<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 1993
--------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ------------- to -----------------
Commission File Number 1-7872
--------
TransTechnology Corporation
(Exact name of registrant as specified in its charter)
Delaware 95-4062211
(State of Incorporation) (I.R.S. Employer
Identification No.)
700 Liberty Avenue
Union, New Jersey 07083
(Address of principal executive offices) (Zip Code)
(908) 964-5666
(Registrant's telephone number, including area code)
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
----- ----
At February 1, 1994, the total number
of outstanding shares of registrant's
one class of common stock was 5,158,691
<PAGE> 2
TRANSTECHNOLOGY CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements . . . . . . . . . . . . . . . . . 2
Statements of Consolidated Operations--
Three and Nine Month Periods Ended
December 26, 1993 and December 27, 1992 . . . . . . . 3
Consolidated Balance Sheets--
December 26, 1993 and March 31, 1993 . . . . . . . . . 4
Statements of Consolidated Cash Flow--
Nine Months Ended December 26, 1993 and
December 27, 1992 . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . 10-16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
EXHIBIT 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19-21
EXHIBIT 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
PAGE 1 OF 22
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The following unaudited Statements of Consolidated Operations, Consolidated
Balance Sheets and Statements of Consolidated Cash Flow are of TransTechnology
Corporation and its consolidated subsidiaries. These reports reflect all
adjustments of a normal recurring nature, which are, in the opinion of
management, necessary to a fair presentation of the results of operations for
the interim periods. The results reflected in the unaudited Statements of
Consolidated Operations for the period ended December 26, 1993 are not
necessarily indicative of the results to be expected for the entire year. The
following unaudited Consolidated Financial Statements should be read in
conjunction with the notes thereto, and Management's Discussion and Analysis
set forth in Item 2 of Part I of this report, as well as the audited financial
statements contained in the Form 10-K filed for the period ended March 31,
1993.
[THIS SPACE INTENTIONALLY LEFT BLANK]
PAGE 2 OF 22
<PAGE> 4
TRANSTECHNOLOGY CORPORATION
STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- -------------------------
12/26/93 12/27/92 12/26/93 12/27/92
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total Revenue $ 33,525 $ 23,952 $ 86,738 $ 69,415
Cost of Sales 23,691 16,802 61,219 49,152
------------- ------------- ------------- -------------
Gross Profit 9,834 7,150 25,519 20,263
------------- ------------- ------------- -------------
General Administrative, Selling
and Other Expenses 6,138 4,997 16,077 14,197
Interest Expense 500 (73) 1,062 474
------------- ------------- ------------- -------------
Total G&A, Selling, Interest
and Other Expenses 6,638 4,924 17,139 14,671
------------- ------------- ------------- -------------
Income from Continuing
Operations before Income Taxes 3,196 2,226 8,380 5,592
Income Taxes 1,214 757 3,215 1,901
------------- ------------- ------------- -------------
Income from
Continuing Operations 1,982 1,469 5,165 3,691
(Loss) Income from Discontinued Operations
(Net of tax benefit of $231,000 and
$89,000 for the quarters ended 12/26/93
and 12/27/92, respectively, and $506,000
for the nine months ended 12/26/93.
