<PAGE> 1
FORM 10-Q
-----------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 25, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-7872
-----------------------------------------------------
TRANSTECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-4062211
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
700 Liberty Avenue 07083
Union, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (908) 964-5666
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
As of January 30, 1995, the total number of outstanding shares
of registrant's one class of common stock was 5,235,821
<PAGE> 2
TRANSTECHNOLOGY CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. Financial Information
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Consolidated Operations--
Three and Nine Month Periods Ended December 25, 1994
and December 26, 1993 . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets--
December 25, 1994 and March 31, 1994 . . . . . . . . . . . . . . . . 4
Statements of Consolidated Cash Flow--
Nine Months Ended December 25, 1994 and
December 26, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Consolidated Stockholders' Equity--
Nine Months Ended December 25, 1994 . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 7-9
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition . . . . . . . . . . . . . . 10-16
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
EXHIBIT 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19-35
EXHIBIT 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
EXHIBIT 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Statements of Consolidated Operations, Consolidated
Balance Sheets, Statements of Consolidated Cash Flow and Statements of
Consolidated Stockholders' Equity are of TransTechnology Corporation and its
consolidated subsidiaries. These reports reflect all adjustments of a normal
recurring nature, which are, in the opinion of management, necessary to a fair
presentation of the results of operations for the interim periods reflected
therein. The results reflected in the unaudited Statements of Consolidated
Operations for the period ended December 25, 1994 are not necessarily
indicative of the results to be expected for the entire year. The following
unaudited Consolidated Financial Statements should be read in conjunction with
the notes thereto, and Management's Discussion and Analysis set forth in Item 2
of Part I of this report, as well as the audited financial statements and
related notes thereto contained in the Form 10-K filed for the fiscal year
ended March 31, 1994.
[THIS SPACE INTENTIONALLY LEFT BLANK]
2
<PAGE> 4
STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- ------------------------
12/25/94 12/26/93 12/25/94 12/26/93
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total Revenue $33,683 $31,096 $89,649 $79,713
Cost of Sales 24,115 22,093 64,795 56,363
------- ------- ------- -------
Gross Profit 9,568 9,003 24,854 23,350
------- ------- ------- -------
General, Administrative
and Selling Expenses 5,556 5,674 16,220 14,664
Interest Expense 959 457 2,155 922
------- ------- ------- -------
Total General, Administrative,
Selling and Interest Expenses 6,515 6,131 18,375 15,586
------- ------- ------- -------
Income from Continuing Operations
before Income Taxes 3,053 2,872 6,479 7,764
Income Taxes 978 1,086 2,175 2,980
------- ------- ------- -------
Income from Continuing Operations 2,075 1,786 4,304 4,784
Discontinued Operations:
Loss from Operations (net of applicable
tax benefits of $261,000 and $784,000 for
the three and nine months ended 12/25/94,
respectively, and $103,000 and $271,000
for the three and nine months ended
12/26/93, respectively) (426) (181) (1,278) (434)
Loss from Disposal (net of applicable tax
benefits of $181,000 and $247,000 for
the three and nine months ended
12/25/94, respectively) (295) - (403) -
------- ------- ------- -------
Net Income $ 1,354 $ 1,605 $ 2,623 $ 4,350
======= ======= ======= =======
Earnings (Loss) per Share: (Note 1)
Income from Continuing Operations $ 0.41 $ 0.35 $ 0.84 $ 0.93
Loss from Discontinued Operations (0.14) (0.04) (0.33) (0.08)
------- ------- ------- -------
Net Income $ 0.27 $ 0.31 $ 0.51 $ 0.85
======= ======= ======= =======
