<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
--- of 1934 (No Fee Required)
For the fiscal year ended March 31, 2000
--------------------
OR
___ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No Fee Required)
For the transition period from ______________________ to________________________
Commission file number 0-3905
------
Transmation, Inc.
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(Exact name of registrant as specified in its charter)
Ohio 16-0874418
------------------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10 Vantage Point Drive, Rochester, New York 14624
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 716-352-7777
------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------------------------- -----------------------------------------
None None
------------------------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
--------------------------------------------------------------------------------
(Title of Class)
Common Stock $0.50 Par Value
--------------------------------------------------------------------------------
(Title of Class)
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 or No
--- ---
Total Pages - 39
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Indicate by check mark (X) if disclosure of delinquent filers pursuant to Item
405 of the Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. (X)
The aggregate market value of the voting stock held by non-affiliates of the
registrant is $12,886,672 as of the close of business June 2, 2000. Market value
is determined by reference to the final NASDAQ quotation of the price paid for
Transmation stock as of that date.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the close of business on June 2, 2000.
Class Number of Shares Outstanding
Common 5,984,027
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Documents incorporated by reference and the part of Form 10-K into which they
are incorporated are listed hereunder.
Part of Form 10-K Document Incorporated
----------------- ---------------------
Part III Registrant's definitive Proxy Statement for
Annual Meeting of Shareholders to be held
on August 15, 2000
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Part I
Item 1. Business
Transmation, Inc. (the "Company"), an Ohio corporation organized in 1964, is
primarily engaged in the sale and distribution, development, manufacture and
service of electronic instrumentation which is used principally for measurement,
indication and transmission of information.
The principle products and services sold by Transmation are test, measurement
and calibration instruments used to calibrate, measure and test many physical
parameters in industry and science. Products sold and serviced by Transmation
are manufactured by the Company and by approximately two hundred fifty other
manufacturers.
Principle products sold by Transmation range in price from $100 to more than
$20,000 for large calibration test systems. Services sold by Transmation range
in price from $25 for a product certification to more than $100,000 for large
on-site service projects.
Transmation believes it is uniquely positioned in its industry in that it
provides customers significant opportunity to fulfill many of their product
purchasing and product service requirements from one vendor. The ability to sell
both products and services to customers enables the Company to distribute its
sales and administrative costs over both sales activities and to better
penetrate customer accounts to achieve enhanced sales results from customers
compared to competitors who do not offer both sales and service solutions for
customers.
The principal market for Transmation's products and services is within the
process industry and is primarily directed to the petroleum refining and
chemical manufacturing industries, and secondarily to the pulp and paper, gas
pipeline and primary metals industries.
Transmation's sales are accomplished through (i) its Transcat Distribution
Division ("Transcat") which uses both direct marketing (catalog and internet)
and direct salesmen, (ii) a manufacturing subsidiary, The Products Group, which
produces products primarily under the Transmation and Altek product labels,
(iii) the MetersandInstruments.com subsidiary, begun in July 1999, a distributor
to price-sensitive customers in discrete industries having a well defined
purchasing intent over the internet, and (iv) three foreign subsidiaries.
Sales of test, measurement and calibration equipment and services are
principally made through Transcat, which sells through a catalog distributed to
existing and prospective customers, through the internet and through salespeople
in selected locations in the United States and Canada. Transcat sells
Transmation-manufactured products and re-sells the products of approximately 250
other manufacturers through an annual catalog, which is currently approximately
800 pages. To date, more than one million catalogs have been distributed through
this part of Transmation's sales and marketing effort. In addition to the annual
catalog, Transcat makes periodic mailings to existing and prospective customers
to spur additional sales as well as to generate names for future catalog or
product mailings. In fiscal 1999, Transcat introduced Transcat.com(R), an
Internet site containing much of Transcat's catalog "on-line", making on-line
commerce available for Transcat's customers.
In fiscal 2000, Transmation, Inc. incorporated MetersandInstruments.com, also an
"on-line" sales activity, to target sales to customers traditionally very well
informed with respect to their product purchase requirements and also very price
sensitive in their purchasing practices. In addition to its "on-line" catalog,
MetersandInstruments makes periodic mailings to existing and prospective
customers in both electronic and traditional formats and advertises extensively
in appropriate trade publications to promote site awareness among customers and
prospective customers.
In addition to catalog and internet sales, Transmation engages in direct sales
of test, measurement and calibration equipment and services. The Company employs
over 20 direct sales people and sales managers in Transcat. The Company also
maintains one regional sales manager in China. In addition, the Company has
arrangements with over 60 sales representative and distributor organizations,
each employing one or more sales engineers, located in other areas of
concentrated demand for Transmation's products in the United States, Canada, the
Far East, Central and South America, Australia, the Middle East and Eastern and
Western Europe. These sales representatives and distributors either promote
Transmation's products on a commission basis or purchase them from Transmation
at a discount and resell such products to end users.
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The Company's Transcat CalLab operations, 6 of which are Guide 25 certified and
all of which are ISO 9002 registered, provide periodic calibration and repair
services for customers owning instrumentation manufactured by others and by
Transmation. At March 31, 2000, there were Transcat CalLab facilities in 13
locations in the United States and Canada.
The Company's manufacturing operations, located in Rochester, New York,
primarily develop, manufacture and sell electronic and pneumatic instrumentation
used to calibrate and test instrumentation used primarily in the process
industries. The facility has ISO 9001 registration.
The Company's value-added operation, which customizes, modifies and repairs
analog gauges, is located in Baltimore, Maryland.
Since the beginning of fiscal 1997, Transmation has expanded its business
through three acquisitions:
Altek Acquisition
In April 1996, the Company acquired all of the stock of Altek, a manufacturer of
electronic calibration equipment, for cash and notes aggregating $4.8 million,
and 300,000 shares of Common Stock. As a result of this acquisition, the
Company's sales have increased by more than $5 million annually.
EIL Acquisition
In April 1997, the Company acquired substantially all of the assets of the Sales
and Service Divisions of E.I.L. Instruments, Inc., a distributor and servicer of
electronic test, measurement and calibration instrumentation, for $22 million in
cash and the value of certain assumed liabilities. As a result of this
acquisition, the Company has added a large base of potential new customers, a
value-added meter modification business and several new product lines, and has
significantly increased its overall capabilities to provide repair, calibration
and certification services.
Metermaster Acquisition
In February 1999, the Company acquired the capital stock of Metermaster, Inc., a
distributor of electronic test, measurement and calibration instrumentation and
value-added provider of analog gauges, for approximately $1,000,000 in cash plus
the assumption of liabilities totaling approximately $7,600,000. As the result
of this acquisition, the Company has added a large base of potential new
customers, added significantly to its value-added business, and acquired a
presence in potentially important new market territories not formerly served by
Transmation.
Transmation's future performance will depend substantially on its ability to
integrate and manage its acquired businesses and operations, to respond to
competitive developments, to further develop markets for its products and
services, and to anticipate future customer needs and to provide solutions for
customers in a timely, cost-effective manner.
The Company's principal executive offices are located at 10 Vantage Point Drive,
Rochester, New York 14624. Its telephone number is (716) 352-7777.
The following information is set forth as it is deemed material to an
understanding of the business of the registrant:
Competition
The market to which the Company sells the products it manufactures is highly
competitive, and the Company expects that competition will increase in the
future. Failure to keep pace with rapid technological advances, which
characterize the industry, could adversely affect the Company's competitive
position with respect to the products it manufactures and the way it distributes
its products. In its manufacturing operation, the Company competes on the basis
of price, performance, inventory availability, quality, reliability and customer
service and support. To maintain its competitive position with respect to
manufactured product, the Company must continue to develop new products,
periodically enhance its existing products, reduce its cost of manufacturing
such products, maintain the quality of its products and compete effectively in
the areas described above. Although the Company believes that its products are
competitive in each of the above-described areas, there can be no assurance that
existing or future competitors, some of which have greater financial resources
than the Company, will not introduce comparable or superior products
incorporating
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more advanced technology at lower prices. The Company's competitors are
numerous, ranging from large corporations to many relatively small and highly
specialized firms. Although no single company competes in all of the Company's
product markets, some of the major competitors which compete in the Company's
individual product markets include Fluke, a unit of Danaher, Beta (a division of
Hathaway Corporation) and certain divisions of Ametek Corporation. Some of these
competitors have more extensive sales, distribution, engineering, manufacturing
and/or marketing capabilities and substantially greater financial, technological
and personnel resources than does the Company.
The market to which the Company, through Transcat, sells products and related
services is also highly competitive. Competition for sales in distribution and
service is quite fragmented and ranges from large, well financed national
distributors to small local distribution organizations and service providers, as
well as the manufacturers of the products themselves. Transcat competes on the
basis of price, inventory availability, service quality and customer service and
support. To maintain its competitive position with respect to such products and
services, the Company must continually demonstrate to customers its commitment
to achieving the highest level of performance possible for a distributor and
compete effectively in the areas described above.
Significant Customers
There were no sales to any customer or controlled group which amounted to 10
percent or more of the Company's consolidated net sales during the years
2000-1998, nor is the Company dependent on a single customer or a few customers,
the loss of any one or more of which would have a material adverse effect on the
Company.
Backlog
At the close of the fiscal year ended March 31, 2000, Transmation had a firm
order backlog of approximately $3,125,000 as compared to $2,483,000 in 1999 and
$2,485,000 in 1998.