Net of tax provision of $12,000
for the nine months ended 12/27/92.) (377) (172) (815) 23
------------- ------------- ------------- -------------
Net Income $ 1,605 $ 1,297 $ 4,350 $ 3,714
============= ============= ============= =============
Earnings (Loss) per Share: (Note 1)
Income from Continuing
Operations $ 0.39 $ 0.29 $ 1.01 $ 0.73
Loss from Discontinued
Operations (0.07) (0.03) (0.16) -
------------- ------------- ------------- -------------
Net Income $ 0.31 $ 0.25 $ 0.85 $ 0.73
============= ============= ============= =============
Number of Shares Used in
Computation of Per Share
Information: 5,147,000 5,090,000 5,135,000 5,086,000
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE 3 OF 22
<PAGE> 5
TRANSTECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS 12/26/93 3/31/93
- ------ -------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 715,000 $ 1,505,000
Accounts receivable:
United States Government 3,054,000 2,075,000
Commercial 19,683,000 17,426,000
Notes Receivable - Short term 426,000 -
Income tax receivable 24,000 59,000
Inventories 35,513,000 33,375,000
Net Assets of discontinued businesses 9,482,000 3,176,000
Prepaid expenses and other current assets 2,268,000 1,656,000
Deferred income taxes 3,393,000 3,393,000
--------------- --------------
Total Current Assets 74,558,000 62,665,000
--------------- --------------
Property-at cost:
Land 3,934,000 2,780,000
Buildings 12,560,000 9,997,000
Machinery and equipment 34,204,000 23,825,000
Furniture and fixtures 3,962,000 3,499,000
Leasehold improvements 615,000 710,000
--------------- --------------
Total 55,275,000 40,811,000
Less accumulated depreciation and amortization 21,801,000 20,079,000
--------------- --------------
Property-Net 33,474,000 20,732,000
--------------- --------------
Other Assets:
Notes receivable 5,485,000 5,643,000
Cost in excess of tangible net assets of acquired
business (net of accumulated amortization:
December 26, 1993, $2,362,000;
March 31, 1993, $2,178,000) 2,544,000 2,728,000
Other 7,922,000 5,995,000
--------------- --------------
Total other assets 15,951,000 14,366,000
--------------- --------------
TOTAL $ 123,983,000 $ 97,763,000
=============== ==============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 12/26/93 3/31/93
- ------------------------------------ -------- -------
<S> <C> <C>
Current Liabilities:
Current portion of
long-term debt $ 1,479,000 $ 38,000
Accounts payable-trade 6,122,000 5,895,000
Accrued compensation 2,768,000 3,433,000
Accrued income taxes 1,524,000 1,871,000
Other current liabilities 5,665,000 7,940,000
-------------- ------------
Total Current Liabilities 17,558,000 19,177,000
-------------- ------------
Long-Term Debt:
Long-term debt payable to
banks and others 33,898,000 12,387,000
-------------- ------------
Other Long-Term Liabilities 7,614,000 4,985,000
-------------- ------------
Stockholders' Equity:
Common stock-authorized, 14,700,000
shares of $.01 par value; issued
5,150,919 at December 26, 1993, and
5,121,604 at March 31, 1993 52,000 51,000
Additional paid-in capital 44,863,000 44,616,000
Retained earnings 19,998,000 16,547,000
-------------- ------------
Total stockholders' equity 64,913,000 61,214,000
-------------- ------------
TOTAL $ 123,983,000 $ 97,763,000
============== ============
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE 4 OF 22
<PAGE> 6
TRANSTECHNOLOGY CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOW
UNAUDITED
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended 12/26/93 Ended 12/27/92
-------------- --------------
<S> <C> <C>
Cash Flow From Operating Activities:
Net income $ 4,350 $ 3,714
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 3,306 2,363
Provision for losses on accounts receivable 26 49
Gain on sale or disposal of fixed assets
and discontinued businesses (2) (97)
Change in assets and liabilities (net of the effect
of purchases of businesses) :
Decrease in accounts receivable 1,554 2,682
Decrease in income tax receivables 35 -
Decrease in inventories 2,888 824
(Increase) decrease in net assets of
discontinued operations (4,348) 1,525
(Increase) decrease in prepaid and other assets (1,447) 4,564
Decrease in accounts payable (1,188) (522)
Decrease in accrued compensation (665) (839)
(Decrease) increase in accrued income taxes (347) 27
Decrease in other liabilities (1,841) (7,711)
----------------- ----------------
Net cash provided by operations 2,321 6,579
----------------- ----------------
Cash Flow from Investing Activities:
Purchase of businesses (22,284) -
Capital expenditures (2,863) (3,461)
Proceeds from the sale of fixed assets 2 87
(Increase) decrease in notes receivables (268) 1,022
----------------- ----------------
Net cash used in investing activities (25,413) (2,352)
----------------- ----------------
Cash Flow from Financing Activities:
Payments on short-term debt - (11,099)
Payments on long-term debt (11,676) (32)
Proceeds from long-term debt 34,628 6,727
Proceeds from issuance of stock
under stock option plan 274 326
Dividends paid (924) -
----------------- ----------------
Net cash provided by (used in) financing activities 22,302 (4,078)
----------------- ----------------
Net (Decrease) Increase in Cash and Cash Equivalents (790) 149
Cash and Cash Equivalents at Beginning of Year 1,505 798
----------------- ----------------
Cash and Cash Equivalents at End of Period $ 715 $ 947
================= ================
Supplemental Information:
Interest payments $ 1,080 $ 499
Income tax payments 3,519 136
================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE 5 OF 22
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Earnings (Loss) Per Share:
Earnings (loss) per share are based on the weighted average number of
common shares and common stock equivalents (stock options) outstanding
during each period. In computing earnings (loss) per share, common
stock equivalents were either anti-dilutive because of the market
value of the stock or not material, and, therefore, have been excluded
from the calculation.
