<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--- ACT OF 1934
For the quarterly period ended June 30, 1996
-------------------------
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 number 0-3905
----------
TRANSMATION, INC.
- -------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 16-0874418
- ------------------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Vantage Point Drive, Rochester, NY 14624
- --------------------------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 716-352-7777
------------------------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark (X) 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 (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements 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.
<TABLE>
<CAPTION>
Class Number of Shares Outstanding Date
- ----- ---------------------------- ----
<S> <C> <C>
Common 2,606,472 July 25, 1996
</TABLE>
TOTAL PAGES - 15
<PAGE> 2
Part I
FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
- -----------------------------
TRANSMATION, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, March 31,
ASSETS: 1996 1996
------------ ------------
<S> <C> <C>
Current Assets:
Cash $ 216,942 $ 204,046
Accounts Receivable, less allowance
for doubtful accounts of $485,000 at
June 30, 1996, and $436,000 at
March 31, 1996 6,237,379 5,320,996
Inventories 7,115,197 6,491,127
Prepaid Expenses and Deferred Charges 727,200 947,209
Deferred Tax Assets 416,200 310,294
------------ ------------
Current Assets 14,712,918 13,273,672
Properties, at cost, less accumulated
depreciation 2,188,487 1,976,679
Deferred Charges 132,589 172,713
Deferred Income Taxes 72,955 54,366
Other Assets 251,201 224,297
Goodwill 6,233,007
------------ ------------
$ 23,591,157 $ 15,701,727
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities
Notes Payable 1,700,000
Accounts Payable 2,770,833 3,049,880
Accrued Payrolls, Commissions & Other 1,358,149 1,345,499
Income Taxes Payable 328,797 410,566
------------ ------------
Current Liabilities 6,157,779 4,805,945
Long-Term Debt 6,378,149 2,050,800
Deferred Compensation 659,671 682,593
------------ ------------
13,195,599 7,539,338
============ ============
Stockholders' Equity:
Common Stock, par value $.50 per share
Authorized - 8,000,000 shares -
issued and outstanding - 2,606,472 at June 30,
1996, and 2,451,946 at March 31, 1996 1,303,236 1,225,973
Capital in Excess of Par Value 1,768,224 1,124,583
Stocks payable former Altek Owners 1,225,000
Accumulated Translation Adjustment (110,428) (93,819)
Retained Earnings 6,209,526 5,905,652
------------ ------------
10,395,558 8,162,389
------------ ------------
$ 23,591,157 $ 15,701,727
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE> 3
TRANSMATION, INC.
CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
April 1, 1996 - April 1, 1995 -
June 30, 1996 June 30, 1995
----------------- ------------------
<S> <C> <C>
Net Sales $11,047,617 $9,566,497
Cost and Expenses:
Cost of Product Sold 6,733,456 6,033,964
Selling & Administrative Expenses 3,221,128 2,801,684
Research & Development Costs 395,398 267,925
Interest Expense 152,461 112,099
----------------- ------------------
10,502,443 9,215,672
----------------- ------------------
Income Before Taxes 545,174 350,825
Provision for Income Taxes
State and Federal 241,300 148,000
----------------- ------------------
Net Income 303,874 202,825
Retained Earnings at
Beginning of Period 5,905,652 4,670,929
----------------- ------------------
Retained Earnings at
End of Period $6,209,526 $4,873,754
================= ==================
Net Income Per Share $.11 $.08
==== ====
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 4
TRANSMATION, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
June 30, 1996 June 30, 1995
----------- ---------
Cash Flows from Operating Activities
<S> <C> <C>
Net Income $ 303,874 $ 202,825
Items Not Requiring (Providing) Cash
Included in Income
Depreciation and Amortization 236,286 99,724
Provision for Losses on Accounts Receivable 49,000 28,500
Other Assets 109
(Increase)Decrease in Accounts Receivable (320,737) 697,309
Decrease(Increase) in Inventories 217,499 (1,790)
Decrease(Increase) in Prepaid Expenses &
Deferred Charges 260,203 (122,626)
(Decrease) in Accounts Payable (704,531) (916,055)
Increase(Decrease) in Accrued Payrolls, Commissions
and Other Liabilities (313,499) (173,568)
Increase(Decrease) in Income Taxes Payable (81,769) 99,779
