<PAGE> 1
FORM 10-Q
--------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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 26, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-7872
--------------------------------
TRANSTECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-4062211
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
700 Liberty Avenue 07083
Union, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (908) 964-5666
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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
----- -----
As of August 1, 1994, the total number of outstanding
shares of registrant's one class of common stock was
5,217,127
<PAGE> 2
TRANSTECHNOLOGY CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information Page No.
--------------------- --------
<S> <C> <C>
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-------
Statements of Consolidated Operations--
Three Month Periods Ended June 26, 1994
and June 27, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets--
June 26, 1994 and March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Consolidated Cash Flow--
Three Months Ended June 26, 1994 and
June 27, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Consolidated Stockholders' Equity--
Three Months Ended June 26, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Results
------- of Operations and Financial Condition . . . . . . . . . . . . . . . . . . . . . . 8-12
PART II. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-------
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EXHIBIT 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14-19
EXHIBIT 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Statements of Consolidated Operations, Consolidated
Balance Sheets and Statements of Consolidated Cash Flow are of TransTechnology
Corporation and its consolidated subsidiaries. These reports reflect all
adjustments of a normal recurring nature, which are, in the opinion of
management, necessary to a fair presentation of the results of operations for
the interim periods reflected therein. The results reflected in the unaudited
Statements of Consolidated Operations for the period ended June 26, 1994 are
not necessarily indicative of the results to be expected for the entire year.
The following unaudited Consolidated Financial Statements should be read in
conjunction with the notes thereto, and Management's Discussion and Analysis
set forth in Item 2 of Part I of this report, as well as the audited financial
statements and related notes thereto contained in the Form 10-K filed for the
fiscal year ended March 31, 1994.
[THIS SPACE INTENTIONALLY LEFT BLANK]
2
<PAGE> 4
STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------
6/26/94 6/27/93
----------------- ----------------
<S> <C> <C>
Total Revenue . . . . . . . . . . . . . . . . . . . . . $ 29,325 $ 24,006
Cost of Sales . . . . . . . . . . . . . . . . . . . . . . 22,031 16,727
----------------- ----------------
Gross Profit . . . . . . . . . . . . . . . . . . . . . . 7,294 7,279
----------------- ----------------
General, Administrative and Selling
Expenses . . . . . . . . . . . . . . . . . . . . . . . 5,141 4,475
Interest Expense . . . . . . . . . . . . . . . . . . . . 563 162
----------------- ----------------
Total General, Administrative, Selling
and Interest Expenses . . . . . . . . . . . . . . . . . 5,704 4,637
----------------- ----------------
Income from Continuing Operations
before Income Taxes . . . . . . . . . . . . . . . . . . 1,590 2,642
Income Taxes . . . . . . . . . . . . . . . . . . . . . . 561 989
----------------- ----------------
Income from Continuing Operations . . . . . . . . . . . . 1,029 1,653
Discontinued Operations:
Loss from Operations (net of applicable tax benefits of
$80,000 for the quarter ended 6/27/93) . . . . . . . . -- (139)
Gain from Disposal (includes a tax provision of $29,000
for the quarter ended 6/26/94) . . . . . . . . . . . 43 --
----------------- ----------------
Net Income . . . . . . . . . . . . . . . . . . . . . . . $ 1,072 $ 1,514
================= ================
Earnings per Share: (Note 1)
Income from Continuing Operations . . . . . . . . . . . $ 0.20 $ 0.32
Income (Loss) from Discontinued Operations . . . . . . 0.01 (0.03)
----------------- ----------------
Net Income . . . . . . . . . . . . . . . . . . . . . . . $ 0.21 $ 0.30 (a)
================= ================
Number of Shares Used in Computation
of Per Share Information . . . . . . . . . . . . . . . 5,186,000 5,122,000
</TABLE>
(a) Per share amounts do not always add because the figures are required to
be independently calculated.
