<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 October 1, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-7872
_____________
TRANSTECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-4062211
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
700 Liberty Avenue 07083
Union, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (908) 964-5666
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
----- -----
As of November 8, 1995, the total number of outstanding
shares of registrant's one class of common stock was 5,280,718
<PAGE> 2
TRANSTECHNOLOGY CORPORATION
INDEX
PART I. Financial Information Page No.
--------
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . 2
Statements of Consolidated Operations--
Three and Six Month Periods Ended October 1, 1995
and September 25, 1994 . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets--
October 1, 1995 and March 31, 1995 . . . . . . . . . . . 4
Statements of Consolidated Cash Flow--
Six Months Ended October 1, 1995 and
September 25, 1994 . . . . . . . . . . . . . . . . . . . 5
Statements of Consolidated Stockholders' Equity--
Six Months Ended October 1, 1995 . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . 7-11
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition . . . . . . . 12-18
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
EXHIBIT 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
EXHIBIT 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Statements of Consolidated Operations, Consolidated
Balance Sheets and Statements of Consolidated Cash Flow are of TransTechnology
Corporation and its consolidated subsidiaries. These reports reflect all
adjustments of a normal recurring nature, which are, in the opinion of
management, necessary to a fair presentation of the results of operations for
the interim periods reflected therein. The results reflected in the unaudited
Statements of Consolidated Operations for the period ended October 1, 1995 are
not necessarily indicative of the results to be expected for the entire year.
The October 1, 1995 unaudited Consolidated Financial Statements include the
assets and liabilities of the Seeger Group of companies acquired by
TransTechnology Corporation on June 30, 1995. See Note 5 of the Notes to
Unaudited Consolidated Financial Statements for further discussion on this
acquisition. The following unaudited Consolidated Financial Statements should
be read in conjunction with the notes thereto, and Management's Discussion and
Analysis set forth in Item 2 of Part I of this report, as well as the audited
financial statements and related notes thereto contained in the Form 10-K filed
for the fiscal year ended March 31, 1995.
[THIS SPACE INTENTIONALLY LEFT BLANK]
2
<PAGE> 4
STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
10/01/95 9/25/94 10/01/95 9/25/94
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenue $ 44,434 $ 22,411 $ 70,844 $ 44,848
Cost of sales 31,972 15,460 49,911 31,759
----------- ----------- ----------- -----------
Gross profit 12,462 6,951 20,933 13,089
----------- ----------- ----------- -----------
General, administrative
and selling expenses 8,509 4,617 13,206 7,791
Interest expense 1,879 579 2,765 1,006
----------- ----------- ----------- -----------
Total general, administrative,
selling and interest expenses 10,388 5,196 15,971 8,797
----------- ----------- ----------- -----------
Income from continuing operations
before income taxes 2,074 1,755 4,962 4,292
Income taxes 731 586 1,886 1,526
----------- ----------- ----------- -----------
Income from continuing operations 1,343 1,169 3,076 2,766
Discontinued operations:
Loss from operations (net of applicable
tax benefits of $122,000 and $294,000 for
the quarter and six months ended 10/01/95,
respectively, and $560,000 and $939,000
for the quarter and six months ended
9/25/94, respectively) (221) (821) (480) (1,389)
Gain (loss) from disposal (net of applicable tax
provision of $40,000 and $98,000 for
the quarter and six months ended
10/01/95, respectively, and net of
applicable tax benefits of $107,000 and
$78,000 for the quarter and six months
ended 9/25/94, respectively) 72 (151) 159 (108)
----------- ----------- ----------- -----------
Net income $ 1,194 $ 197 $ 2,755 $ 1,269
=========== =========== =========== ===========
Earnings per Share: (Note 1)
Income from continuing operations $ 0.26 $ 0.23 $ 0.60 $ 0.54
Loss from discontinued operations (0.03) (0.19) (0.06) (0.29)
----------- ----------- ----------- -----------
Net income $ 0.23 $ 0.04 $ 0.54 $ 0.25
=========== =========== =========== ===========
