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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, 1995
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
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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
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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. / /
As of May 30, 1995, 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 on such date was $55,331,000.00
As of May 30, 1995, the registrant had 5,260,124 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's Proxy Statement for the fiscal year ended March 31,
1995 (to be filed on or before July 28, 1995) is incorporated by reference into
Part III hereof.
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PART I
ITEM 1. BUSINESS.
GENERAL
TransTechnology Corporation develops, manufacturers and sells a wide
range of products in two industry segments, as 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.
During 1995, the Company continued its program of focusing on core
businesses by acquiring a company that manufactures retaining rings (Industrial
Retaining Ring Company located in New Jersey), selling the Company's chaff
business (Lundy Technical Center) and reclassifying its computer graphics
service operations and its Electronics division as discontinued operations.
These actions, together with acquisition activities subsequent to the close of
the fiscal year, position the company as a major supplier of specialty
fasteners for the industrial markets. The only remaining aerospace business is
the Breeze-Eastern division, which manufactures helicopter rescue hoists, cargo
hook systems and cargo tie-down systems. These changes led to the Company's
decision to retitle its industry segments based upon its current components.
The former "Industrial Products" segment is now entitled "Specialty Fastener
Products" and the former "Aerospace" segment is now entitled "Rescue Hoist and
Cargo Hook Products."
DISCONTINUED OPERATIONS
The following entities, discontinued in the years indicated, have been
classified as discontinued operations in the Company's financial statements:
Federal Laboratories (tear gas) (1994), the Lundy Technical Center (chaff)
(1995), TransTechnology Electronics and Electronic Connections and Assemblies,
Inc. (cables, connectors and wire harness) (1995), and TransTechnology Systems
& Services (computer maintenance and service) (1995). For a more detailed
description of these transactions, see "Note 2" of the "Notes to Consolidated
Financial Statements." See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
SPECIALTY FASTENER PRODUCTS
The Company's specialty fastener products are manufactured by its
Breeze Industrial Products division ("Breeze Industrial"), its Palnut Company
division and its Industrial Retaining Ring subsidiary. 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
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
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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. Effective August 31, 1994 the Company acquired
all of the outstanding capital stock of Industrial Retaining Ring Company and
its affiliated companies for a total purchase price of $14.8 million in cash
and the assumption of liabilities. Industrial Retaining Ring manufactures
retaining rings used in heavy equipment and industrial machinery.
Specialty fasteners are marketed through a combination of a direct
sales force, distributors and manufacturing representatives. Such products
contributed 70%, 64% and 45% of the Company's consolidated sales from
continuing operations in 1995, 1994 and 1993, respectively.
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.
At March 31, 1995, the Company's Specialty Fastener Products segment
backlog was $12.7 million, compared to $9.5 million at March 31, 1994. The
increase is primarily the result of the acquisition of Industrial Retaining
Ring. Substantially all of the March 31, 1995 backlog is scheduled to be
shipped during fiscal 1996.
RESCUE HOIST AND CARGO HOOK 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. Management
believes that Breeze-Eastern is the industry market share leader in sales of
personnel-rescue hoists and cargo hook equipment. As a 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 30%, 36% and 55% to the Company's
consolidated sales in 1995, 1994 and 1993, respectively. The declining
percentage is attributable
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primarily to disposition of the chaff business, the reclassification of the
Electronics division as a discontinued operation and the acquisitions of
fastener businesses (Palnut and Industrial Retaining Ring).
The Rescue Hoist and Cargo Hook Product segment backlog varies
substantially from time to time due to the size and timing of orders. At March
31, 1995, the backlog of unfilled orders was $21.8 million, compared to $21.4
million at March 31, 1994. The majority of the March 31, 1995 backlog is
anticipated to be shipped during fiscal 1996.
DEFENSE INDUSTRY SALES
Only 18% of the Company's revenues in 1995, as compared to 23% and 28%
in 1994 and 1993, respectively, were derived from sales to the United States
Government, principally the military services of the Department of Defense and
its prime contractors. 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. With overall defense spending down,
it is expected that the defense market for the Company's products will decline
in the future. However, the overall reduction in the Company's dependence on
these products renders it less vulnerable to defense budget cuts.
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
The Company's businesses compete in some markets 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 such markets will depend on its ability to develop and apply
technological innovations and to expand its customer base and product lines.
The Company is successfully doing so both internally and through acquisitions.
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 the
Company to compete in more than one of these businesses could have a material
and adverse effect on the Company's profitability.
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RAW MATERIALS
The various components and raw materials used by the Company to
produce its products are generally available from more than one source. In
those instances where only a single source for any material is available, most
of such items 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 May 30, 1995 the Company employed 1,014 persons. There were 495
employees associated with the Specialty Fastener Products segment, 173 with the
Rescue Hoist and Cargo Hook Products segment, 16 with the corporate office and
330 employees associated with operations classified as discontinued.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Financial information relating to each of the Company's segments has
been included in Note 12 of Notes to Financial Statements included in Item 8
hereof.
FOREIGN OPERATIONS AND SALES
The Company's only foreign-based facilities during fiscal 1995
consisted of businesses that are treated as discontinued operations as of
March 31, 1995. The Company had export sales of $15.4 million, $14.9 million
and $10.2 million in fiscal 1995, 1994 and 1993, respectively, representing
15%, 18% and 16% of the Company's consolidated sales from continuing operations
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. The acquisition of the business of AB SKF's Seeger companies will
significantly increase the Company's foreign operations and sales, with
manufacturing facilities located in Germany, England and Brazil. (See the last
paragraph of "Liquidity and Capital Resources" in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations.")
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 12 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>
Owned or
Location Use of Premises Leased Sq. Ft
-------- --------------- ---------- ------
<S> <C> <C> <C>
SPECIALTY FASTENER
PRODUCTS SEGMENT
- - ------------------
Saltsburg, Pennsylvania Breeze Industrial offices and Owned 100,000
manufacturing plant
Mountainside, New Jersey Palnut offices and manufacturing Owned 142,000
plant
Irvington, New Jersey Industrial Retaining Ring Owned 90,000
manufacturing plant
RESCUE HOIST AND CARGO
HOOK PRODUCTS SEGMENT
- - ---------------------
Union, New Jersey Corporate offices, Owned 188,000
Breeze-Eastern offices
and manufacturing plant
</TABLE>
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. The Company continues to own or lease property that it no
longer needs in its operations. These properties are located in California,
Florida, Pennsylvania, New York, Illinois and North Carolina. In some
instances, the properties are leased or subleased and in nearly all instances
these properties are for sale.
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 sites in Pennsylvania and Illinois which
continue to be owned although the related businesses have been sold or are
expected to be sold during fiscal 1996. 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 state regulatory 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. In addition, the Company is pursuing
recovery of a portion of clean-up costs in litigation with several of its
insurance
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carriers. The Company expects that remediation work at the Pennsylvania site
will not be completed until fiscal 1999.
In addition, the Company has been named as a potentially responsible
party in various environmental remediation recovery 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 and, as to
several sites, it is alleged that the Company was an owner or operator. Such
properties generally relate to businesses which have been sold or discontinued.
It is not possible to reasonably 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.
Management believes that the Company's potential liability with respect to such
remediation will not have any material adverse effect on the Company.
In 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 sought to recover in excess of $15.0 million for
compensatory damages and an unspecified sum for punitive damages. The
plaintiffs alleged that the Company's waste handling practices 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. This action was settled in May 1995 with the Company paying $2.8
million in exchange for title to the subject real estate and a release of all
claims. The Company recorded in discontinued operations a loss of $1.3
million, in fiscal 1995, based on the appraised value of the property. 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 this 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 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 then brought counterclaims against other
insurance carriers who had refused to contribute to defense and settlement
costs for these matters. The Company has settled these cases by the payment of
$350,000 to one of the carriers and the collection of an aggregate $846,500 on
its counterclaims from the other carriers.
The Company is also engaged in various other legal proceedings
incidental to its business all of which are immaterial to the Company's
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, 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 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
Second Quarter 13-5/8 10-3/4
Third Quarter 12-1/2 10-1/2
Fourth Quarter 13-5/8 10
Fiscal 1996
First Quarter $ 11.875 $ 10.750
(through May 30, 1995)
</TABLE>
As of May 30, 1995, the number of stockholders of record of the Common
Stock was 2,649. On May 30, 1995 the closing sales price of the Common Stock
was $11.375.
The Company's bank indebtedness permits quarterly dividend payments
which cannot exceed 25% of the Company's cumulative net income in each year.
The Company paid a regular quarterly dividend of $0.06 per share on June 1,
September 1 and December 1, 1993 and March 1 and June 1, 1994, and an increased
dividend of $0.065 per share on September 1 and December 1, 1994 and March 1,
1995.
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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, 1995, 1994, 1993, 1992 and 1991 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,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues from continuing operations . . . . . . $ 102,692 $ 82,843 $ 64,671 $ 56,790 $ 58,247
========== ========= ========= ========= =========
Income (loss) from continuing operations before
income taxes . . . . . . . . . . . . . . . . $ 10,842 $ 8,860 $ 4,285 $ (507) $ 1,696
Provision (credit) for income taxes . . . . . . 3,457 3,060 962 (77) 503
---------- --------- --------- --------- ---------
Income (loss) from continuing operations . . 7,385 5,800 3,323 (430) 1,193
Income (loss) from discontinued operations . (4,852) 1,084 1,810 (8,985) (5,202)
---------- --------- --------- --------- ---------
Net income (loss) . . . . . . . . . . . . . . . $ 2,533 $ 6,884 $ 5,133 $ (9,415) $ (4,009)
========== ========= ========= ========= =========
Earnings (loss) per share:
Income (loss) from continuing operations . . . $ 1.45 $ 1.13 $ 0.65 $ (0.08) $ 0.23
Income (loss) from discontinued operations . . (0.95) 0.21 0.36 (1.77) (1.02)
---------- --------- --------- --------- ---------
Earnings (loss) per share . . . . . . . . . . . $ 0.50 $ 1.34 $ 1.01 $ (1.85) $ (0.79)
========== ========= ========= ========= =========
Dividends declared and paid per share . . . . . $ 0.255 $ 0.24 $ 1.56 $ -- $ 0.24
Total assets . . . . . . . . . . . . . . . . . $ 129,396 $ 125,857 $ 97,763 $ 104,905 $ 159,828
Long-term debt . . . . . . . . . . . . . . . . $ 37,021 $ 33,168 $ 12,387 $ 528 $ 42,052
Shareholders' equity . . . . . . . . . . . . . $ 64,502 $ 65,953 $ 61,214 $ 63,735 $ 73,162
Book value per share . . . . . . . . . . . . . $ 12.72 $ 12.71 $ 11.95 $ 12.54 $ 14.40
Shares outstanding at year-end . . . . . . . . 5,070 5,189 5,122 5,084 5,080
</TABLE>
See Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, and Note 3 of the Notes to Financial
Statements included in Item 8 hereof for additional financial information
relating to acquisitions included in the data above.
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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.
Revenue from continuing operations in 1995 was $102.7 million, an
increase of $19.8 million or 24% from 1994, compared with a $18.2 million or
28% increase from 1993 to 1994. Gross profit in 1995 increased $5.8 million or
23% from 1994, compared with an increase of $5.0 million or 25% from 1993 to
1994. Operating profit from continuing operations for 1995 was $16.7 million,
an increase of $2.9 million or 21% from 1994, compared with an increase of $2.3
million or 20% from 1993 to 1994. 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 12 of
the Notes to Financial Statements.
Net income, including discontinued operations, for 1995 was $2.5
million or $.50 per share, compared to $6.9 million or $1.34 per share in 1994.
These changes in net income were affected both by operating profit, as
discussed in the Business Segment sections below, and by discontinued
operations, as discussed in the Discontinued Operations section below. Net
loss from discontinued operations, including disposal losses, was $4.9 million
or $.95 in 1995 and accounted for net income of $1.1 million or $.21 per share
in 1994.
In the fourth quarter of 1995 the Company sold primarily all of the
assets and business of its chaff products operation and recorded a pre-tax loss
of $0.6 million as discussed below in the Discontinued Operations section. In
August, 1994 the Company acquired Industrial Retaining Ring Company as
discussed below in the Acquisitions section and the Business Segment section.
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.
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Fiscal 1993 results were impacted by a pre-tax charge of $0.5 million
for the final costs of downsizing the corporate staff and relocating corporate
headquarters from California to New Jersey.
Interest expense increased $1.7 million in 1995 primarily as a result
of increased bank borrowings used for the acquisition of Industrial Retaining
Ring Company, as discussed below in the Liquidity and Capital Resources
section, and higher interest rates on the Company's debt in fiscal 1995 due to
increases in the prime interest rate throughout the year. Interest expense
increased $1.0 million from 1993 to 1994 primarily as a result of increased
bank borrowings used for the acquisitions of Palnut and Electrical Specialties
Company.
New orders received during 1995 by continuing operations totaled
$104.5 million, an increase of $17.1 million or 20% from 1994. New orders
received during 1994 by continuing operations totaled $87.3 million, an
increase of $27.6 million or 46% from 1993. New orders are discussed below by
industry segment. At March 31, 1995, total backlog of unfilled orders was
$34.4 million, compared to $30.9 million and $25.8 million at March 31, 1994
and 1993, respectively.
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 a
pre-tax charge to income of $0.4 million in 1994, 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 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.
ACQUISITIONS
Effective August 31, 1994, the Company acquired all of the outstanding
capital stock of Industrial Retaining Ring Company and its affiliated companies
for a total purchase price of $14.8 million in cash and the assumption of
liabilities. Industrial Retaining Ring Company manufactures retaining rings
and clips used primarily in the heavy equipment and industrial machinery
industries. Sales on an annual basis approximate $9 million.
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. In the fourth quarter of fiscal
1995 this product line, which is located at the TransTechnology Electronics
division, was classified with discontinued operations.
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
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$1.4 million. The Palnut operation manufactures single and multi-thread metal
fasteners, for the automotive and industrial products industries. Sales on an
annual basis approximate $29 million.