It is anticipated that 100 percent of Transmation's backlog existing on March
31, 2000 will be filled by shipments in fiscal year 2001. Transmation's cycle of
sales to delivery at the present time is 1 day to 12 weeks on all product
categories except for process monitoring systems, where the cycle is 10-40
weeks. However, backlog has generally not been a significant factor in
Transmation's business.
Seasonally
Transmation does not believe that its line of business has any significant
seasonal factor.
Raw Materials
Finished products required for the Transcat division's catalog sales are
generally available from only one source per product (the manufacturer) although
on occasion substitutions of product are possible. Additionally, while the raw
materials and components essential to Transmation's manufacturing business are
available from a number of sources of supply, a portion of the Company's
manufacturing operations is dependent on the ability to deliver completed
products, sub-assemblies or components in time to meet critical distribution and
manufacturing schedules. In certain instances, important parts and components
are available through fewer suppliers than Transmation deems suitable. If such
suppliers should fail in deliveries, delays in Transmation's production could
result which, in turn, could have a material adverse effect on the Company's
business, prospects, results of operations and financial condition.
Periodically, Transmation has experienced delays in obtaining certain parts and
components or finished products. Such delays are primarily attributable to
demand for parts or products and long lead times. In order to minimize such
delays, Transmation has placed scheduled blanket purchase orders, has sought out
alternate sources of supply, has provided vendors with greater lead time in
filling such orders and has placed certain finished product in its inventory.
Transmation believes that such delays have not had a material adverse effect on
its business to date, although it cannot predict what effect such delays may
have in the future.
Patents
The Company's success and ability to compete depends in part upon protecting its
proprietary rights in its products, its name and its trade names. There can be
no assurance that the measures taken by the Company will be adequate to deter
misappropriation of its products, its name and its trade names or independent
third-party development of its products, or that its intellectual property
rights
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can be successfully enforced or defended if challenged. Given the continuing
development of technology, there can be no assurance that certain aspects of the
Company's products do not or will not infringe upon the existing or future
proprietary rights of others or that, if licenses or rights are required to
avoid infringement, such licenses or rights could be obtained on terms that
would not have a material adverse effect on the Company, if at all.
It is the opinion of Management that the obtaining of patent protection is not
essential to the conduct of Transmation's business. Transmation has, however,
sought patent protection for its manufactured products in certain instances and
presently holds several United States patents, the most recent of which was
granted in 1994; patents expire at various dates through 2012. Transmation
believes that the patents obtained provide a short-term marketing benefit,
particularly when marketing products against similar products produced by
competitors. However, Transmation does not believe that the patents have a
significant impact on its business.
Transmation has registered numerous trademarks in the United States Patent and
Trademark Office, including Transcat(R), Quick-Cal(R), CalXpress(R), and Shop
Access(R).
Research and Development
During the fiscal year ended March 31, 2000, Transmation expended approximately
$1,513,077 in research and development as compared with an approximate
expenditure of $1,616,747 in 1999 and $1,660,110 in 1998. The research and
development costs in fiscal 2000 reflected the Company's efforts in all of its
product lines in its Products Group.
Research and development is Company sponsored. Approximately 16 of its employees
and several consultants are engaged in product development. All such employees
hold technical degrees.
Many of the instruments which the Company designs and manufactures are used in
the petroleum refining and chemical manufacturing industries. The tolerance for
error in the design, manufacture or use of these products may be small or
non-existent. If an instrument designed or manufactured by the Company is found
to be defective, whether due to design or manufacturing defects, improper use of
the product or other reasons, the instrument may need to be recalled, possibly
at the Company's expense. Furthermore, the adverse effect of a product recall on
the Company might not be limited to the cost of the recall to the Company.
Recalls, especially if accompanied by unfavorable publicity or termination of
customer contracts, could result in substantial costs, loss of revenues and
diminution of the Company's reputation, each of which could have a material
adverse effect on the Company's business, prospects, results of operations and
financial condition. In addition, the manufacture and sale of the instruments
manufactured by the Company also involves the risk of product liability claims.
The Company evaluates its insurance coverage from time to time in view of
developments in its business and products currently under development. Product
liability insurance is expensive and, in the future, may not be available on
acceptable terms, in sufficient amounts, or at all. A successful claim brought
against the Company in excess of its insurance coverage or any material claim
for which insurance coverage is denied or limited could have a material adverse
effect on the Company's business, prospects, results of operations and financial
condition.
Employees
At March 31, 2000, Transmation employed 351 persons, including 3 part time.
Transmation employed 418 persons as of March 31, 1999, and at March 31, 1998,
Transmation employed 407 persons (including 3 part-time employees). None of
Transmation's employees is subject to collective bargaining agreements.
Environmental Matters
Registrant does not believe that compliance with Federal, State or Local
provisions relating to the protection of the environment have any material
effect on its capital expenditures, earnings or competitive position.
Information as to classes of similar products:
The Company sells and services predominately one type of product, that being
test, measurement and calibration products.
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Information Regarding Export Sales
Approximately 14.9 percent of Transmation's sales in 2000 resulted from sales in
foreign countries. This compares with 18.8 percent of sales in 1999 and 19.1
percent of sales in 1998. In 2000, the percentage of foreign sales decreased
compared to 1999 as the result of the acquisition of Metermaster, Inc. in
February 1999. Metermaster's business is conducted entirely in the United
States. In 1999, the percentage of foreign sales decreased compared to 1998 as
the result of continuing unsettled economic conditions, which continued in the
Far East, a major Transmation market. Sales in foreign countries generate
relatively the same profit margins as domestic sales. During fiscal 1998, many
Asian currencies weakened significantly compared to the U.S. dollar and that
weakness continued throughout 2000. The Company believes the stronger U.S.
dollar contributed to reduce sales in all years 1998-2000, below levels, which
would otherwise have been anticipated from Asian markets. Those markets are
areas of significant market potential for the Company. Management believes that
continued weakness in Asian currencies will have a negative influence on our
future sales to Asia although it is impossible to predict the magnitude of such
impact. In addition, Transmation's revenues are subject to the customary risks
of operating in an international environment, including the potential imposition
of trade or foreign exchange restrictions, tariff and other tax increases,
fluctuations in exchange rates and unstable political situations, any one or
more of which could have a material adverse effect on the Company's business,
prospects, results of operations and financial condition.
The information contained in Notes 2 and 3 to the Financial Statements of this
report is incorporated herein by reference.
Item 2. Properties
During 1999, Transmation sold its former facility at Mt. Read Boulevard in
Rochester, New York for net proceeds totaling approximately $423,000. The
operations of both its former Instrument Division manufacturing division and its
Altek subsidiary were consolidated into a facility of approximately 26,000
square feet at 35 Vantage Point Drive in Rochester, New York on April 1, 1999.
In addition, Transmation has leased an additional 24,000 square feet of space in
Rochester. This space is being used for certain executive, administrative,
sales, service and manufacturing purposes. The lease for this space will expire
in October 2002.
Various sales office and CalLab space is leased by the Company and its
subsidiary, Transmation (Canada), Inc., and is considered adequate to meet both
present and future needs in those locations. (See Note 7 to the Financial
Statements.)
Generally, Transmation's present facilities are being fully utilized and are
considered suitable for its current needs and there is no present requirement
for significant additional space. Any expansion or change in business facilities
as the result of a consolidation of manufacturing operations will be made in the
future, if necessary.
Item 3. Legal Proceedings
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
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Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is traded in NASDAQ under the symbol TRNS. A record
of actual transactions in Transmation's stock is reflected in the following
table:
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
2000 High $4.50 $3.38 $3.25 $4.00
Low $2.50 $2.56 $1.47 $2.25
1999 High $8.50 $6.31 $4.75 $5.38
Low $6.00 $3.00 $2.88 $2.63
</TABLE>
At June 2, 2000, there were approximately 917 shareholders.
The Company has paid no cash dividends since its inception.
During fiscal 2000, the Company issued the following securities which were not
registered under the Securities Act of 1935, as amended (the "Act"). Each of
such issuances was made by private offering in reliance on the exemption from
the registration provisions of the Act provided by Section 4(2) of the Act. The
facts relied upon to establish such exemption include the recipients'
representations as to their investment intent with respect to such securities
and restrictions on the transfer of such securities imposed by the Company:
(1) On October 29, 1999, as part of the consideration authorized by the
Board of Directors to compensate the Lead Director of the Board for his
services theretofore rendered, the Company issued to him 870 shares of
Common Stock.
(2) On May 11, 2000, the Company issued to a consultant and former
executive officer of the Company, 800 shares of Common Stock earned by
him during fiscal 2000 pursuant to a certain Employer Consultant
Agreement dated January 24, 2000.
Item 6.
Transmation, Inc.
Selected Financial Data
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales $79,968,749 $70,873,287 $79,517,898 $47,311,224 $38,449,758
----------- ----------- ----------- ----------- -----------
Operating Income $ 121,389 $ 3,756,122 $ 4,187,289 $ 3,435,961 $ 2,165,037
----------- ----------- ----------- ----------- -----------
Net (Loss) Income $(2,490,110) $ 1,049,101 $ 997,971 $ 2,059,736 $ 1,234,723
----------- ----------- ----------- ----------- -----------
(Loss) Income Per
Share - Basic $ (.42) $ .18 $ .17 $ .37 $ .26
----------- ----------- ----------- ----------- -----------
(Loss) Income Per
Share - Diluted $ (.42) $ .17 $ .16 $ .35 $ .24
----------- ----------- ----------- ----------- -----------
Total Assets $52,358,728 $57,295,584 $51,875,214 $25,858,358 $15,701,727
----------- ----------- ----------- ----------- -----------
Long-Term Debt $26,693,400 $26,166,900 $21,752,922 $ 6,000,000 $ 2,050,800
----------- ----------- ----------- ----------- -----------
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Increases (Decreases) in Consolidated Operating Results Compared to Prior Year.