Number of shares used in computation
of per share information 5,095,000 5,121,000 5,089,000 5,152,000
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE> 5
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
UNAUDITED
10/01/95 3/31/95
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,976 $ 1,544
Accounts receivable:
United States Government 1,290 1,204
Commercial (net of allowance for doubtful accounts of
$586,000 at 10/01/95 and $103,000 at 3/31/95) 25,132 18,280
Notes receivable 1,167 836
Inventories 47,801 25,239
Prepaid expenses and other current assets 4,865 2,706
Deferred income taxes 2,058 2,592
Net assets of discontinued businesses 11,519 24,269
--------- ---------
Total current assets 96,808 76,670
Property, Plant & Equipment 75,188 42,574
Less accumulated depreciation and amortization 15,215 13,040
--------- ---------
Property, Plant & Equipment - net 59,973 29,534
--------- ---------
Other assets:
Notes receivable 12,437 3,274
Costs in excess of net assets of acquired businesses
(net of accumulated amortization:
10/01/95, $3,074,227; 3/31/95, $2,793,000) 22,823 12,813
Other 11,800 7,105
--------- ---------
Total other assets 47,060 23,192
--------- ---------
Total $ 203,841 $ 129,396
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,516 $ 3,356
Accounts payable-trade 10,115 9,147
Accrued compensation 2,446 4,247
Accrued income taxes 2,254 591
Other current liabilities 17,203 6,267
--------- ---------
Total current liabilities 38,534 23,608
--------- ---------
Long-term debt payable to banks and others 74,314 37,021
--------- ---------
Other long-term liabilities 24,287 4,265
--------- ---------
Stockholders' equity:
Preferred stock-authorized, 300,000 shares; none issued -- --
Common stock-authorized, 14,700,000 shares of $.01 par value;
issued 5,097,403 at 10/01/95, and 5,242,316 at 3/31/95 53 52
Additional paid-in capital 46,134 45,802
Retained earnings 25,512 23,418
Other stockholders' equity (2,838) (2,680)
--------- ---------
68,861 66,592
Less treasury stock, at cost - (177,500 shares at 10/01/95) (2,155) (2,090)
--------- ---------
Total stockholders' equity 66,706 64,502
--------- ---------
Total $ 203,841 $ 129,396
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 6
STATEMENTS OF CONSOLIDATED CASH FLOW
UNAUDITED
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Six Months Ended
---------------------
10/01/95 9/25/94
-------- -------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income............................................ $ 2,755 $ 1,269
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................ 2,215 1,926
Provision for losses on accounts receivable.......... 67 36
(Gain) on sale or disposal of fixed assets and
discontinued businesses............................. (181) --
Change in assets and liabilities net of acquisitions
and dispositions:
Decrease in accounts receivable..................... 6,618 2,843
(Increase) decrease in inventories.................. (1,209) 427
Increase in net assets of discontinued businesses... (409) (2,965)
(Increase) decrease in other assets................. (791) 1,536
Decrease in accounts payable........................ (4,133) (133)
Decrease in accrued compensation.................... (1,801) (2,047)
Increase (decrease) in other liabilities............ 2,424 (2,573)
Decrease in income tax payable...................... (737) (824)
------- -------
Net cash provided by (used in) operating activities.. 4,818 (505)
------- -------
Cash Flows from Investing Activities:
Business acquisitions................................. (46,185) (15,320)
Capital expenditures.................................. (1,946) (1,973)
Proceeds from sale of fixed assets and discontinued
business............................................. 14,338 40
(Increase) decrease in notes receivable............... (9,494) 302
------- -------
Net cash used in investing activities................ (43,287) (16,951)
------- -------
Cash Flows from Financing Activities:
Proceeds from long-term borrowings.................... 81,637 22,021
Payments on long-term borrowings...................... (41,184) (4,701)
Proceeds from issuance of stock under stock option
plan................................................. 163 331
Stock repurchases and other........................... (53) (1,865)
Dividends paid........................................ (662) (646)
------- -------
Net cash provided by financing activities............ 39,901 15,140
------- -------
Net increase (decrease) in cash and cash equivalents.. 1,432 (2,316)
Cash and cash equivalents at beginning of year........ 1,544 3,027
-------- --------