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE> 5
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
UNAUDITED
6/26/94 3/31/94
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,656 $ 3,027
Accounts receivable:
United States Government . . . . . . . . . . . . . . . . . . . . . . . . . . 2,686 2,815
Commercial (net of allowance for doubtful accounts of $263 at 6/26/94
and $271 at 3/31/94) . . . . . . . . . . . . . . . . . . . . . . . . . 18,300 19,500
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,814 2,814
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,584 35,786
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . 2,638 2,932
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,253 4,253
Net assets of discontinued businesses . . . . . . . . . . . . . . . . . . . 4,320 4,309
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,251 75,436
Property:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,223 5,223
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,650 15,657
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,564 32,611
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,081 4,050
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . 671 671
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,189 58,212
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . 22,931 22,204
----------- -----------
Property-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,258 36,008
Other assets:
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,912 4,061
Costs in excess of net assets of acquired businesses (net of accumulated
amortization: June 26, 1994, $2,488; March 31, 1994, $2,423) . . . . . . . 3,052 3,117
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,140 7,235
----------- -----------
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,104 14,413
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 123,613 $ 125,857
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . $ 1,480 $ 1,479
Accounts payable-trade . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,100 7,489
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,608 4,570
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,273 943
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 5,524 7,109
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 18,985 21,590
----------- -----------
Long-term debt payable to banks and others . . . . . . . . . . . . . . . . . . 33,158 33,168
----------- -----------
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 5,551 5,146
----------- -----------
Stockholders' equity:
Preferred stock-authorized, 300,000 shares; none issued . . . . . . . . . . . -- --
Common stock-authorized, 14,700,000 shares of $.01 par value; issued,
5,134,104 at June 26, 1994, and 5,189,104 at March 31, 1994 . . . . . . . . 51 52
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 45,283 45,283
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,947 22,186
Other stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . (2,362) (1,568)
----------- -----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . 65,919 65,953
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 123,613 $ 125,857
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 6
STATEMENTS OF CONSOLIDATED CASH FLOWS
UNAUDITED
(In Thousands of Dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------
6/26/94 6/27/93
-------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,072 $ 1,514
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . 1,311 1,025
Provision for losses on accounts receivable . . . . . . . . . . . 15 18
Loss (gain) on sale or disposal of fixed assets . . . . . . . . 8 (3)
Change in assets and liabilities (net of the effect of purchases
of businesses):
Decrease in accounts receivable . . . . . . . . . . . . . . . . 1,314 1,295
Decrease (increase) in inventories . . . . . . . . . . . . . . . 202 (1,119)
Increase in net assets of discontinued operations . . . . . . . (11) (724)
Increase in prepaid and other assets . . . . . . . . . . . . . . (800) (474)
Decrease in accounts payable . . . . . . . . . . . . . . . . . . (389) (849)
Decrease in accrued compensation . . . . . . . . . . . . . . . . (962) (955)
Decrease in other liabilities . . . . . . . . . . . . . . . . . (1,180) (1,559)
Increase in accrued income taxes . . . . . . . . . . . . . . . 330 680
-------------- -------------
Net cash provided by (used in) operations . . . . . . . . . . . 910 (1,151)
-------------- -------------
Cash Flows from Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . (1,371) (972)
Proceeds from the sale of fixed assets . . . . . . . . . . . . . . -- 3
Decrease (increase) in notes receivable . . . . . . . . . . . . . . 149 (138)
-------------- -------------
Net cash used in investing activities . . . . . . . . . . . . . . (1,222) (1,107)
-------------- -------------
Cash Flows from Financing Activities:
Payments to acquire treasury stock . . . . . . . . . . . . . . . . (739) --
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . (9) (3,306)
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . -- 4,600
Proceeds from issuance of stock under stock option plan . . . . . . -- 3
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . (311) (307)
-------------- -------------
Net cash (used in) provided by financing activities . . . . . . . (1,059) 990
-------------- -------------
Net Decrease in Cash and Cash Equivalents . . . . . . . . . . . . . (1,371) (1,268)
Cash and Cash Equivalents at Beginning of Year . . . . . . . . . . 3,027 1,505
-------------- -------------
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . $ 1,656 $ 237
============== =============
Supplemental Information:
Interest payments . . . . . . . . . . . . . . . . . . . . . . . . . $ 633 $ 158
Income tax payments . . . . . . . . . . . . . . . . . . . . . . . . $ 59 $ 340
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 7
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
ADDITIONAL OTHER
PAID-IN RETAINED STOCKHOLDERS'
FOR THE QUARTER ENDED JUNE 26, 1994 SHARES AMOUNT CAPITAL EARNINGS EQUITY TOTAL
- - ----------------------------------- --------- -------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1994 . . . . . . 5,189,104 $ 52 $ 45,283 $ 22,186 $ (1,568) $ 65,953
Net Income . . . . . . . . . . . . -- -- -- 1,072 -- 1,072
Cash dividends ($.06 per share) . . -- -- -- (311) -- (311)
Unrealized investment holding
losses . . . . . . . . . . . . . -- -- -- -- (58) (58)
Purchase of treasury stock . . . . (55,000) (1) -- -- (738) (739)
Foreign translation adjustments . . -- -- -- -- 2 2
--------- -------- ------------ ------------ ------------ -----------
Balance, June 26, 1994 . . . . . . 5,134,104 $ 51 $ 45,283 $ 22,947 $ (2,362) $ 65,919
========= ======== ============ ============ ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars)
NOTE 1. Earnings Per Share:
Earnings per share are based on the weighted average number of common
shares and common stock equivalents (stock options) outstanding during
each period. In computing earnings per share, common stock
equivalents were either anti-dilutive because of the market value of
the stock or not material, and, therefore, have been excluded from the
calculation.