Number of Shares Used in Computation
of Per Share Information 5,082,000 5,147,000 5,124,000 5,135,000
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE> 5
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
UNAUDITED
12/25/94 3/31/94
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 179 $ 3,027
Accounts receivable:
United States Government 2,972 2,815
Commercial (net of allowance for doubtful accounts of $354 at 12/25/94
and $271 at 3/31/94) 16,575 19,500
Income tax receivable 872 --
Notes receivable 2,780 2,814
Inventories 38,302 35,786
Prepaid expenses and other current assets 2,957 2,932
Deferred income taxes 4,287 4,253
Net assets of discontinued businesses 14,249 4,309
-------- -------
Total current assets 83,173 75,436
Property:
Land 4,517 5,223
Buildings 13,249 15,657
Machinery and equipment 29,069 32,611
Furniture and fixtures 3,985 4,050
Leasehold improvements 671 671
-------- -------
Total 51,491 58,212
Less accumulated depreciation and amortization 19,515 22,204
-------- -------
Property-net 31,976 36,008
Other assets:
Notes receivable 3,457 4,061
Costs in excess of net assets of acquired businesses (net of accumulated amortization:
December 25, 1994, $2,657; March 31, 1994, $2,423) 12,278 3,117
Other 7,430 7,235
-------- --------
Total other assets 23,165 14,413
-------- --------
Total $138,314 $125,857
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,480 $ 1,479
Accounts payable-trade 7,169 7,489
Accrued compensation 2,957 4,570
Accrued income taxes 394 943
Other current liabilities 5,781 7,109
-------- -------
Total current liabilities 17,781 21,590
-------- -------
Long-term debt payable to banks and others 47,966 33,168
-------- -------
Other long-term liabilities 7,554 5,146
-------- -------
Stockholders' equity:
Preferred stock-authorized, 300,000 shares; none issued -- --
Common stock-authorized, 14,700,000 shares of $.01 par value; issued 5,235,821
at December 25, 1994, and 5,189,104 at March 31, 1994 52 52
Additional paid-in capital 45,756 45,283
Retained earnings 23,833 22,186
Other stockholders' equity (2,592) (1,568)
-------- -------
67,049 65,953
Less treasury stock, at cost (157,000 shares at 12/25/94) (2,036) --
-------- -------
Total stockholders' equity 65,013 65,953
-------- -------
Total $138,314 $125,857
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 6
STATEMENTS OF CONSOLIDATED CASH FLOW
UNAUDITED
(In Thousands of Dollars)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
12/25/94 12/26/93
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 2,623 $ 4,350
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,429 3,306
Provision for losses on accounts receivable 121 26
Gain on sale or disposal of fixed assets - (2)
Change in assets and liabilities (net of the effect of purchases of
businesses) :
Decrease in accounts receivable 1,969 1,554
(Increase) decrease in income tax receivable (872) 35
(Increase) decrease in inventories (221) 2,888
Increase in net assets of discontinued operations (961) (4,348)
Decrease (increase) in prepaid and other assets (929) (1,447)
Decrease in accounts payable (78) (1,188)
Decrease in accrued compensation (1,249) (665)
Decrease in accrued income taxes (494) (347)
Decrease in other liabilities (636) (1,841)
-------- --------
Net cash provided by operations 2,702 2,321
-------- --------
Cash Flow from Investing Activities:
Purchase of businesses (15,320) (22,284)
Capital expenditures (2,990) (2,863)
Proceeds from the sale of fixed assets 44 2
Decrease (increase) in notes receivables 604 (268)
-------- --------
Net cash used in investing activities (17,662) (25,413)
-------- --------
Cash Flow from Financing Activities:
Payments to acquire treasury stock (2,036) -
Payments on long-term debt (15,272) (11,676)
Proceeds from long-term debt 30,069 34,628
Proceeds from issuance of stock under stock option plan 327 274
Dividends paid (976) (924)
-------- --------
Net cash provided by financing activities 12,112 22,302
-------- --------
Net Decrease in Cash and Cash Equivalents (2,848) (790)
Cash and Cash Equivalents at Beginning of Year 3,027 1,505
-------- --------
Cash and Cash Equivalents at End of Period $ 179 $ 715
======== ========
Supplemental Information:
Interest payments $ 2,281 $ 1,080
