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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 [FEE REQUIRED]
For the fiscal year ended March 31, 1994
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 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
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $0.01
(Title of class)
New York Stock Exchange
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
NONE
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of 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 /
As of June 13, 1994, the aggregate market value of voting stock held by
nonaffiliates of the registrant based on the last sales price as reported by
the New York Stock Exchange was $66,043,000.00
As of June 13, 1994, the registrant had 5,215,327 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's Proxy Statement for the fiscal year ended
March 31, 1994 (to be filed on or before July 29, 1994) is incorporated by
reference into Part III hereof.
<PAGE> 2
PART I
ITEM 1. BUSINESS.
GENERAL
TransTechnology Corporation develops, manufacturers and sells a wide
range of products in two industry segments, Industrial Products and Aerospace
Products, as further described below. TransTechnology Corporation was
originally organized in 1962 as a California corporation and reincorporated in
Delaware in 1986. Unless the context otherwise requires, references to the
"Company" or the "Registrant" in this Annual Report refer to TransTechnology
Corporation (including the California corporation prior to the reincorporation)
and its consolidated subsidiaries. The Company's fiscal year ends on March 31.
Accordingly, all references to years in this report refer to the fiscal year
ended March 31 of the indicated year.
BACKGROUND
The Company initially engaged in the design and manufacture of
ordnance devices for use in space vehicles and missiles. During the 1970's and
1980's the Company acquired a number of diverse businesses, including
manufacturers of gear driven fasteners, custom electrical interconnection
systems, aircraft rescue hoists, hoists and winches for aircraft and weapon
systems, certain law enforcement equipment, chaff countermeasure products,
computer graphics display terminals, bank automation equipment, message-
switching equipment and message-communication terminals.
In May 1990, the Company sold its pyrotechnic aerospace device and
systems business, Space Ordnance Systems ("Space Ordnance Systems"). In August
1991, the Company discontinued manufacturing operations at its Computer
Graphics division. In March 1992, the Company sold its Financial Systems
division's ("Financial Systems") bank automation equipment line. In May 1992,
the Company divested its textile and construction machinery business,
Gessner/Howard Brothers/Miller ("Gessner"). In June 1992, the Company sold its
Lloyd Manufacturing division's ("Lloyd") elastomer product line, and, in
January 1993, the Company sold its weather instrument product line, Belfort
Instrument ("Belfort").
During fiscal 1994, the Company continued its program of focusing on
its core businesses by acquiring two new product lines, selling one product
line and establishing an exclusive distributor relationship for another product
line. In July 1993 the Company acquired the assets and business of Electrical
Specialties Company, a manufacturer of electrical cables and wire harnesses for
the heavy equipment industry and integrated this operation into its Electronics
division. In August 1993, the Company acquired the assets and business of a
unit of TRW which manufactures single and multi-thread fasteners for the
automotive and industrial markets. This unit is now operating as a division of
TransTechnology under the name "The Palnut Company." In November 1993, the
Company entered into agreements with six manufacturers of electrical connector
and components located in the Commonwealth of Independent States (formerly the
Soviet Union) for the design and manufacture of connectors and assemblies for
the computer, telecommunications and other industrial markets. In March 1994,
the Company sold its Federal Laboratories ("Federal Laboratories") tear gas and
related law enforcement product lines to Mace Security International.
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DISCONTINUED OPERATIONS
Space Ordnance Systems, Financial Systems, Gessner, Lloyd, Belfort,
Federal Laboratories and Computer Graphics' manufacturing operations are
classified as "Discontinued Operations" in the Company's financial statements
for fiscal years 1994, 1993 and 1992. The results of operations from each of
these divisions have been excluded from continuing operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
HISTORICAL SEGMENT INFORMATION
The Company's Industrial Products segment generated approximately 55%
of the Company's consolidated sales for fiscal 1994. For fiscal 1994, the
Industrial Products segment's principal products and services included
specialty fasteners, wire harnesses, and computer graphics service.
The Aerospace Products segment contributed approximately 45% to the
Company's consolidated sales for fiscal 1994. This segment's principal
products are helicopter rescue hoist and cargo-hook equipment, custom
electrical interconnection systems and their components and
metallized-glass-fiber products (chaff) and related devices.
INDUSTRIAL PRODUCTS
The Company's specialty fastener products are manufactured by its
Breeze Industrial Products division and its Palnut Company division. Breeze
Industrial Products division ("Breeze Industrial") designs and manufactures a
diverse line of high-quality stainless steel hose clamps including worm drive
hose clamps, T-Bolt and V-Band clamps and light duty clamps for the appliance
and hardware markets. These clamps are widely used in the heavy-duty vehicle,
industrial, automotive and aircraft industries by both original equipment
manufacturers and replacement suppliers. Breeze Industrial's clamp products
are sold to distributors and to industrial manufacturers that require
engineered products for specific applications. The Company's newest division,
The Palnut Company, manufactures single and multi-thread metal fasteners for
the automotive and industrial products industries. These include lock nuts
used for load carrying in light duty assemblies or as a supplement to ordinary
nuts to assure tightness; the On-Sert fastener, which is pressed onto hollow
plastic bosses to increase torque and minimize stripping; Pushnuts used as
temporary fasteners that hold pre-inserted bolts in place for final assembly or
in ratchet plates which fasten onto a shaft or stud; self- threaders used in
the installation of automotive trim; U-Nuts that provide one-sided screw
assembly and are used to fasten bumpers, fenders and grills to vehicles; and
various single-threaded parts designed for insertion into metal or plastic
panels. Specialty fasteners are marketed through a combination of a direct
sales force, distributors and manufacturing representatives. Such products
contributed 44% of the Company's consolidated sales in fiscal 1994 and 30% in
each of fiscal 1993 and 1992.
Through its MassTech product line, Breeze Industrial also manufactures
tachometers and related items such as speed sensors that are used to measure
rotational shaft speeds and direction and to indicate revolutions per minute.
These products are sold to heavy-duty original equipment manufacturers and in
the military and high-performance markets.
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The Company's computer graphics service operations operate under the
name TransTechnology Systems & Services as part of the Company's Industrial
Products segment. This division maintains and services workstations in the
United States and Europe, and also integrates and sells small financial systems
in Europe and Australia.
During the fourth quarter of fiscal 1994, the Company established a
new business unit, a wholly owned subsidiary, Electronic Connections and
Assemblies, Inc. ("ECA"). ECA will provide engineering and product development
services to assist customers in the design of new high-volume electrical
connectors and assemblies for the computer, telecommunications and other
industries. ECA is also the exclusive distributor of connector products for
six manufacturers organized in the Commonwealth of Independent States (formerly
the Soviet Union). No sales were generated by ECA in fiscal 1994.
With the acquisition of the assets and business of Electrical
Specialties Company in fiscal 1994, the Company's Electronics division (whose
other products are in the Aerospace Products segment) became a manufacturer of
electrical cables and wire harnesses used in the heavy equipment industry.
At March 31, 1994, the Company's Industrial Products segment backlog
was $15 million. At March 31, 1993, the backlog was $7 million. Substantially
all of the March 31, 1994 backlog is scheduled to be shipped during fiscal
1995.
AEROSPACE PRODUCTS
The Company's Breeze-Eastern division ("Breeze-Eastern") specializes
in the design, development and manufacture of sophisticated lifting and
restraining products, principally helicopter rescue hoists, reeling machines
and external hook systems. In addition, Breeze-Eastern designs, develops and
manufactures winches and hoists for aircraft cargo and weapon-handling systems
with applications ranging from cargo handling on fixed-wing aircraft to
positioning television cameras on blimps, antenna and gear drives.
Breeze-Eastern is the industry market share leader in sales of personnel-rescue
hoist and cargo-hook equipment. As the pioneer of helicopter hoist technology,
Breeze-Eastern continues to develop sophisticated helicopter hoist systems,
including systems for the current generation of Seahawk, Chinook, Dolphin,
Merlin and Super Stallion helicopters. Breeze-Eastern also supplies equipment
for the United States, Japanese and European Multiple-Launch Rocket Systems
which use two specialized hoists to load and unload rocket pod containers.
Breeze-Eastern's external cargo-lift hook systems are original equipment on
most helicopters manufactured today. These hook systems range from small
1,000-pound capacity models up to the largest 36,000-pound capacity hooks
employed on the Super Stallion helicopter. Breeze-Eastern also manufactures
aircraft and cargo tie-downs and electronic control boxes and components for
helicopter tow boom assemblies for helicopters employed in Navy minesweeping
operations.
Breeze-Eastern sells its products through an internal marketing
representative and several independent sales representatives and distributors.
Breeze-Eastern's product lines contributed 25% to the Company's consolidated
sales in fiscal 1994, 36% in fiscal 1993 and 33% in fiscal 1992.
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The Technical Center division (the "Technical Center") develops and
produces metallized-glass-fiber products, known as chaff, and related devices
and systems. Chaff reflects radar signals and is used to defend military
aircraft, ships and vehicles against radar detection and attack by radar-guided
missiles. The Technical Center is one of only three chaff suppliers to the
United States Government. In addition, the Technical Center sells chaff
products to both domestic and international customers including air-frame
manufacturers, avionics-equipment suppliers and United States approved foreign
governments. The Technical Center's sales are generated by an employee
marketing representative and several independent sales representatives. The
Technical Center contributed 12% to the Company's consolidated sales in fiscal
1994, 11% in fiscal 1993 and 14% in fiscal 1992.
The Company's Electronics division ("Electronics") designs and
manufactures custom electrical interconnection products for use in military and
commercial aircraft, radar installations, naval weapons and missile launch
systems, ground-based military vehicles and weapons systems (such as tanks and
anti-armor weapons), and secure communication and computer applications.
Aircraft products include cable assemblies, conduit assemblies and related
hardware elements (metallic and composite) and high reliability connectors.
Electronics manufactures these products for various military and commercial
aircraft programs including ground support test equipment for the Air Force
F-16 fighter, the Army Patriot missile system and the Navy Phalanx
anti-aircraft weapons system. Electronics' sales are generated by an internal
sales force and several independent sales representatives throughout the United
States. Electronics' sales of Aerospace Products contributed 12% to the
Company's consolidated sales in fiscal 1994, 14% in fiscal 1993 and 14% in
fiscal 1992.
The Aerospace Products segment backlog varies substantially from time
to time due to the size and timing of orders. At March 31, 1994, the backlog
of unfilled orders was $30 million, compared to $34 million at March 31, 1993.
The majority of the March 31, 1994 backlog is anticipated to be shipped during
fiscal 1995.
DEFENSE INDUSTRY SALES
Approximately 20% of the Company's consolidated revenues in fiscal
1994, 1993 and 1992, were derived from sales to the United States Government,
principally the military services of the Department of Defense and its prime
contractors. Such sales are attributable primarily to the Aerospace Products
segment. These sales are based on firm fixed-price contracts, some of which
are negotiated sole-source awards, while others are awarded on a
competitive-bid basis. These contracts typically contain precise performance
specifications and are subject to customary provisions which give the United
States Government the contractual right of termination for convenience. In the
event of termination for convenience, however, the Company is typically
protected by provisions allowing reimbursement for costs incurred as well as
payment of any applicable fees or profits. Although overall defense spending
is down, the major cuts are primarily attributable to reductions in platforms,
ships, submarines, tanks and fixed wing aircraft. Management believes that
funding for defense accessories and expendables (which comprise a major portion
of the Company's defense industry sales) will remain constant for the Company's
1995 fiscal year. At the same time, there can be no assurance that funding for
defense accessories and expendables will remain at such a level for the
foreseeable future.
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ENVIRONMENTAL MATTERS
Due primarily to Federal and State legislation which imposes
liability, regardless of fault, upon commercial product manufacturers for
environmental harm caused by chemicals, processes and practices that were
commonly and lawfully used prior to the enactment of such legislation, the
Company may be liable for all or a portion of the environmental clean-up costs
at sites previously owned or leased by the Company (or corporations acquired by
the Company). The Company's contingencies associated with environmental
matters are described in Item 3 "Legal Proceedings," and Note 10 of Notes to
Financial Statements included in Item 8 hereof.
COMPETITION
Some of the Company's various business divisions compete with entities
that are larger and have substantially greater financial and technical
resources than the Company. Generally, competitive factors include design
capabilities, product performance and delivery and price. The Company's
ability to compete successfully in many markets described above will depend on
its ability to develop and apply technological innovations and to expand its
customer base and product lines. There can be no assurance that the Company
will continue to successfully compete in any or all of the businesses discussed
above. The failure of more than one of these businesses could have a material
and adverse effect on the Company's profitability.
RAW MATERIALS
The various components and raw materials used by the Company to
produce its many products are generally available from more than one source.
In those instances where only a single source is available, most of such
products can generally be redesigned to accommodate materials made by other
suppliers. In some cases, the Company stocks an adequate supply of the single
source materials for use until a new supplier can be approved. No material
part of the Company's business is dependent upon a single supplier or a few
suppliers the loss of which would have a materially adverse effect on the
Company's consolidated financial position.
EMPLOYEES
As of June 10, 1994 the Company employed 1,059 persons. There are 500
employees associated with the Industrial Products segment, 543 with the
Aerospace Products segment and 16 with the corporate office.
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FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Financial information relating to each of the Company's segments has
been included in Note 11 of Notes to Financial Statements included in Item 8
hereof.
FOREIGN OPERATIONS AND SALES
The Company's foreign-based facilities consist of the sales and
service offices of the computer graphics workstation operations located in the
United Kingdom and Australia and its chaff manufacturing center in Belgium.
The Company had export sales of $22.2 million in fiscal 1994, $19.5 million in
fiscal 1993 and $18.4 million in fiscal 1992, representing 18%, 20% and 20% of
the Company's consolidated sales in each of those years, respectively. The
risk and profitability attendant to these sales are generally comparable to
similar products sold in the United States. Sales, profits and identifiable
assets attributable to the Company's combined foreign and domestic operations,
and the identification of export sales by geographic area, are set forth in
Note 11 of Notes to Financial Statements in Item 8 hereof.
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ITEM 2. PROPERTIES
The following table sets forth certain information concerning the
Company's principal facilities for its continuing operations:
<TABLE>
<CAPTION>
Location Use of Premises Expiration Sq. Ft
- - -------- --------------- ---------- ------
<S> <C> <C> <C>
INDUSTRIAL PRODUCTS
SEGMENT
- - ----------------------------
Saltsburg, Pennsylvania Breeze Industrial offices Owned 100,000
and manufacturing plant
Mountainside, New Jersey Palnut offices and Owned 142,000
manufacturing plant
Bartonville, Illinois* TransTechnology 1994 30,000
Electronics offices and
manufacturing plant
Livonia, Michigan* TransTechnology Systems & 1999 10,400
Services sales and service
office
Portsmouth, U.K.* TransTechnology Systems & 2017 7,000
Services sales and service
office
Melbourne, Australia* TransTechnology Systems & 1995 2,800
Services service office
AEROSPACE
PRODUCTS SEGMENT
- - ----------------
Union, New Jersey Corporate offices, Breeze- Owned 188,000
Eastern offices and
manufacturing plant
Peoria, Illinois* TransTechnology 2003 105,000
Electronics offices and
manufacturing plant
Wyoming, Illinois TransTechnology Owned 29,400
Electronics manufacturing
plant
Pompano Beach, Florida Lundy Technical Center Owned 92,000
offices and manufacturing
plant
Brussels, Belgium* Coil Lundy offices and 1997 12,000
manufacturing plant
- - ----------------------
</TABLE>
* Leased premises, including renewal options
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The Company believes that such facilities are suitable and adequate
for the Company's foreseeable needs and that additional space, if necessary,
will be available. See Note 9 of Notes to Financial Statements in Item 8
hereof for information regarding the Company's rental expense and future rental
commitments under its facilities lease agreements relating to continuing
operations.
ITEM 3. LEGAL PROCEEDINGS
The Company has commenced environmental site assessments and cleanup
feasibility studies to determine the presence, extent and sources of any
environmental contamination at two facilities in Pennsylvania and the Wyoming,
Illinois facility. Although no governmental action requiring remediation has
been taken at this time, the Company is working in cooperation with the
relevant state authorities and any remedial work required to be performed would
be subject to their approval. At the Pennsylvania sites, a feasibility study
has been prepared and submitted to the state. Based upon that study and upon
claims for recovery which the Company has against others, a pre-tax charge of
$3.6 million (net of $1.2 million in probable recoveries from third parties)
was recorded in March 1993 for future cleanup costs at the Pennsylvania sites.
At March 31, 1994, the balance of this clean-up reserve was $3 million (net of
$1.2 million in probable recoveries). In addition, the Company is pursuing
recovery of a portion of clean-up costs in litigation with several of its
insurance carriers. The Company expects that remediation work at the
Pennsylvania site will not be completed until fiscal 1997.
In addition, the Company has been named as a potentially responsible
party in various proceedings pending in several other states in which it is
alleged that the Company was a generator of waste that was sent to landfills
and other treatment facilities at which environmental remediation activities
are pending. It is not possible to reliably estimate the costs associated with
any remedial work to be performed until the studies at the Wyoming, Illinois
site and these other sites have been completed, the scope of work defined and a
method of remediation selected and approved by the relevant state authorities.
In February 1990, a lawsuit was brought in Los Angeles Superior Court
against the Company and certain of its former officers by Special Devices, Inc.
("Special Devices"), a landlord at one of the Company's former California
facilities, and Placerita Land and Farming Company, a predecessor of Special
Devices, in which plaintiffs seek to recover in excess of $15 million for
compensatory damages and an unspecified sum for punitive damages. The
plaintiffs allege that the Company's waste handling practices have diminished
the value of the leased property, reduced future rental income and caused
plaintiffs to incur substantial defense costs in connection with related legal
proceedings. In November 1985, the Company entered into agreements with the
California Department of Health Services obligating the Company to clean up
soil and groundwater contaminated by hazardous materials on the property.
Substantially all of the remedial work has been performed, with ongoing
monitoring and water treatment activity expected to continue until 2002.
Two of the Company's general liability insurance carriers have filed
actions in California Superior Court asking the Court to determine that their
policies do not cover California environmental cleanup costs, damages to
neighboring landowners for alleged personal injury and property damage, and
related defense costs. The Company continues to believe that these policies
cover such costs and is negotiating with the carriers to settle these actions.