NOTE 2. Inventories:
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 26, March 31,
1993 1993
------------ -----------
<S> <C> <C>
Finished goods $ 5,958,000 $ 4,913,000
Work-in-process 6,049,000 6,824,000
Purchased and
manufactured parts 23,506,000 21,638,000
----------- -----------
TOTAL $35,513,000 $33,375,000
=========== ===========
</TABLE>
NOTE 3. Long-term Debt Payable to Banks and Others
Long-term debt payable to banks and others consists of the following:
<TABLE>
<CAPTION>
December 26, March 31,
1993 1993
------------ ------------
<S> <C> <C>
Credit agreement - 5.50% $15,000,000 -
Credit agreement - 5.375% 10,000,000 -
Credit agreement - 6.00% - $ 1,900,000
Credit agreement - 5.20% - 10,000,000
Term Loan - 6.25% 9,880,000 -
Other 497,000 525,000
----------- -----------
35,377,000 12,425,000
Less current maturities 1,479,000 38,000
----------- -----------
Total $33,898,000 $12,387,000
=========== ===========
</TABLE>
PAGE 6 OF 22
<PAGE> 8
At December 26, 1993, the Company's debt consisted of $25 million of
borrowings under a revolving bank credit line, a $9.9 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 commitment from $25
million to $35 million. This commitment will be available to the
Company through September 30, 1995, which is subject to a borrowing
base formula. The agreement provides for borrowings and letters of
credit based on collateralized accounts receivable, inventory, all
fixed assets other than real property, with the exception of certain
real property located in Mountainside, New Jersey. Letters of credit
under the line at December 26, 1993 were $2.1 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 it's outstanding
borrowings at December 26, 1993. The agreement contains requirements
for a minimum tangible net worth of $59 million at December 26, 1993;
a quarterly maximum total liabilities to tangible equity ratio of 1.0
at December 26, 1993; a minimum working capital level of $40 million;
a minimum 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 net income for
each quarter.
The $9.9 million term loan is with the same lender 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 points, but will be reduced to prime if the Company exceeds
$6.0 million in net income for fiscal year 1994. Interest is payable
monthly.
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.
PAGE 7 OF 22
<PAGE> 9
<TABLE>
<S> <C>
Debt maturities:
December 31, 1994 (Current) $ 1,479,000
December 31, 1995 26,480,000
December 31, 1996 1,481,000
December 31, 1997 1,482,000
December 31, 1998 4,163,000
Thereafter 292,000
-----------
Total $35,377,000
===========
</TABLE>
NOTE 4. Discontinued Operations
In December 1993, the Company decided to discontinue its tear
gas products operation for financial reporting purposes.
Operating results of the discontinued business were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
12/26/93 12/27/92 12/26/93 12/27/92
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues $1,933,000 $1,419,000 $ 4,340,000 $5,371,000
---------- ---------- ----------- ----------
(Loss) income before
income taxes $ (608,000) $ (261,000) $(1,321,000) $ 35,000
Income tax (benefit)
provision (231,000) (89,000) (506,000) 12,000
----------- ----------- ------------ ----------
(Loss) income from
operations $ (377,000) $ (172,000) $ (815,000) $ 23,000
=========== =========== ============ ==========
</TABLE>
NOTE 5. Acquisitions
The following summarizes TransTechnology Corporation's combined
Proforma Revenue, Net Income and Earnings (Loss) per Share information
prepared as if the August 2, 1993, acquisition of the Palnut threaded
fastener business had occurred at the beginning of the periods
presented.
