<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 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- -----------------
Commission file number 1-7872
---------------------
TRANSTECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-4062211
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
700 Liberty Avenue 07083
Union, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (908) 964-5666
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
As of February 6, 1996, the total number of outstanding
shares of registrant's one class of common stock was 5,103,218
<PAGE> 2
TRANSTECHNOLOGY CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information Page No.
<S> <C>
Item 1. Financial Statements...................................... 2
Statements of Consolidated Operations--
Three and Nine Month Periods Ended December 31, 1995
and December 25, 1994..................................... 3
Consolidated Balance Sheets--
December 31, 1995 and March 31, 1995...................... 4
Statements of Consolidated Cash Flow--
Nine Months Ended December 31, 1995 and
December 25, 1994......................................... 5
Statements of Consolidated Stockholders' Equity--
Nine Months Ended December 31, 1995....................... 6
Notes to Consolidated Financial Statements................ 7 - 11
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition................... 12 - 18
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K.......................... 19
SIGNATURES...................................................................... 19
EXHIBIT 11...................................................................... 20
EXHIBIT 27...................................................................... 21
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Statements of Consolidated Operations, Consolidated
Balance Sheets and Statements of Consolidated Cash Flow are of TransTechnology
Corporation and its consolidated subsidiaries. These reports reflect all
adjustments of a normal recurring nature, which are, in the opinion of
management, necessary to a fair presentation of the results of operations for
the interim periods reflected therein. The results reflected in the unaudited
Statements of Consolidated Operations for the period ended December 31, 1995 are
not necessarily indicative of the results to be expected for the entire year.
The December 31, 1995 unaudited Consolidated Financial Statements include the
assets and liabilities of the Seeger Group of companies acquired by
TransTechnology Corporation on June 30, 1995. See Note 5 of the Notes to
Unaudited Consolidated Financial Statements for further discussion on this
acquisition. The following unaudited Consolidated Financial Statements should be
read in conjunction with the notes thereto, and Management's Discussion and
Analysis set forth in Item 2 of Part I of this report, as well as the audited
financial statements and related notes thereto contained in the Form 10-K filed
for the fiscal year ended March 31, 1995.
[THIS SPACE INTENTIONALLY LEFT BLANK]
2
<PAGE> 4
STATEMENTS OF CONSOLIDATED OPERATIONS
UNAUDITED
(In Thousands of Dollars Except Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- --------------------------
12/31/95 12/25/94 12/31/95 12/25/94
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenue $ 41,601 $ 26,328 $ 112,445 $ 71,176
Cost of sales 27,269 17,759 77,180 49,518
----------- ----------- ----------- -----------
Gross profit 14,332 8,569 35,265 21,658
----------- ----------- ----------- -----------
General, administrative
and selling expenses 7,644 4,080 20,850 11,871
Interest expense 1,787 857 4,552 1,863
----------- ----------- ----------- -----------
Total general, administrative,
selling and interest expenses 9,431 4,937 25,402 13,734
----------- ----------- ----------- -----------
Income from continuing operations
before income taxes 4,901 3,632 9,863 7,924
Income taxes 2,108 1,198 3,994 2,724
----------- ----------- ----------- -----------
Income from continuing operations 2,793 2,434 5,869 5,200
Discontinued operations:
Loss from operations (net of applicable
tax benefits of $74,000 and $368,000 for
the quarter and nine months ended 12/31/95,
respectively, and $393,000 and $1,332,000
for the quarter and nine months ended
12/25/94, respectively) (121) (785) (601) (2,174)
Loss from disposal (net of applicable tax
benefits of $200,000 and $102,000 for
the quarter and nine months ended
12/31/95, respectively, and $181,000 and
$247,000 for the quarter and nine months
ended 12/25/94, respectively) (326) (295) (167) (403)
----------- ----------- ----------- -----------
Net income $ 2,346 $ 1,354 $ 5,101 $ 2,623
=========== =========== =========== ===========
Earnings per Share: (Note 1)
Income from continuing operations $ 0.55 $ 0.48 $ 1.15 $ 1.01