Income tax payments $ 1,246 $ 3,519
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK ADDITIONAL OTHER
FOR THE NINE MONTHS ----------------- ------------------- PAID-IN RETAINED STOCKHOLDERS'
ENDED DECEMBER 25, 1994 SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY TOTAL
- - ----------------------- --------- ------ -------- -------- ---------- -------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1994 5,189,104 $52 -- $ -- $45,283 $22,186 $(1,568) $65,953
Net Income -- -- -- -- -- 2,623 -- 2,623
Cash dividends
($.19 per share) -- -- -- -- -- (976) -- (976)
Unrealized investment
holding losses -- -- -- -- -- -- (872) (872)
Purchase of treasury stock -- -- (157,500) (2,036) -- -- -- (2,036)
Issuance of stock under
stock option plan 18,294 -- -- -- 210 -- -- 210
Issuance of stock under
incentive bonus plan 28,423 -- -- -- 263 -- (146) 117
Foreign translation
adjustments -- -- -- -- -- -- (6) (6)
--------- --- --------- ------- ------- ------- -------- -------
Balance, December 25, 1994 5,235,821 $52 (157,500) $(2,036) $45,756 $23,833 $(2,592) $ 65,013
========= === ========= ======= ======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars)
NOTE 1. Earnings Per Share:
Earnings per share are based on the weighted average number of common
shares and common stock equivalents (stock options) outstanding during
each period. In computing earnings per share, common stock
equivalents were either anti-dilutive because of the market value of
the stock or not material, and, therefore, have been excluded from the
calculation.
NOTE 2. Inventories:
Inventories are summarized as follows:
<TABLE>
<CAPTION>
12/25/94 3/31/94
-------- -------
<S> <C> <C>
Finished goods $ 7,222 $ 5,057
Work-in-process 4,227 7,589
Raw materials, purchased and
manufactured parts 26,853 23,140
------- -------
Total inventories $38,302 $35,786
======= =======
</TABLE>
NOTE 3. Long-term Debt Payable to Banks and Others
In connection with the Industrial Retaining Ring Company acquisition,
on September 9, 1994, the Company obtained a $15 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.
NOTE 4. Discontinued Operations:
In March 1994, the Company completed the sale of its Federal
Laboratories division. Pursuant to such sale, the Company recorded an
after-tax disposal gain of $0.1 million for the nine month period
ended December 25, 1994. This gain was offset by $0.3 million of
after-tax disposal costs, recorded for the nine months ended December
25, 1994, related to other previously discontinued businesses. For
the three month period ended December 25, 1994, the Company recorded
$0.2 million of after-tax disposal costs related
7
<PAGE> 9
to other previously discontinued businesses. The gain and losses
consisted primarily of disposal costs different from previous
estimates associated primarily with legal and related matters. The
three and nine month periods ended December 26, 1993 have been
restated to reflect Federal Laboratories as a discontinued operation.
In September 1994, the Company discontinued its chaff and related
products division. At December 25, 1994, this division was classified
for financial reporting purposes as a discontinued operation.
Accordingly, the results of consolidated operations at December 26,
1993, have been restated. The loss from disposal for the nine and
three months ended December 25, 1994 includes an after-tax charge of
$0.2 and $0.1 million, respectively, for estimated legal and selling
costs related to disposal of the chaff product operation.
Operating results of the discontinued business were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- ------------------------
12/25/94 12/26/93 12/25/94 12/26/93
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total Revenues $2,379 $4,362 $ 5,494 $11,365
Loss before income
taxes $ (687) $ (284) $(2,062) $ (705)
Income tax benefit (261) (103) (784) (271)
------ ------ ------- -------
Loss from operations $ (426) $ (181) $(1,278) $ (434)
====== ====== ======= =======
</TABLE>
The loss from operations includes interest expense of $49 thousand and $69
thousand for the three months ended 12/25/94 and 12/26/93, respectively, and
$138 thousand and $215 thousand for the nine months ended 12/25/94 and
12/26/93, respectively.