PAGE 8 OF 22
<PAGE> 10
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------
December 26, 1993 December 27, 1992
----------------- -----------------
<S> <C> <C>
Revenue $95,440,000 $88,829,000
=========== ===========
Income from Continuing
Operations $ 4,959,000 $ 5,085,000
(Loss) Income from
Discontinued Operations $ (815,000) $ 23,000
----------- -----------
Net Income $ 4,144,000 $ 5,108,000
=========== ===========
Earnings per Share from
Continuing Operations $0.97 $1.00
Loss per Share from
Discontinued Operations (0.16) -
------ ----
Earnings per Share $0.81 $1.00
===== =====
</TABLE>
NOTE 6. Subsequent Event
In January 1994, the Company signed a letter of intent to sell certain
assets and have the buyer assume certain liabilities of its tear gas
products division. This transaction is subject to execution of a
definitive asset purchase agreement, due diligence, and final approval
by the respective Company's Board of Directors.
PAGE 9 OF 22
<PAGE> 11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All references to three-month and nine-month periods in this Management's
Discussion refer to the three and nine-month periods ended December 26, 1993
for fiscal year 1994, and the three and nine-month periods ended December 27,
1992 for fiscal year 1993. In the product segment discussion below, operating
profit means net sales less operating expenses, without deduction for general
corporate expenses, interest and income taxes. The Consolidated Statement of
Operations for fiscal year 1993 has been restated with respect to discontinued
operations to provide a consistent basis for comparing the performance of the
Company's continuing operations.
Revenue from continuing operations for the nine-month period in 1994 was $86.7
million, an increase of $17.3 million or 25%, from the comparable period of
1993. For the three-month period in 1994, total revenue was $33.5 million, an
increase of $9.6 million or 40%, from the comparable period of 1993. The
increases occurred primarily in the Industrial Products segment for both
periods.
Gross profit for the nine-month period in 1994 increased $5.3 million or 26%
from the comparable period of 1993. For the three- month period in 1994, gross
profit increased $2.7 million or 38% from the comparable period of 1993.
Changes in sales, operating profit and new orders are discussed below by
segment.
Net income, including discontinued operations, for the nine-month period in
1994 was $4.4 million or $.85 per share, compared to $3.7 million or $.73 per
share, for the comparable period in 1993. The three-month period in 1994
experienced net income of $1.6 million or $.31 per share compared to $1.3
million or $.25 per share for the year earlier period. Discontinued
operations, which are discussed in more detail below, accounted for losses of
$0.8 million and $0.4 million in the 1994 nine-month and three-month periods,
respectively, and $0.2 million for the comparable three-month period in 1993.
The nine-month period in 1993 experienced break-even from discontinued
operations.
New orders received during the nine-month period in 1994 totaled $94.9 million,
an increase of $35.7 million or 37% from 1993's comparable period. For the
three-month period, new orders totaled $34.2 million, an increase of $18.5
million or 118% from last year's comparable period.
In January 1994, The Company entered into a letter of intent with a prospective
buyer to sell certain assets and have the buyer assume certain liabilities of
the Company's tear-gas products division. At December 26, 1993, this division
was classified for financial reporting purposes as a discontinued operation.
Accordingly, the results of consolidated operations at December 27, 1992, have
been restated.
At December 26, 1993, total backlog of unfilled orders was $50.1 million
compared to $44.8 million at December 27, 1992.
PAGE 10 OF 22
<PAGE> 12
TRANSTECHNOLOGY CORPORATION
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
<TABLE>
<CAPTION>
NET CHANGE
NINE MONTHS NINE MONTHS ------------------------
ENDED 12/26/93 ENDED 12/27/92 $ %
-------------- -------------- --------- ---------
<S> <C> <C> <C> <C>
Operating Revenue:
Industrial Products $ 45,176 $ 26,638 $ 18,538 69.6
Aerospace Products 40,855 42,348 (1,493) (3.5)
-------- -------- --------- --------
Total $ 86,031 $ 68,986 $ 17,045 24.7
======== ======== ========= ========
Operating Profit:
Industrial Products $ 6,776 $ 4,843 $ 1,933 39.9
Aerospace Products 5,895 5,343 552 10.3
-------- -------- --------- --------
Total 12,671 10,186 2,485 24.4
Corporate Expense (3,229) (4,120)(a) 891 21.6
Interest Expense (1,062) (474) (588) (124.1)
-------- -------- --------- --------
Income from
Continuing Operations
before Income Taxes $ 8,380 $ 5,592 $ 2,788 49.9
======== ======== ========= ========
</TABLE>
(a) The corporate expense allocated to product segments for the nine
months ended December 27, 1992 has been reduced by $236,000 to
reflect an allocation made to discontinued operations.