NOTE 2. Inventories:
Inventories are summarized as follows:
<TABLE>
<CAPTION>
June 26, March 31,
1994 1994
---------------- ---------------
<S> <C> <C>
Finished goods $ 5,068 $ 5,057
Work-in-process 7,965 7,589
Purchased and
manufactured parts 22,551 23,140
---------------- ---------------
Total inventories $ 35,584 $ 35,786
================ ===============
</TABLE>
NOTE 3. Discontinued Operations:
In March 1994, the Company completed the sale of its Federal
Laboratories division. Pursuant to such sale, in June 1994 the
Company recorded an after-tax disposal gain of $76 thousand. This
gain was partially offset by $33 thousand of after- tax disposal costs
related to other previously discontinued businesses. The gain and
losses consisted primarily of disposal costs different from previous
estimates associated primarily with legal matters.
The three-month period ended June 27, 1993 has been restated to
reflect Federal Laboratories as a discontinued operation.
Federal Laboratories' operating results for the period ended June 27,
1993 were as follows:
<TABLE>
<S> <C>
Total revenue $ 750
===========
Loss before income taxes $ (219)
Income tax benefit (80)
-----------
Loss from operations $ (139)
===========
</TABLE>
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All references to three-month periods in this Management's Discussion refer to
the three-month period ended June 26, 1994 for fiscal year 1995 and the
three-month period ended June 27, 1993 for fiscal year 1994. Also when
referred to herein, operating profit means net sales less operating expenses,
without deduction for general corporate expenses, interest and income taxes.
The Consolidated Statement of Operations has been restated with respect to
discontinued operations to provide a consistent basis for comparing the
performance of the Company's continuing operations for the periods presented.
Revenue from continuing operations for the three-month period in 1995 was $29.3
million, a $5.3 million or 22% increase from the $24 million reported in the
comparable period in 1994. Gross profit was $7.3 million for the three-month
period in 1995, unchanged from the comparable period in 1994. Operating profit
from continuing operations for the three-month period in 1995 was $2.7 million,
a decrease of $1.0 million or 27% from the comparable period in 1994. Changes
in sales, operating profit and new orders from continuing operations are
discussed below by segment.
Net income, including discontinued operations, for the three-month period in
1995 was $1.1 million or $0.21 per share, compared to $1.5 million or $0.30 per
share for the comparable period of 1994. As further discussed below, the
decreased earnings performance in 1995 resulted primarily from reduced chaff
and related product sales, lower sales and margins in hoists, winches and
related spare parts, lower margins on cargo hook sales, losses attendant to the
start-up of Electrical Connections and Assemblies, Inc.'s business and
shipments of low margin contracts by the newly acquired electrical harness
product line. These earnings decreases were partially offset by the inclusion
of the Palnut Fastener business and the recording of pre-tax income of $0.6
million from a favorable insurance settlement.
Interest expense increased $0.4 million for the three-month period in 1995,
from $0.2 million in the comparable 1994 period, primarily as a result of
increased bank borrowings used for the acquisition of the Palnut Fastener
business and the Electrical Specialties harness business in the second quarter
of the 1994 fiscal year.