Loss from discontinued operations (0.09) (0.21) (0.15) (0.50)
----------- ----------- ----------- -----------
Net income $ 0.46 $ 0.27 $ 1.00 $ 0.51
=========== =========== =========== ===========
Number of shares used in computation
of per share information 5,099,000 5,082,000 5,092,000 5,124,000
</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
12/31/95 3/31/95
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,867 $ 1,544
Accounts receivable:
United States Government 931 1,204
Commercial (net of allowance for doubtful accounts
of $607,000 at 12/31/95 and $103,000 at 3/31/95) 22,331 18,280
Notes receivable 1,167 836
Inventories 47,492 25,239
Prepaid expenses and other current assets 792 2,706
Deferred income taxes 2,582 2,592
Net assets of discontinued businesses 10,386 24,269
--------- ---------
Total current assets 88,548 76,670
Property, Plant & Equipment 76,530 42,574
Less accumulated depreciation and amortization 16,480 13,040
--------- ---------
Property, Plant & Equipment - net 60,050 29,534
--------- ---------
Other assets:
Notes receivable 13,183 3,274
Costs in excess of net assets of acquired businesses
(net of accumulated amortization: 12/31/95, $3,254,000;
3/31/95, $2,793,000) 16,956 12,813
Other 14,748 7,105
--------- ---------
Total other assets 44,887 23,192
--------- ---------
Total $ 193,485 $ 129,396
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,141 $ 3,356
Accounts payable-trade 8,434 9,147
Accrued compensation 4,032 4,247
Accrued income taxes 2,568 591
Other current liabilities 9,719 6,267
--------- ---------
Total current liabilities 30,894 23,608
--------- ---------
Long-term debt payable to banks and others 74,845 37,021
--------- ---------
Other long-term liabilities 19,294 4,265
--------- ---------
Stockholders' equity:
Preferred stock-authorized, 300,000 shares; none issued -- --
Common stock-authorized, 14,700,000 shares of $.01 par value;
issued 5,277,644 at 12/31/95, and 5,242,316 at 3/31/95 53 52
Additional paid-in capital 46,202 45,802
Retained earnings 27,526 23,418
Other stockholders' equity (3,174) (2,680)
--------- ---------
70,607 66,592
Less treasury stock, at cost - (177,500 shares at 12/31/95
and 172,500 shares at 3/31/95) (2,155) (2,090)
--------- ---------
Total stockholders' equity 68,452 64,502
--------- ---------
Total $ 193,485 $ 129,396
========= =========
</TABLE>
- --------------------------------------
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 6
STATEMENTS OF CONSOLIDATED CASH FLOW
UNAUDITED
(In Thousands of Dollars)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
12/31/95 12/25/94
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 5,101 $ 2,623
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 3,620 3,429
Provision for losses on accounts receivable 182 121
(Gain) on sale or disposal of fixed assets and discontinued
businesses (70) --
Change in assets and liabilities net of acquisitions and dispositions:
Decrease in accounts receivable 9,663 1,969
Increase in income tax receivable -- (872)
Increase in inventories (900) (221)
Increase in net assets of discontinued businesses (277) (961)
Decrease (increase) in other assets 298 (929)
Decrease in accounts payable (5,815) (78)
Decrease in accrued compensation (215) (1,249)
Decrease in other liabilities (9,563) (636)
Increase (decrease) in accrued income taxes 1,977 (494)
--------- ---------
Net cash provided by operating activities 4,001 2,702
--------- ---------
Cash Flows from Investing Activities:
Business acquisitions (42,094) (15,320)
Capital expenditures (4,106) (2,990)
Proceeds from sale of fixed assets and discontinued business 14,273 44
(Increase) decrease in notes receivable (10,241) 604
--------- ---------
Net cash used in investing activities (42,168) (17,662)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from long-term borrowings 100,820 30,069
Payments on long-term debt (60,178) (15,272)
Proceeds from issuance of stock under stock plans 400 327
Stock repurchases and other (559) (2,036)
Dividends paid (993) (976)
--------- ---------
Net cash provided by financing activities 39,490 12,112
--------- ---------
Net increase (decrease) in cash and cash equivalents 1,323 (2,848)
Cash and cash equivalents at beginning of year 1,544 3,027
--------- ---------
Cash and cash equivalents at end of year $ 2,867 $ 179
========= =========
Supplemental Information:
Interest payments $ 3,722 $ 2,281
Income tax payments $ 1,751 $ 1,246
</TABLE>
- -------------------------------
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 7
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
UNAUDITED
<TABLE>
<CAPTION>
ADDITIONAL OTHER
FOR THE NINE MONTHS COMMON STOCK TREASURY STOCK PAID-IN RETAINED STOCKHOLDERS'
--------------------- ---------------------