DISCONTINUED OPERATIONS
In March 1995, the Company sold substantially all of the assets and
business of its chaff products operation for $6.7 million in cash. The sale of
this operation resulted in an after-tax disposal loss of $0.4 million. The
Company retained the chaff avionics product line and negotiated its sale
separately in May 1995. Also, in March 1995, the Company discontinued and is
negotiating the sale of its computer graphics service operations which operate
under the name TransTechnology Systems & Services, and its Electronics
division, which includes Electronic Connections and Assemblies, Inc. The
domestic portion of the computer graphics service operations was sold in June
1995.
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 after-tax gain of $0.5 million. Additional after-tax disposal
costs of $0.5 million were recorded in 1995 in connection with the sale.
During 1992, the Company adopted a restructuring plan which provided
for the sale of its Financial Systems, Gessner , Lloyd and Belfort
divisions, and the discontinuance of its Computer Graphics manufacturing
operation. At March 31, 1992, the Company had completed the sale of its
Financial Systems division, and had classified all of these businesses for
financial reporting purposes as discontinued operations. 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 $2.0 million, and a receivable of $0.3 million. In the fourth quarter
of 1995 and 1993, the Company reported an after-tax loss and gain on disposal
of these divisions of $0.4 million and $0.4 million, respectively. These
additional costs and income represented adjustments to previous estimates
related to litigation matters. In January 1993, the Company sold its Belfort
division for $1.0 million in cash and a $1.7 million note receivable.
After-tax income of $1.0 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 agreement of which $0.7 million remained at
March 31, 1995. The Company retained one weather instrument product line and
is negotiating its sale separately from the above transaction. Additional
after-tax costs of $0.1 and $0.9 million were recorded in 1994 and 1993,
respectively, in connection with the Company's former Computer Graphics
manufacturing operation, which was discontinued in August, 1991. These
additional costs were for actual and estimated future discontinuation costs.
Additional after-tax net costs of $0.7 million and $0.7 million were
recorded in 1995 and 1993 in connection with the Company's former Space
Ordinance Systems division, which was sold in May 1990, and an after-tax gain
on disposal of $0.2 million was recorded in 1994. These additional costs and
income represent adjustments to previous estimates related to litigation and
environmental matters.
Additional after-tax costs of $0.3 million were recorded in 1995 in
connection with other previously discontinued and sold operations. These
additional costs represent adjustments to previous estimates related to
environmental matters.
11
<PAGE> 13
SPECIALTY FASTENER PRODUCTS SEGMENT
1995 COMPARED WITH 1994
Sales for the Specialty Fastener Products segment were $71.1 million
in 1995, an increase of $18.8 million or 36% from 1994. The increase in sales
was primarily due to the inclusion of twelve months of Palnut fastener
operations in 1995 versus eight months in 1994, the inclusion of eight months
of Industrial Retaining Ring Company operations in 1995, and increased
industrial and truck fastener demand for gear-driven fasteners in fiscal 1995.
Operating profit for the Specialty Fastener Products segment was $16.5
million in 1995, an increase of $6.5 million or 65% from 1994. The primary
factors contributing to the segments increased operating profit in 1995 were
the inclusion of eight months of Industrial Retaining Ring Company operations,
the inclusion of twelve months of Palnut fastener operations in 1995 versus
eight months in 1994 and increased shipments of gear-driven fasteners.
In 1995, new orders in the Specialty Fastener Products segment
increased $14.4 million or 24% from 1994. The primary reasons for the increase
were the inclusion of twelve months of Palnut fastener operations in 1995
versus eight months in 1994, the inclusion of eight months of Industrial
Retaining Ring Company operations and the increased demand for gear-driven
fasteners. Backlog of unfilled orders was $12.7 million at March 31, 1995,
compared to $9.5 million at March 31, 1994.
1994 COMPARED WITH 1993
Sales for the Specialty Fastener Products segment were $52.3 million
in 1994, an increase of $23.3 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.
Operating profit for the Specialty Fastener Products segment was $10.0
million in 1994, an increase of $4.5 million or 81% 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.
In 1994, new orders in the Specialty Fastener Products segment
increased $29.7 million or 99% from 1993. All product lines experienced
increased new orders in 1994 over 1993. This increase was due primarily to the
acquisition of the Palnut product line. Backlog of unfilled orders was $9.5
million at March 31, 1994, compared to $2.5 million at March 31, 1993.
RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT
1995 COMPARED WITH 1994
Sales for the Rescue Hoist and Cargo Hook Products segment were flat
in 1995 at $30.0 million. All three product lines in this segment, rescue
hoists and related spare parts, cargo hooks, and tie-downs, experienced
virtually identical sales as in 1994.
12
<PAGE> 14
Operating profit for the Rescue Hoist and Cargo Hook Products segment
was $0.2 million in 1995, a decrease of $3.6 million or 96% from 1994. The
decrease was primarily due to reduced margins for all product lines through the
first three quarters from shipments on low profit contracts.
In 1995 new orders in the Rescue Hoist and Cargo Hook Products segment
increased by $2.7 million or 10% from 1994. New orders for rescue hoists and
related spare parts were up $5.2 million or 27%, new orders for cargo hooks
were down $2.8 million or 35%, and new orders for tie-downs were up $0.3
million or 55%, in 1995 over 1994. These changes were primarily due to customer
timing of order placement. At March 31, 1995, the backlog of unfilled orders
was $21.8 million, compared to $21.4 million at March 31, 1994.
Sales related to United States Government contracts, which consist
primarily of defense contracts and represent 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 a strategy of developing its
non-defense businesses through acquisitions and refocused foreign and
commercial market attention.
1994 COMPARED WITH 1993
Sales for the Rescue Hoist and Cargo Hook Products segment were $29.6
million in 1994, a decrease of $5.4 million or 16% from 1993. Fiscal 1994
sales of rescue hoists and related spare parts and tie-downs decreased $8.0
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.
Operating profit for the Rescue Hoist and Cargo Hook Products segment
was $3.8 million for 1994, a decrease of $2.2 million or 37% from 1993. The
decrease was primarily due to the reduced shipments of rescue hoists and
related spare parts, offset by increased cargo hook shipments, as mentioned
above.
New orders for the Rescue Hoist and Cargo Hook Products segment
decreased in 1994 by $2.1 million or 7%. Cargo hook new orders increased while
rescue hoists and related spare parts and tie-downs experienced decreased new
orders in 1994, primarily due to the timing of customer orders. At March 31,
1994, the backlog of unfilled orders was $21.4 million, compared to $23.3
million at March 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's debt-to-capitalization ratio was 38%, 34% and 17% as of
March 31, 1995, 1994 and 1993, respectively. The current ratio at March 31,
1995, stood at 3.25 compared to 3.49 and 3.27 at March 31, 1994 and 1993,
respectively. Working capital was $53.1 million at March 31, 1995, down $0.8
million from March 31, 1994 and up $9.6 million from March 31, 1993.
At March 31, 1995, the Company's debt consisted of $16.3 million of
borrowings under a revolving bank credit line, an $8.1 million bank term loan,
a $15.0 million bank term loan and $1.0 million of other borrowings. The
revolving bank credit line commitment is $35.0 million and is subject to a
borrowing base
13
<PAGE> 15
formula. This commitment, which was available to the Company through September
30, 1995, was refinanced on June 30, 1995. 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 $5.0 million. Letters of credit under the line at March
31, 1995 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 $16.3 million of
outstanding borrowings at March 31, 1995. 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. For the year ended March 31, 1995, the
Company was not in compliance with the net income covenant, and paid dividends
in excess of 25% of the Company's cumulative net income for the year. The
Company has received waivers of acceptance from the lenders for both these
covenant non-compliance issues. The $8.1 million term loan, which was used to
acquire the Palnut fastener operation in August 1993, is with the same lenders
as the revolving credit line, is secured by the same collateral, and is due and
payable on August 31, 1998. Principal payments of $360,000 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 and is payable monthly. In connection with the
Industrial Retaining Ring Company acquisition, in September 1994, the Company
obtained a $15.0 million term loan with the same lender as the revolving credit
line and secured by the same collateral. This term loan is due and payable in
equal quarterly installments of $937,500 commencing on December 31, 1995.
Interest accrues at the lending bank's prime rate and is payable monthly. The
$8.1 and $15.0 million term loans were also refinanced on June 30, 1995.
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 March 31, 1995, the Company had
repurchased 172,500 shares at an aggregate cost of $2.1 million.
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 1995 were $5.0 million as compared with $5.0
million in 1994. 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.
On June 30, 1995 the Company acquired the Seeger Group of companies
from a unit of AB SKF of Gothenburg, Sweden for approximately $43,000,000 plus
the assumption of trade debts and accrued expenses. The Seeger Group,
headquartered in Konigstein, Germany, is the global leader in manufacturing
circlips, snap rings and retaining rings. In 1994 the Group's consolidated
revenues from its manufacturing operations in Germany, the UK, Brazil and
U.S.A. were approximately $73.0 million with an operating income of $4.4
million. The Seeger Group operates under the trade names of "Seeger",
"Anderton", and "Waldes" with over 900 employees at its five manufacturing
facilities. Financing for the transaction was provided through a new
$115,000,000 credit facility provided by a bank.
The credit facility, structured as a $25,000,000, 7 year term loan, a
$50,000,000, 4-1/2 year term loan, a $34,000,000 revolving crecdit facility,
and $6,000,000 of international lines of credit, is secured by all of the
assets of the Company and its subsidiaries. Interest rates are tied to either
Prime or LIBOR with a margin depending upon the Company's achievement of
certain operating and financial goals. The facility limits the Company's
ability to pay dividends to 25% of net income and restricts capital
expenditures to $6,500,000 for the fiscal year ending March 31, 1996, and
$7,000,000 thereafter for the life of the loan, as well as containing other
customary financial covenants.
Proceeds from the new credit facility were also used to retire the
Company's existing bank debt.
14
<PAGE> 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements:
Independent Auditors' Report 16
Consolidated Balance Sheets as of March 31, 1995 and 1994 17
Statements of Consolidated Operations for years ended March 31, 1995, 1994 and 1993 18
Statements of Consolidated Cash Flows for years ended March 31, 1995, 1994 and 1993 19
Statements of Consolidated Stockholders' Equity for years ended March 31, 1995, 1994
and 1993 20
Notes to Consolidated Financial Statements 21
Financial Statement Schedules:
Schedule II --
Consolidated Valuation and Qualifying Accounts for years ended March 31, 1995,
1994 and 1993 34
</TABLE>
Schedules required by Article 5 of Regulation S-X, other than those
listed above, are omitted because of the absence of the conditions under which
they are required.
15
<PAGE> 17
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, 1995 and 1994 and the related
statements of consolidated operations, stockholders' equity, and cash flows for
each of the three years in the period ended March 31, 1995. Our audits also
included the consolidated financial statement schedule listed in the Table of
Contents at Item 8. These financial statements and the financial statement
schedule are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on the financial statements and
financial statement schedule 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, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1995 in conformity with generally accepted accounting principles. Also, in our
opinion, such consolidated financial statement schedule, 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.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Parsippany, New Jersey
June 20, 1995
(June 30, 1995 as to Note 11)
16
<PAGE> 18
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,544,000 $ 3,027,000
Accounts receivable:
United States Government 1,204,000 2,815,000
Commercial (net of allowance for doubtful accounts of $103,000
and $271,000 in 1995 and 1994, respectively) 18,280,000 19,500,000
Notes receivable 836,000 2,814,000
Inventories 25,239,000 35,786,000
Prepaid expenses and other current assets 2,706,000 2,932,000
Deferred income taxes 2,592,000 4,253,000
Net assets of discontinued businesses 24,269,000 4,309,000
------------ ------------
Total current assets 76,670,000 75,436,000
------------ ------------
Property:
Land 4,330,000 5,223,000
Buildings 13,268,000 15,657,000
Machinery and equipment 21,772,000 32,611,000
Furniture and fixtures 3,043,000 4,050,000
Leasehold improvements 161,000 671,000
------------ ------------
Total 42,574,000 58,212,000
Less accumulated depreciation and amortization 13,040,000 22,204,000
------------ ------------
Property -net 29,534,000 36,008,000
------------ ------------
Other assets:
Notes receivable 3,274,000 4,061,000
Costs in excess of net assets of acquired businesses (net of accumulated amortization:
$2,793,000 and $2,423,000 in 1995 and 1994, respectively) 12,813,000 3,117,000
Other 7,105,000 7,235,000
------------ ------------
Total other assets 23,192,000 14,413,000
------------ ------------
Total $129,396,000 $125,857,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 3,356,000 $ 1,479,000
Accounts payable-trade 9,147,000 7,489,000
Accrued compensation 4,247,000 4,570,000
Accrued income taxes 591,000 943,000
Other current liabilities 6,267,000 7,109,000
------------ ------------
Total current liabilities 23,608,000 21,590,000
------------ ------------
Long-term debt payable to banks and others 37,021,000 33,168,000
------------ ------------
Other long-term liabilities 4,265,000 5,146,000
------------ ------------
Stockholders' equity:
Preferred stock-authorized, 300,000 shares; none issued -- --
Common stock-authorized, 14,700,000 shares of $.01 par value; issued 5,242,316
and 5,189,104 shares in 1995 and 1994, respectively 52,000 52,000
Additional paid-in capital 45,802,000 45,283,000
Retained earnings 23,418,000 22,186,000
Other stockholders' equity (2,680,000) (1,568,000)
------------ ------------
66,592,000 65,953,000
Less treasury stock, at cost - 1995, 172,500 shares (2,090,000) --
------------ ------------
Total stockholders' equity 64,502,000 65,953,000
------------ ------------
Total $129,396,000 $125,857,000
============ ============
</TABLE>
- - --------------------------------------
See accompanying notes to consolidated financial statements.