The Company is also engaged in various other legal proceedings
incidental to its business.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, par value $0.01, is traded on the New York
Stock Exchange under the symbol TT. The following table sets forth the range
of high and low closing sales prices on the New York Stock Exchange for the
Common Stock for the calendar quarters indicated, as reported by the New York
Stock Exchange.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fiscal 1993
First Quarter $11 $ 8
Second Quarter 10-1/4 8-1/4
Third Quarter 12-1/2 8-1/2
Fourth Quarter 11-1/8 9-3/8
Fiscal 1994
First Quarter $10-1/2 $ 9-1/8
Second Quarter 12 9-1/4
Third Quarter 12 10-1/2
Fourth Quarter 17-7/8 11
Fiscal 1995
First Quarter $16-5/8 $12-3/8
(through June 13, 1994)
</TABLE>
As of June 13, 1994, the number of stockholders of record of the
Common Stock was 2,768. On June 13, 1994 the closing sales price of the Common
Stock was $13.625.
The Company's bank indebtedness permits quarterly dividend payments
which cannot exceed 25% of the Company's cumulative net income in each year.
On December 31, 1992, the Company paid a special dividend of $1.50 per share.
The Company has paid a regular quarterly dividend of $0.06 per share on each of
March 1, June 1, September 1 and December 1, 1993, and March 1 and June 1,
1994.
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ITEM 6. SELECTED FINANCIAL DATA
The following table provides selected financial data with respect to
the consolidated statements of operations of the Company for the fiscal years
ended March 31, 1994, 1993, 1992, 1991 and 1990 and the consolidated balance
sheets of the Company at the end of each such period.
SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues from continuing operations . . . . . . $ 121,539 $ 96,732 $ 90,831 $ 102,825 $ 107,282
Income (loss) from continuing operations before
income taxes . . . . . . . . . . . . . 10,770 6,519 (979) 2,792 6,719
Provision (credit) for income taxes . . . . . . 3,902 1,325 (149) 828 3,073
--------- --------- --------- --------- ---------
Income (loss) from continuing operations 6,868 5,194 (830) 1,964 3,646
Income (loss) from discontinued
operations . . . . . . . . . . 16 (61) (8,585) (5,973) (12,088)
--------- --------- --------- --------- ---------
Net income (loss) . . . . . . . . . . . . . . . $ 6,884 $ 5,133 $ (9,415) $ (4,009) $ (8,442)
========= ========= ========= ========= =========
Earnings (loss) per share:
Income (loss) from continuing operations . . . $ 1.34 $ 1.02 $ (0.16) $ 0.39 $ 0.71
Loss from discontinued operations . . . . . . . - (0.01) (1.69) (1.17) (2.35)
--------- --------- --------- --------- ---------
Earnings (loss) per share . . . . . . . . . . . $ 1.34 $ 1.01 $ (1.85) $ (0.79) $ (1.64)
========= ========= ========= ========= =========
Dividends declared and paid per share . . . . . $ 0.24 $ 1.56 -- $ 0.24 $ 0.96
Total assets . . . . . . . . . . . . . . . . . $ 125,857 $ 97,763 $ 104,905 $ 159,828 $ 188,569
Long-term debt . . . . . . . . . . . . . . . . $ 33,168 $ 12,387 $ 528 $ 42,052 $ 66,215
Shareholders' equity . . . . . . . . . . . . . $ 65,953 $ 61,214 $ 63,735 $ 73,162 $ 78,852
Book value per share . . . . . . . . . . . . . $ 12.71 $ 11.95 $ 12.54 $ 14.40 $ 15.36
Shares outstanding at year-end . . . . . . . . 5,189 5,122 5,084 5,080 5,135
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's fiscal year ends on March 31. Accordingly, all
references to years in this Management's Discussion refer to the fiscal year
ended March 31 of the indicated year. 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 years presented. As a result of the sale of the Financial
Systems division and the discontinuance of the Computer Graphics manufacturing
operation in 1992, the Advanced Technology Products segment has been eliminated
as a reporting segment.
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Revenue from continuing operations in 1994 was $121.5 million, an
increase of $24.8 million or 26% from 1993, compared with a $5.9 million or 6%
increase from 1992 to 1993. Gross profit in 1994 increased $6.7 million or 23%
from 1993, compared with an increase of $9.0 million or 44% from 1992 to 1993.
Operating profit from continuing operations for 1994 was $17.3 million, an
increase of $1.4 million or 9% from 1993, compared with an increase of $8.9
million or 127% from 1992 to 1993. Changes in sales, operating profit and new
orders from continuing operations are discussed below by segment, and
additional information regarding industry segments is contained in Note 11 of
the Notes to Financial Statements.
Net income, including discontinued operations, for 1994 was $6.9
million or $1.34 per share, compared to $5.1 million or $1.01 per share in
1993. These changes in net income were primarily affected by operating profit,
as discussed in the Business Segment sections below. Discontinued operations,
including the gain on disposal which is discussed in more detail below, were
essentially break-even in 1994 and accounted for net losses of $0.1 million or
$.01 per share in 1993.
Revenue from continuing operations for the quarter ended March 31,
1994 was $34.8 million, an increase of $7.5 million or 27% from the comparable
period in 1993.
In the fourth quarter of 1994, the Company recorded a reduction of
$0.8 million of Federal income tax provisions. Also in the fourth quarter of
1994 the Company sold its tear gas division and recorded a pre-tax gain of $0.7
million as discussed below in the discontinued operations section. In August,
1993 the Company acquired the Palnut fastener division and the Electrical
Specialties Company as discussed below in the Acquisitions section and the
Business Segment sections.
In the fourth quarter of 1993, the Company recorded a pre-tax charge
of $3.6 million to provide for estimated future site remediation costs at two
facilities located in Pennsylvania. Also during 1993, the Company reflected
pre-tax charges of $0.8 million for proxy solicitation and related legal
expenses associated with the contested election of directors. The Company
accrued or reimbursed the expenses for both slates of directors in connection
with the solicitation of proxies for the September 1992 annual meeting of
stockholders. These charges were offset in the fourth quarter of 1993 by the
settlement of a contract termination claim for a pre-tax profit of $1.9 million
and a fourth quarter reduction of $1.9 million of federal and state income tax
provisions.
Interest expense increased $0.9 million in 1994 primarily as a result
of increased bank borrowings used for the acquisitions of Palnut and Electrical
Specialties Company, as discussed below in the Liquidity and Capital Resources
section. Interest expense decreased $1.5 million from 1992 to 1993 primarily
as a result of the Company using the proceeds from the sale of its Financial
Systems, Gessner, Lloyd and Belfort divisions to reduce long-term debt.
Fiscal 1993 and 1992 results were impacted by a pre-tax charge of $0.5
million and $2.7 million, respectively, for the costs of downsizing the
corporate staff and relocating corporate headquarters from California to New
Jersey.
New orders received during 1994 by continuing operations totaled
$125.6 million, an increase of $43.4 million or 53% from 1993. New orders
received during 1993 by continuing operations totaled $82.2 million, a decrease
of $9.7 million or 11% from 1992. New orders are discussed below by industry
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segment. At March 31, 1994, total backlog of unfilled orders was $45.2
million, compared to $40.7 million at March 31, 1993, and $54.6 million at
March 31, 1992.
During 1994 two new accounting standards were adopted effective April
1, Statement of Financial Accounting Standards No. 106 and No. 109. Statement
No. 106, related to post-retirement benefits other than pensions, resulted in
an after-tax charge to income of $0.1 million while Statement No. 109, related
to income taxes, had no material effect on 1994 earnings. The corporation's
liquidity and cash flow were not affected by these accounting changes.
In March 1994, the Company adopted Statement of Financial Accounting
Standard No. 115, related to accounting for certain investments in debt and
equity securities. Adoption of this standard resulted in a March 31, 1994
balance sheet reduction of $1.6 million to other assets and stockholders
equity.
ACQUISITIONS
On July 28, 1993, the Company acquired the assets and business of
Electrical Specialties Company for a total purchase price of $1.7 million in
cash. Electrical Specialties Company manufactures electrical cables and wire
harnesses for the heavy equipment industry.
On August 2, 1993, the Company acquired substantially all of the
assets of the Palnut fastener operation ("Palnut") of TRW Inc. for a total
purchase price of $20.5 million in cash and the assumption of certain
liabilities consisting primarily of trade payables and accrued expenses
aggregating approximately $1.4 million. The Palnut operation manufactures
single and multi-thread metal fasteners for the automotive and industrial
products industries.
DISCONTINUED OPERATIONS
During 1992, the Company adopted a restructuring plan which provided
for the sale of its Financial Systems, Gessner, Lloyd and Belfort divisions,
and the discontinuation of its Computer Graphics manufacturing operation. At
March 31, 1992, these businesses were classified for financial reporting
purposes as discontinued operations.
On March 30, 1992, the Company completed the sale of its Financial
Systems division to Recognition Equipment Incorporated for total consideration
of $37.8 million, consisting of a note receivable of $2.5 million and $35.3
million in cash, of which $5.1 million was placed in escrow pending the
resolution of certain issues as specified in the purchase agreement. This
transaction resulted in an after-tax gain of $0.7 million. At March 31, 1994,
$2.1 million remained in escrow.
On May 29, 1992, and June 4, 1992, the Company completed the sales of
its Gessner and Lloyd divisions, respectively. The Company received cash of
$4.3 million, long term notes of $2 million, and a receivable of $0.3 million.
These sales resulted in a combined after-tax loss of $1.6 million reflected in
the March 31, 1992 financial statements. In the fourth quarter of 1993, the
Company reported a gain on disposal of these divisions of $0.4 million (net of
applicable income tax provision of $0.1 million).
On January 24, 1993, the Company sold its Belfort division. The
Company received cash of $1.0 million and a long term note of $1.7 million.
After-tax income of $0.1 million and $0.4 million were recorded in the fourth
quarter of 1994 and 1993, respectively, from this transaction. Additionally,
as part of the sale, the Company consigned $1.3 million of inventory under a
five-year contractual purchase
12
<PAGE> 14
agreement of which $0.8 million remained at March 31, 1994. The Company
retained one weather instrument product line and is negotiating its sale
separately from the above transaction.
In August 1991, the Company discontinued its Computer Graphics
manufacturing operation. Such operation was reclassified as a discontinued
operation, and an after-tax loss from the discontinuation of $4.1 million is
reflected in the Company's 1992 statement of operations. In 1994 and 1993 the
Company recognized another $0.1 and $0.9 million, respectively, for additional
after- tax actual and estimated future discontinuation costs. The Computer
Graphics manufacturing operation incurred an after-tax operating loss of $1.2
million in 1992.
Additional costs of $0.7 million, after-tax, were recorded in 1993 in
connection with the Company's Space Ordnance Systems division, which was sold
in May 1990, and a gain on disposal of $0.2 million, after tax, was recorded in
1994. These additional costs and income represent adjustments to previous
estimates related to litigation and environmental matters.
In March 1994, the Company sold its Federal Laboratories division for
$1.0 million in cash, $1.2 million in notes receivable and 465,000 shares of
Mace Security International, Inc. common stock. The sale of this division
resulted in a gain of $0.5 million (net of applicable income tax provision of
$0.2 million).
INDUSTRIAL PRODUCTS SEGMENT
1994 COMPARED WITH 1993
Sales for the Industrial Products segment were $66.4 million in 1994,
an increase of $29.5 million or 80% from 1993. The increase in sales was
primarily due to the inclusion of eight months of Palnut fastener operations
and increased sales of gear- driven fasteners. The total 1994 increase in
specialty fastener sales was $23.4 million. Additionally, the increase
included eight months of electrical harness operations which amounted to $5
million in sales. TransTechnology Systems & Services sales increased $1.1
million or 15% in 1994 primarily due to increased domestic and overseas demand
for workstations and small financial systems as well as increased maintenance
contract sales.
Operating profit for the Industrial Products segment was $9.2 million
in 1994, an increase of $1.8 million or 25% from 1993. The primary factors
contributing to the segment's increased operating profit in 1994 were the
inclusion of eight months of the Palnut threaded fastener operations and
increased shipments of gear-driven fasteners which were partially offset by
reduced operating profit at TransTechnology Systems & Services due to costs
associated with the introduction of two new small financial systems products
which were subsequently cancelled in the fourth quarter of 1994. Other
contributing factors which offset the overall increase in operating profit were
shipments on low margin contracts from the newly acquired electrical harness
product line and losses attendant to the start-up of Electrical Connections and
Assemblies, Inc.'s business.
In 1994, new orders in the industrial products segment increased $38.6
million or 105% from 1993. All industrial product lines experienced increased
new orders in 1994 over 1993. The specialty fastener product line and
electrical harness product line contributed $29.7 million and $7.4 million of
increased new orders in 1994, respectively. In 1994, TransTechnology Systems &
Services new orders were up 22% over 1993. The specialty fastener increase was
due primarily to the acquisition of the Palnut product line. The new order
increase at TransTechnology Systems & Services was primarily due to increased
penetration of
13
<PAGE> 15
third party maintenance markets. Backlog of unfilled orders was $15.2 million
at March 31, 1994, compared to $6.8 million at March 31, 1993.
1993 COMPARED WITH 1992
Sales for the Industrial Products segment were $37 million in 1993, an
increase of $1.6 million or 5% from 1992. The increase in sales was primarily
related to the increased sales volume of specialty fasteners which was up in
1993 by $2.3 million, an increase of 8% from 1992, as a result of new product
market penetration and increased industrial and truck fastener demand.
TransTechnology Systems & Services sales decreased $0.6 million in 1993
primarily due to reduced overseas demand for workstations and small financial
systems, partially offset by an increase in domestic maintenance contract
sales.
Operating profit for the Industrial Products segment was $7.3 million
in 1993, up $0.3 million or 5% from 1992, resulting primarily from increased
sales and margins related to specialty fasteners and domestic maintenance
contracts, and partially offset by the decreased sales and margins related to
overseas workstations and small financial systems.
In 1993, new orders in the Industrial Products segment increased $1.9
million or 5% from 1992. Orders for specialty fasteners increased in 1993 by
$2.6 million or 9% due to increased market share. TransTechnology Systems &
Services new orders were down $0.7 million or 10% mainly due to reduced demand
for workstations and small financial systems. Backlog of unfilled orders was
$6.8 million at March 31, 1993, compared to $7.1 million at March 31, 1992.
AEROSPACE PRODUCTS SEGMENT
1994 COMPARED WITH 1993
Sales for the Aerospace Products segment were $54.1 million in 1994, a
decrease of $4.9 million or 8% from 1993. Fiscal 1994 sales of hoists and
winches, related spare parts and tie-downs decreased $8 million or 27% from
1993 due primarily to delays in the timing of customers placing new orders in
1994, increased competition resulting in reduced tie-down orders and the
settlement of a contract termination claim for a pre-tax profit of $1.9 million
in the fourth quarter of 1993. Sales of cargo hooks increased $2.6 million or
51% primarily due to timing of customer orders. Chaff product sales were down
in 1994 by $0.4 million or 4%. The Company's primary customer for chaff
product is the United States Department of Defense and its prime contractors.
Due to reduced government defense spending and the fact that customers have
adequate quantities of chaff products in inventory, domestic sales are likely
to continue at reduced levels. Sales of electrical cable and conduit in 1994
were up $1.6 million or 16% primarily due to increased shipments on the F-16
fighter and other military programs. Electrical connector sales decreased in
1994 by $0.7 million or 21% due to a general decrease in demand by commercial
airline customers.
Operating profit for the Aerospace Products segment was $8.1 million
for 1994, a decrease of $0.4 million or 5% from 1993. The decrease was
primarily due to the reduced shipments of hoist and winches, related spare
parts, tie-downs, and electrical connectors, offset by increased cargo hook and
electrical cable and conduit shipments, as mentioned above.
14
<PAGE> 16
New orders for the Aerospace Products segment increased in 1994 by
$4.8 million or 11%. All product lines, with the exception of hoists and
winches, related spare parts and tie-downs experienced increased new orders in
1994, primarily due to the timing of customer orders.
The Aerospace Products segment backlog varies substantially from time
to time due to the size and timing of orders. At March 31, 1994, the backlog
of unfilled orders was $30 million, compared to $34 million at March 31, 1993.
Sales related to United States Government contracts, which consist
primarily of defense contracts and represent approximately 20% of the Company's
total 1994 sales, 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.
1993 COMPARED WITH 1992
Sales for the Aerospace Products segment were $59 million in 1993, an
increase of $4.0 million or 7% from 1992. Fiscal 1993 sales of hoists and
winches, related spare parts and tie-downs increased $6.4 million or 27% from
1992 due primarily to improved manufacturing capability. Sales of cargo hooks
decreased $1.2 million or 19% from 1992. As a result of the resolution of
manufacturing problems in 1992, the Company was able to significantly reduce a
large amount of accumulated overdue backlog by the end of fiscal 1992. This
reduction in backlog resulted in unusually high sales volume of primarily cargo
hooks in the prior year. This increase was partially offset in 1993 by the
product line acquisition from Kinedyne which added $0.3 million of cargo hook
sales. Chaff product sales were down in 1993 by $2.9 million or 22%, due to
reduced government defense spending and the fact that adequate quantities of
the product were in customer inventories. Sales of electrical cable and
conduit in 1993 were up by $1.8 million or 20% primarily due to increased
shipments on the F-16 jet fighter program which had been delayed in 1992.
Electrical connector sales decreased in 1993 by $0.3 million or 9% due to a
general decrease in commercial airline orders.
Operating profit for the Aerospace Products segment was $8.5 million
for 1993, compared to a break-even in the prior year. Primary factors
contributing to the segment's increased operating profit were increased
domestic and foreign shipments of hoists, winches, related spare parts,
electrical cable and conduit, and improved manufacturing systems and
efficiencies in cargo hooks, hoists and winches, related spare parts and
electrical cable, conduit and connector products.