8
<PAGE> 10
Net assets of the discontinued businesses at December 25, 1994 and March 31,
1994 were as follows:
<TABLE>
<CAPTION>
12/25/94 3/31/94
-------- -------
<S> <C> <C>
Accounts Receivable $ 1,734 $ 25
Inventory 1,996 186
Property 9,653 3,203
Other Assets 2,162 1,198
Liabilities (1,296) (303)
------- ------
Net Assets of
Discontinued Businesses $14,249 $4,309
======= ======
</TABLE>
NOTE 5. Acquisitions
Effective August 31, 1994, the Company acquired Industrial Retaining
Ring Company and its affiliated companies for a total purchase price
of $15.3 million in cash and the assumption of $219 thousand of
liabilities. Industrial Retaining Ring Company manufactures retaining
rings used in heavy equipment and industrial machinery.
The following summarizes TransTechnology Corporation's combined
Proforma Revenue, Net Income and Earnings per Share information as if
the acquisition of Industrial Retaining Ring Company and its
affiliated companies had occurred at the beginning of the period
presented.
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------------
12/25/94 12/26/93
---------- ----------
<S> <C> <C>
Revenue $ 93,541 $ 85,913
======== ========
Net Income $ 3,625 $ 5,667
======== ========
Earnings per share $0.71 $1.10
===== =====
</TABLE>
9
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All references to three month and nine month periods in this Management's
Discussion refer to the three and nine month periods ended December 25, 1994
for fiscal year 1995 and the three and nine month periods ended December 26,
1993 for fiscal year 1994. Also when referred to herein, operating profit
means net sales less operating expenses, without deduction for general
corporate expenses, interest and income taxes. The Consolidated Statement of
Operations has been restated with respect to discontinued operations to provide
a consistent basis for comparing the performance of the Company's continuing
operations for the periods presented.
Revenue from continuing operations for the nine month period in 1995 was $89.6
million, an increase of $9.9 million or 12% from the comparable period in 1994.
For the three month period in 1995 total revenue was $33.7 million, an increase
of $2.6 million or 8% from the comparable period of 1994. The increases
occurred primarily in the Industrial Products segment for both periods.
Gross profit for the nine month period in 1995 increased $1.5 million or 6%
from the comparable period in 1994. For the three month period in 1995, gross
profit increased $0.6 million or 7% from the comparable period of 1994.
Operating profit from continuing operations for the nine month period in 1995
was $10.6 million, a decrease of $1.2 million or 10% from the comparable period
in 1994. For the three month period in 1995 operating profit from continuing
operations was $4.9 million, an increase of $0.3 million or 7% from the
comparable period in 1994. Changes in sales, operating profit and new orders
from continuing operations are discussed below by segment.
Net income, including discontinued operations, for the nine month period in
1995 was $2.6 million or $.51 per share, compared to $4.4 million or $.85 per
share, for the comparable period in 1994. The three month period in 1995
experienced net income of $1.4 million or $.27 per share compared to $1.6
million or $.31 per share for the year earlier period. Discontinued
operations, which are discussed in more detail below, accounted for losses of
$1.7 million and $0.7 million in the 1995 nine month and three month periods,
respectively, and $0.4 million and 0.2 million for the comparable nine month
and three month periods in 1994.
Interest expense increased $1.2 million for the nine month period in 1995, and
$0.5 million for the three month period, primarily as a result of increased
bank borrowings used for the acquisition of the Palnut fastener business and
the Electrical Specialties wiring harness business in the second quarter of the
1994 fiscal year, and the Industrial Retaining Ring business in the second
quarter of the 1995 fiscal year.