17
<PAGE> 19
STATEMENTS OF CONSOLIDATED OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
---------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Sales $ 101,122,000 $ 81,873,000 $ 63,999,000
Interest Income 760,000 675,000 514,000
Other Income 810,000 295,000 158,000
------------- ------------- -------------
Total 102,692,000 82,843,000 64,671,000
Cost of goods sold 71,968,000 57,887,000 44,676,000
------------- ------------- -------------
Gross profit 30,724,000 24,956,000 19,995,000
General, administrative and selling expenses 17,044,000 14,599,000 10,996,000
Environmental charge 7,000 374,000 4,167,000
Corporate office relocation -- -- 468,000
Interest expense 2,831,000 1,123,000 79,000
------------- ------------- -------------
Income from continuing operations before income taxes 10,842,000 8,860,000 4,285,000
Provision for income taxes 3,457,000 3,060,000 962,000
------------- ------------- -------------
Income from continuing operations 7,385,000 5,800,000 3,323,000
Discontinued operations:
(Loss) income from operations (net of applicable tax
benefits of $1,619,000 and $213,000 for 1995 and
1994, respectively, and net of applicable tax provision
of $366,000 for 1993) (2,602,000) 324,000 1,881,000
(Loss) gain from disposal (net of applicable tax benefits
of $1,400,000 and $1,337,000 for 1995 and 1993,
respectively, and net of applicable tax provision of
$306,000 for 1994) (2,250,000) 760,000 (71,000)
------------- ------------- -------------
Net income $ 2,533,000 $ 6,884,000 $ 5,133,000
============= ============= =============
Earnings per share
Income from continuing operations $ 1.45 $ 1.13 $ 0.65
(Loss) income from discontinued operations (0.95) 0.21 0.36
------------- ------------- -------------
Income per share $ 0.50 $ 1.34 $ 1.01
============= ============= =============
Number of shares used in computation of per share
information 5,109,000 5,143,000 5,095,000
</TABLE>
- - ----------------------------------
See accompanying notes to consolidated financial statements.
18
<PAGE> 20
STATEMENTS OF CONSOLIDATED CASH FLOW
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 2,533,000 $ 6,884,000 $ 5,133,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 5,349,000 4,505,000 3,369,000
Provision for losses on accounts receivable 65,000 102,000 79,000
Loss (gain) on sale or disposal of fixed assets and discontinued
businesses 704,000 (452,000) 37,000
Decrease (increase) in deferred income taxes 1,661,000 (1,124,000) (216,000)
Change in assets and liabilities net of acquisitions and dispositions:
(Increase) decrease in accounts receivable (2,672,000) 261,000 368,000
Decrease (increase) in inventories 5,595,000 (200,000) (968,000)
(Increase) decrease in net assets of discontinued businesses (3,672,000) (1,133,000) 523,000
(Increase) decrease in other assets (4,182,000) 93,000 4,485,000
Increase in accounts payable 3,211,000 506,000 105,000
Increase in accrued compensation 1,041,000 1,137,000 672,000
Decrease in other liabilities (2,043,000) (2,895,000) (3,998,000)
Decrease in income tax payable (121,000) (928,000) (1,238,000)
------------ ------------ ------------
Net cash provided by operating activities 7,469,000 6,756,000 8,351,000
------------ ------------ ------------
Cash Flows from Investing Activities:
Business acquisitions (15,952,000) (22,670,000) --
Capital expenditures (5,033,000) (4,973,000) (5,514,000)
Proceeds from sale of fixed assets and discontinued business 6,977,000 1,027,000 5,461,000
Decrease (increase) in notes receivable 2,515,000 (176,000) (687,000)
------------ ------------ ------------
Net cash used in investing activities (11,493,000) (26,792,000) (740,000)
------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from long-term borrowings 42,019,000 34,400,000 28,174,000
Payments on long-term debt (36,289,000) (12,178,000) (27,414,000)
Proceeds from issuance of stock under stock option plan 202,000 571,000 326,000
Stock repurchases and other (2,090,000) -- --
Dividends paid (1,301,000) (1,235,000) (7,990,000)
------------ ------------ ------------
Net cash provided by (used in) financing activities 2,541,000 21,558,000 (6,904,000)
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents (1,483,000) 1,522,000 707,000
Cash and cash equivalents at beginning of year 3,027,000 1,505,000 798,000
------------ ------------ ------------
Cash and cash equivalents at end of year $ 1,544,000 $ 3,027,000 $ 1,505,000
============ ============ ============
Supplemental Information:
Interest payments $ 3,054,000 $ 1,602,000 $ 812,000
Income tax payments $ 1,573,000 $ 4,476,000 $ 600,000
</TABLE>
- - -------------------------------
On 3/1/94 the Company received marketable securities valued at $3.4 million
from the sale of a discontinued business.
See accompanying notes to consolidated financial statements.
19
<PAGE> 21
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK ADDITIONAL
FOR THE YEARS ENDED MARCH 31, 1995, ------------------------- ------------------------- PAID-IN
1994 AND 1993 SHARES AMOUNT SHARES AMOUNT CAPITAL
- - ----------------------------------- --------- --------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1992 5,083,792 $ 51,000 -- $ -- $ 44,290,000
Net income -- -- -- -- --
Cash dividends ($1.56 per share) -- -- -- -- --
Issuance of stock under stock option plan 37,812 -- -- -- 326,000
Foreign translation adjustments -- -- -- -- --
--------- --------- -------- ------------- --------------
Balance, March 31, 1993 5,121,604 51,000 -- -- 44,616,000
Net income -- -- -- -- --
Cash dividends ($.24 per share) -- -- -- -- --
Issuance of stock under stock option plan 57,415 1,000 -- -- 570,000
Issuance of stock under incentive bonus
plan 10,085 -- -- -- 97,000
Foreign translation adjustments -- -- -- -- --
Unrealized investment holding losses -- -- -- -- --
--------- --------- -------- ------------- --------------
Balance, March 31, 1994 5,189,104 52,000 -- -- 45,283,000
Net Income -- -- -- -- --
Cash dividends ($.255 per share) -- -- -- -- --
Purchase of treasury stock -- -- (172,500) (2,090,000) --
Issuance of stock under stock option plan 24,789 -- -- -- 202,000
Issuance of stock under incentive bonus
plan - net 28,423 -- -- -- 317,000
Foreign translation adjustments -- -- -- -- --
Unrealized investment holding losses -- -- -- -- --
--------- --------- -------- ------------- --------------
Balance, March 31, 1995 5,242,316 $ 52,000 (172,500) $ (2,090,000) $ 45,802,000
========= ========= ======== ============= ==============
</TABLE>
<TABLE>
<CAPTION>
OTHER
FOR THE YEARS ENDED MARCH 31, 1995, RETAINED STOCKHOLDERS'
1994 AND 1993 EARNINGS EQUITY TOTAL
- - ----------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Balance, March 31, 1992 $ 19,394,000 $ -- $ 63,735,000
Net income 5,133,000 -- 5,133,000
Cash dividends ($1.56 per share) (7,990,000) -- (7,990,000)
Issuance of stock under stock option plan -- -- 326,000
Foreign translation adjustments -- 10,000 10,000
--------------- --------------- ---------------
Balance, March 31, 1993 16,537,000 10,000 61,214,000
Net income 6,884,000 -- 6,884,000
Cash dividends ($.24 per share) (1,235,000) -- (1,235,000)
Issuance of stock under stock option plan -- -- 571,000
Issuance of stock under incentive bonus
plan -- (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 22,186,000 (1,568,000) 65,953,000
Net Income 2,533,000 -- 2,533,000
Cash dividends ($.255 per share) (1,301,000) -- (1,301,000)
Purchase of treasury stock -- -- (2,090,000)
Issuance of stock under stock option plan -- -- 202,000
Issuance of stock under incentive bonus
plan - net -- (122,000) 195,000
Foreign translation adjustments -- 54,000 54,000
Unrealized investment holding losses -- (1,044,000) (1,044,000)
--------------- --------------- ---------------
Balance, March 31, 1995 $ 23,418,000 $ (2,680,000) $ 64,502,000
=============== =============== ===============
</TABLE>
- - -------------------------------------------
See accompanying notes to consolidated financial statements.
20
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
22% 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 had 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, $0.7, $0.9 and $0.5 million has been expensed and paid during fiscal
1995, 1994 and 1993, respectively.
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 amortization.
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 $1.4 million, $1.4 million and $1.0 million
in 1995, 1994 and 1993, respectively. Included in these amounts were
expenditures of $0.4 million, $0.6 million and $0.4 million in 1995, 1994 and
1993, respectively, which represent costs related to research and development
activities.
Income Taxes. Effective April 1, 1993, the Company adopted 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
21
<PAGE> 23
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. 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 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."
Investments. On March 1, 1994 the Company acquired 465,000 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 aggregate fair market value of
the investment at March 31, 1995 and 1994 was $0.8 and $1.8 million,
respectively. This investment has been classified as available for sale, and
accordingly, gross unrealized holding losses of $2.6 million and $1.6 million
are reported as a reduction to stockholders' equity in the March 31, 1995 and
1994 balance sheets, respectively.
2. DISCONTINUED OPERATIONS
In March 1995, the Company sold substantially all of the assets and
business of its chaff products operation for $6.7 million in cash. The sale of
this operation resulted in an after-tax disposal loss of $0.4 million. The
Company retained the chaff avionics product line and negotiated its sale
separately in May 1995. Also, in March 1995, the Company discontinued and is
negotiating the sale of its computer graphics service operations which operate
under the name TransTechnology Systems & Services, and its Electronics
division, which includes Electronic Connections and Assemblies, Inc. The
domestic portion of the computer graphics service operations was sold in June
1995.
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 after-tax gain of $0.5 million. Additional after-tax disposal
costs of $0.5 million were recorded in 1995 in connection with the sale.
During 1992, the Company adopted a restructuring plan which provided
for the sale of its Financial Systems, Gessner , Lloyd and Belfort
divisions, and the discontinuance of its Computer Graphics manufacturing
operation. At March 31, 1992, the Company had completed the sale of its
Financial Systems division, and had classified all of these businesses for
financial reporting purposes as discontinued operations. 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 $2.0 million, and a receivable of $0.3 million. In the fourth quarter
of 1995 and 1993, the Company reported an after-tax loss and gain on disposal of
these divisions of $0.4 million and $0.4 million, respectively. These
additional costs and income represented adjustments to previous estimates
related to litigation matters. In January 1993, the Company sold its Belfort
division for $1.0 million in cash and a $1.7 million note receivable. 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 agreement of which $0.7 million remained at March 31,
1995. The Company retained one weather instrument product line and is
negotiating its sale separately from the above transaction. Additional
after-tax costs of $0.1 and $0.9 million were recorded in 1994 and 1993,
respectively, in connection with the Company's former Computer Graphics
manufacturing operation, which was discontinued in August, 1991. These
additional costs were for actual and estimated future discontinuation costs.
Additional after-tax net costs of $0.7 million and $0.7 million were
recorded in 1995 and 1993 in connection with the Company's former Space
Ordinance Systems division, which was sold in May 1990, and an after-tax gain
on disposal of $0.2 million was recorded in 1994. These additional costs and
income represent adjustments to previous estimates related to litigation and
environmental matters.
Additional after-tax costs of $0.3 million were recorded in 1995 in
connection with other previously discontinued and sold operations. These
additional costs represent adjustments to previous estimates related to
environmental matters.
22
<PAGE> 24
Operating results of the discontinued businesses were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------------- --------------- -------------
<S> <C> <C> <C>
Total revenues . . . . . . . . . . . . . . . . . . $ 35,515,000 $ 43,661,000 $ 38,452,000
============== =============== =============
(Loss) income before income taxes . . . . . . . . . $ (4,221,000) $ 111,000 $ 2,247,000
Income tax (benefit) provision . . . . . . . . . . (1,619,000) (213,000) 366,000
-------------- --------------- -------------
(Loss) income from operations . . . . . . . . . . . $ (2,602,000) $ 324,000 $ 1,881,000
============== =============== =============
</TABLE>
The loss from operations includes interest expense of $488,000,
$523,000 and $708,000 in 1995, 1994 and 1993, respectively.
Net assets of the discontinued businesses at March 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,344,000 $ 25,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,993,000 186,000
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,109,000 3,203,000
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,755,000 1,198,000
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,932,000) (303,000)
------------ -----------
Net Assets of Discontinued Businesses . . . . . . . . . . . . . . . . . . . $ 24,269,000 $ 4,309,000
============ ===========
</TABLE>
Other assets and liabilities retained by the Company associated with
the discontinued businesses at March 31, 1995 and 1994 are included in the
following balance sheet captions:
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Prepaid Expenses and Other Current Assets . . . . . . . . . . . . . . . . . $ 246,000 $ 376,000
Other Long-term Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 734,000 $ 821,000
Other Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . $ (150,000) $ --
</TABLE>
3. ACQUISITIONS
Effective August 31, 1994, the Company acquired all of the outstanding
capital stock of Industrial Retaining Ring Company and its affiliated companies
for a total purchase price of $14.8 million in cash and the assumption of
liabilities. Industrial Retaining Ring Company manufactures retaining rings
and clips used primarily in the heavy equipment and industrial machinery
industries.
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. In the fourth quarter of fiscal
1995 this product line, which is located at the TransTechnology Electronics
division, was classified with discontinued operations.
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.