New orders for the Aerospace Products segment decreased in 1993 by
$13.1 million or 22% from 1992. New orders for hoists and winches and related
spare parts decreased in 1993 by $2.9 million or 12%. This fluctuation was
primarily a result of the timing of receipt of new contracts rather than a
trend related to demand for these products. Chaff product and electrical cable
and connector orders were down by $14.4 million or 58%. Chaff product new
orders were down $5.6 million or 50% from 1992 primarily due to reduced
government defense spending and adequate quantities of the product in customer
inventories, as described above. Electrical cable and connector orders
decreased $8.8 million or 64% primarily as a result of delays in new orders
from the military and aerospace industries and general slowdown in department
of defense purchases, a trend that is likely to continue. New orders for cargo
hooks, tie-downs
15
<PAGE> 17
and electrical conduit increased by $4.1 million or 42% primarily due to the
acquisition of a new product line, receipt of a multi- year order for the CH-53
Helicopter program and increased market share.
At March 31, 1993, the backlog of unfilled orders was $34 million,
compared to $47 million at March 31, 1992.
LIQUIDITY AND CAPITAL RESOURCES
The Company's debt-to-capitalization ratio was 34% as of March 31,
1994, 17% as of March 31, 1993 and 15% as of March 31, 1992. The current ratio
at March 31, 1994, stood at 3.49 compared to 3.27 at March 31, 1993 and 1.94 at
March 31, 1992. Working Capital was $53.8 million at March 31, 1994, up $10.4
million from March 31, 1993 and $18.1 million from March 31, 1992.
At March 31, 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. In connection with the Palnut
acquisition, the Company amended its revolving bank credit line on July 29,
1993 to increase the bank's lending commitment from $25 million to $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 March
31, 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 plus two
percentage points, which the Company was utilizing for $25 million of
outstanding borrowings at March 31, 1994. 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. The first principal payment of
$120,000 was due and paid on September 30, 1993. Thereafter, principal
payments of $360,000 are due and payable on the last day of each quarter
through June 30, 1998, with a final balloon payment of $3,040,000 due and
payable on August 31, 1998. Interest accrues at the lending bank's prime rate
plus 1/4 percentage points, but in accordance with the loan agreement will be
reduced to the prime rate for fiscal 1995 because the Company exceeded $6.0
million in net income for fiscal year 1994. Interest is payable monthly.
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. At June 16, 1994, the Company had
repurchased 50,000 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 1994 were $5 million as compared with $5.5
million in 1993. The Company's two industry segments have similar cash flow
requirements.
The Company is subject to various contingencies related to land and
groundwater contamination at several facilities. These matters are described
in Note 10 of the Notes to Financial Statements. Management believes that,
after taking into consideration information provided by counsel, the resolution
of these matters will not have a materially adverse effect on the Company's
liquidity.
16
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements:
Independent Auditors' Report 18
Consolidated Balance Sheets as of March 31, 1994 and 1993 19
Statements of Consolidated Operations for years ended March 31, 1994, 1993 and 1992 20
Statements of Consolidated Cash Flows for years ended March 31, 1994, 1993 and 1992 21
Statements of Consolidated Stockholders' Equity for years ended March 31, 1994, 1993
and 1992 22
Notes to Consolidated Financial Statements 23
Financial Statement Schedules:
Schedule I --
Consolidated Marketable Securities and Other Security Investments for the years
ended March 31, 1994, 1993 and 1992 36
Schedule VIII --
Consolidated Valuation and Qualifying Accounts for years ended March 31, 1994,
1993 and 1992 37
Schedule X --
Consolidated Supplementary Income Statement Information for years ended
March 31, 1994, 1993 and 1992 38
</TABLE>
Schedules required by Article 12 of Regulation S-X, other than those
listed above, are omitted because of the absence of the conditions under which
they are required or because the required information is included in the
financial statements or notes thereto.
17
<PAGE> 19
INDEPENDENT AUDITORS' REPORT
To the Stockholders and the Board of Directors of TransTechnology Corporation:
We have audited the accompanying consolidated balance sheets of TransTechnology
Corporation and subsidiaries as of March 31, 1994 and 1993 and the related
statements of consolidated operations, stockholders' equity, and cash flows for
each of the three years in the period ended March 31, 1994. Our audits also
included the consolidated financial statement schedules listed in the Table of
Contents at Item 8. These financial statements and the financial statement
schedules are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on the financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of TransTechnology Corporation and
subsidiaries at March 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1994 in conformity with generally accepted accounting principles. Also, in our
opinion, such consolidated financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
As discussed in Note 8 to the consolidated financial statements, in 1994 the
Corporation changed its method of accounting for postretirement benefits other
than pensions to conform with Statement of Financial Accounting Standards No.
106.
As discussed in Note 5 to the consolidated financial statements, in 1994 the
Corporation changed its method of accounting for income taxes to conform with
Statement of Financial Accounting Standards No. 109.
/s/ Deloitte & Touche
Deloitte & Touche
Parsippany, New Jersey
June 20, 1994
18
<PAGE> 20
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
----------------------------------
1994 1993
---------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 3,027,000 $ 1,505,000
Accounts receivable:
United States Government . . . . . . . . . . . . . . . . . . . 2,815,000 2,075,000
Commercial (net of allowance for doubtful accounts of $271,000 19,500,000 17,426,000
in 1994 and $318,000 in 1993) . . . . . . . . . . . .
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 2,814,000 --
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,786,000 33,375,000
Prepaid expenses and other current assets . . . . . . . . . . . . . . 2,932,000 1,715,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . 4,253,000 3,393,000
Net assets of discontinued businesses . . . . . . . . . . . . . . . . 4,309,000 3,176,000
---------------- ----------------
Total current assets . . . . . . . . . . . . . . . . . . . . . 75,436,000 62,665,000
Property:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,223,000 2,780,000
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,657,000 9,997,000
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . 32,611,000 23,825,000
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . 4,050,000 3,499,000
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . 671,000 710,000
---------------- ----------------
Total 58,212,000 40,811,000
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . 22,204,000 20,079,000
---------------- ----------------
Property-net . . . . . . . . . . . . . . . . . . . . . . . . . 36,008,000 20,732,000
Other assets:
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 4,061,000 5,643,000
Costs in excess of net assets of acquired businesses (net of
accumulated amortization: 1994, $2,423,000; 1993,
$2,178,000) . . . . . . . . . . . . . . . . . . . . . . . . . 3,117,000 2,728,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,235,000 5,995,000
---------------- ----------------
Total other assets . . . . . . . . . . . . . . . . . . . . . . 14,413,000 14,366,000
---------------- ----------------
Total $ 125,857,000 $ 97,763,000
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . $ 1,479,000 $ 38,000
Accounts payable-trade . . . . . . . . . . . . . . . . . . . . . . . . 7,489,000 5,895,000
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . 4,570,000 3,433,000
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . 943,000 1,871,000
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . 7,109,000 7,940,000
---------------- ----------------
Total current liabilities . . . . . . . . . . . . . . . . . . 21,590,000 19,177,000
---------------- ----------------
Long-term debt payable to banks and others . . . . . . . . . . . . . . . . . . 33,168,000 12,387,000
---------------- ----------------
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 5,146,000 4,985,000
---------------- ----------------
Stockholders' equity:
Preferred stock-authorized, 300,000 shares; none issued . . . . . . . -- --
Common stock-authorized, 14,700,000 shares of $.01 par value; issued,
5,189,104 and 5,121,604 shares in 1994 and 1993, respectively 52,000 51,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 45,283,000 44,616,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 22,186,000 16,537,000
Other stockholders' equity . . . . . . . . . . . . . . . . . . . . . . (1,568,000) 10,000
---------------- ----------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . 65,953,000 61,214,000
---------------- ----------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,857,000 $ 97,763,000
================ ================
</TABLE>
- - --------------------
See accompanying notes to consolidated financial statements.
19
<PAGE> 21
STATEMENTS OF CONSOLIDATED OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
----------------------------------------------
1994 1993 1992
-------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $ 120,507,000 $ 95,913,000 $ 90,267,000
Interest income . . . . . . . . . . . . . . . . . . . . 733,000 661,000 347,000
Other income . . . . . . . . . . . . . . . . . . . . . 299,000 158,000 217,000
-------------- ------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . 121,539,000 96,732,000 90,831,000
-------------- ------------- -------------
Cost of goods sold . . . . . . . . . . . . . . . . . . . 85,322,000 67,258,000 70,354,000
-------------- ------------- -------------
Gross profit . . . . . . . . . . . . . . . . . . . . . . 36,217,000 29,474,000 20,477,000
General, administrative and selling expenses . . . . . . 23,517,000 17,624,000 16,163,000
Environmental charge . . . . . . . . . . . . . . . . . . 374,000 4,167,000 358,000
Corporate office relocation . . . . . . . . . . . . . . - 468,000 2,696,000
Interest expense . . . . . . . . . . . . . . . . . . . . 1,556,000 696,000 2,239,000
-------------- ------------- -------------
Income (loss) from continuing operations before income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . 10,770,000 6,519,000 (979,000)
Provision (credit) for income taxes . . . . . . . . . . 3,902,000 1,325,000 (149,000)
-------------- ------------- -------------
Income (loss) from continuing operations . . . . . . . . 6,868,000 5,194,000 (830,000)
Discontinued Operations:
(Loss) income from operations (net of applicable tax
benefits of $1,055,000 and $1,983,000 for 1994 and
1992, respectively, and including a tax provision of
$3,000 for 1993) . . . . . . . . . . . . . . . . . . (744,000) 10,000 (2,797,000)
Gain (loss) from disposal (includes a tax provision of
$306,000 and $963,000 for 1994 and 1992, respectively,
and net of applicable tax benefit of $1,337,000 for
1993) . . . . . . . . . . . . . . . . . . . . . . . . 760,000 (71,000) (5,788,000)
-------------- ------------- -------------
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 6,884,000 $ 5,133,000 $ (9,415,000)
============== ============= =============
Earnings per share
Income (loss) from continuing operations . . . . . . . $ 1.34 $ 1.02 $ (0.16)
Loss from discontinued operations . . . . . . . . . . . - (0.01) (1.69)
-------------- ------------- -------------
Income (loss) per share . . . . . . . . . . . . . . . . . $ 1.34 $ 1.01 $ (1.85)
============== ============= =============
Number of shares used in computation of per share
information . . . . . . . . . . . . . . . . . . . . . . 5,143,000 5,095,000 5,081,000
</TABLE>
- - --------------
See accompanying notes to consolidated financial statements.
20
<PAGE> 22
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------------------
1994 1993 1992
------------- ------------ -------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . $ 6,884,000 $ 5,133,000 $ (9,415,000)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . 4,505,000 3,369,000 6,318,000
Provision for losses on accounts receivable . . . . . . . . 102,000 79,000 55,000
(Gain) loss on sale or disposal of fixed assets and
discontinued businesses . . . . . . . . . . . . . . . . . . (452,000) 37,000 5,211,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . (1,124,000) (216,000) (1,441,000)
Change in assets and liabilities net of acquisitions and
dispositions:
Decrease in accounts receivable . . . . . . . . . . . . . 261,000 368,000 4,080,000
Increase in inventories . . . . . . . . . . . . . . . . . (200,000) (968,000) (541,000)
(Increase) decrease in net assets of discontinued
businesses . . . . . . . . . . . . . . . . . . . . . . . (1,133,000) 523,000 5,033,000
Decrease (increase) in other assets . . . . . . . . . . . 193,000 4,485,000 (4,825,000)
Increase (decrease) in accounts payable . . . . . . . . . 506,000 105,000 (3,789,000)
Increase in accrued compensation . . . . . . . . . . . . . 1,137,000 672,000 318,000
(Decrease) increase in other liabilities . . . . . . . . . (2,895,000) (3,998,000) 7,662,000
(Decrease) increase in income tax payable . . . . . . . . (928,000) (1,238,000) 3,109,000
------------- ------------ -------------
Net cash provided by operating activities . . . . . . . . . 6,756,000 8,351,000 11,775,000
------------- ------------ -------------
Cash Flows from Investing Activities:
Business acquisitions . . . . . . . . . . . . . . . . . . . . (22,670,000) -- --
Capital expenditures . . . . . . . . . . . . . . . . . . . . (4,973,000) (5,514,000) (3,077,000)
Proceeds from sale of fixed assets and discontinued business 1,027,000 5,461,000 30,037,000
Increase in notes receivable . . . . . . . . . . . . . . . . (176,000) (687,000) (4,500,000)
------------- ------------ -------------
Net cash provided by (used in) investing activities . . . . (26,792,000) (740,000) 22,460,000
------------- ------------ -------------
Cash Flows from Financing Activities:
Proceeds from long-term borrowings . . . . . . . . . . . . . 34,400,000 28,174,000 29,700,000
Payments on long-term debt . . . . . . . . . . . . . . . . . (12,178,000) (27,414,000) (71,225,000)
Proceeds from issuance of stock under stock option plan . . . 571,000 326,000 --
Stock repurchases and other . . . . . . . . . . . . . . . . . -- -- (12,000)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . (1,235,000) (7,990,000) --
------------- ------------ -------------
Net cash provided by (used in) financing activities . . . . 21,558,000 (6,904,000) (41,537,000)
------------- ------------ -------------
Net increase (decrease) in cash and cash equivalents . . . . 1,522,000 707,000 (7,302,000)
Cash and cash equivalents at beginning of year . . . . . . . 1,505,000 798,000 8,100,000
------------- ------------ -------------
Cash and cash equivalents at end of year . . . . . . . . . . $ 3,027,000 $ 1,505,000 $ 798,000
============= ============ =============
Supplemental Information:
Interest payments . . . . . . . . . . . . . . . . . . . . . . $ 1,602,000 $ 812,000 $ 5,542,000
Income tax payments . . . . . . . . . . . . . . . . . . . . . $ 4,476,000 $ 600,000 $ 190,000
</TABLE>
- - ---------------
During 1994 the Company received marketable securities valued at $3.4 million
from the sale of a discontinued business. The carrying value of these
securities at March 31, 1994, was $1.8 million.
See accompanying notes to consolidated financial statements.
21
<PAGE> 23
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL OTHER
FOR THE YEARS ENDED MARCH 31, PAID-IN RETAINED STOCKHOLDERS'
1994, 1993 AND 1992 SHARES AMOUNT CAPITAL EARNINGS EQUITY TOTAL
- - --------------------------------- ---------- ------- ----------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1991 . . . . . 5,080,310 $51,000 $44,302,000 $28,809,000 -- $73,162,000
Net loss . . . . . . . . . . . . -- -- -- (9,415,000) -- (9,415,000)
Other . . . . . . . . . . . . . . 3,482 -- (12,000) -- -- (12,000)
--------- ------- ----------- ----------- ------------ -----------
Balance, March 31, 1992 . . . . . 5,083,792 51,000 44,290,000 19,394,000 -- 63,735,000
Net Income . . . . . . . . . . . -- -- -- 5,133,000 -- 5,133,000
Cash dividends ($1.56 per share) -- -- -- (7,990,000) -- (7,990,000)
Issuance of stock under stock
option plan . . . . . . . . . . 37,812 -- 326,000 -- -- 326,000
Foreign translation adjustments . -- -- -- -- $ 10,000 10,000
--------- ------- ----------- ----------- ------------ -----------
Balance, March 31, 1993 . . . . . 5,121,604 51,000 44,616,000 16,537,000 10,000 61,214,000
Net income . . . . . . . . . . . -- -- -- 6,884,000 -- 6,884,000
Cash dividends ($.24 per share) . -- -- -- (1,235,000) -- (1,235,000)
Issuance of stock under stock
option plan . . . . . . . . . . 57,415 1,000 570,000 -- -- 571,000
Issuance of stock under incentive
bonus plan . . . . . . . . . . . 10,085 -- 97,000 -- (65,000) 32,000
Foreign translation adjustments . -- -- -- -- 56,000 56,000
Unrealized investment holding
losses -- -- -- -- (1,569,000) (1,569,000)
--------- ------- ----------- ----------- ------------ -----------
Balance, March 31, 1994 . . . . . 5,189,104 $52,000 $45,283,000 $22,186,000 $ (1,568,000) $65,953,000
========= ======= =========== =========== ============ ===========
</TABLE>
- - ----------------------
See accompanying notes to consolidated financial statements.
22
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TransTechnology Corporation and Subsidiaries
1. SUMMARY OF ACCOUNTING PRINCIPLES
Principles of Consolidation. The accompanying consolidated financial
statements include the accounts of TransTechnology Corporation ("the Company")
and its subsidiaries, all of which are wholly-owned. Intercompany balances and
transactions are eliminated in consolidation.
Related Party. Research Industries Incorporated owns approximately
21% of the Company's outstanding common stock. Two former directors of the
Company are the only shareholders of Research Industries Incorporated, and each
of these directors has a consulting contract with the Company; one for $1.4
million and one for $0.7 million. Of the total $2.1 million original
contracts, $1.5 million has been expensed and paid through March 31, 1994,
which includes $0.9 million expensed and paid during fiscal 1994.
Accounting for Contracts. All of the Company's contracts are firm
fixed-price. Sales and cost of sales on such contracts are recorded as
deliveries are made. Estimates of cost to complete are reviewed and revised
periodically throughout the lives of the contracts, and adjustments to profit
resulting from such revisions are recorded in the accounting period in which
the revisions are made. Losses on contracts are recorded in full as they are
identified.
Cash and Cash Equivalents. The Company considers all highly liquid
investments with a maturity at date of acquisition of three months or less to
be cash equivalents.
Accounts Receivable. Accounts receivable from the United States
Government represent billed receivables and substantially all amounts are
expected to be collected within one year. The Company has no amounts billed
under retainage provisions of contracts.
Inventories. Inventories are stated at the lower of cost or market.
Cost is determined using the first-in, first-out method. Cost includes
material, labor and manufacturing overhead costs.
Property and Related Depreciation and Amortization. Provisions for
depreciation are made on a straight-line basis over the estimated useful lives
of depreciable assets ranging from three to thirty years. Amortization of
leasehold improvements is computed on a straight-line basis over the shorter of
the estimated useful lives of the improvements or the terms of the leases.
Costs in Excess of Net Assets of Acquired Businesses. The difference
between the purchase price and the fair value of the net assets of acquired
businesses is included in the accompanying Consolidated Balance Sheets under
the caption "Costs in Excess of Net Assets of Acquired Businesses" and is being
amortized over forty years, or shorter periods where deemed appropriate. The
Company has determined that there is no impairment in value since projected
future operating results on an undiscounted basis through the period such costs
in excess of net assets of acquired businesses is being amortized are expected
to be sufficient to absorb the amortizaion.