PAGE 11 OF 22
<PAGE> 13
TRANSTECHNOLOGY CORPORATION
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
<TABLE>
<CAPTION> NET CHANGE
THREE MONTHS THREE MONTHS ----------------------
ENDED 12/26/93 ENDED 12/27/92 $ %
-------------- -------------- -------- --------
<S> <C> <C> <C> <C>
Operating Revenue:
Industrial Products $ 19,583 $ 9,236 $ 10,347 112.0
Aerospace Products 13,720 14,464 (744) (5.1)
--------- --------- --------- --------
Total $ 33,303 $ 23,700 $ 9,603 40.5
========= ========= ========= ========
Operating Profit:
Industrial Products $ 2,781 $ 1,913 $ 868 45.4
Aerospace Products 2,103 1,513 590 39.0
--------- --------- --------- --------
Total 4,884 3,426 1,458 42.6
Corporate Expense (1,188) (1,273) (a) 85 6.7
Interest Expense (500) 73 (573) (784.9)
--------- --------- --------- --------
Income from
Continuing Operations
before Income Taxes $ 3,196 $ 2,226 $ 970 43.6
========= ========= ========= ========
</TABLE>
a) The corporate expense allocated to product segments for the three
months ended December 27, 1992 has been reduced by $79,000 to
reflect an allocation made to discontinued operations.
PAGE 12 OF 22
<PAGE> 14
INDUSTRIAL PRODUCTS SEGMENT
Sales for the industrial products segment were $45.2 million for the nine-month
period in 1994, an increase of $18.5 million or 70% from the comparable period
in 1993. Sales for the three-month period in 1994 were $19.6 million, up $10.3
million or 112% from the comparable period in 1993. The significant increases
were primarily due to the inclusion of approximately five months of operations
of the recently acquired Palnut threaded fastener business and the recently
acquired Electrical Specialties Company industrial wiring harness business.
Threaded fasteners contributed $11 million and $6.9 million of sales to the
automotive and industrial products markets in the 1994 nine-month and
three-month periods, respectively. The industrial electrical wiring harness
business contributed $3.2 million and $1.8 million of sales in the 1994
nine-month and three-month periods, respectively. Additionally, sales of
gear-driven fasteners for the nine-month and three-month periods in 1994
increased by $3.3 million and $1.1 million or 16% and 15%, respectively, over
last year's comparable periods, and sales from TransTechnology Systems and
Services were also up $1 million and $0.5 million or 17% and 26%, respectively,
over the same periods. The increase in gear-driven fastener sales was
primarily due to continued new product market penetration and increased
industrial and truck fastener demand, while the increase in TransTechnology
Systems and Services sales was primarily due to continued increases in third
party maintenance contract sales.
Operating profit for the segment was $6.8 million for the nine-month period in
1994, an increase of $1.9 million or 40% from the comparable period in 1993.
The three-month period showed an operating profit of $2.8 million, an increase
of $0.9 million or 45% over the comparable period in 1993. Primary factors
contributing to the segment's increased operating profit for the nine-month and
three-month periods were the inclusion of five months of Palnut threaded
fastener operations, the increased shipment volume of gear- driven fasteners
and sales of third party maintenance contracts.
New orders increased by $25 million or 90% for the nine-month period in 1994,
and $11 million or 123% for the three-month period. All industrial product
lines experienced increased new orders for both the nine-month and three-month
periods in 1994 over the comparable 1993 periods. The recently acquired
threaded fastener product line contributed $15.4 million and $7.4 million of
new orders during the current year nine-month and three-month periods,
respectively, and the industrial electrical wiring harness product line
contributed $5.4 million and $1.8 million in the current year nine-month and
three-month periods, respectively. Gear- driven fastener new orders in 1994
were up 14% in the nine-month period and 12% in the three-month period.