23
<PAGE> 25
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 Industrial Retaining Ring Company and
Palnut threaded fastener business had occurred at the beginning of the periods
presented.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
---------------------------------------
(UNAUDITED)
---------------------------------------
1995 1994
---------------- ----------------
<S> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 106,584,000 $ 101,117,000
================ ================
Income from Continuing Operations . . . . . . . . . . . . . . . $ 8,379,000 $ 8,232,000
(Loss) income from Discontinued Operations . . . . . . . . . . (4,852,000) 1,084,000
---------------- ----------------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,527,000 $ 9,316,000
================ =================
Earnings per Share from Continuing Operations . . . . . . . . . $ 1.64 $ 1.60
(Loss) earnings per Share from Discontinued Operations . . . . (0.95) 0.21
---------------- ----------------
Earnings per Share . . . . . . . . . . . . . . . . . . . . . . $ 0.69 $ 1.81
================ ================
</TABLE>
4. INVENTORIES
Inventories at March 31 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
------------ -------------
<S> <C> <C>
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,152,000 $ 5,057,000
Work-in-process:
U.S. Government contracts . . . . . . . . . . . . . . . . . . . . . . . . 1,530,000 1,515,000
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,337,000 6,074,000
Purchased and manufactured parts . . . . . . . . . . . . . . . . . . . . . 15,220,000 23,140,000
------------ -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,239,000 $ 35,786,000
============ =============
</TABLE>
5. INCOME TAXES
The components of total income (loss) from operations (including
continuing and discontinued operations) before income taxes were:
<TABLE>
<CAPTION>
1995 1994 1993
------------- -------------- --------------
<S> <C> <C> <C>
Domestic . . . . . . . . . . . . . . . . . . . . . . . . $ 3,694,000 $ 11,010,000 $ 4,927,000
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . (723,000) (973,000) 197,000
------------- -------------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 2,971,000 $ 10,037,000 $ 5,124,000
============= ============== ==============
</TABLE>
24
<PAGE> 26
The provision (benefit) for income taxes is summarized below:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------- ------------
<S> <C> <C> <C>
Currently payable:
Domestic . . . . . . . . . . . . . . . . . . . . . $ 140,000 $ 2,987,000 $ 1,314,000
Foreign . . . . . . . . . . . . . . . . . . . . . . -- (109,000) 203,000
State . . . . . . . . . . . . . . . . . . . . . . . 208,000 734,000 (256,000)
----------- ------------- ------------
348,000 3,612,000 1,261,000
Deferred . . . . . . . . . . . . . . . . . . . . . . 90,000 (459,000) (1,270,000)
----------- ------------- ------------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 438,000 $ 3,153,000 $ (9,000)
=========== ============= ============
</TABLE>
The provision (benefit) for income taxes is allocated between
continuing and discontinued operations as summarized below:
<TABLE>
<CAPTION>
1995 1994 1993
------------ -------------- ------------
<S> <C> <C> <C>
Continuing . . . . . . . . . . . . . . . . . . $ 3,457,000 $ 3,060,000 $ 962,000
Discontinued . . . . . . . . . . . . . . . . . (3,019,000) 93,000 (971,000)
------------ ------------- ------------
Total . . . . . . . . . . . . . . . . . . . . . $ 438,000 $ 3,153,000 $ (9,000)
============ ============= ============
</TABLE>
The consolidated effective tax rates for continuing operations differ
from the federal statutory rates as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ----------
<S> <C> <C> <C>
Statutory federal rate . . . . . . . . . . . . . . . . . . . 34.0% 34.0% 34.0%
State income taxes after federal income tax . . . . . . . . . 4.6% 4.7% 1.5%
Earnings of the foreign sales corporation . . . . . . . . . . (2.6%) (3.7%) (10.7%)
Amortization of purchase adjustments not
deductible for tax purposes . . . . . . . . . . . . . . . . 1.0% 1.5% 4.8%
Revision of prior years' tax accruals . . . . . . . . . . . . (5.1%) (1.7%) (6.0%)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (0.3%) (1.1%)
--------- --------- ----------
Consolidated effective tax rate . . . . . . . . . . . . . . . 31.9% 34.5% 22.5%
========= ========= ==========
</TABLE>
25
<PAGE> 27
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>
1995 1994
----------- -----------
<S> <C> <C>
Assets
Current
Inventory . . . . . . . . . . . . . . . . . . . $ 2,307,000 $ 3,582,000
Other . . . . . . . . . . . . . . . . . . . . . 285,000 671,000
----------- -----------
Total Current . . . . . . . . . . . . . 2,592,000 4,253,000
----------- -----------
Non-Current
Environmental . . . . . . . . . . . . . . . . . 1,274,000 1,317,000
Other . . . . . . . . . . . . . . . . . . . . . 360,000 --
----------- -----------
Total Non-Current . . . . . . . . . . . 1,634,000 1,317,000
----------- -----------
Total Assets . . . . . . . . . . . $ 4,226,000 $ 5,570,000
=========== ===========
Liabilities
Non-Current
Depreciation . . . . . . . . . . . . . . . . . . $ 1,147,000 $ 1,157,000
----------- -----------
Total Liabilities . . . . . . . . . . . $ 1,147,000 $ 1,157,000
=========== ===========
Summary-Accumulated Deferred Income Taxes
Net Current Assets . . . . . . . . . . . . . . . . $ 2,592,000 $ 4,253,000
Net Non-Current Assets . . . . . . . . . . . . . . 487,000 160,000
----------- -----------
Total . . . . . . . . . . . . . . . . . $ 3,079,000 $ 4,413,000
=========== ===========
</TABLE>
6. LONG-TERM DEBT PAYABLE TO BANKS AND OTHERS
Long-term debt payable, including current maturities, at March 31
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
------------- --------------
<S> <C> <C>
Credit Agreement - 8.3125% . . . . . . . . . . . . . . $ 16,300,000 $ --
Credit Agreement - 5.50% . . . . . . . . . . . . . . . -- 15,000,000
Credit Agreement - 5.375% . . . . . . . . . . . . . . . -- 10,000,000
Term Loan - 9.0% and 6.50% in 1995 and 1994,
respectively . . . . . . . . . . . . . . . . . . . . 8,080,000 9,160,000
Term Loan - 9.0% . . . . . . . . . . . . . . . . . . . 15,000,000 --
Other . . . . . . . . . . . . . . . . . . . . . . . . . 997,000 487,000
------------- --------------
40,377,000 34,647,000
Less current maturities . . . . . . . . . . . . . . . . 3,356,000 1,479,000
------------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,021,000 $ 33,168,000
============= ==============
</TABLE>
26
<PAGE> 28
Credit Agreement
At March 31, 1995, outstanding bank debt consisted of a revolving
credit facility which provides for borrowings and letters of credit of $35.0
million and two term loans totalling $23.1 million. Borrowing under the
credit facility at March 31, 1995 was $16.3 million.
The revolving credit facility, which was available to the Company
through September 1995, was refinanced in June 1995 (see Note 11). 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 $18.0 million. Letters of credit, which are included
in the borrowing base formula, are limited to $5.0 million. Letters of credit
under this facility at March 31, 1995 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, 1995, the Company had $16.3 million
of borrowings using LIBOR. The agreement contains requirements for a minimum
tangible net worth of $50.0 million at March 31, 1995; a quarterly maximum
total liabilities to tangible equity ratio of 1.4 to 1.0 at March 31, 1995; a
minimum annual working capital level of $40.0 million; a minimum annual cash
flow coverage ratio of 1.1 to 1.0; and minimum net income of $5.0 million per
year for the year ending on March 31, 1995. 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. For the year ended March 31,
1995, the Company was not in compliance with the net income covenant, and paid
dividends in excess of 25% of the Company's cumulative net income for the year.
The Company has received waivers of acceptance from the lenders for both these
covenant non-compliance issues.
The $8.1 million and $15.0 million term loans are with the same
lenders as the revolving credit line and were also refinanced on June 30, 1995
(see Note 11). They are secured by the same collateral, and are due and
payable on August 31, 1998 and September 30, 1999, respectively. Principal
payments on the $8.1 million term loan 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. Principal payments on the $15.0
million term loan of $937,500 are due and payable on the last day of each
quarter, commencing December 31, 1995, through September 30, 1999. Interest on
the term loans accrue at the lending bank's prime rate plus 1/4 percentage
point. 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 and loans on life insurance policies owned by the Company
with a fixed interest rate of 5%.
Debt Maturities
<TABLE>
<S> <C>
1996 (current) . . . . . . . . . . . . . . . . . $ 3,356,000
1997 . . . . . . . . . . . . . . . . . . . . . . 21,532,000
1998 . . . . . . . . . . . . . . . . . . . . . . 5,233,000
1999 . . . . . . . . . . . . . . . . . . . . . . 7,554,000
2000 . . . . . . . . . . . . . . . . . . . . . . 1,921,000
Thereafter . . . . . . . . . . . . . . . . . . . 781,000
--------------
Total . . . . . . . . . . . . . . . . . $ 40,377,000
==============
</TABLE>
27
<PAGE> 29
7. STOCKHOLDERS' EQUITY AND EMPLOYEE/DIRECTOR STOCK OPTIONS
Under the Company's stock option plan, options to purchase shares of
the Company's common stock have been granted to directors, officers and key
employees 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, 1995, there were 375,015 options outstanding, of which
72,843 were exercisable at that date. The remaining options for 302,172 shares
are exercisable on various dates through October 1999.
The table below summarizes stock option transactions:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Options outstanding, beginning of the year
($5.50-$29.81 per share) . . . . . . . . . 230,537 169,679 375,543
Options granted ($9.63-$15.13 per share) . . 234,836 146,500 --
Options exercised ($5.50-$13.44 per share) . (24,789) (57,415) (37,812)
Options expired and cancelled . . . . . . . . (65,569) (28,227) (168,052)
----------- ----------- -----------
Options outstanding, end of the year . . . . 375,015 230,537 169,679
=========== =========== ===========
Aggregate option price . . . . . . . . . . . $ 4,637,517 $ 2,406,531 $ 2,002,194
Options exercisable ($7.50-$18.53 per share) 72,843 63,914 107,973
</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 $1,220,000,
$1,301,000 and $779,000 in 1995, 1994 and 1993, respectively. The Company has
two defined contribution plans covering substantially all employees.
Contributions are based on certain percentages of an employee's eligible
compensation. Expenses related to these plans were $1,373,000, $1,786,000, and
$1,493,000 in 1995, 1994, and 1993, 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
$275,000, $226,000 and $218,000 in 1995, 1994 and 1993, 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.
28
<PAGE> 30
The components of net postretirement benefit cost for the years ended
March 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
------------- ------------
<S> <C> <C>
Service cost (benefits earned during the year) . . . . . . . . . . . . . $ 94,000 $ 124,000
Interest cost on projected postretirement benefit obligation . . . . . . 168,000 196,000
Amortization of transition obligation . . . . . . . . . . . . . . . . . . 101,000 123,000
------------- ------------
Total postretirement benefit cost . . . . . . . . . . . . . . . . . $ 363,000 $ 443,000
============= ============
</TABLE>
The estimated before tax expense, using the Company's previous
practice of recognizing expense as claims were paid, would have been
approximately $116,000 and $127,000 for fiscal 1995 and 1994, respectively,
and was $139,000 for fiscal 1993.
The accumulated postretirement benefit obligation and funded status at
March 31 were as follows:
Accumulated postretirement benefit obligation:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (711,000) $ (893,000)
Fully eligible plan participants . . . . . . . . . . . . . . . . . . (364,000) (295,000)
Other active plan participants . . . . . . . . . . . . . . . . . . . (958,000) (1,149,000)
------------ ------------
Accumulated postretirement benefit obligation . . . . . . . . . . . . . . (2,033,000) (2,337,000)
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . -- --
------------ ------------
Accumulated postretirement benefit obligation in excess of plan assets . (2,033,000) (2,337,000)
Unrecognized net (gain) loss . . . . . . . . . . . . . . . . . . . . . . (356,000) 94,000
Unrecognized transition obligation . . . . . . . . . . . . . . . . . . . 1,826,000 1,927,000
------------ ------------
Accrued postretirement benefit liability . . . . . . . . . . . . . . . $ (563,000) $ (316,000)
============ ============
</TABLE>
Accrued postretirement benefit cost is included in other liabilities
on the balance sheet.
The assumed health care cost trend rates used for measurement purposes
were 13% and 14% for 1995 and 1994, respectively, trending down 1% each year to
10% in 1998 and then decreasing .5% each year to 6.5% in 2005 and beyond, for
substantially all participants. The weighted-average discount rates used were
8.5% and 8.0% at March 31, 1995 and 1994, respectively.
A 1% increase in health care trend rate would increase the annual
expense by approximately 12.3% for the year ended March 31, 1995 and
accumulated postretirement benefit obligation by approximately 13.5% at March
31, 1995.
29
<PAGE> 31
9. COMMITMENTS
Rent expense under operating leases for the years ended March 31,
1995, 1994, and 1993 was $1,802,000, $1,450,000 and $1,150,000, 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:
1996 . . . . . . . . . . . . . . . . . . . . . . $ 2,185,000
1997 . . . . . . . . . . . . . . . . . . . . . . 2,032,000
1998 . . . . . . . . . . . . . . . . . . . . . . 1,741,000
1999 . . . . . . . . . . . . . . . . . . . . . . 1,054,000
2000 . . . . . . . . . . . . . . . . . . . . . . 545,000
Thereafter . . . . . . . . . . . . . . . . . . . 1,521,000
-----------
Total . . . . . . . . . . . . . . . . . $ 9,078,000
===========
</TABLE>
Included in the above amounts is the aggregate lease commitment
associated with the Company's former corporate office. Other-long-term
liabilities at March 31, 1995, include a $0.4 million obligation associated
with the lease which expires in July 1998.
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 sites in Pennsylvania and Illinois which
continue to be owned although the related businesses have been sold or are
expected to be sold during fiscal 1996. 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, 1995, the balance of this clean-up reserve
was $3.1 million. 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 1999.
In 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 sought to recover in excess of $15.0 million for
compensatory damages and an unspecified sum for punitive damages. The
plaintiffs alleged that the Company's waste handling practices 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. This action was settled in May 1995 with the Company paying $2.8
million in exchange for title to the subject real estate and a release of all
claims. The Company recorded in discontinued operations a loss of $1.3
million, in fiscal 1995, based on the appraised value of the property. 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
30
<PAGE> 32
hazardous materials on this property. Substantially all of the remedial work
has been performed, with ongoing monitoring and water treatment activity
expected to continue until 2002.
In addition, the Company has been named as a potentially responsible
party in various environmental remediation recovery 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 and, as to
several sites, it is alleged that the Company was an owner or operator. Such
properties generally relate to businesses which have been sold or discontinued.
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.
The Company is also engaged in various other legal proceedings
incidental to its business.