ENDED DECEMBER 31, 1995 SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY TOTAL
- ---------------------------- ----------- --------- ---------- --------- ----------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1995 5,242,316 $ 52 (172,500) $ (2,090) $ 45,802 $ 23,418 $ (2,680) $ 64,502
Net Income -- -- -- -- -- 5,101 -- 5,101
Cash dividends
($.195 per share) -- -- -- -- -- (993) -- (993)
Unrealized investment
holding losses -- -- -- -- -- -- (300) (300)
Purchase of treasury stock -- -- (5,000) (65) -- -- -- (65)
Issuance of stock under
stock option plan 20,308 1 -- -- 187 -- -- 188
Issuance of stock under
incentive bonus plan 15,020 -- -- -- 213 -- (104) 109
Foreign translation
adjustments -- -- -- -- -- -- (90) (90)
----------- --------- ---------- --------- ----------- ----------- -------------- ----------
Balance, December 31, 1995 5,277,644 $ 53 (177,500) $ (2,155) $ 46,202 $ 27,526 $ (3,174) $ 68,452
=========== ========= ========== ========= =========== =========== ============== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE> 8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars)
NOTE 1. Earnings Per Share:
Earnings per share are based on the weighted average number of common
stock 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>
12/31/95 3/31/95
----------- --------
<S> <C> <C>
Finished goods $ 25,972 $ 6,152
Work-in-process 6,934 3,867
Purchased and
manufactured parts 14,586 15,220
----------- --------
Total inventories $ 47,492 $ 25,239
=========== ========
</TABLE>
NOTE 3. Long-term Debt Payable to Banks and Others
Long term debt payable, including current maturities, at December 31,
1995 and March 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
12/31/95 3/31/95
-------- -----------
<S> <C> <C>
Credit Agreement - 8.3% $ 21,420 --
Credit Agreement - 8.3125% -- $ 16,300
Term Loans - 8.41% 58,600 --
Term Loans - 9.0% -- 23,080
Other 966 997
-------- -----------
80,986 40,377
Less current maturities 6,141 3,356
-------- -----------
Total $ 74,845 $ 37,021
======== ===========
</TABLE>
7
<PAGE> 9
Credit Agreement
Related to the Company's acquisition of the Seeger Group, on June 30,
1995 the Company refinanced all of its bank debt, so that on December
31, 1995 it consisted of $17.3 million of borrowings under a revolving
credit line, $4.1 million of borrowings under international lines of
credit, a $33.6 million term loan and a $25 million term loan. The
revolving bank credit line commitment is $34 million, which includes $5
million available for letters of credit. This commitment will be
available to the Company through December 31, 2000 and is subject to a
borrowing base formula. The agreement provides for borrowings and
letters of credit based on collateralized accounts receivable and
inventory. In addition, all of the remaining assets of the Company and
its subsidiaries are included as collateral. Letters of credit under
the line at December 31, 1995 were $0.8 million. The total commitment
from the international lines of credit are $6 million and have the same
availability and collateral as the revolving credit line, but are not
subject to a borrowing base formula. Interest on the revolver and the
international lines of credit are tied to the primary lending bank's
prime rate, or the London Interbank Offered Rate (LIBOR), with a
margin, depending upon the Company's achievement of certain operating
and financial goals.
The $33.6 million and $25 million term loans are with the same lenders
as the revolving and international lines of credit, are secured by the
same collateral, and are due and payable on December 31, 2000 and June
30, 2002, respectively. The $33.6 million term loan has an additional
$15 million available for future acquisitions. Principal payments on
the $33.6 million term loan of $1.4 million, with escalations to $1.8
million and $2.8 million in June 1999 and June 2000, respectively,
began on December 31, 1995, and are due and payable on the last day of
each quarter through December 31, 2000. Interest on the $33.6 million
term loan is tied to the primary lending bank's prime rate, or LIBOR,
with a margin, depending upon the Company's achievement of certain
operating and financial goals. Principal payments on the $25 million
term loan of $0.5 million are due and payable annually, beginning on
June 30, 1996 through June 30, 2000, with final balloon payments of
$7.5 million and $15 million due and payable on June 30, 2001 and June
30, 2002, respectively. Interest on the $25 million term loan accrues
at the primary lending bank's prime rate plus two percentage points.
The agreement also gives the Company the option of using LIBOR plus
three and one-quarter percentage points. At December 31, 1995, the
Company had $64.4 million of borrowings utilizing LIBOR.