Cash and cash equivalents at end of year.............. $ 2,976 $ 711
======= ========
Supplemental Information:
Interest payments..................................... $ 1,740 $ 1,341
Income tax payments................................... $ 1,694 $ 1,184
</TABLE>
- - - - - --------------------
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 7
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
UNAUDITED
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK ADDITIONAL
FOR THE SIX MONTHS -------------------- ------------------------- PAID-IN
ENDED OCTOBER 1, 1995 SHARES AMOUNT SHARES AMOUNT CAPITAL
- - - - - --------------------------- --------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1995 5,242,316 $ 52 (172,500) $ (2,090) $ 45,802
Net Income -- -- -- -- --
Cash dividends
($.13 per share) -- -- -- -- --
Unrealized investment
holding losses -- -- -- -- --
Purchase of treasury stock -- -- (5,000) (65) --
Issuance of stock under
stock option plan 17,808 1 -- -- 163
Issuance of stock under
incentive bonus plan 14,779 -- -- -- 169
Foreign translation
adjustments -- -- -- -- --
--------- --------- -------- --------- --------
Balance, October 1, 1995 5,274,903 $ 53 (177,500) $ (2,155) $ 46,134
========= ========= ======== ========= ========
<CAPTION>
OTHER
FOR THE SIX MONTHS RETAINED STOCKHOLDERS'
ENDED OCTOBER 1, 1995 EARNINGS EQUITY TOTAL
- - - - - --------------------------- --------- --------- ---------
<S> <C> <C> <C>
Balance, March 31, 1995 $ 23,418 $ (2,680) $ 64,502
Net Income 2,756 -- 2,756
Cash dividends
($.13 per share) (662) -- (662)
Unrealized investment
holding losses -- (46) (46)
Purchase of treasury stock -- -- (65)
Issuance of stock under
stock option plan -- -- 164
Issuance of stock under
incentive bonus plan -- (58) 111
Foreign translation
adjustments -- (54) (54)
--------- --------- ---------
Balance, October 1, 1995 $ 25,512 $ (2,838) $ 66,706
========= ========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE> 8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars)
NOTE 1. Earnings Per Share:
Earnings per share are based on the weighted average number of common
shares and common stock equivalents (stock options) outstanding during
each period. In computing earnings per share, common stock
equivalents were either anti-dilutive because of the market value of
the stock or not material, and, therefore, have been excluded from the
calculation.
NOTE 2. Inventories:
Inventories are summarized as follows:
<TABLE>
<CAPTION>
10/01/95 3/31/95
-------- -------
<S> <C> <C>
Finished goods $21,833 $ 6,152
Work-in-process 7,637 3,867
Purchased and
manufactured parts 18,331 15,220
------- -------
Total inventories $47,801 $25,239
======= =======
</TABLE>
NOTE 3. Long-term Debt Payable to Banks and Others
Long term debt payable, including current maturities, at October 1,
1995 and March 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
10/01/95 3/31/95
-------- -------
<S> <C> <C>
Credit Agreement - 8.375% $19,895 --
Credit Agreement - 8.3125% -- $16,300
Term Loan - 8.03% 35,000 --
Term Loan - 9.0% -- 23,080
Term Loan - 9.125% 25,000 --
Other 935 997
------- -------
80,830 40,377
Less current maturities 6,516 3,356
------- -------
Total $74,314 $37,021
======= =======
</TABLE>
7
<PAGE> 9
Credit Agreement
Related to the Company's acquisition of the Seeger Group, on June 30,
1995 the Company refinanced all of its bank debt, so that on October
1, 1995 it consisted of $15.7 million of borrowings under a revolving
credit line, $4.2 million of borrowings under international lines of
credit, a $35 million term loan and a $25 million term loan. The
revolving bank credit line commitment is $34 million, which includes
$5 million available for letters of credit. This commitment will be
available to the Company through December 31, 2000 and is subject to a
borrowing base formula. The agreement provides for borrowings and
letters of credit based on collateralized accounts receivable and
inventory. In addition, all of the remaining assets of the Company
and its subsidiaries are included as collateral. Letters of credit
under the line at October 1, 1995 were $1.1 million. The total
commitment from the international lines of credit are $6 million and
have the same availability and collateral as the revolving credit
line, but are not subject to a borrowing base formula. Interest on
the revolver and the international lines of credit are tied to the
primary lending bank's prime rate, or the London Interbank Offered
Rate (LIBOR), with a margin, depending upon the Company's achievement
of certain operating and financial goals.