New orders received during the 1995 period totaled $34 million, an increase of
$2.2 million or 7% from 1994's comparable period. At June 26, 1994, total
backlog of unfilled orders was $47.8 million compared to $48.6 million at June
27, 1993.
DISCONTINUED OPERATIONS
In March 1994, the Company completed the sale of its Federal Laboratories
division. Pursuant to such sale, in June 1994 the Company recorded an
after-tax disposal gain of $76 thousand. This gain was partially offset by $33
thousand of after-tax disposal costs related to other previously discontinued
businesses. The gain and losses consisted primarily of disposal costs
different from previous estimates associated primarily with legal matters.
8
<PAGE> 10
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NET CHANGE
------------------------------------- -----------------------------
6/26/94 6/27/93 $ %
------------ ------------ ---------- ------
<S> <C> <C> <C> <C>
Operating Revenue:
Industrial Products $ 18,592 $ 9,531 $ 9,061 95.1
Aerospace Products 10,484 14,272 (3,788) (26.5)
------------ ------------ ---------- ------
Total $ 29,076 $ 23,803 $ 5,273 22.2
============ ============ ========== ======
Operating Profit:
Industrial Products $ 2,530 $ 1,828 $ 702 38.4
Aerospace Products 218 1,913 (1,695) (88.6)
------------ ------------ ---------- ------
Total 2,748 3,741 (993) (26.5)
Corporate Expense (595) (a) (937) (b) 342 36.5
Interest Expense (563) (162) (401) (247.5)
------------ ------------ ---------- ------
Income from Continuing
Operations before
Income Taxes $ 1,590 $ 2,642 $ (1,052) (39.8)
============ ============ ========== ======
</TABLE>
a) The corporate expense segments for the three months
ended June 26, 1994 has been reduced by $575 thousand
for a favorable insurance settlement.
b) The corporate expense for the three months ended June
27, 1993 has been reduced by $82 thousand to reflect
an allocation made to discontinued operations.
9
<PAGE> 11
INDUSTRIAL PRODUCTS SEGMENT
Sales for the industrial products segment were $18.6 million for the
three-month period in 1995, an increase of $9.1 million, or 95% from the same
period in 1994. Sales of specialty fasteners and electrical harnesses were up
$8.3 million or 114% and $1.5 million or 100%, respectively, from the
comparable period in 1994. The increase in specialty fastener sales was
primarily due to the inclusion of operations of the Palnut fastener business in
the 1995 period, new product market penetration and increased industrial and
truck fastener demand, while the increase in electrical wiring harness sales
was due to the inclusion of operations of the Electrical Specialties Company
product line in the 1995 period. These increases were partially offset by a
$0.7 million or 32% decrease in TransTechnology Systems & Services sales in the
three-month period in 1995 as compared to the same period in 1994, which is
largely due to reduced domestic and foreign third party maintenance contract
sales.
Operating profit for the three-month period in 1995 was $2.5 million, an
increase of $0.7 million or 38% from the comparable period of 1994. The
increase was primarily due to the increased sales volume of specialty fasteners
and electrical wiring harnesses partially offset by reduced TransTechnology
Systems & Services maintenance contract sales, losses attendant to the start-up
of Electrical Connections and Assemblies, Inc.'s business, and shipments of low
margin contracts from the newly acquired electrical harness product line.
New orders for the three-month period in 1995 increased $10.3 million or 97%
from the comparable period in 1994, primarily due to the inclusion of
operations of Palnut fastener products and the electrical wiring harness
product line, new product market penetration and increased industrial and truck
fastener demand. These increases were partially offset by reduced
TransTechnology Systems & Services maintenance contract orders.
Backlog of unfilled orders at June 26, 1994, was $16.8 million compared to $7.8
million at June 27, 1993.
AEROSPACE PRODUCTS SEGMENT
Sales of the Aerospace Products segment were $10.5 million for the three-month
period in 1995, down $3.8 million or 27% from the comparable period in 1994.
Sales of hoists and winches and related spare parts, chaff product, and
electrical cables, conduit and connectors decreased from the 1994 period to the
1995 period by $1.9 million or 29%, $1.0 million or 41% and $0.8 million or
25%, respectively, primarily due to delays in the timing of customers placing
new orders in the 1995 period. Additionally, sales of hoists and winches and
related spare parts in the 1995 period were negatively impacted by pricing
constraints. Tie-down sales were down $0.2 million or 47% in the 1995 period,
as compared to the 1994 period, mainly due to increased competition. Cargo
hook sales were relatively unchanged in the 1995 period, compared to the 1994
period.