<TABLE>
<CAPTION>
$000
----
2000 1999
---------------------- ----------------------
Change from % Change from %
Prior Year - Prior Year -
----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 9,095 13 $(8,645) (11)
Costs and Expenses:
Cost of Products Sold 10,124 21 (6,812) (13)
Selling and Administrative Expenses 2,710 15 (1,358) (7)
Research and Development Costs (104) (6) (44) (3)
Interest Expense 714 32 (331) (13)
Income from Operations (4,349) (282) (100) (6)
Other Income (246) (100) 246
(Loss) Income Before Income Taxes (4,595) (257) 146 9
Provision for Income Taxes 1,056 143 95 15
Net (Loss) Income $(3,539) (337) $ 51 5
(Loss) Earnings Per Share - Diluted $ (.59) (347) $ .01 6
</TABLE>
Net Sales
The 13% increase in net sales in 2000 compared to 1999 is attributable to the
acquisition of Metermaster Inc. by Transmation, Inc. in February 1999.
The 11% decrease in net sales in 1999 compared to 1998 is attributable to lower
demand for Transmation's products and services as the result of economic
uncertainties which existed in the Far East, a major market for the Company, and
as the result of low oil prices which existed throughout much of fiscal 1999
which reduced economic activity in major markets which the company serves.
Cost of Product Sold
Cost of product sold increased by $10,124,000, or 21% in 2000 compared to 1999.
During 2000, the Company identified $2,600,000 of excess and slow-moving
inventory within its Transcat Division. This accumulation of unusable inventory
resulted from overly aggressive sales forecasting and the failure to properly
take advantage of vendor restocking policies on a timely basis. The Company has
implemented procedures which should reduce its exposure to future inventory
writedowns resulting from such occurrences. Additionally in 2000, the Company
began its MetersandInstruments.com subsidiary. This subsidiary sells products to
customers over the World Wide Web at discounts to prices otherwise available in
the marketplace. Discounts offered through this sales channel reduce margins the
Company would otherwise achieve. Further, in 2000, the Company sold
proportionately more lower margin distribution product than in 1999 also causing
further erosion of the Company's gross margin compared to 1999.
In 1999, cost of product sold decreased by 13% compared to 1998. This decrease
resulted from lower sales volumes in 1999 vs. 1998 and from cost savings
initiatives in 1999 in both the Company's manufacturing and service
organizations.
Selling and Administrative Expenses
Selling and administrative expenses increased by 15% in 2000 compared to 1999.
In addition to increases which resulted from higher sales volumes, one-time
charges including $468,000 for severance payments and a $150,000 charge to
increase the reserve for bad debts are included in 2000 amounts. Exclusive of
those one-time charges, selling and administrative costs increased by 11.7% in
2000, a rate somewhat lower than the rate of sales increases achieved in 2000.
Selling and administrative expenses decreased by 7% in 1999 compared to 1998.
The decrease in 1999 was the result of cost savings initiatives implemented in
the Company's Sales and Administrative departments throughout fiscal 1999.
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Research and Development
Research and development costs decreased by 6% in 2000 compared to 1999.
Spending in the research and development effort is considered appropriate to
enable the Company to maintain its competitive position in the marketplace. In
1999, research and development spending decreased by 3% compared to 1998.
Spending is considered appropriate to enable the Company to maintain its
competitive position in the marketplace.
Interest Expense
Interest expense increased by 32% in 2000 compared to 1999. This increase is the
result of higher rates and higher average borrowings in 2000 compared to 1999
combined with a charge imposed by Transmation's lenders during the third quarter
of fiscal 2000 due to Transmation's failure to comply with certain financial
covenants of its borrowing agreement, which failures were waived by the lenders
as of March 31, 2000.
Interest expense decreased by 13% in 1999 compared to 1998. That decrease was
the result of a reduction in average borrowings outstanding during 1999 compared
to 1998, and as the result of a new borrowing agreement the Company entered into
in August 1998 which called for the Company to pay lower rates than did the
Company's previous debt agreement.
Other Income
There was no other income in 2000.
Other income in 1999 is comprised of the profit realized on the sale of the
Company's former manufacturing facility in Rochester, New York. The Company
consolidated both of its manufacturing operations into a single location on
April 1, 1999.
Income Taxes
The Company's effective income tax benefit in 2000 is 11.4% compared to an
effective tax rate of 41.3% on pre-tax profits in 1999. The Company is limited
as to the amount of its loss it can carry back against taxes paid in prior years
and will claim benefits from existing net operating losses in future years.
The Company's effective tax rate in 1999 was 41.3% of pre-tax profits in 1999
compared to 39.2% of profits in 1998. The higher tax rate in 1999 compared to
1998 is primarily the result of an increase in income in the Company's Canadian
subsidiary, where higher tax rates exist.
Impact of Inflation
The effects of inflation have not been significant to Transmation during
2000-1998 because inflation rates have been relatively low.
Year 2000 Issue
The Company has not incurred any material adverse effects as the result of Year
2000 issues.
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Liquidity and Capital Resources:
Cash Flows
$000
----------------------------------------
2000 1999 1998
---- ---- ----
Cash Provided (used) by:
Operating Activities $ 293 $ 4,642 $ 2,852
Investing Activities $(1,491) $(2,768) $(24,084)
Financing Activities $ 1,355 $(2,165) $ 21,117
Operating Activities
Net cash from operations totaled $293,000 in 2000, a decrease of $4,350,000 from
1999. The primary reason for reductions in cash provided from operations in 2000
compared to 1999 was the net loss of $2,490,000 recorded in 2000 together with
the reduction in trade accounts payable of $4,588,000 in 2000. Offsetting the
foregoing uses of cash for the Company in 2000 were amortizations of goodwill
and catalog costs together with depreciation which totaled $4,808,000 in 2000
compared to $3,057,424 in 1999, and the reduction of inventories by $2,933,000
in 2000 (of which $2,600,000 resulted from a one-time charge) compared to an
increase in inventories of $500,000 in 1999.
Net cash from operations totaled $4,642,000 in 1999, an increase of $1,790,000
from 1998. Trade accounts receivable were reduced by $1,667,000 from amounts
outstanding one year earlier and trade accounts payable increased by $757,000
compared to the prior year (after giving consideration to such amounts as were
purchased in the Metermaster acquisition). Additionally, depreciation and
amortization increased by $346,000 in 1999 compared to 1998 providing additional
cash flow. Inventories increased by $500,000 in 1999 compared to 1998 partially
offsetting the favorable cash flow provided by the increased accounts payable.
Investing Activities
Cash used in investing activities totaled $1,491,000 in 2000 compared to
$2,768,000 in 1999. The Company received a return of deposits totaling $457,000
relating to its purchase of Metermaster, Inc. in 1999. In April 1997, the
Company invested $22,000,000 in its purchase of the Sales and Service divisions
of E.I.L. Instruments. Capital assets acquired totaled $1,949,000 in 2000,
$1,702,000 in 1999 and $2,084,000 in 1998. Additionally in 1999, the Company
sold its former manufacturing facility in Rochester, New York for net proceeds
totaling $423,000.
There are no material commitments for capital expenditures in fiscal 2001 as of
this date.
Financing Activities
In 2000, the Company increased its debt by $1,027,000. Term debt was reduced by
$2,200,000 in 2000 using proceeds from its available line of credit which
increased by $3,227,000 in 2000. The Company received $329,000 from the issuance
of stock under its stock option, directors' stock plan and stock purchase
programs in 2000.
In 1999, the Company used $2,165,000 to reduce debt. Proceeds from long-term
debt totaled $7,428,000 in 1999 and such proceeds were used to repay $2,500,000
on Notes Payable which existed at March 31, 1998. Additionally, the Company used
proceeds from long-term debt to reduce amounts due under its revolving credit by
$5,780,000, repay term debt of $1,264,000, and repurchase $453,000 of its common
stock (119,358 shares) in 1999. The Company received $405,000 from the issuance
of stock under its stock option, directors' stock plan and stock purchase
programs in 1999.
11
<PAGE> 12
Forward-looking Statements
This Report may contain forward-looking statements based on current
expectations, estimates and projections about Transmation's industry,
management's beliefs and assumptions made by management. Words such as
"anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates",
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult to forecast. Therefore, actual results may differ materially from
those expressed or forecast in any such forward-looking statements. Transmation
undertakes no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to changes in interest rates results from investing and
borrowing activities. The Company has entered into interest rate swap agreements
to effectively limit its exposure to upward interest rate movements. These
financial instruments have the effect of changing the interest rate of the
original borrowing with the objective of minimizing the Company's risk relative
to potential increases in interest rates. The maturities of these instruments
are closely matched with maturities of the underlying debt. The notional
principal amount of these derivative instruments was $15,000,000 at March 31,
2000 and 1999. Underlying base fixed interest rates on these instruments ranged
from 5.82% to 6.20% and are periodically adjusted to reflect leverage ratios
under the loans. At March 31, 2000, rates ranged from 8.22% to 8.60%. (There
were no similar instruments at March 31, 1998.) This activity resulted in a
substantial portion of floating interest rate debt being swapped into fixed
interest rate debt as of both March 31, 2000 and 1999. Interest rate swaps
effectively hedge interest rate exposures; the net cash amounts paid or received
on the agreements are recognized as adjustments to interest expense. The
estimated amount that the Company would have paid to terminate the agreements at
March 31, 1999, taking into account current interest rates and the current
creditworthiness of counterparties, is $298,279. At March 31, 2000, the Company
would have received $114,506 had it terminated the agreements.