Earnings Per Share. Earnings per share are based on the weighted
average number of common shares and, if dilutive, common stock equivalents
(stock options) outstanding during each year.
Research, Development and Engineering Costs. Research and development
costs and engineering costs in support of active products, which are charged to
expense when incurred, amounted to $2.3 million, $1.8 million and $1.7 million
in 1994, 1993, and 1992, respectively. Included in these amounts were
expenditures of $1.1 million in 1994, $0.9 million in 1993, and $0.6 million in
1992, which represent costs related to research and development activities.
Income Taxes. In February 1992, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". Statement No. 109 requires a change from the
deferred method of accounting for income taxes of APB Option 11 to the asset
and liability method of accounting for income taxes. Under the asset and
liability method of Statement No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases.
23
<PAGE> 25
Effective April 1, 1993, the Company adopted Statement No. 109 and has
reported the cumulative effect of this change in the method of accounting for
income taxes in the Consolidated Statements of Income and Retained Earnings.
The adoption of Statement No. 109 had no material effect on the financial
statements.
Postretirement Benefits Other Than Pensions. The Company makes
contributions toward the cost of providing certain health care and life
insurance benefits to certain retirees, their beneficiaries and covered
dependents. Company contributions in 1992 and 1993 were expensed as paid. The
accrual method of accounting for these benefits was adopted April 1, 1993 in
accordance with the provisions of Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." The adoption of Statement No. 106 had no material effect on the
financial statements.
Investments. On March 1, 1994 the Company acquired 365,000 shares of
Mace Security International common stock, valued at $3.4 million, as
partial payment for the sale of a division. At March 31, 1994, the Company
adopted Statement of Financial Accounting Standards No. 115 "Accounting for
Certain Investments in Debt and Equity Securities". The adoption of this
statement resulted in a gross unrealized holding loss of $1.6 million, reported
as a reduction to stockholders' equity in the March 31, 1994 Balance Sheet.
The aggregate fair market value of the investment at March 31, 1994 was $1.8
million.
2. DISCONTINUED OPERATIONS
In March 1994, the Company sold its Federal Laboratories division for
$1.0 million in cash, $1.2 million in notes receivable and 465,000 shares of
Mace Security International, Inc. common stock. The sale of this division
resulted in a gain of $0.5 million (net of applicable income tax provision of
$0.2 million).
In March 1992, the Company sold its Financial Systems division,
entered into agreements to sell its textile machinery and special elastomer
products divisions, and entered into discussions with a prospective buyer
regarding its weather instruments division. Financial Systems was sold for
$35.3 million in cash, of which $5.1 million was placed in escrow pending
resolution of matters specified in the purchase agreement, and a $2.5 million
note which was reduced to $1.9 million in the first quarter of fiscal 1993, due
in March 1995. The sale of Financial Systems resulted in a 1992 gain on
disposal of $0.7 million (net of applicable income tax expense of $2.6
million). The sales of the textile machinery and special elastomer products
divisions were completed in May and June 1992 and consisted of $4.3 million in
cash, a $2.0 million note due in April 1997 and a receivable of $0.3 million.
The sales of these divisions resulted in a 1992 loss on disposal of $1.6
million (net of applicable income tax benefit of $0.8 million). In the fourth
quarter of 1993, the Company reported a gain on final disposal of these
divisions of $0.4 million (net of applicable income tax provision of $0.1
million). The weather instruments division was sold in January 1993 for $1
million in cash and a $1.7 million note due in January 1998. In the fourth
quarter of 1992, the division was written down to its net realizable value
based on its expected sales price, which resulted in a loss on disposal of $0.1
million (net of applicable tax benefits of $0.1 million). In the fourth
quarters of 1993 and 1994, the Company recorded additional gains on disposal
relating to the weather instrument division of $0.4 million and $0.1 million,
respectively (net of applicable income tax provision of $0.1 million in 1993).
Additionally, as part of the sale, the Company consigned $1.3 million of
inventory under a five-year contractual purchase agreement of which $0.8
million remained at March 31, 1994. The Company has retained one weather
instrument product line and is continuing to negotiate its sale separately from
the above transaction.
In August 1991, the Company discontinued its Computer Graphics
manufacturing operation. In connection with such decision, the Company
recorded losses on disposal of $0.1 million and $0.9 million for 1994 and 1993,
respectively (net of applicable income tax benefit of $0.3 million in 1993).
In March 1990, the Company entered into an agreement to sell
substantially all of the inventories and plant and equipment of its Space
Ordnance Systems division. A gain on disposal of $0.2 million was recorded in
1994 (net of applicable income tax provision of $0.1 million). Losses on
disposal of $0.7 million and $0.8 million were recorded in 1993 and 1992,
respectively (net of applicable income tax benefits of $0.3 million and $0.5
million in 1993 and 1992, respectively). The gain and losses consist of
disposal costs different from previous estimates associated primarily with
legal and environmental matters and the settlement of a contract claim
receivable in 1991.
24
<PAGE> 26
Operating results of the discontinued businesses were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------------- --------------- -------------
<S> <C> <C> <C>
Total revenues . . . . . . . . . . . . . . . . . . $ 4,965,000 $ 6,391,000 $ 77,531,000
============== =============== =============
Income (loss) before income taxes . . . . . . . . . $ (1,799,000) $ 13,000 $ (4,780,000)
Income tax provision (benefit) . . . . . . . . . . (1,055,000) 3,000 (1,983,000)
-------------- --------------- -------------
Income (loss) from operations . . . . . . . . . . . $ (744,000) $ 10,000 $ (2,797,000)
============== =============== =============
</TABLE>
The loss from operations includes interest expense of $90,000, $91,000
and $2.0 million in 1994, 1993 and 1992, respectively.
Net assets of the discontinued businesses at March 31, 1994 and 1993
were as follows:
<TABLE>
<CAPTION>
1994 1993
------------ -------------
<S> <C> <C>
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,000 $ 164,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,000 454,000
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,203,000 3,116,000
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,198,000 789,000
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (303,000) (1,347,000)
------------ -------------
Net Assets of Discontinued Businesses . . . . . . . . . . . . . . . . . . . $ 4,309,000 $ 3,176,000
============ =============
</TABLE>
Other assets and liabilities retained by the Company associated with
the discontinued businesses at March 31, 1994 and 1993 are included in the
following balance sheet captions:
<TABLE>
<CAPTION>
1994 1993
----------- ----------
<S> <C> <C>
Commercial Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . $ -- $ 87,000
Prepaid Expenses and Other Current Assets . . . . . . . . . . . . . . . . . $ 289,000 $ 632,000
Other Long-term Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 821,000 $ 688,000
</TABLE>
3. ACQUISITIONS
On July 28, 1993, the Company acquired the assets and business of
Electrical Specialties Company for a total purchase price of $1.7 million in
cash. Electrical Specialties Company manufactures electrical cables and wire
harnesses for the heavy equipment industry.
On August 2, 1993, the Company acquired substantially all of the
assets of the Palnut fastener operation ("Palnut") of TRW Inc. for a total
purchase price of $20.5 million in cash and the assumption of certain
liabilities consisting primarily of trade payables and accrued expenses
aggregating approximately $1.4 million. The Palnut operation manufactures
single and multi-thread metal fasteners for the automotive and industrial
products industries.
25
<PAGE> 27
The following summarizes TransTechnology Corporation's unaudited
combined Proforma Revenue, Net Income and Earnings (Loss) per Share information
prepared as if the acquisitions of the Palnut threaded fastener business and
Electrical Specialties Company had occurred at the beginning of the periods
presented.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
---------------------------------------
1994 1993
---------------- ----------------
<S> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 130,253,000 $ 124,025,000
================ ================
Income from Continuing Operations . . . . . . . . . . . . . . . 6,729,000 7,908,000
Income (loss) from Discontinued Operations . . . . . . . . . . 16,000 (61,000)
---------------- ----------------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . 6,745,000 7,847,000
================ ================
Earnings per Share from Continuing Operations . . . . . . . . . $ 1.31 $ 1.55
Loss per Share from Discontinued Operations . . . . . . . . . . -- (.01)
---------------- ----------------
Earnings per Share . . . . . . . . . . . . . . . . . . . . . . $ 1.31 $ 1.54
================ ================
</TABLE>
4. INVENTORIES
Inventories at March 31, 1994 and 1993 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
------------ -------------
<S> <C> <C>
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,057,000 $ 4,913,000
Work-in-process:
U.S. Government contracts . . . . . . . . . . . . . . . . . . . . . . . . 1,515,000 1,412,000
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,074,000 5,412,000
Purchased and manufactured parts . . . . . . . . . . . . . . . . . . . . . 23,140,000 21,638,000
------------ -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,786,000 $ 33,375,000
============ =============
</TABLE>
5. INCOME TAXES
The components of total income (loss) from operations before income
taxes were:
<TABLE>
<CAPTION>
1994 1993 1992
------------- -------------- --------------
<S> <C> <C> <C>
Domestic . . . . . . . . . . . . . . . . . . . . . . . . $ 11,010,000 $ 4,927,000 $ (11,771,000)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . (973,000) 198,000 1,187,000
------------- -------------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 10,037,000 $ 5,125,000 $ (10,584,000)
============= ============== ==============
</TABLE>
26
<PAGE> 28
The provision (benefit) for income taxes is summarized below:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
Currently payable:
United States . . . . . . . . . . . . . . . . . . . $ 2,987,000 $ 1,314,000 $ (91,000)
Foreign . . . . . . . . . . . . . . . . . . . . . . (109,000) 203,000 429,000
State . . . . . . . . . . . . . . . . . . . . . . . 734,000 (256,000) (66,000)
----------- ------------ ------------
$ 3,612,000 $ 1,261,000 $ 272,000
Deferred . . . . . . . . . . . . . . . . . . . . . . (459,000) (1,270,000) (1,441,000)
----------- ------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 3,153,000 $ (9,000) $ (1,169,000)
=========== ============ ============
</TABLE>
The provision (benefit) for income taxes is allocated between
continuing and discontinued operations as summarized below:
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------- ------------
<S> <C> <C> <C>
Continuing . . . . . . . . . . . . . . . . . . $ 3,902,000 $ 1,325,000 $ (149,000)
Discontinued . . . . . . . . . . . . . . . . . (749,000) (1,334,000) (1,020,000)
------------ ------------- ------------
Total . . . . . . . . . . . . . . . . . . . . . $ 3,153,000 $ (9,000) $ (1,169,000)
============ ============= ============
</TABLE>
The provision (benefit) for deferred taxes is comprised of the
following tax effect of timing differences:
<TABLE>
<CAPTION>
1993 1992
------------- -------------
<S> <C> <C>
Depreciation . . . . . . . . . . . . . . . . . $ (459,000) $ 352,000
Inventory reserves . . . . . . . . . . . . . . 661,000 549,000
Bad debts . . . . . . . . . . . . . . . . . . . 79,000 63,000
Deferred income . . . . . . . . . . . . . . . . (117,000) (181,000)
Accruals deductible in future years . . . . . . (1,131,000) (2,100,000)
Other . . . . . . . . . . . . . . . . . . . . . (303,000) (124,000)
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . $ (1,270,000) $ (1,441,000)
============= =============
</TABLE>
In 1992, the consolidated tax credit of $149,000 on loss from
continuing operations of $979,000 is primarily attributable to tax benefits
associated with the foreign sales corporation.
The consolidated effective tax rates for continuing operations differ
from the federal statutory rates as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Statutory federal rate . . . . . . . . . . . . . . . . . . . 34.0% 34.0%
State income taxes after federal income tax . . . . . . . . . 4.8% 1.2%
Earnings of the foreign sales corporation . . . . . . . . . . (3.3%) (7.0%)
Amortization of purchase adjustments not
deductible for tax purposes . . . . . . . . . . . . . . . . 2.4% 4.0%
Revision of prior years' tax accruals . . . . . . . . . . . . (7.5%) (11.0%)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0% (0.9%)
------ ------
Consolidated effective tax rate . . . . . . . . . . . . . . . 31.4% 20.3%
====== ======
</TABLE>
27
<PAGE> 29
Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
Prior to the adoption of SFAS 109, the Company accounted for income taxes under
the deferral method and prior periods have not been restated to reflect this
change in accounting principle. There was no material effect on the Company's
financial results as a result of adopting SFAS No. 109.
The following is an analysis of accumulated deferred income taxes:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Assets
Current
Inventory . . . . . . . . . . . . . . . . . . . $ 3,582,000 $ 3,201,000
Other . . . . . . . . . . . . . . . . . . . . . 671,000 192,000
----------- -----------
Total Current . . . . . . . . . . . . . 4,253,000 3,393,000
Non-Current
Environmental . . . . . . . . . . . . . . . . . 1,317,000 1,344,000
----------- -----------
Total Assets . . . . . . . . . . . . . . $ 5,570,000 $ 4,737,000
=========== ===========
Liabilities
Non-Current
Depreciation . . . . . . . . . . . . . . . . . . $ 1,157,000 $ 920,000
----------- -----------
Total Liabilities . . . . . . . . . . . $ 1,157,000 $ 920,000
=========== ===========
Summary-Accumulated Deferred Income Taxes
Net Current Assets . . . . . . . . . . . . . . . . $ 4,253,000 $ 3,393,000
Net Non-Current Assets . . . . . . . . . . . . . . 160,000 424,000
----------- -----------
Total . . . . . . . . . . . . . . . . . $ 4,413,000 $ 3,817,000
=========== ===========
</TABLE>
6. LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS
Long-term debt payable to banks and others consists of the following:
<TABLE>
<CAPTION>
1994 1993
------------ -------------
<S> <C> <C>
Credit Agreement - 5.50% . . . . . . . . . . . . . . . $ 15,000,000 --
Credit Agreement - 5.375% . . . . . . . . . . . . . . . 10,000,000 --
Credit Agreement - 5.20% . . . . . . . . . . . . . . . -- $ 10,000,000
Credit Agreement - 6.0% . . . . . . . . . . . . . . . . -- 1,900,000
Term Loan - 6.50% . . . . . . . . . . . . . . . . . . . 9,160,000 --
Other . . . . . . . . . . . . . . . . . . . . . . . . . 487,000 525,000
------------ -------------
34,647,000 12,425,000
Less current maturities . . . . . . . . . . . . . . . . 1,479,000 38,000
------------ -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,168,000 $ 12,387,000
============ =============
</TABLE>
28
<PAGE> 30
Credit Agreement
At March 31, 1994, outstanding bank debt consisted of a revolving
credit facility which provides for borrowings and letters of credit of $35
million and a term loan of $9.2 million. Borrowing under the credit facility
at March 31, 1994 was $25 million.
The credit facility expires in September 1995. Under this facility,
accounts receivable, inventory and all fixed assets other than real property,
with the exception of certain real property located in Mountainside, New
Jersey, are pledged as collateral. Borrowings are limited to 80% of the unpaid
face amount of eligible accounts receivable, plus the lesser of 50% of eligible
net inventory or $18 million. Letters of credit, which are included in the
borrowing base formula, are limited to $5 million. Letters of credit under
this facility at March 31, 1994 were $1.6 million. Borrowing under this
facility bears interest at the lending bank's prime rate. The agreement also
gives the Company the option of using the London Interbank Offered Rate (LIBOR)
plus two percentage points. At March 31, 1994, the Company had $25 million of
borrowings using LIBOR. The agreement contains requirements for a minimum
tangible net worth of $60 million at March 31, 1994; a quarterly maximum total
liabilities to tangible equity ratio of 1.0 to 1.0 at March 31, 1994; a minimum
annual working capital level of $40 million; a minimum annual cash flow
coverage ratio of 1.2 to 1.0; and minimum net income of $4 million per year
commencing on March 31, 1993. In addition, the agreement requires the Bank's
approval for the repurchase of the Company's common stock, and provides that
quarterly dividend payments cannot exceed 25% of the Company's cumulative net
income in each year. At March 31, 1994 $0.5 million was available for
dividends.
The $9.2 million term loan is with the same lenders as the revolving
credit line. It is secured by the same collateral, and is due and payable on
August 31, 1998. Principal payments of $360,000 are due and payable on the
last day of each quarter through June 30, 1998, with a final balloon payment of
$3,040,000 due and payable on August 31, 1998. Interest accrues at the lending
bank's prime rate plus 1/4 percentage point, but in accordance with the loan
agreement will be reduced to the prime rate for fiscal 1995 since the Company
exceeded $6.0 million in net income for fiscal year 1994. Interest is payable
monthly.
Other
Other long-term debt is comprised principally of an obligation due
under a collateralized borrowing arrangement with a fixed interest rate of 3%
due December 2004.
Debt Maturities
<TABLE>
<S> <C>
1995 (current) . . . . . . . . . $ 1,479,000
1996 . . . . . . . . . . . . . . 26,481,000
1997 . . . . . . . . . . . . . . 1,482,000
1998 . . . . . . . . . . . . . . 1,483,000
1999 . . . . . . . . . . . . . . 3,444,000
Thereafter . . . . . . . . . . . 278,000
---------------
Total . . . . . . . . . $ 34,647,000
===============
</TABLE>
29
<PAGE> 31
7. STOCKHOLDERS' EQUITY AND EMPLOYEE STOCK OPTIONS
Under the Company's stock option plan, options to purchase shares of
the Company's common stock have been granted to officers, key employees, and an
officer/director at prices determined by the Board of Directors which may not
be less than 100% of the fair market value at date of grant.
At March 31, 1994, there were 230,537 options outstanding, of which
63,914 were exercisable at that date. The remaining options for 166,623 shares
are exercisable on various dates through October 1998.
The table below summarizes stock option transactions:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Options outstanding, beginning of the year
($5.50-$29.81 per share) . . . . . . . . . 169,679 375,543 418,489
Options granted ($5.50-$18.00 per share) . . 146,500 -- 138,349
Options exercised ($5.50-$13.44 per share) . (57,415) (37,812) --
Options expired and cancelled . . . . . . . . (28,227) (168,052) (181,295)
----------- ----------- -----------
Options outstanding, end of the year . . . . 230,537 169,679 375,543
=========== =========== ===========
Aggregate option price . . . . . . . . . . . $ 2,406,531 $ 2,002,194 $ 4,596,270
Options exercisable ($7.50-$29.81 per share) 63,914 107,973 202,022
</TABLE>
8. EMPLOYEE BENEFIT PLANS
The Company has an incentive bonus plan which provides for cash
payments to selected employees based upon formulas approved by the Board of
Directors. Provisions for awards under the plan approximated $1,419,000 in
1994, $779,000 in 1993 and $226,000 in 1992. The Company has two defined
contribution savings plans. Expenses related to these plans
were $1,786,000, $1,493,000, and $1,106,000 in 1994, 1993, and 1992,
respectively. A division of the Company also makes
contributions to a union-sponsored multi-employer pension plan in accordance
with the negotiated labor contract. Contributions to the plan were $226,000,
$218,000 and $179,000 in 1994, 1993 and 1992, respectively.
Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 ("SFAS No. 106") on Employers' Accounting for
Postretirement Benefits Other Than Pensions. This statement requires that the
cost of these benefits, which are primarily health care related, be recognized
in the financial statements during the employee's active working career. The
Company's previous practice was to recognize expense as claims were paid. The
plan maintained by the Company provides postretirement benefits to union
employees at one of the Company's divisions. Adopting the new standard created
a previously unrecognized obligation covering prior years. This transition
obligation, estimated at $2.9 million, before tax effects, is being amortized
on a straight-line basis over the average remaining service life of active
employees, estimated by the Company to be approximately 20 years. During
fiscal year 1994, the Company adopted an amendment to the plan resulting in a
decrease of $859,000 to the transition obligation. The current period charge
was $443,000 before tax effects. The estimated current period charge, using
the Company's previous practice of recognizing expense
30
<PAGE> 32
as claims were paid, would have been approximately $127,000 before tax effects.
Accrued postretirement benefit cost is included in other liabilities on the
balance sheet.
The periodic postretirement benefit cost for the year ended March 31,
1994, included the following components:
<TABLE>
<S> <C>
Service cost (benefits earned during the year) . . . . . . . . . . . . . . . . . . . . . . $ 124,000
Interest cost on projected postretirement benefit obligation . . . . . . . . . . . . . . . 196,000
Amortization of transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,000
------------
Total periodic postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . $ 443,000
============
</TABLE>
The funded status and accrued postretirement benefit cost on March 31,
1994 are as follows:
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (893,000)
Fully eligible plan participants . . . . . . . . . . . . . . . . . . . . . . . . . . . (295,000)
Other active plan participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,149,0000)
------------
Accumulated postretirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . (2,337,000)
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
------------
Accumulated postretirement benefit obligation in excess of plan assets . . . . . . . . . . (2,337,000)
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,000
Unrecognized transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,927,000
------------
Accrued postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (316,000)
============
</TABLE>
The assumptions used in accounting for the plan in 1994 was a 14%
health care cost trend rate for substantially all participants (decreasing 1%
each year to 10% in the year 1998 and then decreasing 0.5% each year to 6% in
the year 2006 and beyond) and an 8% discount rate. As of March 31, 1994, the
discount rate used to measure the accumulated postretirement benefit obligation
was changed to 7.5%. A 1% increase in the health care trend rate would
increase the accumulated postretirement benefit obligation by 14.2% at year end
1994 and the net periodic cost by 22.8% for the year.
31
<PAGE> 33
9. COMMITMENTS
Rent expense under operating leases for the years ended March 31,
1994, 1993, and 1992 was $1,450,000, $1,150,000, and $1,731,000, respectively.
The Company has no material capital leases.
The Company and its subsidiaries have minimum rental commitments under
noncancellable operating leases (relating primarily to leased buildings) which
are as follows:
<TABLE>
<S> <C>
Year ending March 31:
1995 . . . . . . . . . . . . . . . . . . . $ 1,943,000
1996 . . . . . . . . . . . . . . . . . . . 1,850,000
1997 . . . . . . . . . . . . . . . . . . . 1,702,000
1998 . . . . . . . . . . . . . . . . . . . 926,000
1999 . . . . . . . . . . . . . . . . . . . 584,000
Thereafter . . . . . . . . . . . . . . . . 1,789,000
------------
Total . . . . . . . . . . . . . . $ 8,794,000
============
</TABLE>
Included in the above amounts is the aggregate lease commitment
associated with the Company's former corporate office. In connection with the
relocation of the corporate office, the loss incurred on this lease (net of
estimated sublease rentals) and other costs associated with the move totalling
$0.5 million and $2.7 million were charged to expense during the years ended
March 31, 1993 and March 31, 1992, respectively. Other-long-term liabilities
at March 31, 1994, include a $0.6 million obligation associated with the lease.
The Company has consulting agreements with certain former members of
the Board of Directors and former executives. The remaining commitments under
such agreements for the year ending March 31, 1994 are $819,000.
10. CONTINGENCIES
The Company has commenced environmental site assessments and cleanup
feasibility studies to determine the presence, extent and sources of any
environmental contamination at two facilities in Pennsylvania, and one facility
in Illinois. Although no governmental action requiring remediation has been
taken at this time, the Company is working in cooperation with the relevant
state authorities and any remedial work required to be performed would be
subject to their approval. At the Pennsylvania sites, a feasibility study has
been prepared and submitted to the state. Based upon that study and upon
claims for recovery which the Company has against others, a pre-tax charge of
$3.6 million (net of $1.2 million in probable recoveries) was recorded in March
1993 for estimated cleanup costs at the Pennsylvania sites. At March 31, 1994,
the balance of this clean-up reserve was $3 million (net of $1.2 million in
probable recoveries). In addition, the Company is pursuing recovery of a
portion of such costs in litigation with several of its insurance carriers.
The Company expects that remediation work at the Pennsylvania site will not be
completed until fiscal 1997.
In addition, the Company has been named as a potentially responsible
party in various proceedings pending in several other states in which it is
alleged that the Company was a generator of waste that was sent to landfills
and other treatment facilities at which environmental remediation activities
are pending. It is not possible to reliably estimate the costs associated with
any remedial work to be performed until the studies at the Illinois site and
these other sites have been completed, the scope of work defined and a method
of remediation selected and approved by the relevant state authorities.
32
<PAGE> 34
In February 1990, a lawsuit was brought in Los Angeles Superior Court
against the Company and certain of its former officers by Special Devices, Inc.
("Special Devices"), a landlord at one of the Company's former California
facilities, and Placerita Land and Farming Company, a predecessor of Special
Devices, in which plaintiffs seek to recover in excess of $15 million for
compensatory damages and an unspecified sum for punitive damages. The
plaintiffs allege that the Company's waste handling practices have diminished
the value of the leased property, reduced future rental income and caused
plaintiffs to incur substantial defense costs in connection with related legal
proceedings. In November 1985, the Company entered into agreements with the
California Department of Health Services obligating the Company to clean up
soil and groundwater contaminated by hazardous materials on the property.
Substantially all of the remedial work has been performed, with ongoing
monitoring and water treatment activity expected to continue until 2002.
Two of the Company's general liability insurance carriers have filed
actions in California Superior Court asking the Court to determine that their
policies do not cover California environmental cleanup costs, damages to
neighboring landowners for alleged personal injury and property damage, and
related defense costs. The Company continues to believe that these policies
cover such costs and is negotiating with the carriers to settle these actions.
The Company is also engaged in various other legal proceedings
incidental to its businesses.
It is the opinion of the management that, after taking into
consideration information furnished by its counsel, the above matters will not
have a material effect on the consolidated financial position of the Company.
11. SEGMENT INFORMATION
The Company develops, manufactures and sells a wide range of
technically sophisticated products. Industrial Products include: (1)
gear-driven band fasteners and threaded fasteners for the marine, auto, toy and
aircraft industries; (2) electrical wiring harnesses and (3) service and
distribution of drafting (CADD) display workstations. Aerospace Products
include: (1) lifting, control, and restraint devices-principally helicopter
rescue hoists and external hook systems, winches and hoists for aircraft and
weapon-handling systems, and aircraft and cargo tie-downs; (2) custom
electrical interconnection systems and their components used in computers,
communications equipment, aircraft, and military applications and (3)
metallized-glass-fiber products (referred to as chaff and used to reflect
hostile radar signals) and related devices and systems.
Operating profit is net sales less operating expenses. General
corporate expenses, interest and income taxes have not been deducted in
determining operating profit. Assets, depreciation and amortization, and
capital expenditures are those identifiable to a particular segment by their
use. Approximately 20% of sales in 1994, 1993 and 1992 were derived from sales
to the United States Government and its prime contractors which are
attributable primarily to the Aerospace Products segment.
33
<PAGE> 35
As a result of the sale of the Financial Systems division and the
discontinuance of the Computer Graphics manufacturing operation, the
Advanced-Technology products segment has been eliminated as a reporting
segment.
<TABLE>
<CAPTION>
OPERATING DEPRECIATION/
FISCAL PROFIT CAPITAL AMORTIZATION IDENTIFIABLE
YEAR SALES (LOSS)(1) EXPENDITURES(2) EXPENSE(2) ASSETS
------ ----- --------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Industrial Products . . . . 1994 $ 66,436,000 $ 9,165,000 $2,519,000 $ 2,461,000 $ 48,187,000
1993 36,955,000 7,341,000 1,784,000 1,122,000 24,273,000
1992 35,322,000 6,996,000 1,339,000 956,000 25,168,000
Aerospace Products . . . . 1994 $ 54,071,000 $ 8,113,000 $1,862,000 $ 1,552,000 $ 51,936,000
1993 58,958,000 8,540,000 2,993,000 1,826,000 54,405,000
1992 54,945,000 5,000 794,000 1,810,000 52,834,000
- - --------------------------------------------------------------------------------------------------------------------
Total Segments . . . . . . 1994 120,507,000 17,278,000 4,381,000 4,013,000 100,123,000
1993 95,913,000 15,881,000 4,777,000 2,948,000 78,678,000
1992 90,267,000 7,001,000 2,133,000 2,766,000 78,002,000
Corporate . . . . . . . . . 1994 -- (5,791,000) 57,000 282,000 25,734,000
1993 -- (9,301,000)(3) 97,000 227,000 19,085,000
1992 -- (6,058,000) 37,000 64,000 26,903,000
Corporate Interest and Other 1994 -- 839,000 -- -- --
1993 -- 635,000 -- -- --
1992 -- 317,000 -- -- --
Interest Expense . . . . . 1994 -- (1,556,000) -- -- --
1993 -- (696,000) -- -- --
1992 -- (2,239,000) -- -- --
Consolidated . . . . . . . 1994 120,507,000 10,770,000 4,438,000 4,295,000 125,857,000
1993 95,913,000 6,519,000 4,874,000 3,175,000 97,763,000
1992 90,267,000 (979,000) 2,170,000 2,830,000 104,905,000
====================================================================================================================
</TABLE>
(1) Operating profit represents net sales less operating expenses which
include all costs and expenses related to the Company's operations in
each segment. General corporate expenses and investments and other
income earned at the corporate level are included in the corporate
section. Interest expense is also separately reported. The amount of
the "Consolidated" line represents "Income from Continuing Operations
Before Income Taxes." Loss from discontinued operations is not
included.
(2) The capital expenditures and depreciation/amortization expense from
discontinued operations are excluded from the above schedule.
(3) Corporate operating profit in 1993 includes a pre-tax charge of
$3,613,000 for estimated future environmental site remediation costs.
34
<PAGE> 36
In 1994, 1993 and 1992, the Company had revenues from export sales as
follows:
<TABLE>
<CAPTION>
1994 1993(a) 1992(a)
------------- ------------- -------------
<S> <C> <C> <C>
LOCATION
Middle East . . . . . . . . . . . . . . . . . . . . . . . . $ 158,000 $ 128,000 $ 219,000
Mexico, Central and South America . . . . . . . . . . . . . 765,000 321,000 984,000
Western Europe . . . . . . . . . . . . . . . . . . . . . . 10,682,000 13,448,000 11,601,000
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . 4,812,000 1,753,000 1,544,000
Pacific and Far East . . . . . . . . . . . . . . . . . . . 5,637,000 3,483,000 3,423,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,000 323,000 614,000
------------- ------------- -------------
Total . . . . . . . . . . . . . . . . . . $ 22,199,000 $ 19,456,000 $ 18,385,000
============= ============= =============
</TABLE>
- - ---------------
(a) Restated to reflect only continuing operations.
12. UNAUDITED QUARTERLY FINANCIAL DATA (in thousands except per share
amounts)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
-------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
1994
- - ----
Total Revenues . . . . . . . . . . $ 24,006 $29,207 $33,525 $34,801 $121,539
Gross Profit . . . . . . . . . . . 7,279 8,406 9,834 10,698 36,217
Income from Continuing Operations . 1,653 1,530 1,982 1,703 6,868
Income (loss) from Discontinued
Operations . . . . . . . . . . . . (139) (299) (377) 831 16
Net Income . . . . . . . . . . . . 1,514 1,231 1,605 2,534 6,884
Earnings (Loss) Per Share:
Income from Continuing Operations $ 0.32 $ 0.30 $ 0.39 $ 0.33 $ 1.34
Income (loss) from Discontinued
Operations . . . . . . . . . . . (0.03) (0.06) (0.07) 0.16 --
Net Income . . . . . . . . . . . $ 0.30(a) $ 0.24 $ 0.31(a) $ 0.49 $ 1.34
1993
- - ----
Total Revenues . . . . . . . . . . $ 23,127 $22,336 $23,952 $27,317 $ 96,732
Gross Profit . . . . . . . . . . . 6,750 6,363 7,150 9,211 29,474
Income from Continuing Operations . 1,265 957 1,469 1,503 5,194
Income (loss) from Discontinued
Operations . . . . . . . . . . . 150 45 (172) (84) (61)
Net Income . . . . . . . . . . . . 1,415 1,002 1,297 1,419 5,133
Earnings (Loss) Per Share:
Income from Continuing Operations $ 0.25 $ 0.19 $ 0.29 $ 0.29 $ 1.02
Income (loss) from Discontinued
Operations . . . . . . . . . . 0.03 0.01 (0.03) (0.02) (0.01)
Net Income . . . . . . . . . . . $ 0.28 $ 0.20 $ 0.25(a) $ 0.28(a) $ 1.01
</TABLE>
- - ---------------
(a) Per share amounts do not always add because the figures are required
to be independently calculated.
35
<PAGE> 37
TRANSTECHNOLOGY CORPORATION
SCHEDULE I
CONSOLIDATED MARKETABLE SECURITIES AND OTHER SECURITY INVESTMENTS
FOR YEARS ENDED MARCH 31, 1994, MARCH 31, 1993 AND MARCH 31, 1992
<TABLE>
<CAPTION>
DESCRIPTION
- - -----------
NUMBER OF BALANCE SHEET
1994 SHARES HELD COST MARKET VALUE CARRYING AMOUNT
- - ---- ----------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
MACE SECURITY INTERNATIONAL
COMMON STOCK . . . . . . . . 465,000 $ 3,371,000 $ 1,802,000 $ 1,802,000
1993
- - ----
-- -- -- -- --
1992
- - ----
-- -- -- -- --
</TABLE>
36
<PAGE> 38
TRANSTECHNOLOGY CORPORATION
SCHEDULE VIII
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
For Years Ended March 31, 1994, March 31, 1993 and March 31, 1992
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING OF COSTS AND OTHER AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS(A) DEDUCTIONS(B) OF PERIOD
- - --------------- ------------ ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
1994
- - ----
Allowances for
doubtful accounts
and sales returns $318,000 $102,000 $72,000 $221,000 $271,000
1993
- - ----
Allowances for
doubtful accounts
and sales returns $ 268,000 $124,000 $31,000 $105,000 $318,000
1992
- - ----
Allowances for
doubtful accounts
and sales returns $ 959,000 $ 55,000 $12,000 $758,000(C) $268,000
</TABLE>
(A) Amount consists primarily of sales adjustments charged to revenue
accounts.
(B) Amount represents write-off of uncollectible accounts.
(C) Amount includes $576,000 reserves for uncollectible accounts of
discontinued operations included in assets of discontinued operations.
37
<PAGE> 39
TRANSTECHNOLOGY CORPORATION
SCHEDULE X
CONSOLIDATED SUPPLEMENTARY INCOME STATEMENT INFORMATION
For Years Ended March 31, 1994, March 31, 1993 and March 31, 1992
The amounts summarized below were charged to costs and expenses:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Maintenance and
Repairs $2,352,000 $1,631,000 $1,819,000
</TABLE>
38
<PAGE> 40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be contained in the
Company's Proxy Statement for the year ended March 31, 1994 and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in the
Company's Proxy Statement for the year ended March 31, 1994 and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be contained in the
Company's Proxy Statement for the year ended March 31, 1994 and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be contained in the
Company's Proxy Statement for the year ended March 31, 1994 and is incorporated
herein by reference.
39
<PAGE> 41
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of the Annual Report:
1. Financial Statements:
Consolidated Balance Sheets at March 31, 1994 and March 31,
1993
Statements of Consolidated Operations for the years ended
March 31, 1994, March 31, 1993 and March 31, 1992
Statements of Consolidated Cash Flows for the years ended
March 31, 1994, March 31, 1993 and March 31, 1992
Statements of Consolidated Stockholders' Equity for the years
ended March 31, 1994, March 31, 1993 and March 31, 1992
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
Schedule I - Consolidated Marketable Securities and Other
Security Investments for the years ended March 31, 1994, 1993
and 1992
Schedule VIII - Consolidated Valuation and Qualifying Accounts
for the years ended March 31, 1994, 1993 and 1992
Schedule X - Consolidated Supplementary Income Statement
Information for the years ended March 31, 1994, 1993 and 1992
3. Exhibits:
The exhibits listed on the accompanying Index to Exhibits are
filed as part of this Annual Report.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
March 31, 1994.