The $35 million and $25 million term loans are with the same lenders
as the revolving and international lines of credit, are secured by the
same collateral, and are due and payable on December 31, 2000 and June
30, 2002, respectively. The $35 million term loan has an additional
$15 million available for future acquisitions. Principal payments on
the $35 million term loan of $1.4 million, with escalations to $1.8
million and $2.8 million in June 1999 and June 2000, respectively,
begin on December 31, 1995, and are due and payable on the last day of
each quarter through December 31, 2000. Interest on the $35 million
term loan is tied to the primary lending bank's prime rate, or LIBOR,
with a margin, depending upon the Company's achievement of certain
operating and financial goals. Principal payments on the $25 million
term loan of $0.5 million are due and payable annually, beginning on
June 30, 1996 through June 30, 2000, with final balloon payments of
$7.5 million and $15 million due and payable on June 30, 2001 and June
30, 2002, respectively. Interest on the $25 million term loan accrues
at the primary lending bank's prime rate plus two percentage points.
The agreement also gives the Company the option of using LIBOR plus
three and one-quarter percentage points. At October 1, 1995, the
Company had $67 million of borrowings utilizing LIBOR.
On August 2, 1995, the Company entered into an interest rate swap
agreement with its primary lending bank to reduce the impact of
changes in interest rates on its floating-rate debt. The agreement
has a notional amount of $25,000,000 and terminates on August 2, 1998.
The agreement effectively changes the Company's interest rate exposure
on $25,000,000 of its LIBOR-based debt to a fixed rate of 9.79%.
The credit facility limits the Company's ability to pay dividends to
25% of net income and restricts capital expenditures to $6.5 million
for the fiscal year ending March 31, 1996,
8
<PAGE> 10
and $7 million thereafter for the life of the agreement, as well as
containing other customary financial covenants.
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 and loans on life insurance policies
owned by the Company with a fixed interest rate of 5%.
Debt Maturities
<TABLE>
<S> <C>
1996 (current) $ 6,516
1997 6,518
1998 6,143
1999 7,392
2000 9,643
Thereafter 44,618
-------
Total $80,830
=======
</TABLE>
NOTE 4. Discontinued Operations
In August 1995, the Company sold substantially all of the assets and
business of its Electronics division, which included Electronic
Connections and Assemblies, Inc., for $4.4 million in cash and
$8.8 million of notes receivable. The sale of this operation
resulted in an after-tax disposal gain of $0.2 million.
In June 1995, the Company sold the domestic portion of its computer
graphics service operation, doing business under the trade name
TransTechnology Systems & Services, for book value. The Company
received $0.7 million in cash and a $0.6 million note receivable for
this sale. The Company is currently negotiating the sale for the
remaining international portion of its graphics service operation.
In March 1995, the Company sold substantially all of the assets and
business of its chaff products operation. The sale of this operation
resulted in an after-tax disposal loss of $0.4 million. In May 1995,
the Company sold the remaining chaff avionics product line for $0.3
million in cash and a $0.7 million note receivable. This sale
resulted in an after-tax disposal gain of $0.4 million.
Through September 1995, the Company recorded an additional $0.5
million of after-tax disposal costs related to other previously
discontinued businesses. These losses consisted primarily of disposal
costs different from previous estimates associated primarily with
legal, environmental and employee related matters.
9
<PAGE> 11
Operating results of the discontinued business were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------- -----------------------
10/01/95 9/25/94 10/01/95 9/25/94
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Total Revenues $2,276 $ 5,573 $7,580 $12,461
Loss before income
taxes $ (343) $(1,381) $ (774) $(2,328)
Income tax benefit 122 560 294 939
------ ------- ------ -------
Loss from operations $ (221) $ (821) $ (480) $(1,389)
====== ======= ====== =======
</TABLE>
The loss from operations includes interest expense of $88 thousand and $143
thousand for the three months ended 10/01/95 and 9/25/94, respectively, and
$214 thousand and $279 thousand for the six months ended 10/01/95 and 9/25/94,
respectively.
Net assets of the discontinued businesses at October 1, 1995 and March 31, 1995
were as follows:
<TABLE>
<CAPTION>
10/01/95 3/31/95
-------- --------
<S> <C> <C>
Accounts Receivable $ 890 $ 6,344
Inventory 1,252 10,993
Property 9,400 10,109
Other Assets 715 1,755
Liabilities (738) (4,932)
-------- --------
Net Assets of
Discontinued Businesses $ 11,519 $ 24,269
======== ========
</TABLE>
10
<PAGE> 12
NOTE 5. Acquisitions
On June 30, 1995 the Company acquired the Seeger Group of companies
from a unit of AB SKF of Gothenburg, Sweden for approximately $43
million plus the assumption of trade debts and accrued expenses. The
Seeger Group, headquartered in Konigstein, Germany manufactures
circlips, snap rings and retaining rings used primarily in the
automotive, heavy equipment and industrial machinery markets. The
Seeger Group operates under the trade names of "Seeger", "Anderton",
and "Waldes" with over 900 employees at its five manufacturing
facilities.