On August 2, 1995, the Company entered into an interest rate swap
agreement with its primary lending bank to reduce the impact of changes
in interest rates on its floating-rate debt. The agreement has a
notional amount of $25 million and terminates on August 2, 1998. The
agreement effectively changes the Company's interest rate exposure on
$25 million of its LIBOR-based debt to a fixed rate of 9.79%.
The credit facility limits the Company's ability to pay dividends to
25% of net income and restricts capital expenditures to $6.5 million
for the fiscal year ending March 31, 1996,
8
<PAGE> 10
and $7 million thereafter for the life of the agreement, as well as
containing other customary financial covenants.
Other
Other long-term debt is comprised principally of an obligation due
under a collateralized borrowing arrangement with a fixed interest rate
of 3% due December 2004 and loans on life insurance policies owned by
the Company with a fixed interest rate of 5%.
Debt Maturities
<TABLE>
<S> <C>
1996 (current) $ 6,141
1997 6,142
1998 6,143
1999 7,194
2000 10,695
Thereafter 44,671
---------
Total $ 80,986
=========
</TABLE>
NOTE 4. Discontinued Operations
In August 1995, the Company sold substantially all of the assets and
business of its Electronics division, which included Electronic
Connections and Assemblies, Inc., for $4.4 million in cash and $8.8
million of notes receivable. The sale of this operation resulted in an
after-tax disposal gain of $0.2 million.
In June 1995, the Company sold the domestic portion of its computer
graphics service operation for book value. The Company received $0.7
million in cash and a $0.6 million note receivable for this sale. In
November 1995, the Company sold the European portion of its graphics
service operation for book value. The Company received $0.1 million in
cash, with future contractual remittances to be made as receivables are
collected and inventory sold.
In March 1995, the Company sold substantially all of the assets and
business of its chaff products operation. The sale of this operation
resulted in an after-tax disposal loss of $0.4 million. In May 1995,
the Company sold the remaining chaff avionics product line for $0.3
million in cash and a $0.7 million note receivable. This sale resulted
in an after-tax disposal gain of $0.4 million.
Through December 1995, the Company recorded an additional $0.8 million
of after-tax disposal costs related to other previously discontinued
businesses. These losses consisted primarily of disposal costs
different from previous estimates associated primarily with legal,
environmental and employee related matters.
9
<PAGE> 11
Operating results of the discontinued business were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- ---------------------------------
12/31/95 12/25/94 12/31/95 12/25/94
----------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Total Revenues $ 66 $ 11,506 $ 7,646 $ 23,967
Loss before income
taxes $ (195) $ (1,178) $ (969) $ (3,506)
Income tax benefit 74 393 368 1,332
----------- ------------- -------------- -------------
Loss from operations $ (121) $ (785) $ (601) $ (2,174)
=========== ============= ============== =============
</TABLE>
The loss from operations includes interest expense of $151 thousand for the
three months ended 12/25/94, and $214 thousand and $430 thousand for the nine
months ended 12/31/95 and 12/25/94, respectively.
Net assets of the discontinued businesses at December 31, 1995 and March 31,
1995 were as follows:
<TABLE>
<CAPTION>
12/31/95 3/31/95
----------------- ------------------
<S> <C> <C>
Accounts Receivable $ 728 $ 6,344
Inventory 555 10,993
Property 9,190 10,109
Other Assets 1,050 1,755
Liabilities (1,137) (4,932)
----------------- ------------------
Net Assets of
Discontinued Businesses $ 10,386 $ 24,269
================= ==================
</TABLE>
10
<PAGE> 12
NOTE 5. Acquisitions
On June 30, 1995 the Company acquired the Seeger Group of companies
from a unit of AB SKF of Gothenburg, Sweden for approximately $43
million plus the assumption of trade debts and accrued expenses. The
Seeger Group, headquartered in Konigstein, Germany manufactures
circlips, snap rings and retaining rings used primarily in the
automotive, heavy equipment and industrial machinery markets. The
Seeger Group operates under the trade names of "Seeger", "Anderton",
and "Waldes" with over 900 employees at its five manufacturing
facilities.
The following summarizes TransTechnology Corporation's combined
Proforma Revenue, Net Income and Earnings per Share information as if
the acquisition of the Seeger Group of companies had occurred at the
beginning of the period presented. The Proforma results give effect to
the amortization of goodwill and the effects on interest expense and
taxes.