New orders received during the nine month period in 1995 totaled $91.5 million,
an increase of $6.1 million or 7% from 1994's comparable period. For the three
month period, new orders
10
<PAGE> 12
totaled $36 million, an increase of $4.1 million or 13% from last year's
comparable period. At December 25, 1994, total backlog of unfilled
orders was $46.7 million, compared to $45 million at December 26, 1993.
DISCONTINUED OPERATIONS
In March 1994, the Company completed the sale of its Federal Laboratories
division. Pursuant to such sale, the Company recorded an after-tax disposal
gain of $0.1 million for the nine month period ended December 25, 1994. This
gain was offset by $0.3 million of after-tax disposal costs, recorded for the
nine months ended December 25, 1994, related to other previously discontinued
businesses. For the three month period ended December 25, 1994, the Company
recorded $0.2 million of after-tax disposal costs related to other previously
discontinued businesses. The gain and losses consisted primarily of disposal
costs different from previous estimates associated primarily with legal and
related matters. The three and nine month periods ended December 26, 1993 have
been restated to reflect Federal Laboratories as a discontinued operation.
In September 1994, the Company discontinued its chaff and related products
division. At December 25, 1994, this division was classified for financial
reporting purposes as a discontinued operation. Accordingly, the results of
consolidated operations at December 26, 1993, have been restated. The loss
from disposal for the nine and three months ended December 25, 1994 include an
after-tax charge of $0.2 and $0.1 million, respectively, for estimated legal
and selling costs related to disposal of the chaff product operation.
11
<PAGE> 13
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NET CHANGE
--------------------------- ---------------------
12/25/94 12/26/93 $ %
-------- -------- ------- ------
<S> <C> <C> <C> <C>
Operating Revenue:
Industrial Products $60,248 $45,175 $15,073 33.4
Aerospace Products 27,956 33,831 (5,875) (17.4)
------- ------- -------
Total $88,204 $79,006 $ 9,198 11.6
======= ======= =======
Operating Profit:
Industrial Products $ 8,882 $ 7,141 $ 1,741 24.4
Aerospace Products 1,759 4,666 (2,907) (62.3)
------- ------- -------
Total $10,641 $11,807 $(1,166) (9.9)
Corporate Expense (2,007)(a)(b) (3,121)(b) 1,114 35.7
Interest Expense (2,155)(c) (922)(c) (1,233) (133.7)
------- ------- -------
Income from Continuing
Operations before
Income Taxes $ 6,479 $ 7,764 $(1,285) (16.6)
======= ======= =======
</TABLE>
a) The corporate expense for the nine months ended December 25, 1994
has been reduced by $740 thousand from a favorable insurance
settlement.
b) The corporate expense for the nine months ended December 25, 1994
and the nine months ended December 26, 1993 has been reduced by
$464 thousand and $656 thousand, respectively, to reflect an
allocation made to discontinued operations.
c) Interest expense for the nine months ended December 25, 1994 and
the nine months ended December 26, 1993 has been reduced by $138
thousand and $215 thousand, respectively, to reflect an allocation
made to discontinued operations.
12
<PAGE> 14
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NET CHANGE
--------------------------- ---------------------
12/25/94 12/26/93 $ %
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Operating Revenue:
Industrial Products $23,187 $19,581 $ 3,606 18.4
Aerospace Products 10,278 11,293 (1,015) (9.0)
------- ------- -------
Total $33,465 $30,874 $ 2,591 8.4
======= ======= =======
Operating Profit:
Industrial Products $ 3,886 $ 2,950 $ 936 31.7
Aerospace Products 1,011 1,611 (600) (37.2)
------- ------- -------
Total $ 4,897 $ 4,561 $ 336 7.4
Corporate Expense (885)(a) (1,232)(a) 347 28.2
Interest Expense (959)(b) (457)(b) (502) (109.8)
------- ------- -------
Income from Continuing
Operations before
Income Taxes $ 3,053 $ 2,872 $ 181 6.3
======= ======= =======
</TABLE>
a) The corporate expense for the three months ended December 25, 1994
and the three months ended December 26, 1993 has been reduced by
$155 thousand and $219 thousand, respectively, to reflect an
allocation made to discontinued operations.
b) The interest expense for the three months ended December 25, 1994
and the three months ended December 26, 1993 has been reduced by
$49 thousand and $69 thousand, respectively, to reflect an
allocation made to discontinued operations.