The following summarizes TransTechnology Corporation's combined
Proforma Revenue, Net Income and Earnings per Share information as if
the acquisition of the Seeger Group of companies had occurred at the
beginning of the period presented. The Proforma results give effect
to the amortization of goodwill and the effects on interest expense
and taxes.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------------
10/01/95 9/25/94
-------- ---------
<S> <C> <C>
Revenue $ 93,371 $ 74,400
======== =========
Net Income $ 4,312 $ 1,753
======== =========
Earnings per share $ 0.85 $ 0.34
======== =========
</TABLE>
The above Proforma information does not purport to be indicative of the
financial results which actually would have occurred had the acquisition been
made at the beginning of the periods presented or subsequent to that date. The
information is preliminary and subject to change as the financial data is
finalized.
The net income for the six month period ended October 1, 1995, includes a
non-recurring real estate sale which resulted in an after tax gain of $1.3
million, recorded prior to the Company's acquisition of the Seeger Group.
11
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All references to three and six month periods in this Management's Discussion
refer to the three and six month periods ended October 1, 1995 for fiscal year
1996 and the three and six month periods ended September 25, 1994 for fiscal
year 1995. Also when referred to herein, operating profit means net sales less
operating expenses, without deduction for general corporate expenses, interest
and income taxes. The Consolidated Statement of Operations has been restated
with respect to discontinued operations to provide a consistent basis for
comparing the performance of the Company's continuing operations for the
periods presented.
Revenue from continuing operations for the six month period in 1996 was $70.8
million, an increase of $26.0 million or 58% from the comparable period in
1995. For the three month period in 1996 total revenue was $44.4 million, a
$22.0 million or 98% increase from the comparable period in 1995. As further
discussed below, the increased revenue performance for both periods in 1996
resulted primarily from the Seeger Group acquisition on June 30, 1995.
Gross profit for the six month period in 1996 increased $7.8 million or 60%
from the comparable period in 1995. For the three month period in 1996, gross
profit increased $5.5 million or 79%. Operating profit from continuing
operations for the six month period in 1996 was $10.5 million, an increase of
$4.6 million or 80% from the comparable period in 1995. For the three month
period in 1996 operating profit from continuing operations was $5.4 million, an
increase of $2.3 million or 74% from the comparable period in 1995. Changes in
sales, operating profit and new orders from continuing operations are discussed
below by segment.
Net income, including discontinued operations, for the six month period in 1996
was $2.8 million or $0.54 per share, compared to $1.3 million or $0.25 per
share, for the comparable period of 1995. The three month period in 1996
experienced net income of $1.2 million or $0.23 per share compared to $0.2
million or $0.04 per share for the year earlier period. As further discussed
below, the increased earnings performance in 1996 resulted primarily from the
inclusion of Industrial Retaining Ring Company operations in the three and six
month 1996 periods and the Seeger Group acquisition.
Interest expense increased $1.8 million for the six month period in 1996, and
$1.3 million for the three month period, primarily as a result of increased
bank borrowings used for the acquisition of the Seeger Group.
New orders received during the six month period in 1996 totaled $77.4 million,
an increase of $32.8 million or 73% from 1995's comparable period. For the
three month period, new orders totaled $49.2 million, an increase of $29.1
million or 145% from last year's comparable period. At October 1, 1995, total
backlog of unfilled orders was $67.7 million compared to $32.3 million at
September 25, 1994.
12
<PAGE> 14
DISCONTINUED OPERATIONS
In August 1995, the Company sold substantially all of the assets and business
of its Electronics division, which included Electronic Connections and
Assemblies, Inc., for $4.4 million in cash and $8.8 million of notes
receivable. The sale of this operation resulted in an after-tax disposal gain
of $0.2 million.
In June 1995, the Company sold the domestic portion of its computer graphics
service operation, doing business under the trade name TransTechnology Systems
& Services, for book value. The Company received $0.7 million in cash and a
$0.6 million note receivable for this sale. The Company is currently
negotiating the sale for the remaining international portion of its graphics
service operation.