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------------------------
12/31/95 12/25/94
--------------------- ---------------------
<S> <C> <C>
Revenue $ 134,972 $ 115,472
========== ==========
Net Income $ 6,741 $ 1,340
========== ==========
Earnings per share $ 1.32 $ 0.26
========== ==========
</TABLE>
The above Proforma information does not purport to be indicative of the
financial results which actually would have occurred had the acquisition been
made at the beginning of the periods presented or subsequent to that date.
The Proforma net income for the nine month period ended December 31, 1995,
includes a non-recurring real estate sale which resulted in an after tax gain of
$1.3 million, recorded prior to the Company's acquisition of the Seeger Group.
11
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All references to three and nine month periods in this Management's Discussion
refer to the three and nine month periods ended December 31, 1995 for fiscal
year 1996 and the three and nine month periods ended December 25, 1994 for
fiscal year 1995. Also when referred to herein, operating profit means net sales
less operating expenses, without deduction for general corporate expenses,
interest and income taxes. The Consolidated Statement of Operations has been
restated with respect to discontinued operations to provide a consistent basis
for comparing the performance of the Company's continuing operations for the
periods presented.
Revenue from continuing operations for the nine month period in 1996 was $112.4
million, an increase of $41.3 million or 58% from the comparable period in 1995.
For the three month period in 1996 total revenue was $41.6 million, a $15.3
million or 58% increase from the comparable period in 1995. As further discussed
below, the increased revenue performance for both periods in 1996 resulted
primarily from the Seeger Group acquisition on June 30, 1995.
Gross profit for the nine month period in 1996 increased $13.6 million or 63%
from the comparable period in 1995. For the three month period in 1996, gross
profit increased $5.8 million or 67%. Operating profit from continuing
operations for the nine month period in 1996 was $5.9 million, an increase of
$0.7 million or 13% from the comparable period in 1995. For the three month
period in 1996 operating profit from continuing operations was $2.8 million, an
increase of $0.4 million or 15% from the comparable period in 1995. Changes in
sales, operating profit and new orders from continuing operations are discussed
below by segment.
Net income, including discontinued operations, for the nine month period in 1996
was $5.1 million or $1.00 per share, compared to $2.6 million or $0.51 per
share, for the comparable period of 1995. The three month period in 1996
experienced net income of $2.3 million or $0.46 per share compared to $1.4
million or $0.27 per share for the year earlier period. As further discussed
below, the increased earnings performance in 1996 resulted primarily from the
inclusion of Industrial Retaining Ring Company operations in the three and nine
month 1996 periods and the Seeger Group acquisition.
Interest expense increased $2.7 million for the nine month period in 1996, and
$0.9 million for the three month period, primarily as a result of increased bank
borrowings used for the acquisition of the Seeger Group.
New orders received during the nine month period in 1996 totaled $118.1 million,
an increase of $43.7 million or 59% from 1995's comparable period. For the three
month period, new orders totaled $42.2 million, an increase of $12.5 million or
42% from last year's comparable period. At December 31, 1995, total backlog of
unfilled orders was $66.7 million compared to $34.5 million at December 25,
1994.
12
<PAGE> 14
DISCONTINUED OPERATIONS
In August 1995, the Company sold substantially all of the assets and business of
its Electronics division, which included Electronic Connections and Assemblies,
Inc., for $4.4 million in cash and $8.8 million of notes receivable. The sale of
this operation resulted in an after-tax disposal gain of $0.2 million.
In June 1995, the Company sold the domestic portion of its computer graphics
service operation for book value. The Company received $0.7 million in cash and
a $0.6 million note receivable for this sale. In November 1995, the Company sold
the European portion of its graphics service operation for book value. The
Company received $0.1 million in cash, with future contractual remittances to be
made as receivables are collected and inventory sold.
In March 1995, the Company sold substantially all of the assets and business of
its chaff products operation. The sale of this operation resulted in an
after-tax disposal loss of $0.4 million. In May 1995, the Company sold the
remaining chaff avionics product line for $0.3 million in cash and a $0.7
million note receivable. This sale resulted in an after-tax disposal gain of
$0.4 million.
Through September 1995, the Company recorded an additional $0.8 million of
after-tax disposal costs related to other previously discontinued businesses.
These losses consisted primarily of disposal costs different from previous
estimates associated primarily with legal, environmental and employee related
matters.
