139,737 $ .04
Effect of dilutive securities
Stock options -- 1,128 .00
-------------- --------------- ---------
Diluted earnings per share:
Earnings available to stockholders
plus assumed conversions $137,851 3,140,865 $ .04
============== =============== =========
<CAPTION>
EARNINGS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------
<S> <C> <C> <C>
Qtr. ended September 30, 1998
-----------------------------
Basic earnings per share:
Earnings available to common
stockholders $15,842 3,074,396 $ .01
Effect of dilutive securities
Stock Options -- 54,774 (.00)
-------------- --------------- ----------
Diluted earnings per share:
Earnings available to stockholders
plus assumed conversions $15,842 3,129,170 $ .01
============== =============== =========
</TABLE>
During 1998, the Company's stock transfer agent (agent) notified the Company
that the agent's records did not reflect the issuance of 62,948 shares of the
Company's common stock which shares were presented for the payment of dividends.
The certificates underlying the shares were issued prior to 1995. The Company's
Board of Directors authorized the issuance of the 62,948 shares to validate the
underlying certificates. Prior year earnings per share computations were based
on information furnished by the transfer agent and have been revised to give
effect to these shares as if they had been outstanding for all periods
presented. Earnings per share as presented in the accompanying financial
statements have been restated and are less than those previously reported for
1998.
9
<PAGE> 10
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Stock Changes
In June of 1998, the Company received a request from an employee to
exercise his stock option for 1189 shares of common stock at a price of
$6.875 per share. Accordingly, the Company issued a certificate for 1189
shares.
In July of 1998, the Company received a request from an employee to
exercise his stock option for 1200 shares of common stock at a price of
$6.875 per share. Accordingly, the Company issued a certificate for 1200
shares.
8. Segment Information
During 1998, the Company adopted SFAS No. 131, "Disclosure About Segments
of an Enterprise and Related Information," which establishes standards for
the way that public business enterprises report information about operating
segments. This statement also establishes standards for related disclosures
about products and services, geographic areas and major customers. The
Company operates in one market segment, the transportation industry.
Financial information summarized by geographic area is as follows:
<TABLE>
<CAPTION>
9/30/99 9/30/98
-------------------------------------- -----------------------------------
LONG- LONG-
LIVED LIVED
REVENUES ASSETS REVENUES ASSETS
-------- ------ -------- ------
<S> <C> <C> <C> <C>
United States $20,594,250 $7,103,966 $19,590,842 $5,523,831
United Kingdom 2,447,011 1,605,556 2,560,381 602,731
Canada 3,223,076 - 3,066,039 -
Other 1,862,678 - 1,539,331 -
Total $28,127,015 $8,709,522 $26,756,593 $6,126,562
</TABLE>
10
<PAGE> 11
9. Business Acquisition
In February, 1999, Trans-Industries, Inc. acquired 100% of the outstanding
common stock of Plastech Transparencies, Inc., a California based company
specializing in the design and manufacture of glass and window system
technology, for the amount of $1,609,741, in a transaction accounted for as
a purchase. Plastech Transparencies, Inc. has served the replacement and
conversion market in the West Coast transit industry since 1991. Plastech
has become part of Trans-Industries' Transmatic Group of Companies,
operating as a wholly owned subsidiary of Transmatic, Inc. and has changed
its name to TransGlass, Inc.
11
<PAGE> 12
TRANS-INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For Three Months Ended September 30, 1999
Sales and Earnings
Sales for the quarter ended September 30, 1999 were $9,698,966 compared to
$8,338,694 for the same period a year ago. This increase of $1,360,272 is
attributed to increased demand for the Company's lighting products, improved
production throughput of the Company's variable message signs, and the addition
of a new subsidiary, TransGlass, which contributed nominally to total revenue.
During the third quarter of 1999, the Company realized a net profit of $137,851
on sales of $9,698,966. For the same period of the prior year, the Company
reported a net profit of $15,842 on sales of $8,338,694. The net profit for the
third quarter of 1999, in the amount of $137,851, includes a one-time gain of
$395,534, representing net interest awarded the Company relating to damages
awarded in 1998 from a patent infringement lawsuit.
Inventories
Inventory valuation is based upon the lower of cost or market. At September 30,
1999, consolidated inventories were $12,325,086 compared to $8,693,813 a year
ago. This increase of $3,631,273 is to accommodate anticipated growth in sales
volume.