40
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: June 24, 1994
TRANSTECHNOLOGY CORPORATION
By: /s/Michael J. Berthelot
---------------------------------------
Michael J. Berthelot,
Chairman of the Board, President
and Chief Executive Officer
41
<PAGE> 43
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Michael J. Berthelot Chairman of the Board, President June 24, 1994
- - ----------------------------------- and Chief Executive Officer
MICHAEL J. BERTHELOT (Principal Executive Officer)
/s/Patrick K. Bolger Executive Vice President, Chief June 24, 1994
- - ----------------------------------- Operating Officer and Director
PATRICK K. BOLGER
/s/Chandler J. Moisen Senior Vice President, Treasurer and June 24, 1994
- - ----------------------------------- Chief Financial Officer
CHANDLER J. MOISEN (Principal Financial Officer)
/s/Richard Mascuch Director June 16, 1994
- - -----------------------------------
RICHARD MASCUCH
/s/Walter Belleville Director June 16, 1994
- - -----------------------------------
WALTER BELLEVILLE
/s/George S. Hofmeister Director June 16, 1994
- - -----------------------------------
GEORGE S. HOFMEISTER
/s/Thomas V. Chema Director June 16, 1994
- - -----------------------------------
THOMAS V. CHEMA
/s/H. Gary Carlson, Ph.D. Director June 16, 1994
- - -----------------------------------
H. GARY CARLSON, Ph.D.
/s/James A. Lawrence Director June 16, 1994
- - -----------------------------------
JAMES A. LAWRENCE
</TABLE>
42
<PAGE> 44
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page
Sequentially
Numbered
------------
<S> <C> <C>
3.1 Certificate of Incorporation of the Company.(1) --
3.2 Bylaws of the Company.(2) --
4.1 Specimen Certificate of Common Stock 45
10.1 1982 Stock Option Plan of the Company, as amended.(3) --
10.2 Form of Incentive Stock Option Agreement used under the Company's 1982 Stock
Option Plan.(4) --
10.3 Form of Nonqualified Stock Option Agreement used under the Company's 1982 Stock
Option Plan.(4) --
10.4 1992 Long Term Incentive Plan of the Company.(5) --
10.5 Indemnification Agreement dated February 11, 1987 between the Company and each of
its officers and directors.(6) --
10.6 Executive Life Insurance Plan.(7) --
10.7 Revolving Loan and Security Agreement dated as of June 21, 1991 between the
Company and National Canada Finance Corp.(8) --
10.8 First Amendment to Revolving Loan and Security Agreement dated as of December 12,
1991 between the Company and National Canada Finance Corp.(9) --
10.9 Second Amendment to Revolving Loan and Security Agreement dated as of December 10,
1992 between the Company and National Canada Finance Corp.(9) --
10.10 Letter Agreement and General Release dated June 27, 1991 between Paul
Grosher and the Company.(11) --
10.11 Amended Compensation Agreement dated April 2, 1993 between Arch Scurlock and
the Company.(12) --
10.12 Amended Compensation Agreement dated April 2, 1993 between John H. Grover
and the Company.(12) --
10.13 Severance and Consulting Agreement dated December 12, 1991 between Ralph
Hutchins and the Company.(10) --
10.14 Third Amendment to Revolving Loan and Security Agreement dated August 2, 1993
between the Company and National Canada Finance Corp. 46
10.15 Form of Restricted Stock Award Agreement used under the Company's 1992 Long Term
Incentive Plan 66
21.1 List of Subsidiaries of the Company. 79
23.1 Independent Auditor's Consent. 80
</TABLE>
- - ----------------------
(1) Incorporated by reference from the Company's Form 8-A Registration
Statement No. 2-85599 dated February 9, 1987.
43
<PAGE> 45
<TABLE>
<CAPTION>
Page
Sequentially
Numbered
------------
<S> <C> <C>
(2) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the Quarter ended September 27, 1992. --
(3) Incorporated by reference from the Company's Annual Report on Form 10-K for
the Fiscal Year ended March 31, 1983. --
(4) Incorporated by reference from the Company's Post-Effective Amendment No. 1
to Form S-8 Registration Statement No. 33-19390. --
(5) Incorporated by reference from the Company's Registration Statement on
Form S-8 No. 33-59546 dated March 15, 1993. --
(6) Incorporated by reference from the Company's Annual Report on Form 10-K for
the Fiscal Year ended March 31, 1987. --
(7) Incorporated by reference from the Company's Annual Report on Form 10-K for
the Fiscal Year ended March 31, 1989. --
(8) Incorporated by reference from the Company's Annual Report on Form 10-K from
the Fiscal Year ended March 31, 1991. --
(9) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the Quarter ended December 27, 1992. --
(10) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the Quarter ended December 29, 1991. --
(11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the Quarter ended September 29, 1991. --
(12) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended March 31, 1993. --
</TABLE>
44
<PAGE> 1
EXHIBIT 4.1
NUMBER COMMON STOCK COMMON STOCK SHARES
NYS
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR
IN THE CITY OF NEW YORK OR CERTAIN DEFINITIONS
IN WINSTON-SALEM, NORTH CAROLINA
CUSIP 893889 10 5
(TRANSTECHNOLOGY CORPORATION LOGO)
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This Certifies that
is the record holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01 PER
SHARE OF THE COMMON STOCK OF
Transtechnology Corporation, transferable on the books of the Corporation
by the holder hereof in person or by duly authorized attorney upon surrender of
this Certificate properly endorsed. This Certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/S/ Michael J. Berthelot
-----------------------
Chairman of the Board
(LOGO)
/S/ Valentina Doss /S/ Michael J. Berthelot
------------------ ----------------------
Secretary President
Countersigned and Registered:
Wachovia Bank of North Carolina, N.A.
(Winston-Salem, N.C.)
Transfer Agent and Registrar
By
Authorized Signature
45
<PAGE> 1
EXHIBIT 1O.14
THIRD AMENDMENT TO THE
REVOLVING LOAN AND
SECURITY AGREEMENT
THIS THIRD AMENDMENT TO THE REVOLVING LOAN AND SECURITY AGREEMENT (the
"Third Amendment") is entered into by and among NATIONAL CANADA FINANCE
CORP., NATIONAL BANK OF CANADA (New York, New York) (collectively, "Bank"), and
TRANSTECHNOLOGY CORPORATION, a Delaware corporation ("Borrower").
RECITALS
A. On June 21, 1991, Borrower and Bank entered into a certain
Revolving Loan And Security Agreement (the "Loan Agreement," all terms defined
therein being used in this Third Amendment with the same meaning unless
otherwise stated) under the terms of which Bank loaned to Borrower $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, Borrower 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 Borrower 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 Borrower's compliance with Section 7.1(N) of the Loan Agreement relating to
Borrower's net worth for the period ended September 29, 1991.
C. On December 10, 1992, Borrower 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 Borrower 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
Borrower, (4) the modification of Bank's Collateral of Borrower to include
machinery and equipment of Borrower, (5) the modification of certain financial
covenants of Borrower, (6) the payment by Borrower of certain dividends, and
(7) the extension of the Termination Date of the Loan Agreement.
D. On December 31, 1992, Borrower and Bank entered into a letter
agreement (the "Letter Agreement") to permit Borrower 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. Borrower and Bank now desire to amend the Loan Agreement, as
amended, to (1) increase the maximum principal amount of borrowings under the
Revolving Loan from $25,000,000 to $35,000,000
46
<PAGE> 2
(inclusive of the issuance by Bank to Borrower of a maximum of $5,000,000 of
standby letters of credit), (2) provide for 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) provide Bank with
a mortgage on the Palnut Property (as defined below), (4) modify the Borrowing
Base to increase the amount of funds Borrower may borrow against Eligible
Inventory from $13,000,000 to $18,000,000, and (5) establish a termination fee
upon the prepayment by Borrower of the term loan, all in accordance with the
provisions of this Third Amendment.
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 Third 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 and this Third Amendment. The Loan Agreement, as amended
by the First Amendment, the Second Amendment, the Letter Agreement and this
Third Amendment, is, and shall continue to be, in full force and effect and
hereby is ratified and confirmed in all respects.
B. Paragraphs (G), (J), (M), (N), (0), (MM), (XX) and (CCC) of Section
1.1 of the Loan Agreement are amended in their entirety as follows:
(G) Borrowing Base. Subject to the provisions of Section 2.1
of this Agreement, an amount equal to the lesser of:
(1) The sum of (a) eighty percent (80%) of the unpaid
face amount of Eligible Accounts, plus (b) the lesser of (i)
fifty percent (50%) of the lower of cost (determined on a
first-in, first-out basis) or market value of Eligible
Inventory or (ii) $18,000,000; or
(2) The Revolving Loan Credit Limit.
(J) Collateral. The Accounts, Inventory, Fixed Collateral,
Palnut Property and all other Property of
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47
<PAGE> 3
Borrower now or at any time or times hereafter subject to a Lien in
favor of Bank.
(M) Adjusted Base Rate. A fluctuating rate of interest equal
to (1) with respect to the Revolving Loan, zero (0) percentage points
above the Base Rate, and (2) with respect to the Term Loan, one-quarter
(1/4) percentage points above the Base Rate; provided, however, that
the Adjusted Base Rate applicable to the Term Loan shall be reduced by
one-quarter (1/4) percentage points if Borrower's Net Income (as
defined in Section 7.2(H) of this Agreement) equals or exceeds
$6,000,000 for the fiscal year ended March 31, 1994. Any such reduction
in the Adjusted Base Rate applicable to the Term Loan shall become
effective two (2) business days following the receipt by Bank from
Borrower of Borrower's unaudited interim financial statements for its
fiscal year ending March 31, 1994; provided, however, if Borrower's
audited financial statements for such fiscal year report Net Income of
less than $6,000,000, such rate reduction shall be discontinued and any
interest savings realized by Borrower based on such rate reduction
shall be immediately due and payable to Bank.
(N) Credit Documents. This Agreement, the Promissory Note, the
Term Note, the Mortgage, and all other agreements, instruments, and
documents (including, but not limited to, all assignments, security
agreements, lien waivers, subordinations, guarantees, powers of
attorney, and consents) heretofore, now, or hereafter executed by
Borrower and delivered to Bank (other than the legal opinions) with
respect to the transactions contemplated by this Agreement, in each
instance as the foregoing may be amended from time to time.
(O) Revolving Loan Credit Limit. An amount equal to
Thirty-Five Million Dollars ($35,000,000).
(MM) Promissory Note. The Promissory Note executed by Borrower
and delivered to Bank, dated June 21, 1991, as amended by the First
Amendment To Promissory Note, dated December 10, 1992, and the Second
Amendment To Promissory Note in the form attached hereto as Exhibit A
(with such changes or modifications, if any, to which Borrower 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-
48
<PAGE> 4
(XX) Adjusted LIBOR Rate. A rate of interest equal to two (2)
percentage points above LIBOR.
(CCC) Interest Period. A period of one hundred twenty (120)
days commencing on the applicable borrowing date of each LIBOR Loan and
ending on each Interest Adjustment Date with respect thereto; provided,
however, that if any such period would be affected by prepayment as
provided in Section 2.4(C) of this Agreement or maturity of the
Revolving Loan as provided in Section 2.1(B) of this Agreement, such
period shall be shortened to end on such date.
C. Paragraphs (GGG), (HHH), (III) and (JJJ) are added to Section 1.1
of the Loan Agreement as follows:
(GGG) Mortgage. The Open-End Mortgage And Security Agreement
executed by Borrower in substantially the same form as attached to the
Third Amendment as Exhibit B.
(HHH) Palnut Property. As defined in Section 4.1(E) of this
Agreement.
(III) Term Loan. As defined in Section 2.2(A) of this
Agreement.
(JJJ) Term Note. The Term Note to be executed by Borrower in
substantially the form attached to the Third Amendment as Exhibit C
(with such changes or modifications, if any, to which Borrower 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.
D. Section 2 of the Loan Agreement is amended in its entirety as
follows:
2. LOANS, ADVANCES, AND LETTERS OF CREDIT
Subject to the provisions of this Agreement and each of the
other Credit Documents including, but not limited to, those provisions
or Credit Documents that provide that no loan advances need be made or
standby letters of credit issued by Bank if, at the date of request for
loan advances or the issuance of standby letters of credit hereunder by
Borrower, an Event of Default, or event or condition which, with
notice, lapse of time or both, would constitute an Event of Default,
then exists, Bank shall provide the credit facilities described in this
Section 2 for the account of Borrower.
-4-
49
<PAGE> 5
2.1 Revolving Loan.
(A) Establishment of Revolving Loan. Subject to the provisions
of this Agreement, and subject at all times to Bank's right to the
creation of reserves for accrued interest and otherwise as Bank deems
necessary or appropriate from time to time, Bank shall make such loans
to Borrower as are requested by Borrower subject to the provisions of
this Agreement consisting of advances made by Bank against the value of
Eligible Accounts and Eligible Inventory (the "Revolving Loan");
provided, however, that the aggregate unpaid principal of the Revolving
Loan outstanding at any one time shall not at any time exceed the
Borrowing Base reduced by the aggregate face amount of all outstanding
letters of credit under the Letter of Credit Facility, together with
all unpaid draws thereon.
(B) Payment. The Revolving Loan shall bear interest as
provided in this Section 2.1 and shall be evidenced by, and repayable
in accordance with, the Promissory Note but, in the absence of the
Promissory Note, shall be evidenced by Bank's record of disbursements
and repayments. Without in any way limiting Bank's right at any time to
demand payment of the entire principal amount of the Revolving Loan and
all interest accrued thereon, upon the occurrence of an Event of
Default, which right is absolute and unconditional, the entire
principal amount of the Revolving Loan, together with all interest
accrued thereon, shall become due and payable in full on the
Termination Date without notice, presentment, demand, notice of
dishonor, or any notice of any kind.
(C) Adjusted Base Rate Revolving Loans or Adjusted LIBOR Rate
Revolving Loans. Borrower shall have the option, subject to the
provisions set forth in this Agreement, to borrow under this Agreement,
repay the same in whole but not in part, and re-borrow again at any
time and from time to time, up to the applicable Borrowing Base (if
any), (1) Revolving Loans, the outstanding principal balance of which
shall bear interest at a rate per annum which shall be the Adjusted
Base Rate from time to time in effect, or (2) Revolving Loans, the
outstanding principal balance of which shall bear interest at a rate
per annum which shall be equal to the Adjusted LIBOR Rate.
(D) Payment of Interest on Revolving Loans Bearing the
Adjusted Base Rate. Borrower shall pay interest (based on a year having
360 days and calculated for the actual number of days elapsed) on the
unpaid principal
-5-
50
<PAGE> 6
amount of the Adjusted Base Rate Loans outstanding from time to time
from the date thereof until paid, payable as of the last day of each
month commencing December 31, 1992, and continuing on the last day of
each month thereafter, and, at the maturity thereof, at a rate per
annum which shall be equal to the Adjusted Base Rate from time to time
in effect. Any increase or decrease in the Adjusted Base Rate resulting
from a change in the Base Rate shall become effective on the date of
such change.
(E) Payment of Interest on Revolving Loans Bearing the Adjusted
LIBOR Rate. Borrower shall pay interest (based on a year having 360
days and calculated for the actual number of days elapsed) at a fixed
rate for each Interest Period on the unpaid principal amount of the
LIBOR Loans outstanding from time to time from the date thereof until
paid, payable as of each Interest Adjustment Date with respect to an
Interest Period, at the rate per annum equal to the Adjusted LIBOR
Rate, fixed in advance of each Interest Period as herein provided for
each such Interest Period.
(F) Conversion of Loans. At the request of Borrower, Bank
shall convert Revolving Loans bearing interest at the Adjusted Base
Rate to Revolving Loans bearing interest at the Adjusted LIBOR Rate at
any time, and shall convert Revolving Loans bearing interest at the
Adjusted LIBOR Rate to Revolving Loans bearing interest at the Adjusted
Base Rate, on any Interest Adjustment Date applicable to the Revolving
Loan, but each request for loans under this Section 2.1 must bear
interest only at the Adjusted Base Rate or at the Adjusted LIBOR Rate.
Any Revolving Loan bearing interest at the Adjusted LIBOR Rate
automatically shall begin bearing interest at the Adjusted Base Rate,
if Borrower fails to request the Adjusted LIBOR Rate (i) when the
Revolving Loan is made or (ii) prior to the expiration of the Interest
Period of the Revolving Loan. In addition, if an Event of Default has
occurred, Borrower shall be required, at the expiration of the then
current Interest Period, to convert Revolving Loans bearing interest at
the Adjusted Libor Rate to Revolving Loans bearing interest at the
Adjusted Base Rate, and all Revolving Loans shall continue to bear
interest at the Adjusted Base Rate until such Event of Default is
cured.
2.2 Term Loan.
(A) Establishment of Term Loan. Subject to the provisions of
this Agreement, Bank shall make a term loan to Borrower in the amount
of Ten Million Dollars ($10,000,000; the "Term Loan").
-6-
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<PAGE> 7
(B) Payment. The Term Loan shall bear interest as provided in
paragraph (C) of this Section 2.2 and shall be evidenced by, and
repayable in accordance with, the Term Note in the form of Exhibit C
attached to the Third Amendment but, in the absence of such Term Note,
shall be evidenced by Bank's records of disbursements and repayments.
Without in any way limiting Bank's right at any time to demand payment
of the entire principal amount of the Term Loan, and all interest
accrued thereon, upon the occurrence of an Event of Default, which
right is absolute and unconditional, the entire principal amount of the
Term Loan, together with all interest accrued thereon, shall become due
and payable in full on August 31, 1998, without notice, presentment,
demand, notice of dishonor, or any notice of any kind.
(C) Interest on Term Loan. Borrower shall pay interest (based
on a year having 360 days and calculated for the actual number of days
elapsed) on the unpaid principal amount of the Term Loan outstanding
from time to time from the date thereof until paid, payable as of the
last day of each month commencing August 31, 1993, and continuing on
the last day of each month thereafter, and, at the maturity thereof, at
a rate per annum which shall be equal to the Adjusted Base Rate from
time to time in effect. Any increase or decrease in the Adjusted Base
Rate resulting from a change in the Base Rate shall become effective on
the date of such change.
2.3 Letter of Credit Facility. Subject to the provisions of
this Agreement, National Canada Finance Corp. or its parent
corporation, National Bank of Canada (New York, New York), shall issue
for and on behalf of Borrower standby letters of credit the issued and
outstanding amounts of which, together with all unpaid draws thereon,
(1) shall not exceed the lesser of (a) the Borrowing Base or (b)
$5,000,000 (the "Letter of Credit Facility"), and (2) shall reduce, on
a dollar for dollar basis, the Borrowing Base and the Revolving Loan
Credit Limit. All draws made upon any issued and outstanding standby
letter of credit shall bear interest at the Adjusted Base Rate from
time to time in effect and all payments of principal, and accrued
interest thereon, shall be due and payable in accordance with the
provisions of Section 2.1(B) and (D) above.