ACQUISITIONS
On June 30, 1995 the Company acquired the Seeger Group of companies from a unit
of AB SKF of Gothenburg, Sweden for approximately $43 million plus the
assumption of trade debts and accrued expenses. The Seeger Group, headquartered
in Konigstein, Germany manufactures circlips, snap rings and retaining rings
used primarily in the automotive, heavy equipment and industrial machinery
markets. The Seeger Group operates under the trade names of "Seeger",
"Anderton", and "Waldes" with over 900 employees at its five manufacturing
facilities.
13
<PAGE> 15
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NET CHANGE
--------------------------------------- ----------------------------
12/31/95 12/25/94 $ %
--------------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Sales:
Speciality fastener products $ 90,145 $ 49,513 $ 40,632 82.1
Rescue hoist and cargo hook products 21,010 20,071 939 4.7
--------------- -------------- -----------
Total $ 111,155 $ 69,584 $ 41,571 59.7
=============== ============== ===========
Operating profit:
Speciality fastener products $ 15,729 $ 10,393 $ 5,336 51.3
Rescue hoist and cargo hook products 2,855 554 2,301 415.3
--------------- -------------- -----------
Total $ 18,584 $ 10,947 $ 7,637 69.8
Corporate expense (4,169)(a) (1,160)(a)(c) (3,009) (259.4)
Interest expense (4,552)(b) (1,863)(b) (2,689) (144.3)
--------------- -------------- -----------
Income from continuing
operations before
income taxes $ 9,863 $ 7,924 $ 1,939 24.5
=============== ============== ===========
</TABLE>
a) The corporate expense for the nine months ended December 31, 1995
and the nine months ended December 25, 1994 has been reduced by
$341 thousand and $1,311 thousand, respectively, to reflect an
allocation made to discontinued operations.
b) The interest expense for the nine months ended December 31, 1995
and the nine months ended December 25, 1994 has been reduced by
$214 thousand and $430 thousand, respectively, to reflect an
allocation made to discontinued operations.
c) The corporate expense for the nine months ended December 25, 1994
has been reduced by $575 thousand for a favorable insurance
settlement.
14
<PAGE> 16
FINANCIAL SUMMARY BY PRODUCT SEGMENT
(In Thousands of Dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NET CHANGE
---------------------------------------- ----------------------------
12/31/95 12/25/94 $ %
---------------- --------------- ------------ ----------
<S> <C> <C> <C> <C>
Sales:
Speciality fastener products $ 33,779 $ 18,775 $ 15,004 79.9
Rescue hoist and cargo hook products 7,308 7,298 10 -
--------------- -------------- -----------
Total $ 41,087 $ 26,073 $ 15,014 57.6
=============== ============== ===========
Operating profit:
Speciality fastener products $ 6,756 $ 4,490 $ 2,266 50.5
Rescue hoist and cargo hook products 1,341 618 723 117.0
--------------- -------------- -----------
Total $ 8,097 $ 5,108 $ 2,989 58.5
Corporate expense (1,409) (619)(a) (790) (127.6)
Interest expense (1,787) (857)(b) (930) (108.5)
--------------- -------------- -----------
Income from continuing
operations before
income taxes $ 4,901 $ 3,632 $ 1,269 34.9
=============== ============== ===========
</TABLE>
a) The corporate expense for the three months ended December 25,
1994 has been reduced by $416 thousand to reflect an allocation
made to discontinued operations.
b) The interest expense for the three months ended December 25, 1994
has been reduced by $151 thousand to reflect an allocation made
to discontinued operations.
15
<PAGE> 17
SPECIALTY FASTENER PRODUCTS SEGMENT
Sales for the specialty fastener products segment were $90.1 million for the
nine month period in 1996, an increase of $40.6 million or 82% from the
comparable period in 1995. Sales for the three month period in 1996 were $33.8
million, up $15 million, or 80% from the same period in 1995. The increase in
specialty fastener sales for both 1996 periods was primarily due to the
inclusion of operations of the Seeger Group and to a lesser extent the
acquisition of Industrial Retaining Ring Company. Additionally, new product
market penetration and increased industrial and truck fastener demand offset by
a decrease in domestic automotive fastener demand, further increased 1996 sales
performance.
Operating profit for the segment was $15.7 million for the nine month period in
1996, an increase of $5.3 million or 51% from the comparable period in 1995. The
three month period in 1996 showed an operating profit of $6.8 million, an
increase of $2.3 million or 51% from the comparable period in 1995. The
increases were primarily due to the inclusion of operations of the Seeger Group
and Industrial Retaining Ring Company for the 1996 periods, new product market
penetration and increased industrial and truck fastener demand offset by a
decrease in domestic automotive fastener sales volume, as mentioned above.