TransTechnology Systems and Services new orders were also up 22% for the
nine-month period and 66% for the three-month period. The gear-driven fastener
increases were due primarily to the new product market penetration and
increased demand, as discussed above. The new order increases at
TransTechnology Systems and Services were primarily due to increased
penetration in third party maintenance markets.
PAGE 13 OF 22
<PAGE> 15
Backlog of unfilled orders at December 26, 1993 was $14.8 million, while at
December 27, 1992 backlog was $8.1 million. The increase was primarily due to
the recent Palnut and Electrical Specialties Company acquisitions.
AEROSPACE PRODUCTS SEGMENT
Sales for the Aerospace Products segment were $40.9 million for the nine-month
period in 1994, a decrease of $1.5 million or 4% from the comparable nine-month
period in 1993. Sales for the three-month period in 1994 were $13.7 million,
down $0.7 million or 5% from the comparable period in 1993. Sales decreases
were led by hoists and winches and related spare parts, down $3.2 million or
16% for the nine-month period in 1994, and $0.9 million or 15% for the
three-month period, primarily due to delays in the timing of customers placing
new orders in the current year periods. Tie-down sales decreased $0.9 million
or 51% for the nine-month period in 1994, and $0.6 million or 70% for the
three-month period, due mainly to increased competition resulting in reduced
orders in the current year periods. Electrical connector sales for the
nine-month period in 1994 were down $0.8 million or 31%, and $0.1 million or 9%
for the three-month period, primarily due to a general decrease in commercial
airline orders. Offsetting these decreases, cargo hook sales increased by $1.5
million or 43% for the nine-month period in 1994, and $1 million or 87% for the
three-month period, primarily due to customer timing and placement of orders.
Electrical cable and conduit sales were up $1.8 million or 24% for the
nine-month period in 1994, but were relatively unchanged for the three-month
period, primarily due to the rescheduling and shipment in 1994 of previously
delayed U.S. Government defense program products. Finally, chaff product sales
for the three-month period decreased $0.2 million or 9%, primarily due to
customer timing and placement of orders.
Operating profit for the segment was $5.9 million for the nine-month period in
1994, an increase of $0.6 million or 10% from the comparable period in 1993.
The three-month period had an operating profit of $2.1 million, an increase of
$0.6 million or 39% over the comparable period in 1993. The primary factors
contributing to the segment's increase in operating profit in the current year
periods were product mix changes resulting in the shipment of higher margin
items than the prior year comparable periods, and the continued effect of cost
reductions and efficiencies.
New orders increased by $10.7 million or 34% for the nine-month period in 1994,
and $7.5 million or 112% for the three-month period. New orders of hoists and
winches and related spare parts increased 32% in the nine-month period and 48%
in the three-month period, primarily due to customer timing and placement of
new orders.
PAGE 14 OF 22
<PAGE> 16
New orders of electrical cable in 1994 were up 384% in the nine-month period
and in the three-month period total electrical cable orders were received for
$2.4 million as compared to no orders being recorded for the prior year
three-month period. These increases were primarily due to the rescheduling and
shipment in 1994 of previously delayed U.S. Government defense program products
and the recording of a $1.8 million Patriot missile system electrical cable
contract in the current year three-month period. Cargo hook orders were down
by 7% for the nine-month period and up 238% for the three-month period,
primarily due to customer timing of new orders and the receipt of a $1 million
U.S. Navy multi-year contract in the current year three-month period. New
orders for tie-downs decreased 77% in the nine-month period and 55% in the
three-month period, primarily due to reduced demand and increased competition
throughout fiscal 1994. Finally, electrical conduit and connecter new orders
were down 17% for the nine-month period and 11% for the three-month period,
mainly due to a general decrease in commercial airline demand.
Backlog of unfilled orders at December 26, 1993 was $35.3 million, while at
December 27, 1992 backlog was $36.7 million.
Sales related to United States Government contracts, which consist primarily of
defense contracts and represent approximately 20% of the Company's total sales
for the year ended March 31, 1993, have been declining in recent years.