2.4 Fees and Additional Charges.
(A) Commitment Fee. On the date of execution of the Third
Amendment, Borrower shall pay to Bank a commitment fee of $175,000 (the
"Commitment Fee").
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<PAGE> 8
(B) Unused Line Fee. Commencing July 31, 1991, and continuing
on the last day of each month thereafter until such time as the
Revolving Loan is terminated as provided herein and Borrower's
Obligations are paid in full, Borrower shall pay to Bank an amount
equal to one-quarter of one percent (1/4%) per annum of the difference
between the Revolving Loan Credit Limit and the sum of (1) the issued
and outstanding standby letters of credit and (2) the outstanding
principal balance of the Revolving Loan during the preceding month (the
"Unused Line Fee").
(C) Termination Fee. Prior to the Termination Date, Borrower
may terminate this Agreement as of the last day of any month by giving
Bank at least ninety (90) days prior written notice of the date on
which this Agreement is to terminate, which date must be the last day
of a month, and by paying to Bank on such termination date all of the
outstanding principal balance due and payable under the Promissory
Note, the Term Note, all other Obligations, and all accrued and unpaid
interest thereon; provided, however, that if such specified date of
termination is on or before the Termination Date, Borrower shall pay
Bank an amount equal to one percent (1%) of the sum of the Revolving
Loan Credit Limit and the original principal amount of the Term Loan
(the "Termination Fee"). The Termination Fee shall be paid to Bank at
the same time and in the same manner in which Borrower pays in full the
then outstanding principal amounts and interest thereon due and owing
under the Promissory Note, the Term Note and all other Obligations.
(D) Letter of Credit Fee. Borrower shall be obligated to pay
Bank a per-annum amount equal to one and one-half percent (1.5%) of
the face amount of each standby letter of credit issued by Bank for the
benefit of Borrower (the "Letter of Credit Fee"). Each Letter of Credit
Fee shall be due and payable in equal quarterly installments. The first
quarterly installment of each Letter of Credit Fee shall be due and
payable on the date of issuance of such Letter of Credit and any
additional quarterly installments shall be due and payable in advance
for each subsequent quarter in which a standby letter of credit is
issued and outstanding for the benefit of Borrower.
2.5 Accountings. Any accounting rendered by Bank to Borrower
shall be deemed correct and conclusively binding upon Borrower unless
(A) Borrower notifies Bank by certified mail, return receipt requested,
within thirty (30) calendar days after the date when each such
accounting is mailed or otherwise delivered to Borrower, or (B) there
exists a bona fide mistake in such
-8-
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<PAGE> 9
accounting regardless of which party discovers such mistake.
2.6 All Advances to Constitute One Loan. The Revolving Loan,
the Term Loan, and all other amounts owed by Borrower to Bank under
this Agreement, whether or not evidenced by a promissory note or term
note, shall constitute one obligation of Borrower, secured by Bank's
lien on and security interest in all of the Collateral. Borrower shall
be liable to Bank for all of the Obligations, regardless of whether
such Obligations arise as a result of advances made directly to
Borrower, it being stipulated and agreed that all monies advanced by
Bank hereunder inure to the benefit of Borrower, and that Bank is
relying on the liability of Borrower in extending credit and otherwise
making advances under this Agreement.
2.7 Excess Interest. In no contingency or event whatsoever
shall the interest rate charged pursuant to the terms of this Agreement
exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that such a court determines that Bank has
received interest under this Agreement in excess of the highest
applicable rate, such excess interest shall first be applied to any
unpaid principal balance owed by Borrower and, if the then remaining
excess interest is greater than the unpaid principal balance, Bank
promptly shall refund such excess interest to Borrower.
Notwithstanding anything to the contrary contained in this Agreement,
the Promissory Note, or the Term Note, if the rate of interest payable
on the Promissory Note or the Term Note is ever reduced as a result of
this Section 2.7 and at any time thereafter the maximum rate permitted
by applicable law shall exceed the rate of interest provided for in the
Promissory Note or the Term Note, then the rate provided for in the
Promissory Note or the Term Note, as the case may be, shall be
increased to the maximum rate permitted by applicable law for such
period as is required so that the total amount of interest received by
Bank is that which would have been received by Bank but for the
operation of this Section 2.7.
2.8 Revival. To the extent that Borrower makes a payment or
payments to Bank or to the extent Bank receives any payment or proceeds
of the Collateral for Borrower's benefit, which payment or proceeds or
any part thereof is subsequently invalidated, declared to be fraudulent
or preferential, set aside, and/or required to be repaid to a trustee,
receiver, or any other party
-9-
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<PAGE> 10
under any bankruptcy act, state or Federal law, common law, or
equitable cause, then, to the extent of such payment or proceeds
received by Borrower, the Obligations or part thereof intended to be
satisfied shall be revived and shall continue in full force and effect
as if such payment or proceeds had not been received by Bank.
2.9 Optional Charge Against Revolving Loan. To the extent
Borrower does not remit, when due, any payments of interest or, in the
case of the Term Loan or any other loans or Obligations other than the
Revolving Loan, any payment of principal or any other payment required
to be made by Borrower to Bank pursuant to the terms of any of the
Credit Documents within any applicable grace periods, Bank, at its
option, may make such payment by increasing the outstanding principal
balance of the Revolving Loan in order to prevent such amount from
becoming past due, but it is expressly acknowledged and covenanted that
Bank shall be under no obligation to do so.
2.10 Specific Conditions Applicable to Requests for Revolving
Loan. In addition to all other conditions set forth in this Agreement,
each request by Borrower for a Revolving Loan also is subject to the
following specific conditions:
(A) Notice of Request. Borrower shall notify Bank in writing
or telephonically of Borrower's request for a Revolving Loan, which
request shall be received by Bank not later than 2:00 p.m., Cleveland,
Ohio time and shall state the total amount of the Revolving Loan
requested.
(B) Borrowing Base Certificate. Borrower's written request
shall be accompanied by a duly completed and executed "Borrowing Base
Certificate" in the form attached to this Agreement as Exhibit 2.9(B).
If Borrower's request is made telephonically, the Borrowing Base
Certificate shall be delivered to Bank no later than the next business
day after such telephonic request is made. Each Borrowing Base
Certificate shall demonstrate that the principal amount of the
Revolving Loan, when added to the aggregate principal amount of all
Revolving Loans then outstanding, shall not exceed the Borrowing Base,
as determined based on the last Borrowing Base Certificate timely
delivered to Bank pursuant to Section 5.4(B) of this Agreement.
(C) Borrower's Acceptance of Proceeds. The acceptance by
Borrower of the proceeds of any Revolving Loan, as of the date of such
acceptance, shall be deemed (1) to constitute a representation and
warranty by Borrower that all conditions to the making of such
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<PAGE> 11
Revolving Loan set forth in this Agreement have been satisfied, and (2)
a confirmation by Borrower of the granting and continuance of the Lien
in favor of Bank created pursuant to this Agreement and the Credit
Documents.
(D) Conditions to Making Revolving Loan. Bank shall not make
any Revolving Loan unless (1) it shall have received Borrower's written
or telephonic request and Borrowing Base Certificate in the prescribed
time as set forth in paragraph (A) of this Section 2.10, (2) no Event
of Default shall then exist or, immediately after the making of any
Revolving Loan, would exist, (3) all provisions or covenants contained
in Section 7 of this Agreement shall have been complied with or
performed, (4) all of the Credit Documents shall be in full force and
effect, (5) the representations and warranties contained in Section 6
of this Agreement shall be true and correct in all material respects as
if made on and as of the date of such borrowing except to the extent
that any thereof expressly relate to an earlier date, and (6) Bank
shall not have made demand for the payment of the Obligations or
otherwise terminated the availability of any Revolving Loan.
2.11 Manner of Payments. On or before the date they become
due, Borrower shall make payments to Bank in immediately available
funds, even if it contests any statement rendered by Bank; provided,
however, that if any statement is subsequently proved to be incorrect,
Bank, at the option of Borrower, shall (A) refund any overpaid amount
to Borrower, or (B) grant a credit against amounts due for the
following month in the appropriate amount. As to Obligations which
become due and payable other than on a fixed date by their terms or as
a result of demand for payment and/or acceleration on account of an
Event of Default, Borrower immediately shall pay to Bank such
Obligations in immediately available funds. Whenever any payment to be
made hereunder including, but not limited to, any payment to be made on
the Promissory Note or the Term Note, is stated to be due on a day
which is not a banking day, such payment may be made on the next
succeeding banking day and such extension of time in each such case
shall be included in the computation of the interest payable on the
Promissory Note or the Term Note or such other Obligation. Unless
otherwise provided in this Agreement, all payments or prepayments made
or due hereunder (including, but not limited to, payments with respect
to the Promissory Note and the Term Note) shall be made in immediately
available funds to Bank prior to 2:00 p.m., Cleveland, Ohio time, on
the date when due. Payments
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<PAGE> 12
received by Bank after 2:00 p.m., Cleveland, Ohio time, shall be deemed
to have been made on the next following banking day.
2.12 Default Interest. Upon and after the occurrence of an
Event of Default, and during the continuation thereof, the Obligations
shall bear interest at the Default Rate, calculated daily on a 360-day
year basis, based upon the actual number of days elapsed.
E. Section 4.1 of the Loan Agreement is amended in its entirety as
follows:
4.1 Grant of Security Interest. To secure the prompt payment
and performance of the Obligations, and in addition to any other
Collateral or Lien securing the Obligations, Borrower hereby grants to
Bank a continuing security interest in and to all of the following
Property of Borrower, whether now owned or existing or hereafter
acquired or arising and wheresoever located:
(A) Inventory. All Inventory.
(B) Accounts. All Accounts.
(C) Deposits. With respect to the Inventory and the Accounts
(and all products and proceeds thereof): any and all deposits or other
sums at any time credited by or due from Bank to Borrower, whether in a
Depository Account or other account, together with any and all
instruments, documents, policies, and certificates of insurance,
securities, goods, choses in action, general intangibles, chattel
paper, cash, or other Property, and the proceeds of each of the
foregoing, to the extent owned by Borrower or in which Borrower has an
interest and which now or hereafter are at any time in the possession
or control of Bank or in transit by mail or carrier to or from Bank or
in the possession of any Person acting in Bank's behalf, without regard
to whether Bank received the same in pledge, for safekeeping, as agent
for collection or transmission or otherwise, or whether Bank had
conditionally released the same, and any and all balances, sums,
proceeds, and credits of Borrower with, and any claims of Borrower
against, Bank.
(D) Fixed Collateral. All Fixed Collateral.
(E) Palnut Property. The real property located at Glen Road,
in Mountainside, New Jersey, 07092 including all buildings and
improvements thereon (the "Palnut Property"), as further described on
Exhibit A to the Mortgage.
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<PAGE> 13
(F) Accessions, Products, and Proceeds. All accessions to,
substitutions for, and all replacements, products, and proceeds of the
Property described in Subsections (A), (B), (C), (D) and (E) above
including, but not limited to, proceeds of insurance policies insuring
such Property and proceeds of all such proceeds.
(G) Books and Records. All books, records, and other property
(including, but not limited to, credit files, programs, printouts,
computer software, programs, and disks, magnetic tape and other
magnetic media, and other materials and records) of Borrower pertaining
to any of the Property described in Subsections (A), (B), (C), (D), (E)
or (F) of this Section 4.1.
F. The phrase "Contract Rate" set forth in Section 4.4 of the Loan
Agreement is amended and replaced with the phrase "Adjusted Base Rate
applicable to the Revolving Loan."
G. The reference to Section 2.9(B) set forth in Section 5.4 of the
Loan Agreement is hereby amended to mean and refer to Section 2.10(B).
H. Section 6.1(Q) of the Loan Agreement is amended in its entirety as
follows:
(Q) Fraudulent Conveyance. The security interests and liens
granted by Borrower and/or the utilization of the proceeds of the
borrowings described in this Agreement are not, and will not be, in
violation or contravention of the general corporate laws of Delaware
and New Jersey, the Uniform Fraudulent Conveyance Act as adopted in
Delaware and New Jersey, or any other law designed for the protection
of the rights of creditors.
I. Section 7.1(L) of the Loan Agreement is amended in its entirety as
follows:
(L) Government Accounts. If any of the Accounts arise out of a
contract with the United States of America, or any department, agency,
subdivision, or instrumentality thereof (the "U.S. Government"),
promptly notify Bank thereof in writing and execute any instruments and
take any other action required or requested by Bank to perfect Bank's
security interest in such Accounts under the provisions of the
Assignment of Claims Act of 1940, as amended. Borrower further agrees
to provide to Bank, within thirty (30) days from the last day of each
fiscal year of Borrower during the term of this Agreement, a list of
unexpired contracts with the U.S. Government as of the last day of such
fiscal year with a value of $75,000 or more, together with (1) the
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<PAGE> 14
amount of proceeds yet to be received by Borrower under each such
contract, and (2) the name, address and telephone number of each of the
administrative contracting officer and the disbursing officer for each
such contract.
J. Item (11) of the table in Section 7.1(N) of the Loan Agreement is
deleted in its entirety and item (10) of such table is amended in its entirety
as follows:
Minimum
Tangible
Date Net Worth
---- ---------
(10) As of March 31, 1995, and
as of the last day of each
quarter thereafter 65,000,000
K. Paragraph (1) of Section 7.1(N) of the Loan Agreement is amended in
its entirety as follows:
(1) The net book value of all intangible assets including, but
not limited to, goodwill, trademarks, trade names, copyrights, and
rights in any thereof, and "special technologies"; provided, however,
for purposes of this paragraph (1), intangible assets shall not include
unamortized debt discount and expense or any intangibles arising from
the Kinnedyne or the Coil Systems acquisitions by Borrower.
L. Section 7.1(N) of the Loan Agreement is amended by adding the
following paragraph to the end of such section:
For purposes of this Section 7.1(N) and Section 7.1(0),
"Tangible Net Worth" shall be increased by the amount of the FAS 106
liability recorded by Borrower (if any) for the fiscal year ending
March 31, 1994, up to a maximum of Two Million Five Hundred Thousand
Dollars ($2,500,000).
M. Section 7.1(O) of the Loan Agreement is amended in its entirety as
follows:
(O) Total Debt/Tangible Net Worth Ratio. Maintain at the close
of each calendar quarter during the following time periods a "Total
Debt to Tangible Net Worth" ratio which is equal to or less than as set
forth below:
Total Debt/
Tangible Net
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<PAGE> 15
Date Worth Ratio
---- -----------
(1) As of the date hereof and 0.8 to 1.0
through March 30, 1993
(2) As of March 31, 1993, and 0.75 to 1.0
through the day immediately
prior to the date of
execution of the Third Amendment
(3) As of the date of execution 1.0 to 1.0
of the Third Amendment and
through March 30, 1995
(4) As of March 31, 1995, and at 0.9 to 1.0
the end of each quarter
thereafter
N. The first sentence of Section 7.1(P) of the Loan Agreement
is amended in its entirety as follows:
At all times commencing on the date of the Third
Amendment, maintain Working Capital of not less than
$40,000,000.
O. Section 7.2(H) of the Loan Agreement is amended in its
entirety as follows:
(H) Capital Distributions. Except as permitted in
Section 7.2(B) of this Agreement, pay dividends or make any
distributions in cash or otherwise or effect any redemption or
other distribution of property to any shareholder of Borrower
or invest in or purchase any stock or securities of any
individual, firm, or corporation (other than Borrower or
existing Affiliates); provided, however, that commencing with
the quarter ended December 31, 1992, and continuing for each
calendar quarter thereafter, Borrower shall be entitled to pay
after the close of each such quarter dividends with respect to
its issued and outstanding shares which, when added to all
additional dividends previously paid for such fiscal year, do
not exceed 25% of Borrower's Net Income for the portion of such
fiscal year ending the last day of such quarter (the "Permitted
Capital Transactions"). "Net Income" shall mean Borrower's net
income determined in accordance with GAAP; provided, however,
that for the fiscal year ending March 31, 1994, "Net Income"
shall mean Borrower's net income determined in accordance with
GAAP increased by the FAS 106 expense of Borrower (if any)
recorded for such year up to a maximum of Two Million Five
Hundred Thousand Dollars ($2,500,000).
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<PAGE> 16
P. Section 7.2(J) of the Loan Agreement is amended in its
entirety as follows:
(J) Capital Expenditures. Make Capital Expenditures
which would cause the Capital Expenditures of Borrower,
determined in the aggregate in each fiscal year, to exceed the
amounts set forth below:
Maximum
Capital
Date Expenditures
---- ------------
(1) From April 1, 1992, $6,000,000
through March 31, 1993
(2) From April 1, 1993, 8,500,000
through March 31, 1994
(3) From April 1, 1994, 9,500,000
through March 31, 1995,
and each fiscal year
thereafter
Q. Section 10.1(A) of the Loan Agreement is amended in its
entirety as follows:
(A) Payment of Debt Service. Failure by Borrower to
(1) make payment of principal or interest on the Promissory
Note or the Term Note on or within two (2) days after the due
date thereof, (2) pay any other Obligation on or within ten
(10) days after the due date thereof, (3) remit Accounts or
deposit funds as required by the terms of this Agreement; or
(4) make payment of any other sum on the Promissory Note or the
Term Note within ten (10) days after receipt by Borrower from
Bank of notice of such failure to pay.
R. Section 10.2 of the Loan Agreement is amended in its
entirety as follows:
10.2 Acceleration of the Obligations. Upon and after
the occurrence of an Event of Default and upon notice by Bank
to Borrower in the manner set forth in Section 12.10 hereof,
all of the Obligations due or to become due from Borrower to
Bank, whether under this Agreement, the Promissory Note, the
Term Note, or otherwise, at the option of Bank immediately
shall become due and payable, anything in the Promissory Note,
the Term Note, or other evidence of the Obligations or in any
of the other Credit Documents to the contrary notwithstanding.
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<PAGE> 17
S. Section 10.3(E) of the Loan Agreement is amended by adding
the following sentence to the end of such section:
In addition, all moneys, securities and other properties of
Borrower, and the proceeds thereof, now or hereafter held or
received by Bank from or for the account of Borrower, including
any and all deposits, account balances and credits of Borrower
with Bank at any time existing, may be set-off and applied
against any Obligations in accordance with the provisions of
this Agreement without any necessity on Bank's part to resort
to other security or sources of reimbursement for the
Obligations.