In March 1995, the Company sold substantially all of the assets and business of
its chaff products operation. The sale of this operation resulted in an
after-tax disposal loss of $0.4 million. In May 1995, the Company sold the
remaining chaff avionics product line for $0.3 million in cash and a $0.7
million note receivable. This sale resulted in an after-tax disposal gain of
$0.4 million.
Through September 1995, the Company recorded an additional $0.5 million of
after-tax disposal costs related to other previously discontinued businesses.
These losses consisted primarily of disposal costs different from previous
estimates associated primarily with legal, environmental and employee related
matters.
ACQUISITIONS
On June 30, 1995 the Company acquired the Seeger Group of companies from a unit
of AB SKF of Gothenburg, Sweden for approximately $43 million plus the
assumption of trade debts and accrued expenses. The Seeger Group,
headquartered in Konigstein, Germany manufactures circlips, snap rings and
retaining rings used primarily in the automotive, heavy equipment and
industrial machinery markets. The Seeger Group operates under the trade names
of "Seeger", "Anderton", and "Waldes" with over 900 employees at its five
manufacturing facilities.
13
<PAGE> 15
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
<TABLE>
<CAPTION>
SIX MONTHS ENDED NET CHANGE
---------------------------- -------------------------
10/01/95 9/25/94 $ %
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Sales:
Speciality fastener products $ 56,366 $ 30,738 $ 25,628 83.4
Rescue hoist and cargo hook products $ 13,702 12,773 929 7.3
-------- -------- --------
Total $ 70,068 $ 43,511 $ 26,557 61.0
======== ======== ========
Operating profit (loss):
Speciality fastener products 8,973 $ 5,903 $ 3,070 52.0
Rescue hoist and cargo hook products 1,514 (64) 1,578 2465.6
-------- -------- --------
Total $ 10,487 $ 5,839 $ 4,648 79.6
Corporate expense (2,760)(a) (541)(a)(c) (2,219) (410.2)
Interest expense (2,765)(b) (1,006)(b) (1,759) (174.9)
-------- -------- --------
Income from continuing
operations before
income taxes $ 4,962 $ 4,292 $ 670 15.6
======== ======== ========
</TABLE>
a) The corporate expense for the six months ended October 1, 1995
and the six months ended September 25, 1994 has been reduced
by $341 thousand and $895 thousand, respectively, to reflect
an allocation made to discontinued operations.
b) The interest expense for the six months ended October 1, 1995
and the six months ended September 25, 1994 has been reduced
by $214 thousand and $279 thousand, respectively, to reflect
an allocation made to discontinued operations.
c) The corporate expense for the six months ended September 25,
1994 has been reduced by $575 thousand for a favorable
insurance settlement.
14
<PAGE> 16
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NET CHANGE
---------------------------- -------------------------
10/01/95 9/25/94 $ %
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Sales:
Speciality fastener products $ 37,171 $ 15,194 $ 21,977 144.6
Rescue hoist and cargo hook products $ 6,690 6,203 487 7.9
-------- -------- --------
Total $ 43,861 $ 21,397 $ 22,464 105.0
======== ======== ========
Operating profit (loss):
Speciality fastener products $ 4,476 $ 3,082 $ 1,394 45.2
Rescue hoist and cargo hook products 886 (13) 899 6915.4
-------- -------- --------
Total $ 5,362 $ 3,069 $ 2,293 74.7
Corporate expense (1,409)(a) (735)(a) (674) (91.7)
Interest expense (1,879)(b) (579)(b) (1,300) (224.5)
-------- -------- --------
Income from continuing
operations before
income taxes $ 2,074 $ 1,755 $ 319 18.2
======== ======== ========
</TABLE>
a) The corporate expense for the three months ended October 1,
1995 and the three months ended September 25, 1994 has been
reduced by $130 thousand and $447 thousand, respectively, to
reflect an allocation made to discontinued operations.
b) The interest expense for the three months ended October 1,
1995 and the three months ended September 25, 1994 has been
reduced by $88 thousand and $143 thousand, respectively, to
reflect an allocation made to discontinued operations.
15
<PAGE> 17
SPECIALTY FASTENER PRODUCTS SEGMENT
Sales for the specialty fastener products segment were $56.4 million for the
six month period in 1996, an increase of $25.6 million or 83% from the
comparable period in 1995. Sales for the three month period in 1996 were $37.1
million, up $22 million, or 145% from the same period in 1995. The increase in
specialty fastener sales for both 1996 periods was primarily due to the
inclusion of operations of the Seeger Group and to a lesser extent the
acquisition of Industrial Retaining Ring Company. Additionally, new product
market penetration and increased industrial and truck fastener demand offset by
a slight decrease in domestic automotive fastener demand, further increased
1996 sales performance.