(Decrease) in Deferred Compensation (22,922) (21,136)
Increase(Decrease) in Deferred Income Taxes 315
----------- ---------
Net Cash Provided(used) by Operating Activities (376,487) (106,723)
----------- ---------
Cash Flows from Investing Activities:
Purchase of Altek Industries Corp (6,728,293)
Purchases of Properties (60,427) (93,082)
----------- ---------
Net Cash (used in) Investing Activities (6,788,720) (93,082)
----------- ---------
Cash Flows from Financing Activities:
Increase in Notes Payable 1,700,000
Exercise of Stock Options & Warrants 108,404 88,367
Stock Issued - Altek Purchase 612,500
Increase(Decrease) in Long-Term Debt 3,548,808 (143,726)
Stock Payable - Former Altek Owners 1,225,000
----------- ---------
Net Cash Provided by Financing Activities 7,194,712 (55,359)
----------- ---------
Effect of Exchange Rate Changes on Cash (16,609) 5,637
----------- ---------
Net Increase(Decrease) in Cash 12,896 (249,527)
Cash at Beginning of Period 204,046 607,763
----------- ---------
Cash at End of Period $ 216,942 $ 358,236
=========== =========
Cash Paid for Interest and Income Taxes is as follows:
Interest Paid $ 167,343 $ 105,957
Taxes Paid $ 305,190 $ 131,943
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE> 5
TRANSMATION, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Number of
Shares of $.50
Par Value Common Stock Capital
Common Stock Issued and in Excess of Retained
Outstanding Outstanding Par Value Earnings
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Balance, March 31, 1994 2,374,240 $1,187,120 $835,029 $4,289,144
Issuance of Stock 6,400 3,200 14,800
Net Income 381,785
----------------- ----------------- ----------------- -----------------
Balance, March 31, 1995 2,380,640 1,190,320 849,829 4,670,929
Issuance of Stock 71,306 35,653 274,754
Net Income 1,234,723
----------------- ----------------- ----------------- -----------------
Balance, March 31, 1996 2,451,946 1,225,973 1,124,583 5,905,652
Issuance of Stock 154,526 77,263 643,641
Net Income 303,874
----------------- ----------------- ----------------- -----------------
Balance, June 30, 1996 2,606,472 $1,303,236 $1,768,224 $6,209,526
================= ================= ================= =================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE> 6
Note 1 - Revolving Credit Agreement
- -----------------------------------
Borrowings under a secured revolving credit agreement with a bank which extends
through July 31, 1998 total $4,978,149 at June 30, 1996.
Maximum funds available under this credit agreement total $7,000,000. The
interest rate is the bank's prime lending rate or may be fixed for up to a
90-day period.
The revolving credit agreement contains, among other provisions, restrictions on
the annual amount of capital expenditures, restrictions on the annual amount of
expenditures made for the purpose of printing and distributing catalogs and
requirements for minimum amounts of tangible net worth.
Additionally, the company has pledged its personal property and fixtures,
including inventory and equipment, and its accounts receivable as collateral
security for the loan. Further, the company has agreed to pay to the lender an
amount equal to 1/4% of the unused portion of the total credit available. The
fee is payable quarterly. Total commitment fees paid on any unused lines of
credit under revolving credit agreements were immaterial in 1996 and 1995.
The company is in compliance with provisions of its loan agreement or has
received a waiver at June 30, 1996.
Note 2 - Inventories
- --------------------
The major classifications of inventory are as follows:
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
---------- ----------
<S> <C> <C>
Raw Materials and Purchased Parts $1,548,267 $1,412,576
Work in Process 624,003 569,317
Finished Products 4,942,927 4,509,234
---------- ----------
$7,115,197 $6,491,127
========== ==========
</TABLE>
Note 3 - Stockholders' Equity
- -----------------------------
In August 1993, an incentive Stock Option plan was adopted; this plan was
amended in August 1995. Options are available to be granted to employees under
the 1993 Plan at prices not less than fair market value at the date of grant and
are exercisable in annual installments beginning at the date of grant and
expiring up to ten years later. A plan adopted in August 1981 has now expired;
however, certain options remain exercisable under that plan.