The counterparty to the financial instruments discussed above expose the Company
to credit risks to the extent of non-performance. The credit rating of the
counterparty, which is the Company's main lender, is regularly monitored and
thus credit loss arising from counterparty non-performance is not anticipated.
Item 8. Financial Statements and Supplementary Data
Transmation, Inc.
Index to Financial Statements
Document Page
-------- ----
Report of Independent Accountants 13
Consolidated Balance Sheet - March 31, 2000, 1999 14
Consolidated Statement of Income - March 31, 2000, 1999, 1998 15
Consolidated Statement of Cash Flows - March 31, 2000, 1999, 1998 16
Consolidated Statement of Stockholders' Equity - March 31, 2000,
1999, 1998 17
Notes to Consolidated Financial Statements 18-29
Schedule II - Valuation and Qualifying Accounts - March 31, 2000,
1999, 1998 30
All other schedules have been omitted because they are not applicable or the
required information is shown in the Financial Statements or notes thereto.
12
<PAGE> 13
Report of Independent Accountants
To the Stockholders of Transmation, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Transmation, Inc.
and its subsidiaries at March 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 2000, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Rochester, New York
May 17, 2000, except for Note 5, which is as of June 23, 2000
13
<PAGE> 14
Transmation, Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash $ 508,453 $ 282,625
Accounts Receivable, less allowance for doubtful accounts of $363,500 in 2000, and
$549,000 in 1999 11,635,069 13,301,156
Inventories 8,834,612 12,009,770
Income Taxes Receivable 963,343 371,673
Prepaid Expenses and Deferred Charges 1,577,413 1,905,008
Deferred Tax Assets 582,427 257,480
----------- -----------
Current Assets 24,101,317 28,127,712
Properties, at cost, less accumulated depreciation 6,542,814 6,886,231
Goodwill, less accumulated amortization of $3,726,805 in 2000 and $2,473,621 in 1999 21,245,824 21,738,856
Deferred Charges 185,379 214,295
Deferred Income Taxes 65,692
Other Assets 283,394 262,798
----------- -----------
$52,358,728 $57,295,584
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current Portion of Long-Term Debt $ 2,700,000 $ 2,200,000
Accounts Payable 7,103,734 11,423,358
Accrued Payrolls, Commissions and Other 2,418,299 2,167,714
----------- -----------
Current Liabilities 12,222,033 15,791,072
Long-Term Debt 26,693,400 26,166,900
Deferred Compensation 360,108 431,609
Deferred Tax Liabilities 269,480
----------- -----------
39,545,021 42,389,581
----------- -----------
Stockholders' Equity
Common Stock, par value $.50 per share - Authorized - 15,000,000 shares 3,050,159 2,966,371
Capital in Excess of Par Value 2,826,208 2,581,055
Accumulated Other Comprehensive Income (131,695) (200,568)
Retained Earnings 7,522,350 10,012,460
----------- -----------
13,267,022 15,359,318
Treasury Stock, at cost, 119,358 shares in 2000 and 1999 (453,315) (453,315)
----------- -----------
12,813,707 14,906,003
----------- -----------
$52,358,728 $57,295,584
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
14
<PAGE> 15
Transmation, Inc.
Consolidated Statement of Income
<TABLE>
<CAPTION>
Year Ending March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Net Sales $79,968,749 $70,873,287 $79,517,898
----------- ----------- -----------
Costs and Expenses:
Cost of Product Sold 57,787,484 47,663,742 54,475,620
Selling and Administrative Expenses 20,546,799 17,836,676 19,194,879
Research and Development 1,513,077 1,616,747 1,660,110
Interest Expense 2,930,499 2,216,262 2,547,218
----------- ----------- -----------
82,777,859 69,333,427 77,877,827
----------- ----------- -----------
(2,809,110) 1,539,860 1,640,071
Other Income, Gain on Sale of Land 246,341
----------- ----------- -----------
(Loss) Income Before Income Taxes (2,809,110) 1,786,201 1,640,071
-----------
(Benefit) Provision for Income Taxes (319,000) 737,100 642,100
----------- ----------- -----------
Net (Loss) Income $(2,490,110) $ 1,049,101 $ 997,971
=========== =========== ===========
(Loss) Earnings Per Share - Basic $ (.42) $ .18 $ .17
=========== =========== ===========
(Loss) Earnings Per Share - Diluted $ (.42) $ .17 $ .16
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
15
<PAGE> 16
Transmation, Inc.
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ending March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net (Loss) Income $(2,490,110) $ 1,049,101 $ 997,971
Adjustments to reconcile net income to net cash provided from operating
activities:
Depreciation and Amortization 4,807,518 3,057,424 2,711,779
Increase in CSV of Life Insurance Policies (20,596) (9,285) (2,196)
Provision for Losses on Accounts Receivable (185,500) (108,000) 37,191
Deferred Income Taxes (106,000) 782,982 22,000
Provision for Losses on Inventories 1,589,228 317,708 176,509
Gain on Sale of Land, Net (246,341)
Changes in Assets and Liabilities
Accounts Receivable 1,851,587 1,667,477 700,688
Inventories 1,343,794 (818,162) (819,102)
Prepaid Expenses and Deferred Charges (967,908) (398,607) (219,878)
Other Assets 284,277
Accounts Payable (4,588,072) 757,001 295,054
Other Liabilities (132,628) (723,835) (793,304)
Income Taxes Receivable/Payable (737,087) (606,657) (454,477)
Deferred Compensation (71,501) (78,372) (84,045)
----------- ----------- ------------
Net Cash Provided by Operating Activities 292,725 4,642,434 2,852,467
----------- ----------- ------------
Cash Flows from Investing Activities:
Purchase of EIL Instruments (22,000,000)
Proceeds from Sales of Land, Net 423,000
Purchase of Metermaster, Inc. 457,487 (1,488,553)
Purchase of Properties (1,948,698) (1,702,397) (2,084,320)
----------- ----------- ------------
Net Cash used in Investing Activities (1,491,211) (2,767,950) (24,084,320)
----------- ----------- ------------
Cash Flows from Financing Activities:
Purchase of Treasure Shares (453,315)
(Decrease) Increase in Notes Payable (2,500,000) 1,900,000
Repayment of Long-Term Debt (2,200,000) (1,264,000) (714,000)
Revolving Line of Credit, Net 3,226,500 (5,780,266) 6,822,922
Issuance of Common Stock 328,941 404,838 607,636
Proceeds from Long-Term Debt 7,428,000 12,500,000
----------- ----------- ------------
Net Cash Provided (Used) By Financing Activities 1,355,441 (2,164,743) 21,116,558
----------- ----------- ------------
Effect of Exchange Rates on Cash 68,873 (79,780) 9,744
----------- ----------- ------------
Net Increase (Decrease) in Cash 225,828 (370,039) (105,551)
Cash at Beginning of Period 282,625 652,664 758,215
----------- ----------- ------------
Cash at End of Period $ 508,453 $ 282,625 $ 652,664
=========== =========== ============
Cash Paid for Interest and Income Taxes is as follows:
Interest Paid $ 2,961,025 $ 2,269,866 $ 2,517,840
Taxes Paid $ 293,502 $ 642,094 $ 1,052,268
Liabilities Assumed from Acquisitions $ 6,895,398 $ 4,929,355
</TABLE>
See Notes to Consolidated Financial Statements
16
<PAGE> 17
Transmation, Inc.
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Number of
Shares of Accumu-
$.50 Par lated Other
Value Compre-
Common Common Stock Capital in hensive
Stock Out- Issued and Excess of Retained (Loss) Treasury
standing Outstanding Par Value Earnings Income Stock Total
-------- ----------- --------- -------- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance March 31, 1997 2,826,412 $1,413,206 $ 3,121,746 $ 7,965,388 ($130,532) $12,369,808
Components of Compre-
hensive Income:
Net Income 997,971 997,971
Currency Translation 9,744 9,744
-----------
Total Comprehensive Income 1,007,715
-----------
Issuance of Stock 150,838 75,419 532,217 607,636
Two for One Stock Split
On July 22, 1997 2,853,692 1,426,846 (1,426,846)
--------- ---------- ----------- ----------- --------- --------- -----------
Balance March 31, 1998 5,830,942 2,915,471 2,227,117 8,963,359 (120,788) 13,985,159
Components of Compre-
hensive Income:
Net Income 1,049,101 1,049,101
Currency Translation (79,780) (79,780)
-----------
Total Comprehensive Income 969,321
-----------
Issuance of Stock 101,800 50,900 353,938 404,838
Share Re-purchase $(453,315) (453,315)
--------- ---------- ----------- ----------- --------- --------- -----------
Balance March 31, 1999 5,932,742 2,966,371 2,581,055 10,012,460 (200,568) (453,315) 14,906,003
Components of Compre-
hensive Income:
Net Loss (2,490,110) (2,490,110)
Currency Translation 68,873 68,873
-----------
Total Comprehensive Loss (2,421,237)
-----------
Issuance of Stock 167,576 83,788 245,153 328,941
--------- ---------- ----------- ----------- --------- --------- -----------
6,100,318 $3,050,159 $ 2,826,208 $ 7,522,350 $(131,695) $(453,315) $12,813,707
========= ========== =========== =========== ========= ========= ===========
</TABLE>
See Notes to Consolidated Financial Statements
17
<PAGE> 18
Transmation, Inc.