Operating profit for the three-month period in 1995 was $0.2 million, a
decrease of $1.7 million or 89% from the comparable period in 1994. The
primary factors contributing to the decrease in the segment's operating profit
were the reduced sales volume of hoists and winches and related spare parts,
chaff product, electrical cables, conduit and connectors and tie-downs
accompanied by reduced margins and increased price erosion in hoists and
winches and related spare parts, cargo hooks and tie-downs.
10
<PAGE> 12
New orders decreased for the three-month period in 1995 by $8.1 million or 38%
from the comparable period in 1994. Decreases period to period were
experienced by all aerospace product lines with the exception of cargo hooks
and electrical conduit which were up $0.1 million or 9% and $0.3 million or
41%, respectively, primarily due to customer timing and placement of new
orders. The decreases in all other aerospace product lines reflect a
combination of customer timing and placement of new orders coupled with a
general slowdown in the military and aerospace industries. Backlog of unfilled
orders at June 26, 1994 was $31.1 million compared to $40.8 million at June 27,
1993.
Sales related to United States government contracts, which consist primarily of
defense contracts and represented approximately 20% of the Company's total
sales in fiscal year 1994, have been declining in recent years. Management
remains concerned with the continued trend toward reductions in defense
spending by the United States government. However, many of the Company's
programs, as well as spare parts requirements for these programs, are expected
to continue for several years, and the Company continues to pursue and is
currently implementing its strategy of developing its non-defense businesses
through acquisitions and refocused foreign and commercial market attention.
LIQUIDITY AND CAPITAL RESOURCES
The Company's debt-to-capitalization ratio was 34% as of June 26, 1994,
unchanged from March 31, 1994. The current ratio at June 26, 1994, stood at
3.81 compared to 3.49 at March 31, 1994. Working Capital was $53.3 million at
June 26, 1994, down $0.5 million from March 31, 1994.
At June 26, 1994, the Company's debt consisted of $25 million of borrowings
under a revolving bank credit line, a $9.2 million bank term loan and $0.5
million of other borrowings. The revolving bank credit line lending commitment
is $35 million. This commitment will be available to the Company through
September 30, 1995, and is subject to a borrowing base formula. The agreement
provides for borrowings and letters of credit based on collateralized accounts
receivable and inventory. All fixed assets other than real property with the
exception of certain real property located in Mountainside, New Jersey, are
also included as collateral. Letters of credit, which are included in the
borrowing base formula, are limited to $5 million. Letters of credit under the
line at June 26, 1994 were $1.6 million. Interest is accrued at the lending
bank's prime rate or, at the Company's option, the London Interbank Offered
Rate (LIBOR) plus two percentage points, which the Company utilized for $25
million of its outstanding debt. The agreement contains customary operating
and financial covenants typical to this form of financing and further provides
that quarterly dividend payments cannot exceed 25% of the Company's cumulative
net income in each year. The $9.2 million term loan is with the same lenders
as the revolving credit line, is secured by the same collateral, and is due and
payable on August 31, 1998. Principal payments of $360 thousand are due and
payable on the last day of each quarter through June 30, 1998, with a final
balloon payment of $3 million due and payable on August 31, 1998. Interest
accrues at the lending bank's prime rate and is payable monthly.
11
<PAGE> 13
On May 13, 1994, the Company obtained authorization from its lender to
repurchase up to 200,000 shares of the Company's common stock at an aggregate
price not to exceed $2.5 million. Through August 2, 1994, the Company had
repurchased 80,000 shares.
Management believes that the Company's anticipated cash flow from operations,
combined with the bank credit described above, will be sufficient to support
current and forecasted working capital requirements and dividend payments.
Capital expenditures in the three-month period in 1995 were $1.4 million as
compared with $1.0 million in the comparable period in 1994. The Company's two
segments have similar cash flow requirements.
12
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 Fourth Amendment to the Revolving Loan and Security Agreement
dated as of January 31, 1994 among the Company, National Canada
Finance Corporation and National Bank of Canada.