SECTION II. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.
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 Borrower, all
representations, warranties and covenants in the Loan Agreement, as
amended by the First Amendment, the Second Amendment, and the Letter
Agreement, shall continue and be binding on Borrower under this Third
Amendment.
SECTION III. CONDITIONS PRECEDENT.
Borrower acknowledges that the effectiveness of this Third
Amendment is subject to the following:
A. Receipt by Bank of the following documents on the date of
this Agreement, all in form and substance satisfactory to Bank and its
counsel:
1. A certified copy of resolutions of Members of the
Board of Directors of Borrower approving this Third Amendment
and all of the matters described in this Third Amendment, and
authorizing the execution, delivery, and performance by
Borrower of this Third Amendment, the Second Amendment To
Promissory Note, the Term Note, the Mortgage, and every other
document required to be delivered pursuant to this Third
Amendment.
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<PAGE> 18
2. The Second Amendment To Promissory Note executed by
Borrower and accepted by Bank in substantially the same form as
is attached to this Third Amendment as Exhibit A.
3. The Term Note, executed by Borrower.
4. The Mortgage executed by Borrower and delivered to
the escrow agent to be used by Borrower and TRW, Inc. ("TRW")
relating to Borrower's acquisition of the Palnut Property.
5. A legal opinion of Riordan & McKinzie.
6. Legal opinions from Borrower's local counsel in
each of New Jersey, Pennsylvania and Illinois.
7. A certificate signed by a duly authorized officer
of Borrower to the effect that:
(a) 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
(b) The representations and warranties set
forth in Section 6.1 of the Loan Agreement are true as
of the date of this Third Amendment.
8. A certificate of Borrower's corporate secretary
certifying (a) to the incumbency and signatures of the officers
of Borrower signing this Third Amendment and every other
document to be delivered pursuant to the Third Amendment, (b)
to the effect that Borrower's Certificate of Incorporation has
not been amended since the execution of the Loan Agreement, and
(c) to the effect that Borrower's Bylaws have not been amended
since the execution of the Second Amendment, and each of
Borrower's Certificate of Incorporation and Bylaws are in full
force and effect.
9. UCC-1 Financing Statements signed by a duly
authorized officer of Borrower.
10. On or before August 13, 1993, an updated list of
Borrower's government contracts, and documentation executed by
Borrower necessary to effectuate an assignment of the proceeds
under such contracts to Bank.
11. A title commitment policy relating to the Palnut
Property.
12. Such other documents as Bank may reasonably
request to implement this Third Amendment and the transactions
described in this Third Amendment.
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<PAGE> 19
B. The consummation of the acquisition by Borrower
from TRW Inc. ("TRW") of TRW's Fastener Division (including,
but not limited to, the Palnut Property).
C. Approval of the transfer of the Palnut Property by
any and all state and local environmental agencies of the state
of New jersey, and the resolution of all environmental issues
to the satisfaction of Bank and its counsel.
SECTION IV. APPLICABLE LAW.
This Third 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.
SECTION V. COUNTERPARTS.
This Third 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 Third Amendment by signing any such counterpart.
IN WITNESS WHEREOF, the parties have executed this
Third Amendment by their duly authorized officers this 2nd day
August, 1993.
TRANSTECHNOLOGY CORPORATION NATIONAL CANADA FINANCE CORP.
By: /s/ Chandler J. Moisen By: /s/ Robert T. Strathern
------------------------ -----------------------------
Title: Sr. VP & CFO Title: Vice President - Manager
-------------------- -------------------------
NATIONAL BANK OF CANADA (NEW
(NEW YORK, NEW YORK)
By: /s/ Robert T. Strathern
-----------------------------
Title: Agent
--------------------------
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<PAGE> 20
SCHEDULE OF EXHIBITS
Exhibit A - Form of Second Amendment To Promissory Note
Exhibit B - Form of Mortgage
Exhibit C - Form of Term Note
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<PAGE> 1
EXHIBIT 10.15
Participant:
-------------------
No. of Shares:
-----------------
TRANSTECHNOLOGY CORPORATION
Restricted Stock Award Agreement
This Agreement is entered into as of this --- day of----------,
19--, by and between TransTechnology Corporation, a Delaware corporation (the
"Company"), and the undersigned participant in the Company's 1992 Long Term
Incentive Plan (the "Participant").
R E C I T A L S
A. Pursuant to the Company's 1992 Long Term Incentive Plan (the
"Plan"), the Compensation and Incentives Committee of the Company (the
"Committee") has authorized an award to Participant of shares of the Company's
Common Stock, par value $.01 per share (the "Restricted Stock").
B. Pursuant to the Plan, the Committee has determined that the
Restricted Stock to be so awarded shall be issued subject to certain conditions
and restrictions, which conditions and restrictions are set forth in this
Agreement.
THEREFORE, in consideration of the covenants herein set forth, the
parties agree as follows:
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<PAGE> 2
1. Award; Acceptance of Award. Subject to the terms and conditions
contained herein, the Company shall issue to Participant, as an award pursuant
to the Plan and without payment by Participant of any consideration therefor,
- - -------- shares of Restricted Stock, and Participant hereby accepts such award.
2. Forfeiture of Restricted Stock Upon Termination of Employment. In
the event that Participant ceases to be a full-time employee of the Company or
any corporation a majority of the voting stock of which is owned by the Company
(a "Subsidiary") for any reason whatsoever (including without limitation by
reason of the termination of such employment by the Company or a Subsidiary
with or without cause, by reason of disability, death or retirement or by
reason of Participant leaving the employ of the Company or a Subsidiary
voluntarily), then a portion (determined as hereinafter set forth) of the
shares of Restricted Stock awarded pursuant to this Agreement shall thereupon
automatically, and without further notice, demand, period of time or legal or
administrative proceeding, be forfeited and cancelled, and all right, title and
interests therein of Participant shall terminate and expire, without payment by
the Company or any Subsidiary of any consideration therefor and without any
liability on the part of the Company or any Subsidiary. Such forfeiture
provisions shall apply as follows:
2.
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<PAGE> 3
(a) If the Participant so ceases to be such an employee on or
after ---------, 19-- (the "Award Date") but prior to that date which occurs
one year thereafter (the "First Anniversary Date"), 100% of the total number
of shares of Restricted Stock awarded pursuant to this Agreement shall be so
forfeited and cancelled;
(b) If the Participant so ceases to be such an employee on or after
the First Anniversary Date but prior to that date which occurs two years after
the Award Date (the "Second Anniversary Date"), then 66-2/3% of the total
number of shares of Restricted Stock awarded pursuant to this Agreement shall
be so forfeited and cancelled;
(c) If the Participant so ceases to be such an employee on or after
the Second Anniversary Date but prior to that date which occurs three years
after the Award Date (the "Third Anniversary Date"), then 33-1/3% of the total
number of shares of Restricted Stock awarded pursuant to this Agreement shall
be so forfeited and cancelled; and
(d) If the Participant remains a continuous full-time employee of the
Company or a Subsidiary until the Third Anniversary Date, then none of the
shares of Restricted Stock
3.
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<PAGE> 4
awarded pursuant to this Agreement shall be forfeited or cancelled.
For purposes of the foregoing, the Participant shall not lose his or
her status as a full-time employee of the Company or a Subsidiary by reason of
time away from such employment as a result of authorized vacation, authorized
leave of absence, and leave by reason of sickness or disability of not longer
than three consecutive months (or such longer period as the Committee may
specifically permit, in its sole discretion, in any particular instance upon
written request by the Participant to do so).
Notwithstanding the foregoing, the Participant may elect to extend the
period during which shares of Restricted Stock are subject to forfeiture and
cancellation (the "Restriction Period") as follows. If the Participant desires
to extend the Restriction Period, the Participant shall deliver to the Company
a written request that the Restriction Period be extended for a specified
period or until a specified event. Such election shall be subject in each case
to the Committee's approval and to such terms as are determined by the
Committee, all in its sole discretion. The Committee shall notify the
Participant of its approval and such terms as have been determined by the
Committee, or of its disapproval (as the case may be), within 30 days of its
receipt of the Participant's
4.
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<PAGE> 5
written request to extend the Restriction Period. Subject to any exceptions
adopted by the Committee, each request must generally be made at least twelve
months prior to the applicable date, set forth above in this Section 2, upon
which shares of Restricted Stock may no longer be forfeited or cancelled.
3. Forfeiture Procedures. If, pursuant to Sections 2 or 7 of this
Agreement, any shares of Restricted Stock are forfeited and cancelled, such
forfeiture and cancellation shall be documented pursuant to the appropriate one
of the following procedures:
(a) If a certificate or certificates representing the number of
shares of Restricted Stock so forfeited and cancelled are in the possession of
the Company pursuant to Section 4 hereof, then the officer of the Company having
custody of such certificate shall, forthwith upon the occurrence of the event
resulting in such forfeiture and cancellation, transmit such certificates to
the Company's transfer agent and registrar (or, if the Company has no such
transfer agent or registrar, then the appropriate officer of the Company) with
information as to the number of shares so forfeited and cancelled and, if the
certificates evidence a number of shares greater than the amount to be so
cancelled, with instructions that a certificate representing the shares not so
cancelled be issued in the name of
5.
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<PAGE> 6
the Participant; and
(b) If, pursuant to the provisions of Sections 2 or 7 of this
Agreement, any shares of Restricted Stock are forfeited and cancelled and the
Company does not have in its possession a certificate or certificates
representing the shares so forfeited and cancelled, then the Participant shall,
upon written demand from the Company, furnish to the Company a certificate duly
endorsed and assigned to the Company representing the number of shares of
Restricted Stock so forfeited and cancelled and, upon its receipt thereof, the
Company shall follow the procedures indicated in the preceding paragraph.
The Participant agrees to provide the Company, upon its request
therefor, with one or more stock assignments separate from certificate,
executed by the Participant without completing the information as to share
amount transferred or name of transferee, and with such other and further
instruments of assignment or other documents which may be reasonably required
in order to implement the forfeiture and cancellation provisions of Sections 2
and 7 of this Agreement.
4. Issuance of Restricted Stock; Retention of Certificate by Company.
Within a reasonable time after the
6.
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<PAGE> 7
execution of this Agreement by the Company and the Participant, the Company
shall issue, in the name of the Participant as the registered holder thereof,
certificates representing, in the aggregate, the number of shares of Restricted
Stock awarded pursuant to Section 1 hereof. At the time of such issuance and at
all times thereafter, the Company shall deliver to Participant, upon the
Participant's request, one or more certificates (in such denominations as the
Participant may direct) representing in the aggregate a number of shares of
Common Stock which does not at any time exceed the number of shares not subject
to forfeiture and cancellation under Section 2 hereof. Certificates
representing the remaining shares of Restricted Stock awarded hereunder (which
shares are subject to possible forfeiture and cancellation pursuant to Section
2 hereof) shall be retained in the custody of the Secretary or any Assistant
Secretary of the Company (or any other officer of the Company designated by the
Board of Directors of the Company) for the purpose of implementing the
forfeiture and cancellation provisions of this Agreement.
5. Stock Splits, Stock Dividends, Mergers and Reorganizations. If, at
any time or from time to time when there are shares of Restricted Stock subject
to forfeiture and cancellation under Section 2 hereof:
7.
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<PAGE> 8
(a) There is any stock dividend or liquidating dividend of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Company; or
(b) There is any consolidation, merger or sale of all, or
substantially all, of the assets of the Company;
then, in such event, any and all new, substituted or additional securities or
other property to which the Participant is entitled by reason of his or her
ownership of the shares of Restricted Stock which are so subject to forfeiture
and cancellation shall be immediately and similarly subject to such forfeiture
and shall be included in the words and treated as "Restricted Stock" for all
purposes of such forfeiture provisions and all other terms and conditions
hereof with the same force and effect as the original shares of Restricted
Stock subject to such forfeiture provisions.
Notwithstanding the above, upon the dissolution or liquidation of the
Company or upon any reorganization, merger or consolidation in which the
Company does not survive, the forfeiture and cancellation provisions of Section
2 shall terminate as to any shares of Restricted Stock not previously forfeited
and cancelled pursuant to such provisions.
8.
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<PAGE> 9
6. Indemnification of Company. The Participant hereby agrees to
indemnify the Company and to hold the Company harmless from and against any
loss, liability, cost or expense, including attorneys' fees and expenses, which
the Company may incur or to which the Company may be subject by any reason of
or based upon the fact that the Company has custody of any certificates
representing Restricted Stock retained in accordance with Section 4 hereof and
that such stock, or any right, title or interest therein, may become involved
in any legal, administrative or arbitration proceeding.
7. Transfer or Hypothecation of Stock. The Participant agrees that he
or she will not transfer, sell, pledge, assign or in any other way hypothecate,
alienate or dispose of any shares of Restricted Stock awarded under this
Agreement so long as such shares are subject to forfeiture and cancellation
under Section 2 hereof. It is agreed that if the Participant does, or attempts
to do, or suffers any of such prohibited acts or events specified in the
immediately preceding sentence, then forthwith upon the occurrence of such act
or event such shares shall be automatically forfeited and cancelled, without
payment by the Company of any consideration therefor and without any notice,
demand, period of time or legal or administrative proceeding.
9.
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<PAGE> 10
8. Ownership Rights. Subject only to the provisions of this Agreement,
the Participant shall have all of the rights, powers and privileges of an owner
of shares of Common Stock, including without limitation the right to vote such
shares and to receive non-liquidating cash dividends and non-liquidating
distributions thereon, with respect to shares of Restricted Stock awarded
hereunder notwithstanding that certificates representing any or all of such
shares are retained by the Company pursuant to Section 4 hereof; provided,
however, that all such rights shall terminate automatically with respect to any
shares forfeited and cancelled pursuant to Sections 2 or 7 of this Agreement.
9. Endorsement on Share Certificates. The Participant agrees that the
certificates representing any Restricted Stock subject to the forfeiture and
cancellation provisions of Section 2 may have endorsed upon them in a
conspicuous manner a legend in substantially the following form:
"THE VOLUNTARY OR INVOLUNTARY TRANSFER OR ENCUMBRANCE OF THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY, AND SUCH SHARES ARE
SUBJECT TO, THE PROVISIONS OF A CERTAIN AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER HEREOF (WHICH AGREEMENT, AMONG OTHER THINGS,
SUBJECTS SUCH SHARES TO POSSIBLE FORFEITURE AND CANCELLATION), A COPY
OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED TO THE HOLDER OF THIS CERTIFICATE UPON REQUEST WITHOUT
CHARGE."
10.
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<PAGE> 11
When the forfeiture and cancellation provisions of Section 2 hereof
expire or terminate as to any of such shares, the Company shall, upon the
Participant's request and at no charge to the Participant, exchange the
certificates representing the shares that contain the endorsement provided for
herein for new certificates representing those of the shares as to which such
rights have expired or terminated containing no such endorsement and
certificates containing such endorsement representing the balance of the shares
as to which such rights have not expired or terminated.
10. No Contract of Employment. The Participant acknowledges and agrees
that this Agreement shall not be construed to give Participant any right to be
retained in the employ of the Company or any Subsidiary, and that the right and
power of the Company or any Subsidiary to dismiss or discharge the Participant
(with or without cause) is strictly reserved. The Participant recognizes that,
in the event of any such discharge, the forfeiture provisions of Section 2
hereof shall be fully applicable.
11. Tax Withholding. Participant acknowledges that the Company is
required, and hereby specifically authorizes the Company, to deduct and
withhold from the wages, salary or other income payable by the Company to
Participant from time to time,
11.
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<PAGE> 12
the requisite amounts required to be so deducted and withheld for federal,
state or local taxes with respect to the award of Restricted Stock hereunder.
Participant specifically authorizes the Company to withhold such amounts from
time to time, as required by law, in connection with the termination or
expiration of the forfeiture provisions of Section 2 hereof. Participant agrees
that the Company may, at its election, require Participant to pay to the
Company (for such withholding on behalf of Participant) any amounts required to
be so withheld if such amounts are not directly withheld from such wages,
salary or other income, and in such event Participant shall forthwith make such
payments.
12. Governing Law. This Agreement and the rights and obligations of
the parties hereto shall be governed by and construed in accordance with the
internal substantive laws of the State of Delaware.
13. Notices. Any notice or other communication required or permitted
hereunder shall be sufficiently given only if delivered personally or sent by
registered or certified mail, postage prepaid, to the Company at its principal
place of business, or to the Participant at the address below or any address of
Participant appearing on the Company's stock records, or to such other address
or addresses as shall be furnished in
12.
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<PAGE> 13
writing in the foregoing manner by either party to the other party, and shall
be deemed to have been given as of the date so personally delivered or two days
after the date deposited in the United States mail, as the case may be.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TRANSTECHNOLOGY CORPORATION
By:
---------------------------------
Its:
--------------------------------
PARTICIPANT:
Name:
-------------------------------
[Type or print]
-----------------------------------
[Signature]
Address:
----------------------------
------------------------------------
------------------------------------
13.
78
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
LISTED BELOW ARE THE WHOLLY OWNED SUBSIDIARIES
OF TRANSTECHNOLOGY CORPORATION AS OF JUNE 13, 1993
<TABLE>
<CAPTION>
Jurisdiction of
Incorporation
-------------
<S> <C>
Coil Lundy Europe, N.V. Belgium
Electronic Connections and Assemblies, Inc. Delaware
Palnut Fasteners, Inc. Delaware
Rancho TransTechnology Corporation California
SSP Industries (1) California
TransTechnology Australasia Pty. Ltd. Australia
TransTechnology (Europe) Ltd. U.K.
TransTechnology International Corporation Virgin Islands
TransTechnology Systems & Services, Inc. Michigan
</TABLE>
(1) SSP Industries owns all of the outstanding stock of SSP
International Sales, Inc., a California corporation.
79
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-Effective Amendment No. 1
to Registration Statement No. 33-19390, Post-Effective Amendment No. 1 to
Registration Statement No. 2-84205, and Registration Statement No. 33-59546 on
Forms S-8 of our report dated June 20, 1994, appearing in this Annual Report on
Form 10-K of TransTechnology Corporation for the year ended March 31, 1994.
/s/ Deloitte & Touche
Parsippany, New Jersey
June 27, 1994
80