Operating profit for the segment was $9.0 million for the six month period in
1996, an increase of $3.1 million or 52% from the comparable period in 1995.
The three month period in 1996 showed an operating profit of $4.5 million, an
increase of $1.4 million or 45% from the comparable period in 1995. The
increases were primarily due to the inclusion of operations of the Seeger Group
and Industrial Retaining Ring Company for the 1996 periods, new product market
penetration and increased industrial and truck fastener demand offset by a
slight decrease in domestic automotive fastener sales volume, as mentioned
above.
New orders increased by $20.9 million or 63% for the six month period in 1996,
primarily due to the acquisitions mentioned above. New orders for the three
month period in 1996 increased $19.5 million or 127% from the comparable period
in 1995, also primarily due to the acquisitions mentioned above. These
increases were offset by reduced automotive fastener demand during the three
and six month periods in 1996, primarily due to an overall slowdown in
production by domestic automotive manufacturers. Backlog of unfilled orders at
October 1, 1996, was $36.3 million compared to $15.4 million at September 25,
1995.
RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT
Sales of the rescue hoist and cargo hook products segment were $13.7 million
for the six month period in 1996, an increase of $0.9 million or 7% from the
comparable period in 1995. Sales for the three month period in 1996 were $6.7
million, up $0.5 million or 8% from the comparable period in 1995. The
increases were primarily due to the timing of customers placing new orders.
Operating profit for the six month period in 1996 was $1.5 million, an increase
of $1.6 million from the slight loss experienced in the comparable period in
1995. The three month period had an operating profit of $0.9 million, an
increase of $0.9 million from the slight loss experienced in the comparable
period in 1995. The primary factors contributing to the increase in the
segment's operating profit in the 1996 six and three month periods were the
increases in the sales volume, mentioned above, product sales mix and sales
price increases.
16
<PAGE> 18
New orders for the six month period in 1996 increased by $11.9 million or 104%
from the comparable period in 1995. New orders for the three month period in
1996 increased by $9.5 million or 201% from the comparable period in 1995. All
product lines experienced increases in both 1996 periods, primarily due to a
large multi-year order for hoist and winch products and customers timing and
placement of new orders. Backlog of unfilled orders at October 1, 1995 was
$30.4 million compared to $20.1 million at September 25, 1994.
Sales related to United States government contracts, which consist primarily of
defense contracts and represented approximately 18% of the Company's total 1995
sales from continuing operations, have been declining in recent years. While
management remains concerned with the continued trend toward reductions in
defense spending, many of the Company's defense related programs, as well as
spare parts requirements for these programs, will continue for several years,
though there can be no assurances in that regard. Moreover, the Company is
well on its way in 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 55% as of October 1, 1995,
compared to 38% as of March 31, 1995. The current ratio at October 1, 1995,
stood at 2.51 compared to 3.25 at March 31, 1995. Working Capital was $58.3
million at October 1, 1995, up $5.2 million from March 31, 1995. These changes
were primarily the result of the Seeger Group acquisition on June 30, 1995 and
the sale of discontinued operations.
Related to the Company's acquisition of the Seeger Group, on June 30, 1995 the
Company refinanced all of its bank debt, so that on October 1, 1995 it
consisted of $15.7 million of borrowings under a revolving credit line, $4.2
million of borrowings under international lines of credit, a $35 million term
loan and a $25 million term loan. The revolving bank credit line commitment is
$34 million, will be available to the Company through December 31, 2000 and is
subject to a borrowing base formula. The agreement provides for borrowings and
letters of credit based on collateralized accounts receivable and inventory.
In addition, all of the remaining assets of the Company and its subsidiaries
are included as collateral. Letters of credit under the line at October 1, 1995
were $1.1 million. The total commitment from the international lines of credit
are $6 million and have the same availability and collateral as the revolving
credit line, but are not subject to a borrowing base formula. Interest on the
revolver and the international lines of credit are tied to the primary lending
bank's prime rate, or the London Interbank Offered Rate (LIBOR), with a margin,
depending upon the Company's achievement of certain operating and financial
goals.