Notes to Financial Statements - March 31, 2000, 1999 and 1998
Note 1 - Summary of Significant Accounting Policies
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
Principles of Consolidation
The financial statements include the accounts of wholly owned subsidiaries. All
intercompany transactions have been eliminated.
Foreign Operations
The accounts of Transmation's foreign subsidiaries are maintained in the local
currency of the countries in which they operate and have been translated to U.S.
dollars in accordance with the Statement of Financial Accounting Standards
(SFAS) No. 52. Accordingly, accounts representing assets and liabilities, except
for long-term intercompany and equity accounts, have been translated at the
year-end rates of exchange and related revenue and expense accounts have been
translated at average rates of exchange during the year. Gains and losses
arising from translation of subsidiaries' balance sheets into U.S. dollars are
recorded directly to the accumulated comprehensive income component of
stockholders' equity. Currency gains and losses on business transactions are
included in net income. In 1999 and 1998, transaction losses totaled $53,965 and
$59,303 respectively. In 2000, transaction gains totaled $32,485.
Inventories
Inventories are valued at the lower of standard cost or market. Standard costs
approximate the average cost method of inventory valuation.
Depreciation and Amortization.
The cost of properties is depreciated over the estimated useful lives of the
assets. Depreciation is determined on a straight-line basis. For income tax
purposes, depreciation is determined by accelerated methods as permitted under
tax regulations. Additions and betterments are capitalized; maintenance and
repairs are charged to income. The cost and accumulated depreciation of assets
retired or otherwise disposed of are eliminated from the accounts and any
resulting gain or loss is credited or charged to income. Leasehold improvements
are amortized over the terms of the related leases.
Income Taxes
The Company accounts for certain income and expense items differently for
financial reporting purposes than for income tax reporting purposes. Deferred
income taxes are provided in recognition of these temporary differences.
Deferred Catalog Costs
Costs relating to mail order catalogs are amortized over a two-year period
beginning in the month of distribution. Such amortization periods approximate
the estimated productive life of a catalog. Prepaid expenses and deferred
charges at March 31, 2000, 1999 and 1998 consist principally of the unamortized
balance of costs associated with the catalogs. Catalog costs expensed in 2000,
1999 and 1998 were $1,202,561, $1,369,244 and $1,059,418 respectively.
Fiscal Year
The Company operates within a conventional 52-week accounting fiscal year ending
on March 31st of each year.
18
<PAGE> 19
Revenue Recognition
The Company recognizes revenue from product sales at the time of shipment.
Goodwill
Goodwill represents the excess of acquisition cost over fair value of assets
acquired at the time subsidiaries were purchased. The excess acquisition cost is
being amortized over 20 years on a straight-line basis. The Company evaluates
the carrying value of the excess acquisition costs of its subsidiaries whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. The carrying value of excess acquisition costs is considered
impaired when the projected undiscounted future cash flows from the related
business unit is less than its carrying value. The Company measures impairment
based on the amount by which carrying value exceeds fair market value. Fair
market value is determined primarily using the projected future cash flows
discounted at a rate commensurate with the risk involved.
Stock Options
The Company follows the provisions of Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees", to account for its stock
option and warrant activity in the financial statements. The Company granted all
options currently outstanding at an exercise price equal to the market price at
the date of grant and, therefore, under APB 25, no compensation expense is
recorded. The Company follows the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation".
Comprehensive Income
The Company reports Comprehensive Income under SFAS 130. Comprehensive income is
comprised of net income (loss) and other comprehensive earnings such as currency
translation adjustments.
Reclassification of Amounts
Certain prior year balances have been reclassified to conform with current year
presentation.
19
<PAGE> 20
Note 2 - Business Segments
The Company and its subsidiaries operate in one basic industry - instrumentation
products for the process industry. Sales are made by the Company and its
subsidiaries to end users and engineering contractors in the United States and
other countries. The Company's domestic operations include manufacturing, sales
and service; the Company's foreign operations are limited to sales and service.
A summary of 2000, 1999 and 1998 geographic information relating to the Company
and its subsidiaries is as follows:
<TABLE>
<CAPTION>
Adjustments
United and
2000 States Canada Other Eliminations Consolidated
---- ------ ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue from Unaffiliated Customers $74,058,449 $5,910,300 $79,698,749
Intercompany Sales and Credits 770,177 $ (770,177)
----------- ---------- ----------- -----------
Total Revenue $74,828,626 $5,910,300 $ (770,177) $79,968,749
=========== ========== =========== ===========
Net (Loss) Income $(2,832,208) $ 31,369 $ 310,729 $(2,490,110)
=========== ========== =========== ===========
Identifiable Assets $50,691,260 $2,307,761 $ (640,293) $52,358,728
=========== ========== =========== ===========
1999
----
Revenue from Unaffiliated Customers $65,761,064 $5,112,223 $70,873,287
Intercompany Sales and Credits 635,125 $1,568,752 $(2,203,877)
----------- ---------- ---------- ----------- -----------
Total Revenue $66,396,189 $5,112,223 $1,568,752 $(2,203,877) $70,873,287
=========== ========== ========== =========== ===========
Net Income $ 385,187 $ 326,811 $ 327,350 $ 9,753 $ 1,049,101
=========== ========== ========== =========== ===========
Identifiable Assets $53,433,685 $1,860,023 $1,719,809 $ 282,067 $57,295,584
=========== ========== ========== =========== ===========
1998
----
Revenue from Unaffiliated Customers $74,351,826 $5,166,072 $79,517,898
Intercompany Sales and Credits 624,791 $1,489,598 $(2,114,389)
----------- ---------- ---------- ----------- -----------
Total Revenue $74,976,617 $5,166,072 $1,489,598 $(2,114,389) $79,517,898
=========== ========== ========== =========== ===========
Net Income $ 277,773 $ 222,371 $ 548,075 $ (50,248) $ 997,971
=========== ========== ========== =========== ===========
Identifiable Assets $49,240,409 $1,451,495 $1,388,336 $ (205,026) $51,875,214
=========== ========== ========== =========== ===========
</TABLE>
Sales and transfers among the United States, Canada, and others are made on a
formula basis intended to reflect market value.
Total consolidated sales to additional separate foreign geographic areas except
Canada, as defined by the Company, did not aggregate more than 10 percent of
total consolidated sales during the years 2000-1998. Sales in foreign countries,
including Canada, represented 14.9 percent of sales in 2000, 18.8 percent of
sales in 1999, and 19.1 percent of sales in 1998.
20
<PAGE> 21
Note 3 - Inventories
The major classifications of inventory are as follows:
March 31,
---------
2000 1999
---- ----
Raw Materials and Purchased Parts $ 3,900,063 $ 5,195,188
Work in Process 612,554 614,816
Finished Products 6,493,767 7,222,400
----------- -----------
11,006,384 13,032,404
----------- -----------
Less - Inventory Reserve (2,171,772) (1,022,634)
=========== ===========
$ 8,834,612 $12,009,770
=========== ===========
Note 4 - Properties
The major classification of properties is as follows:
March 31,
---------
2000 1999
---- ----
Machinery, Equipment and Software $11,448,528 $11,133,306
Tools, Dies and Molds 959,303 934,187
Furniture and Fixtures 1,459,215 1,454,402
Leasehold Improvements 404,973 140,311
Vehicles 51,995
----------- -----------
14,272,019 13,714,201
Less - Accumulated Depreciation and
Amortization (7,729,205) (6,827,970)
----------- -----------
$ 6,542,814 $ 6,886,231
=========== ===========
Useful lives are estimated to be 5 to 10 years for machinery, equipment and
software, 3 years for tools, dies and molds, 5 to 10 years for furniture and
fixtures, and 3 years for vehicles. Leasehold improvements are amortized over
the terms of the related leases.
Depreciation expenses totaled $2,254,615 in 2000, $1,873,673 in 1999 and
$1,704,863 in 1998.
Note 5 - Borrowings
At March 31, 2000, the Company has a $33,800,000 Revolving Credit and Term Loan
Agreement with banks dated August 8, 1998 and amended February 8, 1999, and
extending through June 1, 2007. At March 31, 2000, $18,800,000 was borrowed
under term loans. The term loans require annual repayments of amounts
outstanding, paid on a quarterly basis, as follows:
April 1, 2000 - March 31, 2001 $2,700,000
April 1, 2001 - March 31, 2002 $4,033,333
April 1, 2002 - March 31, 2003 $4,033,333
April 1, 2003 - March 31, 2004 $4,033,333
April 1, 2004 - March 31, 2005 $1,333,333
Interest is payable on a formula basis, at the Company's option, at rates above
prime or above LIBOR determined on the basis of Company performance as
determined by its leverage ratio. On March 31, 2000, interest to be paid under
Term Loans was 2.40% to 3.00% above LIBOR or .50% to .75% above the bank's prime
lending rate.
21
<PAGE> 22
At March 31, 2000, $10,593,400 was borrowed under the Revolving Credit portion
of the Company's credit facility. The term of the Revolving Credit Facility
dated August 8, 1998 matures on July 1, 2001. Interest is payable under the
Revolving Credit Facility on a formula basis, at the Company's option, at rates
above prime or above LIBOR determined on the basis of the Company's performance
as determined by its leverage ratio. On March 31, 2000, interest to be paid
under the Revolving Credit Agreement was 2.40% above LIBOR or .50% above the
bank's prime lending rate. At March 31, 2000, interest was payable on the above
loans at rates ranging from 8.34% to 9.50%. The Company has entered into
interest rate swaps resulting in a substantial portion of the floating interest
rate debt being swapped into fixed interest rate debt. See Note 12.