11 Statement of Computation of Per Share Earnings
(b) No reports on Form 8-K were filed during the quarter ended June 26,
1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSTECHNOLOGY CORPORATION
(Registrant)
Dated: August 8, 1994 By: \s\ Chandler J. Moisen
-----------------------------------------
CHANDLER J. MOISEN, Senior Vice President
and Chief Financial Officer*
* On behalf of the Registrant and as Principal Financial Officer.
13
<PAGE> 15
EXHIBIT INDEX
Exhibit No. Description
- - ----------- -----------
10 Fourth Amendment to the Revolving Loan and Security Agreement
dated as of January 31, 1994 among the Company, National Canada
Finance Corporation and National Bank of Canada.
11 Statement of Computation of Per Share Earnings
<PAGE> 1
EXHIBIT 10
FOURTH AMENDMENT TO THE
REVOLVING LOAN AND
SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO THE REVOLVING LOAN AND SECURITY AGREEMENT
(the "Fourth Amendment") is entered into by and among NATIONAL CANADA FINANCE
CORP., NATIONAL BANK OF CANADA (New York, New York) (collectively, "Bank"),
TRANSTECHNOLOGY CORPORATION, a Delaware corporation ("TT"), and Electronic
Connectors & Assemblies, Inc., a Delaware corporation ("ECA, Inc." and,
together with TT, sometimes hereinafter referred to collectively in this
Fourth Amendment as "Borrowers").
RECITALS
A. On June 21, 1991, TT and Bank entered into a certain Revolving
Loan and Security Agreement (the "Loan Agreement," all terms defined therein
being used in this Fourth Amendment with the same meaning unless otherwise
stated) under the terms of which Bank loaned to TT $9,000,000 on a
revolving loan basis and $4,000,000 in the form of letters of credit pursuant
to the provisions set forth in the Loan Agreement.
B. On December 18, 1991, TT and Bank entered into a certain First
Amendment To The Revolving Loan And Security Agreement (the "First Amendment")
to provide for (1) the elimination of the $4,000,000 sub-limit imposed on TT by
Bank with respect to funding of the Letter of Credit Facility, (2) the
modification of certain covenants, and (3) the waiver by Bank of TT's
compliance with Section 7.1(N) of the Loan Agreement relating to TT's net worth
for the period ended September 29, 1991.
C. On December 10, 1992, TT and Bank entered into a certain
Second Amendment To The Revolving Loan And Security Agreement (the "Second
Amendment") to provide for (1) an increase in the maximum principal amount of
borrowings under the Revolving Loan from $13,000,000 to $25,000,000 (inclusive
of the issuance by Bank to TT of a maximum of $5,000,000 of standby letters of
credit), (2) a modification to the rate of interest charged on borrowings under
the Revolving Loan to provide for a rate of interest based on the Base Rate or
LIBOR (as defined therein), (3) a modification to the Borrowing Base to permit
loan advances against the Eligible Inventory of TT, (4) the modification of
Bank's Collateral of TT to include machinery and equipment of TT, (5) the
modification of certain financial covenants of TT, (6) the payment by TT of
certain dividends, and (7) the extension of the Termination Date of the Loan
Agreement.
<PAGE> 2
D. On December 31, 1992, TT and Bank entered into a letter
agreement (the "Letter Agreement") to permit TT to pay dividends in accordance
with Section 7.2(H) of the Loan Agreement, as amended, commencing with the
quarter ending December 31, 1992.
E. On August 2, 1993, TT and Bank entered into a certain Third
Amendment To The Revolving Loan And Security Agreement (the "Third Amendment")
to provide for (1) an increase in the maximum principal amount of borrowings
under the Revolving Loan from $25,000,000 to $35,000,000 (inclusive of the
issuance by Bank to TT of a maximum of $5,000,000 of standby letters of
credit), (2) a term loan facility in the principal amount of $10,000,000 with
interest accruing at a rate equal to one-quarter (1/4) percentage points above
the Base Rate, (3) the grant to Bank of a mortgage on the Palnut Property (as
defined in the Third Amendment), (4) a modification to the Borrowing Base to
increase the amount of funds TT may borrow against Eligible Inventory from
$13,000,000 to $18,000,000, and (5) the establishment of a termination fee upon
the prepayment by TT of the term loan.
F. TT has established ECA, Inc., a wholly-owned subsidiary of TT,
for the purpose of purchasing and distributing electrical connectors on a
worldwide basis.