The $35 million and $25 million term loans are with the same lenders as the
revolving and international lines of credit, are secured by the same
collateral, and are due and payable on December 31, 2000 and June 30, 2002,
respectively. The $35 million term loan has an additional $15 million
available for future acquisitions. Principal payments on the $35 million term
loan of $1.4 million, with escalations to $1.8 million and $2.8 million in June
1999 and June 2000,
17
<PAGE> 19
respectively, begin on December 31, 1995, and are due and payable on the last
day of each quarter through December 31, 2000. Interest on the $35 million
term loan is tied to the primary lending bank's prime rate, or LIBOR, with a
margin, depending upon the Company's achievement of certain operating and
financial goals. Principal payments on the $25 million term loan of $0.5
million are due and payable on the last day of each year beginning on June 30,
1996 through June 30, 2000, with final balloon payments of $7.5 million and $15
million due and payable on June 30, 2001 and June 30, 2002, respectively.
Interest on the $25 million term loan accrues at the primary lending bank's
prime rate plus two percentage points. The agreement also gives the Company
the option of using LIBOR plus three and one-quarter percentage points. At
October 1, 1995, the Company had $42 million of borrowings utilizing LIBOR.
On August 2, 1995, the Company entered into an interest rate swap agreement
with its primary lending bank to reduce the impact of changes in interest rates
on its floating-rate debt. The agreement has a notional amount of $25,000,000
and terminates on August 2, 1998. The agreement effectively changes the
Company's interest rate exposure on $25,000,000 of its LIBOR-based debt to a
fixed rate of 9.79%.
The credit facility limits the Company's ability to pay dividends to 25% of net
income and restricts capital expenditures to $6.5 million for the fiscal year
ending March 31, 1996, and $7 million thereafter for the life of the agreement,
as well as containing other customary financial covenants.
Management believes that the Company's anticipated cash flow from operations,
combined with the bank credit described above, will be sufficient to support
current and forecasted working capital requirements and dividend payments.
Capital expenditures in the six month period in 1996 were $1.9 million as
compared with $2.0 million in the comparable period in 1995. The Company's two
segments have similar cash flow requirements.
18
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
(b) A report on Form 8-K was filed on July 14, 1995 to report the June 30,
1995 acquisition by the company's wholly owned subsidiaries of (i)
substantially all of the assets of SKF USA Inc.'s Seeger Division and
(ii) all of the outstanding stock of SKF GmbH's subsidiaries,
Seeger-Orbis GmbH. This report on Form 8-K was amended by the filing of
a report on Form 8-K/A dated September 11, 1995.
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: November 14, 1995 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.
19
<PAGE> 21
EXHIBIT INDEX
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
STATEMENT OF THE COMPUTATION OF PER SHARE EARNINGS
IN ACCORDANCE WITH INSTRUCTION 4(g)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- ----------------------------
10/01/95 9/25/94 10/01/95 9/25/94
------------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Primary earnings per share:
Weighted average number
of common shares outstanding 5,094,843 5,120,710 5,088,590 5,151,699
Dilutive effect of stock
option plan - (a) - (a) - (a) - (a)
------------- ----------- ------------ -----------
5,094,843 5,120,710 5,088,590 5,151,699
============= =========== ============ ===========
Net income $ 1,194,000 $ 197,000 $ 2,755,000 $ 1,269,000
============= =========== ============ ===========
Primary earnings per share $ 0.23 $ 0.04 $ 0.54 $ 0.25
============= =========== ============ ===========
</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.
20
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> OCT-01-1995
<CASH> 2,976
<SECURITIES> 0
<RECEIVABLES> 40,026
<ALLOWANCES> 586
<INVENTORY> 47,801
<CURRENT-ASSETS> 96,808
<PP&E> 75,188
<DEPRECIATION> 15,215
<TOTAL-ASSETS> 203,841
<CURRENT-LIABILITIES> 38,534
<BONDS> 80,830
<COMMON> 53
0
0
<OTHER-SE> 4,993
<TOTAL-LIABILITY-AND-EQUITY> 203,841
<SALES> 70,200
<TOTAL-REVENUES> 70,844
<CGS> 49,911
<TOTAL-COSTS> 15,971
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 67
<INTEREST-EXPENSE> 2,765
<INCOME-PRETAX> 4,962
<INCOME-TAX> 1,886
<INCOME-CONTINUING> 3,076
<DISCONTINUED> (321)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,755
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
</TABLE>