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. SUBSEQUENT EVENTS
On June 30, 1995 the Company acquired the Seeger Group of companies
from a unit of AB SKF of Gothenburg, Sweden for approximately $43,00,000 plus
the assumption of trade debts and accrued expenses. Financing for the
transaction was provided through a new $115,000,000 credit facility provided by
a bank.
The credit facility, structured as a $25,000,000, 7 year term loan, a
$50,000,000, 4-1/2 year term loan, a $34,000,000 revolving credit facility, and
$6,000,000 of international lines of credit, is secured by all of the assets of
the Company and its subsidiaries. Interest rates are tied to either Prime or
LIBOR with a margin depending upon the Company's achievement of certain
operating and financial goals. The facility limits the Company's ability to
pay dividends to 25% of net income and restricts capital expenditures to
$6,500,000 for the fiscal year ending March 31, 1996, and $7,000,000 thereafter
for the life of the loan, as well as containing other customary financial
covenants.
Proceeds from the new credit facility were also used to retire the
Company's existing bank debt.
12. SEGMENT INFORMATION
The Company develops, manufactures and sells primarily specialty
fastener products and rescue hoist and cargo hook products. Specialty Fastener
Products include gear-driven band fasteners, threaded fasteners and retaining
rings for the marine, auto, toy, aircraft, heavy equipment and industrial
machinery industries. Rescue Hoist and Cargo Hook Products include 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.
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 18%, 23% and 28% of sales from continuing operations in
1995, 1994 and 1993, respectively, were derived from sales to the United States
Government and its prime contractors which are attributable primarily to the
Rescue Hoist and Cargo Hook Products Segment.
31
<PAGE> 33
<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>
Specialty Fastener Products (4) . 1995 $ 71,103,000 $ 16,500,000 $ 3,193,000 $ 1,906,000 $ 60,986,000
1994 52,319,000 10,018,000 2,289,000 1,545,000 38,669,000
1993 28,998,000 5,524,000 1,060,000 550,000 13,845,000
Rescue Hoist and Cargo Hook (4) . 1995 30,019,000 160,000 469,000 605,000 24,493,000
1994 29,554,000 3,772,000 661,000 675,000 32,249,000
1993 35,001,000 5,993,000 1,002,000 536,000 33,446,000
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Segments . . . . . . . . . . 1995 $ 101,122,000 $ 16,660,000 $ 3,662,000 $ 2,511,000 $ 85,479,000
1994 81,873,000 13,790,000 2,950,000 2,220,000 70,918,000
1993 63,999,000 11,517,000 2,062,000 1,086,000 47,291,000
Corporate . . . . . . . . . . . . . 1995 -- (3,882,000) 64,000 260,000 43,917,000
1994 -- (4,646,000) 56,000 283,000 54,939,000
1993 -- (7,788,000)(3) 97,000 228,000 50,472,000
Corporate Interest and Other Income 1995 -- 895,000 -- -- --
1994 -- 839,000 -- -- --
1993 -- 635,000 -- -- --
Interest Expense . . . . . . . . . 1995 -- (2,831,000) -- -- --
1994 -- (1,123,000) -- -- --
1993 -- (79,000) -- -- --
Consolidated . . . . . . . . . . . 1995 $ 101,122,000 $ 10,842,000 $ 3,726,000 $ 2,771,000 $ 129,396,000
1994 81,873,000 8,860,000 3,006,000 2,503,000 125,857,000
1993 63,999,000 4,285,000 2,159,000 1,314,000 97,763,000
===================================================================================================================================
</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.
(4) The Company's segments have been retitled to reflect the current business
activity after the discontinuance of entities previously included.
32
<PAGE> 34
In 1995, 1994 and 1993, the Company had revenues from export
sales as follows:
<TABLE>
<CAPTION>
1995 1994(a) 1993(a)
------------- ------------- -------------
<S> <C> <C> <C>
LOCATION
Middle East . . . . . . . . . . . . . . . . . . . . . . . . $ 114,000 $ 142,000 $ 126,000
Mexico, Central and South America . . . . . . . . . . . . . 1,015,000 657,000 312,000
Western Europe . . . . . . . . . . . . . . . . . . . . . . 6,641,000 6,221,000 6,719,000
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . 5,896,000 3,630,000 1,584,000
Pacific and Far East . . . . . . . . . . . . . . . . . . . 1,638,000 4,159,000 1,178,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,000 141,000 301,000
------------- ------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,440,000 $ 14,950,000 $ 10,220,000
============= ============= =============
</TABLE>
- - ---------------
(a) Restated to reflect only continuing operations.
13. 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>
1995
- - ----
Total Revenues . . . . . . . . . . $22,437 $22,411 $26,328 $31,516 $102,692
Gross Profit . . . . . . . . . . . 6,138 6,951 8,569 9,066 30,724
Income from Continuing Operations . 1,597 1,169 2,434 2,185 7,385
Loss from Discontinued Operations . (525) (972) (1,080) (2,275) (4,852)
Net Income (Loss) . . . . . . . . . 1,072 197 1,354 (90) 2,533
Earnings (Loss) Per Share:
Income from Continuing Operations $ 0.31 $ 0.23 $ 0.48 $ 0.43 $ 1.45
Loss from Discontinued Operations (0.10) (0.19) (0.21) (0.45) (0.95)
Net Income (Loss) . . . . . . . . $ 0.21 $ 0.04 $ 0.27 $ (0.02) $ 0.50
1994
- - ----
Total Revenues . . . . . . . . . . $16,031 $19,712 $22,775 $24,325 $ 82,843
Gross Profit . . . . . . . . . . . 4,701 5,863 6,758 7,634 24,956
Income from Continuing Operations . 1,274 1,301 1,489 1,736 5,800
Income (loss) from Discontinued 240 (70) 116 798 1,084
Operations . . . . . . . . . . .
Net Income . . . . . . . . . . . . 1,514 1,231 1,605 2,534 6,884
Earnings (Loss) Per Share:
Income from Continuing Operations $ 0.25 $ 0.25 $ 0.29 $ 0.34 $ 1.13
Income (loss) from Discontinued 0.05 (0.01) 0.02 0.15 0.21
Operations . . . . . . . . . .
Net Income . . . . . . . . . . . $ 0.30 $ 0.24 $ 0.31 $ 0.49 $ 1.34
</TABLE>
33
<PAGE> 35
TRANSTECHNOLOGY CORPORATION
SCHEDULE II
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
For Years Ended March 31, 1995, March 31, 1994 and March 31, 1993
<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>
1995
- - ----
Allowances for
doubtful accounts
and sales returns $271,000 $ 65,000 $23,000 $256,000(C) $103,000
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 $ 79,000 $76,000 $105,000 $318,000
</TABLE>
(A) Amount consists primarily of sales adjustments charged to revenue
accounts.
(B) Amount represents write-off of uncollectible accounts.
(C) Amount includes $97,000 reserves for uncollectible accounts of
discontinued operations reclassed to net assets held for sale.
34
<PAGE> 36
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, 1995 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, 1995 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, 1995 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, 1995 and is incorporated
herein by reference.
35
<PAGE> 37
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, 1995 and March 31,
1994
Statements of Consolidated Operations for the years ended
March 31, 1995, March 31, 1994 and March 31, 1993
Statements of Consolidated Cash Flows for the years ended
March 31, 1995, March 31, 1994 and March 31, 1993
Statements of Consolidated Stockholders' Equity for the years
ended March 31, 1995, March 31, 1994 and March 31, 1993
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
Schedule II - Consolidated Valuation and Qualifying Accounts
for the years ended March 31, 1995, 1994 and 1993
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:
In September 1994, a report on Form 8-K was filed to report
the acquisition of all of the outstanding stock of Industrial
Retaining Ring Company and of Retainer, Inc., and
substantially all of the assets of Industrial Advertising on
September 12, 1994.
A report on Form 8-K/A was filed in January 1995, amending the
report on Form 8-K previously filed.
36
<PAGE> 38
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 12, 1995
TRANSTECHNOLOGY CORPORATION
By: /s/Michael J. Berthelot
-------------------------------------
Michael J. Berthelot,
Chairman of the Board, President
and Chief Executive Officer
37
<PAGE> 39
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 12, 1995
- - ----------------------------------- and Chief Executive Officer
MICHAEL J. BERTHELOT (Principal Executive Officer)
/s/Patrick K. Bolger Executive Vice President, Chief June 12, 1995
- - ----------------------------------- Operating Officer and Director
PATRICK K. BOLGER
/s/Chandler J. Moisen Senior Vice President, Treasurer and June 12, 1995
- - --------------------------------- Chief Financial Officer
CHANDLER J. MOISEN (Principal Financial and Accounting Officer)
/s/Richard Mascuch Director June 12, 1995
- - --------------------------------
RICHARD MASCUCH
/s/Walter Belleville Director June 13, 1995
- - -----------------------------------
WALTER BELLEVILLE
/s/Gideon Argov Director June 12, 1995
- - ----------------------------------
GIDEON ARGOV
/s/Thomas V. Chema Director June 12, 1995
- - -------------------------------
THOMAS V. CHEMA
/s/H. Gary Carlson, Ph.D. Director June 12, 1995
- - -------------------------------
H. GARY CARLSON, Ph.D.
/s/James A. Lawrence Director June 12, 1995
- - --------------------------------
JAMES A. LAWRENCE
</TABLE>
38
<PAGE> 40
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) --
10.1 1992 Long Term Incentive Plan of the Company.(3) --
10.2 Amended and Restated 1992 Long Term Incentive Plan (12) --
10.3 Form of Incentive Stock Option Agreement (12) --
10.4 Form of Director Stock Option Agreement --
10.5 Form of Restricted Stock Award Agreement used under the Company's 1992 Long Term
Incentive Plan.(11) --
10.6 Indemnification Agreement dated February 11, 1987 between the Company and each of
its officers and directors.(4) --
10.7 Executive Life Insurance Plan.(5) --
10.8 Revolving Loan and Security Agreement dated as of June 21, 1991 between the
Company and National Canada Finance Corp.(6) --
10.9 First Amendment to Revolving Loan and Security Agreement dated as of December 12,
1991 between the Company and National Canada Finance Corp.(7) --
10.10 Second Amendment to Revolving Loan and Security Agreement dated as of December 10,
1992 between the Company and National Canada Finance Corp.(7) --
10.11 Third Amendment to Revolving Loan and Security Agreement dated August 2, 1993
between the Company and National Canada Finance Corp.(11) --
10.12 Fourth Amendment to Revolving Loan and Security Agreement dated January 31, 1994
between the Company and National Canada Finance Corp. --
10.13 Fifth Amendment to Revolving Loan and Security Agreement dated September 9, 1994
between the Company and National Canada Finance Corp. --
21.1 List of Subsidiaries of the Company. --
23.1 Independent Auditors' Consent. --
27.1 Financial Data Schedule --
</TABLE>
- - ----------------------
<TABLE>
<S> <C> <C>
(1) Incorporated by reference from the Company's Form 8-A Registration Statement
No. 2-85599 dated February 9, 1987. --
(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 Registration Statement on
Form S-8 No. 33-59546 dated March 15, 1993. --
(4) Incorporated by reference from the Company's Annual Report on Form 10-K for
the Fiscal Year ended March 31, 1987. --
(5) Incorporated by reference from the Company's Annual Report on Form 10-K for
the Fiscal Year ended March 31, 1989. --
</TABLE>
39
<PAGE> 41
<TABLE>
<CAPTION>
Page
Sequentially
Numbered
------------
<S> <C> <C>
(6) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended March 31, 1991. --
(7) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the Quarter ended December 27, 1992. --
(8) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the Quarter ended December 29, 1991. --
(9) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the Quarter ended September 29, 1991. --
(10) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended March 31, 1993. --
(11) Incorporated by reference from the Company's Annual Report on Form 10-K
for the Fiscal Year ended March 31, 1994 --
(12) Incorporated by reference from the Company's Registration Statement on
Form S-8 No. 33-87800 dated December 22, 1994 --
</TABLE>
40
<PAGE> 1
EXHIBIT 10.4
TRANSTECHNOLOGY CORPORATION
DIRECTOR STOCK OPTION AGREEMENT
Agreement dated as of September 15, 1994 between TransTechnology
Corporation, a Delaware corporation (the "Company"), and _________________
("Optionee"), residing at _____________________________________________________.
Whereas, pursuant to the TransTechnology Corporation Amended and Restated
1992 Long Term Incentive Plan of the Company (the "Plan"), the Board of
Directors and shareholders have authorized the granting to Optionee of an
incentive stock option to purchase shares of common stock of the Company upon
the terms and conditions hereinafter stated.
NOW THEREFORE, in consideration of the covenants herein set forth, the
parties agree as follows:
1. Shares & Price. The Company grants to Optionee the right to
purchase, upon and subject to the terms and conditions herein stated
and the terms and conditions of the Plan, all or any part of _______
shares of common stock ($.01 par value) of the Company (the
"Shares"), for cash at the price of $_______ per share.
2. Term of Option. This option shall expire on September 15, 1999.
3. Installments. Subject to the provisions hereof, this option shall
become exercisable on September 15, 1995.
4. Exercise. This option may only be exercised by delivery to the
Company of (i) a written notice of exercise, in form acceptable to
the Company, stating the number of Shares then being purchased
hereunder, and (ii) a check, or cash, in the amount of the purchase
price of such shares (or, at the discretion of the Board of
Directors, with Shares of Company with a market value equal to the
purchase price at date of exercise).
5. Termination of Service as a Director. If Optionee ceases to be a
director of the Company for any reason other than his death or
disability, either Optionee or the person entitled to succeed to his
rights hereunder shall have the right, at any time within ninety
days after such termination and prior to the expiration of this
option pursuant to Paragraph 2 hereof, to exercise this option to
the extent, but only to the extent, that this option was exercisable
and had not
41
<PAGE> 2
previously been exercised at the date of such termination of
employment; provided, however, that all rights under this option
shall expire in any event on the day specified in Paragraph 2 hereof
or ninety days after Optionee terminates service as a Director,
whichever first occurs.