G. Borrowers have requested that Bank make available to ECA, Inc.
funds under the Revolving Loan in accordance with the provisions of the Loan
Agreement, as amended.
H. In consideration for Bank agreeing to loan and re-loan funds
to ECA, Inc. under the Revolving Loan in accordance with the provisions of the
Loan Agreement, as amended, ECA, Inc. desires to (1) assume as co-obligor all
obligations and liabilities of Borrowers due and owing to Bank now or hereafter
arising under the Loan Agreement, as amended, and (2) grant to Bank a security
interest in and to its Collateral in accordance with the provisions of this
Fourth Amendment.
I. Borrowers and Bank now desire to amend the Loan Agreement, as
amended, to (1) add ECA, Inc. as a co-obligor for the repayment of all loans to
Borrowers by Bank and (2) provide for such other amendments and modifications
as are set forth in the provisions of this Fourth Amendment.
J. Due to the affiliation and financial interdependence of
Borrowers, Bank and Borrowers have determined that it would be in their
respective best interests for each Borrower to be a joint and several obligor
of each other Borrower's obligations to Bank in accordance with the provisions
set forth in the Loan Agreement, as amended by the First Amendment, the Second
Amendment, the Letter Agreement, the Third Amendment, and this Fourth Amendment.
-2-
<PAGE> 3
PROVISIONS
NOW, THEREFORE, in consideration of the foregoing, the parties agree
as follows:
SECTION I. AMENDMENTS TO LOAN AGREEMENT.
The Loan Agreement is amended as follows:
A. On and after the effective date of this Fourth Amendment, each
reference in the Loan Agreement to "this Agreement," "hereunder," and "hereof,"
or words of like import referring to the Loan Agreement shall mean and refer to
the Loan Agreement, as amended by the First Amendment, the Second Amendment,
the Letter Agreement, the Third Amendment, and this Fourth Amendment. The Loan
Agreement, as amended by the First Amendment, the Second Amendment, the Letter
Agreement, the Third Amendment, and this Fourth Amendment, is, and shall
continue to be, in full force and effect and hereby is ratified and confirmed
in all respects.
B. On and after the effective date of this Fourth Amendment, each
reference in the Loan Agreement, as amended, to "Borrower" or words of like
import referring to Borrower shall mean, refer to, and include ECA, Inc. and
shall hereinafter be treated as referring to "Borrowers" on a collective basis
and in the aggregate.
C. Grant of Security Interest. To secure the prompt payment and
performance of the Obligations, ECA, Inc. hereby grants to Bank in accordance
with the provisions of Section 4.1 of the Loan Agreement, as amended, a
continuing security interest in and to all of the Property of ECA, Inc.
described in Section 4.1(A) through (G) of the Loan Agreement, as amended,
whether now owned or existing or hereafter acquired or arising and wheresoever
located.
D. Paragraphs (MM) and (JJJ) of Section 1.1 of the Loan Agreement
are amended in their entirety as follows:
(MM) Promissory Note. The Promissory Note executed by TT
and delivered to Bank, dated June 21, 1991, as amended by (1) the
First Amendment To Promissory Note, executed by TT and delivered to
Bank, dated December 10, 1992, (2) the Second Amendment To Promissory
Note, executed by TT and delivered to Bank, dated August 2, 1993, and
(3) the Third Amendment To Promissory Note in the form attached to the
Fourth Amendment as Exhibit A (with such changes or modifications, if
any, to which Borrowers and National Canada Finance Corp. may agree)
evidencing the Revolving Loan made by National Canada Finance Corp.
pursuant to Section 2.1(A) of this Agreement, together with all
amendments thereto and all notes issued in substitution therefor or
replacement thereof.
-3-
<PAGE> 4
(JJJ) Term Note. The Term Note executed by TT and
delivered to Bank, dated August 2, 1993, as amended by the First
Amendment To Term Note, in the form attached to the Fourth Amendment
as Exhibit B (with such changes or modifications, if any, to which
Borrowers and National Canada Finance Corp. may agree) evidencing the
Term Loan made by National Canada Finance Corp. pursuant to Section
2.2(A) of this Agreement, together with all amendments thereto and all
notes issued in substitution therefor or replacement thereof.