Management continues to address the ongoing trend toward reductions in defense
spending by the United States government. Many of the Company's programs, as
well as spare parts requirements for these programs, are expected to continue
for several years, and the Company continues to pursue and is currently
implementing its strategy of developing its non-defense businesses through
acquisitions and refocused foreign and commercial market attention.
LIQUIDITY AND CAPITAL RESOURCES
The Company's debt-to-capitalization ratio was 35% as of December 26, 1993, 17%
as of March 31, 1993, and 11% as of December 27, 1992. The current ratio at
December 26, 1993, stood at 4.25 compared to 3.27 at March 31, 1993, and 2.59
at December 27, 1992. Working Capital was $57 million at December 26, 1993, up
$13.5 million and $18 million from March 31, 1993, and December 27, 1992,
respectively.
At December 26, 1993, the Company's debt consisted of $25 million of borrowings
under a revolving bank credit line, a $9.9 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 commitment from $25 million to $35 million. This commitment, which is
subject to a borrowing base formula, will be available to the Company through
September 30, 1995. The agreement provides for borrowings and letters of
credit based on collateralized accounts receivable, inventory, all fixed assets
other than real property, with the exception of certain real property located
PAGE 15 OF 22
<PAGE> 17
in Mountainside, New Jersey. Letters of credit under the line at December 26,
1993 were $2.1 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 December 26, 1993. 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
net income for each quarter. The $10 million term loan is with the same lender
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 payable 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 will be reduced to prime if the Company exceeds $6.0 million in net income
for fiscal year 1994. Interest is payable monthly.
Management believes that the Company's cash flow forecast for 1994, combined
with the bank credit described above, will be sufficient to support current and
forecasted working capital requirements and dividend payments. Capital
expenditures in the nine- month period in 1994 were $2.9 million as compared
with $3.5 million in the comparable period in 1993. The Company's two segments
have similar cash flow requirements.
PAGE 16 OF 22
<PAGE> 18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 Letter amendment dated November 11, 1993 to the Revolving Loan
and Security Agreement dated as of June 21, 1991 among the
Company, National Canada Finance Corporation and National Bank
of Canada.
11 Statement of Computation of Per Share Earnings
(b) A report on Form 8-K/A was filed on November 10, 1993, amending the
Form 8-K filed on August 14, 1993, to report the financial information
relating to the Palnut metal fastener product line.
PAGE 17 OF 22
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSTECHNOLOGY CORPORATION
(Registrant)
Dated: February 7, 1994 By: \s\ Chandler J. Moisen
-----------------------------------------
CHANDLER J. MOISEN, Senior Vice President
and Chief Financial Officer*
* On behalf of the Registrant and as Principal Financial Officer.
PAGE 18 OF 22
<PAGE> 20
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
10 Letter amendment dated November 11, 1993 to the Revolving Loan
and Security Agreement dated as of June 21, 1991 among the
Company, National Canada Finance Corporation and National Bank
of Canada.
11 Statement of Computation of Per Share Earnings
<PAGE> 1
EXHIBIT 10
[NATIONAL CANADA FINANCE CORP. LETTERHEAD]
November 11, 1993
TransTechnology Corporation
700 Liberty Avenue
Union, New Jersey 07083
Attention: Chandler J. Moisen,
Senior Vice President, CFO and Treasurer
Dear Chandler:
It is the understanding of National Canada Finance Corp. ("Bank") that
TransTechnology Corporation ("Borrower") is requesting that the Revolving Loan
And Security Agreement entered into by and among Borrower, Bank and National
Bank of Canada (New York, New York) ("NBC") dated June 21, 1991 (the "Loan
Agreement"), as amended by (a) the First Amendment To The Revolving Loan And
Security Agreement, dated December 18, 1991, (b) the Second Amendment To The
Revolving Loan And Security Agreement, dated December 10, 1992, (c) the letter
agreement among Bank, NBC and Borrower, dated December 31, 1992, and (d) the
Third Amendment To The Revolving Loan And Security Agreement, dated August 2,
1993 (collectively, the "Amended Loan Agreement") be amended by this letter
agreement so that the definition of "Total Debt" as defined in Section 7.1(0)
of the Amended Loan Agreement excludes certain liabilities of Borrower relating
to its acquisition from TRW, Inc. of TRW's Fastener Division (the "Palnut
Acquisition").