6. Death of Optionee & No Assignment. The option shall not be
assignable or transferable except by will or by the laws of descent
and distribution and shall be exercisable during his lifetime only
by the Optionee. If Optionee shall become disabled or die while in
the employ of the Company, the Optionee or the person entitled to
succeed to his rights hereunder may exercise this option until the
first to occur of (i) the date one year from the date of the
Optionee's disability or death, or (ii) the date such option expires
pursuant to Paragraph 2 hereof to the extent that Optionee was
entitled to exercise this Option at the date of his disability or
death.
7. Service of Optionee. In consideration of the granting of this Option
by the Company, the Optionee agrees to render faithful and efficient
services to the Company as a director for a period of at least one
year from the date this Option is granted.
8. No Rights as Stockholders. Optionee shall have no rights as a
stockholder with respect to the Shares covered by the Option until
the date of the issuance of stock certificates to him. No adjustment
will be made for dividends or other rights for which the record date
is prior to the date such stock certificates are issued pursuant to
the exercise of options granted hereunder.
9. Modification and Termination. The rights of Optionee are subject to
modification and termination in certain events as provided in the
Plan.
10. Shares Purchased for Investment. Optionee represents and agrees that
if he exercises this option in whole or in part, he shall acquire
the shares upon such exercise for the purpose of investment and not
with a view to their resale or distribution. The Company reserves
the right to include a legend of each certificate representing
shares subject to this option, stating in effect that such shares
have not been registered under the Securities Act of 1933, as
amended.
11. This Agreement Subject to Plan. This agreement is made pursuant to
all of the provisions of the Plan, and is intended, and shall be
interpreted in a manner, to comply therewith. Any provision hereof
inconsistent with the Plan shall be superseded and governed by the
Plan.
42
<PAGE> 3
12. Gender. Unless the context otherwise requires, the masculine gender
includes the feminine.
13. Notices. Any notices or other communication required or permitted
hereunder shall be sufficiently given if delivered personally or
sent by registered or certified mail, postage prepaid, to the
Company at its corporate headquarters, and to the Optionee at the
address above, or to such other address as shall be furnished in
writing by either party to the other party, and shall be deemed to
have been given as of the date so delivered or deposited in the
United States mail, as the case may be.
IN WITNESS WHEREOF, the parties hereto have executed this agreement.
TRANSTECHNOLOGY CORPORATION
("Company")
--------------------------------
Michael J. Berthelot
Chairman, President and CEO
("Optionee")
---------------------------------------
Optionee Name
Grant Number: 00
------
VD:2033
43
<PAGE> 1
EXHIBIT 10.12
FOURTH AMENDMENT TO THE
REVOLVING LOAN AND
SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO THE REVOLVING LOAN AND SECURITY AGREEMENT (the
"Fourth Amendment") is entered into by and among NATIONAL CANADA FINANCE
CORP., NATIONAL BANK OF CANADA (New York, New York) (collectively, "Bank"),
TRANSTECHNOLOGY CORPORATION, a Delaware corporation ("TT") , and Electronic
Connectors & Assemblies, Inc., a Delaware corporation ("ECA, Inc." and,
together with TT, sometimes hereinafter referred to collectively in this
Fourth Amendment as "Borrowers").
RECITALS
A. On June 21, 1991, TT and Bank entered into a certain Revolving Loan
And Security Agreement (the "Loan Agreement," all terms defined therein being
used in this Fourth Amendment with the same meaning unless otherwise stated)
under the terms of which Bank loaned to TT $9,000,000 on a revolving loan
basis and $4,000,000 in the form of letters of credit pursuant to the
provisions set forth in the Loan Agreement.
B. On December 18, 1991, TT and Bank entered into a certain First
Amendment To The Revolving Loan And Security Agreement (the "First Amendment")
to provide for (1) the elimination of the $4,000,000 sub-limit imposed on TT
by Bank with respect to funding of the Letter of Credit Facility, (2) the
modification of certain covenants, and (3) the waiver by Bank of TT's
compliance with Section 7.1 (N) of the Loan Agreement relating to TT's net
worth for the period ended September 29, 1991.
C. On December 10, 1992, TT and Bank entered into a certain Second
Amendment To The Revolving Loan And Security Agreement (the "Second
Amendment") to provide for (1) an increase in the maximum principal amount of
borrowings under the Revolving Loan from $13,000,000 to $25,000,000 (inclusive
of the issuance by Bank to TT of a maximum of $5,000,000 of standby letters of
credit), (2) a modification to the rate of interest charged on borrowings
under the Revolving Loan to provide for a rate of interest based on the Base
Rate or LIBOR (as defined therein), (3) a modification to the Borrowing Base
to permit loan advances against the Eligible Inventory of TT, (4) the
modification of Bank's Collateral of TT to include machinery and equipment of
TT, (5) the modification of certain financial covenants of TT, (6) the payment
by TT of certain dividends, and (7) the extension of the Termination Date of
the Loan Agreement.
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D. On December 31, 1992, TT and Bank entered into a letter agreement
(the "Letter Agreement") to permit TT to pay dividends in accordance with
Section 7.2(H) of the Loan Agreement, as amended, commencing with the quarter
ending December 31, 1992.
E. On August 2, 1993, TT and Bank entered into a certain Third
Amendment To The Revolving Loan And Security Agreement (the "Third Amendment")
to provide for (1) an increase in the maximum principal amount of borrowings
under the Revolving Loan from $25,000,000 to $35,000,000 (inclusive of the
issuance by Bank to TT of a maximum of $5,000,000 of standby letters of
credit), (2) a term loan facility in the principal amount of $10,000,000 with
interest accruing at a rate equal to one-quarter (1/4) percentage points above
the Base Rate, (3) the grant to Bank of a mortgage on the Palnut Property (as
defined in the Third Amendment), (4) a modification to the Borrowing Base to
increase the amount of funds TT may borrow against Eligible Inventory from
$13,000,000 to $18,000,000, and (5) the establishment of a termination fee
upon the prepayment by TT of the term loan.
F. TT has established ECA, Inc., a wholly-owned subsidiary of TT, for
the purpose of purchasing and distributing electrical connectors on a
worldwide basis.
G. Borrowers have requested that Bank make available to ECA, Inc. funds
under the Revolving Loan in accordance with the provisions of the Loan
Agreement, as amended.
H. In consideration for Bank agreeing to loan and re-loan funds to ECA,
inc. under the Revolving Loan in accordance with the provisions of the Loan
Agreement, as amended, ECA, Inc. desires to (1) assume as co-obligor all
obligations and liabilities of Borrowers due and owing to Bank now or
hereafter arising under the Loan Agreement, as amended, and (2) grant to Bank
a security interest in and to its Collateral in accordance with the provisions
of this Fourth Amendment.
I. Borrowers and Bank now desire to amend the Loan Agreement, as
amended, to (1) add ECA, Inc. as a co-obligor for the repayment of all loans
to Borrowers by Bank and (2) provide for such other amendments and
modifications as are set forth in the provisions of this Fourth Amendment.
J. Due to the affiliation and financial interdependence of Borrowers,
Bank and Borrowers have determined that it would be in their respective best
interests for each Borrower to be a joint and several obligor of each other
Borrower's obligations to Bank in accordance with the provisions set forth in
the Loan Agreement, as amended by the First Amendment, the Second Amendment,
the Letter Agreement, the Third Amendment, and this Fourth Amendment.
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PROVISIONS
NOW, THEREFORE, in consideration of the foregoing, the parties agree as
follows:
SECTION I. AMENDMENTS TO LOAN AGREEMENT.
The Loan Agreement is amended as follows:
A. On and after the effective date of this Fourth Amendment, each
reference in the Loan Agreement to "this Agreement," "hereunder," and
"hereof," or words of like import referring to the Loan Agreement shall mean
and refer to the Loan Agreement, as amended by the First Amendment, the Second
Amendment, the Letter Agreement, the Third Amendment and this Fourth
Amendment. The Loan Agreement, as amended by the First Amendment, the Second
Amendment, the Letter Agreement, The Third Amendment and this Fourth
Amendment, is, and shall continue to be, in full force and effect and hereby
is ratified and confirmed in all respects.
B. On and after the effective date of this Fourth Amendment, each
reference in the Loan Agreement, as amended, to "Borrower" or words of like
import referring to Borrower shall mean, refer to, and include ECA, Inc. and
shall hereinafter be treated as referring to "Borrowers" on a collective basis
and in the aggregate.
C. Grant of Security Interest. To secure the prompt payment and
performance of the Obligations, ECA, Inc. hereby grants to Bank in accordance
with the provisions of Section 4.1 of the Loan Agreement, as amended, a
continuing security interest in and to all of the Property of ECA, Inc.
described in Section 4.1(A) through (G) of the Loan Agreement, as amended,
whether now owned or existing or hereafter acquired or arising and wheresoever
located.
D. Paragraphs (MM) and (JJJ) of Section 1.1 of the Loan Agreement are
amended in their entirety as follows:
(MM) Promissory Note. The Promissory Note executed by TT and
delivered to Bank, dated June 21, 1991, as amended by (1) the First
Amendment To Promissory Note, executed by TT and delivered to Bank, dated
December 10, 1992, (2) the Second Amendment To Promissory Note, executed
by TT and delivered to Bank, dated August 2, 1993, and (3) the Third
Amendment To Promissory Note in the form attached to the Fourth Amendment
as Exhibit A (with such changes or modifications, if any, to which
Borrowers and National Canada Finance Corp. may agree) evidencing the
Revolving Loan made by National Canada Finance Corp. pursuant to Section
2.1(A) of this Agreement, together with all amendments thereto and all
notes issued in substitution therefor or replacement thereof.
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<PAGE> 4
(JJJ) Term Note. The Term Note executed by TT and delivered to Bank,
dated August 2, 1993, as amended by the First Amendment To Term Note, in
the form attached to the Fourth Amendment as Exhibit B (with such changes
or modifications, if any, to which Borrowers and National Canada Finance
Corp. may agree) evidencing the Term Loan made by National Canada Finance
Corp. pursuant to Section 2.2(A) of this Agreement, together with all
amendments thereto and all notes issued in substitution therefor or
replacement thereof.
SECTION II. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWERS.
Each Borrower represents, warrants, and covenants that it has good and
marketable title to the Collateral free and clear of all liens, claims,
mortgages, security interests, pledges, charges or encumbrances whatsoever
(other than Permitted Liens or as have otherwise been permitted by Bank
pursuant to the Loan Agreement, as amended), except as have been granted to
Bank.
A. To the extent such representations, warranties and covenants pertain
to or are to be performed by Borrowers, all representations, warranties and
covenants in the Loan Agreement, as amended by the First Amendment, the Second
Amendment, the Letter Agreement, and the Third Amendment, shall continue and
be binding on Borrowers under this Fourth Amendment.
SECTION III. CONDITIONS PRECEDENT.
Each Borrower acknowledges that the effectiveness of this Fourth
Amendment is subject to the receipt by Bank of the following documents on the
date of this Agreement, all in form and substance satisfactory to Bank and its
counsel:
A. A certified copy of resolutions of Members of the Board of
Directors of each Borrower approving this Fourth Amendment and all of the
matters described in this Fourth Amendment, and authorizing the
execution, delivery, and performance by Borrowers of this Fourth
Amendment, the Third Amendment To Promissory Note, the First Amendment To
Term Note, and every other document required to be delivered pursuant to
this Fourth Amendment.
B. The Third Amendment To Promissory Note executed by Borrowers
and accepted by Bank in substantially the same form as is attached to
this Fourth Amendment as Exhibit A.
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<PAGE> 5
C. The First Amendment To Term Note executed by Borrowers and
accepted by Bank in substantially the same form as is attached to this
Fourth Amendment as Exhibit B.
D. A certificate signed by a duly authorized officer of each
Borrower to the effect that:
(1) As of the date hereof, no Event of Default has occurred
and is continuing, and no event has occurred and is continuing that,
with the giving of notice or passage of time or both, would be an
Event of Default; and
(2) The representations and warranties set forth in Section
6.1 of the Loan Agreement are true as of the date of this Fourth
Amendment.
E. A certificate of each Borrower's corporate secretary certifying
(1) to the incumbency and signatures of the officers of each Borrower
signing this Fourth Amendment and every other document to be delivered
pursuant to the Fourth Amendment, (2) to the effect that TT's Certificate
of Incorporation has not been amended since the execution of the Loan
Agreement, (3) to the effect that TT's Bylaws have not been amended since
the execution of the Second Amendment, and (4) attached thereto is a
true, correct and complete copy of the Certificate of Incorporation and
Bylaws of ECA, Inc., and each of Borrower's Certificate of Incorporation
and Bylaws are in full force and effect as of the date of such
certificate.
F. UCC-1 Financing Statements signed by a duly authorized officer
of ECA, Inc.
G. A good standing certificate for ECA, Inc. from the Secretary of
State for each of Delaware and Illinois.
H. Such other documents as Bank may reasonably request to
implement this Fourth Amendment and the transactions described in this
Fourth Amendment.
SECTION IV. APPLICABLE LAW.
This Fourth Amendment shall be deemed to be a contract under the laws of
the State of New Jersey, and for all purposes shall be construed in accordance
with the laws of such State.
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SECTION V. COUNTERPARTS.
This Fourth Amendment may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument, and any
one of the parties hereto may execute this Fourth Amendment by signing any
such counterpart.
IN WITNESS WHEREOF, the parties have executed this Fourth Amendment by
their duly authorized officers this 31 day January, 1994.
TRANSTECHNOLOGY CORPORATION NATIONAL CANADA FINANCE CORP.