New orders increased by $33.3 million or 63% for the nine month period in 1996,
primarily due to the acquisitions mentioned above. New orders for the three
month period in 1996 increased $13.9 million or 72% from the comparable period
in 1995, also primarily due to the acquisitions mentioned above. These increases
were offset by reduced automotive fastener demand during the three and nine
month periods in 1996, primarily due to an overall slowdown in production by
domestic automotive manufacturers. Backlog of unfilled orders at December 31,
1996, was $85.7 million compared to $52.5 million at December 25, 1995.
RESCUE HOIST AND CARGO HOOK PRODUCTS SEGMENT
Sales of the rescue hoist and cargo hook products segment were $21 million for
the nine month period in 1996, an increase of $0.9 million or 5% from the
comparable period in 1995. Sales for the three month period in 1996 were $7.3
million, unchanged from the comparable period in 1995. The nine month increase
was primarily due to the timing of customers placing new orders.
Operating profit for the nine month period in 1996 was $2.9 million, an increase
of $2.3 million or 415% from the comparable period in 1995. The three month
period had an operating profit of $1.3 million, an increase of $0.7 or 117% from
the comparable period in 1995. The primary factors contributing to the increase
in the segment's operating profit in the 1996 nine and three month periods were
the increases in the sales volume, mentioned above, product sales mix and sales
price increases.
16
<PAGE> 18
New orders for the nine month period in 1996 increased by $10.5 million or 48%
from the comparable period in 1995. New orders for the three month period in
1996 decreased by $1.4 million or 13% from the comparable period in 1995. New
order fluctuations in both 1996 periods were primarily due to a large multi-year
order for hoist and winch products and customers timing and placement of new
orders. Backlog of unfilled orders at December 31, 1995 was $32.4 million
compared to $21.8 million at December 25, 1994.
Sales related to United States government contracts, which consist primarily of
defense contracts and represented approximately 18% of the Company's total 1995
sales from continuing operations, have been declining in recent years. While
management remains concerned with the continued trend toward reductions in
defense spending, many of the Company's defense related programs, as well as
spare parts requirements for these programs, will continue for several years,
though there can be no assurances in that regard. Moreover, the Company is well
on its way in implementing its strategy of developing its non-defense businesses
through acquisitions and refocused foreign and commercial market attention.
LIQUIDITY AND CAPITAL RESOURCES
The Company's debt-to-capitalization ratio was 54% as of December 31, 1995,
compared to 38% as of March 31, 1995. The current ratio at December 31, 1995,
stood at 2.91 compared to 3.25 at March 31, 1995. Working Capital was $58.9
million at December 31, 1995, up $5.8 million from March 31, 1995. These changes
were primarily the result of the Seeger Group acquisition on June 30, 1995 and
the sale of discontinued operations.
Related to the Company's acquisition of the Seeger Group, on June 30, 1995 the
Company refinanced all of its bank debt, so that on December 31, 1995 it
consisted of $17.3 million of borrowings under a revolving credit line, $4.1
million of borrowings under international lines of credit, a $33.6 million term
loan and a $25 million term loan. The revolving bank credit line commitment is
$34 million, will be available to the Company through December 31, 2000 and is
subject to a borrowing base formula. The agreement provides for borrowings and
letters of credit based on collateralized accounts receivable and inventory. In
addition, all of the remaining assets of the Company and its subsidiaries are
included as collateral. Letters of credit under the line at December 31, 1995
were $0.8 million. The total commitment from the international lines of credit
are $6 million and have the same availability and collateral as the revolving
credit line, but are not subject to a borrowing base formula. Interest on the
revolver and the international lines of credit are tied to the primary lending
bank's prime rate, or the London Interbank Offered Rate (LIBOR), with a margin,
depending upon the Company's achievement of certain operating and financial
goals.
The $33.6 million and $25 million term loans are with the same lenders as the
revolving and international lines of credit, are secured by the same collateral,
and are due and payable on December 31, 2000 and June 30, 2002, respectively.