13
<PAGE> 15
INDUSTRIAL PRODUCTS SEGMENT
Sales for the industrial products segment were $60.2 million for the nine month
period in 1995, an increase of $15.1 million or 33% from the comparable period
in 1994. Sales for the three month period in 1995 were $23.2 million, up $3.6
million or 18% from the comparable period in 1994. The increase for the nine
month period was primarily due to the inclusion of nine months of operations of
the Palnut fastener business and Electrical Specialties Company industrial
wiring harness business in the 1995 period compared to only five months of
operations in the comparable 1994 period. Additionally, the nine month period
in 1995 included four months of Industrial Retaining Ring Company fastener
operations. In the nine and three month periods in 1995, specialty fastener
sales other than Palnut and Industrial Retaining Ring were up slightly over
the comparable nine month and three month periods in 1994. Offsetting these
increases, TransTechnology Systems & Services maintenance contract sales
decreased 22% and 12% in the nine and three month periods in 1995 over the
comparable periods in 1994. These decreases were largely due to reduced
domestic and foreign third party maintenance contract demand.
Operating profit for the segment was $8.9 million for the nine month period in
1995, an increase of $1.7 million or 24% from the comparable period in 1994.
The three month period showed an operating profit of $3.9 million, an increase
of $0.9 million or 32% from the comparable period in 1994. Primary factors
contributing to the segment's increased operating profit for the nine and three
month periods was the inclusion of nine months of Palnut fastener operations in
the 1995 nine month period versus five months of operations in the 1994 nine
month period, the inclusion of four months of operations of the Industrial
Retaining Ring Company and increased shipment volume and higher margin product
mix of other specialty fasteners. These increases were offset in the nine and
three month periods by losses incurred due to the start-up of the Electrical
Connector and Assemblies Company, low margin sales of electrical wiring harness
product and reduced third party maintenance contract sales.
New orders increased by 15% for the nine month period in 1995 over the prior
year period, primarily due to the acquisitions mentioned. New orders for the
three month period in 1995 were up 16% over the prior year period, primarily
due to the Industrial Retaining Ring Company acquisition mentioned above and
customer timing and placement of orders for other specialty fasteners.
Backlog of unfilled orders at December 25, 1994 was $18.4 million, while at
December 26, 1993 backlog was $14.8 million.
AEROSPACE PRODUCTS SEGMENT
Sales for the Aerospace Products segment were $28 million for the nine month
period in 1995, a decrease of $5.9 million or 17% from the comparable period in
1994. Sales for the three month period in 1995 were $10.3 million, down $1.0
million or 9% from the comparable period in 1994. All aerospace product line
sales were down in the nine month period in 1995 as compared to the 1994
period, with the exception of electrical connectors which were up slightly.
All aerospace product line sales were down in the three month period in 1995
with the exception of rescue hoist and winch products which were up slightly.
The primary reasons for the decreases, in both the
14
<PAGE> 16
nine and three month periods, were delays in the timing of customers placing
new orders in the current year periods and reduced demand for aerospace and
related products.
Operating profit for the segment was $1.8 million for the nine month period in
1995, a decrease of $2.9 million or 62% from the comparable period in 1994. The
three month period had an operating profit of $1.0 million, a decrease of $0.6
million or 37% over the comparable period in 1994. The primary factors
contributing to the segment's decrease in operating profit in the current year
periods were the lower overall aerospace sales as mentioned above and reduced
margins in the rescue hoist and winch products and cargo hook lines. The
reduced margins were due mainly to shipments of low margin contracts during the
current nine and three month periods.
New orders decreased 5% for the nine month period in 1995 over the prior year
period, and increased 7% for the three month period over the prior year period.