By:/s/Chandler J. Moisen By:/s/Jack Jankovic
--------------------------- -----------------------------
Title: Sr. VP & CFO Title: Vice President
------------------------ --------------------------
ELECTRICAL CONNECTORS NATIONAL BANK OF CANADA
& ASSEMBLIES, INC. (NEW YORK, NEW YORK)
By: /s/Valentina Doss By: /s/Jack Jankovic
--------------------------- -----------------------------
Title: VP of Admin.& Secretary Title: Agent
------------------------ --------------------------
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<PAGE> 7
SCHEDULE OF EXHIBITS
Exhibit A - Form of Third Amendment To Promissory Note
Exhibit B - Form of First Amendment To Term Note
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<PAGE> 1
EXHIBIT 10.13
FIFTH AMENDMENT TO THE
REVOLVING LOAN AND
SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO THE REVOLVING LOAN AND SECURITY AGREEMENT (the
"Fifth Amendment") is entered into by and among NATIONAL CANADA FINANCE CORP.,
NATIONAL BANK OF CANADA (New York, New York) (collectively, "Bank"),
TRANSTECHNOLOGY CORPORATION, a Delaware corporation ("TT"), ELECTRONIC
CONNECTIONS AND ASSEMBLIES, INC., a Delaware corporation ("ECA, Inc."),
INDUSTRIAL RETAINING RING COMPANY, a New Jersey corporation ("IRR") and
RETAINERS, INC., a New Jersey corporation ("Retainers" and, together with TT,
ECA, Inc. and IRR, sometimes hereinafter referred to collectively in this
Fifth Amendment as "Borrowers").
RECITALS
A. On June 21, 1991, TT and Bank entered into a certain Revolving Loan
And Security Agreement (the "Loan Agreement," all terms defined therein being
used in this Fifth Amendment with the same meaning unless otherwise stated)
under the terms of which Bank loaned to TT $9,000,000 on a revolving loan
basis and $4,000,000 in the form of letters of credit pursuant to the
provisions set forth in the Loan Agreement.
B. On December 18, 1991, TT and Bank entered into a certain First
Amendment To The Revolving Loan And Security Agreement (the "First Amendment")
to provide for (1) the elimination of the $4,000,000 sub-limit imposed on TT
by Bank with respect to funding of the Letter of Credit Facility, (2) the
modification of certain covenants, and (3) the waiver by Bank of TT's
compliance with Section 7.1(N) of the Loan Agreement relating to TT's net
worth for the period ended September 29, 1991.
C. On December 10, 1992, TT and Bank entered into a certain Second
Amendment To The Revolving Loan And Security Agreement (the "Second
Amendment") to provide for (1) an increase in the maximum principal amount of
borrowings under the Revolving Loan from $13,000,000 to $25,000,000 (inclusive
of the issuance by Bank to TT of a maximum of $5,000,000 of standby letters of
credit), (2) a modification to the rate of interest charged on borrowings
under the Revolving Loan to provide for a rate of interest based on the Base
Rate or LIBOR (as defined therein), (3) a modification to the Borrowing Base
to permit loan advances against the Eligible Inventory of TT, (4) the
modification of Bank's Collateral of TT to include machinery and equipment of
TT, (5) the modification of certain financial covenants of TT, (6) the payment
by TT of certain dividends, and (7) the extension of the Termination Date of
the Loan Agreement.
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<PAGE> 2
D. On December 31, 1992, TT and Bank entered into a letter agreement
(the "Letter Agreement") to permit TT to pay dividends in accordance with
Section 7.2(H) of the Loan Agreement, as amended, commencing with the quarter
ending December 31, 1992.
E. On August 2, 1993, TT and Bank entered into a certain Third
Amendment To The Revolving Loan And Security Agreement (the "Third
Amendment") to provide for (1) an increase in the maximum principal amount of
borrowings under the Revolving Loan from $25,000,000 to $35,000,000 (inclusive
of the issuance by Bank to TT of a maximum of $5,000,000 of standby letters of
credit), (2) a term loan facility in the principal amount of $10,000,000 with
interest accruing at a rate equal to one-quarter (1/4) percentage points above
the Base Rate, (3) the grant to Bank of a mortgage on the Palnut Property (as
defined in the Third Amendment), (4) a modification to the Borrowing Base to
increase the amount of funds TT may borrow against Eligible Inventory from
$13,000,000 to $18,000,000, and (5) the establishment of a termination fee
upon the prepayment by TT of the term loan.
F. On January 31, 1994, TT, ECA, Inc. and Bank entered into a certain
Fourth Amendment To The Revolving Loan Security Agreement (the "Fourth
Amendment") to add ECA, Inc., a wholly-owned subsidiary of TT, as a
co-obligor for the repayment of all loans to TT and ECA, Inc. by Bank.
G. TT is purchasing all of the outstanding stock of each of IRR and
Retainers, each of which will be operated as wholly-owned subsidiaries of TT.
H. In consideration for Bank agreeing to loan and re-loan funds to each
of IRR and Retainers under the Revolving Loan in accordance with the
provisions of the Loan Agreement, as amended, each of IRR and Retainers desire
to (1) assume as a co-obligor all obligations and liabilities of Borrowers due
and owing to Bank now or hereafter arising under the Loan Agreement, as amended,
and (2) grant to Bank a security interest in and to its Collateral in
accordance with the provisions of this Fifth Amendment.
I. Borrowers and Bank now desire to amend the Loan Agreement, as
amended, to (1) add each of IRR and Retainers as a co-obligor for the
repayment of all loans to Borrowers by Bank, (2) provide for a term loan
facility in the principal amount of $15,000,000 with interest accruing at a
rate equal to the Base Rate, (3) modify the Borrowing Base to increase the
maximum amount of borrowings against Eligible Inventory and to permit
borrowings against the stock of Mace Security International owned by TT, (4)
modify certain financial covenants of Borrowers, and (5) provide for such
other amendments and modifications as are set forth in the provisions of this
Fifth Amendment.
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<PAGE> 3
J. Due to the affiliation and financial interdependence of Borrowers,
Bank and Borrowers have determined that it would be in their respective best
interests for each Borrower to be a joint and several obligor of each other
Borrower's obligations to Bank in accordance with the provisions set forth in
the Loan Agreement, as amended by the First Amendment, the Second Amendment,
the Letter Agreement, the Third Amendment, the Fourth Amendment and this Fifth
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 Fifth Amendment, each
reference in the Loan Agreement to "this Agreement," "hereunder," and
"hereof," or words of like import referring to the Loan Agreement shall mean
and refer to the Loan Agreement, as amended by the First Amendment, the Second
Amendment, the Letter Agreement, the Third Amendment, the Fourth Amendment and
this Fifth Amendment. The Loan Agreement, as amended by the First Amendment,
the Second Amendment, the Letter Agreement, the Third Amendment, the Fourth
Amendment and this Fifth Amendment, is, and shall continue to be, in full
force and effect and hereby is ratified and confirmed in all respects.
B. On and after the effective date of this Fifth Amendment, each
reference in the Loan Agreement, as amended, to "Borrower" or words of like
import referring to Borrower shall mean, refer to, and include each of TT,
ECA, Inc., IRR and Retainers, and shall hereinafter be treated as referring to
"Borrowers" on a collective basis and in the aggregate.
C. Grant of Security Interest. To secure the prompt payment and
performance of the Obligations, each of IRR and Retainers hereby grants to
Bank in accordance with the provisions of Section 4.1 of the Loan Agreement,
as amended, a continuing security interest in and to all of the Property of
IRR and Retainers, as the case may be, described in Section 4.1(A) through (G)
of the Loan Agreement, as amended, whether now owned or existing or hereafter
acquired or arising and wheresoever located.
D. Paragraphs (G), (J), (N), (MM), and (JJJ) of Section 1.1 of the
Loan Agreement are amended in their entirety as follows:
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<PAGE> 4
(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)
$19,000,000, plus (c) the lesser of (i) fifty percent (50%) of the
close price (to be determined as of the last day of the immediately
preceding month for the then current month) of the Mace Stock as
quoted by the NASDAQ National Market Issues, or (ii) $1,000,000; or
(2) The Revolving Loan Credit Limit.
(J) Collateral. The Accounts, Inventory, Fixed Collateral, the
Palnut Property, the Mace Stock and all other Property of Borrowers now
or at any time or times hereafter subject to a Lien in favor of Bank.
(N) Credit Documents. This Agreement, the Promissory Note, the Term
Note, the Acquisition Term Note, the Mortgage, the Pledge Agreement 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 Borrowers 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.
(MM) Promissory Note. The Promissory Note executed by TT and
delivered to Bank, dated June 21, 1991, as amended by (1) the First
Amendment To Promissory Note, executed by TT and delivered to Bank, dated
December 10, 1992, (2) the Second Amendment To Promissory Note, executed
by TT and delivered to Bank, dated August 2, 1993, (3) the Third
Amendment To Promissory Note executed by TT and ECA, Inc. and delivered
to Bank, dated January 31, 1994, and (4) the Fourth Amendment To
Promissory Note in the form attached to the Fifth Amendment as Exhibit A
(with such changes or modifications, if any, to which Borrowers and
National Canada Finance Corp. may agree) evidencing the Revolving Loan
made by National Canada Finance Corp. pursuant to Section 2.1(A) of this
Agreement, together with all amendments thereto and all notes issued in
substitution therefor or replacement thereof.
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<PAGE> 5
(JJJ) Term Note. The Term Note executed by TT and delivered to Bank,
dated August 2, 1993, as amended by (1) the First Amendment To Term Note,
executed by TT and ECA, Inc., dated January 31, 1994, and (2) the Second
Amendment To Term Note in the form attached to the Fifth Amendment as
Exhibit B (with such changes or modifications, if any, to which Borrowers
and National Canada Finance Corp. may agree) evidencing the Term Loan
made by National Canada Finance Corp. pursuant to Section 2.2(A) of this
Agreement, together with all amendments thereto and all notes issued in
substitution therefor or replacement thereof.
E. Paragraphs (KKK), (LLL), (MMM) and (NNN) are added to Section 1.1 of
the Loan Agreement as follows:
(KKK) Acquisition Term Loan. As defined in Section 2.3(A) of
this Agreement.
(LLL) Acquisition Term Note. The Acquisition Term Note to be
executed by Borrowers in substantially the form attached to the Fifth
Amendment as Exhibit C (with such changes or modifications, if any, to
which Borrowers and National Canada Finance Corp. may agree) evidencing
the Acquisition Term Loan made by National Canada Finance Corp. pursuant
to Section 2.3 (A) of this Agreement, together with all amendments
thereto and all notes issued in substitution therefor or replacement
thereof.
(MMM) Mace Stock. The 465,000 shares of common stock of Mace
Security International, a Delaware corporation, owned by TT.
(NNN) Pledge Agreement. The Pledge And Security Agreement in the
form attached to the Fifth Amendment as Exhibit D (with such changes or
modifications, if any, to which TT and National Canada Finance Corp. may
agree).
F. Sections 2.3 through 2.12 of the Loan Agreement are amended in their
entirety and a new Section 2.13 is added to the Loan Agreement as follows:
2.3 Acquisition Term Loan.
(A) Establishment of Acquisition Term Loan. Subject to the
provisions of this Agreement, on the effective date of the Fifth
Amendment, Bank shall make a term loan to Borrowers in the amount of
Fifteen Million Dollars ($15,000,000; the "Acquisition Term Loan").
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<PAGE> 6
(B) Payment. The Acquisition Term Loan shall bear interest as
provided in paragraph (C) of this Section 2.3 and shall be evidenced by,
and repayable in accordance with, the Acquisition Term Note but, in the
absence of such Acquisition 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 Acquisition 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 Acquisition Term Loan,
together with all interest accrued thereon, shall become due and payable
in full on September 30, 1999, without notice, presentment, demand,
notice of dishonor, or any notice of any kind.
(C) Interest on Acquisition Term Loan. Borrowers 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 Acquisition Term Loan
outstanding from time to time from the date thereof until paid, payable
as of the last day of each month commencing September 30, 1994, 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 Base Rate from
time to time in effect. Any increase or decrease in the Base Rate shall
become effective on the date of such change.
2.4 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 Borrowers 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.
2.5 Fees and Additional Charges.
(A) Commitment Fee. On the date of execution of the Fifth
Amendment, Borrowers shall pay to Bank a commitment fee of $37,500 (the
"Commitment Fee").
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<PAGE> 7
(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 Borrowers' Obligations are paid
in full, Borrowers 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, Borrowers 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, the Acquisition 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, Borrowers 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 Borrowers pay in full the then
outstanding principal amounts and interest thereon due and owing under
the Promissory Note, the Term Note, the Acquisition Term Note and all
other Obligations.
(D) Letter of Credit Fee. Borrowers 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
Borrowers (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 Borrowers.
2.6 Accountings. Any accounting rendered by Bank to Borrowers shall
be deemed correct and conclusively binding upon Borrowers unless (A)
Borrowers notify Bank by certified mail, return receipt requested, within
thirty (30) calendar days after the date when each such
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<PAGE> 8
accounting is mailed or otherwise delivered to Borrowers, or (B) there
exists a bona fide mistake in such accounting regardless of which party
discovers such mistake.
2.7 All Advances to Constitute One Loan. The Revolving Loan, the
Term Loan, the Acquisition Term Loan and all other amounts owed by
Borrowers to Bank under this Agreement, whether or not evidenced by a
promissory note or term note, shall constitute one obligation of
Borrowers, secured by Bank's lien on and security interest in all of the
Collateral. Borrowers shall be liable to Bank for all of the Obligations,
regardless of whether such Obligations arise as a result of advances made
directly to Borrowers, it being stipulated and agreed that all monies
advanced by Bank hereunder inure to the benefit of Borrowers, and that
Bank is relying on the liability of Borrowers in extending credit and
otherwise making advances under this Agreement.
2.8 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 Borrowers and, if the then remaining excess interest is greater
than the unpaid principal balance, Bank promptly shall refund such excess
interest to Borrowers. Notwithstanding anything to the contrary contained
in this Agreement, the Promissory Note, the Term Note or the Acquisition
Term Note, if the rate of interest payable on the Promissory Note, the
Term Note or the Acquisition Term Note is ever reduced as a result of
this Section 2.8 and at any time thereafter the maximum rate permitted by
applicable law shall exceed the rate of interest provided for in the
Promissory Note, the Term Note or the Acquisition Term Note, then the
rate provided for in the Promissory Note, the Term Note or the
Acquisition 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 2.8.