The revolving credit and term loan agreement contains, among other provisions,
requirements to maintain minimum levels of net worth, to meet minimum fixed
charge coverage ratios and leverage ratios throughout the term of the loans.
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 its lenders an
annual commitment fee from .125% to .25%, depending on performance of the
Company, of the unused portion of the Lenders' Revolving Credit Committed
Amount. The fee is payable quarterly and total commitment fees paid under any
unused lines of credit under Revolving Credit Agreements were immaterial in all
years 1998-2000. The Company also paid a closing fee in the amount of $130,000
in conjunction with the Revolving Credit and Term Loan Facility and the
amendment thereto; fees are being amortized over the term of the loans.
At March 31, 2000, the Company was in violation of certain provisions of its
loan agreement and has received a waiver of those violations from its lenders
through that date.
On June 23, 2000, the Company signed an amendment to its Revolving Credit and
Term Loan Agreements where under certain ratios and equity balances previously
required under the agreement were modified. As the result of the waiver received
as of March 31, 2000 and the amendment to the loan agreement dated June 23,
2000, $26,693,400 of the Company's debt has been classified as long term.
Note 6 - Leases
The Company has operating leases under renewable agreements covering sales
office and manufacturing space. At March 31, 2000, minimum future rental
payments due under such leases for space which had an initial non-cancelable
term in excess of one year were $3,958,676 due in monthly installments. Amounts
due under these leases are as follows:
2001 - $1,199,625
2002 - $847,824
2003 - $582,367
2004 - $293,831
2005 - $230,091
Thereafter - $804,938
Total rental expense under these leases was $861,672 in 2000, $842,371 in 1999,
and $840,955 in 1998.
22
<PAGE> 23
Note 7 - Stockholders' Equity
In August 1993, an incentive Stock Option Plan was adopted. This plan was
amended and restated in August 1995, 1996, and 1997. 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.
The following table summarizes the transactions under the plans during 2000,
1999 and 1998:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
No. of Weighted Average No. of Weighted Average No. of Weighted Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of Year 1,607,081 $4.26 1,620,990 $4.58 1,493,870 $3.70
Add (Deduct)
Granted 146,540 2.96 300,711 4.57 539,520 7.10
Exercised (153,502) 2.13 (38,330) 2.45 (82,410) 2.66
Canceled (342,327) 2.80 (276,290) 6.72 (329,990) 5.22
--------- ----- --------- ----- --------- -----
End of Year 1,257,792 $4.77 1,607,081 $4.26 1,620,990 $4.58
--------- ----- --------- ----- --------- -----
Exercisable, End of Year 569,303 $4.80 667,592 $3.21 648,435 $3.65
========= ===== ========= ===== ========= =====
Available, End of Year 359,306 163,519 187,940
========= ========= =========
</TABLE>
The following options were outstanding or exercisable as of March 31, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------- -------------------------------
No. of Weighted Average Remaining Weighted Average No. of Weighted Average
Shares Contractual Life Exercise Price Shares Exercise Price
------ ---------------- -------------- ------ --------------
Range of Exercise Prices:
<S> <C> <C> <C> <C> <C>
$2.13-$3.13 183,080 3.15 years $3.03 68,480 $3.13
$3.25-$3.79 236,212 3.06 years $3.68 93,688 $3.53
$4.19-$4.75 484,480 1.90 years $4.62 245,000 $4.61
$5.25-$9.25 354,020 2.16 years $6.60 162,135 $6.52
</TABLE>
23
<PAGE> 24
On August 21, 1983, shareholders approved the Directors' Warrant Plan. This Plan
was amended and restated in August 1995. The Plan provides that warrants may be
granted to non-employee directors of Transmation to purchase in the aggregate
not more than 200,000 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:
<TABLE>
<CAPTION>
No. of Shares Range of Warrant Prices
------------- -----------------------
<S> <C> <C>
Balance, 3/31/97 66,000 $1.50-$4.19
Granted During 1998 24,000 $7.88
Exercised During 1998 (26,000) $1.50
-------- -----------
Balance, 3/31/98 64,000 $3.25-$7.88
Granted During 1999 24,000 $3.75
-------- -----------
Balance, 3/31/99 88,000 $3.25-$7.88
Granted During 2000 24,000 $3.06
Canceled During 2000 (16,000) $3.75-$7.88
-------- -----------
Balance, 3/31/2000 96,000 $3.06-$7.88
======== ===========
</TABLE>
The Board of Directors of the Company has also granted the following
non-qualified stock options to certain officers of the Company. All of such
options were granted at the fair market value at the date of the grant, are
exercisable in equal annual installments beginning at the date of the grant, and
expire five years after issuance:
<TABLE>
<CAPTION>
No. of Shares Grant Price Date of Grant
------------- ----------- -------------
<S> <C> <C>
47,900 $3.13 8/15/95
25,000 $7.25 4/21/98
25,000 $3.79 10/28/98
25,000 $2.88 4/21/99
</TABLE>
Proforma information regarding net (loss) income and net (loss) income per share
is required by SFAS 123 and it has been determined as if the Company had
accounted for options and warrants under the fair value method. To calculate the
fair value of the options and warrants awarded, the Company elected to use the
Black-Scholes pricing model which produced a weighted average fair value of
options granted of $1.68, $2.33, and $3.90 in 2000, 1999 and 1998 respectively.
The following assumptions were used in the pricing model: a weighted average
expected option life of five years; an annualized volatility rate of 58.8% for
2000, 51.1% for 1999, and 54.4% for 1998; a weighted average risk-free rate of
return of 6.14% in 2000, 5.35% in 1999, and 6.64% in 1998; and no dividends in
any year. The Company elected to account for terminations when they occur rather
than include an attrition factor into its model.
Proforma (loss) earnings and (loss) earnings per share are as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Pro Forma
Net (Loss) Income $(2,993,935) $246,754 $(458,150)
Earnings Per share
Basic $(.50) $.04 $(.08)
Diluted $(.50) $.04 $(.08)
</TABLE>
The effect of applying SFAS 123 in the current year is not representative of the
effect on income for future years since each subsequent year will reflect
expense for additional years' vesting.
24
<PAGE> 25
Note 8 - Net Earnings Per Share
Basic earnings per share are computed based on the weighted average number of
common shares outstanding during the period. Diluted earnings per share reflects
the assumed conversion of dilutive stock options and warrants. In computing the
per share effect of assumed conversion, funds which would have been received
from the exercise of options and warrants are considered to have been used to
purchase common shares at average market prices for the period, and the
resulting net additional common shares are included in the calculation of
average common shares outstanding.
The table below summarizes the amounts used to calculate basic and diluted
earnings per share:
<TABLE>
<CAPTION>
2000 1999 1998
-------------------------------- ---------------------------------- ------------------------------
Average Average Average
Out- Out- Out-
Net standing Per Net standing Net standing Per
(Loss) Shares Share Earnings Shares Per Share Earnings Shares Share
------ ------ ----- -------- ------ --------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic (Loss)
Earnings $(2,490,110) 5,882,842 $(.42) $1,049,101 5,847,077 $0.18 $997,971 5,729,599 $0.17
Per Share
Effect of Dilutive
Options & Warrants
284,135 545,039
----------- --------- ----- ---------- --------- ----- -------- --------- -----
Diluted (Loss)
Earnings Per Share $(2,490,110) 5,882,842 $(.42) $1,049,101 6,131,212 $0.17 $997,971 6,274,638 $0.16
=========== ========= ===== ========== ========= ===== ======== ========= =====
</TABLE>
Certain anti-dilutive outstanding stock options and warrants were excluded from
the calculation of average shares outstanding in 2000, 1999 and 1998 since their
exercise prices exceeded the average market price of common shares during the
period. Those years and their associated exercise prices are also summarized
below. The options expire at various times between 2001 and 2005.