New orders in the nine month period for hoist and winch products decreased 7%,
new orders for cargo hooks decreased 6% and new orders for electrical cables
decreased 37%, primarily due to customer timing, reduction in new orders and
the general slowdown in the military and aerospace industries. New orders for
all other aerospace products lines increased in the nine month period. In the
three month period in 1995 new orders for hoist and winch products increased
71%, new orders for tie-downs increased 258% and new orders for electrical
connectors increased 34%, primarily due to customer timing and placement of new
orders. The remaining aerospace product lines experienced reduced new orders
in the 1995 three month period.
Backlog of unfilled orders at December 25, 1994 was $28.3 million, while at
December 26, 1993 backlog was $30.3 million.
Sales related to United States Government contracts, which consist primarily of
defense contracts and represented approximately 20% of the Company's total
sales in fiscal year 1994, have been declining in recent years. Management
remains concerned with the continued trend toward reductions in defense
spending by the United States government. However, many of the Company's
programs, as well as spare parts requirements for these programs, are expected
to continue for several years, and the Company continues to pursue and is
currently implementing its strategy of developing its non-defense businesses
through acquisitions and refocused foreign and commercial market attention.
LIQUIDITY AND CAPITAL RESOURCES
The Company's debt-to-capitalization ratio was 43% as of December 25, 1994,
compared to 34% as of March 31, 1994. The current ratio at December 25, 1994,
stood at 4.68 compared to 3.49 at March 31, 1994. Working Capital was $65.4
million at December 25, 1994, up $11.6 million from March 31, 1994.
At December 25, 1994, the Company's debt consisted of $25 million of borrowings
under a revolving bank credit line, an $8.4 million bank term loan, a new $15
million bank term loan, as discussed below, and $1.0 million of other
borrowings. In connection with the Industrial Retaining Ring Company
acquisition, in September 1994, the Company obtained a $15 million term loan
with the same lender as the revolving credit line and secured by the same
collateral.
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This term loan is due and payable in equal quarterly installments of $938
thousand commencing on December 31, 1995. Interest accrues at the lending
bank's prime rate and is payable monthly. The revolving bank credit line
commitment is $35 million. This commitment will be available to the Company
through September 30, 1995 and is subject to a borrowing base formula. The
agreement provides for borrowings and letters of credit based on collateralized
accounts receivable and inventory. All fixed assets other than real property
with the exception of certain real property located in Mountainside, New
Jersey, are also included as collateral. Letters of credit, which are included
in the borrowing base formula, are limited to $5 million. Letters of credit
under the line at December 25, 1994 were $2.1 million. Interest is accrued at
the lending bank's prime rate or, at the Company's option, the London Interbank
Offered Rate (LIBOR) plus two percentage points, which the Company utilized for
$25 million of its outstanding debt at December 25, 1994. The agreement
contains customary operating and financial covenants typical to this form of
financing and further provides that quarterly dividend payments cannot exceed
25% of the Company's cumulative net income in each year. The $8.4 million term
loan is with the same lenders as the revolving credit line and is secured by
the same collateral. Principal payments of $360 thousand are due and payable
on the last day of each quarter through June 30, 1998, with a final balloon
payment of $3 million due and payable on August 31, 1998. Interest accrues at
the lending bank's prime rate and is payable monthly.
Capital expenditures in the nine month period in 1995 were $3.0 million as
compared with $2.9 million in the comparable period in 1994.
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.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 Fifth Amendment to the Revolving Loan and Security Agreement
dated as of September 9, 1994 among the Company, National
Canada Finance Corporation and National Bank of Canada
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSTECHNOLOGY CORPORATION
(Registrant)
Dated: February 7, 1995 By: /s/ Chandler J. Moisen
-----------------------------------------
CHANDLER J. MOISEN, Senior Vice President
and Chief Financial Officer*
* On behalf of the Registrant and as Principal Financial Officer.