2.9 Revival. To the extent that Borrowers make a payment or
payments to Bank or to the extent Bank receives any payment or proceeds
of the Collateral for
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<PAGE> 9
Borrowers' 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 under any bankruptcy act, state or Federal law, common law, or
equitable cause, then, to the extent of such payment or proceeds received
by Borrowers, 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.
2.10 Optional Charge Against Revolving Loan. To the extent Borrowers
do not remit, when due, any payments of interest or, in the case of the
Term Loan, the Acquisition 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 Borrowers 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.
2.11 Specific Conditions Applicable to Requests for Revolving Loan.
In addition to all other conditions set forth in this Agreement, each
request by Borrowers for a Revolving Loan also is subject to the
following specific conditions:
(A) Notice of Request. Borrowers shall notify Bank in writing or
telephonically of Borrowers' 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. Borrowers' 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 Borrowers'
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.
-9-
59
<PAGE> 10
(C) Borrowers' Acceptance of Proceeds. The acceptance by Borrowers
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
Borrowers that all conditions to the making of such Revolving Loan set
forth in this Agreement have been satisfied, and (2) a confirmation by
Borrowers 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 Borrowers' written or
telephonic request and Borrowing Base Certificate in the prescribed time
as set forth in paragraph (A) of this Section 2.11, (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.
2.12 Manner of Payments. On or before the date they become due,
Borrowers 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 Borrowers, shall (A) refund any overpaid amount to
Borrowers, 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,
Borrowers 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, the Term
Note or the Acquisition 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, the Term Note or the Acquisition Term Note or such other
-10-
60
<PAGE> 11
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, the Term Note or the
Acquisition 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 received by Bank after 2:00 p.m., Cleveland, Ohio time, shall be
deemed to have been made on the next following banking day.
2.13 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.
G. The reference to Section 2.10(B) set forth in Section 5.4 of the
Loan Agreement is hereby amended to mean and refer to Section 2.11(B).
H. Section 4.6 is added to the Loan Agreement as follows:
4.6 Pledge of Mace Stock. To further secure the prompt payment and
performance of the Obligations, TT hereby pledges to Bank the Mace Stock
pursuant to the provisions of the Pledge Agreement.
I. Paragraphs (N), (Q) and (S) and the first paragraph of paragraph (O)
of Section 7.1 of the Loan Agreement are amended in their entirety as follows:
(N) Tangible Net Worth. Maintain a Tangible Net Worth on the
following dates which is equal to or greater than as set forth below:
<TABLE>
<CAPTION>
Minimum
Tangible
Date Net Worth
---- ---------
<S> <C> <C>
(1) As of the date of
this Agreement and
on December 31, 1992 56,000,000
(2) As of March 31, 1993 57,000,000
(3) As of June 30, 1993 58,000,000
(4) As of September 30,
1993 59,000,000
(5) As of December 31,
1993 59,000,000
(6) As of March 31, 1994 60,000,000
(7) As of June 30, 1994 61,000,000
(8) As of September 30,
1994 45,000,000
(9) As of March 31, 1995 50,000,000
</TABLE>
-11-
61
<PAGE> 12
<TABLE>
<S> <C> <C>
(10) As of March 31, 1996 59,000,000
(11) As of March 31, 1997
and the last day of
each quarter thereafter 64,000,000
</TABLE>
For purposes of this Section 7.1(N) and Section 7.1(0), "Tangible
Net Worth" shall mean the amount of the shareholders' equity computed in
accordance with GAAP as shown on the financial statements of Borrowers
described in Section 7.1(I) (as certified to by the Chief Financial
Officer of Borrowers), but deducting from such amount the sum of (1),
(2), (3), (4), and (5) below:
(1) The net book value of all intangible assets includings,
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
Borrowers.
(2) The net book value of all marketable and nonmarketable
securities which are not deemed to be cash equivalents by Bank;
(3) Any write-up in the book value of any assets, other than
(a) purchase accounting write-ups made in accordance with GAAP and
(b) write-ups in the ordinary course of business resulting from a
revaluation thereof which results in a corresponding increase in
shareholder equity;
(4) Loans or advances to individual shareholders, employees,
or any other individual except in the ordinary course of business;
and
(5) Loans or advances by Borrowers to any Affiliate (other
than a Subsidiary of Borrowers).
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
Borrowers (if any) for the fiscal year ending March 31, 1994, up to a maximum
of Two Million Five Hundred Thousand Dollars ($2,500,000).
(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
-12-
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<PAGE> 13
Worth" ratio which is equal to or less than as set forth below:
<TABLE>
<CAPTION>
Total Debt/
Tangible Net
Date Worth Ratio
---- ------------
<S> <C> <C>
(1) As of the date of this 0.8 to 1.0
Agreement 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 September 29, 1994
(4) As of September 30, 1994 1.65 to 1.0
and through March 30, 1995
(5) As of March 31, 1995 and 1.4 to 1.0
through March 30, 1996
(6) As of March 31, 1996, and at 1.25 to 1.0
the end of each quarter
thereafter
</TABLE>
(Q) Cashflow Coverage. For the period ending September 30, 1994,
and at the close of each fiscal quarter thereafter, maintain a "Cashflow
Coverage" ratio equal to or greater than 1.1 to 1.0. For purposes of this
Section 7.1 (Q), "Cashflow Coverage" shall be a ratio the numerator of.
which is equal to Borrowers' net income plus depreciation and
amortization of Borrowers for such quarter and the denominator of which
is equal to Borrowers' current maturities of its long-term debt plus
Borrowers' Capital Expenditures for such quarter. So long as no Event of
Default has occurred, commencing September 30, 1994, the outstanding
principal portion of the Obligations shall not be characterized as a
current liability for purposes of determining Borrowers' compliance with
the requirements of this Section 7.1(Q).
-13-
63
<PAGE> 14
(S) Net Income. Commencing with Borrowers' fiscal year ending March
31, 1995, Net Income (as defined in Section 7.2(H) of this Agreement)
shall not be less than $5,000,000 for each of its fiscal years during the
term of this Agreement.
J. Section 10.1(A) of the Loan Agreement is amended in its entirety as
follows:
(A) Payment of Debt Service. Failure by Borrowers to (1) make
payment of principal or interest on the Promissory Note, the Term Note or
the Acquisition 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, the Term Note or the Acquisition Term Note within ten
(10) days after receipt by Borrowers from Bank of notice of such failure
to pay.
K. 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 Borrowers in the manner
set forth in Section 12.10 hereof, all of the Obligations due or to
become due from Borrowers to Bank, whether under this Agreement, the
Promissory Note, the Term Note, the Acquisition Term Note or otherwise,
at the option of Bank immediately shall become due and payable, anything
in the Promissory Note, the Term Note, the Acquisition Term Note or other
evidence of the Obligations or in any of the other Credit Documents to
the contrary notwithstanding.
SECTION II. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWERS.
A. Each Borrower represents, warrants, and covenants that it has good
and marketable title to the Collateral free and clear of all liens, claims,
mortgages, security interests, pledges, charges or encumbrances whatsoever
(other than Permitted Liens or as have otherwise been permitted by Bank
pursuant to the Loan Agreement, as amended), except as have been granted to
Bank.
B. To the extent such representations, warranties and covenants pertain
to or are to be performed by Borrowers, all representations, warranties and
covenants in the Loan Agreement, as amended by the First Amendment, the Second
Amendment, the Letter
-14-
64
<PAGE> 15
Agreement, the Third Amendment, and the Fourth Amendment shall continue and be
binding on Borrowers under this Fifth Amendment.
SECTION III. CONDITIONS PRECEDENT.
Each Borrower acknowledges that the effectiveness of this Fifth Amendment
is subject to the receipt by Bank of the following documents on the date of
this Agreement, all in form and substance satisfactory to Bank and its
counsel:
A. A certified copy of resolutions of Members of the Board of
Directors of each Borrower approving this Fifth Amendment and all of the
matters described in this Fifth Amendment, and authorizing the execution,
delivery, and performance by such Borrower of this Fifth Amendment, the
Fourth Amendment To Promissory Note, the Second Amendment To Term Note,
the Acquisition Term Note, and every other document required to be
delivered pursuant to this Fifth Amendment.
B. The Fourth Amendment To Promissory Note executed by Borrowers
and accepted by Bank in substantially the same form as is attached to
this Fifth Amendment as Exhibit A.
C. The Second Amendment To Term Note executed by Borrowers and
accepted by Bank in substantially the same form as is attached to this
Fifth Amendment as Exhibit B.
D. The Acquisition Term Note executed by Borrowers and accepted by
Bank in substantially the same form as is attached to this Fifth
Amendment as Exhibit C.
E. The Pledge And Security Agreement executed by TT to Bank in
substantially the same form as is attached to this Fifth Amendment as
Exhibit D, along with (1) the stock certificate(s) possessed by TT
evidencing TT's ownership in the stock of Mace Security International,
and (2) an irrevocable stock power executed in blank by TT.
F. A certificate signed by a duly authorized officer of each
Borrower to the effect that:
(1) As of the date hereof, no Event of Default has occurred
and is continuing, and no event has occurred and is continuing that,
with the giving of notice or passage of time or both, would be an
Event of Default; and
(2) The representations and warranties set forth in Section
6.1 of the Loan Agreement are true as of the date of this Fifth
Amendment.
-15-
65
<PAGE> 16
G. A certificate of each Borrower's corporate secretary certifying
(1) to the incumbency and signatures of the officers of each Borrower
signing this Fifth Amendment and every other document to be delivered
pursuant to the Fifth Amendment, (2) to the effect that TT's Certificate
of Incorporation has not been amended since the execution of the Loan
Agreement, (3) to the effect that TT's Bylaws have not been amended since
the execution of the Second Amendment, (4) to the effect that the
Certificate of Incorporation and Bylaws of ECA, Inc. have not been
amended since the execution of the Fourth Amendment, and (5) attached
thereto are true, correct and complete copies of the Articles of
Incorporation and Bylaws of each of IRR and Retainers, and each
Borrower's Articles of Incorporation and Bylaws are in full force and
effect as of the date of such certificate.
H. UCC-1 Financing Statements signed by a duly authorized officer
of ECA, Inc., IRR and Retainers.
I. A good standing certificate for ECA, Inc. from the Secretary of
State for each of Delaware, Texas and Illinois, and a good standing
certificate for each of IRR and Retainers from the Secretary of State of
New Jersey.
J. Such other documents as Bank may reasonably request to
implement this Fifth Amendment and the transactions described in this
Fifth Amendment.
SECTION IV. APPLICABLE LAW.
This Fifth 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 Fifth 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 Fifth Amendment by signing any such
counterpart.
-16-
66
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Fifth Amendment by
their duly authorized officers this 9 day September, 1994.
TRANSTECHNOLOGY CORPORATION INDUSTRIAL RETAINING RING
COMPANY
By: /s/Chandler J. Moisen By: /s/Steven R. Wilson
--------------------------------- ------------------------------
Title: Sr. VP & CFO Title: President
------------------------------ ---------------------------
ELECTRICAL CONNECTORS RETAINERS, INC.
& ASSEMBLIES, INC.
By:/s/Valentina Doss By: /s/Steven R. Wilson
--------------------------------- ------------------------------
Title: Vice President & Secretary Title: President
------------------------------ ---------------------------
NATIONAL BANK OF CANADA NATIONAL CANADA FINANCE CORP.
(NEW YORK, NEW YORK)
By:/s/Jack Jankovic By: /s/Jack Jankovic
--------------------------------- ------------------------------
Title: Agent Title: Vice President
------------------------------ ---------------------------
-17-
67
<PAGE> 18
SCHEDULE OF EXHIBITS
Exhibit A - Form of Fourth Amendment To Promissory Note
Exhibit B - Form of Second Amendment To Term Note
Exhibit C - Form of Acquisition Term Note
Exhibit D - Form of Pledge And Security Agreement
-18-
68
<PAGE> 1
EXHIBIT 21.1
LIST OF TRANSTECHNOLOGY CORPORATION SUBSIDIARIES
TransTechnology (Europe) Ltd.
(A U.K. Corporation)
TransTechnology International Corporation
(A Virgin Islands Corporation)
The Palnut Company
(A Delaware Corporation)
Industrial Retaining Ring, Inc.
(A New Jersey Corporation)
Retainers, Inc.
(A New Jersey Corporation)
Rancho TransTechnology
(A California Corporation)
TransTechnology Systems and Services, Inc.
(A Michigan Corporation)
TransTechnology Australasia Pty, Ltd.
(An Australian Corporation)
Electronic Connections and Assemblies, Inc.
(A Delaware Corporation)
SSP Industries
(A California Corporation)
SSP International Sales, Inc.
(A California Corporation)
TransTechnology Seeger-Orbis, Inc.
(A Delaware Corporation)
Waldes Truarc, Inc.
(A Delaware Corporation)
69
<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, 1995 (June 30, 1995 as to Note 11),
appearing in this Annual Report on Form 10-K of TransTechnology Corporation
for the year ended March 31, 1995.
/s/Deloitte & Touche LLP
Parsippany, New Jersey
July 11, 1995
70
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,544
<SECURITIES> 0
<RECEIVABLES> 23,594
<ALLOWANCES> 103
<INVENTORY> 25,239
<CURRENT-ASSETS> 76,670
<PP&E> 42,574
<DEPRECIATION> 13,040
<TOTAL-ASSETS> 129,396
<CURRENT-LIABILITIES> 23,608
<BONDS> 40,377
<COMMON> 52
0
0
<OTHER-SE> 4,770
<TOTAL-LIABILITY-AND-EQUITY> 129,396
<SALES> 101,122
<TOTAL-REVENUES> 102,692
<CGS> 71,968
<TOTAL-COSTS> 19,882
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 65
<INTEREST-EXPENSE> 2,831
<INCOME-PRETAX> 10,842
<INCOME-TAX> 3,457
<INCOME-CONTINUING> 7,385
<DISCONTINUED> (4,852)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,533
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