Upon review of this matter, and subject to this letter being signed by
all the parties to the Amended Loan Agreement, and subject to the provisions of
the next paragraph of this letter, the last sentence of Section 7.1(0) the
Amended Loan Agreement is hereby amended to provide the following:
For purposes of this Section 7.1(0), "Total Debt" shall mean
(1) the sum of all balance sheet liabilities of Borrower,
determined on a consolidated basis in accordance with GAAP,
decreased by (2) certain current liabilities and a purchase
accounting reserve arising from the Palnut Acquisition up to an
aggregate amount not to exceed $3,600,000.
Baltimore * Charlotte * Cincinnati * Cleveland * Memphis
New York * Pittsburgh * Roseland, N.J. * San Francisco * Southfield, MI
PAGE 19 of 22
<PAGE> 2
[NATIONAL CANADA FINANCE CORP. LETTERHEAD]
Finally, except for the provisions agreed to and set forth in this
letter, by its execution of this letter, Borrower hereby (a) ratifies, confirms
and agrees to continue to be bound by and to comply with the terms and
conditions of the Amended Loan Agreement as if it was fully rewritten and set
forth in this letter, and (b) agrees that Bank and NBC have acted commercially
reasonable in all respects with their dealings with Borrower in this matter and
in their relationship as Borrower and lenders.
If this letter meets with your agreement and understanding of the terms
and provisions set forth in this letter, please acknowledge your acceptance by
causing all copies of this letter to be executed by Borrower where indicated
below, and then return all copies to me. I will then execute each copy on
behalf of NBC and obtain the executed consent of The First National Bank of
Boston and will then provide you with copies of the fully executed letter
agreement.
Very truly yours,
NATIONAL CANADA FINANCE CORP.
By: /S/ JACK JANKOVIC
----------------------
Jack Jankovic
Vice President
BY CAUSING THIS LETTER TO BE EXECUTED BY ITS DULY AUTHORIZED
OFFICER ON THIS 11 DAY OF NOVEMBER 1993, THE UNDERSIGNED
-- --------
MANIFESTS ITS AGREEMENT AND UNDERSTANDING THAT THIS LETTER SETS
FORTH THE AGREEMENT AND UNDERSTANDING REACHED BETWEEN THE PARTIES.
TRANSTECHNOLOGY CORPORATION
By: /S/ CHANDLER J. MOISEN
---------------------------------
Chandler J. Moisen
Senior Vice President, CFO and
Treasurer
AGREED TO AND ACCEPTED EFFECTIVE AS OF THE 11 DAY OF NOVEMBER,
-- --------
1993, BY:
NATIONAL BANK OF CANADA
(NEW YORK, NEW YORK)
By: /s/ JACK JANKOVIC
---------------------------------
Title: AGENT
---------------------------------
[SIGNATURE CONTINUED ON NEXT PAGE]
Page 20 of 22
<PAGE> 3
[NATIONAL CANADA FINANCE CORP. LETTERHEAD]
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ GAIL R. LONG
-------------------------------------
Title: Division Executive
-------------------------------------
Page 21 of 22
<PAGE> 1
EXHIBIT 11
TRANSTECHNOLOGY CORPORATION
STATEMENT OF THE COMPUTATION OF PER SHARE EARNINGS
IN ACCORDANCE WITH INSTRUCTION 4(g)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- --------------------------
12/26/93 12/27/92 12/26/93 12/27/92
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Primary earnings per share:
Weighted average number
of common shares
outstanding 5,147,084 5,089,999 5,134,530 5,085,876
Dilutive effect of stock
option plan - (a) - (a) - (a) - (a)
--------- --------- --------- ---------
5,147,084 5,089,999 5,134,530 5,085,876
========= ========= ========= =========
Net income $ 1,605,000 $ 1,297,000 $ 4,350,000 $ 3,714,000
========= ========= ========= =========
Primary earnings
per share $ 0.31 $ 0.25 $ 0.85 $ 0.73
========= ========= ========= =========
</TABLE>
(a) The inclusion of stock options in the calculation of primary earnings per
share was either anti-dilutive or not material as per APB 15.
PAGE 22 OF 22