SECTION II. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
BORROWERS.
Each Borrower represents, warrants, and covenants that it has good and
marketable title to the Collateral free and clear of all liens, claims,
mortgages, security interests, pledges, charges or encumbrances whatsoever
(other than Permitted Liens or as have otherwise been permitted by Bank
pursuant to the Loan Agreement, as amended), except as have been granted to
Bank.
A. To the extent such representations, warranties and covenants
pertain to or are to be performed by Borrowers, all representations, warranties
and covenants in the Loan Agreement, as amended by the First Amendment, the
Second Amendment, the Letter Agreement, and the Third Amendment, shall continue
and be binding on Borrowers under this Fourth Amendment.
SECTION III. CONDITIONS PRECEDENT.
Each Borrower acknowledges that the effectiveness of this Fourth
Amendment is subject to the receipt by Bank of the following documents on the
date of this Agreement, all in form and substance satisfactory to Bank and its
counsel:
A. A certified copy of resolutions of Members of the
Board of Directors of each Borrower approving this Fourth Amendment
and all of the matters described in this Fourth Amendment, and
authorizing the execution, delivery, and performance by Borrowers of
this Fourth Amendment, the Third Amendment To Promissory Note, the
First Amendment To Term Note, and every other document required to be
delivered pursuant to this Fourth Amendment.
B. The Third Amendment to Promissory Note executed by
Borrowers and accepted by Bank in substantially the same form as is
attached to this Fourth Amendment as Exhibit A.
-4-
<PAGE> 5
C. The First Amendment To Term Note executed by
Borrowers and accepted by Bank in substantially the same form as is
attached to this Fourth Amendment as Exhibit B.
D. A certificate signed by a duly authorized officer of
each Borrower to the effect that:
(1) As of the date hereof, no Event of Default
has occurred and is continuing, and no event has occurred and
is continuing that, with the giving of notice or passage of
time or both, would be an Event of Default; and
(2) The representations and warranties set forth
in Section 6.1 of the Loan Agreement are true as of the date
of this Fourth Amendment.
E. A certificate of each Borrower's corporate secretary
certifying (1) to the incumbency and signatures of the officers of
each Borrower signing this Fourth Amendment and every other document
to be delivered pursuant to the Fourth Amendment, (2) to the effect
that TT's Certificate of Incorporation has not been amended since the
execution of the Loan Agreement, (3) to the effect that TT's Bylaws
have not been amended since the execution of the Second Amendment, and
(4) attached thereto is a true, correct and complete copy of the
Certificate of Incorporation and Bylaws of ECA, Inc., and each of
Borrower's Certificate of Incorporation and Bylaws are in full force
and effect as of the date of such certificate.
F. UCC-1 Financing Statements signed by a duly
authorized officer of ECA, Inc.
G. A good standing certificate for ECA, Inc. from the
Secretary of State for each of Delaware and Illinois.
H. Such other documents as Bank may reasonably request
to implement this Fourth Amendment and the transactions described in
this Fourth Amendment.
SECTION IV. APPLICABLE LAW.
This Fourth Amendment shall be deemed to be a contract under the laws
of the State of New Jersey, and for all purposes shall be construed in
accordance with the laws of such State.
-5-
<PAGE> 6
SECTION V. COUNTERPARTS.
This Fourth Amendment may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any one of the parties hereto may execute this Fourth Amendment by signing any
such counterpart.
IN WITNESS WHEREOF, the parties have executed this Fourth Amendment by
their duly authorized officers this 31 day January, 1994.
-6-
<PAGE> 1
EXHIBIT 11
STATEMENT OF THE COMPUTATION OF PER SHARE EARNINGS
IN ACCORDANCE WITH INSTRUCTION 4(G)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------
6/26/94 6/27/93
--------------- ---------------
<S> <C> <C>
Primary earnings per share:
Weighted average number of 5,185,791 5,122,004
common shares outstanding
Dilutive effect of stock
option plan - (a) - (a)
--------------- ---------------
5,185,791 5,122,004
=============== ===============
Net income $ 1,072,000 $ 1,514,000
=============== ===============
Primary earnings per share $ 0.21 $ 0.32
=============== ===============
</TABLE>
(a) The inclusion of stock options in the calculation of primary
earnings per share were either anti-dilutive or not material as
per APB 15.
20