Number of Options and Warrants Exercise Price
------------------------------ --------------
2000 1,476,692 $2.13-$9.25
1999 905,700 $4.63-$9.25
1998 70,520 $8.13-$9.25
25
<PAGE> 26
Note 9 - Income Taxes
The provisions for income taxes determined in accordance with FAS 109 for the
years ended March 31, 2000, 1999 and 1998 are comprised of:
2000 Current Deferred Total
---- --------- --------- ---------
Federal $(306,000) $ (95,400) $(401,400)
State 65,000 (10,600) 54,400
Foreign 28,000 28,000
--------- --------- ---------
$(213,000) $(106,000) $(319,000)
========= ========= =========
1999 Current Deferred Total
---- --------- --------- ---------
Federal $(159,900) $ 542,900 $ 383,000
State (40,300) 68,100 27,800
Foreign 326,300 326,300
--------- --------- ---------
$ 126,100 $ 611,000 $ 737,100
========= ========= =========
1998 Current Deferred Total
---- --------- --------- ---------
Federal $ 312,800 $ 18,200 $ 331,000
State 77,500 3,800 81,300
Foreign 229,800 229,800
--------- --------- ---------
$ 620,100 $ 22,000 $ 642,100
========= ========= =========
The following is a reconciliation of the "expected" federal income tax provision
computed by applying the statutory U.S. federal income tax rate and the income
tax provision reflected in the statement of income:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Computed "Expected" Federal
Income Tax $(955,100) $ 607,300 $557,600
State Income Taxes 55,400 32,900 38,300
Foreign Sales Corporation (78,800) (126,600)
Book Expense not Deductible for
Taxes 141,000 99,700 150,300
Foreign Taxes 9,000 64,300 44,000
Valuation Allowance 450,000 (17,900)
R&D Credit (30,800)
Other, Net (19,300) 42,500 (3,600)
--------- --------- --------
$(319,000) $ 737,100 $642,100
========= ========= ========
</TABLE>
26
<PAGE> 27
The components of net deferred tax assets are as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Deferred Tax Assets:
Foreign Net Operating Loss Carryforward $ 42,160 $ 123,485 $ 133,235
Domestic Net Operating Loss Carryforward 380,731 620,000
Deferred Compensation 136,841 175,643 209,069
Accrued Vacation Pay 159,943 201,534 216,211
Allowance for Doubtful Accounts and Warranties 118,225 194,160 221,474
Reserves for Inventory Obsolescence 825,406 426,345 289,023
Amortizations of Leaseholds 35,150
Adverse Lease Commitments 168,000
Valuation Allowance (450,000) (620,000)
Foreign Tax Credit 96,000
AMT Credit Carryforward 86,000
---------- ---------- ----------
Gross Deferred Tax Assets 1,395,306 1,289,167 1,104,162
---------- ---------- ----------
Deferred Tax Liabilities:
Goodwill 299,739 166,212 94,721
Depreciation 530,633 561,196 244,150
Accelerated Catalog and Postage Write-offs 251,987 238,587 166,537
---------- ---------- ----------
Gross Deferred Tax Liabilities 1,082,359 965,995 505,408
---------- ---------- ----------
Net Deferred Tax Assets $ 312,947 $ 323,172 $ 598,754
========== ========== ==========
</TABLE>
The valuation allowance required under SFAS No. 109 "Accounting for Income
Taxes", has been established for deferred income tax benefits related to certain
loss carryforwards that may not be realized. Even though Transmation has
incurred tax losses for the current fiscal year, management believes it is more
likely than not that it will generate taxable income sufficient to realize a
portion of the tax benefit associated with future deductible temporary
differences, NOL carryforwards and credit carryforwards prior to their
expiration. This belief is based upon, among other factors, changes in
operations that have occurred during the last year as well as consideration of
available tax planning strategies. Included in the valuation allowance at March
31, 1999 is $620,000 which related to the deferred tax assets recorded from the
Metermaster acquisition. In fiscal year 2000, Transmation elected to account for
the Metermaster acquisition as an asset purchase and as a result, the Company
forfeited all NOL's which were fully reserved for.
The Company has available foreign net operating loss carryforwards totaling
approximately $125,000. These carryforwards have an unlimited expiration period
and their use is limited to the Company's future taxable income.
Note 10 - Consulting Agreement
On February 28, 1995, William J. Berk, former President of Transmation, Inc.
retired. In accordance with terms of a deferred compensation agreement between
the Company and Mr. Berk, payments due under such agreement commenced on March
1, 1995. Mr. Berk is entitled to annual payments amounting to $96,456 for life.
His wife will receive 60% of the annual benefit for her lifetime should she
survive him. This deferred compensation agreement was not funded and the
estimated present value of the future benefits was recorded as an expense and a
liability over the term of Mr. Berk's actual employment.
Note 11 - Deferred Profit Sharing
All United States employees of Transmation, Inc. are eligible to participate in
a plan providing certain qualifications are met. Effective April 1, 1981, the
Transmation, Inc. Deferred Profit Sharing Plan was adopted. Effective April 1,
1987, this plan was amended from a non-contributory to a contributory defined
contribution plan and renamed the Transmation, Inc. Long-Term Savings and
Deferred Profit Sharing Plan. Employer contributions are made to the plan at the
discretion of the Board of Directors of the Company. Payments of benefits
accrued for plan participants will be made upon retirement or upon termination
of employment
27
<PAGE> 28
prior to retirement providing certain conditions have been met by the employee
prior to termination. There were no company profit sharing contributions made
under this plan in any of the periods 2000-1998.
Note 12 - Fair Value of Financial Instruments
The Company has determined the fair value of its debt and other financial
instruments using available market information and appropriate valuation
methodologies as follows:
Cash and accounts receivable:
The carrying amounts reported in the Balance Sheet for cash and receivables
approximate their fair value.
Long-term Debt:
The carrying amount of debt under the Company's floating rate revolving credit
agreement with a bank approximates its fair value.
Debt-related derivative instruments:
The Company has entered into interest rate swaps. These financial instruments
have the effect of changing the interest rate of the original borrowing with the
objective of minimizing the Company's risk relative to potential increases in
interest rates. The notional principal amount of these derivative instruments
was $15,000,000 at March 31, 2000 and 1999. The maturities of such swaps are as
follows: $5,000,000 on February 10, 2001 and $10,000,000 on August 1, 2001.
Underlying base fixed interest rates on these instruments were 5.82% and 6.20%
respectively and the spread between these base rates and interest actually paid
on loans is periodically adjusted to reflect leverage ratios under the loans. At
March 31, 2000 and March 31, 1999, rates ranged from 8.22% to 9.20%. This
activity resulted in a substantial portion of floating interest rate debt being
swapped into fixed interest rate debt at both March 31, 2000 and 1999. Interest
rate swaps effectively hedge interest rate exposures, the net cash amounts paid
or received on the agreements are recognized as adjustments to interest expense.
Taking into account current interest rates and the current creditworthiness of
counterparties, the estimated amount the Company would have received if it had
terminated the agreements at March 31, 2000 is $114,506. At March 31, 1999, the
Company would have paid $298,279 had it terminated its agreements.
Note 13 - Acquisitions
In February 1999, the Company acquired all the outstanding shares of the capital
stock of Metermaster, Inc. ("Metermaster") for a total cash purchase of
approximately $1,000,000 and the assumption of Metermaster's liabilities of
approximately $7,600,000 The acquisition has been accounted for under the
purchase method, and Metermaster's results of operations have been consolidated
with the Company's results of operations as of the acquisition date. During
fiscal 2000, the Company made a final determination and allocation of the
purchase price as of the acquisition date, resulting in the recognition of
goodwill approximating $2,100,000.
28
<PAGE> 29
Note 14 - Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
2000 Net Sales Gross Profit Net (Loss) Income Diluted Earnings Per Share
---- --------- ------------ ----------------- --------------------------
<S> <C> <C> <C> <C>
Fourth Quarter $20,349,965 $6,151,093 $(52,684) $(.01)
Third Quarter $19,674,400 $3,111,667 $(3,011,058) $(.50)
Second Quarter $19,570,394 $6,207,266 $283,448 $.05
First Quarter $20,373,990 $6,411,239 $290,184 $.05
1999 Net Sales* Gross Profit Net Income Diluted Earnings Per Share
---- ---------- ------------ ---------- --------------------------
Fourth Quarter $18,937,879 $5,963,422 $92,758 $0.02
Third Quarter $17,112,602 $5,564,725 $381,682 $0.06
Second Quarter $16,620,912 $5,549,534 $285,103 $0.05
First Quarter $18,201,894 $6,131,864 $289,558 $0.05
</TABLE>
NOTE: Quarterly Diluted EPS amounts do not total to the annual Diluted EPS
amount due to rounding.
* 1999 sales amounts are restated for comparative purposes.
29
<PAGE> 30
Transmation, Inc.
Schedule II - Valuation and Qualifying Accounts
Year Ended March 31,
<TABLE>
<CAPTION>
Balance at Additions/(Reductions) Acquired in Balance at End of
Beginning of Year Charged to Profit and Loss Acquisition Year
----------------- -------------------------- ----------- ----
<S> <C> <C> <C> <C> <C>
2000
------------------------------------------------------------------------------------------------
Allowance for Doubtful Accounts $549,000 $(185,500) $363,500
======== ========== ========
1999
------------------------------------------------------------------------------------------------
Allowance for Doubtful Accounts $592,000 $(108,000) $65,000 $549,000
======== ========== ======= ========
1998
------------------------------------------------------------------------------------------------
Allowance for Doubtful Accounts $404,000 $37,000 $151,000 $592,000
======== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Additions
Balance at (Reductions) Inventory Acquired in
Beginning Charged To Charged to Acquisition/ Balance at End of
of Year Profit & Loss Reserves Goodwill Year
------- ------------- -------- -------- ----
<S> <C> <C> <C> <C> <C>
2000
------------------------------------------------------------------------------------------------
Inventory Reserves $1,022,634 $2,690,318 $(1,915,645 $374,465 $2,171,772
========== ========== =========== ======== ==========
1999
------------------------------------------------------------------------------------------------
Inventory Reserves $705,010 $257,624 $60,000 $1,022,634
======== ======== ======= ==========
1998
------------------------------------------------------------------------------------------------
Inventory Reserves $528,501 $176,509 $705,010
======== ======== ========
</TABLE>
Item 9. Changes In And Disagreements With Accountants on Accounting and
Financial Disclosure
None.
30
<PAGE> 31
Part III
The information required by Items 10 through 13 is presented in the definitive
proxy statement to be filed pursuant to Regulation 14A which Transmation will
file within the period prescribed in connection with the annual meeting of
shareholders to be held on August 15, 2000 and which is incorporated herein by
reference.