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EXHIBIT INDEX
10 Fifth Amendment to the Revolving Loan and Security Agreement
dated as of September 9, 1994 among the Company, National
Canada Finance Corporation and National Bank of Canada
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10
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 immdediately 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
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 Acquisiton 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 Acquisiton 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
26
<PAGE> 9
Borowers' 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
Document 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. Borowers 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 pricipal 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.
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<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 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 of 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
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<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>
(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>
29
<PAGE> 12
<TABLE>
<S> <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 the Section 7.1(N) and Section 7.1(O), "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 including,
but not limited to, goodwill, trademarks, trade names, copyrights,
and rights in any thereof, and "special technologies"; provided,
however, for purposes of this paragraph (1), intangible assets
shall not include unamortized debt discount and expense or any
intangibles arising from the Kinnedyne or the Coil Systems
acquisitions by 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(O), "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
30
<PAGE> 13
Worth" ration which is equal to or less than as set forth below:
Total Debt/
Tangible Net
Date Worth Ratio
---- ------------
(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, 1995
(6) As of March 31, 1996, and at 1.25 to 1.0
the end of each quarter
thereafter
(Q) Cashflow Coverage. For the period ending September 30, 1994 and
at the close of each fiscal quarter thereafter, maintain a "Cashfow 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).
31
<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
32
<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.
33
<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 Incororation 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.
34
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Fifth Amendment by
their duly authorized officers this 9th day September, 1994.
TRANSTECHNOLOGY CORPORATION INDUSTRIAL RETAINING RING
COMPANY
By: /s/ Chandler J. Moisen By: /s/ Steven R. Wilson
------------------------------- ------------------------------
Title: Senior Vice President and Title: President
Chief Financial Officer
ELECTRONIC CONNECTIONS RETAINERS, INC.
AND ASSEMBLIES, INC.
By: /s/ Valentina Doss By: /s/ Steven R. Wilson
------------------------------- ------------------------------
Title: Vice President and 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
35
<PAGE> 1
EXHIBIT 11
STATEMENT OF THE COMPUTATION OF PER SHARE EARNINGS
IN ACCORDANCE WITH INSTRUCTION 4(g)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- --------------------------
12/25/94 12/26/93 12/25/94 12/26/93
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Primary earnings per share:
Weighted average number
of common shares outstanding 5,082,321 5,147,084 5,124,221 5,134,530
Dilutive effect of stock
option plan - (a) - (a) - (a) - (a)
---------- ---------- ---------- ----------
5,082,321 5,147,084 5,124,221 5,134,530
========== ========== ========== ==========
Net income $1,354,000 $1,605,000 $2,623,000 $4,350,000
========== ========== ========== ==========
Primary earnings per share $ 0.27 $ 0.31 $ 0.51 $ 0.85
========== ========== ========== ==========
</TABLE>
(a) The inclusion of stock options in the calculation of primary earnings per
share was either anti-dilutive or not material as per APB 15.
36
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1994
<PERIOD-END> DEC-25-1994
<CASH> 179
<SECURITIES> 0
<RECEIVABLES> 27,656
<ALLOWANCES> 354
<INVENTORY> 38,302
<CURRENT-ASSETS> 83,173
<PP&E> 51,491
<DEPRECIATION> 19,515
<TOTAL-ASSETS> 138,314
<CURRENT-LIABILITIES> 17,781
<BONDS> 49,446
<COMMON> 52
0
0
<OTHER-SE> 4,628
<TOTAL-LIABILITY-AND-EQUITY> 138,314
<SALES> 88,036
<TOTAL-REVENUES> 89,649
<CGS> 64,795
<TOTAL-COSTS> 18,375
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 121
<INTEREST-EXPENSE> 2,155
<INCOME-PRETAX> 6,479
<INCOME-TAX> 2,175
<INCOME-CONTINUING> 4,304
<DISCONTINUED> (1,681)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,623
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.51
</TABLE>