Interest
Interest expense amounted to approximately $266,000 and $146,000 for the third
quarter of 1999 and 1998, respectively. This increase of $120,000 was the result
of higher debt levels in 1999, plus increased interest costs tied to the bank's
prime rate.
Financial Condition
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.
12
<PAGE> 13
Year 2000 Compliance
The Company has recognized that, without some modifications and enhancements,
some of its computer software and hardware may not operate properly after
December 31, 1999. The problem stems from the fact that some computers and
software programs, particularly those which are several years old, only
recognize the last two digits of the year when reading the date. Hence, in the
year 2000 it may read the date as 1900, and cause significant malfunctions.
To correct this potential problem, the Company has completed an internal review
of its computer systems and identified all the areas where modifications and/or
upgrades may be required. This process was completed in the first half of 1998.
Fortunately, the Company, as a whole, is not faced with any serious consequences
relating to the year 2000 issue. Both U.K. operations are utilizing relatively
new data processing systems and are already "Year 2000 Compliant". Likewise, the
Company's lighting and dust control operations have installed a new system in
1998. Testing of the system was completed in October of 1998 and went live in
November 1998, thus eliminating potential year 2000 compliance issues. The
balance of the Company's operations utilize the same software, which consist of
eight modules. All necessary modules have been modified to accommodate a four
digit year and testing has been completed. Except for one subsidiary, the
modified programs have been installed and operating properly for several months.
The last subsidiary is scheduled to be completed in early November.
Additionally, the Company has talked to some of its larger vendors and received
assurances that there will not be any undue disruptions of services or products
due to year 2000 issues.
The Company has estimated the magnitude of costs to accommodate the year 2000
data change to be less than $30,000.00. Because the Company sees little risk
associated with the year 2000 date change, and modifications and enhancements
have progressed so favorably, the Company has not developed a contingency plan
and nor does it intend to.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDING
The Company was the plaintiff in a patent infringement lawsuit filed in the
Federal District Court for the Eastern District of Michigan, the Southern
Division. On April 9, 1998, the District Court awarded the Company $3,023,773 in
damages and $1,119,588 in interest. On May 1, 1998, the defendant paid the
damages awarded to the Company and appealed the interest award. On April 29,
1999, the Court of Appeals, consisting of a three judge panel, ruled in favor of
the defendant, thus allowing the interest calculation to be computed using an
interest rate of approximately 1/2 the original calculation. Because the
decision was not unanimous, the Company appealed this decision. In June of 1999,
the court again ruled in favor of the defendant. The Company has decided that
another appeal would be fruitless and therefore has agreed to settle for
approximately $717,000 as an interest award. In August of 1999, a final interest
award of $719,153 was paid to the Company, thereby bringing a conclusion to this
suit.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Form 8K dated May 4, 1998; receipt of damage award and Declaration of
Special Dividend.
14
<PAGE> 15
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: November 10, 1999 /s/ Kai Kosanke
---------------------------
Kai Kosanke, Treasurer
and Chief Financial Officer
Date: November 10, 1999 /s/ Paul Clemo
---------------------------
Paul Clemo
Assistant Treasurer
15
<PAGE> 16
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
Ex - 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000099102
<NAME> TRANS-INDUSTRIES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 24,797
<SECURITIES> 0
<RECEIVABLES> 9,834,204
<ALLOWANCES> 0
<INVENTORY> 12,325,086
<CURRENT-ASSETS> 23,509,579
<PP&E> 17,312,014
<DEPRECIATION> 10,494,662
<TOTAL-ASSETS> 32,219,101
<CURRENT-LIABILITIES> 13,896,518
<BONDS> 4,049,296
0
0
<COMMON> 313,974
<OTHER-SE> 13,300,445
<TOTAL-LIABILITY-AND-EQUITY> 32,219,101
<SALES> 28,127,015
<TOTAL-REVENUES> 28,798,433
<CGS> 20,043,610
<TOTAL-COSTS> 7,687,184
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 682,022
<INCOME-PRETAX> 385,617
<INCOME-TAX> 214,000
<INCOME-CONTINUING> 171,617
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 171,617
<EPS-BASIC> .05
<EPS-DILUTED> .05
</TABLE>