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
Report of Independent Accountants
Consolidated Balance Sheet - March 31, 2000, 1999, 1998
Consolidated Statement of Income - March 31, 2000, 1999, 1998
Consolidated Statement of Cash Flows - March 31, 2000, 1999, 1998
Consolidated Statement of Stockholders' Equity - March 31, 2000, 1999,
1998
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts - March 31, 2000, 1999
All other schedules have been omitted because they are not applicable
or the required information is shown in the Financial Statements or
notes thereto.
3. Index to Exhibits
(2) Plan of acquisition, reorganization, arrangement, liquidation
or succession
NOT APPLICABLE
(3) Articles of Incorporation and By-Laws
(i) The 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) filed on August 8, 1995,
and Exhibit 3 (i) to the Registrant's Form 10-Q for
the quarter ended September 30, 1999.
(ii) Bylaws, as amended through August 18, 1987, are
incorporated herein by reference to Exhibit (3) to
the Registrant's Form 10-K for the year ended March
31,1988.
(4) Instruments defining the rights of security holders, including
indentures
31
<PAGE> 32
Credit and Loan Agreement dated August 7, 1998 between
Transmation, Inc. and KeyBank National Association is
incorporated herein by reference to Exhibit 4(a) to the
Registrant's Form 10-Q for the quarter ended September 30,
1998.
(9) Voting Trust Agreement
NOT APPLICABLE
(10) Material Contracts
The documents listed under (4) are incorporated herein by
reference.
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.
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) filed on August 8, 1995.
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
Statement No. 33-61665) filed On August 8, 1995.
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) filed on August 8, 1995.
Amendment No. 1 to the Transmation, Inc. Directors' Stock Plan
is incorporated herein by reference to Exhibit 10 (i) to the
Registrant's Form 10-Q for the quarter ended September 30,
1995.
Amendment No. 2 to the Transmation, Inc. Directors' Stock Plan
is incorporated herein by reference to Exhibit 10 (a) to the
Registrant's Form 10-K for the fiscal year ended March 31,
1996.
Amendment No. 1 to the Transmation, Inc. Employees' Stock
Purchase Plan is incorporated herein by reference to Exhibit
10 (b) to the Registrant's Form 10-k for the fiscal year ended
March 31, 1996.
Amendment No. 1 to Transmation, Inc. Amended and Restated
Directors' Warrant Plan is incorporated herein by reference to
Exhibit II to the Registrant's Form 10-Q for the quarter ended
September 30, 1996.
Amendments No. 1 and No. 2 to the Transmation, Inc. Amended
and Restated 1993 Stock Option Plan are incorporated herein by
reference to Exhibits III and IV to the Registrant's Form 10-Q
for the quarter ended September 30, 1996.
Amendment No. 2 to the Transmation, Inc. Employee's Stock
Purchase Plan is incorporated herein by reference to Exhibit V
to the Registrant's Form 10-Q for the quarter ended September
30, 1996.
Amendment No. 3 to the Transmation, Inc. Directors' Stock Plan
is incorporated herein by reference to Exhibit 10(a) to the
Registrant's Form 10-K for the year ended March 31, 1997.
Amendment No. 2 to the Transmation, Inc. Amended and Restated
Directors' Warrant Plan is incorporated herein by reference to
Exhibit 10(i) to the Registrant's Form 10-Q for the quarter
ended June 30, 1997.
32
<PAGE> 33
Amendments No. 3 and 4 to the Transmation, Inc. Amended and
Restated 1993 Stock Option Plan are incorporated herein by
reference to Exhibit 10(j) to the Registrant's Form 10-Q for
the quarter ended September 30, 1997.
Amendment No. 3 to the Transmation, Inc. Employees' Stock
Purchase Plan is incorporated herein by reference to Exhibit
10(k) to the Registrant's Form 10-Q for the quarter ended
September 30, 1997.
Amendment No. 5 to the Transmation, Inc. Directors' Stock Plan
is incorporated herein by reference to Exhibit 10(a) to the
Registrant's Form 10-K for the year ended March 31, 1998.
Non-Statutory Stock Option Agreement dated as of April 21,
1998 by and between Transmation, Inc. and Barry F. Wharity is
incorporated herein by reference to Exhibit 10(d) to the
Registrant's Form 10-K for the year ended March 31, 1998.
Amendments No. 3 and 4 to the Transmation, Inc. Amended and
Restated Directors' Warrant Plan are incorporated herein by
reference to the Registrant's definitive proxy material filed
on July 7, 1998 in connection with the 1998 Annual Meeting of
Shareholders.
Amendment No. 4 to the Transmation, Inc. Directors' Stock Plan
is incorporated herein by reference to Exhibit 10(a) to the
Registrant's Form 10-Q for the quarter ended December 31, 1998
and supercedes Exhibit 10(h) to the Registrant's Form 10-Q for
the quarter ended June 30, 1997.
Non-Statutory Stock Option Agreement dated as of October 28,
1998 by and between Transmation, Inc. and John A. Misiaszek is
incorporated herein by reference to Exhibit 10(b) to the
Registrant's Form 10-Q for the quarter ended December 31,
1998.
Amendment No. 5 to the Transmation, Inc. Amended and Restated
1993 Stock Option Plan is incorporated herein by reference to
Exhibit 10 (a) to the Registrant's Form 10-K for the fiscal
year ended March 31, 1999.
Employment Agreement dated as of April 1, 1999 by and between
Transmation, Inc. and Robert G. Klimasewski is incorporated
herein by reference to Exhibit 10 (b) to the Registrant's Form
10-K for the fiscal year ended March 31, 1999.
Employment Agreement dated as of April 1, 1999 by and between
Transmation, inc. and Eric W. McInroy is incorporated herein
by reference to Exhibit 10 (C) to the Registrant's Form 10-K
for the fiscal year ended March 31, 1999.
Amendment No. 6 to the Transmation, Inc. Amended and Restated
1993 Stock Option Plan is incorporated herein by reference to
Appendix A to the Registrant's 1999 Preliminary Proxy
Statement which was filed in electronic format on June 21,
1999.
Amendment No. 5 to the Transmation, Inc. Amended and Restated
Directors' Warrant Plan is incorporated herein by reference to
Appendix B to the Registrant's 1999 Preliminary Proxy
Statement which was filed in electronic format on June 21,
1999.
(a) Employment Agreement by and between Transmation, Inc.
and Robert G. Klimasewski dated December 7, 1999 and
included herein as Exhibit 10 (a).
(b) Amendment No. 7 to the Transmation, Inc. Amended and
Restated 1993 Stock Option Plan is included Herein as
Exhibit 10 (b).
(11) Statement re Computation of Per Share Earnings
Computation can be clearly determined from Note 8 to the
Financial Statements included herein at Item 8.
33
<PAGE> 34
(12) Statements re Computation of Ratios
NOT APPLICABLE
(13) Annual Report to Security Holders, Form 10-Q on Quarterly
Report to Security Holders
NOT APPLICABLE
(16) Letter re Change in Certifying Accountant
NOT APPLICABLE
(18) Letter re Change in Accounting Principles
NOT APPLICABLE
(21) Subsidiaries of Registrant
Subsidiaries of the Registrant are included herein as Exhibit
21.
(22) Published Report Regarding Matters Submitted to Vote of
Security Holders
NOT APPLICABLE
(23) Consents of Experts and Counsel
Consent of PricewaterhouseCoopers LLP is included herein as
Exhibit 23.
(24) Power of Attorney
NOT APPLICABLE
(27) Financial Data Schedule
Financial Data Schedule is included herein as Exhibit 27.
(99) Additional Exhibits
NOT APPLICABLE
(b) Report on Form 8-K dated December 7, 1999 was filed during the quarter
ended December 31, 1999 reporting on Item 5 Other events.
(c) See (a) 3. above.
(d) (1) NOT APPLICABLE
(2) NOT APPLICABLE
(3) See Item 8
34
<PAGE> 35
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
TRANSMATION, INC.
<TABLE>
<CAPTION>
<S> <C>
By: /s/ Robert G. Klimasewski By: /s/ Cornelius J. Murphy
------------------------------------------------------------ ------------------------------------------------------
Robert G. Klimasewski, President & Chief Executive Officer Cornelius J. Murphy, Chairman of the Board of Directors
(Principle Executive Officer)
Date: June 29, 2000 Date: June 29, 2000
---------------------------------------------------------- ----------------------------------------------------
By: /s/ Angelo J. Chiarella By: /s/ G. Thomas Bowers
------------------------------------------------------------ ------------------------------------------------------
Angelo J. Chiarella, Director G. Thomas Bowers, Director
Date: June 29, 2000 Date: June 29, 2000
---------------------------------------------------------- ----------------------------------------------------
By: /s/ E. Lee Garelick By: /s/ Harvey J. Palmer
------------------------------------------------------------ ------------------------------------------------------
E. Lee Garelick, Director Dr. Harvey J. Palmer, Director
Date: June 29, 2000 Date: June 29, 2000
---------------------------------------------------------- ----------------------------------------------------
By: /s/ Nancy D. Hessler By:
------------------------------------------------------------ ------------------------------------------------------
Nancy D. Hessler, Director Arthur M. Richardson, Director
Date: June 29, 2000 Date:
---------------------------------------------------------- ----------------------------------------------------
By: /s/ John A. Misiaszek
------------------------------------------------------------
John A. Misiaszek, Vice President, Finance
(Principle Financial Officer and Principle Accounting Officer)
Date: June 29, 2000
----------------------------------------------------------
</TABLE>
35