6
<PAGE> 7
The following table summarizes the transactions under the plans during 1996,
1995, and 1994:
<TABLE>
<CAPTION>
Option Price
------------
Shares Per Share Aggregate
------ --------- ---------
<S> <C> <C> <C>
Balance, 3/31/94 97,300 $2.25-$4.00 236,425
------------------------------------------
Options Granted During the Year 164,600 4.25 699,550
Options Exercised During the Year (5,200) 2.25 (11,700)
Options Canceled During the Year (12,100) 2.25 (27,225)
------------------------------------------
Balance, 3/31/95 244,600 2.25-4.25 897,050
Options Exercised During the Year (24,400) 2.25 (54,900)
Options Canceled During the Year (11,100) 2.25-6.25 (51,375)
Options Granted During the Year 194,450 4.25-6.63 995,581
------------------------------------------
Balance, 12/31/95 402,550 2.25-6.63 1,777,900
Options Exercised During the Year (27,000) 2.25 (60,750)
Options Canceled During the Year (16,100) 4.25-6.25 (132,850)
Options Granted During the Year 55,280 6.50 359,320
------------------------------------------
Balance, 6/30/96 414,730 $2.25-$6.63 $1,947,826
======= ===== ===== ==========
</TABLE>
116,326 shares are eligible to be exercised under the 1981 and 1993 plans. The
market value of these shares at the date they first became eligible for exercise
ranged from $2.00 to $8.00 per share and aggregated $773,058.
On August 21, 1984, shareholders approved the Directors' Warrant Plan. On August
16, 1995, this plan was amended by shareholders. The Plan provides that warrants
may be granted thereunder to non-employee directors of Transmation to purchase
in the aggregate not more than 100,000 shares of the company's Common Stock. The
purchase price for shares issued under the Directors' Warrant Plan shall be
equal to the fair market value of the stock on the date of the grant of the
warrant. A summary of activity under the 1984 Directors' Warrant Plan is as
follows:
7
<PAGE> 8
<TABLE>
<CAPTION>
Warrant
Shares Price Aggregate
------ ----- ---------
<S> <C> <C> <C> <C>
Balance - 3/31/95 32,500 $3.00 -$3.875 110,625
------------------------------------------
Exercised During the Year (14,500) 3.00 - 3.875 (54,875)
Granted During the Year 14,000 6.500 91,000
Canceled During the Year (2,000) 3.875 (7,750)
--------- ------- --------
Balance - 3/31/96 30,000 3.00 - 6.50 139,000
Exercised During the Year 500 3.00 (1,500)
--------- -------- --------
Balance - 6/30/96 29,500 $3.00 - $6.50 $137,500
========= ============= ========
</TABLE>
On March 11, 1993, the Board of Directors granted the former President of the
company's Instrument Division a non-qualified stock option contract for the
purchase of 25,000 shares of the company's common stock at $3.00 per share, the
fair market value at the date of the grant. Upon his termination in January
1996, the former President of the company's Instrument Division exercised his
right to purchase 15,000 of such shares. The remainder of this grant was
canceled.
On August 15, 1995, the Board of Directors granted the then President of the
Company's Transcat division a non-qualified stock option contract for the
purchase of 30,000 shares of the Company's common stock at $6.25 per share, the
fair market value at the date of the grant. These shares are exercisable in
equal installments beginning at the date of the grant and expiring five years
later.
Note 4 - Net Income Per Share
- -----------------------------
The net income per share amounts in 1996 and 1995 were computed by dividing the
net income by the average number of shares actually outstanding plus common
equivalent shares resulting from the assumed conversion of the dilutive stock
options and warrants. Common and common equivalent shares averaged 2,857,957 in
1996 and 2,461,455 in 1995.
8
<PAGE> 9
Item 2.
- -------
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations
- ----------
On April 3, 1996, Transmation, Inc. acquired the stock of Altek Industries Corp
for a combination of cash, notes payable and stock totaling $6,637,500. The cash
required for the transaction was obtained from funds available under the
Company's revolving credit agreement.
Sales increases during the first quarter resulted from the acquisition of Altek
and from increases in the sale of products and services in the Company's
Transcat division. Sales through the Company's Instrument division are below
plan and organizational changes and aggressive new product efforts have been
implemented to attempt to correct that condition.