The $33.6 million term loan has an additional $15 million available for future
acquisitions. Principal payments on the $33.6 million term loan of $1.4 million,
with escalations to $1.8 million and $2.8 million in June 1999 and
17
<PAGE> 19
June 2000, respectively, began on December 31, 1995, and are due and payable on
the last day of each quarter through December 31, 2000. Interest on the $33.6
million term loan is tied to the primary lending bank's prime rate, or LIBOR,
with a margin, depending upon the Company's achievement of certain operating and
financial goals. Principal payments on the $25 million term loan of $0.5 million
are due and payable annually beginning on June 30, 1996 through June 30, 2000,
with final balloon payments of $7.5 million and $15 million due and payable on
June 30, 2001 and June 30, 2002, respectively. Interest on the $25 million term
loan accrues at the primary lending bank's prime rate plus two percentage
points. The agreement also gives the Company the option of using LIBOR plus
three and one-quarter percentage points. At December 31, 1995, the Company had
$64.4 million of borrowings utilizing LIBOR.
On August 2, 1995, the Company entered into an interest rate swap agreement with
its primary lending bank to reduce the impact of changes in interest rates on
its floating-rate debt. The agreement has a notional amount of $25 million and
terminates on August 2, 1998. The agreement effectively changes the Company's
interest rate exposure on $25 million of its LIBORbased debt to a fixed rate of
9.79%.
The credit facility limits the Company's ability to pay dividends to 25% of net
income and restricts capital expenditures to $6.5 million for the fiscal year
ending March 31, 1996, and $7 million thereafter for the life of the agreement,
as well as containing other customary financial covenants.
Management believes that the Company's anticipated cash flow from operations,
combined with the bank credit described above, will be sufficient to support
current and forecasted working capital requirements and dividend payments.
Capital expenditures in the nine month period in 1996 were $4.1 million as
compared with $3.0 million in the comparable period in 1995. The Company's two
segments have similar cash flow requirements.
18
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
(b) A report on Form 8-K was filed on July 14, 1995 to report the June 30,
1995 acquisition by the company's wholly owned subsidiaries of (i)
substantially all of the assets of SKF USA Inc.'s Seeger Division and
(ii) all of the outstanding stock of SKF GmbH's subsidiaries,
Seeger-Orbis GmbH. This report on Form 8-K was amended by the filing of
a report on Form 8-K/A dated September 11, 1995. This report on Form
8-K/A was amended by the filing of another report on Form 8-K/A dated
November 30, 1995.
(c) A report on Form 8-K was filed on November 16, 1995, reporting the
disposition of the company's business and assets of its TransTechnology
Electronics Division.
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 13, 1996 By: /s/ Chandler J. Moisen
--------------------------
CHANDLER J. MOISEN, Senior Vice President
and Chief Financial Officer*
* On behalf of the Registrant and as Principal Financial Officer.
19
<PAGE> 21
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
STATEMENT OF THE COMPUTATION OF PER SHARE EARNINGS
IN ACCORDANCE WITH INSTRUCTION 4(g)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------- -------------------------------------
12/31/95 12/25/94 12/31/95 12/25/94
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Primary earnings per share:
Weighted average number
of common shares outstanding 5,099,338 5,082,321 5,092,146 5,124,221
Dilutive effect of stock
option plan - (a) - (a) - (a) - (a)
--------------- --------------- --------------- ---------------
5,099,338 5,082,321 5,092,146 5,124,221
=============== =============== =============== ===============
Net income $ 2,346,000 $ 1,354,000 $ 5,101,000 $ 2,623,000
================ ================ ================= =================
Primary earnings per share $ 0.46 $ 0.27 $ 1.00 $ 0.51
================ ================ ================= =================
</TABLE>
(a) The inclusion of stock options in the calculation of primary earnings per
share was either anti-dilutive or not material as per APB 15.
20
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 2,867
<SECURITIES> 0
<RECEIVABLES> 37,612
<ALLOWANCES> 607
<INVENTORY> 47,492
<CURRENT-ASSETS> 88,548
<PP&E> 76,530
<DEPRECIATION> 16,480
<TOTAL-ASSETS> 193,485
<CURRENT-LIABILITIES> 30,894
<BONDS> 80,986
0
0
<COMMON> 53
<OTHER-SE> 5,329
<TOTAL-LIABILITY-AND-EQUITY> 193,485
<SALES> 111,155
<TOTAL-REVENUES> 112,445
<CGS> 77,180
<TOTAL-COSTS> 25,402
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 182
<INTEREST-EXPENSE> 4,552
<INCOME-PRETAX> 9,863
<INCOME-TAX> 3,994
<INCOME-CONTINUING> 5,869
<DISCONTINUED> (768)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,101
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