Financial Condition
- -------------------
The Company's primary sources of liquidity and capital are funds provided
through its borrowing agreement with a bank, and through management of its
balance sheet. Exclusive of assets acquired in the Altek acquisition,
inventories were reduced by $217,500 in the first quarter and prepaid expenses
(principally catalog related charges) were reduced by $260,000. Accounts
receivable increased by approximately $321,000 in the first quarter and accounts
payable and accrued liabilities were reduced by $704,500 and $288,200
respectively in the quarter. The Company's profitability and cash flow from
operations together with increased bank borrowings financed the increase in
receivables and reductions in accounts payable and accrued liabilities.
Results of Operations
- ---------------------
Comparison of April 1, 1996 - June 30, 1996
- -------------------------------------------
to
April 1, 1995 - June 30, 1995
-----------------------------
Sales increased to $11,047,617 from $9,566,497, an increase of 15% in the
quarter ended June 30, 1996 compared to June 30, 1995. This increase resulted
from the inclusion of Altek Industries Corp in the Company's operations together
with increases in sales and services in the Company's Transcat division.
Cost of Products Sold in the quarter ended June 30, 1996 totaled 61% of sales
compared to 63.1% of sales in the same quarter last year. This improvement is
the result of proportionately more sales of high margin manufactured product in
1996 resulting from our Altek acquisition compared to last year.
9
<PAGE> 10
R&D costs in 1996 totaled 3.6% of sales compared to 2.8% of sales and interest
totaled 1.4% of sales compared to 1.2% of sales in 1995. These changes result
from Transmation's acquisition of Altek Industries Corp.
PART II
-------
OTHER INFORMATION
-----------------
Item 2. Changes in Securities
---------------------
None
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.
TRANSMATION, INC.
Date August 8, 1996 /s/ Robert G. Klimasewski
------------------------- -------------------------
Robert G. Klimasewski
President
Date August 8, 1996 /s/ John A. Misiaszek
------------------------- ------------------------------
John A. Misiaszek
Vice President, Finance
10
<PAGE> 11
INDEX TO EXHIBITS
(2) Plan of acquisition, reorganization, arrangement, liquidation or succession
Not applicable.
(3) (a) Articles of Incorporation
Articles of Incorporation, as amended, are incorporated herein by
reference to Exhibit 4(a) to the Registrant's Registration Statement
on Form S-8 (Registration No. 33-61665) as filed on August 8, 1995.
(b) By-laws
Code of Regulations, as amended, are incorporated herein by
reference to Exhibit 3 to the Registrant's Annual Report on Form
10-K for the fiscal year ended March 31, 1988.
(4) Instruments defining the rights of security holders, including indentures
(a) The documents listed under Item (3) of this Index are
incorporated herein by reference.
(b) Revolving Credit Agreement between the Registrant and
Manufacturers and Traders Trust Company is incorporated herein to
Exhibit 1 to the Registrant's Form 10-Q for the quarter ended
September 30, 1994.
(c) Agreement and Amendment No. 1 to an Existing Revolving Credit
Facility Agreement between the Registrant and Manufacturers and
Trades Trust Company dated September 8, 1995 is incorporated
herein by reference to Exhibit 1 to the Registrant's Form 10-Q
for the quarter ended September 30, 1995.
*(d) Agreement and Amendment No. 2 to an Existing Revolving Credit
Facility Agreement between the Registrant and Manufacturers and
Traders Trust Company dated December 15, 1995, is incorporated
herein by reference to Exhibit 1 to Registrant's Form 10-Q for
the quarter ended December 31, 1995. Upon written request, the
Registrant will provide to security holders copies of any of the
referenced omitted exhibits.
(10) Material Contracts
(a) The documents listed under Item (4) of this Index are
incorporated herein by reference.
(b) Compensation agreements between the Registrant and William J.
Berk are incorporated herein by reference to Exhibit 10 to the
Registrant's Form 10-K for the fiscal year ended March 31, 1984,
and Exhibit 10(b) to the Registrant's Form 10-K for the fiscal
year ended March 31, 1991.
11
<PAGE> 12
(c) Non-Statutory Stock Option Agreement dated March 11, 1993 between
the Registrant and Thomas R. Crumlish is incorporated herein by
reference to Exhibit 10 to the Registrant's Form 10-K for the
fiscal year ended March 31, 1993.
(d) Transmation, Inc. Directors' Stock Plan is incorporated herein by
reference to Exhibit 10(i) to the Registrant's Form 10-K for the
fiscal year ended March 31, 1995 and as amended by reference to
Exhibit 10(a) of the Registrant's Form 10-K for the fiscal year
ended March 31, 1996.
(e) Employment Agreement dated as of April 1, 1995 between the
Registrant and Robert G. Klimasewski is incorporated herein by
reference to Exhibit 10(ii) to the Registrant's Form 10-K for the
fiscal year ended March 31,1995 and amended by reference to
Exhibit 10(d) of the Registrant's Form 10-K for the fiscal year
ended March 31, 1996.
(f) Transmation, Inc. Amended and Restated Directors' Warrant Plan is
incorporated herein by reference to Exhibit 99(b) to the
Registrant's Registration Statement on Form S-8 (Registration No.
33-61665) as filed on August 8, 1995.
(g) Transmation, Inc. Amended and Restated 1993 Stock Option Plan is
incorporated herein by reference to Exhibit 99(c) to the
Registrant's Registration Statement on Form S-8 (Registration No.
33-61665) as filed on August 8, 1995.
(h) Transmation, Inc. Employees' Stock Purchase Plan is incorporated
herein by reference to Exhibit 99(e) to the Registrant's
Registration Statement on Form S-8 (Registration No. 33- 61665)
as filed on August 8, 1995 and as amended by reference to Exhibit
10(b) of the Registrant's Form 10-K for the fiscal year ended
March 31, 1996.
(i) Amendment No. 1 to Transmation, Inc. Directors' Stock Plan is
included herein by reference to Exhibit 10(i) to the Registrant's
Form 10-Q for the quarter ended September 30, 1995.
(j) Non-Statutory Stock Option Agreement dated August 15, 1995
between Transmation, Inc. and Eric W. McInroy is included by
reference to Exhibit 10(j) to the Registrant's Form 10- Q for the
quarter ended September 30, 1995 and as amended by reference to
Exhibit 10(c) of the Registrant's Form 10-K for the fiscal year
ended March 31, 1996.
(11) Statement re computation of per share earnings Computation can be
clearly determined from Note 4 to the financial statements filed with
Item 1.
12
<PAGE> 13
(15) Letter re unaudited interim financial information
Not applicable.
(18) Letter re change in accounting principles
Not applicable.
(19) Report furnished to security holders
Not applicable.
(22) Published report regarding matters submitted to vote of security
holders
Not applicable.
(23) Consents of experts and counsel
Not applicable.
(24) Power of attorney
Not applicable.
*(27) Financial Data Schedule
The Financial Data Schedule is included herein as Exhibit 27 at pages
14 through 15 of this Report.
(99) Additional Exhibits
Not applicable.
(b) A report on Form 8-K was filed on April 3, 1996.
- -----------------
* Exhibit filed with this Report
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's June 30, 1996 Form 10-Q and is qualified in its entirey by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 216,942
<SECURITIES> 0
<RECEIVABLES> 6,722,379
<ALLOWANCES> 485,000
<INVENTORY> 7,115,197
<CURRENT-ASSETS> 14,712,918
<PP&E> 6,480,628
<DEPRECIATION> 4,292,141
<TOTAL-ASSETS> 23,591,157
<CURRENT-LIABILITIES> 6,157,779
<BONDS> 6,378,149
<COMMON> 1,303,236
0
0
<OTHER-SE> 9,092,322
<TOTAL-LIABILITY-AND-EQUITY> 23,591,157
<SALES> 9,528,913
<TOTAL-REVENUES> 11,047,617
<CGS> 5,951,410
<TOTAL-COSTS> 6,733,456
<OTHER-EXPENSES> 3,567,526
<LOSS-PROVISION> 49,000
<INTEREST-EXPENSE> 152,461
<INCOME-PRETAX> 545,174
<INCOME-TAX> 241,300
<INCOME-CONTINUING> 303,874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 303,874
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
